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.
