LCFS Tidewater Renewables Ltd

CALGARY, AB, May 9, 2024 /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 months ended March 31, 2024.

FIRST-QUARTER HIGHLIGHTS

• During the first quarter of 2024, Tidewater Renewables generated record Adjusted EBITDA⁽¹⁾ of $25.3 million and net income attributable to shareholders of $7.7 million, inclusive of $8.1 million of realized losses on derivative contracts. Net cash provided by operating activities totaled $40.5 million and record distributable cash flow⁽¹⁾ of $12.8 million.
  
  
• Tidewater Renewables' first-quarter 2024 results were driven by the progressive improvements in throughput and reliability at the Renewable Diesel & Renewable Hydrogen ("HDRD Complex"). During the first quarter of 2024, the HDRD Complex averaged daily throughput of approximately 2,120 bbl/d, representing a 71% utilization rate. Initial operating results for April 2024 show continued improvement, with a utilization rate of approximately 95%. Tidewater Renewables expects the HDRD Complex to exceed a full-year 2024 utilization rate of 85%, representing an average daily throughput of 2,550 bbl/d (previously 2,400 – 2,600 bbl/d).
  
  The HDRD Complex's operating performance was supported by robust demand for renewable fuels and record Canadian emissions credit pricing.
  
  
• While meeting its customers' requests for renewable fuel blends, Tidewater Renewables synergistically expanded Tidewater Midstream and Infrastructure Ltd. ("Tidewater Midstream") market access. During the first quarter of 2024, the Corporation blended approximately 9.8 million liters of its renewable diesel with 23.6 million liters of Tidewater Midstream's conventional diesel fuel, offering its customers a sustainable and resource-efficient solution for their ESG and energy needs.
  
  
• During the first quarter of 2024, Tidewater Renewables made significant progress on the front-end engineering design of its proposed 6,500 bbl/d sustainable aviation fuel ("SAF") project. This included integrating lessons learned from the HDRD Complex into the SAF project's design basis. During the first quarter of 2024, the Corporation received emissions credits for achieving its first milestone under an executed incentive agreement. These credits were sold to an investment-grade counterparty under a previously announced purchase commitment. The Corporation continues to progress commercial arrangements and is evaluating potential offtake agreements for the SAF project. The SAF project remains subject to a final investment decision, which is expected in 2025.
  
  
• In the first quarter of 2024, Tidewater Renewables met its financial covenants, repaid $27.7 million of debt under its Senior Credit Facility and significantly improved its liquidity. Tidewater Renewables is working collaboratively with its lenders to extend its Senior Credit Facility.
  
  
• The Corporation is pleased to welcome Mr. Todd Moser to its Board of Directors. Mr. Moser brings over 35 years of refining, biofuel and environmental experience to Tidewater Renewables. Mr. Moser's previous roles include senior leadership positions at Petro-Canada, Maple Leaf Foods and most recently as President & CEO of Terrapure Environmental. Mr. Moser also has extensive board experience including service with the Canadian Renewable Fuels Association and the National Renderers Association.
  
  Mr. Moser has agreed to serve as an independent member on the Corporation's Audit Committee, Independence Committee, and Governance, Compensation, Safety and Sustainability Committee. In conjunction with Mr. Moser's appointment, Jeremy Baines is relinquishing his temporary position on the Audit Committee. This ends the Corporation's reliance on Section 3.5 of National Instrument 52-110, following the resignation of John Adams announced on April 22, 2024. The Corporation is pleased to have improved its governance ahead of its annual general meeting.
  
  "I believe that Tidewater Renewables' first-quarter performance highlights our focus on operational excellence and continuous improvement. During the first quarter of 2024, we stabilized the HDRD Complex's operations, expanded our commercial network and significantly improved our financial position. We are also proud of our renewable diesel, which offers Canadians a viable low-carbon alternative without the need for costly infrastructure replacement. I am confident that these hard-fought achievements and our feasible environmental solution will position Tidewater Renewables for success in the future." – Jeremy Baines, Chief Executive Officer

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 months ended March 31, 2024, which are available under the Corporation's profile on SEDAR+ at www.sedarplus.ca and on its website at www.tidewater-renewables.com.

Financial Highlights

OUTLOOK AND CORPORATE UPDATE 

Tidewater Renewables' primary focus continues to be on maintaining a high and consistent utilization rate at the HDRD Complex. The Corporation expects the HDRD Complex to exceed an average 2024 throughput of 2,550 bbl/d, inclusive of the approximate 2,120 bbl/d of throughput in the first quarter of 2024. During 2024, the Corporation also expects to optimize the HDRD Complex's operating costs, extend its Senior Credit Facility and progress the engineering design on its announced SAF project.

In line with its objectives, Tidewater Renewables expects to execute a restrained 2024 capital program significantly offset by government funding. The Corporation's 2024 maintenance capital expenditures are expected to be approximately $7.0 million.

CONFERENCE CALL

In conjunction with the earnings release, investors will have the opportunity to listen to Tidewater Renewables' senior management review its first quarter 2024 results via a conference call on Thursday, May 9, 2024 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/7qvdLRXOEZ9 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. 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.sedarplus.ca 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 non-GAAP financial measure, non-GAAP ratios, capital management measures and supplementary financial measures when assessing its results and measuring overall performance which do not have standardized meanings as prescribed under International Financial Reporting Standards, which are also generally accepted accounting principles ("GAAP") for publicly accountable entities in Canada. Such measures and ratios are considered non-GAAP financial measures ("non-GAAP measures") and non-GAAP financial ratios ("non-GAAP ratios"), respectively. The intent of non-GAAP measures and non-GAAP ratios is to provide additional useful information to investors and analysts as further described below. These non-GAAP measures and non-GAAP ratios are 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 the Corporation's non-GAAP measures, non-GAAP ratios, capital management measures and supplementary financial measures, including reconciliations to the closest comparable GAAP measure for any non-GAAP measures and non-GAAP ratios, see the "Non-GAAP and Other Financial Measures" section of Tidewater Renewables' MD&A which is available on SEDAR+ at www.sedarplus.ca.

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 Adjusted EBITDA in its equity investment.

Adjusted EBITDA is used by management to set objectives, make operating and capital investment decisions, monitor debt covenants and assess performance. The Corporation issues guidance on Adjusted EBITDA and believes that it is useful for analysts and investors to assess the performance of the Corporation as seen from management's perspective. Investors should be cautioned that Adjusted EBITDA should not be construed as an alternative to net income, net cash provided by operating activities or other measures of financial results determined in accordance with GAAP. Investors should also be cautioned that Adjusted EBITDA as used by the Corporation may not be comparable to financial measures used by other companies with similar calculations.

The following table reconciles net income (loss), 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 the Corporation's 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. Maintenance capital expenditures, including turnarounds, are deducted from distributable cash flow 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. Distributable cash flow 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:

Non-GAAP Financial Ratios 

Distributable cash flow per common share (basic and diluted)

Distributable cash flow per common share is calculated as distributable cash flow over the weighted average number of common shares outstanding for the three months ended March 31, 2024.

Distributable cash flow is a non-GAAP financial measure. Management believes that distributable cash flow per common share provides investors an indicator of funds generated from the business that could be allocated to each shareholder's equity position.

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:

Supplementary Financial Measures

Growth Capital

Growth capital expenditures are defined as expenditures which are recoverable, incrementally increase cash flow or the earning potential of assets, expand the capacity of current operations, or significantly extend the life of existing assets. This measure can be used by investors to assess the Corporation's discretionary capital spending in light of the value that such spending brings to the Corporation.

Maintenance Capital

Maintenance capital expenditures are generally defined as expenditures that support and/or maintain the current capacity/cash flow or earning potential of existing assets without the characteristic benefits associated with growth capital expenditures. These expenditures include major inspections and overhaul costs that are required on a periodic basis. This measure can be used by investors to assess the Corporation's non-discretionary capital spending.

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", "expect" 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 HDRD Complex; the Corporation's ability to optimize the HDRD's operating costs; expectations regarding the Corporation's utilization rate and throughput at the HDRD Complex; the Corporation's continued ability to convert feedstock into low carbon fuels; the Corporation's ability to negotiate and enter into offtake agreements with investment grade counterparties, including with respect to the SAF project; the expectation that the Corporation will be able to grow its revenue, actively maintain and manage its capital projects and assets 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 the projects and related milestones and capital costs; expectations related to the SAF facility including costs and regulatory approval thereof, timing of construction thereof and anticipated production therefrom; the ability to leverage existing infrastructure and engineering expertise of Tidewater Midstream regarding development of the Corporation's projects and product offerings; the future price and volatility of commodities; the Corporation's ability to execute a restrained 2024 capital program significantly offset by government funding; expectations related to the Corporation's maintenance capital program for 2024; and the Corporation's ability to negotiate and refinance its Senior Credit Facility and the Additional Debt Capacity under its Term Facility.

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; general economic and industry trends; 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; the ownership and operation of Tidewater Renewables' business; regulatory risks; the expansion of production of renewable fuels by competitors; the future pricing of environmental 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 environmental 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.sedarplus.ca.

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 Corporation's ability to refinance its Senior Credit Facility and Term Debt Facility on acceptable terms; the risk that the Corporation's Senior Credit Facility and the applicable portions of the Term Debt Facility may not be renewed or extended beyond the August 18, 2024, or may not be renewed or extended at the same level; risks related to the environment and changing environmental laws in relation to the operations conducted with the Corporation's 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.sedarplus.ca.

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, its MD&A and in other documents on file with the Canadian Securities regulatory Administrators available under the Corporation's profile on SEDAR+ at www.sedarplus.ca.

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.sedarplus.ca.

Financial Outlook

This press release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about expectations regarding financial results for 2024 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.