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Invest in

green building technologies Invest in the Calgary Region #2 - Insulating Concrete Forms

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Calgary Region: Green Capital of Alberta The Calgary Region covers 28,632 square kilometres (11,054 square miles) centered around the City of Calgary, and is home to 1.26 million people living, working and playing in the foothills of the Canadian Rockies. Vibrant and entrepreneurial: the Calgary Region is an investor’s dream. A “get it done” attitude welcomes new ideas and drives the business community forward.

• The Calgary Region marks the intersection of the Trans-Canada highway and the CanaMex freight corridor allowing for efficient delivery of goods from Alberta to Mexico, and from Vancouver to Halifax.

• The Calgary International Airport offers

direct access to over 50 destinations worldwide, and both national railways serve the Calgary Region.

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A Message from Calgary Regional Partnership October 2009

Dear Prospective Investor The Calgary Regional Partnership (CRP) is pleased to sponsor this series of reports on the potential for investing in Green Building Technologies in the Calgary Region. The business cases for Green Building Technologies, prepared and developed by industry consultants, Woodbridge Associates, are a series of manufacturing investment opportunity analyses. Manufacturers considering expansion or investors searching for a suitable location in the Calgary Region to establish operations will find these reports informative and useful. Calgary Regional Partnership is comprised of fourteen municipalities and one First Nation working together to foster regional solutions through intermunicipal collaboration. We are committed to promoting a balance between a healthy environment, enriched communities, sustainable infrastructure and a prosperous economy. The Calgary Region Economic Partnership is an operational Branch of CRP and is focused on the Region’s prosperity by working with member communities to: identify strategic opportunities, attract and support business development and promote job creation throughout the region. The Calgary Region has a population of 1.26 million people (2008). Access to significantly larger market areas can be achieved through a series of interconnected transportation corridors which include the Canamex Corridor, Trans-Canada Highway, rail lines and an international airport. All these nodes provide ease of access in the movement of goods between Canada, United States, Mexico and other geo-markets. With a pro-business environment and communities that are ready to seize new business opportunities, the Region looks forward to continued growth and prosperity. Investors considering a potential manufacturing investment in the Calgary Region will need to carry out their own due diligence evaluations to determine start-up costs, land and building costs, transportation and logistics issues and overall viability. The Calgary Region offers many strategic and competitive advantages to prospective investors and CRP looks forward to discussing how it can support your business expansion objectives. Calgary Regional Partnership would like to take this opportunity to acknowledge and thank Peter Woodbridge of Woodbridge Associates for preparation and development of the series of business cases for Green Building Technologies. CRP would also like to thank the Department of Foreign Affairs and International Trade Canada, Alberta Agriculture and Rural Development and Alberta Finance and Enterprise for their financial contribution to this project. Regards Calgary Regional Partnership www.calgaryregion.ca [email protected] 403-851-2509 Prepared by Woodbridge Associates Inc. for the Calgary Regional Partnership 2nd Edition October 2009

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A Leader in Green Technologies and Products The Calgary Region is home to leading and innovative green product manufacturers as well as outstanding, world-class green building projects. A number of factors have contributed to establishing the Region as a green building technologies hub in North America:

• Natural resources. The abundance of our natural resources puts us at the forefront of green energy technology. • Sunlight: The Calgary Region has more hours of sunlight per year than the state of California. • Wind: Alberta currently has 521 MW of wind power generation, with enough capacity to serve over 500,000 homes. Calgary’s Light Rail Transit system is 100% wind powered and, by 2012, all City owned facilities and equipment will be powered entirely by renewable energy. • Wood: Forests cover nearly 60% of Alberta. The average 1,700 square foot home (158 square metres) uses approximately 157 trees. Roughly 82 million trees are planted in Alberta each year.

• Wealth. Residents of the Region have higher than average incomes and modest cost of living increases. With an average annual disposable income growth rate of 9.3%, the population has the means to invest in better living standards.

• Strong building activity. Despite the 2008-09 economic downturn, building activity in the Calgary Region remains strong. • New residential construction and home improvements are providing a healthy market for building products that improve energy and water efficiency. • Non-residential construction, public and private, continues to trend strongly toward green building technology.

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Calgary Region – Fast Facts > Economic Driver: The City of Calgary is a key economic driver in the Calgary Region and Alberta. > Head Offices: Calgary is home to more head offices than any other city in western Canada. Calgary has the highest per capita concentration of head office employment in Canada. > Small Business: With a growth rate of 13.9% from 2003-2008, companies with less than 50 employees account for 94.4% of all businesses (with employees) in the Calgary Region. > Income: The Calgary Region average per capita income was $49,185 in 2007. > Housing Starts: Average of 16,373 housing starts per year in the Calgary Region from 2003 to 2008. > Retail Sales: $18,852 per capita in the City of Calgary in 2008 – the highest in Canada.

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Insulating Concrete Forms & Concrete Panels A Business Case for Investing in the Calgary Region

Table of Contents

Page

Preface to the 2nd Edition

6

1.

Insulating Concrete Forms (ICFs) & Concrete Panels: What Are They?

7

2.

Supporting Clusters of Manufacturing Activity

9

3.

Demand Outlook: Drivers of Demand for Energy Efficient Housing

11

4.

Supply & Supply Chain Issues: Commercial Delivery Platforms for Energy Efficient Housing

13

5.

Economics & Strategic Analysis

18

6.

Summary of the Business Case

25

Prepared by Woodbridge Associates Inc. for the Calgary Regional Partnership 2nd Edition October 2009

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Preface to the 2nd Edition

A vital ‘takeaway’ message for existing and potential investors in North America’s building materials industry is these changes bring fresh opportunities for strategic re-positioning and enhanced profits.

Astonishing Magnitude of Changes In North America’s building materials industry, there have been more recent changes than in perhaps any other sector of the economy apart from finance. The short to medium term demand outlook has been reduced substantially from earlier expectations. The supply-side has been altered structurally and permanently. These changes are discussed in greater detail later in this report. Importantly, the process is still underway, and may not as yet have reached a balanced point of equilibrium – regardless of very early signs of an initial recovery. Despite these changes, a reassuring conclusion is that many of the longer term structural shifts that were underway during the 1990s and 2000s are still occurring. This is vital news for potential investors in building materials manufacturing and distribution. What is evolving are two key trends: (1) many of the former players who were pioneers of forward integration in the last cycle have left the business or curtailed their operations and modified their longer term goals (2) a possible shift in emphasis between leveraged buying power and un-leveraged selling power seems likely to emerge as the business cycle recovery gathers momentum. Caution suggests that a sustained economic and housing recovery could be prolonged (Figure 1). Today, there are far fewer players throughout the entire supply chain in building materials than at the peak of the past cycle. Many have gone bankrupt or are in Chapter 11 re-organizations, or have left the business. Critically, the supply chain extends backwards into sources of raw materials. It is clear that fundamental changes in raw materials supply (already underway, but un-noticed by many) will affect the availability and price of wood, steel and concrete. Some of these link to unprecedented shifts in raw materials supply and costs – notably sharp reductions in Crown timber harvest in Canada and globally. Re-Structuring of Business Models Creates Profit Opportunity A vital ‘takeaway’ message for existing and potential investors in North America’s building materials industry is these changes bring fresh opportunities for strategic re-positioning and enhanced profits. Re-positioning takes time. This series of reports outlines some key investment opportunities in the Calgary, Alberta region.

Figure A

U.S. Housing Market: A Slow and Gradual ‘W’-Shaped Recovery is Expected

Calgary is not just a supply region close to strategic sources of competitively priced high quality raw materials. It’s also a large market region – in population size and because of long term mega-projects involving billions of dollars of construction and exploration expenditures. Many building materials manufacturers and builders re-located production operations to Alberta during the last cycle. Environmental protection objectives are paramount for the Government of Alberta. That’s why Alberta has become a leader in the production of many leading-edge green building materials. Sustainable green-built communities are more evident here than almost anywhere in North America. Clusters of synergistic activities reinforce each other – and are supported by one of the best-educated, skilled, dedicated workforces on the continent. Investors should evaluate the prospects!

Source: John Burns Real Estate Consulting U.S. Building Market Intelligence™

Prepared by Woodbridge Associates Inc. for the Calgary Regional Partnership 2nd Edition October 2009

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1. Insulting Concrete Forms (ICFs) and Concrete Panels: What Are They? Changes in Building Practices and Energy-Efficient Buildings Although the vast majority of single family homes in North America are wood frame construction, the use of other building materials – such as concrete, brick, steel and some composites – represents a small but significant market share in single family residential construction and accounts for a sizeable part of multi-family construction. In addition, as homebuyers become more concerned about issues such as energy costs, many builders are actively reconsidered the energy-efficiency of the building materials they use. Some are opting for the much greater energy-efficiency (and other advantages, such as low maintenance costs) offered by ICFs and pre-formed concrete blocks and panels. ICFs Essentially, ICFs are polystyrene forms, usually a patented design (Figure 1), which are assembled on site and, after assembly, are filled with reinforced concrete and steel ‘rebar’ to create insulated structural walls. ICFs and similar products address the homeowner’s desire for energy efficiency. In the new era of dramatically higher global energy prices (see Section 3) that began in the 1970s, an increasing number of homeowners are concerned about their ability to pay for rising space heating (furnace) and space cooling (air conditioning) costs. Correspondingly, public policy shifts translated into new regulations via building code changes along with ‘voluntary’ initiatives by builders are now creating a significant shift in North American approaches to building design and construction. This generates the potential for new investments in manufacturing in the CRP region of Alberta. Figure 1

Source: http://www.plastifab.com/ applications/advantageicf /advantage.html ICFs address the homebuyer’s increasing desire for energy efficiency

Concrete Masonry Unit (CMU) or Cast-in-Place (CIP) Concrete Foundations Other similar forms include CMUs and CIPs. The Toolbase** website notes that foundation walls built with ICFs are easier and faster to construct than either concrete masonry unit (CMU) or cast-in-place (CIP) concrete foundations depending on total area and house plan. Insulating forms protect the concrete from freezing and rapid drying. It notes that concrete can be poured in ICFs when ambient temperature is as low as 10°F, requiring only the top of the form to be protected with insulating blankets. In extremely hot weather, in which evaporation is a concern, the top of the form need only be covered with plastic sheeting. **Toolbase: http://www.toolbase.org/Technology-Inventory/walls/Insulating-Concrete-Forms Note: ICFs typically are patented and proprietary products. All the product-specific information provided in this series of reports is derived from website information and these sources are duly acknowledged and websites identified. No evaluations of products or manufacturers have been carried out and the report is generic to the overall product type. Prepared by Woodbridge Associates Inc. for the Calgary Regional Partnership 2nd Edition October 2009

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1. Insulting Concrete Forms (ICFs) and Concrete Panels: What Are They? Toolbase** notes that “ICFs consist of insulating foam, commonly expanded polystyrene (EPS) or extruded polystyrene (XPS). The three basic form types are hollow foam blocks, foam planks held together with plastic ties, and 4 x 8 panels (Figure 2) with integral foam or plastic ties. ICFs can be used to form various structural configurations, such as a standard wall, post and beam, or grid. They provide backing for interior and exterior finishes. “Insulation values of ICF walls vary depending on the material and its thickness. Typical insulation values range from R-17 to R-26, compared to between R13 and R-19 for most wood-framed walls. The strength of ICF structures relative to lumber depends on configuration, thickness, and reinforcement. However, ICF walls are designed as reinforced concrete, having high wind and seismic resistance. “There are many ICF wall types. Products are differentiated based on the type of form and the shape of the concrete sections. Products are further differentiated by how forms attach to each other, how finishes are attached to the wall, insulating values, foam types and other features. Introductory information on the most basic product types follows. The book, Insulating Concrete Forms for Residential Design and Construction, available from The Insulating Concrete Form Association [ICFA], includes an in-depth discussion of design principles, details, types of ICFs, field assembly, and performance and cost data (1)”. Figure 3

“A typical ICF consists of highly insulative foam combined with a reinforced concrete wall”. “Through the combined effects of continuous RValue, reduced air infiltration and thermal mass qualities moderating indoor temperatures”. Figure 2

SIPs are another energy-efficient building product using polystyrene. See Report # 7 in this series for further information on SIPs ** http://www.toolbase.org/Technology-Inventory/walls/Insulating-Concrete-Forms

Source: http://www.greenstrides.com/2008/04/04/icfs-insulated-concrete-forms

(1) http://www.plastifab.com/applications/advantageicf/advantage.html Prepared by Woodbridge Associates Inc. for the Calgary Regional Partnership 2nd Edition October 2009

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2. Supporting Clusters of Manufacturing Activity. In support of the business case for manufacturing investment in these products in Alberta is the fact that (a) some already are produced in the province and region and (b) there is a strong supporting industry which manufacturers locally, or within North America, the key raw materials required – concrete and polystyrene. Concrete The Alberta Ready Mixed Concrete Association, ARMCA, represents over 93% of the concrete producers in Alberta. With a membership of approximately 400 companies, ARMCA has close to 60 producer-members distributed throughout the province, including many with pumping services – an important consideration for ICF construction. Major firms such as Lafarge, Burnco and Inland Concrete are well represented.

Alberta

Petrochemical Production This provides the basic feedstock for production of polystyrene used in ICF production. According to Alberta Energy “petrochemical production is one of the largest manufacturing industries in Alberta in 2006, accounting for over $13 billion worth of products and $7.1 billion worth of exports. The industry directly employs more than 7,000 Albertans with a combined payroll of over $526 million. Alberta is Canada's leading petrochemicals manufacturer and home to four petrochemical plants with a combined annual production capacity of 8.6 billion pounds”. Regarding the size of the industry, the following is quoted from Industry Canada’s website (http://www.ic.gc.ca/epic/site/chemicals-chimiques.nsf/en/bt01198e.html). “ Alberta's Industrial Heartland (AIH) is a $25 billion neighbourhood, the hub of a competitive, world-class petrochemical manufacturing sector with a world market. Home to one of the largest petrochemical and refining clusters in North American and one of the world's largest ethylene plants, the region abounds in opportunities for petrochemical and innovation investment. An abundance of primary and secondary resources, favourable operating costs, low taxes and the confidence demonstrated by huge investments contribute to a long-term window on sustained economic growth. “ The critical mass of world-class industry players, including Dow Chemicals, Shell Chemicals Canada, Shell Canada Products, Degussa Canada, and smaller related industries and support businesses is at the centre of an extensive network of pipeline, truck, and rail transportation links to the U.S. market place. “ Located in the Greater Edmonton area, Alberta's Industrial Heartland is directly linked to the world's largest ethylene cracker, Nova Chemicals, and derivative facilities operated by Nova and Dow Chemicals and Fort McMurray's massive oil sands development. Oil sands marketable production in 2002 reached 740 300 (billion barrels per day), of bitumen and upgraded synthetic crude oil. This represented 48.4 percent of Alberta's and 31.8 percent of Canada's total crude production. Alberta's oil sands promise a secure 50- to 100-year supply of feedstock for petrochemical investment”. Industry Canada has identified polystyrene as a potential petrochemical derivative that potentially could be produced in Alberta.

Prepared by Woodbridge Associates Inc. for the Calgary Regional Partnership 2nd Edition October 2009

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2. Supporting Clusters of Manufacturing Activity. Polystyrene Production Polystyrene is not currently manufactured in Alberta, although studies have been completed that indicate possible future investment based on the province’s rapidly growing petrochemicals industry. However, it is used for manufacturing of products such as ICF’s and SIPs within the province. Polystyrene "beads" are imported from the US and parts of Asia for these purposes, and further processed into the desired products. Beaver Plastic’s LOGIX ICF system is an example (Figure 4). The Company has an ICF manufacturing plant near Edmonton.

Alberta

Beaver Plastics produces polystyrene materials for the construction, transportation, agriculture, silviculture and horticulture industries in Canada and the U.S. LOGIX ** is owned by five ICF manufacturers that operate six plants across North America. The Company also produces SIPs (see report #7 in this series) Alberta Polystyrene Production Options “Completed in October 2000, this study was commissioned by Alberta Economic Development to examine the economic potential of producing polystyrene (PS) in Alberta by Harry Blair Consultants. The study concluded that "the base case project profitability is quite attractive".

Figure 4

“An economic model was developed to evaluate the profitability of constructing and operating a crystal/impact PS plant in Alberta, using local styrene monomer as feedstock, and shipping the product to consumers in Alberta, North America and Asia. The results were an attractive net present value and a strong real earnings power” (source: Industry Canada and AED) Clustering Connections Vital Link to Secure Supplies of Raw Materials Clustering connections (polystyrene supply, concrete and a viable construction industry) are important because polystyrene production, or access to competitively priced supplies of polystyrene beads produced elsewhere is essential for the economics of the ICF process.

Photo: Courtesy of LOGIX website. Beaver Plastics Prepared by Woodbridge Associates Inc. for the Calgary Regional Partnership 2nd Edition October 2009

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3. Demand Outlook – Drivers of Demand for Energy Efficient Housing Global Energy Prices Rising There are several drivers of the current strong shift in consumer sentiment towards energy efficiency and energy savings. ”Pocketbook” and “planet” factors (Figure 7 next page) both feature in peoples’ decisions. High among the ‘pocketbook” issues, the recent rapid rise in global energy prices confirms that a new era is underway. In fact, experts believe that this began with the OPEC 1 and OPEC 2 oil shocks of the 1970s (Figure 5). Rapid rises in global oil prices at that time had impacts on all economies around the world. In retrospect, however, their impacts on changing industrial and consumer behavior were more apparent in Europe and Japan/Asia than they were in North America. Major shifts in construction practices; energy supply and energy efficiency in buildings were more apparent overseas than in North America – where only minor changes were made to vehicle fuel efficiencies, and comparatively modest changes were made to building codes with respect to insulation standards. Until the recent oil price shock, with spot light sweet crude prices above US$145/barrel in mid-2008, and spikes in natural gas (Figure 6) and other fuel prices, North American behavior have shown little imaginative change. Now, it appears that a major shift in energy use and attitudes is occurring.

Natural Gas Prices, Monthly

Crude Oil Prices (Inflation Adjusted) 140

120

16

New Era of World Oil Prices

Spot Prices ~$140/b

Data Source: Financial Trend Forecaster, WTRG Economics*

2005-2008 = estimates added

$80/b

80 $68/b

60

$55/b

Even So, North American Consumers' Usage Behaviour Has Responded Slowly

$8.95

Sustained High Prices (and Shortages) May Be Required to Change Behaviour Permanently

8

$6.21 4

40

$2.59

$26/b

20

$20/b

$2.42

$9/b $15/b

$13/b

0

0 1900

12

Henry Hub, US$/mmBtu

$US/Barrel (2004$)

100

$13.42

Natural Gas Prices Have Spiked Sharply Above Long Term Averages, and the Recent Trend Has Been Upwards

1915

1930

1945

1960

1975

1990

2005

*Data interpreted from graphics

Jan

Jan

1991

2008

Jan

Jan

Jan

Jan

Jan

Jan

Jan

Jan

Jan

2001

Jan

Jan

Jan

2006

Data Source: Canadian Gas Association, St Louis FRB

#2946-500-123

Figure 5

Figure 6 Prepared by Woodbridge Associates Inc. for the Calgary Regional Partnership 2nd Edition October 2009

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Jan

1996

$2.15

11

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3. Demand Outlook – Drivers of Demand for Energy Efficient Housing Climate Change Other factors that are now driving the demand for energy efficient approaches to construction and energy-efficient buildings include concern over carbon emissions. Since the 1997 Kyoto Protocol, adopted effectively since 2005, international action has been taken to restrict and reduce greenhouse gas emissions and reduce fossil-fuel use (although it has not unanimously been supported in terms of actions). International Regulation The Kyoto Protocol is a part of the international Framework Convention on Climate Change which has the objective of reducing grenhouse gases that are believed to cause climate change. As of May 2008, according to Wikipedia, 182 parties have ratified the protocol. Of these, Wikipedia notes, “36 developed countries (plus the European Union as a party in its own right) are required to reduce greenhouse gas emissions to the levels specified for each of them in the treaty (representing over 61.6% of emissions from Annex I countries) with three more countries intending to participate. One hundred thirtyseven developing countries have ratified the protocol, including Brazil, China and India, but have no obligation beyond monitoring and reporting emissions. The United States has not ratified the treaty. Among various experts, scientists, and critics, there is debate about the usefulness of the protocol, and there have been cost-benefit studies performed on its usefulness”. Figure 7

National and Provincial Action within Canada Canada and various provinces have defined plans of action, including carbon caps and credits trading with similar goals to the above. Approaches vary by jurisdiction.

Today, “Planet” and “Pocketbook” Issues are Both Seeking ‘Green-Product’ Solutions

Lifestyle Choices Personal lifestyle choices are perhaps the single most influential driving force behind actions on climate change, and potential major changes to the construction of energy efficient buildings. Today, in North America, many consumers of energy (industrial and residential) are concerned about “planet” and pocketbook” issues (Figure 7). “Planet issues” are causing a shift in behaviors and homeowners increasingly are worried about rising costs of space heating and cooling. Homebuilders are responding to these changes with changed attitudes and new approaches to construction methods and construction materials – including ICFs.

Greenhouse Effect

U -V Index

?

Global Warming

Health & Safety Risks

#2946-500-122

GreenProduct Solutions     

“Planet Issues” Prepared by Woodbridge Associates Inc. for the Calgary Regional Partnership 2nd Edition October 2009

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Rising Home Heating Costs

Reduced House Value

?

Lower Disposable Income

Move or Renovate?

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4. Supply & Supply Chain Issues: Commercial Delivery Platforms for Energy Efficient Homes Industry Structure The broad impacts of rising global energy prices – and the need for changes, including shifts in construction methods and the use of energy-efficient building materials – come as no surprise to most people. These are very high profile issues today in the news and in day-to-day events affecting peoples’ lives. Less clear, however, is what the desired changes should be – and how they should be delivered. For the purposes of this report, delivery issues are the main focus. Current delivery mechanisms for the private residential sector within North America include the following: • Do-it-yourself and custom-designed “one-off” houses (a small percentage of the total) • Small scale builders, building 5 to 50 homes per year (numerically, by far the largest in number of construction firms). Some produce few designs; others produce only custom designed homes.

Top 15 Large US Homebuilders 2005-06

• Larger scale “tract” or “production” builders. Depending on the region, they may produce several hundred homes per year. These firms are linked closely with raw land development and typically are active in gaining entitlement and in development of serviced sub-divisions.

Figure 8

Top 5 = 214,000 Homes Top 15 = 316,800 Homes

42,400 40000

37,200

30000

18,400

20000

16,700 13,800 9,800

10000

ci fic m el Cr Te ow ch O ly m pi c M er ita ge To ll B ro s.

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Prepared by Woodbridge Associates Inc. for the Calgary Regional Partnership 2nd Edition October 2009

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8,800

0

D

“New” building products, such as ICFs, have to gain widespread acceptance with one or more of these groups (and with architects, specifiers and code authorities) in order to increase their market share significantly.

Multi Family

51,400

R

The year 2005 was a peak year for most US homebuilders in terms of deliveries while, in most parts of Canada, sales did not peak until late 2007.

Single Family

50000

# Units (Closings)

• Housing “Giants” comprising large well-capitalized firms many of which are publicly-traded stocks, who each build annually from several thousand to tens of thousands of homes. For example, Lennar Homes which serves the first time buyer, first move and active adult markets, constructed and delivered nearly 50,000 homes in 2006. DR Horton (Figure 8) produced over 51,000 homes. All the US “Giants” are heavily involved in land development.

60000

Data sources: 10K, Annual Reports, Housing Zone

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4. Supply & Supply Chain Issues: Commercial Delivery Platforms for Energy Efficient Homes ICFs and Concrete Acceptance Among US Builders The Portland Cement Association (http://www.cement.org/homes/ch_newsletter2007-11&12.asp#Market) reports that “concrete home market share fell as the broader housing market took a hit in 2006. The overall U.S. concrete home market share dropped to 14.4%, down 3.5% from 2005. Florida was especially hard hit, as the state’s new housing starts were down 31% last year. Since the vast majority of new homes in Florida are built with concrete, this accounted for almost the entire U.S. percentage drop. This is the first decline since PCA started tracking residential above-grade market share in 1993”. The PCA noted that “the overall masonry market share declined 3.3%, while ICFs took a step down to 4.5% from the previous year’s level of 4.7%. Autoclaved aerated concrete and the “other” category of pre-cast, removable forms remained unchanged at 0.1% and 2.0%, respectively. In the next few pages, we explore construction trends in the US homebuilding industry, and note differences in approaches within Canada. These are important observations because ethey help define the market potential (and possible constraints) for ICFs. Rental Market Concrete Structures: A Real-Estate Viewpoint In the ownership market, homeowners and homebuilders make their own choices about the forma of construction and their preferred building materials. Issues of cost and performance come into these decisions. In the smaller, but important rental market, many investors prefer concrete construction for their longevity, durability and permanence (see ‘The Goodman Report’. November 2007. [email protected]). ICF Performance ICFs offer many of the advantages of concrete in terms of lower maintenance costs than traditional wood-frame constructed homes. They have a significant advantage over wood frame currently in terms of energy efficiency. However, the ICF approach requires a different system for attachments to inside and outside walls. It is more widely acceptance in some jurisdictions than others. Toolbase (www.toolbase.org) reports that “ICFs must meet standard prescriptive structural design requirements for cast-in-place concrete walls in the building codes. The plastic foam insulation on the interior surface requires special attention to meet fire resistance provisions. The International Residential Codes (IRC) contain prescriptive methods for building below- and above-ground walls. In February 2003, the International Code Council Evaluation Service (ICC-ES) was formed and issues ICC Evaluation Reports. The ICC also maintains ‘Legacy Reports’ issued by the former four building product evaluation services”. Energy Efficiency Trends in Construction Homebuilders are faced with a large number of issues and cost variables when deciding on the best construction method to use, and which materials to use (which may be pre-specified by an architect or engineer). They put energy issues into their overall calculations for various price points of the market. Clearly, as commercial businesses, their ultimate concern is the bottom line. In this respect, shifting regulations (see previous pages) can “change the goalposts” and most progressive homebuilders try to anticipate these changes and adapt to them early. On the other hand, many do not want to be market pioneers. With respect to the growth market potential for ICFs in North America, regulatory and building code issues are influential. It is also important for potential manufacturing investors in this and similar technologies in the CRP region to be knowledgeable about existing trends towards cost savings (related to housing affordability and market shares) in the residential construction sector. Some key changes in concrete use are explored in the next few pages.

Prepared by Woodbridge Associates Inc. for the Calgary Regional Partnership 2nd Edition October 2009

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4. Supply & Supply Chain Issues: Commercial Delivery Platforms for Energy Efficient Homes Change in Construction Methods Traditionally, poor workmanship by concrete forming crews has been a limiting factor in the market potential for off-site fabricated wall panels and other ‘systems built’ components. Variations in the poured concrete foundations from the architect’s plans or specifier’s drawings often required that the framer had to make impromptu adjustments to compensate. A foundation length might be 20’ in one dimension, but 20’ 6” at the other end. With precisely made foundations, true in all three dimensions, the job of the component producer and systems builder is readily facilitated. Photo: BMC West

This trend has been accelerated with the introduction of Pulte’s factory-built panelized concrete foundations (Figure 9). These units are inspected and preapproved in the factory and save time on site. Further developments have been achieved by Centex in its use of double panels. In effect, these recent developments in residential house panelization are merely mimicking already long established construction practices in industrial and commercial buildings - where the use of concrete panelization is commonplace. These residential trends suggest a return to traditional balloon framing –and the ability to radically speed up the construction cycle. Cycle time (i.e. speed of construction – Figure 10) savings could be significant for tract builders and medium scale developers. ICF could play a role in these developments, but has to compete financially against other approaches, such as panelization.

Concrete: Panelization is a Rising Trend in North American Housing - Panelized Foundations in the US Midwest

Note: Assembly of ‘Gang’ Trusses: Higher Productivity, Safer

Like ICFs, Accurate Site-Preparation is Essential Photo: Woodbridge Associates Inc

#2979-235

Photo: Woodbridge Associates Inc. Figure 9

Figure 10

Prepared by Woodbridge Associates Inc. for the Calgary Regional Partnership 2nd Edition October 2009

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Photo: Woodbridge Associates Inc

Photo: Woodbridge Associates Inc.

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4. Supply & Supply Chain Issues: Commercial Delivery Platforms for Energy Efficient Homes Speed of Construction For most larger builders, and for many others of varying size, speed of construction is important in their ability to control project costs and deliver homes on time and on budget. Various approaches to speed up construction, such as those discussed on the previous page, increasingly will be utilized as the US new residential housing industry emerges from its current slump. In Canada, which is not characterized by large scale builders on the residential side, many of these approaches to site productivity can be found – or are likely to be adopted over the next several years. ICFs have to compete for the attention of homebuilders in a wide range of aspects. With their superior energy-efficiency levels compared with most wood frame construction, ICFs already have the attention of many progressive builders. But they have to compete too in cycle-time. The Pulte factory-built foundation panels shown in the photographs (Figures 11 and 12) are able to provide some of the fastest cycle time advantages currently available. With the wide range of considerations that go into overall building design, and the choice of building methods and materials, each of these emerging technologies has a place. Which will emerge as a dominant technology in the future will depend in large part on factors such as how they meet the needs of consumers for energy efficient structures and how they help the overall economics of home construction including cycle time. The systems built approach is emerging as a dominant consideration.

With Factory-Built Concrete Panels Pre-Fabricated Foundation Assembly Takes a Fraction of the Normal ‘Forming’ Time

Square and “True” (Plumb) Foundations Favor the Use of Building Components and Engineered Lumber

… Less wastage and cutting on site than site built wood frame Photo: Woodbridge Associates Inc

Figure 11

Figure 12 Prepared by Woodbridge Associates Inc. for the Calgary Regional Partnership 2nd Edition October 2009

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Photo: Woodbridge Associates Inc

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4. Supply & Supply Chain Issues: Commercial Delivery Platforms for Energy Efficient Homes Supply Chains: Developing the Alberta and Western Canadian Markets for ICFs Forward integration into construction is one of the strategic growth opportunities for concrete producers. There are numerous non-integrated builders throughout western Canada (Figures 13, 14 and 15). Linkages with these builders would allow concrete producers to gain secure access to market share rather than just being a ‘spot’ provider of wet concrete/cement. ICF’s offer a mutually beneficial means of forward integration. Integration Example: Rempel Bros. Concrete in Vancouver BC entered the ICF (insulating concrete form) market to provide one-stop shopping for concrete construction. The firm provides its traditional concrete product and integrated bracing and scaffolding along with pumping services of an affiliate firm Challenge Concrete Pumping. In a linkage with ECO-BLOCK, the firm offers ICFs for residential homes, roof foundations and commercial tilt up warehouses.

Calgary: Carolina Homes Coventry Hills

Concrete and forming work is a significant cost element in construction

ICF’s are well-suited to complex formwork and can replace conventional concrete in whole or part of structures.

Figure 13

Figure 14 Prepared by Woodbridge Associates Inc. for the Calgary Regional Partnership 2nd Edition October 2009

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Figure 15

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5. Economics and Strategic Analysis How Has the Global and North American Macro-Economic Downturn Affected the Business Case? 1. A ‘New Conservatism’ Exists Among Investors and Capital Providers The severity of the current global macro-economic downturn, and its root causes, are causing investors worldwide to be very cautious in assessing the risks associated with their existing investments – and they are very demanding in their due-diligence of any new investment proposed to them. This caution, and a widespread ‘new conservatism’, extend well beyond private sector investors. As is well known, capital and credit markets are still struggling through a painful re-structuring. This is expected to be a protracted process. Accordingly, all investment analyses – ranging from preliminary pre-feasibility studies such as this one, along with bankable detailed due-diligence evaluation typically carried out by investors – now require an even greater level of analytical rigor and the very best current information available. 2. Expanded Role of the Calgary Regional Partnership (CRP) in this Context In order to assist potential investors in their evaluations of the opportunities presented in this series of reports, the CRP has established an Investor Information Assistance Group (IIAG) to respond to investor requests for data, locational information and general assistance regarding possible manufacturing investments in the building products industry in the CRP region. Please contact the CRP at the e-address provided. 3. Fundamental Changes are Occurring in the Building Industry in North America Compared with just five years ago, the building industries of Canada and the United States have experienced traumatic changes – not just in demand but in supply structure. In the U.S., the re-structuring which still is underway is far greater than that of the industry in Canada where, although severe for industry participants, the decline in construction spending is not nearly as great. This is particularly the case in the residential homebuilding sector. Key structural changes occurring in both countries include the following: Supply Side • Reductions in homebuilding capacity. Many firms have gone bankrupt, are in Chapter 11 or have exited the business. Supply is reduced. • Reductions in non-residential construction capacity, with several large firms now committed to overseas projects (diversification planning), • Generally, despite higher levels of unemployment nationally and in key sectors of the economy, a skilled labor shortage continues to underlie the U.S. homebuilding industry in particular. • U.S. homebuilders are fully aware of this, and are still acutely sensitive to their dependence (during 2003-2006 peak activity markets), on immigrant labor for site-building activities. With the first priority being financial survival, in most cases they remain committed to investing in a greater proportion of systems building in order to (a) reduce direct costs of labor and materials wastage on site and (b) achieve a competitive edge over their competitors. They are also very interested in the potential for ‘green building’ but only providing that they can make money if they use these materials. Some, but not all, consumers are willing to pay a price premium for these products. • The trend to use of green building materials is better established in non-residential sectors, including public buildings where, generally, architects and engineers are willing to specify these materials – and where building codes (and inspectors) are supportive of them. • Basic building raw materials, such as lumber and structural panels, are very cost-competitive today compared with generally higher quality higher priced structural engineered wood products – the price of which has declined, but comparatively less. A key unknown, at this point of time, is the extent to which specifiers and builders will revert to using lower cost materials to save money. We believe that this occur, but will be limited in scope because higher quality often provides a competitive edge. Prepared by Woodbridge Associates Inc. for the Calgary Regional Partnership 2nd Edition October 2009

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5. Economics and Strategic Analysis How Has the Global and North American Macro-Economic Downturn Affected the Business Case?

As a result of the global and North American economic recession, supply-side changes in homebuilding and construction offer even better opportunities for building materials investors in the CRP region than they did previously!

3. Fundamental Changes are Occurring in the Building Industry in North America (continued) Demand Side • The demographic fundamentals underlying strong levels of future demand in North America have not changed because of the global and regional recessions. But these factors address only the ‘need’ for goods and services. The reality is that the leveraged ‘ability to pay’ has been fundamentally re-calibrated to historically more realistic levels. Marginal demand (as it existed at recent peak market demand) has been eliminated for the foreseeable future. • One of the key assumptions linked to this outlook is that lenders’ reduced willingness to advance mortgage funds and construction loans will continue to prevail for some considerable time. They will be far more selective that in the past in making loans – despite historically low interest rates at the present time.

• To keep this analysis in balance, it is worthwhile noting that many new households are emerging that do have the ability to repay mortgage loans. The rental market is no longer as attractive to them because of the financial incentives of homeownership – linked to the perception that house prices are stabilizing in some markets and because if mortgage interest deductibility and first time buyer incentives. • Overall, a recovery in U.S. housing starts is predicted, with activity reaching the 1.5 million unit level by 2013 (Figure 16), rising to 1.8 million by 2016.

U.S. Annual Housing Starts

Woodbridge Associates Inc. June 2009 Projections 2.5

2.2

1.7

1.8 Trend 2016

1.7

1.5

1.4

1.5 Trend 2013

1.4

1.4 1.2

1.0

0.5

515,000

Starts F'cast for 2009 1963 to 1998 = Smoothed 5 Year Moving Average. 0.0 1963

1967

1971

1975

1979

1983

1987

1991

#2982-000-9 Rev June 09

Prepared by Woodbridge Associates Inc. for the Calgary Regional Partnership 2nd Edition October 2009

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Current Cycle & Trend Forecast

2.0

# of Housing Starts (Million)

• Correspondingly, on the consumer side, potential homebuyers will be very reluctant to risk overcommitting themselves because of job insecurity and the fear of what the foreclosure process has brought upon many families and households in the U.S.

Figure 16

1999 to 2008 = Actual. 1995

1999

2003

2007

2011

2015

2019

Conventional units only: excludes mobile homes

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5. Economics and Strategic Analysis How Has the Global and North American Macro-Economic Downturn Affected the Business Case? 3. Fundamental Changes are Occurring in the Building Industry in North America

(continued)

Demand for ‘Green’ Building Materials • Some of the strongest demand-side factors to emerge during the current market down-cycle include consumers’ raised consciousness of climate change issues, their awareness of energy costs and their preference for ‘green’ building products. A clear definition of what constitutes ‘green’ in building products is elusive. Moreover, because there are no industry-set standards or enforceable government regulations in most cases, an extensive amount of ‘green-washing’ takes place across the whole spectrum of the building materials industry – globally and in North America. • Three related issues are crucial to this report. Firstly, as a region, the CRP has perhaps pioneered more advanced ‘green’ practices and invested to a much greater extent than most regions in ‘green’ communities (e.g.Okotoks AB). Secondly, local builders and manufacturing firms are extensively invested and committed commercially to producing ‘green’ products. Thirdly, the Government of Alberta has announced its commitment to a broad set of programs to advance the development of green products. This is very positive support for potential investors in green products in the CRP region! • The business case for green building products rest fundamentally on sound commercial principles. The lack of enforceable standards, however, is an impediment to the growth of this sector (Figure 17). Even so, growth in green building product demand is estimated to be rising rapidly (Figure 18). Figure 17

Figure 18

Adoption of ‘Green’ Building Products: Paradigm Shift? There are Only Two Policy Choices!

Voluntary

Regulated?

Gov’t Incentive Programs for ‘Green’ Industry Standards (All Products) Market and Specific Public Policy Incentives for Non-GHG Products

Source: Woodbridge Associates inc.

Prepared by Woodbridge Associates Inc. for the Calgary Regional Partnership 2nd Edition October 2009

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5. Economics and Strategic Analysis How Has the Global and North American Macro-Economic Downturn Affected the Business Case? 4. Changes in the Building Materials Supply and Distribution Industry • Significant changes have occurred in the supply chain, notably the building materials industry. This has lead to reductions in distribution capacity, and rationalization of many of the distribution centers which previously existed (notably to overbuilt markets such as Reno NV). Distributors have pared back their services substantially, and many offer a much narrower range of products than previously. Cost cutting is the focus. This has many medium and longer term implications for investors in building materials manufacturing. In the context of this report, they include the following: -As the demand recovery gathers momentum, the supply chain will not be able to deliver products (a) as quickly as it did at previous peak markets and (b) at the same lower costs (because volume will be down, and unit costs will be higher). -There are indications that reduced levels of Crown timber harvests in Canada will lead to much higher prices in the U.S. within a few years (most likely around 2011 onwards). -Distributors will focus on higher margin activities, for financial reasons, and many of the products and services desired by homebuilders and constructors will not be provided. This opens up opportunities for building materials investors in the CRP region to collaborate with raw materials suppliers, and to form ‘Tier 1’ special supply relationships with key regional distributors, by providing products –such as ready-to-assemble [RTA] building components (where on-site materials waste can be eliminated) and services – such as engineering, design and logistics (IT) to ensure just-in-time (JIT) delivery to the final customer. These are competitive strengths that can be offered, in particular, by the CRP region. 5. Strategic Shifts Favor Building Materials Manufacturers • It is too early, as yet, to detect a further shift that is believed likely to emerge – notably a possible shift in supply chain power from distributors to building materials manufacturers. The driver for this is likely to be the Crown timber supply changes outlined above. Timber will be available, but most probably only at higher prices. This would represent a fundamental change. In the most recent peak market in North America, most of the innovation in supply chain structural changes emerged from, or as a result of: -consolidation within the wholesale and retail distribution industry; -the emergence of new types of forward integrated distributors such as pro-dealers (manufacturing components, such as trusses and wall systems, and providing installed services. See Figure 20, earlier); -the exercise of commercial buying power leverage by large and rapidly growing distributors, many of which became much larger in market capitalization size than raw building materials manufacturers (i.e. wood products producers); -development of Tier 1 supplier relationships and, to a lesser extent, focus by distributors on their ‘A-List’ customers. These changes largely precluded Canadian manufacturers of wood products (many softwood lumber producers were pre-occupied with SLA 2006 trade issues at the time, and few developed ‘Tier 1’ supplier relationships). That opportunity now re-occurs. The CRP region is an ideal location for establishing these types of manufacturer-linked building component supply relationships. Adaptive, entrepreneurial and innovative smaller-sized firms would be the most nimble investors. Prepared by Woodbridge Associates Inc. for the Calgary Regional Partnership 2nd Edition October 2009

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5. Economics and Strategic Analysis Home Construction Costs Excluding land costs, the foundations, framing and siding of a house are the largest single elements of cost in homebuilding. The actual costs vary widely, depending on factors such as size of home, its location and the construction and finishing materials chosen. Other factors included building codes and other standards. There is no single square foot cost number which could take all of these factors into account. However, national averages provide a useful indication of the comparative importance of the major categories of construction costs. Figure 19 provides this for the US for 2007. The ‘Top 7’ elements of cost typically account for about half of total. Framing and trusses are the largest single element of cost – accounting in the national average in the US for an estimated 15.8% of all costs, land excluded. Based on the average house construction price of $219,000, excluding land, the actual cost of framing and trusses (materials and labour) was $34,600. Foundations cost (mostly concrete) are 7% of the total. Several qualifying comments are necessary in reviewing these numbers as a broad proxy for the Alberta industry. On a square foot basis, they seem to be reasonable estimates after adjusting for differences in construction methods (e.g. use of 2x6 exterior wall framing as standard in many Canadian homes versus 2x4 walls in most of the US).

Figure 19

Moreover, there are significant differences in labour costs during ‘hot’ construction markets compared with low points on the demand and price cycle. Components’ Costs Advantages The business case for using ICFs cannot be made on direct savings (if any) alone – and has to take into account ‘soft costs’ including faster (or slower) construction time (Figure 20) and much greater energy efficiency of ICFs vs. wood frames. Figure 20

Construction Costs for a Single-Family Home (2007 US National Results) Cost Item

Amount US$

Percentage of Total

Framing & Trusses

$34,600

15.8%

Excavation, Foundations and Backfill

$15,249

7.0%

Direct Costs Site labor @ $25/h Factory labor @ $12-15/h ‘Nominal’ Savings ~50%

Cabinets & Countertops

$12,477

5.7%

Siding

$12,476

5.7%

Plumbing

$11,753

5.4%

Traditional site materials Index = 100 Offsite fabricated materials and EWPs =120

Drywall

$11,185

5.1%

Tiles & Carpet

$11,058

5.0%

All Other (>30 Major Categories)

$110,217

49.7%

Total

$219,015

100.0%

Indirect Costs ‘Savings’ • Construction cycle time savings • Growing shortage of skilled craftsmen • Inspection of components “in the factory” vs. on-site by building inspectors • Potential for Tier 1 supply relationships, and RTA assembly

#2979-218

Sheathing (not shown) = 1.6% Siding (not shown) = 1.6%

Prepared by Woodbridge Associates Inc. for the Calgary Regional Partnership 2nd Edition October 2009

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Data Source: NAHB Economics Group (2007) .

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5. Economics and Strategic Analysis ICFs have Up to 32% ‘Share of Wallet’ Potential From a manufacturing investor’s viewpoint, the market potential of ICFs is potentially very attractive. We estimate that ICF’s could gain significant market in a single family housing where this technology could participate in up to 32% of construction expenditures.

Figure 21

Construction Costs for a Single-Family Home ICF's Target Market = Part of ~32% of Total Average House Construction Costs in 2007 = US$219,015

Figure 21 provides the details.

All Other 68.3%

Based on the NAHB single family construction cost data for 2007 already discussed, ICF manufacturers likely would make direct aim at gaining market share in (1) foundations excavation, foundation and backfill) as well as (2) insulation and (3) framing. Together, these total around 32% of the total costs of building a single family home. The data are based on US national averages as estimated by the NAHB, but are a reasonable proxy for Canada too. With over US$90 Billion spend on housing construction in total in western North America in 2007 (see Report #3 in this series, for details), this market potential clearly is quite sizeable.

Insulation Foundations 1.6% 7.0%

Framing, Trusses, Sheathing & Siding = 23.1% (ICFs are a Potential Part Of This Total)

#2979-244

US Data for 2007 National Results (Source NAHB)

Much depends however on the potential for ICF’s to become more widely accepted by homebuilders and buyers in order to move beyond their apparent current market share of around 4.5% as estimated by the Portland Cement Association. Raw Material Cost Trends In recent years, trend in raw materials used for construction in North America have moved in a variety of directions. With rapidly rising demand for steel and concrete – notably in China and other parts of Asia – prices for these raw material have risen sharply. From time to time, physical supplies have been hard to obtain. In contrast, prices for lumber, construction grade plywood and OSB have declined sharply since their peaks in 2004/05. Today, these prices are at their lowest point for more than a decade. When considering their future market share potential, producers of ICFs have to consider two factors in particular. Firstly, what are the potential price trends in competing raw materials, such as lumber and structural panels – and at what price will substitution in favour of ICFs take place?. Secondly, what is the potential for homebuyers and homebuilders to place a much higher priority – and be willing to pay for – much greater levels of energy efficiency in residential housing? Report # 7 in this series provides some further discussion on this issue. Prepared by Woodbridge Associates Inc. for the Calgary Regional Partnership 2nd Edition October 2009

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5. Economics and Strategic Analysis ICF Plant Capital Costs Depending on the product being made, plant size and how much new equipment is being purchased, capital costs can range from $1 million to $5 million or more for ICFs produced from polystyrene ‘beads’ More elaborate plants tend to focus on low unit costs through high productivity. Operating Costs ICFs do not necessarily offer a cheaper construction approach to conventional methods, but when differentials in energy efficiency are taken into account there may be differences, and possibly very significant savings, in operating costs after amortization of the capital cost differential. Initial Costs Toolbase (based on NAHB data) estimates that “ICF material cost ranges from about $1.75 per square foot to about $3.50 per square foot. Cost of installation labor, reinforcement, bracing, and concrete placement will be additional”. However, we do not have information on when these estimates were made, or what they include. On average, it appears (NAHB) that “ICF homes cost about two to five percent more than wood-framed construction. However, contractors installing ICFs for the first time, because of training required and a learning curve, may find that total installed cost is from five to seven percent”. Toolbase notes that “above-grade ICF walls tend to cost more to build than typical wood framed walls. As wood-framed walls approach the thermal insulation value of ICFs, the cost differential decreases. In most cases, material costs (concrete and forms) are primarily responsible for increased costs, while labor costs are often similar to wood framing. Cost premium depends on relative material prices, labor efficiency for each system, necessity for engineering, and effect on Woodbridge Associates Inc. time, other practices or trades, among other factors. The cost premium for ICF houses is smaller in areas such as high-wind regionsPhoto: that require additional labor, and materials for special construction of wood-framed houses. Photo: Woodbridge Associates Inc.

For foundations, Toolbase estimates that “ICF costs about the same or less than CMU or CIP wall systems. ICF costs about the same as for block construction with furring and insulation, but can be erected in one-third of the time”. Operational Cost Savings Once installed, there may be no operational costs directly associated with ICFs, although in some areas maintenance costs may include the need to prevent against termites (which are not attracted to the ICFs, but can penetrate them to attack wood inside the home). Also, depending on the energy efficiency of the home (e.g. windows), heating/cooling ongoing expenditures may be involved. Energy costs for houses with ICF full height walls will tend to be significantly lower than for framed wall construction. Pro Forma Plant Financials – ICF Manufacturing Plant Based on a medium scale ICF manufacturing plant with annual sales of $4 million, and assuming capital costs of $1 million (excluding working capital), and a total of 5 production/design-engineer and sales employees working full-time, with a four man field crew, we estimate that a minimum scale plant could produce and assemble sufficient product to supply 25 ‘average’ 2,000 square foot single family homes per year (based on ~$160,00 total packages, supply and install). However, these economics are very broad indications and are location specific. It is recommended that a comprehensive business plan should be prepared before proceeding. Houses built with ICF exterior walls require an estimated 44% less energy to heat and 32% less energy to cool than comparable frame houses. A typical 2000 square foot home in the center of the U.S. will save approximately $200 in heating costs each year and $65 in air conditioning each year. Source: Insulating Concrete Forms Association http://www.forms.org/index.php?act=energysaving Prepared by Woodbridge Associates Inc. for the Calgary Regional Partnership 2nd Edition October 2009

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6. Summary of the Business Case Proposed Business Model for CRP Region of Alberta The most likely plant model for a small-medium (minimum) scale new investor in ICF manufacturing in the CRP region of Alberta is summarized below in Figure 22. The sales levels indicated in Figure are derived from the ICF plant ‘pro forma’ as shown on the previous page. This business model would provide the manufacturing investor with a business model with significant potential growth, assuming the availability employees skilled in sales and marketing advantage and the financial ability to be able to offer complete ICF packages. Capital costs are assumed at around $1 million for the initial plant (ICF forming plant only). No capital costs have been identified for concrete/cement supply. It is assumed that these would be part of a separate business plan for the channel partner involved, or that of a third-party arms-length supplier. Pro-Forma Operating Statement (Annual Sales Revenues Only) ICF Manufacturing Plant

Figure 22

US$ Thousands

ICF Sales Revenues

Year 1 (Start-Up)

Year 2

Year 3

Year 4

Year 5

500,000

1,000,000

2,000,000

3,000,000

4,000,000

Production Operations Technologically, working with the polystyrene vendor, there are few significant barriers to entry into this business. Prior experience in construction design and engineering would be a pre-requisite. Timing of the plant opening would be critical, and should occur during a market upswing – so that the new firm does not have to win 100% of its market share from existing wood framers. With rapidly growing concern about energy costs and the need for energy efficiency, an integrated approach to the business model (linked with a concrete/cement supplier, pumping facility and builderdeveloper is the most likely way of establishing a growth company. Marketing Operations Wider acceptance of the ICF concept depends to a significant extent on consumer and homebuilder education. With an appropriate supply-chain partnership in place, the ICF firm (working closely with building code officials and specifiers in local communities) could establish a differentiated market for its product –and build progressively on this base. Branding Whole packages (manufacture-build on a turnkey basis) would permits the plant to serve industrial as well as residential markets. Branding the ICF package, along with a well-considered advertising supporting a ‘green-built’ sales campaign, would be a potential marketing advantage that could provide the producer with a competitive edge. Land costs, operating lines of credit and other capital items not identified are excluded. Operating costs are assumed to include rental for leased buildings. No allowances have been made for market cycles. Prepared by Woodbridge Associates Inc. for the Calgary Regional Partnership 2nd Edition October 2009

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Important Disclaimers and Copyright Notice Woodbridge Associates Inc. has prepared this research for the CRP on the basis of the best available information to it at the current time, and based on its judgment of future events and probabilities. However, it should be noted that building materials supply, demand and prices are dynamic and there are substantial risks inherent in any forward looking assessments. Accordingly, readers of this research should not rely on it for any commercial decisions and should carry out their own independent evaluations and due diligence assessments. Woodbridge Associates Inc. accepts no responsibility for any operating, strategic or investment decisions made solely on the basis of the research it has provided. The materials provided in this document are copyrighted. All intellectual property rights are retained by Woodbridge Associates Inc., except in the case of materials, data and information referenced from third parties who retain their own copyrights and intellectual property, and who have been identified accordingly. The materials provided in this document may not be distributed or transferred, copied in print or in electronic format, altered, modified or reproduced without the expressed permission in writing of Woodbridge Associates Inc. www.woodbridgeassociates.com

Prepared by Woodbridge Associates Inc. for the Calgary Regional Partnership 2nd Edition October 2009

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Prepared by Woodbridge Associates Inc. for the Calgary Regional Partnership 2nd Edition October 2009

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Calgary Regional Partnership fosters regional solutions through inter-municipal collaboration. We are committed to working together to promote a balance between a healthy environment, enriched communities, sustainable infrastructure and a prosperous economy. The Calgary Region Economic Partnership is an operational branch of the Calgary Regional Partnership, and is focused on the Region’s prosperity. Calgary Region Economic Partnership works with member communities to identify strategic opportunities, to attract and support business development and to promote job creation throughout the Region. For more information on the Partnership’s activities and initiatives visit www.calgaryregion.ca Phone: 403-851-2509 [email protected] www.calgaryregion.ca

By using recycled paper for the production of this marketing program, we saved 3 tons of wood, 10 million BTU’s, 3,679 lbs of CO2 equivalent, 8,758 gallons wastewater and 974 lbs of solid waste.

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