Mr. Ryan Jackson reports

CIELO ANNOUNCES ASSET PURCHASE AGREEMENT WITH EXPANDER ENERGY INC. TO DEPLOY MARKET READY TECHNOLOGY FOR PRODUCTION OF LOW CARBON RENEWABLE SYNTHETIC FUEL

Cielo Waste Solutions Corp. has executed an asset purchase agreement dated Sept. 15, 2023, with Expander Energy Inc., a private Alberta corporation and an arm's-length third party, for the purchase of certain assets and liabilities of Expander to operate the EBTL and BGTL technologies business being acquired. The proposed acquisition is expected to allow Cielo to accelerate its timeline to commercialization and further enhance Cielo's existing proprietary thermal catalytic depolymerization (TCD) technology.

The proposed transaction includes the grant of an exclusive licence in Canada to use Expander's patented EBTL and BGTL technologies and related intellectual property as well as an exclusive licence in the United States for creosote and treated wood waste. The licensed technologies will be used to build facilities that process biomass (waste) to fuels (biosyndiesel). The particular terms will be set out in a licence agreement to be executed by Cielo and Expander on closing and as more particularly described herein.

The proposed transaction will result in Cielo and Expander remaining separate entities while maximizing synergies between the companies. A key component of the proposed transaction includes the engagement of Expander and/or its affiliates to provide services for both the engineering, procurement and construction phases of the projects (as defined herein) as well as the operation/project management phase of the projects.

Ryan Jackson, chief executive officer of Cielo, commented: "We believe this is a monumental achievement for Cielo and one that will accelerate our path to commercialization and revenues. We expect that the partnering of Expander's technology, technical expertise and extensive engineering and operations experience with Cielo's board and executive management team, access to capital markets and business relationships will position Cielo to be a leader in the renewable fuels industry."

Project development

Cielo intends to undertake three projects in Alberta proposed or under way by Expander as well as three projects proposed by Cielo, including the previously disclosed facility in Dunmore, Alta., and two in the United States, all using the licensed technologies.

Projected financial metrics for the first two proposed projects -- one located in Carseland, Alta., and one in Dunmore, Alta. -- are presented in the attached table.

The remaining four of the six initial projects include locations in Slave Lake and Carseland (phase II) and two locations to be determined in the United States. Carseland phase II will involve an increase in facility size and production volume. Slave Lake has been granted EPA (Alberta Environment and Protected Areas) approval, however, would require an amendment to the EPA permit to allow for an increase in facility size and production volume compared with what had been previously planned. The locations of the two licensed facilities in the United States are to be determined.

In addition, management believes that an anticipated result of the proposed relationship between Expander and Cielo, leveraging Expander's expertise and culture of innovation, will be an improvement to Cielo's proprietary technology, which is currently implemented at Cielo's research and development facility. In the meantime, Cielo's access to the licensed technologies is anticipated to accelerate the timeline to commercialization and therefore shorten the path to revenue.

With regard to the land in Dunmore, Alta., to be acquired by Cielo from Renewable U Energy Inc. (RU), as previously disclosed, Cielo and RU have agreed to extend the deadline for conditions until Sept. 29, 2023, and the closing date to Oct. 28, 2023. Refer to the news release dated May 1, 2023, and May 17, 2023, for additional information. Cielo will provide further material updates as they become available.

Operational expertise

Expander's engineering team is led by its executive vice-president and chief technical officer, Steve Kresnyak, who brings over 40 years of international consulting engineering experience in the hydrocarbon energy industry. Mr. Kresnyak has extensive EPC/EPCM (engineering, procurement and construction/engineering, procurement and construction management) experience and is the technology developer and inventor of many world-issued process patents, including Expander's EGTL for gas to liquids, EBTL for biomass to liquids, biomass gasification and FT Crude process technology.

On closing, Cielo and Expander will execute agreements for the engineering procurement and construction services as well as the project management services to be provided by Expander and its affiliates to Cielo for the projects.

Mr. Kresnyak commented: "We at Expander are elated to be part of the Cielo story, assisting in the commercialization of multiple, patented low-carbon, biosynfuel projects. We also look forward to lending our expertise to help bring Cielo's strategic vision to life with a particular focus on creosote and treated wood feedstocks, carving a lane in this niche market."

Board composition

Following closing, Cielo's board of directors would comprise Cielo's four current directors plus three Expander nominees for a total of seven directors, with the majority remaining Cielo nominees. The proposed nominees will be James H. Ross, Larry B. Haggar and G. Steven Price.

James H. Ross, BSc, CDir, is executive chairman and chief financial officer as well as a shareholder of Expander; he was chief executive officer from 2010 to 2018 and has been a director of Expander since 2009. Mr. Ross has 40 years of capital markets experience, including executive management, venture capital, private equity and small-cap investment banking. Mr. Ross is the former chief executive officer of Rocky Mountain Clean Fuels Inc. and remains a director of Rocky Mountain Clean Fuels. Mr. Ross is co-founder and chief executive officer of Alberta Clean Technologies (VCC) Ltd., an Alberta-based venture capital corporation. His past experience includes director of C-Free Power Corp., a developer of wind and microhydro power generation in Western Canada (acquired by Good Energies Capital); director of Platinum Communication Corp., a provider of rural high-speed Internet in Western Canada (acquired by Xplornet Communication Inc.); and director of Glenbriar Technologies Inc., an information technology service provider in British Columbia, Alberta and Ontario (acquired by Uniserve Communications).

Mr. Haggar is a director as well as a shareholder of Expander. Mr. Haggar has 50 years of experience in the oil and gas industry after graduating from the University of Waterloo with a BASc in chemical engineering (1971). He began his career at Great Canadian Oil Sands (now Suncor) as a process engineer and later as operations engineer for the upgrader. He next joined a major U.S. engineering firm's Calgary office and was assigned to its London, United Kingdom, office, where he worked on a variety of projects for clients in Indonesia, the North Sea and Saudi Arabia. Upon returning to Calgary, he designed and commissioned upstream oil and gas plants before moving to Dubai as chief engineer for Scimitar Oils Ltd. for the design, construction, start-up and first-year operation of the Dugas Jebel Ali gas plant and associated offshore gas gathering facilities. Mr. Haggar operated as a consultant for projects in Italy, New Orleans and Houston prior to joining Colt Engineering, where he was a partner and director for 20 years. He held many line positions at Colt as a process engineer, department head, project engineer, project manager and general manager, working out of its Calgary/Markham/Abu Dhabi joint venture and Edmonton CoSyn Alliance offices. After Colt's sale to WorleyParsons in 2007, he began investing in the energy industry, leading to his investment in Expander. Since 2010, he has been a director and process adviser to Expander in its development of novel technologies for biomass to liquids, gas to liquids, biomass electrolysis to liquids and FT Crude (a more carbon-efficient scheme to process bitumen).

Mr. Price is a professional engineer and president of Price Engineering, a consulting company providing technical and managerial expertise to the energy sector since 1995. He received his bachelor of science in electrical engineering from the University of Manitoba and has over 45 years of experience in engineering and management, including corporate operations, evaluations, facilities design and operation, most recently in biomass and renewable energy systems. Mr. Price also has extensive experience in multistakeholder engagement, working with various groups such as landowners, first nations, government and non-governmental agencies. He is past president and chief executive officer of Expander and has been a director since 2009. Prior to that, he was president of Unitech Energy Resources Ltd., vice-president of HCO Energy Ltd., vice-president of Bralorne Resources Inc. and manager of Ranchmen's Resources Ltd. (all oil and gas issuers that are or were listed on the Toronto Stock Exchange).

Mr. Ross commented: "The Expander team is pleased to be collaborating with Cielo to develop projects producing sustainable synthetic fuels for the transportation industry. I am excited that preliminary conversations to enhance Cielo's technology has grown into this joint endeavour that serves to advance both companies. Larry, Steve and I are looking forward to joining the Cielo board, working alongside the existing directors and management towards a common goal."

Cielo has agreed to propose to its shareholders at its next shareholder meeting, scheduled for Oct. 26, 2023, the election of the Expander nominees to the board of directors of Cielo. If the proposed transaction is not completed prior to the date of the meeting, however, only Mr. Ross will be appointed to the board and the other two Expander nominees will instead be nominated for election at Cielo's next annual general shareholder meeting.

Transaction details

Consideration

Under the asset purchase agreement, Cielo has agreed to acquire certain assets and liabilities that comprise the acquired business.

In consideration for the acquisition of the acquired business, Cielo has agreed to pay a purchase price of $45,323,785.30 by issuing 906,475,706 common shares of the company at a price of five cents per consideration share, resulting in Expander owning 49.9 per cent of the issued and outstanding common shares of Cielo after closing and the existing shareholders of the company retaining 50.1 per cent of the issued and outstanding common shares of Cielo after closing.

Additional terms of the asset purchase agreement related to consideration include the following, among others:

• 15 per cent of the consideration shares to be held back for indemnification purposes for 13 months;
• An additional approximately 25 per cent of the consideration shares to be held in escrow by Cielo's transfer agent for release as follows:
  • 25 per cent on Jan. 4, 2024;
  • 25 per cent on April 1, 2024;
  • 25 per cent on Aug. 28, 2024;
  • 25 per cent one year from closing;
• Expander is required to transfer the majority of the consideration shares to its shareholders (and creditors if applicable) upon closing; however, Expander intends to retain a portion of the consideration shares; Expander has agreed to take actions to avoid the creation of (becoming) a control person (as defined by the policies of the TSX Venture Exchange, which would require the approval of Cielo's shareholders).

The consideration shares will also be subject to a statutory hold period of four months and one day following issuance.

Defined in TSX-V Policy 1.1 Section 1.2, as at the date of this news release, control person means any person who holds or is one of a combination of persons who holds a sufficient number of any of the securities of an issuer so as to affect materially the control of that issuer or who holds more than 20 per cent of the outstanding voting shares of an issuer, except where there is evidence showing that the holder of those securities does not materially affect the control of the issuer.

Prepaid liabilities

As Cielo and Expander wish to continue progress on Carseland phase I during the period leading up to closing, Cielo has agreed to advance to Expander for continued work on Carseland 1 up to $1.5-million (the prepaid liabilities). Before any advance is made by Cielo, Expander will execute loan documentation in favour of Cielo, providing that, in the event that the proposed transaction is not completed by Jan. 5, 2024, the prepaid liabilities will bear interest at a rate of prime plus 3 per cent (minimum of 7.5 per cent), to be repaid to Cielo on or before April 30, 2024.

Financing

Pursuant to the asset purchase agreement, Cielo will be obligated, as a condition to closing of the proposed transaction, to have available as at closing a minimum of $45-million. Cielo has been in discussions with third parties with respect to the financing and has entered into advanced discussions with an arm's-length third party for the full amount of the financing.

The financing is subject to the approval of the TSX-V.

Terms of licence

As of the closing of the proposed transaction, Cielo and Expander will execute the licence agreement, which will set out the terms of the licences to be granted by Expander to Cielo, including, among others:

• Cielo will have an exclusive licence to use the licensed technologies in Canada for all materials and in the United States for creosote and treated wood;
• A royalty of 3 per cent of the gross revenues earned from the sale of products from the licensed facilities;
• Upfront fees for each licensed facility to a maximum of $3.5-million per facility based on capacity; the majority of which will be applied as an advance against the royalty;
• Cielo will be required to achieve the final investment decision (FID) stage for six licensed facilities in Canada and the United States within five years, otherwise losing exclusivity;
• Expander will have the right to construct facilities using the licensed technologies in the event that opportunities arise that Cielo does not wish to pursue.

Closing

The proposed transaction is anticipated to close in October, 2023, prior to the meeting. The proposed transaction is subject to certain conditions, including the completion of financing, the execution of certain third party agreements related to the acquired business, and conditions that are customary for a transaction of this nature. No fees or commissions are payable to any third party in connection with the proposed transaction (except as may be agreed upon at a future time with respect to the financing).

Sheila Leggett, board chair of Cielo, commented: "Cielo's board welcomes the new opportunities this acquisition brings to the company and expresses our thanks to the Cielo and Expander teams for their dedication and diligence in completing this transaction."

The proposed transaction is subject to the approval of the TSX-V. Based on the terms of the asset purchase agreement, Cielo will not be required to obtain shareholder approval for the proposed transaction. The proposed acquisition has been determined by Cielo to be a fundamental acquisition as defined by the policies of the TSX-V and, accordingly, the company's common shares have been halted from trading and will continue to be halted pending review by the TSX-V.

Share consolidation

The company is also proposing, as and when determined by the board of Cielo following the completion of the proposed transaction, to complete a consolidation of Cielo's securities on an up to 1:15 basis, subject to the approval of the TSX-V and Cielo's shareholders (which will be requested at the meeting to be held on Oct. 26, 2023). Although approval is not required for companies incorporated under the Business Corporations Act (British Columbia), Cielo's articles require that special (66-2/3rds per cent) approval of Cielo's shareholders be obtained for a share consolidation. In addition, the policies of the TSX-V require that Cielo obtain shareholder approval in the event of a consolidation that is equal to or greater than on a 1:10 basis. The proposed consolidation is not a condition of the proposed transaction; however, Cielo has agreed to present it for approval to its board. The proposed consolidation remains subject to the approval of Cielo's board and Cielo's shareholders. The board may determine to proceed with the proposed consolidation as and when determined to be at the most opportune time for Cielo or not at all. Shareholders at the company's meeting (shareholder meeting scheduled for Oct. 26, 2023) will be asked to approve the proposed consolidation on an up to 1:15 basis (although it may be less). Further information on the proposed consolidation will be disclosed as it becomes available.

Conference call details -- strategic update

Cielo chief executive officer Ryan Jackson and chief financial officer Jasdeep K. Dhaliwal will host a conference call with Expander guests, executive chairman and chief financial officer Jim Ross and executive vice-president and chief technology officer Steve Kresnyak, on Monday, Sept. 25, 2023, at 4 p.m. ET, to discuss the transaction.

Conference call participant details

Local number:  416-764-8659

North America toll-free number:  1-888-664-6392

Conference replay local number:  416-764-8677

Conference replay North America toll-free number:  1-888-390-0541

Conference replay entry code:   745759 followed by the number sign

Conference replay expiration date:  Oct. 5, 2023

About Cielo Waste Solutions Corp.

Cielo Waste Solutions was incorporated under the Business Corporations Act (British Columbia) on Feb. 2, 2011. Cielo is a publicly traded company with its shares listed to trade on the TSX-V under the symbol CMC, on the Frankfurt Stock Exchange under the symbol C36 as well as on the OTC Venture Market (OTCQB) under the symbol CWSFF. The company's strategic intent is to become a leading waste-to-fuel company using economically sustainable technology while minimizing the environmental impact. Cielo has a patented process that can convert waste feedstocks, including organic material and wood derivative waste, to fuel. Having demonstrated its ability to produce diesel and naphtha from waste, Cielo's business model is to construct additional processing facilities. Cielo's objective is to generate value by converting waste to fuel while fuelling the sustainable energy transition.

We seek Safe Harbor.