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 executed an asset purchase agreement dated
September 15, 2023 (the “
Asset Purchase
Agreement”) with Expander Energy Inc.
(“
Expander”), a private Alberta corporation and an
arm’s length third party, for the purchase of certain assets and
liabilities of Expander to operate the EBTL™ and BGTL™ technologies
business being acquired (the “
Acquired Business”).
The proposed acquisition (the “
Proposed
Transaction”) is expected to allow Cielo to accelerate its
timeline to commercialization and further enhance Cielo’s existing
proprietary Thermal Catalytic Depolymerization (TCD) technology.
The Proposed Transaction includes the grant of
an exclusive licence in Canada to use Expander’s patented EBTL™ and
BGTL™ technologies and related intellectual property (the
“Licensed Technologies”), as well as an exclusive
licence in the United States for creosote and treated wood waste.
The Licensed Technologies will be used to build facilities (the
“Licensed Facilities”) that process biomass
(waste) to fuels (bio-syndiesel). The particular terms will be set
out in a license agreement (the “License
Agreement”) to be executed by Cielo and Expander on
closing, and as more particularly described below.
The Proposed Transaction will result in Cielo
and Expander remaining separate entities while maximizing synergies
between the companies. A key component of the Proposed Transaction
includes the engagement of Expander and/or its affiliates to
provide services for both the engineering, procurement and
construction phases of the Projects (as defined below), as well as
the operation/project management phase of the Projects.
Ryan Jackson, CEO of Cielo, commented, “We
believe this is a monumental achievement for Cielo and one that
will accelerate our path to commercialization and revenues. We
expect that the partnering of Expander’s technology, technical
expertise and extensive engineering and operations experience with
Cielo’s board and executive management team, access to capital
markets and business relationships will position Cielo to be a
leader in the renewable fuels industry.”
PROJECT DEVELOPMENT
Cielo intends to undertake three projects in
Alberta proposed or underway by Expander, as well as three projects
proposed by Cielo, including the previously disclosed facility in
Dunmore, Alberta and two in the United States, all using the
Licensed Technologies (collectively, the
“Projects”).
Projected financial metrics for the first two
proposed Projects, one located in Carseland, Alberta, one in
Dunmore, Alberta, are presented below:
Project (1) |
Production(Million
Litres/year) |
Revenue($MM) |
EBITDA
(1)(2)($MM) |
AnticipatedTimeline |
Carseland Phase I |
8.2 |
19 |
9 |
2026 |
Dunmore |
34 |
79 |
46 |
2027 |
Notes:
1. First full year production.
2. Non-IFRS measure. (See National
Instrument 52-112 – Non-GAAP and Other Financial Measures
Disclosure)
The remaining four of the six initial Projects
include locations in Slave Lake, Carseland (Phase II), and two
locations to be determined in the United States. Carseland Phase II
will involve an increase in facility size and production volume.
Slave Lake has been granted EPA (Alberta Environment and Protected
Areas) approval, however, would require an amendment to the EPA
permit to allow for an increase in facility size and production
volume compared to what had been previously planned. The locations
of the two Licensed Facilities in the United States are to be
determined.
In addition, management believes that an
anticipated result of the proposed relationship between Expander
and Cielo, leveraging Expander’s expertise and culture of
innovation, will be an improvement to Cielo’s proprietary
technology, which is currently implemented at Cielo’s research and
development facility. In the meantime, Cielo’s access to the
Licensed Technologies is anticipated to accelerate the timeline to
commercialization and therefore shorten the path to revenue.
With regard to the land in Dunmore, Alberta to
be acquired by Cielo from Renewable U Energy Inc.
(“RU”), as previously disclosed, Cielo and RU have
agreed to extend the deadline for conditions until September 29,
2023, and the closing date to October 28, 2023. Refer to the news
release dated May 1, 2023, and May 17, 2023 for additional
information. Cielo will provide further material updates as they
become available.
OPERATIONAL EXPERTISE
Expander’s engineering team is led by its
Executive Vice President and Chief Technical Officer, Steve
Kresnyak, who brings over 40 years of international consulting
engineering experience in the hydrocarbon energy industry. Mr.
Kresnyak has extensive EPC/EPCM experience and is the technology
developer and inventor of many world issued process patents
including Expander’s EGTL™ for Gas to Liquids, EBTL™ for Biomass to
Liquids, Biomass Gasification, and FTCrude® process technology.
On closing, Cielo and Expander will execute
agreements for the engineering procurement and construction
services as well as the project management services to be provided
by Expander and its affiliates to Cielo for the Projects.
Mr. Kresnyak commented, “We at Expander are
elated to be part of the Cielo story, assisting in the
commercialization of multiple, patented low carbon, Bio-Synfuel
projects. We also look forward to lending our expertise to help
bring Cielo’s strategic vision to life with a particular focus on
creosote and treated wood feedstocks, carving a lane in this niche
market.”
BOARD COMPOSITION
Following closing, Cielo’s Board of Directors
(the “Board”) would be comprised of Cielo’s four
current directors, plus three Expander nominees for a total of
seven directors with the majority remaining Cielo nominees. The
proposed nominees will be James H. Ross, Larry B. Haggar and G.
Steven Price (the “Expander Nominees”).
James H. Ross, B. Sc., C. Dir., is Executive
Chairman and Chief Financial Officer, as well as shareholder, of
Expander, was Chief Executive Officer from 2010 to 2018, and has
been a director of Expander since 2009. Mr. Ross has 40 years of
capital markets experience including executive management, venture
capital, private equity, and small cap investment banking. Mr. Ross
is the former Chief Executive Officer of Rocky Mountain Clean Fuels
Inc., and remains a director of Rocky Mountain Clean Fuels Inc. Mr.
Ross is Co-Founder and Chief Executive Officer of Alberta Clean
Technologies (VCC) Ltd., an Alberta based Venture Capital
Corporation. His past experience includes director of C-Free Power
Corp., a developer of wind and micro-hydro power generation in
western Canada, (acquired by Good Energies Capital), director of
Platinum Communication Corp. a provider of rural high-speed
internet in western Canada, (acquired by Xplornet Communication
Inc.), and director of Glenbriar Technologies Inc., an information
technology service provider in B.C., Alberta, and Ontario (acquired
by Uniserve Communications).
Larry B. Haggar is a director, as well as a
shareholder, of Expander. Mr. Haggar has 50 years of experience in
the oil and gas industry after graduating from the University of
Waterloo with a B.A.Sc. degree in Chemical Engineering (1971). He
began his career at Great Canadian Oil Sands (now Suncor) as a
Process Engineer and later as Operations Engineer for the Upgrader.
He next joined a major U.S. engineering firm’s Calgary office and
was assigned to its London, U.K office where he worked on a variety
of projects for clients in Indonesia, the North Sea and Saudi
Arabia. Upon returning to Calgary, he designed and commissioned
upstream oil and gas plants before moving to Dubai as Chief
Engineer for Scimitar Oils Ltd. for the design, construction,
start-up and first year operation of the Dugas Jebel Ali Gas Plant
and associated offshore gas gathering facilities. Larry operated as
a consultant for projects in Italy, New Orleans and Houston prior
to joining Colt Engineering where he was a Partner and Director for
20 years. He held many line positions at Colt as a Process
Engineer, Department Head, Project Engineer, Project Manager and
General Manager, working out of its Calgary, Markham, Abu Dhabi
Joint Venture and Edmonton CoSyn Alliance offices. After Colt’s
sale to WorleyParsons in 2007 he began investing in the Energy
industry leading to his investment in Expander. Since 2010 he has
been a director and process advisor to Expander in its development
of novel technologies for Biomass-to-Liquids, Gas-to-Liquids,
Biomass-Electrolysis-to-Liquids and FT Crude (a more carbon
efficient scheme to process Bitumen).
Mr. Price is a Professional Engineer and
President of Price Engineering, a consulting company providing
technical and managerial expertise to the energy sector since 1995.
He received his Bachelor of Science degree in Electrical
Engineering from the University of Manitoba and has over 45 years’
experience in engineering and management including corporate
operations, evaluations, facilities design and operation most
recently in biomass and renewable energy systems. Mr. Price also
has extensive experience in multi-stakeholder engagement, working
with various groups such as landowners, First Nations, government
and non-governmental agencies. He is past President and Chief
Executive Officer of Expander and has been a director since 2009.
Prior to that, he was President of Unitech Energy Resources Ltd.,
Vice President of HCO Energy Ltd., Vice President of Bralorne
Resources Inc., and Manager of Ranchmen's Resources Ltd. (all oil
and gas issuers who are or were listed on the TSX).
Mr. Ross commented, “The Expander team is
pleased to be collaborating with Cielo to develop projects
producing sustainable synthetic fuels for the transportation
industry. I am excited that preliminary conversations to enhance
Cielo’s technology has grown into this joint endeavour that serves
to advance both companies. Larry, Steve and I, are looking forward
to joining the Cielo Board, working alongside the existing
directors and management towards a common goal.”
Cielo has agreed to propose to its shareholders
at its next shareholder meeting, scheduled for October 26, 2023
(the “Meeting”), the election of the Expander
Nominees to the Board of Directors of Cielo (the
“Board”). If the Proposed Transaction is not
completed prior to the date of the Meeting however, only Mr. Ross
will be appointed to the Board and the other two Expander Nominees
will instead be nominated for election at Cielo’s next annual
general shareholder meeting.
TRANSACTION DETAILS
Consideration
Under the Asset Purchase Agreement, Cielo has
agreed to acquire certain assets and liabilities that comprise the
Acquired Business.
In consideration for the acquisition of the
Acquired Business, Cielo has agreed to pay a purchase price of
C$45,323,785.30 by issuing 906,475,706 common shares of the Company
(the “Consideration Shares”) at a price of $0.05
per Consideration Share, resulting in Expander owning 49.9% of the
issued and outstanding common shares of Cielo post-closing, and the
existing shareholders of the Company retaining 50.1% of the issued
and outstanding common shares of Cielo post-closing.
Additional terms of the Asset Purchase Agreement
related to consideration include the following, among others:
- 15% of
the Consideration Shares to be held back for indemnification
purposes for 13 months.
- An
additional approximately 25% of the Consideration Shares to be held
in escrow by Cielo’s transfer agent for release as follows:
- 25% on
January 4, 2024;
- 25% on
April 1, 2024;
- 25% on
August 28, 2024; and
- 25% one
year from closing.
- Expander
is required to transfer the majority of the Consideration Shares to
its shareholders (and creditors if applicable) upon closing,
however Expander intends to retain a portion of the Consideration
Shares. Expander has agreed to take actions to avoid the creation
of (becoming) a Control Person1 (as defined by the policies of the
TSX Venture Exchange [the “TSXV”], which would
require the approval of Cielo’s shareholders).
The Consideration Shares will also be subject to
a statutory hold period of four months and one day following
issuance.
- Defined
in TSXV Policy 1.1 Section 1.2, as at the date of this news
release, as: “Control Person” means any Person that holds or is one
of a combination of Persons that holds a sufficient number of any
of the securities of an Issuer so as to affect materially the
control of that Issuer, or that holds more than 20% of the
outstanding Voting Shares of an Issuer except where there is
evidence showing that the holder of those securities does not
materially affect the control of the Issuer.
Prepaid Liabilities
As Cielo and Expander wish to continue progress
on Carseland Phase I during the period leading up to closing, Cielo
has agreed to advance to Expander for continued work on Carseland 1
up to C$1,500,000 (the “Prepaid
Liabilities”). Before any advance is made by
Cielo, Expander will execute loan documentation in favour of Cielo
providing that, in the event that the Proposed Transaction is not
completed by January 5, 2024, the Prepaid Liabilities will bear
interest at a rate of prime plus three percent (3%) (minimum of
7.5%), to be repaid to Cielo on or before April 30, 2024.
Financing
Pursuant to the Asset Purchase Agreement, Cielo
will be obligated, as a condition to closing of the Proposed
Transaction, have available as at closing a minimum of C$45,000,000
(the “Financing”). Cielo has been in discussions
with third parties with respect to the Financing and has entered
into advanced discussions with an arm’s length third party for the
full amount of the Financing.
The Financing is subject to the approval of the
TSXV.
Terms of License
As of the closing of the Proposed Transaction,
Cielo and Expander will execute the License Agreement, which will
set out the terms of the licenses to be granted by Expander to
Cielo, including, among others:
- Cielo
will have an exclusive licence to use the Licensed Technologies in
Canada for all materials and in the USA for creosote and treated
wood.
- A royalty
of 3% of the gross revenues earned from the sale of products from
the Licensed Facilities (the “Royalty”).
- Upfront
fees for each Licensed Facility to a maximum of C$3,500,000 per
facility based on capacity. The majority of which will be applied
as an advance against the Royalty.
- Cielo
will be required to achieve the Final Investment Decision (FID)
stage for six Licensed Facilities in Canada and the United States
within five years, otherwise losing exclusivity.
- Expander
will have the right to construct facilities using the Licensed
Technologies in the event that opportunities arise that Cielo does
not wish to pursue.
Closing
The Proposed Transaction is anticipated to close
in October 2023, prior to the Meeting. The Proposed Transaction is
subject to certain conditions, including the completion of
Financing, the execution of certain third-party agreements related
to the Acquired Business, and conditions which are customary for a
transaction of this nature. No fees or commissions are payable to
any third party in connection with the Proposed Transaction (except
as may be agreed upon at a future time with respect to the
Financing).
Sheila Leggett, Board Chair of Cielo, commented,
“Cielo’s Board welcomes the new opportunities this acquisition
brings to the company and expresses our thanks to the Cielo and
Expander teams for their dedication and diligence in completing
this transaction.”
The Proposed Transaction is subject to the
approval of the TSXV. Based on the terms of the Asset Purchase
Agreement, Cielo will not be required to obtain shareholder
approval for the Proposed Transaction. The Proposed Acquisition has
been determined by Cielo to be a “Fundamental Acquisition” as
defined by the policies of the TSXV and accordingly, the Company’s
common shares have been halted from trading and will continue to be
halted pending review by the TSXV.
SHARE CONSOLIDATION
The Company is also proposing, as and when
determined by the Board of Cielo following the completion of the
Proposed Transaction, to complete a consolidation of Cielo’s
securities (the “Proposed Consolidation”) on an up
to 15:1 basis, subject to the approval of the TSXV and Cielo’s
shareholders (which will be requested at the Meeting to be held on
October 26, 2023). Although approval is not required for companies
incorporated under the Business Corporations Act (British
Columbia), Cielo’s articles require that special (66 2/3%) approval
of Cielo’s shareholders be obtained for a share consolidation. In
addition, the policies of the TSXV require that Cielo obtain
shareholder approval in the event of a consolidation that is equal
to or greater than on a 10:1 basis. The Proposed Consolidation is
not a condition of the Proposed Transaction; however, Cielo has
agreed to present it for approval to its Board. The Proposed
Consolidation remains subject to the approval of Cielo’s Board and
Cielo’s shareholders. The Board may determine to proceed with the
Proposed Consolidation as and when determined to be at the most
opportune time for Cielo, or not at all. Shareholders at the
Company’s Meeting (shareholder meeting scheduled for October 26,
2023) will be asked to approve the Proposed Consolidation on an up
to 15:1 basis (although it may be less). Further information on the
Proposed Consolidation will be disclosed as it becomes
available.
CONFERENCE CALL DETAILS: STRATEGIC
UPDATE
Cielo’s CEO, Ryan Jackson, and CFO, Jasdeep K.
Dhaliwal, will host a conference call with Expander guests,
Executive Chairman and CFO, Jim Ross and Executive VP and CTO,
Steve Kresnyak, on Monday, September 25, 2023, at 4 p.m.
ET to discuss the transaction.
Conference Call Participant Details:
https://emportal.ink/469L5ZtLocal: 416-764-8659North America Toll
Free: 1-888-664-6392Audience URL:
https://app.webinar.net/JlrQx9gVW3z
Conference Replay Local: 416-764-8677Conference
Replay North America Toll Free: 1-888-390-0541Conference Replay
Entry Code: 745759#Conference Replay Expiration Date:
10/05/2023
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 TSXV under the symbol “CMC,” on the Frankfurt
Exchange 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 Relations
Phone: (403) 348-2972 Email:
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. Forward-looking
statements and information are based on plans, expectations and
estimates of management at the date the information is provided and
are subject to certain factors and assumptions, including, among
others: the ability of Cielo to complete the Proposed Transaction
as and on the terms contemplated and agreed, and to assume and
comply with the material contracts related to the Acquired
Business; the ability to integrate the Acquired Business into
Cielo’s business; that the Company's financial condition and
development plans related to the Proposed Transaction, Projects, do
not change as a result of unforeseen events; that market conditions
that affect the Company, generally and taking into consideration
the completion of the Proposed Transaction, do not change; the
regulatory climate in which the Company operates and the laws and
policies applicable to Cielo, its business, and post-closing the
Acquired Business, do not change; the Company's ability to execute
on its business plans; the availability and cost of feedstocks to
be used in the Projects; the capacity of the Licensed Facilities
with respect to each Project; the ability of each Licensed Facility
to operate as and for such duration(s) as anticipated, without
unplanned stoppages or shut-downs; the ability of the Company to
secure the Financing, and generally financing for all Projects on
commercially reasonable terms or at all; the ability of the Company
to sell the fuels produced by the Licensed Facilities in a timely
manner at commercially reasonable rates; the ability of the Company
to secure tipping fees related to feedstocks in connection with the
Projects; existing agreements, agreements to be assigned by
Expander, and new agreements with third parties to be reasonable
and enforceable and the ability for the relationships with such
parties to continue; and the information provided by Expander with
respect to pro forma financial model(s) related to the Projects
being reasonable, complete and accurate.
Cielo is making forward looking statements, with
respect to, but not limited to: the terms, timing and anticipated
closing of the Proposed Transaction, including but not limited to
the terms of the Asset Purchase Agreement and the License
Agreement, in addition to any other agreement to be signed on
closing, such as engineering and project management agreements; the
expected result of the closing of the Proposed Transaction on
Cielo’s ability to accelerate its timeline to commercialization and
further enhance its proprietary technology; the granting of the
licensed rights to Cielo by Expander, including the fields of use,
territories, fees and royalties payable, and related terms; the
engagement of Expander and/or its affiliates for certain services
related to the Projects, and the nature and extent of such
services; the result of the anticipated synergies between the
companies; the number and location of the Projects and the
anticipated requirements related thereto; the projected financial
metrics regarding the Licensed Facilities to be built in Dunmore,
Alberta and Carseland, Alberta, including the anticipated
timelines; the anticipated result on the relationship between Cielo
and Expander on Cielo’s proprietary technology; timing for the
conditions and closing of the land acquisition in Dunmore, Alberta;
the composition of the Board post-closing and the anticipated
forum(s) for the election of the Expander nominees; the amount and
type of consideration to be paid to Expander, including hold-backs
and resale restrictions on the Consideration Shares, and in
particular escrow release dates; the transfer by, or retention of,
Consideration Shares, by Expander; the terms related to the Prepaid
Liabilities, and repayment terms in the event that the Proposed
Transaction is not consummated; the Financing, including this being
a condition to closing; the anticipated timing for closing of the
Proposed Transaction; the date of the Meeting; Cielo not being
required to obtain shareholder approval for the Proposed
Transaction; the Proposed Transaction being characterized as a
“Fundamental Acquisition” and the related trading halt; the
Proposed Consolidation and the ratio and other terms thereof; and
he conference call to be held on September 25, 2023, including with
respect to timing, agenda, hosts and guests.
This news release also contains future-oriented
financial information and financial outlook information
(collectively, “FOFI”) about prospective results
of operations including, without limitation, expectations with
respect to operations of the Projects to be undertaken in
Carseland, Alberta, and Dunmore, Alberta, which are subject to the
same assumptions, risk factors, limitations, and qualifications as
set forth above. Readers are cautioned that the assumptions used in
the preparation of such information, although considered reasonable
at the time of preparation, may prove to be imprecise and, as such,
undue reliance should not be placed on FOFI. Cielo’s actual
results, performance or achievement could differ materially from
those expressed in, or implied by, these FOFI, or if any of them do
so, what benefits Cielo will derive therefrom. Cielo has included
the FOFI in order to provide readers with a more complete
perspective on Cielo’s future operations, taking into consideration
the integration of the Acquired Business and such information may
not be appropriate for other purposes.
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.
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