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Monterey Peninsula Water Supply Project Cost/Financial Workshop. December 13, 2012. CPUC Cost Workshop Financial Modeling Utility Rate Base Financing Wednesday, December 12: 1:00 p.m. to 5:00 p.m. . Key Assumptions. Plant Size scenarios 9.0 MGD

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Monterey peninsula water supply project cost financial workshop

Monterey Peninsula Water Supply ProjectCost/Financial Workshop

December 13, 2012


CPUC Cost WorkshopFinancial ModelingUtility Rate Base FinancingWednesday, December 12: 1:00 p.m. to 5:00 p.m.


Key assumptions
Key Assumptions

  • Plant Size scenarios

    • 9.0 MGD

    • 5.4 MGD, supplemented with 3,500 AFY of GWR(1)

  • Financing Scenarios:

    • Primary Case -- SRF Debt & CAW Equity

    • Alternative Case – actual cost of debt & CAW Equity

  • Customer Surcharge totaling $99M(2)

  • Utilize $20M of CAW short term debt during construction

  • Cost of Capital:

    • Cost of SRF Debt 2.50%

    • Cost of Equity: 9.99%

    • 53% equity / 47% debt

    • Cost of CAW Debt: 5.00%market(3) (vs. 6.63% authorized)

  • Property taxes avoided on plant funded with SRF and Surcharge #2

  • GWR is assumed to cost between $2,500/AF to $3,000/AF based on information provided by the MRWPCA

  • $99 M equals about 33% of rate base. Currently, contributions equal about 10% of rate base.

  • Current market rate for AWK 30-year debt is approximately 4.5%, for both taxable and tax-exempt issuances. S&P and Moody’s recently raised their outlook for AW debt, which could result in lower future debt costs


Caw strategy to limit revenue requirement

  • We believe the entire project, including the pipeline, qualifies for SRF loans

  • We have proposed a rate base offset of $100M through a surcharge on customers’ bills

  • We will use $15M - $20M of our short-term credit capacity to extend the period between draws and limit interest expense during construction

  • The surcharge and SRF amounts are exempt from real property taxes, at an annual savings of $2.5M

CAW Strategy to Limit Revenue Requirement


Capital financing summary for desal plant
Capital & Financing Summary For Desal Plant qualifies for SRF loans

Capital Cost Financing

¹ As compared to approved WPA equivalent of $277.5M ($297.5 original RDP cost, minus $6M maintenance reserve and $14M pre-effective costs)

² Includes Desal Plant only. The CAW in-service area facilities Revenue Requirement is estimated at an additional $13.2M with SRF

³ Based on assumed cost of $2,500/AFY


Sources uses of cash
Sources & Uses of Cash qualifies for SRF loans

5.4 MGD Plant – SRF Financing

Based on the latest procedural schedule the dates would shift out six months later but the dollar impact would remain the same.


Sources uses of cash1
Sources & Uses of Cash qualifies for SRF loans

9.0 MGD Plant – SRF Financing

Based on the latest procedural schedule the dates would shift out six months later but the dollar impact would remain the same.


Annual customer surcharge
Annual Customer Surcharge qualifies for SRF loans

Based on the latest procedural schedule the dates would shift out six months later but the dollar impact would remain the same.


Projected impact to monterey water bills
Projected Impact to Monterey Water Bills qualifies for SRF loans

  • Assumptions:

  • Usage = 1ccf = 100 cubic feet = 748 gallons

  • Data to determine Percentile Bill usage is from May 2011 consumption data

  • Proposed 2017 bill includes multiple estimates

  • Current bills calculated based on approved tariff rates and surcharges as of December 7, 2012


CPUC Cost Workshop qualifies for SRF loansFinancial ModelingDiscuss Compliance Filing and Present Financial ModelWednesday, December 12: 1:00 p.m. to 5:00 p.m.Thursday, December 13: 9:30 a.m. to 12:30 p.m.


Development submission of financial model
Development & Submission of Financial Model qualifies for SRF loans

  • CAW began developing the current model in February 2012

  • Main objective was to create a framework for evaluating alternatives that could be easily updated as cost estimates & other assumptions change and to allow for different capital and financing scenarios

  • This model was used for the application filed by CAW in April 2012

  • During the Fall of 2012, CAW worked jointly with representatives from DRA and MPWMD on further development of the model

  • CAW made the following changes to the financial model based on discussions with DRA and MPWMD:

    • Consolidated key assumptions into one user page

    • Created high-level summary output for users

    • Identified O&M expenses as either fixed or variable and added an input to allow plant production at less than 100% capacity

    • Added functionality to allow for a contribution to construction costs from an outside public agency

    • Provided a third financing scenario to allow for a combination of SRF debt and CAW debt

  • On 11/15/12, CAW submitted the financial model to the CPUC and all parties to be used to compute various revenue requirement scenarios


  • Financial model inputs plant
    Financial Model Inputs - Plant qualifies for SRF loans


    Financial model inputs financing
    Financial Model Inputs - Financing qualifies for SRF loans



    Project summary output
    Project Summary Output qualifies for SRF loans


    CPUC Cost Workshop qualifies for SRF loansFinancial ModelingRun Financial Model for Possible Project ScenariosBreak Out SessionWednesday, December 12: 1:00 p.m. to 5:00 p.m.Thursday, December 13: 9:30 a.m. to 12:30 p.m.


    Appendix
    Appendix qualifies for SRF loans


    California american in service area facilities
    California qualifies for SRF loansAmerican In-service Area Facilities

    ¹ Does not include AFUDC

    ² Does not include any customer surcharge


    Capital financing summary for desal plant no surcharge
    Capital & Financing Summary For Desal Plant – No Surcharge qualifies for SRF loans

    ¹ As compared to approved WPA equivalent of $277.5M ($297.5 original RDP cost, minus $6M maintenance reserve and $14M pre-effective costs)

    ² Includes Desal Plant only. The CAW In-service Area Facilities Revenue Requirement is estimated at an additional $13.2M with SRF

    ³ Based on assumed cost of $2,500/AFY


    Projected impact to monterey water bills no surcharge 2
    Projected Impact to Monterey Water Bills (no surcharge #2) qualifies for SRF loans

    • Assumptions:

    • Usage = 1ccf = 100 cubic feet = 748 gallons

    • Data to determine Percentile usage is from May 2011

    • Proposed 2017 bill includes multiple estimates

    • Current bills calculated based on approved tariff rates and surcharges as of December 7, 2012


    Capital financing considerations 1
    Capital Financing Considerations #1 qualifies for SRF loans


    Capital financing considerations 2
    Capital Financing Considerations #2 qualifies for SRF loans


    Capital financing considerations 3
    Capital Financing Considerations #3 qualifies for SRF loans


    Capital financing considerations 4
    Capital Financing Considerations #4 qualifies for SRF loans


    Capital financing considerations 5
    Capital Financing Considerations #5 qualifies for SRF loans


    Capital financing considerations 6
    Capital Financing Considerations #6 qualifies for SRF loans


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