![No curtailment[?]](https://image.slidesharecdn.com/zone3-100410200244-phpapp02/85/Zone-3-16-320.jpg)
![Fair value of “scrap” if no FERC license as 2nd way out$100 mm30-yr LoanJoint Powers Authority[Grantor Trust]50/50 County/PCWASponsorshipProfits after debt service split 50/50$1.3 Bn County Managed Fund[Special Districts]](https://image.slidesharecdn.com/zone3-100410200244-phpapp02/85/Zone-3-18-320.jpg)
![BackgroundComparable transactions equate value of free perpetual [renewable] water at $500millionThis is equity belonging to Zone 3 residentsIt’s a real crown jewelUnlike the Middle Fork it does not depend onA future licensePrior debt service claimsUnregulated power marketsThis equity can be leveraged with intelligent debt7Yavapai Regional CapitalMarch 2010](https://image.slidesharecdn.com/zone3-100410200244-phpapp02/85/Zone-3-20-320.jpg)
Zone 3
- 1. Using Private Capital to retrofit PCWA Zone 3 water related infrastructureBy Yavapai Regional Capital – a regional infrastructure merchant bankWorking Draft for comments
- 2. Background2005 LAFCO Municipal Service Review identified serious deficiencies in water infrastructure in Zone 3Wells in fractured rock supply most of the well waterSewage and water can interact in Zone 3Zone 3 is a potential “Katrina Fire”Upper canal flumes are fragile needing investmentA fire chute containing I-80, UP Rail and fuel pipelinesZone 3 historically has been the garden of Placer County– potentially some of the most valuable real estate in North America from Auburn to Lake Tahoe2Yavapai Regional CapitalMarch 2010
- 3. PCWA Zones3Placer County is approximately the size of Rhode IslandDistrict 5 corresponds closely to PCWA Zone 3
- 4. PCWA Zone 3 = District 5 4I-80, Union Pacific Railroad and fuel line
- 5. 5PCWAIndividual entities are “ring fenced” as statutory entities subject to “fair consideration rulesZone 1$100mm COP debt
- 8. Subj. to curtailmentMiddle Fork$100mm claim
- 11. Est. value $1Bn
- 12. Based on 10x FCF Zone 325,000 af/pa
- 13. Essentially free
- 14. For ever
- 15. Est value $500mm
- 17. $100mm Advance Sales/Production Payment
- 18. Fair value of “scrap” if no FERC license as 2nd way out$100 mm30-yr LoanJoint Powers Authority[Grantor Trust]50/50 County/PCWASponsorshipProfits after debt service split 50/50$1.3 Bn County Managed Fund[Special Districts]
- 19. BackgroundWith a new District 5 PCWA Director, Zone 3 now benefits from its own Zone Advisory CouncilZone 3 is a separate statutory entity within PCWABenefits from its own dedicated 25,000 acre ft/pa “almost free” water contract – for everEssentially equivalent to free gasoline for ever for residents for use within Zone 3Water is worth more than gasoline6Yavapai Regional CapitalMarch 2010
- 20. BackgroundComparable transactions equate value of free perpetual [renewable] water at $500millionThis is equity belonging to Zone 3 residentsIt’s a real crown jewelUnlike the Middle Fork it does not depend onA future licensePrior debt service claimsUnregulated power marketsThis equity can be leveraged with intelligent debt7Yavapai Regional CapitalMarch 2010
- 21. The Zone 3 contractDated November 17th 1982Not just a sales contract but also conveys propertyWater goes with the landPotentially immune from statewide cut-backs 25,000 acre feet/p.a.1st 13,000 acre feet/p.a. is freeComplex rebate system after thatAt certain volumes – PG&E pays PCWAPrice can be NEGATIVE 8Yavapai Regional CapitalMarch 2010
- 22. The Zone 3 ambitionKey is to define plan and inherent business riskEngineer CIP without financial constraintsDesign the project of your dreamsBalance complementary needs of Drinking water & sewage maximizing technology Fire safety needs for water along I-80 corridor Biomass as fuel load controllerCIP and financial plan will determine financial leverage of $500mm equity9Yavapai Regional CapitalMarch 2010
- 23. The Zone 3 ambition2-3 x believed achievable = $2BillionWith MF completion guarantee 5x possibleUp to $3bn - or moreSee letter to Brian Martin 12/7/05Bigger bank for the buck because of no prevailing wages with MHAAA structure10
- 24. Key issuesHow to optimally ring fence Zone 3Interaction of Zone 1&3 systems means mutuality must be factored in – physical redundancy has value!This is NOT secessionHow to allocate costs of canal rebuilds between Zones 1/3 – particularly upper stretchesZone 3 could rent new infrastructure to Zone 1Credit-worthiness of other PCWA counterparties11Yavapai Regional CapitalMarch 2010
- 25. Key IssuesZone 3 is analogous to a publicly held corporation with substantial minority interestsThese must be protected by arms-length dealingsNo big deal - a balanced negotiationExperienced advisers on both sides is normalFairness opinions will be neededIntegrating PCWA engineering12Yavapai Regional CapitalMarch 2010
- 26. Key IssuesEnvironmental and anti-growth issues to be dealt withExcept PCWA District 5 voters spoke in November 2008 We want water!!!Take positive aggressive stance on environmental issues with good engineeringConvince populace it’s good long term business As is integrated regional planningDon’t create “islands” of poor infrastructure13Yavapai Regional CapitalMarch 2010
- 27. Action PlanPublic PolicyMust not be seen as privatizationSee following slide for new hybrid public-privateRetains electoral control Legal analysis is key Define engineering plan together with PCWAFinancial plan and credit analysisAttract equity investors and debtOrganize “buy-in”14Yavapai Regional CapitalMarch 2010
- 28. Action Plan - Time frame2010 – Continue building grass roots base in Zone 3Persuade PCWAZone 3 appoints adviser before year-end2011 – Legal, Financial and Engineering Due Diligence2011 – Target CIP and Financial Plan by year-end2012 – Implement Financial Plan & Financial Close2012 – Financial Close by year-end2013-2018 - IMPLEMENT IN 5 MODULES[say]15
- 29. Public Policy16Traditional U.S. Water ModelInvestor owned utility[Cost plus]Public AgencyCPUCElectorsORMHAAA & Zone 3 model – True Public Private PartnershipDesign, Build, Finance & OperateVehiclePublic AgencyContractElectors
- 30. Financing Structure17Middle ForkZone 3 Project Finance Loan secured Charge over Zone 3 project assets
- 31. Counter guaranteed by MF assets
- 32. Until completion2013Sponsors include private investorsZone 3 Commercial Bank Project Finance Loan DesignBuildFinanceOperateVehicle$1.3 Bn County Managed Fund[Special Districts]Refinance at completion
- 33. Why YRC?YRC was inspired by MHAAAWorld-class team who understand local coffee shopsTransparencyPublic PolicyEngineeringFinanceComplex Transaction ManagementBuy-in expertise – selling complex “toothpaste”18
- 34. What it takesEngineering must drive the projectFinancial engineering comes secondAn ambitious Zone 3 CIPAmbition – rewards are enormousA new model for regional developmentJobs and property values the potential prizeA “P3” win for California – after SR125!19
- 35. Some key playersHomeland Security & Fire ChiefsFire insurers – invest now rather than pay later!Schwarzenegger/David CraneTom McClintoch/Karin GlennUnion Pacific RailroadJet Fuel pipeline ownersLead equity investorsSquaw Valley Olympic sponsors potentially20