THIRD QUARTER 2022 HIGHLIGHTS
Tidewater Renewables delivered another solid quarter with Adjusted EBITDA(1) of$16.1 million in the third quarter of 2022. Net cash provided by operating activities totaled$5.2 million for the third quarter of 2022, with distributable cash flow(1) of$9.4 million .- The Corporation's base business continues to exceed previous guidance, with 2022 Adjusted EBITDA(1) now expected to be between
$55 – 65 million.Tidewater Renewables remains confident in its ability to deliver 2023 Run Rate EBITDA(1) of$140 - 150 million, before any additional value from Clean Fuel Regulation ("CFR") credits. Management estimates that the Renewable Diesel & Renewable Hydrogen ("HDRD") Complex has the potential to generate an incremental$30 million of Run Rate EBITDA(1) from CFR credits, assuming pricing of$95 -100 per credit. - The Corporation has made significant progress on its 3,000 bbl/d
HDRD Complex , including completion of construction on multiple refinery modules.The HDRD Complex remains on schedule to commission in Q1 2023 with production increasing through Q2 2023. - Consistent with the global economic environment, the Corporation is experiencing capital cost inflationary pressures, as it resolves supply chain disruptions while adhering to the construction timeline. The Corporation expects gross capital costs to be approximately 10% higher than the previously announced
$235 million . The incremental gross capital is expected to be partially offset by the increased value of the British Columbia Low Carbon Fuel Standard ("BC LCFS") credits issued under the Renewable Diesel Project Part 3 Agreement with the Government ofBritish Columbia as compared to budget. Capital costs net of BC LCFS credits are expected to be approximately$130 - 140 million. The project's economics remain attractive, and payback is expected in less than two years. - During the third quarter of 2022, the Corporation made significant progress on its renewable natural gas ("RNG") business, including the completion of preliminary engineering & design on the announced RNG Facility located in Foothills County near
High River, Alberta (the "RNG Facility"). OnOctober 17, 2022 , the Corporation announced it had entered into a 20-year RNG offtake agreement withFortisBC Energy Inc. ("FortisBC"), whereby FortisBC expects to purchase up to 100% of the RNG Facility's design capacity. The Corporation has also secured a long-term feedstock supply from the Corporation's strategic partnership withRimrock Cattle Company Ltd. ("RCC"). - In
August 2022 , Phase 1 of the fluid catalytic cracking ("FCC") co-processing project was successfully commissioned and began refining various renewable feedstocks, including those provided by the Corporation's feedstock collection business, into renewable diesel and renewable gasoline. Full commissioning of the FCC co-processing project is expected in 2023. - On
October 24, 2022 , the Corporation announced the closing of a$150.0 million five-year senior secured second lien credit facility (the "AIMCo Facility") with an affiliate ofAlberta Investment Management Corporation ("AIMCo"). The AIMCo Facility initially bears interest of 6.50% but is subject to scheduled escalations in year four and year five as well as inflation-based adjustments. 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 ofTidewater Renewables at a price of$14.84 , subject to certain adjustments, for a term of five years.
(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 condensed interim consolidated financial statements and related MD&A for the three month and nine month periods ended
Financial Highlights
Three months ended | Nine months ended | |||||||||
(in thousands of Canadian dollars except per share | 2022 | 2021 | 2022 | 2021(1) | ||||||
Revenue | $ | 19,697 | $ | 6,130 | $ | 56,677 | $ | 6,130 | ||
Net income (loss) attributable to | $ | (10,067) | $ | 3,418 | $ | 11,810 | $ | 2,683 | ||
Basic and diluted net income (loss) | $ | (0.29) | $ | 0.21 | $ | 0.34 | $ | 0.26 | ||
Adjusted EBITDA (2,3) | $ | 16,084 | $ | 5,330 | $ | 45,723 | $ | 5,330 | ||
Net cash provided by operating activities | $ | 5,161 | $ | (1,776) | $ | 38,349 | $ | (1,776) | ||
Distributable cash flow (2) | $ | 9,437 | $ | 3,940 | $ | 28,627 | $ | 3,940 | ||
Distributable cash flow per common share | $ | 0.27 | $ | 0.25 | $ | 0.82 | $ | 0.38 | ||
Total common shares outstanding (000s) | 34,712 | 34,635 | 34,712 | 34,635 | ||||||
Total assets | $ | 915,211 | $ | 709,571 | $ | 915,211 | $ | 709,571 | ||
Net debt (2) | $ | 124,311 | $ | 33,926 | $ | 124,311 | $ | 33,926 | ||
Notes: | |
(1) | The comparable period presented is from the date of incorporation, |
(2) | See "Non-GAAP and Other Financial Measures" in the Corporation's press release and MD&A. |
(3) | For the three and nine months ended |
ANNUAL OUTLOOK AND CORPORATE UPDATE
Robust prices for renewable fuels and BC LCFS credits, along with growth in the Corporation's feedstock collection business into the fourth quarter of 2022, has increased the 2022 Adjusted EBITDA forecast, which is now expected to be between
During the third quarter of 2022, the Corporation made significant progress on its 3,000 bbl/d
CONFERENCE CALL
In conjunction with the earnings release, investors will have the opportunity to listen to
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/D1RMJMlepgo 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
ABOUT
NON-GAAP AND OTHER FINANCIAL MEASURES
Throughout this press release and in other materials disclosed by the Corporation,
Non-GAAP Financial Measures
The non-GAAP financial measures used by the Corporation are Adjusted EBITDA, distributable cash flow and Run Rate EBITDA.
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 EBITDA in its equity investment.
The following table reconciles net income, the nearest GAAP measure, to Adjusted EBITDA:
Three months ended | Nine months ended | ||||||||
(in thousands of Canadian dollars) | 2022 | 2021 | 2022 | 2021(1) | |||||
Net income (loss) | $ | (10,067) | $ | 3,418 | $ | 11,810 | $ | 2,683 | |
Deferred income tax expense (recovery) | (4,378) | 1,324 | 3,984 | 1,059 | |||||
Depreciation | 4,878 | 2,115 | 14,381 | 2,115 | |||||
Finance costs | 2,697 | 717 | 4,881 | 717 | |||||
Share-based compensation | 1,123 | 255 | 2,477 | 255 | |||||
Unrealized loss (gain) on derivative contracts | 22,441 | (2,770) | 8,132 | (2,770) | |||||
Transaction costs | 260 | 271 | 660 | 1,271 | |||||
Adjustment to share of profit from equity | (870) | - | (602) | - | |||||
Adjusted EBITDA | $ | 16,084 | $ | 5,330 | $ | 45,723 | $ | 5,330 |
Notes: | |
(1) | The comparable period presented is from the date of incorporation, |
(2) | For the three and nine months ended |
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
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) | 2022 | 2021 | 2022 | 2021(1) | |||||||
Net cash provided by operating activities | $ | 5,161 | $ | (1,776) | $ | 38,349 | $ | (1,776) | |||
Add (deduct): | |||||||||||
Changes in non-cash working capital | 9,588 | 6,835 | 4,824 | 5,835 | |||||||
Transaction costs | 260 | 271 | 660 | 1,271 | |||||||
Interest and financing charges | (1,161) | (221) | (2,163) | (221) | |||||||
Payment of lease liabilities | (1,489) | (712) | (4,394) | (712) | |||||||
Maintenance capital | (2,922) | (457) | (8,649) | (457) | |||||||
Distributable cash flow | $ | 9,437 | $ | 3,940 | $ | 28,627 | $ | 3,940 |
Notes: | |
(1) | The comparable period presented is from the date of incorporation, |
Run Rate EBITDA
Run Rate EBITDA is defined as the expected Adjusted EBITDA to be generated by
Run Rate EBITDA guidance related to the
Run Rate EBITDA guidance related to CFR credits, which is excluded from other guidance, assumes that CFR credits can be sold at an average price of
Run Rate EBITDA guidance related to the RNG Facility contains various assumptions related to throughput, sales prices, feedstock pricing and operating expenses. Throughput and operating expense assumptions are derived from the facility design. Sales and feedstock pricing is derived from existing and prospective agreements.
Non-GAAP Financial Ratios
Distributable Cash Flow Per Common Share
Three months ended | Nine months ended | ||||||||||
(in thousands of Canadian dollars except per share | 2022 | 2021 | 2022 | 2021(1) | |||||||
Distributable cash flow | $ | 9,437 | $ | 3,940 | $ | 28,627 | $ | 3,940 | |||
Distributable cash flow per share– basic | $ | 0.27 | $ | 0.25 | $ | 0.82 | $ | 0.38 | |||
Notes: | |
(1) | The comparable periods presented is from the date of incorporation, |
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) | ||
Senior Credit Facility | $ | 110,143 |
RNG Credit Facility | 15,550 | |
Cash | (1,382) | |
Net debt | $ | 124,311 |
ADVISORY REGARDING FORWARD-LOOKING STATEMENTS
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
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 Renewables Assets; the expectation that the Corporation will be able to grow its revenue, actively maintain and manage its capital projects and assets, including the Renewables Assets, and achieve growth by selectively pursuing strategic business development opportunities; following the commencement of operations, including underlying assumptions; estimates of EBITDA and Run Rate EBITDA; guidance with respect to forecasted consolidated Adjusted EBITDA and expected growth related thereto; 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; the Corporation's operational and financial performance, including expectations regarding generating revenue, revenues and operating expenses; the ability to leverage existing infrastructure and engineering expertise of Tidewater Midstream and Infrastructure Ltd. regarding development of the Corporation's projects and product offerings; anticipated revenue from future sales of BC LCFS credits; the ability of the Corporation to progress its feedstock strategy; the future price and volatility of commodities; the future pricing of BC LCFS credits and CFR credits; expectations around the Corporation's receipt of BC LCFS credits and CFR credits; and the availability, future price and volatility of feedstocks and other inputs.
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:
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 and in other document in file with the
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 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 annual information form available under the Corporation's profile on SEDAR at www.sedar.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 Annual Information Form and in other documents on file with the
Management of the Corporation has included the above summary of assumptions and risks related to forward-looking statement 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 therefrom. 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.
Financial Outlook
This press release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about expectations regarding financial results for 2022 and 2023, including Adjusted EBITDA, and annual Run Rate 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 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.
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