Tidewater Renewables Ltd. (LCFS) Earnings Call Transcript
May 8, 2025
Earnings Call Speaker Segments
Good morning and good afternoon, everyone, and thank you for joining the Tidewater Renewables 2025 Q1 Financial Results Conference Call. <<operator_script>> Please note that this call is being recorded on Thursday, May 8, 2025. At this point I'd like to hand the conference call over to Tidewater's CFO, Mr. Ian Quartly. Please go ahead.
Thanks, operator, and good morning, everyone — welcome to the Tidewater Renewables conference call covering our first quarter 2025 results. Joining me today is our Chairman and CEO, Jeremy Baines, and he'll walk you through operations and the regulatory picture during the quarter. After that, I'll take you through the financial results, and then we'll open up the line for your questions. Before we begin, please note that we are recording today's call for the benefit of individual shareholders, the media and other interested parties who might want to review it at a later time. The recorded call will be available through Cision. This morning, we reported results for the first quarter ended March 31, 2025. You can access a copy of our news release, financial statements and MD&A on SEDAR+ or on our website. Before I hand things over to Jeremy, a reminder that some comments made today may be forward-looking in nature and are based on Tidewater's current expectations, judgments and projections. The forward-looking statements we express today are subject to risks and uncertainties, which may cause actual results to differ from expectations. In addition, some of the information provided refers to non-GAAP measures. To learn 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 hand things over now to Jeremy.
I appreciate that, Ian, and I want to thank all of you for being on our Q1 results conference call today. Although the quarter disappointed us when it comes to financial results, our outlook is getting considerably better despite what we hope will be merely a postponement of our trade case. Regulatory shifts in British Columbia, together with better U.S. import parity prices for renewable diesel entering British Columbia, both work in favor of our profitability going forward. To begin, let me give you an update on the trade action we have underway. On May 5, 2025, a decision was handed down by the Canadian International Trade Tribunal to end its preliminary injury inquiry into the countervailing, anti-subsidy and antidumping duty complaint filed by Tidewater Renewables regarding renewable diesel imports from the United States. We are disappointed by the Tribunal's ruling, yet we want to state clearly that Tidewater Renewables stays firmly committed to making sure competition in Canada's renewable diesel market is fair. Our position has not changed. The evidence gives strong support to the fact that unfair trade practices on the part of the United States have brought a flood of subsidized, dumped renewable diesel into Canada. This influx has inflicted significant harm on Tidewater, which is presently the only Canadian producer of renewable diesel. It is worth noting that the CBSA launched the investigation after it confirmed the validity of our concerns, recognizing that U.S.
Subsidies and dumping practices have distorted the Canadian market. With help from our external trade law counsel, once we receive the tribunal's reasoning on May 23, 2025, we will review that decision thoroughly. Based on what we find in that review, we will pursue every legal remedy available to us aggressively, including the possibility of filing an amended complaint or a new one with the CBSA. Despite this setback in our trade case, which we hope is temporary, we are optimistic about the future of the Canadian renewable diesel market. On February 27, 2025, the Government of British Columbia announced changes to the Low Carbon Fuels Act, which raised the renewable fuel requirement for diesel from 4% to 8% for the 2025 compliance period. And effective April 1, 2025, it mandates that renewable fuel content be produced in Canada. Since that announcement, we have seen a significant increase in demand from customers who want to buy our Canadian renewable diesel in replacement of their historical volumes imported from the U.S. We have been having good success selling our renewable diesel with the related emissions and Canadian content credits attached at reasonably profitable levels. Additionally, U.S. D4 RINs values have risen over 70% during 2025, and California LCFS values have remained strong, which increases the import parity price of the competing U.S.
When it comes to renewable diesel brought into Canada, that is what ultimately determines the worth of our Canadian emissions credits, and these supportive market conditions are resulting in better Tidewater Renewables margins for the rest of 2025 and past that. We have confidence that such factors will generate meaningful value for our stakeholders and establish us as a frontrunner in Canada's renewable diesel sector. Moving now to how we operated at the HDRD complex in Q1 2025. During the 3 months ended March 31, 2025, the HDRD complex averaged throughput of 2,239 barrels per day, which equals 75% of design capacity. Utilization came in lower in the first quarter because we were managing inventory, given an excess supply of diesel in Western Canadian markets along with somewhat muted demand, and inclement weather that impacted feedstock arriving at the plant by rail. A minor fire occurred on April 1 in the main renewable diesel process unit at the HDRD complex. Our operations team quickly put out the fire using firefighting equipment at site. No injuries were reported. The damage was minimal and could be required with spare parts on hand. Operations restarted on April 14, and the HDRD complex has performed as expected since the outage.
As we look forward, our maintenance capex estimate for 2025 comes in at $8 million -- ranging from $8 million to $10 million. A big chunk of that is earmarked for the planned turnaround at the HDRD complex in the third quarter. That turnaround should run for roughly 3 weeks. Throughout the turnaround, we'll keep selling renewable diesel drawn from inventory. The HDRD complex is designed for a regular cycle of 2 and 4 years between turnarounds. The year 2 turnaround centers on placing the hydrodeoxygenation catalyst. The 4-year turnaround is broader in scope, covering hydrodeoxygenation and dewax catalyst replacements, vessel inspections, and targeted equipment upgrades. Moving through 2025, we feel confident about the favorable trends taking shape in the renewable diesel market. Regulatory developments -- among them the B.C. government's pledge to raise the renewable fuel mandate and its requirement for Canadian production -- should keep pushing demand for domestically produced renewable diesel. Our steady emphasis on operational efficiency, together with strategic maintenance investments, will back our continuing work to maximize throughput and profitability over the coming year. At this point I'll hand the call to Ian, who will walk through our Q1 2025 financial results in greater detail.
Thanks, Jeremy. For the first quarter of 2025, Tidewater Renewables posted net income of $5.2 million, which is $8.6 million higher than what we saw in the fourth quarter of 2024. The main drivers behind that stronger net income were unrealized gains on derivative contracts, along with a substantial income contribution coming from the equity investments. Adjusted EBITDA came in at $2.4 million for the first quarter of 2025, a modest decline compared with the $6 million of adjusted EBITDA we generated in the fourth quarter of 2024. That drop in EBITDA reflects thinner margins on sales of renewable diesel and emissions credits, since most of those sales were contracted before the Government of British Columbia announced changes to the Low Carbon Fuel Act in late February. After the quarter ended, on May 7, 2025, we successfully pushed out the maturity date on the senior credit facility by 1 year, to February 28, 2027. Together with the amendments we made to the first and second lien credit facilities at the end of March, this refinancing materially improved Tidewater Renewables' financial flexibility, gives us the added capacity needed to support the company's continued financial stability, and extends the earliest debt maturity beyond February 2027. At this point I'll ask the operator to open the line for questions.
<<operator_script>> Our initial question is from Robert at CIBC Capital Markets.
Could you begin by giving us a clearer picture of what you're observing in the April LCFS credit market now that the market reforms have taken effect?
Yeah. This is somewhat competitive information to share, but at present we are observing a complete credit stack that, when valued on an import parity basis, comes in at $450-plus or so given today's market.
All right. So what's your understanding of why the trade tribunal decided to end the inquiry? And did it take into account the U.S. bill that seeks to extend the biodiesel tax credits retroactively?
Honestly, Rob, we don't really know for certain. It's a tricky situation. We went through—the CBSA picked up her case. From what we understand, it's very unusual for the CITT to turn that case down the way it did. And we're waiting on the reasoning. At times it's merely a procedural matter. When that occurs, you refile and move the claim forward. But we lack any genuine insight into it, since they won't disclose their actual reasoning and decision until—what's the date, the 23rd or something like that. So we're still 2 weeks away from really understanding what the reasoning is, but we actually are—we're getting ready to refile so that we don't lose time here. So we'll see how that plays out.
Yeah, that makes sense. My final question is this: how do you expect the backing from the B.C. government to shift now that the tribunal has made its determination? And has it done sufficient work to make sure credit prices get back to a level the industry can be supported by?
Yes. So what the B.C. government has stated in public is that they are watching the market closely. They'll consider adopting this, Canadian content as it makes sense. And I think the reality is that we believe they support renewable diesel production and the renewable diesel industry. They want Canadian producers to succeed and to have a fair playing field on which to compete, which isn't the case today. And we expect they probably will take up that Canadian mandate. There's no guarantee of that, but that's our expectation. And ultimately, over the long run, we see the Canadian market being balanced when you look at how much diesel is consumed in British Columbia and the -- with tightening CI requirements going forward, we think the -- what we expect Canadian R&D production to be by the end of this year. The B.C. market is balanced, and we will back out the -- we'll compete well against those imports and the market will be balanced and productive for Canadian-produced renewable diesel.
<<operator_script>> The following question is from Maurice at RBC Capital Markets.
Let me return to a broader question here. I believe you said that thanks to the B.C. government and, I suppose, higher demand, certain prices have in fact bounced back and, to some degree, profitability has come back. So when I consider the tribunal ending its inquiry, stepping back for a moment, do we truly require it? And I'm certain having it would be good, but as far as the durability of your business case goes, for this business, is it still needed? Or are investors able to move on?
Well, we aren’t prepared to move past this yet, since the harm done to us can’t be repaired. The unfair trade has made things difficult. But getting to your point, it’s clear that absent that — with backing from the B.C. government, if they keep carrying out what they’ve committed to on the BC LCFS regulations — we really believe there’s a long, competitive, profitable path forward for us even if we don’t prevail there. We still haven’t seen the ruling, so it’s difficult for us to comment. Even so, we’ll keep seeking a fair and level playing field, and that’s an avenue available to us that we must keep pursuing. But to your point, given the gains in import parity pricing and the gains in the B.C. government regulations, we expect to be profitable and to be healthy in the remaining quarters of this year.
That's really encouraging to hear. And maybe just to wrap up and stay on the policy front. So as you look at the quarters ahead, suppose it takes a few months before the federal government is in place and has issued its mandate, could you just speak broadly about which policies, if kept, are good? And perhaps which policy changes, if proposed, would be good for you, and which ones are you watching for?
Yeah. On the federal side, I think anything that makes the CI rules around federal credits stricter helps our business, since we produce a substantial share of those credits too. Depending on how the trade case ruling comes out, I do believe a matching federal credit of a similar kind — one that mirrors the U.S. credit to keep trade fair — would be a good policy result from the RD standpoint. And measures involving SAF could also benefit our SAF project.
That brings us to the end of the question-and-answer session, as there are no more questions right now. At this point I'll hand things back to Tidewater's CEO, Mr. Jeremy Baines. Please go ahead.
Thanks to all of you for being with us on today's call. If anything comes up that you'd like to ask about, feel free to get in touch with me or with the team. Thank you.
Thanks very much, everyone — that brings today's call to a close. We appreciate your taking part, and please go ahead and disconnect your lines. Have a wonderful day.
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