January 10, 2020 By Cielo Waste Solutions
Cielo Waste Solutions Corp. has announced a Memorandum of Understanding (MOU) with Renewable U Halifax Inc. to build, at an estimated cost of $50 million, a renewable diesel refinery in, or within 150 kilometres of Halifax, N.S.
Renewable U Halifax is one of multiple corporations under the “Renewable U” name (Renewable U Companies), with which Cielo has entered into memorandums of understanding on substantially the same terms as this MOU (the Prior MOUs), as previously announced. Renewable U Halifax and Cielo will be working towards entering into a joint venture agreement (JV agreement) contemporaneously with the joint venture agreements to be entered into with the other Renewable U Companies, which will provide the framework to build and operate a 4,000 litre per hour joint venture refinery (JV Refinery) in Nova Scotia that will be engineered to operate 24 hours a day, 341 days per year. Cielo is expecting to convert 327,360 tonnes of garbage into 163,680,000 litres of renewable fuels annually from the five announced JV refineries. It is anticipated that this JV Refinery will create in Nova Scotia 50 full-time jobs during construction and employ 25 full-time people once operational. The JV Refinery will utilize Cielo’s proprietary waste to high grade renewable fuel technology being commercialized at the Company’s refinery in Aldersyde, Alta., (the Aldersyde Refinery), located just south of Calgary.
In order to gain direct access to a port to potentially import multiple different waste feedstocks, including the problematic single-use plastics, Cielo has agreed to reallocate the $250,000 joint venture fee previously paid to Cielo, by Renewable U Brooks Inc., pursuant to a Memorandum of Understanding dated April 27, 2019 between Cielo and Renewable U Brooks (the Brooks MOU) to Renewable U Halifax. In conjunction with the aforementioned reallocation of the fee, as of Jan. 8, 2020, the Brooks MOU has been terminated.
The general terms to be incorporated into the JV Agreement are substantially the same as those previously announced terms for the joint venture refineries to be located in Grande Prairie, Medicine Hat, Lethbridge and Calgary, Alta., which include the following guidelines:
Renewable U Halifax will be solely responsible for financing 100 per cent of the costs associated with the JV Refinery (JV Costs) including the acquisition of the land, building and commissioning of the JV Refinery.
Cielo will manage the JV Refinery, overseeing its planning, construction, commissioning and operation and will receive a management fee equal to seven per cent of the JV Costs for the construction of the JV Refinery, subject to certain exclusions, and will continue to receive management fees based on industry standards once the JV Refinery commences producing high grade renewable fuels. Based on the estimated JV Costs of $50 million Cielo will receive management fees of $3.5 million over the next several years while the JV Refinery is being permitted, built and commissioned.
Unless otherwise agreed, in the event that Cielo does not execute the definitive JV Agreement with Renewable U Halifax, by March 31, 2020, in lieu of returning the transferred fee, Cielo has agreed, subject to applicable laws and policies, to issue Renewable U Halifax common shares of Cielo equal to the value of the fee, which shares will be valued at the greater of $0.25 per share and the average closing price of Cielo’s shares during the five trading days prior to the agreed upon execution date of the JV Agreement.
Profits from the JV Refinery will be split 30 per cent in favour of Cielo and 70 per cent in favour of Renewable U Halifax, until Renewable U Halifax has received profits equaling 100 per cent of the JV Costs plus the applicable management fees. Thereafter profits will be split on the basis of 50.1 per cent in favour of Cielo and 49.9 per cent in favour of Renewable U Halifax reflecting the respective interests/ownership of the parties.
Raphael Bohlmann, president of Renewable U Halifax and Renewable U Energy Inc., parent company of Renewable U Halifax, commented, “After extensive review of potential waste feedstock arrangements for the four territories previously selected by Renewable U’s subsidiary companies, Renewable U is pleased to be able to help Cielo gain access to the port of Halifax, which may result in Cielo being able to sell high-grade renewable fuels into the marine industry, on a cost effective basis.”
Don Allan, president and CEO of Cielo, stated, “We are pleased that Renewable U was open to helping us gain access to the port of Halifax, which opens up the opportunity for us to broaden our reach of deploying our waste to high-grade renewable fuels technology to the Maritimes and elsewhere, as well as being able to source different waste feedstocks. We appreciate Renewable U’s commitment to helping us to deploy our technology globally.”
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