Cielo Waste Solutions Corp. (TSXV:CMC; OTCQB:CWSFF)
(
“Cielo” or the
“Company”), a
waste-to-fuel environmental technology company, is pleased to
announce that it has entered into a binding letter of intent (the
“
LOI”) with Renewable U Energy Inc., on its own
behalf and on behalf of its affiliates (jointly, severally and
collectively “
Renewable U”), regarding the
memorandums of understanding (each an “
MOU” and
collectively the “
MOUs”) entered into between
Cielo and Renewable U between 2018 and 2021. The LOI provides for
the intention of Cielo and Renewable U to enter into definitive
agreements in the coming weeks regarding the restructuring of
Renewable U’s proposed investment in Cielo’s first commercial
facility. The transactions proposed in the LOI would result in the
participation of Renewable U in the Dunmore Entity (as defined
below) (or other form of repayment as described below) and
consequent termination of the MOUs, and the concurrent acquisition
of the land owned by Renewable U in Dunmore, Alberta (the
“
Land”), on which Cielo intends to build its first
full-scale facility (the “
Dunmore Facility”).
Jasdeep K. Dhaliwal, CFO of Cielo, stated
“Renewable U has been a long-term partner of Cielo and we look
forward to moving ahead with Renewable U’s proposed restructured
investment in our first facility. The revised structure of
Renewable U’s investment will afford Cielo the ability to work with
Crestmont and other potential partners in addition to Renewable U.
The purchase of the land will also allow Cielo the control to move
the development of our first facility forward. We believe this is
of tremendous value and we appreciate Renewable U’s continuing
support in our journey to commercialization.”
Raphael Bohlmann, CEO of Renewable U
Energy Inc., stated “We have always believed in Cielo and their
vision to convert various waste to fuel products in
the sustainable energy sector. The renewed focus of Cielo
led by senior management has provided us the confidence to continue
our investment into Cielo and our planned project in
Dunmore.”
Background
As previously disclosed, Cielo and Renewable U
had entered into the MOUs between the years 2018 and 2021 with the
intention of forming joint ventures for nine (9) territories (each
a “Territory”, collectively the
“Territories”) in aggregate.
Pursuant to the terms of the MOUs, Renewable U
had delivered to Cielo CAD $250,000 per Territory for an aggregate
amount equal to $2,250,000 (the “Fees”). The
initial five (5) MOUs entered into between the years 2018 and 2020
provided for the repayment of the corresponding Fees, if
applicable, by issuing common shares of Cielo at the greater of:
$0.25 per share; and the average of the closing price on the five
(5) most recent trading days. The latter four (4) MOUs
(collectively the “2021 MOUs”) provided for the
repayment of the corresponding Fees, if applicable, by way of
repayment in cash.
It had been the intention of Cielo and Renewable
U that the first commercial facility to be constructed pursuant to
the MOUs would be in Dunmore, Alberta. In anticipation of the
foregoing, Renewable U had acquired close to eighty acres of land
in Dunmore (the “Land”) and incurred related
costs.
The Land is located next to the CP Rail yard
located in Dunmore, Alberta. In addition to the proximity to the CP
Rail Dunmore yard, the location is also at the intersection of a
significant trade corridor linking both Eastern and Western Canada
as well as the United States that allows Cielo access to a broad
market. Management believes this to be beneficial to Cielo, as
previously disclosed, it is Cielo’s initial and primary intention
that the Dunmore Facility process railway ties for CP Rail. Also,
as previously disclosed, Cielo and CP Rail are party to an
agreement pursuant to which CP Rail has agreed to deliver railway
ties to Cielo for a tipping fee.
Current Planning for Dunmore Facility
and Entity
On April 10, 2023, Cielo announced that, as a
part of the Company’s commitment to construct its first commercial
full-scale facility, it had begun the process of structuring and
financing the venture through which the facility will be held, and
that it has been engaged in discussions with third parties, such as
Renewable U, regarding the participation of such third parties in
the financing of this facility, which is intended to be the Dunmore
Facility.
Restructuring of Renewable U
Investment
The Company and Renewable U have continued
discussions throughout and since the period during which the MOUs
were signed and have determined it to be in the best interests of
the respective parties to restructure the nature of the investment
of Renewable U in Cielo’s commercialization efforts in a way that
is beneficial to both parties, such as the proposed participation
of Renewable U in the Dunmore Entity and resulting in the
consequent termination of the MOUs.
As described in further detail below, the LOI
contemplates the exchange of a majority of Renewable U’s interest
in nine (9) of Cielo’s future commercial facilities (CAD $2 million
deemed value) into an interest in the first commercial facility, a
securities debt transaction for the remaining interest (CAD $1
million value), and the sale of the Land on which the Dunmore
Facility is to be built by Renewable U to Cielo, and the resulting
termination of the MOUs for the nine (9) Territories.
The parties intend to enter into definitive
agreements in the coming weeks incorporating the terms below. If
all contemplated agreements are not executed by May 15th, 2023,
unless otherwise agreed by the parties, the LOI will terminate.
As Ryan Jackson, CEO and a director of Cielo,
owned and/or controlled, indirectly, securities of Renewable U at
the time recent discussions were initiated regarding the
restructuring of Renewable U’s investment (which securities have
since been deposited into an irrevocable blind trust managed by a
trustee), Cielo formed a special committee of two (2) independent
directors of Cielo, to evaluate and make recommendations to the
Board of Directors of the Company in this regard. The special
committee will be dissolved upon the completion of the transactions
contemplated in the LOI.
All of the agreements and transactions
contemplated above are subject to the approval of the TSX Venture
Exchange (the “Exchange”), as required. No finder
fees or commissions are payable to any third party in connection
with any of the transactions contemplated in the LOI or Offer to
Purchase (as defined below). All securities of Cielo to be issued
pursuant to the LOI (or resulting definitive agreements) will be
subject to a hold period of four (4) months following the issuance
thereof.
2021 MOUs (4 of 9 Territories)
As stated above, Renewable U delivered Fees of
$1 million ($250,000 per Territory for four (4) Territories) for
the 2021 MOUs, termination of the 2021 MOUs would require Cielo to
repay the corresponding Fees in cash. As a part of the
restructuring and in an effort to conserve cash, the Company and
Renewable U have agreed that the $1 million in Fees will be repaid
by issuing common shares of Cielo at a price of $0.06 per share
(being the last closing price preceding the execution of the LOI),
for an aggregate 16,666,666 shares (the “2021 MOUs
Repayment Shares”), subject to the approval of the
Exchange.
The four (4) 2021 MOUs will terminate upon the
issuance of the 2021 MOUs Repayment Shares.
2018-2020 MOUs and Medicine Hat MOU (5 of 9
Territories)
The remaining five (5) MOUs consist of one (1)
MOU for Medicine Hat, Alberta (the “Med Hat MOU”)
and four MOUs for four (4) more Territories (the latter four (4)
MOUs referred to as the “2018-2020 MOUs”).
As stated above, Renewable U delivered Fees of
$1 million ($250,000 per Territory for four (4) Territories) for
the 2018-2020 MOUs. With regard to the last of the MOUs, the Med
Hat MOU, although Renewable U delivered $250,000 for the one (1)
Territory, Cielo and Renewable U have agreed that the value
attributed by the parties to the Med Hat MOU has increased to CAD
$1 million in total as a result of steps already taken, and costs
incurred, by Renewable U related to the Med Hat MOU and the Land.
As a result, the restructuring and resulting termination of the
remaining five (5) MOUs (the Med Hat MOU and the 2018-2020 MOUs)
would be CAD $2 million, to be paid by Cielo as follows.
- Within
six (6) months of the date of the LOI, Cielo is required to submit
one or more proposals (the “Proposal(s)”) to
Renewable U setting out the terms on which the $2 million owing to
Renewable U would be exchanged for a participation interest in the
Dunmore Facility (the “Participation Interest”),
by issuing securities in the Dunmore Entity once formed.
- In the
event that Cielo fails to submit the Proposal(s) to Renewable U
within the six (6) month period, Cielo will be required to repay
the $2 million in cash within 60 days.
- In the
event that Cielo does submit the Proposal(s) to Renewable U,
Renewable U can either: a) accept the terms of the Proposal(s), in
which case the $2 million will be exchanged for the Participation
Interest (securities of the Dunmore Entity) on the terms to be
proposed; or b) reject the terms of the Proposal(s), in which case:
- With
respect to the four (4) 2018-2020 MOUs, Cielo would repay the $1
million as initially agreed in the 2018-2020 MOUs, by issuing
common shares of Cielo at the greater of $0.25 per share and the
average of the closing price on the five (5) most recent trading
dates, subject to the approval of the Exchange; and
- With
respect to the Med Hat MOU, Cielo would repay:
- the
corresponding Fee of $250,000 as initially agreed in the Med Hat
MOU, by issuing common shares of Cielo at the greater of $0.25 per
share and the average of the closing price on the five (5) most
recent trading dates, subject to the approval of the Exchange,
and
- the
verifiable costs incurred by Renewable U in connection with the Med
Hat MOU in cash.
The 2018-2020 MOUs and the Med Hat MOU would
terminate at the time that the Participation Interest is issued to
Renewable U (or the $2 million is otherwise repaid as described
above).
Acquisition of the Land
Concurrently with the execution of, and as
contemplated in, the LOI, Cielo and Renewable U have also entered
into an agreement of purchase and sale (the “Offer to
Purchase”), pursuant to which Cielo (or its assignee) has
agreed to purchase the Land from Renewable U for a purchase price
of CAD $5.2 million. The Company has received a copy of an
appraisal prepared by an independent third party for Renewable U in
July 2022, indicating a value for the Land of $5.2 million.
The Offer of Purchase provides for certain
conditions and provides for an anticipated closing date of August
1, 2023. Cielo, or its assignee, may, but is not obligated to,
assume the outstanding mortgage on the Land of approximately $1.6
million.
Crestmont Financing
Further to the Company’s news release dated
April 10, 2023, regarding a debt financing to be completed with
Crestmont Investments, LLC (“Crestmont”), the
Company would like to confirm that Cielo and Crestmont continue
advance toward closing and anticipate the completion of the
financing to occur on or about May 15, 2023.
This press release shall not constitute
an offer to sell or the solicitation of an offer to buy securities
of the Company in the United States nor shall there be any sale of
securities of the Company in any jurisdiction in which such offer,
solicitation or sale would be unlawful. The securities described
herein have not been, and will not be, registered under the United
States Securities Act of 1933, as amended, or the securities laws
of any state of the United States. Accordingly, any of the
securities described herein may not be offered or sold in the
United States or to U.S. persons unless an exemption from
registration is available.
Neither the TSX Venture Exchange nor its
Regulation Services Provider (as that term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release.
ABOUT CIELO
Cielo Waste Solutions Corp. was incorporated
under the Business Corporations Act (British Columbia) on February
2, 2011. Cielo is a publicly traded company with its shares listed
to trade on the TSX Venture Exchange (“TSXV”)
under the symbol “CMC,” on the Frankfurt Exchange
(“DAX”) under the symbol “C36”, as well as on the
OTC Venture Market (“OTCQB”), under the symbol
“CWSFF.” The Company’s strategic intent is to become a leading
waste-to-fuel company using economically sustainable technology
while minimizing the environmental impact. Cielo has a patented
process that can convert waste feedstocks, including organic
material and wood derivative waste, to fuel. Having demonstrated
its ability to produce diesel and naphtha from waste, Cielo’s
business model is to construct additional processing facilities.
Cielo’s objective is to generate value by converting waste to fuel,
while fueling the sustainable energy transition.
For further information please
contact:
Cielo Investor RelationsPhone:
(403) 348-2972Email: investors@cielows.com
RB Milestone Group
LLC Email:
cielo@rbmilestone.com
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This news release contains certain
forward-looking statements and forward-looking information
(collectively referred to herein as “forward-looking statements”)
within the meaning of applicable Canadian securities laws. All
statements other than statements of present or historical fact are
forward-looking statements. Forward-looking statements are often,
but not always, identified by the use of words such as
“anticipate”, “achieve”, “could”, “believe”, “plan”, “intend”,
“objective”, “continuous”, “ongoing”, “estimate”, “outlook”,
“expect”, “may”, “will”, “project”, “should” or similar words,
including negatives thereof, suggesting future outcomes.
Forward-looking statements are subject to both
known and unknown risks, uncertainties, and other factors, many of
which are beyond the control of the Company, that may cause the
actual results, level of activity, performance, or achievements of
the Company to be materially different from those expressed or
implied by such forward looking statements. Cielo is making forward
looking statements, with respect to, but not limited to: the
entering into definition agreements as contemplated in the LOI, the
terms and timing thereof, including but not limited to terms
related to the Proposal(s) and the consequences related to whether
or not such Proposal(s) are delivered, and the resulting
participation of Renewable U in the Dunmore Entity and the
termination of the MOUs, including the timing of such termination;
the (deemed) value(s) attributed or to be attributed to the MOUs;
the acquisition by Cielo or its assignee of the Land, and the
timing thereof and purchase price therefor; the location of the
first commercial facility to be built by Cielo; the impact of the
restructuring of Renewable U’s interest on Cielo and its ability to
work with third parties; the impact of the acquisition of the Land,
the purchase price therefor, and the location thereof, and whether
or not Cielo will assume the mortgage thereon; Cielo’s agreement
and intended relationship with CP Rail and related terms; the
issuance of securities of Cielo and/or the Dunmore Entity as
contemplated in the MOU, and the number, price and timing thereof;
the value attributed to the MOUs; the deadline by which Cielo and
Renewable U are to enter into definitive agreements and the
resulting termination of the LOI if not so executed; the
dissolution of the special committee formed to advise on the
subject matter hereof; no fees being payable as finder fees or
commissions; and the anticipated timing for the completion of the
financing with Crestmont.
Investors should continue to review and consider
information disseminated through news releases and filed by the
Company on SEDAR. Although the Company has attempted to identify
important factors that could cause actual results to differ
materially from those contained in forward looking statements,
there may be other factors that cause results not to be as
anticipated, estimated or intended.
Forward-looking statements are not a guarantee
of future performance and involve a number of risks and
uncertainties, some of which are described herein. Such
forward-looking statements necessarily involve known and unknown
risks and uncertainties, which may cause the Company’s actual
performance and results to differ materially from any projections
of future performance or results expressed or implied by such
forward-looking statements. Any forward-looking statements are made
as of the date hereof and, except as required by law, the Company
assumes no obligation to publicly update or revise such statements
to reflect new information, subsequent or otherwise. Neither the
TSXV nor its Regulation Services Provider (as that term is defined
in the policies of the TSXV), nor OTCQB nor WKN, have reviewed, and
do not accept responsibility for the adequacy or accuracy of, the
content of this news release.
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