RE:Thoughts on the Renewables IPOIn addition TWM will be re-imbursed around $25 million for prework on the renewable diesel project ( I think this is extra to the $180 million cash)
Yeah, in either cash or LCFS credits I think? (going from memory) Guess it's part of the capex for the project which LCFS will own 100%. Will be interesting to see what net debt at TWM looks like at the end of Q3.
A variety of 'clean energy' institutional funds could make the IPO a success: we've all seen the market for trendy but not necessarily economic companies the last tought few years. I think LCFS will have to issue more shares next year to fund the renewable diesel project: all the cash from the IPO would go to TWM + ~$55M of their $150M credit line. Perhaps it would be packed as a 'drop down' where they get additional assets from TWM and raise equity in excess of the purchase price and institute a 3% dividend. Or...exactly the playbook of TWM 5 years ago or the US MLP market 10 years ago. I wouldn't be a buyer of LCFS at IPO. They've obviously got ambitions ($1.5B of identified growth, heh) and need a trendy vehicle to raise capital at attractive rates. They thought they had it with TWM but that market closed.
The Brookfield fund is raising part of its money from the Ontario Teachers Pension Fund (ugh), tucking something like this into a fund makes sense, a lot of ESG oriented funds own names like Valero: even idealistic funds need to own some companies that make money. On paper Renewables is attractive ($150M in 2023 run-rate ebitda) and they must have some buyers lined up to have moved this far into the IPO process with it closing in a few weeks.
I'm curious what this means for TWM: they'll have credit capacity for the first time in a while. Acquisition metrics on midstream assets are high (looking at Topaz, market has been quiet outside of the IPL soap opera) but newbuild multiples are still in 5-7x ebitda range.
For now though the IPO needs to price at least near $10 and close. Then we can go back to looking at PGR crack spreads (still near C$60? at US$68 MSW and rack prices of ~C$0.93/l) and Pipestone gas flows.