Good afternoon, ladies and gentlemen, and welcome to the Tidewater Renewables 2024 Q4 End-Year and Financial Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, March 27, 2025. I would now like to turn the conference over to Mr. Ian Courtney, Chief Financial Officer. Thank you. Please go ahead.
Thank you, Operator. Welcome, everyone, to Tidewater Renewables Fourth Quarter 2024 Results Conference Call. On the call with me today is our Chairman and CEO, Jeremy Baines, who will provide an update on operations and transactions during the quarter. I will follow with our financial results, and then we will open the line for your questions. Before we get started, I'd like to note that today's call is being recorded for the benefit of individual shareholders, the media, and other interested parties who may want to review the call at a later time. The recorded call will be available through Cision. This morning, we reported results for the fourth quarter and year-end of December 31st, 2024. A copy of our news release, financial statements, MD&A, and AIF may be accessed on SEDAR+ or on our website.
Before passing the call over to Jeremy, I remind you that some of the comments made today may be forward-looking in nature and are based on Tidewater 's current expectations, judgments, and projections. Forward-looking statements we express today are subject to risk and uncertainties, which can cause actual results to differ from expectations. Further, some of the information provided refers to non-GAAP measures. To know more about these forward-looking statements, non-GAAP measures, and risk factors, please see the company's various financial reports, which are available on our website and on SEDAR+. I'll now turn the call over to Jeremy.
Thank you, Ian, and thanks to everyone for joining our Q4 Results Conference Call today. We are excited to share with you updates on the actions Tidewater Renewables has taken to improve the corporation's financial position and outlook. To begin, I'll address our ongoing regulatory engagement efforts. Tidewater Renewables has been actively engaged in discussions with both the Government of Canada and the Government of British Columbia to explore appropriate adjustments to the low-carbon fuel regulations and policy environment that will provide for a fair and level playing field for renewable diesel produced in Canada. We have raised concerns about the competitive disadvantage faced by Canadian producers due to the ability of U.S. renewable diesel producers to export their products into British Columbia. This unfair advantage arises from U.S.
Subsidies at the point of production and the generation of emission credits at the point of sale in Canada, creating an unlevel playing field. We are encouraged by recent developments in British Columbia. On February 27th, 2025, the Government of British Columbia announced amendments to the Low Carbon Fuels Act. These changes include increasing the renewable fuel content requirement for diesel from 4% to 8% for the 2025 compliance period and mandating that renewable fuel content be produced in Canada effective April 1st, 2025. We view these amendments as a positive first step toward addressing the unfair trade environment and strengthening the Canadian biofuels sector. We believe these changes will help level the playing field, allowing us to compete as the lowest-cost delivered renewable diesel producer in the British Columbia market and support Tidewater Renewables and the broader Canadian renewable diesel industry.
We will continue to collaborate closely with both the Government of Canada and the Government of British Columbia to ensure the right policies are in place to support growth and fair competition in the Canadian renewable fuels market. Next, I'll provide an update on our trade action. As part of our efforts to ensure fair competition in the renewable diesel market, Tidewater Renewables filed a trade remedy complaint with Canada Border Services at the end of 2024. This complaint addresses what we believe to be the unfair subsidization and pricing of U.S. renewable diesel imports, which are negatively impacting the competitiveness of our Canadian operations. On March 6th, 2025, Canada Border Services formally initiated an investigation into our allegations, confirming the validity of our concerns. We are confident in the likelihood of success in this process.
Based on our analysis and legal advice, we expect that starting in June 2025, duties of between CAD 0.50 and CAD 0.80 per liter would be imposed on U.S. imports of renewable diesel to counteract the unfair trade practices. Final duties would be imposed from September 2025 and will be in place for five years, which will provide much-needed stability for the Canadian renewable diesel market and our operations. Moving on to our fourth quarter operational performance, I am pleased to report that our HDRD complex continued to perform exceptionally well. For Q4 2024, we achieved average daily throughput of 2,677 bbl per day. For perspective, when I started in January of 2024, the facility was struggling to run at approximately 2/3 capacity or approximately 2,000 bbl a day.
The team has since done an admirable job in working out the commissioning challenges and being able to run the plant at capacity with industry-appropriate reliability. On a full-year basis, the HDRD complex achieved daily throughput of 2,643 bbl per day, which was above our full-year target of 2,550 bbl per day and reflects the low rate of production we saw in Q1. Since the start of commercial operations in November 2023, Tidewater Renewables has produced and sold over 170 million L of renewable diesel into the local British Columbia market. This robust performance is a testament to the operational efficiency and effectiveness of our team, and it reflects our strong commitment to safety and environmental stewardship. Furthermore, during Q4, we were pleased to receive the final grant of LCFS credits from the B.C. government in recognition of achieving the 12-month operational milestone at the HDRD complex.
In another positive development, subsequent to year-end on January 10th, 2025, we completed the sale of Tidewater Renewables' interest in the Rimrock Renewables Partnership for total proceeds of CAD 7.8 million. This was a great outcome as the partnership's proposed renewable gas project would have cost tens of millions of dollars to complete, and positive cash flow and expected returns were below our standards and years away. As we look forward to the rest of the year, our actions are starting to bear fruit. Demand for domestically produced renewable diesel, as well as pricing, is showing signs of improvement alongside the associated emissions credits markets.
We believe that with the new Canadian renewable content mandate, LCFS regulation changes, and a favorable outcome on the trade complaint, we are well positioned to see an improvement in profitability and a return to results more in line with what we had observed in the first half of the year at the HDRD facility. Looking forward, the recently enacted renewable content changes, a positive outcome on the trade action, and the ongoing tightening carbon intensity mandate in B.C. are expected to create a more balanced and profitable market for renewable diesel. In summary, we are pleased with the progress we've made on multiple fronts in the quarter and throughout the year, including regulatory engagement and positive regulation changes, progress on the trade action, and strong operational performance. These initiatives collectively position Tidewater Renewables for long-term financial success in the Canadian renewable diesel market.
I'll now turn the call over to Ian, who will provide a more detailed review of our financial results for Q4 2024.
Thanks, Jeremy. During the fourth quarter, Tidewater Renewables reported an adjusted EBITDA of CAD 6 million. This represents a decrease of 44% from the fourth quarter of 2023 and a 56% decrease from the third quarter of 2024. The decrease in adjusted EBITDA was primarily driven by the sale of EBITDA-generating assets to Tidewater Midstream during the third quarter of 2024. This transaction, while positive in terms of reducing debt levels and interest costs, led to a reduction in our EBITDA-generating capacity. For the full year 2024, Tidewater Renewables generated adjusted EBITDA of CAD 74.5 million, a 62% increase from 2023. The increase was due to the first full year of operations of the HDRD complex, partially offset by the termination of take-or-pay contracts in connection with the Tidewater Midstream transaction and realized losses on derivative contracts.
Subsequent to year-end, on March 26th, 2025, we took another significant step forward, reinforcing our financial position by enhancing our credit facilities. Total availability at the first-lien credit facility increased by CAD 10 million to CAD 40 million. The second-lien tranche C facility was also increased by a corresponding CAD 10 million. The amendments also provide Tidewater with the option to pick the upcoming April interest payment for the second-lien tranche A facility and have the CAD 5 million balance added to the aggregate principal amount for the facility instead of making a cash payment. The maturity dates for both the second-lien tranche B and tranche C facilities were extended from January 2026 to October 2027. Finally, the financial covenants under both facilities have been waived for an additional two quarters out to March 31st, 2026.
Overall, the amendments to the credit facilities and the growing demand for renewable diesel and emissions credits as a result of the B.C. regulatory changes and the trade complaint have positively impacted our long-term financial viability. As such, the growing concern and uncertainty that was disclosed in the second and third quarter financial statements has been removed from the year-end financial statements. I'll now ask the operator to open the call for questions.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your telephone keypad. You will hear a prompt that your hand has been raised. Should you wish to cancel your request, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from the line of Maurice Choy from RBC Capital Markets. Please go ahead.
Thanks. Good morning, everyone. Maybe just start off with the trade complaint here. The potential duties of CAD 0.50-CAD 0.80 per liter on U.S. imports, is there a way to quantify that in terms of your EBITDA or put differently, suppose these things do come through, would you be in a position to provide the Street with EBITDA guidance for 2025 later this year?
Yeah. Thanks, Maurice, for the question. That CAD 0.50-CAD 0.80 per liter tariff, really, you need to translate that into the equivalent value of LCFS and CFR credits. Basically, over the years, the B.C. market has priced itself in terms of import parity related to U.S. markets, particularly the California market, where they stack on the California LCFS and the RIN D4 value. It is very material. If you look at what level people were able to import renewable diesel into the U.S. at last summer, call it CAD 1.60, CAD 1.70 a liter, that would generate credit prices that were quite low, LCFS equivalent of CAD 200 at CAD 100 CFR. That is significant. All of that would go to those prices. Basically, our view is where current California LCFS and D4 RINs are.
If we get the CAD 0.50-CAD 0.80 per liter tariff through the trade case, we will be back to levels that are very close to what we were in the first half of the year with a stack LCFS and CFR credit prices in that CAD 600 kind of level.
Let me just quick follow up about the CAD 0.50-CAD 0.80. I know that there's obviously a list of scenarios that could have emerged out of this. Where does the CAD 0.50-CAD 0.80 land in terms of the potential scenarios that you envision in terms of duties?
Yeah. I mean, the CAD 0.50 is pretty straightforward. That is a calculation based on the subsidy that the U.S. producers get and obviously the unfair trade action that that represents. The CAD 0.80 is more related to the economic analysis that was part of our submission around actual dumping of product. It is right in line with what we think where it should be. Our view is it very much levels the playing field if we're successful there, and will allow for us to generate the types of cash flow that we expect from the facility go forward.
Suppose this does come in June, as you mentioned, whether that be CAD 0.50 or CAD 0.80, are you possibly going to provide us with guidance, or is it unlikely based on all that certainty?
Yeah. Right now, we're watching it, and we typically don't put guidance out until after our Q1 release. We will be making that decision as we go. Operationally, we expect to run at high utilization rates. Obviously, we're subject to diesel and credit prices. I do think we have given the market enough information that you should be able to back into those.
Got it. Just to finish off with a question about going concern, I think at the last Q3 results, you raised the potential that the company's ability to continue as a going concern may be in jeopardy if a number of things were unsuccessful or regulatory changes do not emerge. How do you see that risk today?
Obviously, we think it is no longer there. We feel very good about the B.C. action, and we're already starting to see some good activity around diesel sales, renewable diesel sales, and the value of the associated emissions credits. We obviously feel very good about the increase in liquidity and the support of our lender. We are cautiously optimistic, but based on our legal advice, we expect to be successful in the trade complaint. We think with all of that, we have a strong position to be a leading renewable diesel provider and generate significant profitability in the long term.
Perfect. Thank you very much.
Thank you. Once again, should you have a question, please press star followed by the one on your telephone keypad. Your next question comes from the line of Robert Catellier from CIBC Capital Markets. Please go ahead.
Hey, good afternoon, everyone. I just wanted to dig down a little bit on some of the changes in the market. Specifically, your disclosures and comments refer to the changes in the Low Carbon Fuels Act. It's a good first step in leveling the unfair trade environment. What more do you need to see to ensure your financial stability and avoid compelling you to seek alternative strategies to address liquidity?
Yeah. I don't think there's anything we need to do more to address that front. Obviously, that change has put a significant underpinning of demand for Canadian-produced renewable diesel, which we are the only one in the market today. The liquidity support we received from our lender gives us a long runway on that front. We just think that the trade complaint and being successful there are additive. There are a few other things. Obviously, we have the terrible forward purchase that was put on by former management that we're generating losses on that derivative in relation to our feedstock purchases. That is dropping off at the end of the year and has been a significant drag on the company. You put all of that together, we believe we're through the worst of it. We are appreciative of the B.C. government for supporting us as well.
The federal government has continued to talk about support for renewable diesel. We think we are out of it to get you there, Rob. Obviously, we would like the B.C. government to continue to monitor their LCFS regulations and ensure that the market stays in balance from a credit point of view.
Okay. What changes in market behavior have you observed since the Canada Border Services Agency initiated its investigation? Similar to that, what progress have you made or what visibility do you have on executing additional forward credit sales at the levels that you need to ensure your ongoing liquidity?
Yeah. A few things on that front. Obviously, when you look at the total 4 billion L a year B.C. diesel market in 2024, about 1/3 of that market was renewable diesel, and the vast majority of that came in from the U.S. That is about the level that is needed to keep the market in balance for LCFS credit generation for the other conventional barrels that are needed for them to stay in compliance. With the Buy Canadian mandate that B.C. has implemented, we have seen significant outreach because we are one of the only ways to satisfy that right now. Traditionally, last year, we were selling, when I got here, renewable diesel just as straight-up diesel in the diesel pool and selling credits separately. We will continue to do some of that.
We have also, with the Canadian content mandate, seen significant interest in buying what we call fully loaded barrels where the compliance obligations go with the barrels. That is how we are moving our marketing program. We are selling a barrel of diesel that includes the LCFS and the CFR credit that is related to that renewable barrel for people to be able to meet their compliance obligations. That has had a significant uptick. We had one pretty solid customer last year. We have been diversifying that and adding a significant number of customers who are now aware that we have renewable diesel available, and we can sell them a barrel that meets the Canadian renewable content mandate as well as provide them with the LCFS and CFR credits they need.
Okay. Last one for me. Obviously, it's never a bad thing to increase your available liquidity under your credit facility. What was the impetus for that change?
Yeah. I mean, like you say, you can never have too much liquidity. As we have gone through the first quarter, we just wanted to make sure we had an appropriate amount of liquidity in the balance sheet to roll through it. Obviously, we started, we communicated, we were engaged with the governments last year in, call it July. We undertook the transaction in September with Tidewater Midstream to ensure our ability to reduce our debt and sell our compliance credits through the period. There's been a lot of political uncertainty, which I think has made it harder for the governments to react. B.C. was in an election, and it took them a while. The federal government had been very supportive. Obviously, with the proroguing of Parliament, their ability to do things changed as well.
With the announcement from B.C. that the regulation change on Canadian content would start April 1st, that was a little bit later than we had hoped and envisioned. With the trade case, there was a bit of a few weeks' delay versus where we wanted it to be. Just better to be safe and have enough liquidity. It is still, with all of the tariff stuff that is going on, we have feedstock pricing that hopefully is for us positive with some of the trade implications given our position in buying Canadian canola. Between that, diesel price volatility and credit markets, it was just the right thing to do and make sure that we are not too close to the line.
Okay. Thank you.
Thank you. Once again, should you have any questions, please press star followed by the one on your telephone keypad. There are no further questions at this time. I will now hand the call back to Mr. Jeremy Baines for any closing remarks.
Thanks, operator. Thanks, everyone, for joining us on the call today. Please do not hesitate to reach out to me or the team if you have any questions. Thank you.
Thank you. This concludes today's call. Thank you for participating. You may all disconnect.