Superior Plus Corp.

Thank you for standing by, and welcome to the Superior Plus 2021 Quarter Results Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentations, there will be a question-and-answer session. To ask a question at that time, please press star then 1 on your touchstone telephone. As a reminder, today's conference call is being recorded. I will now attend the conference with your host, Mr. Robert Doran, Vice President of Investment Relations and Treasurer. Please go ahead.

Robert Doran Thank you, Valerie. Good morning, everyone, and welcome to Superior Plus' conference call and webcast to review our 2021 second quarter results. Our speakers on the call today will be Luc Desjardins, President and CEO, and Beth Summers, Executive VP and CFO. Today's call is being webcast, and we encourage listeners to follow along with the supporting presentation, which is also available on our website. For this morning's call, Luc and Beth will begin with their prepared remarks and then we will open up the call for questions. Before I turn the call to Luke, I'd like to remind you that some of the comments made today may be forward-looking in nature and are based on Superior's current expectations, estimates, judgments, projections, and risks. Further, some of the information provided refers to non-GAAP measures. Please refer to Superior's second quarter MD&A posted on CDAR and Superior's website yesterday for further details on forward-looking information and non-GAAP measures. I would encourage listeners to review the MD&A as it includes more detail on the financial information for the second quarter as we won't be going over each financial metric on today's call. This will allow us to move more quickly into the question and answer period. I'll now turn the call over to Luke.

Thank you, Rob, and good morning, everyone. Thanks for joining the call. We're still dealing with various levels of COVID-19 restriction in our operating regions, primarily in Canada, but also some parts of the U.S., especially commercial business. I'm proud of our team's commitment, safety, reliability, and we continue to provide essential fuel and services to our customer. We'd like to start with some highlights from the second quarter and recent weeks following the end of the quarter. We have been busy in 2021, and we are in a good position to achieve our superior way forward target set out as our investor day. Nothing has changed in our mind from the mid and long term of where we're going to get. In May 2025, we host a virtual investor day where we unveil our next strategic plan, the Superior Way Forward. The Superior Way Forward is focused on growing our business through acquisition as well as through organic growth and continuous improvement initiative. At our investor day, we also set an acquisition target of $1.9 billion and our EBITDA target of $700 to $750 million. Both targets anticipate to be achieved by 2026. We have made great progress in our acquisition initiative in 2021, with approximately $600 million in acquisition announced or completed, including the recent announcement of CAMP, which should be closing during Q3. That is approximately 30% of our acquisition target achieved in the first year. It is a good year because the pipeline is very robust and with the tax potential effect in the States, many entrepreneurs are looking at selling their business. We recently announced Camp Acquisition provides us with a significant operating platform in California, which should enable us to generate a higher level of synergy when we make future token acquisition in California and surrounding states. But don't forget that on the base of every acquisition we make, either it be Camp or Freeman, we do still see line by line how we're going to get a major improvement and a bit of business we acquire. Camp is one of the largest independent propane retailer in California and a well-established business with retail and wholesale operation that should complement our existing business in California. With retail location in California, Nevada, Arizona, Camp is expected to provide us with more opportunity to expand in the western U.S. And then the Kiva Camps wholesale propane business operates across 16 states in the western U.S., which is expected to further expand our reach into new territory and allow us to use our wholesale natural gas liquid expertise on a larger scale. Camps also has a renewable propane offering which is a product we are excited to provide our broader customer base in the future. We expect the camp's acquisition to close in the third quarter, and we are looking forward to welcoming their employees and customers to the Superior. On June 16, we completed the acquisition of Freeman Gas, based in South Carolina. Freeman significantly increased our presence. It's actually doubled our presence in the Southeast U.S. and we expect strong synergy opportunities as several of the Freeman locations are located close to our existing operation in the north and the south of Carolina. Freeman also has an attractive customer base as the business services many suburban neighborhoods in the southeast. Increasing our footprint and utilizing our back office capability of Freeman is expected to increase the synergy opportunities for future acquisition in that region as well. The acquisition of William in July is a great example of increased energy opportunity following the acquisition of Freeman, as Williams also operates in the Southeast. In the second quarter, our results were impacted by warmer weather in the US earlier in the quarter, and to a lesser extent, lower average margin in both US and Canada. However, our strategic growth and operational initiative are still on track with our plan. Our trailing 12-month adjusted EBITDA as of June 30th, including the pro forma EBITDA from acquisition, complete and announced in 2021, is approximately $460 million, and that doesn't include the synergy which we expect on our past acquisition experience to be similar, but that usually takes a good 18 months to unfold. We're seeing some modest improvement in commercial and wholesale volume in Canada, as restrictions related to COVID starts to ease. In the second quarter, EBITDA from operation of $37 million was $11 million lower than the prior year quarter, primarily due to lower EBITDA from operation in the U.S. for paint business and higher corporate costs. We're going to talk a bit later about our long-term incentive, which with the stock value has taken a good $10 million extra cost that we incurred this quarter. In the second quarter, U.S. propane results decreased compared to the prior year quarter, primarily due to warmer weather, and to a lesser extent, higher incremental operating expense related to acquisition and lower average margin due to lower commodity price environment in the prior year. The second quarter is a seasonally lower quarter, accounting for approximately 16% of the sales, but approximately 22% of the operating expense we are unable to completely flex all of our costs. So to give you a relativity of that, we would prefer to make acquisition before the winter starts, but as you do then, you know, in different times of the year, and this one, Freeman, was in the spring, you end up with a lot less volume and margin and volume for the quarter too, but you have the full fixed cost. So it's just a little bit skew when we think quarter two. For that reason, we recently completed also contribute, it contributes less to the second quarter as we pick up more of the expense and less of the sales volume, which comes in quarter four and quarter one of the following year. U.S. propane EBITDA from operation 2021 is anticipated to be higher than 2020, primarily due to the impact of acquisition complete in 20 and then 2021. benefits from the Superior Way Incisional Workforce Optimization Initiative, and realized synergies from acquisition. These factors have been negatively impacted by warmer weather, about $5 million or less due to the weather, which continue into the second quarter, as well as lower average unit margin related to wholesale propane fundamentals, and the impact from the strong Canadian dollar on U.S.-dominated EBITDA. So Canadian propane results for the second quarter were higher in the prior year, quarter primarily due to the benefit from the CAWS and increased sales volume. Partially upset by the decrease in average margin related to the wholesale propane market fundamentals and customer mix. Now, our internal growth sales continue to have good, strong traction. Canadian propane EBITDA from Operation 2021 is anticipated to be lower than 2020, mainly due to the decrease in sales volume and average unit margin, as well as the reduction of CRWS benefits year over year. Partially offset by lower operating expenses, sales volume is expected to decrease due to the impact from COVID-19 and reduced economic activities and Western Canada especially. We are optimistic with our COVID-19 restriction will be lifted in the late part of this year, allowing our commercial customer to operate at higher capacity, which is expected to increase propane demand. Quarter two is a small quarter with only 16% of sales, but all the full fixed costs and their sales and full costs are making your quarter a little bit skew here, which is something to take in consideration. But we're very confident in our game plan, and everything is on track for acquisition and integration and for the mid and long term. So with that, I'll pass the presentation to Beth.

Oh, thank you, Luke, and good morning, everyone. The period achieved second quarter adjusted EBITDA of $31.6 million. a $7.5 million or 19% decrease over the prior year quarter, primarily due to lower EBITDA from operations from U.S. propane and higher corporate costs. This was partially offset by realized gains on foreign exchange hedging contracts and higher EBITDA from operations in Canadian propane distribution. The second quarter consolidated net loss from continuing operations was $36.1 million and compared to a net loss of 0.1 million in the prior year quarter. The primary driver for the higher net loss was the increase in finance expense, which was related to the premiums on the early redemption of the senior unsecured notes, a decrease in unrealized gains on derivatives, and lower adjusted gross profit, partially offset by the impact of the CWS in the current quarter. Our consolidated AOCF before transaction and other costs for the second quarter was $9 million, a $5.5 million or 38% decrease compared to the prior year quarter, primarily due to the lower adjusted EBITDA and higher cash taxes, partially offset by lower interest expense. Now, turning to the individual business results, U.S. propane EBITDA from operations was $14 million, a decrease of $13.1 million or 48% from the prior year quarter. This was primarily due to the lower sales volumes in the base business related to warmer weather and to a lesser extent lower average margins partially offset by the contribution from acquisitions. Residential and wholesale sales volumes were consistent with the prior year quarter primarily due to acquisitions offset by the impact from warmer weather. Average weather is measured by degree days across the markets where U.S. propane operates with 14% warmer than the prior year quarter and 5% colder than the five-year average. Commercial sales volumes were 25% higher compared to the prior year quarter, primarily due to acquisitions and the easing of COVID-19 restrictions, partially offset by warmer weather. Average margins were $0.37 per litre, 20% lower than the prior year quarter, primarily due to short-term margin opportunities in the prior year quarter related to the lower commodity price environment. The impact of the stronger Canadian dollar on the translation of U.S. denominated gross profit, and to a lesser extent, the customer mix. Operating costs increased by 8% compared to the prior year quarter due to acquisitions partially offset by workforce optimization initiatives, realized synergies, and the impact of the stronger Canadian dollar on the U.S. denominated expenses. Canadian propane EBITDA operations of $23 million increased 1.8 million, or 8%, from the prior year quarter. This is primarily due to the impact from the CEWS benefit and higher sales volumes, partially offset by lower average margins related to weaker wholesale propane market fundamentals. Residential sales volumes were consistent with the prior year quarter as the impact of acquisitions completed during the first quarter was offset by warmer weather. Average weather across Canada for the second quarter, as measured by degree days, was 14% warmer than the prior year and 7% warmer than the five-year average. Commercial sales volumes were 6% higher than the prior year quarter as COVID-19 restrictions were lifted in some parts of the country partially offset by warmer weather. Wholesale propane volumes were 13% higher compared to the prior year quarter due to sales and marketing efforts to increase third-party spot-priced wholesale propane sales. Average margins were 13% lower than the prior year quarter due to weaker wholesale propane fundamentals, increase in commodity costs and customer mix. Operating costs decreased by 9% compared to the prior year quarter due to the impact from the CWS benefit and cost-saving initiatives. Lastly, the corporate results, the adjusted EBITDA guidance, and leverage. Corporate operating costs were $8.2 million, an increase of $1.2 million compared to $7 million in the prior year quarter, primarily due to higher long-term incentive plan costs related to share price appreciation in the current quarter. Interest costs decreased 13% compared to the prior year quarter due to lower average debt levels and lower average interest rates. Superior's total net debt to adjusted EBITDA leverage ratio for the trailing 12 months ended June 30, 2021, was 3.3 times, which is within Superior's long-term target range of 3 to 3.5 times. In the quarter, we amended the syndicated credit facility and extended the maturity to May 8, 2026. There were no changes to the total commitments available under the credit facility, the accordion capacity, or the financial covenants in the facility. In addition, we issued $500 million of senior unsecured notes at 4.25%. The proceeds from the notes, along with borrowing under the credit facility and cash on hand, were used to redeem the Canadian $400 million, 5.25% senior unsecured notes, as well as the Canadian $370 million, 5.125% senior secured notes. The extension of the credit facility and refinancing of the Canadian senior unsecured notes has further strengthened our balance sheet and debt maturity profile, so we're well positioned from a debt financing and liquidity perspective. We have updated our 2021 adjusted EBITDA guidance increasing the bottom end of the previously disclosed guidance range of $380 million to $390 million. The new adjusted EBITDA guidance range is $390 million to $420 million, with a midpoint of $405 million, reflecting the expected contribution from the CAMPS acquisition and the impact of year-to-date results. It's useful to note that the adjusted EBITDA for the first six months has been impacted by higher long-term incentive costs related to the share price appreciation, amounting to approximately $10 million. We would typically see this cost in the range in the six-month period between $2 to $3 million. In addition, the impact from warmer weather in the second quarter was approximately $5 million. as well providing some year-to-date headwinds from our initial guidance expectations since we forecast on weather normal conditions. For the remainder of 2021, we anticipate average weather to be consistent with the five-year average for the U.S. and Canada and wholesale propane fundamentals to be consistent with what we've seen in the first six months. With that, I'd like to turn the call over to Q&A.

Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star then 1 on your touch-tone telephone. One moment, please. Our first question comes from David Newman of Dijon Air. Your line is open. Good morning. Good morning, David.

So propane inventories have been very tight, and you have this ongoing saga of Line 5. which could serve to accelerate pricing into the winter even more versus the lofty levels. So I guess a couple of questions on the back of that. Maybe an update on your preparations if Line 5 is shut and alternatives, and any concern that the rise in prices could de-stimulate demand, especially on a reopening, which is actually very important, and what the margins initially pinched, could it be a margin opportunity? Yeah.

Maybe Betsy can start for the wholesale and what you've done for Line 5 and I'll continue if need to on margin and opportunity.

Sure. So from a Line 5 perspective, we have been proactive. We did increase our storage and secure supply with no forced measure parts in the contract with respect to the summer months. In addition to that, we were moving rail cars to strategic storage locations in the east. We are currently working through and being proactive for detailed winter plans. With respect to understanding where the Line 5 issue sits, we are supposed to hear a report from the mediator finding later in August. So from that perspective, we are still working through, and our expectation would be that we will, I'm going to say, do a little bit more of what we did in the summer in order to position ourselves well to ensure that we have the supply for our customers.

Okay.

Arguably, it's going to impact Ontario the most, but also Quebec, as well as Michigan and New York, being that they do get some truck supply from Sarnia. Okay.

Maybe on margin, I don't think it will change. If you have electricity, natural gas at home, you cannot decide to switch to something else. Now, oil prices are high, so you're looking at customers. What we've seen in the past is when something happens and the commodity price becomes very high, there's not a lot of switching. What they do is they try to call other companies. we have a few customers we'll call, not much in Canada, but a bit more in the States. Those customers say, boy, what's going on? And I'll call the competitors. So there's a risk there. We could gain and lose from that, but that's a small portion of our total volume. But for us, it's adjusting always. I call it the added value by segment. How much margin do we make on the residential, commercial, industrial? We're not responsible for propane. Now you get some up and down, of course, within a month you get some situation that could help us or be negative. So far it's been negative on the price of the propane, but within a month or so you adjust and you keep the same margin that you should make on added value I insisted on that 10 years ago when I joined here. We're not in the commodity business. We don't take that risk. I'd rather have less customer, but we're not taking any risk on the commodity, with a percentage to accept that sometimes you have inventory at high price and the price goes down, then you have a mark-to-market at the end of the month and you lose some money in that, of course. But not our game to take any risk with commodity.

So to be specific, I would assume that kind of in sort of a commodity inflationary environment that we can assume that there be no sort of margin opportunities and that we should probably just forecast this kind of level that we're seeing in the queue on the CPL?

Yes. Yes, I rather that we don't increase margin during that time. Customer ask more question. And if you saw, you know, you've seen a result of growth in the last year More in Canada, some growth in the States, but in Canada, we're really humming on internal growth, and we don't want to lose that. We've seen some major competitors in the States doing that, and they'll probably continue to do that. We're rather growth customer versus gaining two cents short term.

Right. And maybe, Luke, I'll just jump in here on the margin side as well. From a U.S. perspective, I think, Dave, the best way to think about it is we would still expect the margin to be in that range of U.S. $0.30 to $0.35 per litre. And we would expect, looking at 2021, that the average margin would be modestly higher than what we would have seen in 2020 for the whole year. When it comes to Canada, as we've said before, that margin range to think about is between $0.14 to $0.18 per litre. And I think with respect to Canada, as you look at the year, expect it at the higher end, but still potentially modestly lower than what you would have seen in 2020 for Canada.

Okay, and then just last question for me, and I'll hand over the line. Just in terms of the margins, obviously a lot of your competitors, especially the small players, have suffered through COVID. You know, they're not as big as you guys, and now you've got this volatile commodity market And they also similarly probably can't squeeze margins anymore in the hope that as they come out of the pandemic that they could actually recoup what they lost. And now you're facing this kind of commodity pressure on upward commodity prices. So are you seeing the funnel of players just capitulating and throwing in the towel?

No, but we've seen more competitors becoming for sale. And we have a few even in Canada that are raising the flag. And I think when it comes to Eastern Canada, I don't think we have a lot of competition anymore to acquire business. And in the States, the same. When you look at government regulation, when you look at ESG, when you look at what's happened in the past two years, you know, with propane, the with the blockage, which we were able to supply 100% of our customers. A lot of small mid-computer were in trouble. There is a lot more. You need to be big, and you need to have the scale. I always insist that we do build a good SGL wholesale business for all of those reasons. And what Beth and the team has done at SGL, they've secured at a bit higher price. We're paying a bit of insurance for that, more liquid products, for Eastern Canada due to Line 5, even though we all believe it's not going to happen. We're in the business of taking that kind of risk, and we're planning the same kind of arrangement for this fall and winter. So it helps to have a size. It helps to have the wholesale scale more and more now in California and with Kiva, that's where it covers more states. So A good mix of that and the scale we have and the professional team, no doubt competitors, entrepreneurs saying, I have enough. There's too much going my way, and you need a lot of people and talent and skill to address all those issues.

Yeah, like Roberto Duran, no mas. Very helpful.

Thank you, Luke. Thanks, Beth. Thank you.

Thank you. Our next question comes from Jacob Bout of CIBC. Your line is open.

Good morning. Good morning. How are you thinking about M&A for the balance of this year, given, you know, with this campus acquisition, you're at or through your target leverage ratios?

Yeah, the backlog, and then Beth can address the debt, the backlog is solid, and it continues to, we continue to have small, mid-sized opportunity We're certainly one of the two or three strategic potential buyers of all the people that are selling. So we're in very good shape there. So what we've presented in the five-year plan, as you can see this here, we're humming big time. I think there will be some years where it won't be as much. I think the tax issue in the States has got a lot of people to be jumping and saying, hey, I'm going to sell in the next three years, might as well do it now. But there's no doubt we'll achieve our $1.3 billion and we'll get there. I always like to do things faster, quicker than we expect and plan, and this is looking good. So on the other side, to continue our growth, Beth, on the debt situation.

Yeah, and I think from a leverage, I think your question, so at the end of the quarter we were sitting at 3.3 times Pro forma to camps acquisition, that would be roughly 3.7 times. So from our perspective, and as I said before, as we looked at larger transactions, which if you take Freeman and camps together, that's roughly 550 million of acquisitions. From a leverage perspective, we're comfortable going up to that sort of 3.75 times and then having a line of sight coming back down over that 18 to 24-month period. So from our perspective, you know, we're going to continue, as Luke's saying, you know, we've got a strong funnel. Typically, we have seen fewer deals historically between now and during the heating season. You tend to find owners and businesses hunkering down just dealing with getting the business done throughout that period. It does tend to pick up in the spring. But that being said, as Luke said, we're committed to our strategic direction for that $1.9 billion of acquisitions over the next five years. So the reality is we'll keep looking at them as they make sense from a shareholder perspective. We'll move forward and we'll ensure from a shareholder perspective that we've got an appropriate capital structure. You know, I will say when we did NGL, from a credit rating perspective, you know, we did touch four times for a period of time with that line of sight to come back down. So certainly we'll make sure that we're doing what makes sense for everyone in the context, but shooting towards achieving that strategic direction.

Yeah, and I'll add to that the timing. I did mention it a bit in my presentation. What's happening is when the winter starts, everybody's hands on deck, every competitor, every propane company, let's deal with servicing customers. Then the spring comes, and then whoever is for sale, we get the calls, and we do the visit. So you end up buying business in quarter two, three that are – less sales than the full cost. So it's not ideal. And when you get to the fall over 12 months, you recuperate that. But we're kind of forced in an industry that you cannot buy doing a 12 month rent at the best time because everybody's busy. The only one that's going to work for us, which is the first one I can think of for a long time, is CAM because it took us so long and it still has an issue before we close. We're talking quarter three. So this one will capture a direct time and it's good to have one of those. So I'll leave it at that.

Okay. Thank you for that. And then maybe my second question here, just on, uh, have you had any updated conversations with Marquardt? I mean, they're getting close to their, their 20% stake.

Uh, it's been a while. We're, uh, I intend to call them after this quarter and, uh, I'm traveling also to the States, and I know that the CEO does travel to Philadelphia, so hopefully we can pick the right time to meet. But if not, we'll do it by phone. Yes, I intend to call soon. They're in the 19 range right now, so there's still a little bit of room, and I'd like to have a chat with them. They're becoming such a large shareholder. We want to treat them well and communicate properly with them at the right time, so Nothing in the last quarter, but probably have some news in the next quarter. But no discussion about a board seat or anything along those lines? Not yet. Not yet. Probably expecting it, but not yet. We'll see what the next discussion.

I'll leave it there. Thank you very much. Thank you.

Thank you. Our next question comes from Ben Iserson of Scotiabank. Your line is open.

Thank you very much. Two questions for me. The first one is, Beth, you talked about being at 3.7 times pro forma, and historically you've been willing to touch four times. When you think about the opportunity set in front of you near term, is issuing equity a possibility, or is that off the table right now?

Well, I mean, I think from our perspective, as I mentioned before, you know, from a modeling perspective, when we targeted numbers like a $550 million for those two acquisitions together, we're certainly comfortable. We want to ensure that we have our double B credit rating, which we are comfortable with in that range, and then have that line of sight to come down. I think, you know, from that question... The reality is we'll continue to look at acquisitions. We're going to balance various pieces and then do what we think makes the most sense from a shareholder perspective. So, you know, that's how it impacts on acquisitions as well as how it would impact on how we look at our capital structure. But again, we are comfortable and we do model looking at in and around that 3.75 range with that line of sight down. And just to flag, that 3.7 is pro forma with no synergies as well. So, you know, as those synergies roll in, it's obviously lower and it's more in that range of... probably looking at that 3.5 to 3.6 times once synergies are rolled in.

Great. And then my final question, Luke, can you talk about the regulatory environment in Canada, in California, in the U.S. Northeast as it relates to antitrust? Are there any concerns that your market share is getting too big or Are you too far away? I know you had mentioned some opportunities for M&A in Canada, and I wasn't clear whether that would push up against those boundaries.

No, we look very good. And when you think of Ontario, Quebec, we're still in the 25% range, and I don't see any problem getting to the 35-40 without an issue. You know, we've done it out west, so we expect the same in the east. So no issue there to continue to grow. And in the States, it's absolutely like lots of room. It's a huge industry when you think of energy representing 5%, 6%, 7% of total energy. Our market share, I think with all the acquisition we've made, the largest one of what, 10%, 12%? Maybe Rob can talk to that. I think 25% is the three large ones together. over a billion of EBITDA, and they only represent 25% of the market. Any more specific point, Rob, on that?

No, I think in most markets that we operate in, there's at least 7 to 10 competitors, and I think America has been the largest overall in the U.S. There are only 12 to 15% of the market, so no concerns there.

Thank you. Yeah.

Thank you. Our next question, Daryl Young of TD Securities. Your line is open.

Morning, everyone. Just a couple quick ones from me. First, the pace of M&A has obviously been very impressive. I'm just wondering around the integration side of these deals and the synergy realization. Would you say maybe there's greater risk this time around than previous transactions, just given there's so many going on simultaneously?

That's a very good question. And I'm going to visit the States in two weeks in the full session on the integration of, let's say, Freeman, the last large one. So the way I looked at it is we know enough. The business model is developed. The KPI and our where the opportunity are from top to bottom. So I don't see any risk. But what we do sometimes, if we buy a million EBITDA business, the focus to wait the next two or six months could be there because we're busy with the Freeman large integration and marching on to the large one. So we'll have parallel the camp and the Freeman not missing the B because they're large. And then do we miss the beat on a million or two EBITDA and we capture it and do it in six months? That will happen because there's so many. But trust me, integration and execution in my career is number one and 1A. So we're not going to let go of all the potential synergy of what we acquire.

Okay, great. And then the... The $460 million LTM EBITDA number that you reported, that does not include any synergies, correct?

Yeah, no, it does not. It includes the synergies.

And it takes a good 18 months, and you don't do much in the wintertime. You don't want to miss the beat on customer again. So it's an 18-month process.

Okay, so we shouldn't expect... the full amount of potential synergies from all these deals to come through in 2022, particularly camps and Freeman, probably no synergies?

No, there's always some. There's always some, but if you think of the full 25% gain, there's always some up front. I would call it 5%. But then you finish the winter, and then you get going in the spring of 2022, very hard at it, and you start to see The last quarter, 2022, and then the full year, 2023.

Got it. And then just one detailed question around the CapEx. The sustaining CapEx doesn't look like it's changed for Camps or Freeman. Will that be updated in the future, or is that sort of a run rate, the 120 to 140? Okay.

I think the 120 to 140 is a reasonable range to think about it. We'll update that guidance for 2022, but I wouldn't expect any material change as a result of those two acquisitions.

Those two owners have run the business from a CapEx very well, so the fleet is more modern. There's no old stuff. There's even a new plant in the in California that they were opening for retail. So they've done a good job, those two owners, of not falling behind on capital investment, which is good news. Great. Thanks very much, everyone. Thank you.

Our next question comes from Patrick Kinney of National Bank. Your line is open. Thank you.

Yeah, good morning, everybody. Just to follow up on your increased presence in California, but I guess more related to the accelerated push out west towards renewable fuels between now and 2030. And I understand Camps, I believe Camps was already looking at opportunities to source renewable propane. But would you have an update maybe on how much of your California supply might potentially come from renewable feedstocks over the next few years? And then also, any sense as to what this could mean financially to your California franchise just based on the existing LCFS and other credit programs out there?

Yeah, so this is very new for us in 2021. We're doing a lot of work to find out who's going to be taking plastic or other products and turning it into biopropane. We have good connection in California for what's coming and we expect to be able to take the offshoot of that production for bio. But to start to calculate how much of all those plants are building to transform into biopropane, We know the player. We're talking to them. I want to capture it as much as possible. I don't know how much of the total volume would be there. I know that we will not lose margin by selling biopropane. It might be that we might be able to make a few penny more because it's biopropane, but I don't see a reduction of margin because of that. And I can assure you that it's on our top radar and priority number one with bet and our leader in the SGL, say, who's going to do that? Where are they? Let's meet them and let's capture the volume when it comes to production.

Yeah, I'll add to that where we are currently working on our longer-term strategy to lay out what we want to do going forward with respect to this. I think the reality is there's no significant customer demand yet, really, because the supply is limited. I think you've got your... synthetic renewable as well as your bio propane. So, you know, we'll obviously go down both of those avenues and look at those. It could be higher, as Luke's saying, higher cost if demand increases. Interestingly, right now it appears that the pricing for the renewable propane is similar. But of course, that'll change as the market changes. But as Luke said, that's going to be something that we look at and becomes part of how we approach our procurement of propane in the future. And then that's something that we're working on that defined strategy for going forward.

Okay, that's great. Yeah, sounds like something to keep a close eye on. And then Beth, maybe just to follow up on your FX hedging. So Looks like you're about two-thirds hedged for next year, but then dropping down to maybe one-third for 2023. So perhaps just could you remind us what your current EBITDA sensitivity might be for a five-cent change in FX? And also, you know, if you're inclined to be a bit more patient here on layering on additional hedges until you can lock in, say, you know, $1.30 or so, or do you simply look to add hedges later? even at the current rates, just given, like you said, the leverage is already at the top end of your comfort zone?

Yeah, so from an FX perspective, the way that we approach FX is we will roll it in over time. So the way that our policy works is we will hedge potentially out five years, depending on where the rates are and where they sit in the context of the 20-year average. So if you look, even historically, we would always have less hedged two, three years out than we would in the current year where we want to be close to fully hedged if not fully hedged in the current year. A five cent, if you looked out three years, probably you're looking at exposure in the range of 10 to 15 million in the future if you want to think about it, but that's three years out. If you think about it in the context of this year, we only really have a nominal unhedged amount. So again, there wouldn't be a material impact of a 5 cent change for the remainder of this year.

Okay, great. Thanks for the color.

Thank you. Again, if you'd like to ask a question, please press star then 1. Our next question comes from Joel Jackson of BMO Capital Markets. Your line is open.

Hi, this is Maria Murphy. I'm for Joel. Thanks for taking my question. Good morning. Good morning. Just to follow up on that last question, FX question. I guess just thinking about into 2022, if currency rates hold at current levels, what kind of currency impact would there be to earnings next year?

From that perspective, I think the best way to think about it is in and around the $5 million range, right? Impacting on the unhedged portion. Obviously, the hedged portion is covered.

Right. Okay. And then just back on the 2021 guide, what's the expected contribution from CAMPS this year? And then can you just walk through what other changes were made in base assumptions leading to the $5 million increase in the guide?

So from the CAMPS perspective, the expectation for this year would be in the range of $8 to $10 million. And for the rest of your question, which I think was just around sort of where the five comes from, you have increase or improvement associated with the acquisition. So you've got Camps as well as Freeman. So think of that in a sort of $13 to $15 million range. And then you have from our original expectations of the year, this is where you have the headwinds, which we've saved from LTIP. as a result of the share price, where at December 31st it was sitting at $12.18, and we're now sitting in sort of mid-$15 range. So that is much higher than we originally expected, so that's having an impact, as well as being Q2 when we saw that $5 million weather. There's other ups and downs, but I'm going to say those are sort of the three pieces that are the largest to point out.

Okay, thank you. Yeah, thank you. Good question.

Thank you. Thank you. I'm showing no further questions at this time. I'm just going to call back for any closing remarks.

So to wrap up, I think I'd like to thank our management and employees. I'm very proud of all of our accomplishments today, 2021, and their action we have undertaken during COVID-19 and continue servicing our customers. Thank you all to participate. I can assure you my feeling of where we are at, even with this short, small quarter that always have some tweaking more difficult to analyze, I think. We're in good shape. And, of course, there was the $5 million in weather. There's a $10 million LTIP. Everything else is business as usual. And we expect, with normal weather in the fall, we expect the rest of the year to be good. And, of course, with all those acquisitions and a little bit of integration, 2022 is going to be moving to the next level. So on that, I will thank you all for participating. I'm looking forward to the next quarter.

Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. May all of us connect. Have a great day.