TIDEWATER RENEWABLES LTD. ANNOUNCES THIRD QUARTER 2023 RESULTS & COMMENCEMENT OF HDRD COMMERCIAL OPERATIONS
CALGARY, AB, Nov. 9, 2023 /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 period ended September 30, 2023.
THIRD QUARTER 2023 HIGHLIGHTS
In the third quarter of 2023, Tidewater Renewables generated Adjusted EBITDA(1) of $14.5 million and a net loss attributable to shareholders of $9.4 million, inclusive of $12.6 million of unrealized losses on derivative contracts. Net cash provided by operating activities totaled $1.5 million, with distributable cash flow(1) of $3.2 million.
In July 2023, Tidewater Renewables' co-processing projects were approved for credit generation under the Canadian Clean Fuel Regulations ("CFR"). Through its co-processing projects and the HDRD Complex, the Corporation expects to maintain its position as one of Canada's largest generators of emissions credits.
OPERATIONAL UPDATE
The HDRD Complex produced its first renewable diesel on October 22 and, as of November 7, has progressed to commercial operations. The facility is currently producing approximately 1,500 bbl/d of on-spec cold weather diesel and the Corporation is actively working on safely increasing production rates towards the facility's 3,000 bbl/d design capacity.
Gross project costs are expected to increase by $10.2 million, due to increased man hours resulting from the delay in commercial operations and the addition of incremental insulation and heat tracing. However, the project's economics remain attractive, with payback expected within two to three years. The HDRD Complex makes Tidewater Renewables the first standalone producer of renewable diesel in Canada.On November 8, 2023, Robert Colcleugh was appointed Chief Executive Officer of both Tidewater Renewables and Tidewater Midstream and Infrastructure Ltd. ("Tidewater Midstream"). Mr. Colcleugh joined Tidewater Midstream's board of directors in 2017 and was appointed Interim Chief Executive Officer of both Tidewater Midstream and Tidewater Renewables in November 2022. During his tenure as Interim Chief Executive Officer, he successfully led the commissioning of the HDRD Complex and Tidewater Midstream's strategic asset review.
"The launching of the HDRD Complex's commercial operations signifies a step change in the evolution of Tidewater Renewables' business model. It also marks the arrival of Canada as one of the few countries in the world that produce renewable diesel. The completion of this project was not without challenges, but with unwavering support from the British Columbia Government, the City of Prince George, our capital providers, and our team's relentless dedication, we got it done. With the completion of the HDRD Complex, Tidewater Renewables is dedicated to strengthening its financial position, reducing its debt, and progressing our strong pipeline of renewables projects" said Chairman and CEO Rob Colcleugh.
(1) | Adjusted EBITDA, distributable cash flow, and net debt 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 condensed interim consolidated financial statements and related MD&A for the period ended September 30, 2023, which are available under the Corporation's profile on SEDAR+ at www.sedarplus.com and on its website at www.tidewater-renewables.com.
Financial Highlights
(in thousands of Canadian dollars except per share | Three months ended | Nine months ended | |||||||
2023 | 2022 | 2023 | 2022 | ||||||
Revenue | $ | 24,244 | $ | 19,697 | $ | 57,303 | $ | 56,677 | |
Net income (loss) attributable to shareholders | $ | (9,449) | $ | (10,067) | $ | (28,272) | $ | 11,810 | |
Net income (loss) attributable to shareholders per | $ | (0.27) | $ | (0.29) | $ | (0.81) | $ | 0.34 | |
Adjusted EBITDA (1) | $ | 14,531 | $ | 16,084 | $ | 35,233 | $ | 45,723 | |
Net cash provided by operating activities | $ | 1,522 | $ | 5,161 | $ | 5,623 | $ | 38,349 | |
Distributable cash flow (1) | $ | 3,209 | $ | 9,437 | $ | 605 | $ | 28,627 | |
Distributable cash flow per share – basic & diluted (1) | $ | 0.09 | $ | 0.27 | $ | 0.02 | $ | 0.82 | |
Total common shares outstanding (000s) | 34,727 | 34,712 | 34,727 | 34,712 | |||||
Total assets | $ | 1,049,533 | $ | 915,211 | $ | 1,049,533 | $ | 915,211 | |
Net debt (1) | $ | 334,114 | $ | 124,311 | $ | 334,114 | $ | 124,311 | |
(1) Refer to "Non-GAAP and Other Financial Measures" in this press release and the Corporation's MD&A. | |||||||||
OUTLOOK AND CORPORATE UPDATE
With the HDRD Complex safely and successfully commissioned, the Corporation is now committed to streamlining the HDRD Complex's operations, strengthening its financial position, repaying debt and progressing the development of the RNG Facility. Tidewater Renewables continues to work with various counterparties to satisfy their fuel compliance requirements, achieve their ESG commitments and meet their energy needs.
Due to the HDRD Complex's delay in commercial operations, the Corporation now expects second-half 2023 Adjusted EBITDA to be between $25 and $35 million (previously $35 to $45 million). The Corporation continues to see strong industry fundamentals in North America, including robust prices for renewable fuels and strong demand for environmental credits. This demand is supported by escalating compliance requirements and voluntary environmental commitments.
CONFERENCE CALL
In conjunction with the earnings release, investors will have the opportunity to listen to Tidewater Renewables' senior management review its third quarter 2023 results via conference call on Thursday, November 9, 2023, 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/E5pAY6y7Ldw 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, 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. 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.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 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, gains/ losses on warrant liability revaluation, 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.
Adjusted EBITDA is used by management to set objectives, make operating and capital investment decisions, monitor debt covenants and assess performance. In addition to its use by management, Tidewater Renewables also believes Adjusted EBITDA is a measure widely used by securities analysts, investors, lending institutions and others to evaluate the financial performance of the Corporation and other companies in the renewable industry.
The following table reconciles net income (loss), the nearest GAAP measure, to Adjusted EBITDA:
Three months ended | Nine months ended | ||||||||
(in thousands of Canadian dollars) | 2023 | 2022 | 2023 | 2022 | |||||
Net income (loss) | $ | (9,449) | $ | (10,067) | $ | (28,272) | $ | 11,810 | |
Deferred income tax expense (recovery) | (3,495) | (4,378) | (10,052) | 3,984 | |||||
Depreciation | 5,945 | 4,878 | 16,133 | 14,381 | |||||
Finance costs | 6,620 | 2,697 | 16,569 | 4,881 | |||||
Share-based compensation | 553 | 1,123 | 3,908 | 2,477 | |||||
Unrealized loss on derivative contracts | 12,558 | 22,441 | 40,398 | 8,132 | |||||
Gain on warrant liability revaluation | (190) | - | (8,160) | - | |||||
Transaction costs | 10 | 260 | 111 | 660 | |||||
Non-recurring transactions (1) | 279 | - | 4,543 | - | |||||
Adjustment to share of profit from equity | 1,700 | (870) | 55 | (602) | |||||
Adjusted EBITDA | $ | 14,531 | $ | 16,084 | $ | 35,233 | $ | 45,723 | |
(1) Non-recurring transactions for the nine months ended September 30, 2023, includes $3.9 million of feedstock rescheduling costs. |
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:
Three months ended | Nine months ended | |||||||
(in thousands of Canadian dollars) | 2023 | 2022 | 2023 | 2022 | ||||
Net cash provided by operating activities | $ | 1,522 | $ | 5,161 | $ | 5,623 | $ | 38,349 |
Add (deduct): | ||||||||
Changes in non-cash working capital | 10,077 | 9,588 | 20,826 | 4,824 | ||||
Transaction costs | 10 | 260 | 111 | 660 | ||||
Non-recurring transactions (1) | 279 | - | 4,543 | - | ||||
Interest and financing charges | (3,916) | (1,161) | (10,484) | (2,163) | ||||
Payment of lease liabilities | (1,737) | (1,489) | (4,953) | (4,394) | ||||
Maintenance capital | (3,026) | (2,922) | (15,061) | (8,649) | ||||
Distributable cash flow | $ | 3,209 | $ | 9,437 | $ | 605 | $ | 28,627 |
Non-GAAP Financial Ratios
Distributable Cash Flow Per Common Share
Distributable cash flow per common share is calculated as distributable cash flow over the weighted average number of common shares outstanding for the three and nine months ended September 30, 2023.
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.
Three months ended | Nine months ended | |||||||
(in thousands of Canadian dollars except per share information) | 2023 | 2022 | 2023 | 2022 | ||||
Distributable cash flow | $ | 3,209 | $ | 9,437 | $ | 605 | $ | 28,627 |
Weighted average shares outstanding– basic | 34,727 | 34,712 | 34,723 | 34,712 | ||||
Weighted average shares outstanding– diluted | 34,727 | 34,712 | 34,723 | 34,824 | ||||
Distributable cash flow per share– basic & diluted | $ | 0.09 | $ | 0.27 | $ | 0.02 | $ | 0.82 |
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:
(in thousands of Canadian dollars) | September 30, 2023 | |
Senior credit facility | $ | 159,410 |
Term debt | 175,000 | |
Cash | (296) | |
Net debt | $ | 334,114 |
FORWARD-LOOKING INFORMATION
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", "will" 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 the MD&A 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 operational and financial performance of the Corporation's Renewable Assets, including the HDRD Complex; the Corporation's business plans and strategies, including the underlying existing assets and capital projects, and the success and timing of its projects and related milestones and capital costs; expectations regarding the stabilization of the HDRD Complex's operations and production; expectations regarding the HDRD Complex's ability to consistently produce cold weather specification diesel; expected timing of the announcement of commercial operations of the HDRD Complex; the expectation that the Corporation will continue to see strong industry fundamentals, including robust prices for renewable fuels and strong demand for environmental credits, driven by escalating compliance requirements and new voluntary commitments; the expectation that the HDRD Complex will be, when commissioned, Canada's first standalone renewable diesel facility and one of the first sizable producers of BC LCFS and CFR credits; the expectation that commercial operations on the HDRD Complex are imminent; expectations regarding increased project costs due to delays of the HDRD Complex; expectations regarding project costs, project paybacks and the timing thereof; expectations regarding HDRD Complex major commissioning milestones and the timing thereof; expectations regarding the Corporation's ability to generate environmental emissions credits from the HDRD Complex; expectations regarding the HDRD Complex's inventory; expected proceeds from executed forward agreements; expectations regarding the future market for environmental emissions credits and counterparty risks associated with such markets; the future price and volatility of commodities; and expectations regarding the Corporation's ability to fulfill its financial commitments, obligations, and anticipated capital expenditures.
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 the 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, including the effect of the COVID-19 pandemic; operating assumptions relating to the Corporation's projects; expectations around the start up of and level of output from the Corporation's projects, including assumptions relating to feedstock supply levels and costs; 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 Credit or CFR Credit systems; the expansion of production of renewable fuels by competitors; the future pricing of BC LCFS Credits and CFR Credits; demand for offtake and offtake prices; 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 for which there is a market; 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 and CFR credits; foreign currency, exchange, inflation and interest rate risks; and the other assumptions set forth in the Corporation's most recent AIF available under the Corporation's profile on SEDAR+ at www.sedarplus.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; risks relating to the BC LCFS Credit or CFR Credit systems; general economic, political, market and business conditions, including fluctuations in interest rates, foreign exchange rates, commodity prices, Consumer Price Index, supply chain pressures and restrictions, inflation, stock market volatility and supply/demand trends; risks related to changes in feedstock prices and revenues from offtakes; economic uncertainties, further cost increases, or unexpected delays with the Corporation's projects; 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; and the other risks set forth in the Corporation's most recent AIF available under the Corporation's profile on SEDAR+ at www.sedarplus.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 AIF and in other documents on file with the Canadian securities regulatory authorities under the Corporation's profile on SEDAR+ at www.sedarplus.com.
Management of the Corporation has included the above summary of assumptions and risks related to forward-looking statements provided in the 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 the 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 the 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 AIF and other filings made by the Corporation with various provincial securities commissions available under the Corporation's profile on SEDAR+ at www.sedarplus.com.
Financial Outlook
The press release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about expectations regarding financial results for 2023 and 2024, including Adjusted 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 the 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 the 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 the press release should not be used for purposes other than for which it is disclosed herein.
SOURCE Tidewater Renewables Ltd
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