Mr. Patrick Charbonneau of CGF reports

CANADA GROWTH FUND ANNOUNCES STRATEGIC INVESTMENT IN ENTROPY INC AND CARBON CREDIT OFFTAKE COMMITMENT

Canada Growth Fund Inc. has entered into a strategic investment agreement with Advantage Energy Ltd.'s Entropy Inc., a Calgary-based developer of technologically advanced carbon capture and sequestration (CCS) projects with the potential to significantly reduce emissions in Canada and worldwide.

CGF has agreed to a $200-million investment in Entropy, coupled with a fixed-price carbon credit purchase agreement (carbon credit offtake commitment, or CCO) of up to one million tonnes per annum. This strategic growth partnership represents an important new investment in Canadian carbon markets. The features of the CCO -- notably its large scale and its long-term fixed price -- represent a global first in compliance markets. This financeable structure helps to derisk and accelerate private CCS investment by establishing carbon price certainty for Canadian projects.

"With its abundance of natural resources, access to high-quality geological storage and sophisticated engineering know-how, Canada is the best place in the world to build a CCS industry," said Patrick Charbonneau, president and chief executive officer of Canada Growth Fund Investment Management Inc. "The CGF Investment Management team is pleased to deliver this inaugural transaction in Alberta's carbon market, and we look forward to putting additional capital to work across Canada in the months ahead."

One pillar of CGF's mandate is to invest in projects and technologies, including CCS, that hold significant potential to reduce emissions across the Canadian economy. A second pillar is to scale promising Canadian clean technology champions that can help create value for Canadians.

"I am very proud of the investment, technical and execution expertise that the Canada Growth Fund Investment Management team is bringing to the CGF mandate," said Deborah K. Orida, president and chief executive officer of Public Sector Pension Investment Board. "CGF is able to deliver complex transactions such as this thanks to PSP Investments' rigorous and established processes and arm's-length governance model."

Entropy aligns well with both aspects of CGF's mandate; it is a Canadian-based CCS company with an innovative technology solution and a skilled team of Canadian experts focused on expanding the use of CCS technology in Canada and globally. Entropy's modular CCS technology is relevant across Canada's hard-to-abate industries, representing an important challenge and opportunity for Canada to tackle as it works toward its emissions objectives.

"Entropy is excited to partner with CGF in re-establishing Canada as a world-leading CCS market," said Mike Belenkie, president and chief executive officer of Entropy. "By creating a large-scale CCO to guarantee long-term carbon pricing and adding $200-million to our existing Brookfield funding for third party projects, Entropy has a clear path to accelerating growth and reducing emissions, right here at home. While we will remain a global CCS developer, we believe our projects are likely to advance much more quickly in Canada than any other country in the world."

In March, 2022, Entropy announced a strategic $300-million investment agreement with Brookfield, through the Brookfield Global Transition Fund, to scale up the deployment of Entropy's CCS technology globally. Today's announcement builds on this strong foundation and provides greater revenue certainty to accelerate Entropy's major investments in Canada.

"Carbon capture and sequestration is a vital technology for reducing emissions in carbon-intensive sectors," said Jehangir Vevaina, managing partner and chief investment officer for renewable power and transition at Brookfield. "Our investment agreement with Entropy was designed to accelerate the deployment of this important technology in Canada and worldwide. We welcome the additional capital and revenue certainty that the Canada Growth Fund is providing to enable Entropy's success."

Transaction highlights:

• Definitive agreements between Entropy and CGF to accelerate the decarbonization of hard-to-abate industries in Canada;
• CGF to invest $200-million in Entropy for the development of Canadian CCS projects and for corporate purposes, which, once fully drawn, could result in CGF owning approximately 20 per cent of Entropy;
• Brookfield will continue to invest the balance of its existing $300-million hybrid security into the business, by which point it would be the largest shareholder and control Entropy;
• CGF to provide the first-ever large-scale, long-term, fixed-price CCO in a compliance carbon market, committing to purchase up to one million tonnes per annum of carbon credits for 15 years;
• The initial allocation of CCO commitment will allow Entropy to proceed with its Glacier phase 2 project, targeting the sale of up to 185,000 tonnes per annum of Alberta TIER (Technology Innovation and Emissions Reduction) carbon credits at an initial price of $86.50 per tonne for a term of 15 years;
• The balance of the remaining CCO will be available for Entropy to underwrite additional third party projects on similar terms in Canada;
• After the investment, Entropy will have approximately $460-million of capital, available which, together with investment tax credits, carbon capture incentives and project financing, establishes a path to execute over $1-billion of CCS projects and abate more than one million metric tonnes per annum of emissions, with a focus on the Canadian market.

Deal structure overview

CGF's investment in Entropy is through a hybrid security similar to the prior investment from Brookfield (please see Entropy news release dated March 28, 2022), though at a valuation that reflects the numerous advancements of the business in the last two years. The flexible structure ensures access to capital for Entropy and retains flexible liquidity options for all major investors, including Brookfield, CGF and Advantage (the company's controlling shareholder). Financing draws from Brookfield and CGF for Canadian projects and corporate purposes will proceed in tandem.

Coupled with the CGF investment, Entropy and CGF have entered into a CCO agreement, whereby CGF has committed to purchase up to nine million tonnes (up to 600,000 tonnes per annum over a 15-year term) of TIER or equivalent carbon credits from Entropy projects. The initial project to benefit from the CCO is intended to be Advantage Glacier phase 2, drawing up to 185,000 tonnes per annum at an initial price of $86.50 per tonne, for a total of approximately 2.8 million tonnes over the 15-year term. With this CCO agreement in place, CGF has absorbed the carbon pricing risk for the project. Entropy is therefore pleased to announce provisional final investment decision of Glacier phase 2.

Beyond Glacier phase 2, CGF and Entropy intend to enter into separate CCO agreements for other Canadian projects, on terms that are expected to provide similar investment returns. Upon successful deployment of the initial 600,000 tonnes per annum of CCO, CGF may make available a further 400,000 tonnes per annum of CCOs for additional Entropy Canadian CCS projects.

CGF will nominate one member to the Entropy board of directors and is pleased to participate in the growth and evolution of this Canadian clean technology leader. Advantage and Brookfield will retain their existing Entropy board representation.

About Entropy Inc.

Entropy was founded by Advantage and Allardyce Bower Consulting Inc. in 2020 with the goal of developing world-leading technology for postcombustion carbon capture. After partnering with the University of Regina to acquire breakthrough technology and developing further advancements, Entropy designed and constructed the world's first commercial natural-gas-fired CCS project (Glacier phase 1), which began capturing and storing carbon about 18 months ago. Entropy's team has industry-leading capabilities in all aspects of the CCS chain, including capture, compression, transportation, subsurface storage, carbon finance, regulatory, carbon markets and commercial structuring. This full-cycle approach allows Entropy to help third parties that would otherwise not have the capacity to take on these complex emission-reduction investments.

Advisers

Osler Hoskin & Harcourt LLP and BMO Capital Markets acted as advisers to Canada Growth Fund.

Burnet, Duckworth & Palmer LLP and TD Securities Inc. acted as advisers to Entropy.

This press release contains information that may be considered a financial outlook under applicable securities laws about CGF's and Entropy's potential financial positions, including, but not limited to, the anticipated volume of Alberta TIER carbon credits targeted by Entropy at its Glacier phase 2 project, and the anticipated price and timing thereof; and expectations that after the investment, Entropy will have approximately $460-million of capital available, which, together with investment tax credits, carbon capture incentives and project financing, establishes a path to execute over $1-billion of CCS projects and abate more than one million tonnes per annum of emissions; all of which are subject to numerous assumptions, risk factors, limitations and qualifications, including those set forth in the previous paragraphs. The actual results of operations of CGF and Entropy and the resulting financial results will vary from the amounts set forth in this press release and such variations may be material. This information has been provided for illustration only and, with respect to future periods, is based on budgets and forecasts that are speculative and are subject to a variety of contingencies and may not be appropriate for other purposes. Accordingly, these estimates are not to be relied upon as indicative of future results. Except as required by applicable securities laws, neither CGF nor Entropy undertakes any obligation to update such financial outlook. The financial outlook contained in this press release was made as of the date of this press release and was provided for the purpose of providing further information about CGF's and Entropy's potential future business operations. Readers are cautioned that the financial outlook contained in this press release is not conclusive and is subject to change.

PSP Investments' conflict of interest policy

PSP Investments has established a policy to address the risk of any real, potential or perceived conflicts of interest in the context of the services provided by Canada Growth Fund Investment Management to Canada Growth Fund, requiring PSP and CGF to disclose where they have overlapping investments.

CGF has entered into binding agreements pursuant to which CGF will participate in Entropy through:

• A delayed-draw convertible debenture facility of up to $200-million that could be converted into common equity of Entropy;
• A carbon credit offtake contract framework for the development of carbon capture and sequestration (CCS) projects in Canada.

Entropy was founded and is majority owned by Advantage Energy, a listed pure play natural gas and liquids producer headquartered in Calgary, Alta. In March, 2022, approximately one year prior to PSP Investments being named as the manager of CGF, Entropy announced a $300-million financing arrangement with Brookfield Global Transition Fund I (BGTF) to finance capital projects.

At the time of the approval of the transaction, PSP Investments held: (i) a passive limited partner interest, representing no more than 4 per cent of fund commitments, with no investment discretion or decision-making ability in BGTF, amounting to an indirect ownership interest in Entropy of no more than 1 per cent; and (ii) ownership of Advantage's publicly traded common stock through index replication activities in an amount not exceeding 360,000 shares as well as positions in Advantage through externally managed funds where PSP has no discretionary authority in an amount not exceeding 68,000 shares. Under the transaction, at full deployment of BGTF's and CGF's convertible debenture facilities, on an as-converted basis, PSP Investments will indirectly own no more than 1.5 per cent of Entropy, excluding any indirect ownership through Advantage.

The foregoing is being disclosed in accordance with PSP Investments' conflict of interest policy.

We seek Safe Harbor.