Tidewater Renewables TSE: LCFS reported record second-quarter adjusted EBITDA of C$56 million, supported by above-nameplate renewable diesel production, stronger pricing and contributions from Canada’s Biofuel Production Incentive program.
Chief Executive Officer Jeremy Baines said the company’s HDRD complex achieved record average daily throughput of 3,315 barrels per day in the quarter, representing 111% utilization. Low-cost debottlenecking projects and facility reliability allowed the complex to operate consistently above nameplate capacity, he said.
The performance came as the company sold renewable diesel at record margins under offtake contracts indexed to U.S. import-parity pricing. Tidewater also captured an additional C$0.16 per litre of margin through the Biofuel Production Incentive, according to Baines.
Biofuel incentive agreement supports cash flow
Tidewater Renewables received conditional approval from Natural Resources Canada for the Biofuel Production Incentive during the first quarter. The company executed its contribution agreement on July 7, securing funding aligned with the HDRD complex’s full annual production capacity.
Baines said Tidewater expects to receive C$13.8 million in cash contributions covering the first and second quarters during the third quarter of 2026. Contributions are then expected quarterly in arrears.
CFO Ian Quartly said second-quarter adjusted EBITDA included C$7.7 million of expected Biofuel Production Incentive proceeds recognized during the period. The result also included C$7.7 million of adjusted EBITDA from Tidewater’s equity investment in a cattle company, primarily reflecting higher cattle prices.
SAF project targets fourth-quarter investment decision
The company continues to advance its sustainable aviation fuel project toward a final investment decision in the fourth quarter. On June 19, Tidewater executed a new initiative agreement with the Government of British Columbia that is intended to provide additional BC-LCFS credits for critical pre-final-investment-decision work.
The work includes engineering, regulatory advancement, preservation of vendor and fabrication capacity, and maintaining the project schedule, Baines said. Tidewater expects to receive the BC-LCFS credits in the third and fourth quarters as milestones are achieved.
In response to an analyst question, Baines said a final investment decision depends on a supportive regulatory environment, including targeted amendments under the Clean Fuel Regulations and other potential programs supporting Canada’s sustainable aviation fuel sector. He put the project’s estimated capital cost at about C$1.2 billion and said the company has completed a class 3 front-end engineering design study.
Baines said the project would have a three-year construction period and could enter service in 2030. Tidewater expects it could contribute funds from operating cash flow during construction and is also evaluating potential investment from a First Nations partner and other interested parties.
Guidance rises as leverage declines
Tidewater increased its 2026 adjusted EBITDA guidance for the renewables business to C$130 million to C$140 million. The company raised consolidated adjusted EBITDA guidance to C$230 million to C$250 million, up 20% at the midpoint from its prior outlook.
Quartly attributed the higher guidance to increased facility utilization, sustained strength in forward crack spreads, and improved renewable diesel and emissions-credit pricing. Forecast 2026 capital expenditures for Tidewater Renewables remain unchanged at C$2 million to C$3 million.
The company reduced Tidewater Renewables’ debt by C$13.5 million during the second quarter. Its debt-to-adjusted-EBITDA ratio was 1.47 times as of June 30, while the consolidated company’s ratio was 1.7 times, within its target range of 1.2 times to 2.5 times.
Quartly said the company intends to direct free cash flow primarily toward debt reduction while maintaining its disciplined capital program.
Broader Tidewater operations benefit from strong refining markets
Tidewater Midstream generated deconsolidated adjusted EBITDA of C$32.9 million in the second quarter, up C$7.3 million from the first quarter. The improvement was driven mainly by higher crack spreads at the Prince George Refinery, partly offset by realized losses on crack-spread hedges.
Prince George Refinery throughput averaged 10,032 barrels per day because of a planned 17-day partial outage in April. Excluding that outage, throughput averaged 12,060 barrels per day, or 101% of design capacity. The Prince George crack spread averaged C$118 per barrel, 16% higher than in the first quarter.
Tidewater has hedged about half of its crack-spread exposure from April through December 2026. It also added hedges during the second half of July covering approximately 40% of its 2027 crack-spread exposure at fixed prices that Baines said were significantly above mid-cycle pricing and 2026 realized hedge pricing.
Baines said Tidewater will continue pursuing non-core asset sales, prioritizing assets that do not fit its strategy or generate appropriate returns, while focusing on refinery and HDRD utilization, midstream volumes, commercial offtakes and the advancement of the sustainable aviation fuel project.
About Tidewater Renewables (TSE:LCFS)
Tidewater Renewables is a multi-faceted, energy transition company. The Corporation is focused on the production of low carbon fuels, including renewable diesel and sustainable aviation fuel. The Corporation was created in response to the growing demand for renewable fuels in North America and to capitalize on its potential to efficiently turn a wide variety of renewable feedstocks (such as canola oil, soybean oil, used cooking oil, distillers corn oil, tallow, and other biomasses) into low carbon fuels.
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