TWM Tidewater Midstream and Infrastructure Ltd

CALGARY, AB, March 9, 2023 /CNW/ - Tidewater Renewables Ltd. ("Tidewater Renewables" or the "Corporation") (TSX: LCFS) is pleased to announce that it has filed its annual consolidated financial statements and Management's Discussion and Analysis ("MD&A") for the year ended December 31, 2022.

FOURTH QUARTER 2022 HIGHLIGHTS

• Tidewater Renewables completed its first full year of operations with net income attributable to shareholders of $25.9 million, Adjusted EBITDA⁽¹⁾ of $62.4 million and distributable cash flow⁽¹⁾ of $38.1 million. The Corporation exited 2022 with strong fourth quarter results, including net income attributable to shareholders or $14.1 million, compared to $0.1 million in the fourth quarter of 2021. Adjusted EBITDA⁽¹⁾ also increased to $16.7 million in the fourth quarter of 2022, compared to $10.6 million in the fourth quarter of 2021, representing a 57% increase. Net cash provided by operating activities was $29.1 million for the fourth quarter of 2022, with distributable cash flow⁽¹⁾ of $9.4 million.
• On December 16, 2022, the Corporation executed a renewable diesel offtake agreement with an investment grade partner to sell approximately 50% of the HDRD Complex's production through to the end of 2024.
• The Corporation anticipates that the HDRD Complex will scale up production gradually 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 October 17, 2022, the Corporation announced that it entered a 20-year RNG offtake agreement with FortisBC Energy Inc. ("FortisBC"), whereby FortisBC expects to purchase up to 100% of the Corporation's production from its announced RNG Facility in Foothills County, Alberta (the "RNG Facility"). Tidewater Renewables continues to advance the facility's engineering design and regulatory applications.
• On October 24, 2022, the Corporation announced the closing of a $150 million five-year senior secured second lien credit facility (the "AIMCo Facility") with an affiliate of Alberta Investment Management Corporation ("AIMCo"). The AIMCo Facility initially bears interest of 6.50% per annum, increases by 37.5 basis points in year four & year five and is subject to certain inflation escalators. In conjunction with the AIMCo Facility, Tidewater Renewables issued 3.375 million warrants to AIMCo. Each warrant entitles the holder to purchase one common share of Tidewater Renewables at a price of $14.84, subject to certain adjustments, for a term of five years.

HDRD COMPLEX UPDATE

• Tidewater Renewables has safely completed an active year of construction on its HDRD Complex. Completion is expected by mid-April 2023, with commissioning beginning at the end of the first quarter and commencement of operations in the second quarter of 2023.

The HDRD Complex has endured material cost pressures, including a challenging labour market, supply chain issues, specialty metal shortages, select contractor underperformance and general cost inflation. The current estimated gross project cost, including commissioning, is approximately $342 million (vs. the previous estimate of $260 million). Gross project costs are expected to be offset by an estimated $125 million of BC LCFS credits issued by the Government of British Columbia, under a Part 3 agreement, for achieving certain construction milestones.

Tidewater Renewables expects to fund the remaining project costs through the sale of BC LCFS credits and with the support of its current capital providers, among other sources. During the first half of 2023, the Corporation expects to receive proceeds of approximately $53 million for the sale of BC LCFS credits, under executed agreements. Despite the cost pressures, the project's economics remain attractive, and payback is expected in less than three years of operations.

• As the HDRD Complex ramps-up in the second half of 2023, it is expected to operate at between 75 – 80% of its design capacity and contribute approximately $35 – 45 million of Adjusted EBITDA ($70 – 90 million annualized). When the HDRD Complex is operating at its design capacity, it is expected to generate annualized run rate EBITDA of between $90 – 115 million.

Selected financial and operating information are outlined below and should be read with the Corporation's consolidated financial statements and related MD&A for the year ended December 31, 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

ANNUAL OUTLOOK AND CORPORATE UPDATE

For 2023, Tidewater Renewables continues to observe strong industry fundamentals including robust prices for renewable fuels, strong demand for environmental credits, durable government support and expanding environmental commitments & targets. The Corporation's focus remains on safely and successfully commissioning Canada's first renewable diesel facility. The incremental Adjusted EBITDA from the HDRD Complex is expected to launch the next phase of Tidewater Renewables' growth.

During the first half of 2023, the Corporation plans to concentrate its capital program on the commissioning of the HDRD Complex and supporting the planned turnaround at PGR in the second quarter of 2023. Tidewater Renewables expects 2023 maintenance capital to range from $14 million to $16 million with the majority related to the planned turnaround of its renewable fuel assets at the Prince George refinery.

CONFERENCE CALL

In conjunction with the earnings release, investors will have the opportunity to listen to Tidewater Renewables' senior management review its fourth quarter 2022 results via a joint conference call with Tidewater Midstream and Infrastructure Ltd. on Thursday, March 9, 2023 at 11:00 am MDT (1:00 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/wPl5R0OLOB4 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 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, that utilize existing proven technologies. 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 50% and 40% hedged through 2023 and 2024, respectively, current diesel strip pricing, the Corporation's previously announced Canadian Clean Fuel Regulation credit sales 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:

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 Renewable Assets; the expectation that the Corporation will be able to grow its revenue, actively maintain and manage its capital projects and assets, including the Renewable Assets, and achieve growth by selectively pursuing strategic business development opportunities; estimates of, and guidance with respect to forecasted, Adjusted EBITDA and run rate EBITDA; 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; 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 CFR credits issued pursuant to the CFR; 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; 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 credits or CFR credits; 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. foreign currency, exchange, inflation and interest rate risks;‎ ‎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 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 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 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 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 MD&A 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.