Tidewater Renewables lands 2nd sale of Clean Fuel Regulation credits, appoints new CFO

Tidewater Renewables Ltd. announced a new agreement Sept. 21 to sell Canadian federal Clean Fuel Regulation credits that it will receive through the production and sale of fuel produced at the renewable diesel and hydrogen complex at Prince George, British Columbia, and the appointment of Ray Kwan as the corporation’s new chief financial officer.

As part of the CFR sale, Tidewater Renewables has agreed to sell a total of 25,000 CFR credits at CAD$100 (USD$74) per credit. This agreement adds previously unrecognized value for CFR credits and Tidewater Renewables will receive total proceeds of CAD$2.5 million over the term of this agreement. The corporation’s current run-rate EBITDA estimates for the complex of CAD$90 million to CAD$100 million exclude the impact of the outlined forward sale and any value for the ongoing sale of CFR credits once the program is implemented.

“This is Tidewater Renewables’ second CFR credit sale with the first being in June,” said Joel MacLeod, executive chairman and CEO. “These credit sales are significant for Tidewater Renewables as they continue to validate our previous view that CFR credits will represent an incremental revenue stream for our clean-fuel projects. Furthermore, at similar CFR credit values, Tidewater Renewables’ [renewable diesel] complex has the potential of generating more than CAD$30 million of incremental run-rate EBITDA assuming feedstock prices, diesel prices and BC LCFS credit prices remain constant.”

The corporation continues to work on other agreements to monetize further CFR credits that it will receive from the operation of the complex, from its canola coprocessing facility, and from other projects.

Appointment of new CFO

The corporation’s board of directors appointed Ray Kwan as the chief financial officer of the corporation. To help ensure a smooth transition, Kwan will work closely with the corporation’s current president and chief financial officer, Joel Vorra, who will remain with the corporation in an advisory capacity for the remainder of 2022.

Kwan comes to Tidewater Renewables with significant senior financial management experience, most notably in the capital markets sector. Prior to joining Tidewater Renewables, Kwan worked primarily in banking with a focus on institutional equity research, most recently as a managing director at BMO Capital Markets. Kwan holds a bachelor’s degree in chemical engineering from the University of Alberta and holds a “chartered financial analyst” designation.

“It is very exciting to join a company that is at the forefront of the energy transformation,” Kwan said. “I feel honored to join a strong leadership team and look forward to working with the corporation’s board, shareholders and stakeholders.”

Macleod added, “Tidewater Renewables is a growth company with a dynamic leadership team, and we are excited for Ray Kwan to help drive the business on the road to the corporation’s previously disclosed expected 2023 run-rate EBITDA of approximately CAD$150 million. We are ecstatic to have Ray join the Tidewater Renewables team. I have known Ray for over 10 years and have watched him become one of the most respected energy minds in North America. Ray is highly regarded by institutional investors with his 15-plus years of experience and multiple TopGun awards. Ray’s success and experience with public companies and capital markets in not only Calgary, but all of Canada and North America, his financial expertise, and his leadership qualities, will be an invaluable addition to the team. Mr. Vorra was a founder at Tidewater Midstream and Infrastructure Ltd. and his skills and leadership were fundamental in the creation of Tidewater Renewables in 2021. We are thankful for his time at both companies, and we are grateful that he has agreed to serve as an advisor to mentor Ray and the entire leadership team.”

Canada’s Clean Fuel Regulations

The Canadian government’s Clean Fuel Regulations increase incentives for the development and adoption of clean fuels, technologies and processes to significantly reduce pollution by making fuels cleaner over time. They require liquid fossil fuel (gasoline and diesel) suppliers—referred to as “primary suppliers”—to gradually reduce the carbon intensity from the fuels they produce and sell for use in Canada over time, leading to a decrease of approximately 15 percent (below 2016 levels) in the carbon intensity of gasoline and diesel used in Canada by 2030. The government of Canada is supporting the development of a clean-fuels sector through a series of investments and initiatives that complement the CFR.

While primary suppliers are the only entities required to reduce the lifecycle emissions of their fuels, the CFR create compliance categories that allow primary suppliers as well as “voluntary credit creators,” such as Tidewater Renewables, to create credits to ultimately be sold to primary suppliers to meet their gasoline or diesel carbon-intensity requirement.