Tidewater Renewables Ltd. (“Tidewater Renewables” or the “Corporation”) (TSX: LCFS) 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).
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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.
| (1) Adjusted EBITDA, distributable cash flow, net debt and run rate EBITDA used throughout this press release are non-GAAP financial measures or ratios. See the “Non-GAAP and Other Financial Measures” in this press release and the Corporation’s MD&A for information on each non-GAAP financial measure or ratio. |
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.
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.
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TIDEWATER RENEWABLES LTD. ANNOUNCES FOURTH QUARTER 2022 RESULTS AND HDRD COMPLEX UPDATE,CALGARY, AB, March 9, 2023
