Contemporary Private Funding Structures for Water Resource Projects

1. Carol Howard Contemporary Private Funding Structures for Water Resource Projects AIF Florida Water Forum Sept. 21, 2017 Orlando, FL

2. Poseidon Water: Leading U.S. water infrastructure development specialist employing a performance-based, Public-Private Partnership approach Founded in 1995; headquartered in Boston, MA with presence in CA, FL, and TX Developer of Carlsbad Desalination Plant and other water infrastructure projects Majority owned by Brookfield Infrastructure Partners Brookfield Asset Management: Global owner and operator of alternative assets 115-year track record in real assets with a global presence (100 offices or locations; ~55,000 employees) $250B of assets under management (AUM) – $135B in U.S. (~11,000 employees) Brookfield in Florida (as of Dec 2016): Assets: $4.6B AUM Employees: ~180 Projects/Assets: ~82 Poseidon Water

3. Brookfield | Florida Presence

4. Public-Private Partnership (“P3”) is a method of delivering public infrastructure in which significant risks are transferred to the private sector developer, builder, operator, and finance partner, while the public agency retains certain risks and has the ability to retain project/asset ownership What is a P3 Concession? • Alignment of interests between Public and Private sector • Guaranteed on-time and on-budget performance • Accelerated delivery of critical project infrastructure • Public asset investment is protected because facility condition and performance is guaranteed for a long-term period (30 to 50 years) • Provides greater “value-for-money,” reflecting the added value of risk transfer (operation, maintenance, compliance, financing, delivery, etc.) using a P3 approach as compared to a traditional project delivery 10/29/2019

5. P3 Concession Overview Development: Project Company funds upfront development expenses to fully define the project, secure permits, and establish final pricing Construction: Project Company provides project funding (debt & equity), potentially including tax-exempt public financing through Private Activity Bonds, WIFIA and State Revolving Funds Risk Transfer: Public Partner only pays if Project Company meets performance obligations • Creates real value for taxpayers by transferring the risk of cost overruns, schedule delays, performance shortfalls, and deferred maintenance Debt Burden: Preserves public partner debt capacity with potential for credit improvement Expedited Schedule: Accelerated project delivery is not constrained by lengthy procurement processes Project/Asset and operations reverts to public agency at end of P3 contract term Public-Private Partnership is Not Privatization

6. Key Typical P3 Concession Structure Agreements Payments Public Agency/Off-taker Debt Provider: Bond Investors or Banks Project Revenues Debt Proceeds/ Repayments Management Services Agreement Equity Contribution Agreement Water Purchase Agreement Project Company Loan Agreement O&M Service Agreement EPC Agreement Engineering, Procurement,and Construction Contractor Operations & Maintenance Provider

7. Addressing Common P3 Concession Concerns

8. Potential P3 Concession Risk Allocation

9. When Does a P3 Concession Make Sense?

10. Concession Case Study

11. Cranston Wastewater Concession | Overview First Large-Scale WWTP P3 & Upgrade in the U.S. • Project Description: Poseidon entered into a 25-year concession to Lease, Upgrade, Operate, Maintain, and Transfer the City of Cranston’s wastewater treatment system • System Overview: 23 MGD WWTP, 250-mile collection system, and pump stations Project Value: $77M in non-recourse debt & equity, including $48M upfront lease payment to the City of Cranston • Equity: $8.6M • Taxable Institutional Debt: $39.5M from New York Life and John Hancock (8.05%) • Tax-exempt Revenue Debt: $28.5M (5.8%) from RI Clean Water Finance Agency1 Agreed capital improvement program ensured system modernization/expansion to meet customer needs, regulatory requirements (incl. Consent Decree), and deadlines Status: 25-year concession term from 1997 – 2022 1 Now the Rhode Island Infrastructure Bank (“RIIB”)

12. City received $48M upfront payment to repay outstanding sewer debt and cover the City’s budget deficit Expected to yield $76M in accumulated savings and $24M in present-value benefits (by reducing rate of user fee increases and avoiding tax increases) Lease structure maintained public ownership and City continued to set rates, handle billing and collection, and enforce their pretreatment program City avoided significant bond issuance; and net payment was expected to be viewed positively by credit rating agencies; credit rating has significantly improved since contract inception from Baa2/BBB+ to A1/AA- (Moody’s/S&P) System and WWTP employees retained Performance-based contracting approach transfers risk to private entity, drives innovation and increased efficiency, and delivers greater value, price certainty, and long-term savings over the contract duration Cranston | Project Benefits

13. HB 85:enrolled in 2013 Qualifying Project: includes water/wastewater facilities Responsible Public Entity: counties, municipalities, school boards, regional entities, state subdivisions Unsolicited Proposals:permitted Proposal Requirements: Conceptual design/plan General financing plan Proposed user fees or lease/service payments over the term Proposal Ranking: Professional Qualifications, General Business Terms, Innovative Design Techniques, Cost-reduction Terms, and Finance Terms Florida P3 Legislation

14. Questions?_____________________________________________________________________________________________________________Carol Howard – choward@poseidonwater.com