LCFS Tidewater Renewables Ltd

CALGARY, AB, May 11, 2023 /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 for the period ended March 31, 2023.

FIRST QUARTER 2023 HIGHLIGHTS & OPERATIONAL UPDATE

• The HDRD Complex is expected to reach commercial production by the end of Q2 2023. The gross project cost forecast remains in line with previous guidance (approximately $342 million) and the project's economics remain attractive with payback expected within 2 - 3 years.
• In the first quarter of 2023, Tidewater Renewables generated $12.6 million of Adjusted EBITDA⁽¹⁾, consistent with $12.7 million in the first quarter of 2022. Net loss attributable to shareholders was $21.5 million for the first quarter of 2023, compared to net income attributable to shareholders of $17.5 million in the first quarter of 2022. The principal cause of the Q1 2023 net loss attributable to shareholders was $37.0 million of non-cash unrealized losses on derivative contracts associated with decreases in forward feedstock pricing.
• The Corporation is forecasting a gradual production ramp-up of the HDRD Complex in the second half of 2023, with an average utilization rate between 75 – 80% of its design capacity. Based on this utilization, second-half 2023 corporate Adjusted EBITDA⁽¹⁾ is expected to range between $50 – 60 million, inclusive of $35 – 45 million of Adjusted EBITDA⁽¹⁾ from the HDRD Complex. When the HDRD Complex is operating at its design capacity, annualized corporate run rate EBITDA⁽¹⁾ is expected to range between $130 – 155 million.
• On May 10, 2023, the Corporation amended its Senior Credit Facility and its AIMCo Facility, providing a temporary increase of $25.0 million each, for a combined total of $50.0 million. These amounts are repayable in variable quarterly installments based on the Corporation's cash flows following the commissioning of the HDRD Complex. Funding remains subject to customary closing procedures.
• On April 13, 2023, the Corporation announced that it had obtained additional capital emissions credits related to the HDRD Complex, which were sold to third parties for proceeds of $43.2 million. These proceeds, combined with the $50.0 million of additional debt capacity, provide Tidewater Renewables with ample liquidity to complete the commissioning of its HDRD Complex.
• On April 24, 2023, Tidewater Renewables published its inaugural Environmental, Social and Governance ("ESG") report. The report highlights the Corporation's commitment to responsible energy development, its approach to sustainability, recent accomplishments and other material items that will drive the success of Tidewater Renewables' long-term ESG goals. The report is available on the Corporation's website at www.tidewater-renewables.com.

"We are excited to be approaching the start-up of Canada's first renewable diesel facility and proud that we have hit the 95% complete mark on the project with an impeccable safety record. The additional $93.2 million of debt capacity and emissions credits secured by the team in the past two months will provide the Corporation with significant cushion as we move through start-up and sets up future growth projects." states Interim CEO Rob Colcleugh.

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 period ended March 31, 2023, 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

OUTLOOK AND CORPORATE UPDATE

The Corporation's immediate focus remains on the safe and successful commissioning of Canada's first standalone renewable diesel facility. Following the commissioning of the HDRD Complex, Tidewater Renewables will be among Canada's first sizable producers of BC LCFS credits and federal clean fuel regulation ("CFR") credits. The Corporation continues to see strong industry fundamentals, including robust prices for renewable fuels and strong demand for environmental credits. This demand is supported by escalating compliance requirements and voluntary environmental commitments. Tidewater Renewables continues to work with various counterparties to achieve their compliance requirements, fulfill their ESG commitments and meet their energy needs.

After the HDRD Complex is successfully commissioned, the Corporation is dedicated to strengthening its financial position, repaying debt and progressing the development of the RNG Facility for the remainder of 2023. Tidewater Renewables continues to observe robust social and government support for the energy transition and the incremental Adjusted EBITDA from the HDRD Complex is expected to launch the next phase of the Corporation's growth.

CONFERENCE CALL

In conjunction with the earnings release, investors will have the opportunity to listen to Tidewater Renewables' senior management review its first quarter 2023 results via conference call on Thursday, May 11, 2023, at 10:00 am MDT (12:00 pm EDT).

To access the conference call by telephone, dial 416-764-8659 (local / international participant dial in) or 1-888-664-6392 (North American toll free participant dial in). A question and answer session for analysts will follow management's presentation. A live audio webcast of the conference call will be available by following this link: https://app.webinar.net/qem6WBdKQ2n will also be archived there for 90 days.

For those accessing the call via Cision's investor website, we suggest logging in at least 15 minutes prior to the start of the live event. For those dialing in, participants should ask to be joined into the Tidewater Renewables Ltd. earnings call.

ABOUT TIDEWATER RENEWABLES

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. Organically, Tidewater Renewables seeks to leverage the existing infrastructure and engineering expertise of Tidewater Midstream and Infrastructure Ltd., 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, distributable cash flow and run rate EBITDA.

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:

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:

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 contains 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 approximately 50% hedged through 2023 and 2024, current diesel strip pricing, the Corporation's previously announced CFR credit sales and average BC LCFS credits sale prices over the past 12-months.

Non-GAAP Financial Ratios

Distributable Cash Flow Per Common Share

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:

FORWARD-LOOKING INFORMATION

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 operational and financial performance of the Corporation's Renewable Assets, including the HDRD Complex and the RNG Facility, as well as expectations regarding generating revenue, revenues and operating expenses; the expectation that the Corporation will be able to grow its revenue, actively maintain and manage its Renewable Assets, including the HDRD Complex and the RNG Facility, and achieve growth by selectively pursuing strategic business development opportunities; the Corporation's business plans and strategies, including the underlying existing assets and capital projects, and the success and timing of its projects and related milestones and capital costs; the expectation that the Corporation will continue to see strong industry fundamentals, including robust prices for renewable fuels and strong demand for environmental credits, driven by escalating compliance requirements and new voluntary commitments; the expectation that the HDRD Complex will be, when commissioned, Canada's first standalone renewable diesel facility; the expectation that the HDRD Complex is approaching commercial production by the end of Q2 2023; the expectation that the HDRD Complex will undergo a gradual production ramp-up in the second half of 2023, with an average utilization rate between 75 – 80% of its design capacity; the expectation that the gross project costs for the HDRD Complex will be approximately $342 million and the project's payback is expected within two to three years; estimates of, and guidance with respect to forecasted run rate EBITDA for the HDRD Complex and Adjusted EBITDA for both the Corporation and the HDRD Complex, including (i) the expectation that the HDRD Complex will contribute approximately $35 – 45 million of Adjusted EBITDA ($70 – 90 million annualized) in the second half of 2023, (ii) the expectation that second-half 2023 corporate Adjusted EBITDA will range between $50 – 60 million, inclusive of $35 – 45 million of Adjusted EBITDA from the HDRD Complex, and (iii) the expectation that the HDRD Complex will generate annualized run rate EBITDA of between $90 – 115 million when the it is operating at its design capacity; the ability to leverage existing infrastructure, regulatory frameworks, and engineering expertise of Tidewater Midstream regarding development of the Corporation's projects and product offerings; the ability of the Corporation to progress its feedstock strategy; the future price and volatility of commodities, including that majority of the underserved regional demand will continue to be served by the PGR; expectations around the Corporation's receipt of BC LCFS credits and CFR credits; anticipated revenue from future sales of BC LCFS credits and CFR credits, including future pricing thereof; the expectation that both (i) the combined $50.0 million of additional debt capacity with its existing creditors and (ii) the receipt of $43.2 million of proceeds from the sale of incremental capital emissions credits, will be sufficient to complete and commission the HDRD Complex; the expectation that the Corporation will continue to make payments under, and comply with the covenants in, both its Senior Credit Facility and the AIMCo Facility; the expectation that the combined $50.0 million of additional debt capacity with its existing creditors will be repaid within the next 12 months; 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 approval related to the RNG Facility and other 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 credit or CFR credit systems; the expansion of production of renewable fuels by competitors; the future pricing of BC LCFS credits and CFR credits; future commodity and renewable energy prices; sustained or growing demand for renewable fuels; the ability for the Corporation to successfully turn a wide variety of renewable feedstocks into low carbon fuels; changes in the credit-worthiness of counterparties; the Corporation's future debt levels and its ability to repay its debt when due; the Corporation's ability to continue to satisfy the terms and conditions of its credit facilities; the continued availability of the Corporation's credit facilities; the Corporation's ability to obtain additional debt and/or equity financing on satisfactory terms; the Corporation's ability to manage liquidity by working with its current capital providers and other sources and through the sale of BC LCFS credits and CFR credits; foreign currency, exchange, inflation and interest rate risks; and the other assumptions set forth in the Corporation's most recent AIF 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 AIF and in other documents on 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; risks related to and the other risks set forth in the Corporation's most recent AIF 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 AIF 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 statements 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 from them. 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 AIF 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 2023 and 2024, 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.