Northstar Announces Updated Economics and Capital Estimate, and Provides Corporate Update on Funding Progression for the Empower Calgary Facility

Rhea-AI Summary

Northstar Clean Technologies (TSXV: ROOF, OTCQB: ROOOF) announced significant updates on its project economics and funding strategy for the planned Empower Calgary Facility. The new figures indicate a potential annual revenue of $9.7 million, a 28% increase from the initial estimates released in April 2022. Additionally, the expected annual gross profit is projected at $6.4 million, reflecting a 31% increase, and potential EBITDA stands at $5.3 million, which is 33% higher than previously anticipated. The internal capital estimate for the facility has been revised to $15.0 million. The update highlights the company's progress in de-risking the facility's design and improving financial projections.

Positive

• Projected annual revenue of $9.7 million, up 28% from initial estimates.
• Expected gross profit of $6.4 million, reflecting a 31% increase.
• Potential EBITDA of $5.3 million, a 33% increase from earlier estimates.
• Updated internal capital estimate of $15.0 million for facility construction.

Negative

• Previous funding strategies fell through, requiring exploration of new funding options.
• Reduced expectations for government grant funding previously outlined in October 2022.

Highlights

• $9.7 million in Potential Annual Revenue Per Facility⁽¹⁾, increased 28% from initial project economics (from April 2022)
• $6.4 million in Potential Annual Gross Profit Per Facility (66% Gross Margin)⁽¹⁾, increased 31% from initial project economics (from April 2022)
• $5.3 million in Potential Annual EBITDA^{(1) (2)} Per Facility (55% EBITDA⁽²⁾ Margin)⁽¹⁾, increased 33% from initial project economics (from April 2022)
• Updated Internal Capital Estimate of $15.0 million
• Announces Corporate Update on Funding Strategy

VANCOUVER, BC, April 20, 2023 /PRNewswire/ - Northstar Clean Technologies Inc. (TSXV: ROOF), (OTCQB: ROOOF) ("Northstar" or the "Company") is pleased to announce its updated preliminary base case project economics (the "Updated Project Economics") for its 150 tonnes per day ("tpd") base case scenario (the "Base Case") for its planned asphalt shingle reprocessing scale-up facility in Calgary, Alberta (the "Empower Calgary Facility"). The Company also announces an updated internal capital estimate for the Empower Calgary Facility (the "Updated Internal Capital Estimate").

Mr. Aidan Mills, President & CEO and Director of Northstar, stated, "We are pleased to announce updated project economics for our Empower Calgary Facility. Over the last 12 months, since our initial preliminary project economics were released, through the operation of the existing pilot facility in Delta, British Columbia (the "Empower Pilot Facility") we have learned a tremendous amount about our process, our proprietary technology, our equipment, including feedback from our key vendors, and our customers' requirements and specifications. Production at the Empower Pilot Facility has enabled us to both significantly de-risk the technical design for the Empower Calgary Facility and allow us to improve our capital and project economic estimates."

"Our Empower Calgary Facility is now expected to return over $5.3 million per year in facility-level EBITDA⁽¹⁾⁽²⁾, resulting in an increase of 33% from our initial project economics released in April 2022. With the Updated Internal Capital Estimate of $15.0 million, that projects a compelling  approximate 3 year payback period and returns on equity and capital invested. These revised financial estimates, combined with the de-risking of the technical design, increase the probability of delivering strong commercial results from the Empower Calgary Facility," concluded Mr. Mills.

As previously announced by the Company on March 31, 2022, an independent front-end engineering design ("FEED") study was prepared by BBA Engineering Ltd. ("BBA"), which provided an initial pre-feasibility level capital estimate (the "Initial Independent Capital Estimate") for the Empower Calgary Facility. As previously announced by the Company on April 1, 2022, the Company released its preliminary project economics (the "Initial Project Economics") based on the FEED. The Updated Project Economics are based on a number of factors including critical lessons learned from operating the Empower Pilot Facility, and customer and critical equipment supplier feedback.

The Company sensitized a broad range of both operational and financial assumptions to arrive at a conservative Base Case scenario, which is shown below. While the Company estimates that the Empower Calgary Facility can operate between 150 to 200 tpd, the figures below are based on the low end of 150 tpd. All currencies quoted within this press release are in Canadian dollars. Note that some figures below may not add due to rounding.

Table 1: Key Operational Assumptions (Base Case – 150tpd)⁽¹⁾

	Initial Project Economics (Apr 2022)	Updated Project Economics (Apr 2023)
Hourly Processing Capacity	15 tonnes per hour	15 tonnes per hour
Operational Hours Per Day	10 hours per day	10 hours per day
Daily Processing Tonnage	150 tpd	150 tpd
Operational Days Per Week	5 days per week	6 days per week
Operational Days Per Month	20 days per month	24 days per month
Operational Months Per Year	11.5 months	11.5 months
Approximate Annual Feedstock Tonnage	34,200 tpa	41,400 tpa
Operational Capacity (Maximum)	95 %	95 %
Product Yield / Recovery	95 %	95 %
Approximate Asphalt Recovered	8,123 tpa	8,407 tpa
Approximate Fiber Recovered	8,123 tpa	9,341 tpa
Approximate Aggregate Recovered	16,245 tpa	19,616 tpa
Liquid Asphalt Composition	25 %	22.5 %
Fiber Composition	25 %	25 %
Aggregate Composition	50 %	52.5 %

Table 2: Key Financial Metrics (Base Case – 150tpd)⁽¹⁾

	Initial Project Economics (Apr 2022)	Updated Project Economics (Apr 2023)
Revenue	$7.6 million	$9.7 million
COGS	$2.7 million	$3.3 million
Gross Profit	$4.9 million	$6.4 million
Facility Operating Overhead	$0.9 million	$1.1 million
EBITDA(2)	$4.0 million	$5.3 million

Table 3: Key Financial Metrics (Per Tonne) (Base Case – 150 tpd)⁽¹⁾

	Initial Project Economics (Apr 2022)	Updated Project Economics (Apr 2023)
Revenue	$222 / tonne	$232 /tonne
COGS	$79 / tonne	$79 / tonne
Gross Profit	$144 / tonne	$153 / tonne
Facility Operating Overhead	$27 / tonne	$27 / tonne
EBITDA(2)	$116 / tonne	$127 / tonne

Updated Internal Capital Estimate

As part of the FEED, the Initial Independent Capital Estimate from BBA estimated capital expenditures to construct the Empower Calgary Facility of approximately $11.75 million. The Initial Independent Capital Estimate was prepared within the targeted nominal estimate accuracy of +/- 20% with deliverables developed to a level sufficient for supporting a Class 3/4 Pre-Feasibility estimate as defined in AACE International Recommended Practice No. 18R-97.

Since the Initial Independent Capital Estimate was completed by BBA in Q1 2022, the Company has continued to operate the Empower Pilot Facility and conducted significant testing for major international and domestic industry participants. The Company has completed the Updated Internal Capital Estimate of capital expenditures of approximately $15.0 million which incorporates learnings from the operation of the Empower Pilot Facility.

Table 4: Capital Estimate Comparison

All figures below noted in C$ thousands.

				March 2022	April 2023
Direct Costs
Equipment
Plant and Yard Mechanical		Mechanical	$5,725		$8,696
		Electrical	$626		$1,026
		Automation / Telecommunications	$725		$725
Total Equipment			$7,075		$10,447
Labour and Materials
		Civil	$137		$153
		Structural & Architectural	$185		$206
		Piping	$646		$718
		Electrical	$487		$487
		Automation / Telecommunications	$87		$87
Total Labour and Materials			$1,542		$1,651
Direct Costs Total			$8,617		$12,098
Indirect Costs
Plant		Civil and Mechanical	$197		$300
Project Indirect Costs		EPCM and Commissioning Services	$980		$1,350
Indirect Costs Total			$1,177		$1,650
Direct Costs Total			$8,617		$12,098
Direct and Indirect Costs (excluding Contingency)			$9,794		$13,749
Contingency			$1,957		$1,251
Capital Cost Estimate - Grand Total (including Contingency)			$11,750		$15,000

The differences between the Initial Independent Capital Estimate prepared by BBA from March 2022 and the Updated Internal Capital Estimate from April 2023 are noted below:

Table 5: Comparison of Initial Independent Capital Estimate (March 2022) vs. Updated Internal Capital Estimate (April 2023)

Initial Independent Capital Estimate (March 2022)	$11,750
Equipment Cost Changes	$2,197
Scope Changes	$666
Customer Scope Changes	$500
Other Indirect Changes	$332
USD Impact	$268
Reduction in Contingency	$705
Updated Internal Capital Estimate (April 2023)	$15,000

Corporate Update on Funding Strategy

On October 4, 2022, Northstar announced a strategic partnership through the execution of a binding term sheet with Renewable U Energy Inc. ("Renewable U") to fully fund Northstar's Phase 1 Expansion Program through financing of over $43.5 million. The proceeds due to the Company from Renewable U were not received through Q4 2022.

Following this, the Company felt it prudent to begin exploring alternate funding strategies to fund the Empower Calgary Facility. After further discussions with Renewable U, the Company has agreed with Renewable U that this transaction will not proceed.

As announced by the Company on February 13, 2023, Northstar was selected for an award of up to $7.1 million in non-dilutive non-repayable government grant funding from Emissions Reduction Alberta ("ERA") and is in advanced stages with a number of alternative funding providers, including non-dilutive project debt funding and project equity funding for project level support.

For more information on the FEED, please see the Company's news release dated March 31, 2022 filed under its profile on SEDAR. For more information on its Initial Project Economics, please see the Company's news release dated April 1, 2022 filed under its profile on SEDAR.

Notes:
	(1)	The Initial Project Economics are based on the anticipated first full operational year expected in 2024. The Updated Project Economics are based on the anticipated first full operational year expected in 2025.
	(2)	Earnings before interest, taxes, depreciation and amortization ("EBITDA") is a Non-GAAP financial measure and refers to earnings determined in accordance with IFRS, before depreciation and amortization, interest expense (finance costs) and income tax expense. EBITDA should not be construed as alternatives to net income/loss determined in accordance with International Financial Reporting Standards ("IFRS"). EBITDA does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. The Company believes that EBITDA is a meaningful financial metric as it measures cash generated from operations which the Company can use to fund working capital requirements, service future interest and principal debt repayments and fund future growth initiatives.

About Northstar

Northstar Clean Technologies Inc. is a Canadian-based clean technology company focused on the sustainable recovery and reprocessing of asphalt shingles. Northstar has developed a proprietary design process for taking discarded asphalt shingles, otherwise destined for already over-crowded landfills, and extracting the liquid asphalt for use in new hot mix asphalt, shingle manufacturing and asphalt flat roof systems, and aggregate and fiber for use in construction products and other industrial applications. Focused on the circular economy, Northstar plans to reprocess used or defective asphalt shingle waste back into its three primary components for reuse/resale at both its Empower Pilot Facility in Delta, British Columbia and its first commercial scale up facility in Calgary, Alberta. As an emerging innovator in sustainable processing, Northstar's mission is to be the leader in the recovery and reprocessing of asphalt shingles in North America, extracting the recovered components from asphalt shingles that would otherwise be sent to landfill.

For further information about Northstar, please visit www.northstarcleantech.com.

On Behalf of the Board of Directors,
Aidan Mills
President & CEO, Director

Cautionary Statement on Forward-Looking Information

Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release. The TSXV has neither approved nor disapproved the contents of this press release.

This press release may contain forward–looking information within the meaning of applicable securities legislation, which forward–looking information reflects the Company's current expectations regarding future events. Forward-looking statements are often identified by the words "may", "would", "could", "should", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" or similar expressions. Forward-looking statements in this press release include, but are not limited to, statements concerning: (i) Northstar's ability to meet the proposed project economics for its Empower Calgary Facility as put forward in the Initial Project Economics and Updated Project Economics based on the FEED; (ii) Northstar's ability to secure debt and project equity funding to complement the funding committed by ERA for the Empower Calgary Facility; (iii) the Empower Calgary Facility's anticipated facility-level EBITDA returns and, in connection therewith, the Company's ability to meet anticipated payback periods and returns on equity and capital invested; and (iv) Northstar's ability to become a leader in the recovery and reprocessing of asphalt shingles in North America. Such statements are subject to risks and uncertainties that may cause actual results, performance or developments to differ materially from those contained in the statements, including risks related the inability by Northstar to close the Private Placement in whole or in part, other factors beyond the control of the Company as well as those risks and uncertainties which are more fully described under the heading "Risk Factors" in the final prospectus of the Company dated June 18, 2021 and in the Company's annual and quarterly management's discussion and analysis and other filings with the Canadian securities regulatory authorities under the Company's profile on SEDAR. The ongoing dispute between the sovereign state of Ukraine and Russia also poses risks that are currently indescribable and immeasurable. No assurance can be given that any of the events anticipated by the forward-looking statements will occur or, if they do occur, what benefits the Company will obtain from them. The Company does not undertake any obligation to update such forward–looking information whether because of new information, future events or otherwise, except as expressly required by applicable law.

Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although the Company has attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended and such changes could be material. The Company does not intend, and do not assume any obligation, to update the forward-looking statements except as otherwise required by applicable law.

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SOURCE Northstar Clean Technologies Inc.

FAQ

What are the updated project economics for Northstar Clean Technologies (ROOOF)?

The updated project economics for Northstar Clean Technologies indicate a potential annual revenue of $9.7 million, gross profit of $6.4 million, and EBITDA of $5.3 million.

How much is the updated internal capital estimate for the Empower Calgary Facility (ROOOF)?

The updated internal capital estimate for the Empower Calgary Facility is $15.0 million.

What is the percentage increase in potential annual revenue for Northstar Clean Technologies (ROOOF)?

The potential annual revenue has increased by 28% from the initial estimates.

When were the initial project economics for Northstar Clean Technologies (ROOOF) released?

The initial project economics were released in April 2022.

What challenges did Northstar Clean Technologies (ROOOF) face regarding funding?

Northstar faced challenges with previous funding strategies that did not materialize, leading them to seek alternative funding options.