Tidewater Renewables Ltd
Quick Take: Crystallizes additional CFR credit value; announces new CFO
TSX: LCFS | CAD 11.00 | Outperform | Speculative Risk | Price Target CAD 20.00
Sentiment: Neutral
Our take
• We view the sale of additional federal Clean Fuel Regulation (CFR) credits as incrementally positive as it crystallizes EBITDA that was not previously included in our estimates or management’s guidance.
• With respect to the appointment of Ray Kwan as the new CFO, we expect a smooth transition with Joel Vorra (current President and CFO) remaining an advisory capacity through the end of 2022.
Details
Sale of additional CFR credits. The company announced an agreement to sell 25,000 credits at $100/credit, which will provide $2.5 million over the term of the agreement. This sale follows the initial monetization of CFR credits back in June 2022 (45,000 credits at $95/credit).
Modest-sized transaction, but the sale of CFR credits could be a meaningful uplift in aggregate. While the $2.5 million transaction size is not particularly material, at similar credit values the renewable diesel project could generate an additional $30 million in incremental run-rate EBITDA. This compares to the company’s current guidance for run-rate EBITDA from the renewable diesel project of $90-100 million, which excludes upside from the sale of additional CFR credits.
Appointment of new CFO. Ray Kwan has been appointed as the new CFO. Previously, he was a research analyst covering the oil and gas sector. He holds a BSc in Chemical Engineering from the University of Alberta and holds the Chartered Financial Analyst designation. Joel Vorra (current President and CFO) will remain with the company through the end of 2022 in an advisory capacity.