CEO.CA Chairman's Briefing

(TSX:TWM)

CALGARY, AB, Sept. 12, 2024 /CNW/ - Tidewater Midstream and Infrastructure Ltd. ("Tidewater" or the "Corporation") (TSX: TWM) is pleased to announce the closing of its previously announced transaction (the "Transaction") with Tidewater Renewables Ltd. ("Tidewater Renewables").

Pursuant to an asset sale agreement dated September 12, 2024, the Corporation has acquired various assets from Tidewater Renewables including canola co-processing infrastructure, and the fluid catalytic cracking co-processing infrastructure, working interests in various other Prince George refinery units, and a natural gas storage facility located at the Brazeau River Complex (collectively, the "Acquired Assets"). The Acquired Assets historically generated annual Adjusted deconsolidated EBITDA¹ of $40.0 million to $50.0 million.  The cash consideration for the Acquired Assets is $122 million, plus the assumption of certain liabilities related to the Acquired Assets.  In addition, as part of the consideration, Tidewater assigned the right to receive certain British Columbia Low Carbon Fuel Standard ("BC LCFS") credits to Tidewater Renewables with a minimum value of $7.7 million.

Furthermore, Tidewater Midstream and Tidewater Renewables have also entered into an Agreement for the Purchase and Sale of Credits dated September 12, 2024, pursuant to which the Corporation purchased BC LCFS credits from Tidewater Renewables for an aggregate purchase price of approximately $7.2 million and the Corporation will also purchase additional BC LCFS credits (subject to certain monthly average limits) from Tidewater Renewables until March 31, 2025 for cash proceeds of approximately $77.5 million (assuming the Renewable Diesel & Renewable Hydrogen Complex (the "HDRD Complex") continues to operate at over 90% utilization).  A portion of such BC LCFS credits are being purchased subject to the exercise of a put option in favour of Tidewater Renewables and/or a call option in favour of the Corporation.  The cash proceeds will be paid monthly by the Corporation as the BC LCFS credits are purchased from Tidewater Renewables.

Concurrent with the close of the Transaction, the Corporation has amended and restated its senior credit facility, increasing the aggregate revolving capacity by $25 million, from $150 million to $175 million, and extending the maturity date from February 10, 2026 to September 12, 2026. The Corporation has also added a three-year delayed draw term loan tranche of $150 million to finance the Acquired Assets and the portion of the BC LCFS credits mentioned above. 

Jeremy Baines, Chief Executive Officer of the Corporation, commented: "This is an important transaction that benefits both the Corporation and Tidewater Renewables. The Corporation will benefit from acquiring a significant amount of deconsolidated EBITDA and cash flow that was previously dropped down to Tidewater Renewables during its initial public offering. Tidewater Renewables will have the ability to repay its first lien debt as well as a establish a contracted purchaser for the BC LCFS credits it produces, and will be able to focus its energies on its renewable fuels business, which consists of the HDRD Complex and the proposed sustainable aviation fuel project, where the front-end engineering and design continues to progress."

The independent special committees and boards of directors of both the Corporation and Tidewater Renewables approved the Transaction and the entering into of the aforementioned agreements. The Transaction constituted a "related party transaction" for Tidewater Renewables under Multilateral Instrument 61-101, Protection of Minority Security Holders in Special Transactions ("MI 61-101"). Tidewater Renewables is exempt from the valuation and majority of the minority approval requirements due to the "financial hardship" exemption provided in Section 5.5(g) and 5.7(1)(e) of MI 61-101.

ABOUT TIDEWATER MIDSTREAM

Tidewater is traded on the TSX under the symbol "TWM". Tidewater's business objective is to profitably grow and create shareholder value in the North American natural gas, natural gas liquids, crude oil, refined product, and renewable energy value chain. Its operations include downstream facilities, natural gas processing facilities, natural gas liquids infrastructure, pipelines, storage, and various renewable initiatives. To complement its infrastructure asset base, the Corporation also markets crude, refined product, natural gas, natural gas liquids and renewable products and services to customers across North America. Tidewater is a majority shareholder of Tidewater Renewables. Additional information relating to Tidewater is available on SEDAR+ at www.sedarplus.ca and at https://www.tidewatermidstream.com.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This news release contains forward-looking statements. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "intend", "project", "should", "believe" and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. More particularly, this news release contains statements regarding the benefits of the Transaction, including the expected [deconsolidated] annual adjusted EBITDA from the Acquired Assets, the 2024 consolidated adjusted EBITDA guidance and the use of proceeds therefrom by Tidewater Renewables.

Although the forward-looking statements contained in this news 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. Any forward-looking statements contained in this news release represent expectations as of the date of this news release and are subject to change after such date. However, the Corporation is under no obligation (and the Corporation expressly disclaims any such obligation) to update or alter any statements containing forward-looking information, the factors or assumptions underlying them, whether as a result of new information, future events or otherwise, except as required by law. With respect to the forward-looking statements contained in this news release, the Corporation has made assumptions regarding its ability to integrate the Acquired Assets; general economic and industry trends; that PGR crack spreads remain strong and refined product demand continues to increase; the market for BC LCFS emission credits, including that such market will improve and the timing thereof; and the expectation that the liquidity issues of Tidewater Renewables will be address by the Transaction.

Forward-looking statements are provided herein for the purpose of giving information about the Transaction. Readers are cautioned that such information may not be appropriate for other purposes. In addition, the Corporation is subject to a number of risks and uncertainties, many of which are beyond the Corporation's control. Such risks and uncertainties include the factors discussed under "Risk Factors" in the Corporation's annual information form for the year ended December 31, 2023 and the most recent management's discussion and analysis.

All the forward-looking statements in this news release are qualified by the cautionary statements herein. Further information about factors affecting forward-looking statements and management's assumptions and analysis thereof is available in filings made by the Corporation with Canadian securities commissions available on SEDAR+ at www.sedarplus.ca.

The financial outlook information contained in this news release is based on assumptions about future events, including economic conditions and proposed courses of action, based on management's assessment of the relevant information currently available. Additionally, the financial outlook information contained in this news release is subject to the risk factors described above in respect of forward-looking information generally as well as any other specific assumptions and risk factors in relation to such financial outlook noted in this news release. Accordingly, readers are cautioned that the financial outlook information contained in this news release should not be used for purposes other than for which it is disclosed herein. The financial outlook information contained in this news release was approved by management as of the date such financial outlook information was announced and was provided for the purpose of providing further information about Tidewater's current expectations and plans for the future.

NON-GAAP MEASURES

Throughout this news release and in other materials disclosed by the Corporation, Tidewater uses a number of non-GAAP financial measures, non-GAAP financial ratios, capital management measures, and supplemental financial measures when assessing its results and measuring overall performance. The intent of these non-GAAP measures and ratios is to provide additional useful information to investors and analysts. Certain of these measures and ratios do not have a standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures and ratios presented by other entities. As such, these non-GAAP measures and ratios should not be considered in isolation or used as a substitute for measures and ratios of performance prepared in accordance with GAAP. Except as otherwise indicated, these financial measures will be calculated and disclosed on a consistent basis from period to period. Specific adjusting items may only be relevant in certain periods. In this news release, Tidewater has disclosed the following non-GAAP financial measures: deconsolidated and consolidated adjusted EBITDA.

The equivalent historical non-GAAP financial measure to the Corporation's expected deconsolidated annual adjusted EBITDA from the Acquired Assets and its consolidated adjusted EBITDA guidance is deconsolidated and consolidated adjusted EBITDA for the year ended December 31, 2023, respectively

Consolidated adjusted EBITDA is calculated as net (loss) income before finance costs, taxes, depreciation, share-based compensation, unrealized gains and losses on derivative contracts, transaction costs, gains and losses on the sale of assets, and other items considered non-recurring in nature plus the Corporation's proportionate share of EBITDA in its equity investments. Deconsolidated adjusted EBITDA is calculated as consolidated adjusted EBITDA less the portion of consolidated adjusted EBITDA attributable to Tidewater Renewables.

In accordance with GAAP, Tidewater's jointly controlled investments are accounted for using equity accounting. Under equity accounting, net earnings from investments in equity accounted investees are recognized in a single line item in the consolidated statement of net (loss) income and comprehensive (loss) income. The adjustments made to net (loss) income, as described above, are also made to share of profit from investments in equity accounted investees.

Consolidated 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 also believes consolidated 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 midstream industry. From time to time, the Corporation issues guidance on this key measure. As a result, consolidated adjusted EBITDA is presented as a relevant measure in this news release to assist analysts and readers in assessing the performance of the Corporation as seen from management's perspective. In addition to reviewing consolidated adjusted EBITDA, management reviews deconsolidated adjusted EBITDA to highlight the Corporation's performance, excluding the portion of consolidated adjusted EBITDA attributable to Tidewater Renewables. Investors should be cautioned that consolidated adjusted EBITDA and deconsolidated adjusted EBITDA should not be construed as alternatives to net (loss) income, net cash provided by operating activities or other measures of financial results determined in accordance with GAAP as an indicator of the Corporation's performance and may not be comparable to companies with similar calculations.

For details of the reconciliations of the equivalent historical non-GAAP financial measures with GAAP financial measures, please refer to the Corporation's management's discussion and analysis for the three and six months ended June 30, 2024, available on SEDAR+ at www.sedarplus.ca and at https://www.tidewatermidstream.com. 

SOURCE Tidewater Midstream and Infrastructure Ltd.

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