Real Property National Workshop Ottawa, ON November 19, 2014

Agenda •  Introduction to Corix •  Public Sector Utility Challenges •  Delivery Model Options •  Creating Value •  Transaction Considerations •  Case Studies

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Corix at a Glance Corix is a leader in sustainable water, wastewater and energy utility infrastructure. We design, supply, build, finance, manage and own community utility infrastructure on behalf of educational, municipal, institutional, military and private sector customers.

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EMPLOYEES

FINANCIAL

SYSTEMS

LOCATIONS

Quick Facts US

Canada

31 states

28

Water

560

Wastewater

262

Total Assets

$1.5B

$620M

Utilities

927

Services

699

Products

469

Corporate

157

TOTAL

Centertown Citizens of Ottawa Corporation

6 provinces

Energy

2013 Revenue

US Military Bases Joint Base Elmendorf-Richardson Fort Wainwright Fort Greely

2,252

University of Oklahoma

Public Sector Utility Challenges At a time when public sector resources are shrinking and demands are growing, many Public Sector institutions are faced with similar :

Greater need for utility technology, staff training and operating procedures

More stringent regulatory and environmental demands

Aging and inefficient critical utility infrastructure

Significant deferred maintenance backlogs

Lack of capital funding for upgrades, renewals and replacements

Accessing trapped equity in utility infrastructure

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Delivery Model Options •  •  •  •  •  •  • 

Private Capital O&M/Emergency Response Risk Transfer Capital Management Asset Management Governance Liability

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P3’s and Utilities Benefits and Limitations of a utility P3 include: •  • 

Substantial risk transfer to private sector partner Access to capital for new infrastructure

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Tendency towards fixed price provides cost certainty to public sector partner

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P3 s work very well for transportation, social infrastructure

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P3 s more challenging and less common in utility sector: –  Costs are less predictable –  Higher risk premium should be included –  Lacking ongoing transparency –  Dynamic nature of systems, environmental regulations –  Lacking contractual alignment for investment in long term maintenance, technology upgrades due to fixed price structure 7

Creating Value Benefits of a utility concession solution include: • 

Tailored solutions that are unique to and flexible for each situation

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Transparent Utility Rate Structure Design

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Upfront payment for market value of assets with flexibility to monetize all or a portion of the assets

•  • 

Predictable utility costs Economies of scope and scale

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Transfer of operations risk and responsibilities Enable public sector resources to be allocated/reallocated to the institutions core mission

•  • 

A stable source of funding for new infrastructure projects Reduced deferred maintenance backlog made possible through the use of predictive and preventative maintenance

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Assurance that utility governance and oversight remains with the Government 8

Typical Contract Key Elements

Past Performance

Technical Issues •  •  •  • 

Contingency Plans O&M Plans Capital Plans Transition Plans

•  •  • 

Contract Terms •  •  •  •  •  • 

Exceptions to Terms Ownership of Commodity Insurance / Liability / Indemnity Differing Site Conditions Service Contract Transfer Termination Provisions Contract Management

Who Proponents Qualifications and Key Members Roles and Responsibilities

Pricing and Structure •  •  •  •  • 

Form of Contract and Tax Implications Term and End of Term Considerations Price Adjustment Provisions Compensation for Legacy Assets O&M and R&R Costs 9

Transaction Process 12 Months

Client Needs Analysis (Asset and Operational Data, Educational Institution s Objectives Completed)

RFI/RFQ Process (Identify Participants, Document Preparation, Short-List Proponents)

RFP Process (Document Preparation, Draft Utility Services Agreement, QA/QC Process)

RFP Evaluations (Technical, Governance, Experience, Financial)

2 Months

               3 Months

2 Months

Preferred Proponent Selection (Best Value Decision)

Finalize Contractual Agreement (Master, Utility Services, Human Resources, Shared Services Agreements)

2 Months

Agreement Start Date (Employee Transition, Commencement of Operations)

Operational Transition (HR, Work Order Process, Emergency Response, Condition Assessment, IT Systems)

Operational and Financial Plans (Budgets, Reporting, QA/QC Plans, Service Plans, Year 1 Capital Plans)

                     4 Months

       Year 1

US Military Bases in Alaska US Military Utility Privatization (2007): •  50-year Utility Agreement* at 3 US Military installations •  Own/finance, operate and maintain, capital renewal and replacement •  Largest Utility Privatization by US Military to date and only Utility Privatization including District Energy

Legal Structure: Acquisition •  • 

Cost of service regulatory model Retained existing employees

Project Cost: •  Acquisition value of legacy Assets: $200 million •  Total Assets at FYE 2013: $650 million •  $1 billion capex projected over 50 years

•  12 Utilities Privatized include: •  20 MW Coal-Fired CHP (STG) with 30 miles of HDS •  5 MW Liquid-Fired DE with 3 miles of HDS •  3 Water Supply, Treatment and Distribution Systems including Dam and Reservoir •  3 Wastewater Collection and Treatment Systems •  3 Electric Distribution Systems •  Natural Gas Distribution System *through Doyon Utilities LLC; a 50/50 partnership of Corix and Doyon Limited

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US Military Bases in Alaska Fort Wainwright (Fairbanks) • Army installation, approx. 40,000 military and civilian personnel • 20 MWe coal-fired Central Heat and Power Plant; 30 miles of utilidor HDS (steam) • WDS and WCS pipes co-located in utilidors; EDS system, including substations needed complete rebuilt/ voltage conversion • Solicitation based on All or None

Joint Base Elmendorf-Richardson (Anchorage) •  Air Force installation approx. 30,000 military and civilian personnel •  Water Supply and Treatment System serves both Richardson and Elmendorf cantonments; Ship Creek Dam and Reservoir, 20 inch Water Pipeline, 7 MGD Conventional Water Treatment Plant •  Richardson systems include WDS, WWCS, EDS and NGDS; EDS system required rebuild/voltage conversion including 20 MVA substation, 40 MVA substation and new 7 MW standby generation •  2012 constructed 7 MW Landfill Gas Power project

Fort Greely (2 hours from Fairbanks, near Delta Junction) •  Army installation, approx. 2,000 military and civilian personnel •  5 MWe liquid-fuel Central Heat and Power Plant with 3 miles of HDS (steam) •  Complete rebuilt/voltage conversion of EDS system including 20 MVA substation and 135 KV switch station allowing for wheeling of power from FWA and installation of standby generators 12

US Military Bases in Alaska JBER Landfill Gas Municipality of Anchorage/Joint-Base Elmendorf Richardson: Regional Landfill Gas Corix, through its affiliate, Doyon Utilities LLC, the Municipality of Anchorage and Joint-Base Elmendorf Richardson, partnered to build the state s first methane power plant at the Anchorage Regional Landfill

Legal Structure: Owner/Operator Project Data: • Capital Cost: $26 million • 64,000 MWh • 5 x 1.46 MWe Jenbacher engines • Expansion potential with ORC s or 6th 2.9 MWe unit • Provides Peak Shaving/Interruptible/Other benefits • Economically viable/Cash positive • Currently working on establishing Carbon Credits

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Centretown Citizens of Ottawa Centretown Citizens of Ottawa Corporation: 25-year utility services agreement at the Beaver Barracks Affordable Housing development in Ottawa, Ontario for the design, construction, operations and maintenance of: •  A sustainable thermal energy utility to provide heating, cooling and domestic hot water to the development •  Hybrid GeoExchange system, including GeoExchange loop field system, central energy plant, and natural gas boilers for peaking

Legal Structure: •  • 

Utility Regulated by Contract Cost of Service regulatory model

Total Initial Project Cost: $2 million Awards: Excellence in Project Development, Building Scale, Canadian Urban Institute, 2012 14

University of Oklahoma OU Utility Partnership: 50-year contract for operations, maintenance and asset management of: •  •  •  •  •  •  •  • 

18 MW Gas-Fired CHP Plant (STG) 15 MW Gas-Fired Co-Gen (CT) / 10,000 Tons Chilling Steam Heat Distribution System and Tunnels 3 Chilled Water Plants and Distribution Potable Water Distribution/ De-ionized Water Wastewater Collection Electricity Distribution Natural Gas Distribution

Legal Structure: 50-year Concession •  •  • 

Cost of service regulatory model Proxy regulation to Oklahoma regulated utilities Retained existing employees

Project Cost: •  • 

Concession value: $118 million $500 million capex projected over 50 years

Corix Institute for Water and Sustainability: Corix $2M donation establishes the Institute and an endowed Chair in Sustainability

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Contact Information

 

Eric van Roon Vice President, COO Utilities & Utility Services Vancouver, BC Canada (604) 697-6712 (o) (604) 341-2242 (c) [email protected]  

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March 2014

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