CALGARY,
AB, Aug. 11, 2022 /CNW/ - Tidewater Renewables
Ltd. ("Tidewater Renewables" or the "Corporation")
(TSX: LCFS) is pleased to announce that it has filed its condensed
interim consolidated financial statements and Management's
Discussion and Analysis ("MD&A") for the three and
six month periods ended June 30,
2022.
SECOND-QUARTER 2022
HIGHLIGHTS
- Tidewater Renewables generated another solid quarter of
Adjusted EBITDA(1) of $16.9
million and net income of $4.4
million during the second quarter of 2022. Net cash provided
by operating activities totaled $13.9
million for the second quarter of 2022, with distributable
cash flow(1) of $11.3
million.
- The Corporation has reached several important milestones on its
3,000 bbl/d Renewable Diesel & Renewable Hydrogen Complex
("HDRD Complex") including the commencement and completion of
various construction activities. Tidewater Renewables expects
production of Renewable Diesel in the first quarter of 2023.
As of June 30, 2022, the Corporation
expects to receive an additional 140,926 British Columbia Low
Carbon Fuel Standard ("BC LCFS") under its Renewable Diesel
Project Part 3 Agreement with the Government of British Columbia.
- On June 28, 2022, Tidewater
Renewables announced a multi-year agreement with an
investment-grade company to sell Federal Clean Fuel Regulation
("CFR") credits that it will receive through the production and
sale of renewable fuels produced at the HDRD Complex, adding
previously unrecognized value and an incremental revenue stream to
the Corporation. As part of the transaction, Tidewater Renewables
agreed to sell a total of 45,000 CFR credits at $95 per credit. This multi-year agreement extends
to June 30, 2025. At similar CFR
credit values, Tidewater Renewables' HDRD Complex has the potential
of generating an incremental $30
million of Run Rate EBITDA(1) assuming other
factors remain constant.
- Tidewater Renewables continues to expand its feedstock supply
and marketing business to secure feedstock for its growth projects.
During the quarter, the Corporation launched its strategic
investment in Rimrock Cattle Company Ltd. ("RCC"). RCC is expected
to generate material feedstock volumes for use in both the RNG and
renewable fuels business units. The Corporation is also pleased
with the continued outperformance and growth of its renewable
feedstock collection business since its acquisition in Q4 2021. The
Corporation continues to pursue partnership opportunities and
long-term arrangements to secure a diversified supply of
feedstocks.
- During the second quarter the Corporation made significant
progress on its RNG business and has commenced preliminary
engineering and design on its announced High River RNG Facility.
This facility is expected to be backstopped by 10 to 20 year
offtake agreements with an investment grade counterparty and has
secured a long-term feedstock supply from the Corporation's
strategic partnership with RCC.
- The Corporation's base business continues to exceed previous
guidance and expectations with 2022 Adjusted EBITDA and 2023 Run
Rate EBITDA(1) expected to be at the high end of the
previously disclosed ranges of $50 -
55 million and $140 - 150 million,
respectively (excluding any additional value from CFR
credits).
(1)
|
Adjusted EBITDA,
distributable cash flow, net debt and Run Rate EBITDA used
throughout this press release are non-GAAP financial measures or
ratios. See the "Non-GAAP and Other Financial Measures" in this
press release and the Corporation's MD&A for information on
each non-GAAP financial measure or ratio.
|
Selected financial and operating information are outlined below
and should be read with the Corporation's condensed interim
consolidated financial statements and related MD&A for the
three month and six month periods ended June
30, 2022, which are available under the Corporation's
profile on SEDAR at www.sedar.com and on its website at
www.tidewater-renewables.com.
Financial Highlights
|
|
Three months
ended
June 30,
|
Six months ended
June 30,
|
(in thousands of
Canadian dollars except per share
information)
|
|
2022
|
|
2021(1)
|
|
2022
|
|
2021(1)
|
Revenue
|
$
|
19,730
|
$
|
-
|
$
|
36,980
|
$
|
-
|
Net income (loss)
attributable to
shareholders
|
$
|
4,363
|
$
|
(735)
|
$
|
21,877
|
$
|
(735)
|
Basic and diluted net
income (loss)
attributable to shareholders per share
|
$
|
0.13
|
$
|
-
(3)
|
$
|
0.63
|
$
|
-
(3)
|
Adjusted EBITDA
(2,4)
|
$
|
16,902
|
$
|
-
|
$
|
29,639
|
$
|
-
|
Net cash provided by
operating activities
|
$
|
13,903
|
$
|
-
|
$
|
33,188
|
$
|
-
|
Distributable cash
flow (2)
|
$
|
11,274
|
$
|
-
|
$
|
19,190
|
$
|
-
|
Distributable cash flow
per common share –
basic and diluted (2)
|
$
|
0.32
|
$
|
-
|
$
|
0.55
|
$
|
-
|
Total common shares
outstanding (000s)
|
|
34,712
|
|
-
(3)
|
|
34,712
|
|
-
(3)
|
Total assets
|
$
|
876,497
|
$
|
-
|
$
|
876,497
|
$
|
-
|
Net debt
(2)
|
$
|
107,829
|
$
|
-
|
$
|
107,829
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
(1)
|
The comparable periods
presented are from the date of incorporation, May 11, 2021, to June
30, 2021.
|
(2)
|
See "Non-GAAP and Other
Financial Measures" in the Corporation's press release and
MD&A.
|
(3)
|
At June 30, 2021 only
one common share was outstanding which was subsequently redeemed by
the Corporation.
|
(4)
|
For the three and six
months ended June 30, 2022, Adjusted EBITDA includes $642 from its
proportionate share of RCC's Adjusted EBITDA.
|
OUTLOOK AND CORPORATE
UPDATE
Tidewater Renewables is pleased to deliver its third full
quarter of operations, generating solid Adjusted EBITDA of
$16.9 million and distributable cash
flow of $11.3 million. Tidewater
Renewables continues to exceed prior guidance and expectations with
2022 Adjusted EBITDA and 2023 Run Rate EBITDA expected to be at the
high end of the previously disclosed ranges of $50 - 55 million and $140 - 150 million, respectively (excluding any
additional value from CFR credits).
Construction of the Corporation's HDRD Complex continues to
progress with multiple key milestones being achieved through
summer. Tidewater Renewables expects the HDRD Complex to deliver
$90 - 100 million of Run Rate EBITDA
(excluding any additional value from CFR credits) once it is
commissioned in the first quarter of 2023. The Corporation's gross
capital cost expectations remain unchanged from previous guidance,
at approximately $235 million. The
Corporation continues to monitor macro-economic conditions,
including those that affect the global supply chain, and has
proactively accelerated the ordering of certain long and
medium-lead equipment to lock-in material costs and help mitigate
any potential supply-chain disruptions.
The Corporation remains hedged on approximately 50% and 30% of
the HDRD Complex's feedstock requirements through 2023 and 2024
respectively, as well as the majority of its Canola Co-Processing
feedstock.
CONFERENCE CALL
On July 27th, 2022 Tidewater
Midstream, the Corporation's majority shareholder and parent,
announced its financing plan to fully fund the repayment of
$125 million senior unsecured notes
and $20 million second lien term
loan. The note and second lien repayments will be funded through
proceeds from the announced unit offering and draws on an expanded
senior credit facility, in aggregate the Financing Plan ("Financing
Plan"). During the period prior to Financing Plan close, securities
regulation restricts issuers from certain marketing activities. To
comply with this requirement, Tidewater Midstream and the
Corporation will not be holding their regularly scheduled post
quarter earnings calls and expect to resume the practice following
their third quarter 2022 results. Management will be available for
investor relations engagement following the Financing Plan close,
currently expected to be on or about August
16, 2022.
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, 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.
NON-GAAP AND OTHER FINANCIAL
MEASURES
Throughout this press release and in other materials disclosed
by the Corporation, Tidewater Renewables uses a number of financial
measures when assessing its results and measuring overall
performance. The intent of non-GAAP measures and ratios is to
provide additional useful information to investors and analysts.
Certain of these financial measures do not have a standardized
meaning prescribed by GAAP and are therefore unlikely to be
comparable to similar measures presented by other entities. As
such, these measures should not be considered in isolation or used
as a substitute for measures of performance prepared in accordance
with GAAP. For more information with respect to financial measures
which have not been defined by GAAP, including reconciliations to
the closest comparable GAAP measure, see the "Non-GAAP and Other
Financial Measures" section of Tidewater Renewables' most recent
MD&A which is available on SEDAR.
Non-GAAP Financial
Measures
The non-GAAP financial measures used by the Corporation are
Adjusted EBITDA and distributable cash flow.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP measure. Adjusted EBITDA is
calculated as income (or loss) before finance costs, taxes,
depreciation, share-based compensation, unrealized gains/losses on
derivative contracts, non-cash items, transaction costs, lease
payments under IFRS 16 Leases and other items considered
non-recurring in nature plus the Corporation's proportionate share
of EBITDA in its equity investment.
The following table reconciles net income, the nearest GAAP
measure, to Adjusted EBITDA:
|
|
Three months
ended
June 30,
|
Six months ended
June 30,
|
(in thousands of
Canadian dollars)
|
|
2022
|
|
2021(1)
|
|
2022
|
|
2021(1)
|
Net income
(loss)
|
$
|
4,363
|
$
|
(735)
|
$
|
21,877
|
$
|
(735)
|
Deferred
income tax expense (recovery)
|
|
1,919
|
|
(265)
|
|
8,362
|
|
(265)
|
Depreciation
|
|
4,815
|
|
-
|
|
9,503
|
|
-
|
Finance
costs
|
|
1,410
|
|
-
|
|
2,184
|
|
-
|
Share-based compensation
|
|
904
|
|
-
|
|
1,354
|
|
-
|
Unrealized
loss (gain) on derivative contracts
|
|
2,876
|
|
-
|
|
(14,309)
|
|
-
|
Transaction costs
|
|
347
|
|
1,000
|
|
400
|
|
1,000
|
Adjustment
to share of profit from equity
accounted investments (2)
|
|
268
|
|
-
|
|
268
|
|
-
|
Adjusted
EBITDA
|
$
|
16,902
|
$
|
-
|
$
|
29,639
|
$
|
-
|
|
Notes:
|
(1)
|
The comparable periods
presented are for the date of incorporation, May 11, 2021 to June
30, 2021.
|
(2)
|
For the three and six
months ended June 30, 2022, Adjusted EBITDA includes $642 from its
proportionate share of RCC's Adjusted EBITDA.
|
Distributable Cash Flow
Distributable cash flow is a non-GAAP measure. Management
believes distributable cash flow is a useful metric for investors
when assessing the amount of cash flow generated from normal
operations. These cash flows are relevant to the Corporation's
ability to internally fund growth projects, alter its capital
structure, or distribute returns to shareholders. Distributable
cash flow is calculated as net cash provided by operating
activities before changes in non-cash working capital plus cash
distributions from investments, transaction costs, non-recurring
expenses, and after any expenditures that use cash from operations.
Changes in non-cash working capital are excluded from the
determination of distributable cash flow because they are primarily
the result of seasonal fluctuations or other temporary changes and
are generally funded with short-term debt or cash flows from
operating activities. Deducted from distributable cash flow are
maintenance capital expenditures, including turnarounds, as they
are ongoing recurring expenditures which are funded from operating
cash flows. Transaction costs are added back as they vary
significantly quarter to quarter based on the Corporation's
acquisition and disposition activity. It also excludes
non-recurring transactions that do not reflect Tidewater
Renewables' ongoing operations.
The following table reconciles net cash provided by operating
activities, the nearest GAAP measure, to distributable cash
flow:
|
|
Three months
ended
June 30,
|
Six months ended
June 30,
|
(in thousands of
Canadian dollars)
|
|
2022
|
|
2021(1)
|
|
2022
|
|
2021(1)
|
Net cash provided by
operating activities
|
$
|
13,903
|
$
|
-
|
$
|
33,188
|
$
|
-
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
Changes in non-cash
working capital
|
|
1,896
|
|
1,000
|
|
(4,764)
|
|
1,000
|
Transaction
costs
|
|
347
|
|
(1,000)
|
|
400
|
|
(1,000)
|
Interest and financing
charges
|
|
(446)
|
|
-
|
|
(1,002)
|
|
-
|
Payment of lease
liabilities
|
|
(1,434)
|
|
-
|
|
(2,905)
|
|
-
|
Maintenance
capital
|
|
(2,992)
|
|
-
|
|
(5,727)
|
|
-
|
Distributable cash
flow
|
$
|
11,274
|
$
|
-
|
$
|
19,190
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
(1)
|
The comparable periods
presented are for the date of incorporation, May 11, 2021 to June
30, 2021.
|
Run Rate EBITDA
Run Rate EBITDA is defined as the expected Adjusted EBITDA to be
generated by Tidewater Renewables' specific Renewable Assets, or
specific growth project, that corresponds to a full year of
operations at full capacity. Run Rate EBITDA excludes non-cash
items including depreciation and share-based compensation. The
calculation of Run Rate EBITDA is based on certain estimates and
assumptions. It should not be regarded as a representation, by the
Corporation or any other person, that Tidewater Renewables will
achieve such operating results. Investors should not place undue
reliance on the Run Rate EBITDA and should make their own
independent assessment of the Corporation's future results or
operations, cash flows and financial condition.
Run Rate EBITDA guidance related to the HDRD Complex includes
various assumptions including a renewable refinery margin of
$90/ bbl. The renewable refinery
margin is derived from vegetable oil strip pricing for the
Corporation's feedstocks, which are 50% and 30% hedged through 2023
and 2024 respectively, current diesel strip pricing and average BC
LCFS sale prices over the past 12-months. The renewable refinery
margin currently excludes any incremental value from CFR
credits.
Run Rate EBITDA guidance related to CFS credits, which is
excluded from other guidance, assumes that CFS credits can be sold
at an average price of $95/ credit,
based on the Corporation's previously announced forward sale.
Non-GAAP Financial
Ratios
Distributable Cash Flow Per Common Share
|
|
Three months
ended
June 30,
|
Six months ended
June 30,
|
(in thousands of
Canadian dollars except per share information)
|
|
2022
|
|
2021(1)
|
|
2022
|
|
2021(1)
|
Distributable cash
flow
|
$
|
11,274
|
$
|
-
|
$
|
19,190
|
$
|
-
|
Distributable cash flow
per share– basic
and diluted (2)
|
$
|
0.32
|
$
|
-
|
$
|
0.55
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
(1)
|
The comparable periods
presented are for the date of incorporation, May 11, 2021 to June
30, 2021.
|
(2)
|
At June 30, 2021 only
one common share was outstanding which was subsequently redeemed by
the Corporation.
|
Capital Management
Measures
Net Debt
Net debt is defined as bank debt, less cash. Net debt is used by
the Corporation to monitor its capital structure and financing
requirements. It is also used as a measure of the Corporation's
overall financial strength.
The following table reconciles net debt:
(in thousands of
Canadian dollars)
|
|
June 30,
2022
|
Senior Credit
Facility
|
$
|
110,000
|
RNG Credit
Facility
|
|
7,900
|
Cash
|
|
(10,071)
|
Net
debt
|
$
|
107,829
|
ADVISORY REGARDING FORWARD-LOOKING
STATEMENTS
Certain statements contained in this press release constitute
forward-looking statements and forward-looking information
(collectively referred to herein as, "forward-looking statements")
within the meaning of applicable Canadian securities laws. Such
forward-looking statements relate to future events, conditions or
future financial performance of Tidewater Renewables based on
future economic conditions and courses of action. All statements
other than statements of historical fact may be forward-looking
statements. Such forward-looking statements are often, but not
always, identified by the use of any words such as "seek",
"anticipate", "budget", "plan", and similar expressions. These
statements involve known and unknown risks, assumptions,
uncertainties and other factors that may cause actual results or
events to differ materially from those anticipated in such
forward-looking statements. The Corporation believes the
expectations reflected in those forward-looking statements are
reasonable, but no assurance can be given that these expectations
will prove to be correct and such forward-looking statements
included in this press release should not be unduly relied
upon.
In particular, this press release contains forward-looking
statements pertaining to, but not limited to, the following: the
expected financial performance of the Corporation's capital
projects and assets including, the Renewables Assets; the
expectation that the Corporation wil be able to grow its revenue,
actively maintain and manage its capital projects and assets,
including the Renewables Assets, and achieve growth by selectively
pursuing strategic business development opportunities; following
the commencement of operations, including underlying assumptions;
estimates of EBITDA and Run Rate EBITDA; guidance with respect to
forecasted consolidated Adjusted EBITDA and expected growth related
thereto; the Corporation's business plans and strategies, including
the underlying existing assets and capital projects, and the
success and timing of the projects and related milestones and
capital costs; the Corporation's operational and financial
performance, including expectations regarding generating revenue,
revenues and operating expenses; the ability to leverage existing
infrastructure and engineering expertise of Tidewater Midstream
regarding development of the Corporation's projects and product
offerings; anticipated revenue from future sales of BC LCFS
Credits; the ability of the Corporation to progress its feedstock
strategy; the future price and volatility of commodities; the
future pricing of BC LCFS Credits and credits issued pursuant to
the CFS ("CFS Credits"); expectations around the Corporation's
receipt of BC LCFS Credits and CFS Credits; and the availability,
future price and volatility of feedstocks and other inputs.
Although the forward-looking statements contained in this press
release are based upon assumptions which management of the
Corporation believes to be reasonable, the Corporation cannot
assure investors that actual results will be consistent with these
forward-looking statements. With respect to forward-looking
statements contained in this press release, the Corporation has
made assumptions regarding, but not limited to: Tidewater
Renewables' ability to execute on its business plan; the timely
receipt of all third party, governmental and regulatory approvals
and consents sought by the Corporation including with respect to
the Corporation's projects and applications; general economic and
industry trends, including the duration and effect of the COVID-19
pandemic; operating assumptions relating to the Corporation's
projects; expectations around level of output from the
Corporation's projects, including assumptions relating to
feedstock supply levels; timing and cost of completion of
the HDRD Complex, including that the project will remain on
budget and on schedule; the ownership and operation of Tidewater
Renewables' business; regulatory risks, including changes or delay
to the BC LCFS Credits or CFS Credits; the expansion of production
of renewable fuels by competitors; the future pricing of BC LCFS
Credits and CFS Credits; future commodity and renewable energy
prices; sustained or growing demand for renewable fuels;
ability for the Corporation to successfully turn a wide variety of
renewable feedstocks into low carbon fuels; and the other
assumptions set forth in the Corporation's most recent annual
information form available under the Corporation's profile on SEDAR
at www.sedar.com.
The foregoing lists are not exhaustive. Additional
information on these and other factors which could affect the
Corporation's operations or financial results are set forth in the
Corporation's most recent Annual Information Form and in other
document in file with the Canadian Securities regulatory
authorities available under the Corporation's profile on SEDAR at
www.sedar.com.
The Corporation's actual results could differ materially from
those anticipated in the forward-looking statements, as a result of
numerous known and unknown risks and uncertainties and other
factors including, but not limited to: changes in supply and demand
for low carbon products; general economic, political, market and
business conditions, including fluctuations in interest rates,
foreign exchange rates, supply chain pressures, inflation, stock
market volatility and supply/demand trends; risks of health
epidemics, pandemics and similar outbreaks, including COVID-19,
which may have sustained material adverse effects on the
Corporation's business, financial position, results of operations
and/or cash flows; risks and liabilities inherent in the operations
related to renewable energy production and storage infrastructure
assets, including the lack of operating history and risks
associated with forecasting future performance; competition for,
among other things, third-party capital, acquisition opportunities,
requests for proposals, materials, equipment, labour, and skilled
personnel; risks related to the environment and changing
environmental laws in relation to the operations conducted with the
Renewable Assets and the Corporation's other capital projects; and
the other risks set forth in the Corporation's most recent annual
information form available under the Corporation's profile on SEDAR
at www.sedar.com.
The foregoing lists are not exhaustive. Additional information
on these and other factors which could affect the Corporation's
operations or financial results are included in the Corporation's
most recent Annual Information Form and in other documents on file
with the Canadian Securities regulatory authorities at
www.sedar.com.
Management of the Corporation has included the above summary of
assumptions and risks related to forward-looking statement provided
in this press release in order to provide holders of common shares
in the capital of the Corporation with a more complete perspective
on the Corporation's current and future operations and such
information may not be appropriate for other purposes. The
Corporation's actual results' performance or achievement could
differ materially from those expressed in, or implied by, these
forward-looking statements and, accordingly, no assurance can be
given that any of the events anticipated by the forward-looking
statements will transpire or occur, or if any of them do occur,
what benefits the Corporation will derive therefrom. Readers are
therefore cautioned that the foregoing list of important factors is
not exhaustive, and they should not unduly rely on the
forward-looking statements included in this press release.
Tidewater Renewables does not undertake any obligation to update
publicly or to revise any of the included forward-looking
statements, whether as a result of new information, future events
or otherwise, other than as required by applicable securities law.
All forward-looking statements contained in this press release are
expressly qualified by this cautionary statement. Further
information about factors affecting forward-looking statements and
management's assumptions and analysis thereof is available in the
Corporation's most recent Annual Information Form and other filings
made by the Corporation with Canadian provincial securities
commissions available under the Corporation's profile on SEDAR at
www.sedar.com.
Financial Outlook
This press release contains future-oriented financial
information and financial outlook information (collectively,
"FOFI") about expectations regarding financial results for 2022 and
2023, including Adjusted EBITDA, and annual Run Rate EBITDA, which
are subject to the same assumptions, risk factors, limitations,
and qualifications as set out under the heading "Forward-Looking
Information". The actual financial results of the Corporation may
vary from the amounts set out herein and such variation may be
material. The Corporation and its management believe that the
financial outlook has been prepared on a reasonable basis,
reflecting management's best estimates and judgments and the FOFI
contained in this press release was approved by management as of
the date hereof. However, because this information is subjective
and subject to numerous risks, it should not be relied on as
necessarily indicative of future results. Except as required by
applicable securities laws, the Corporation undertakes no
obligation to update such FOFI. FOFI contained in this press
release was made as of the date hereof and was provided for the
purpose of providing further information about the Corporation's
anticipated future business operations on an annual basis. Readers
are cautioned that the FOFI contained in this press release
should not be used for purposes other than for which it is
disclosed herein.
SOURCE Tidewater Renewables Ltd.