Guam Society of Professional Engineers Presentation

John M. Benavente, P.E.

Martin L. Roush, P.E.

January 25, 2011

Guam Waterworks Authority

December 6, 2010

Presentation Agenda

1. Introduction

2. Military Buildup

3. GWA Overview

4. Capital Improvement Program

5. Ongoing and upcoming initiatives

6. Conclusion

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Mission Statement:

GWA will Provide the community of Guam with outstanding customer service in delivering excellent water and wastewater services in a safe , reliable,

responsible, and cost effective manner.

GWA recognizes that employees are its greatest asset!!

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1. Introduction

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Consolidated Commission on Utilities (CCU)

The CCU was created by Public Law in 2002

Five members elected at large with staggered four year terms to oversee the Guam Waterworks Authority and the Guam Power Authority

Functions like a Board of Directors with fiduciary, strategic and oversight responsibilities

– Includes setting of rates subject to the regulatory review and approval of the Public Utilities Commission

– The CCU hires GWA’s General Manager, Chief Financial Officer and Attorney and retains contracting authority for GWA

The CCU has acted independently to improve GWA performance, obtain federal compliance, and plan for the future

The CCU is an independent governing board

From Left to Right:Eloy P. Hara, Vice-Chair for GWA, CCU Chairman for the Committee on Customer RelationsJoseph T. Duenas, TreasurerGloria B. Nelson, Secretary, Chair for the CCU Committee for Employee Development and Relations Benigno M. Palomo, Vice Chair for GPA, CCU Chairman for the Committee on Social WelfareSimon A. Sanchez, II, Chairman

Current CCU Board Members

Simon A. Sanchez, II - Elected and Chairman Since 2003– Former Vice Chairman of the PUC, Senator and Businessman

Benigno M. Palomo - Elected Since 2003– Former Senator and 30 year Government of Guam Employee

Eloy P. Hara - Elected Since 2007– Former Assistant GM of GPA and PUC Member

Gloria B. Nelson - Elected Since 2005– Teacher and Former Chair of Guam Board of Education

Joseph T. Duenas - Elected Since 2008– Former PUC Chairman and Rev & Tax/DOA Director, Local Businessman

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GWA Overview

GWA has faced some challenges over the past few years and has taken significant steps to address those challenges

Multi-year rate increases have been put in place to replenish necessary reserves, improve debt service coverage, fund capital needs and provide future liquidity

GWA is making prudent capital investments to meet EPA requirements while improving the system in a cost-effective manner

GWA is well-positioned to accommodate and benefit from the anticipated military buildup while committing its core resources to the system's generic growth and capital needs

GWA possesses the credit fundamentals of an essential island utility with experienced management and strong regulatory support firmly in place

GWA’s continues to improve its engineering capacity and the utility is well-positioned for remarkable growth

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2. Military Buildup and Guam Waterworks Authority

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Military Buildup and GWA: Collaboration

GWA and the Department of the Navy signed an MOU in July 2010 detailing broad agreement to upgrade water and wastewater systems to support the buildup while protecting the environment

GWA and USEPA worked together to identify $1.14 Billion in projects to insure the buildup and Guam’s resulting growth can be supported for the long term

The Record of Decision contained the Department of Defense’s commitment to pursue this funding from Japan and Federal sources

The Department of Defense is negotiating with Japan to determine how it will invest its $740 million for water, wastewater and power improvements

GWA continues regular meetings with the Department of Defense and USEPA to plan the final scope and timing for upgrades

GWA and GPA will be engaging Performance Management Contractors to assist in Buildup and Other infrastructure upgrade needs

GWA has been actively involved in all military buildup discussions

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Military Buildup and GWA: Details

The Department of Defense to provide loans from the Government of Japan at no cost to GWA rate payers

Allocation of $580 Million:

– $340 million to upgrade Guam’s two largest wastewater plants, increasing their capacity and changing processing to secondary treatment

This upgrade will provide sufficient treatment capacity to absorb Guam’s growth beyond the buildup

– $160 million for a new Northern water system to be connected to existing GWA and Navy water systems, providing greater reliability and enough capacity for all northern customers beyond the buildup

– $80 million for upgrades of Guam’s central wastewater collection system

Repayment costs related to Japan’s $580 million will be paid by the Department of Defense

The recent GWA financing of $118M will be used to upgrade infrastructure that is not related to the buildup

The Department of Defense to provide $580M to upgrade GWA infrastructure for civilian and military growth

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3. GWA Overview

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Background

GWA is the sole supplier of civilian island water and wastewater needs

www.guamwaterworks.org

In 2002, GWA became a Guam public corporation under the control of the Consolidated Commission on Utilities (CCU)

GWA facts:– 311 full time employees– 39,000 customers– $495 million in total assets– $74M O&M Budget

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GWA’s Water System

Three water systems

– Extensive facilities

– 108 operable wells, 2 springs

– 1 treatment plant

– 29 reservoirs

– 26 booster stations

– 800 miles of pipe

Population served

– 156,000 (civilian)

– Department of Defense maintains separate system

– GWA buys some of its water from the U.S. Navy for its needs

GWA provides all water service to the civilian population on Guam

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Existing GWA and Navy Water Systems

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GWA’s Wastewater System

7 service basins

Extensive facilities

– 145 miles of pipe

– 72 pumping stations

– 7 treatment plants

– 3 ocean outfalls

Population served

– 100,000 (civilian)

– Treats all Air Force and part of Navy wastewater

GWA will add the new Marine base to join Anderson Air Force base as two large military wastewater customers

GWA collects and treats wastewater throughout the island

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Existing GWA and Navy Wastewater Systems

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4. Capital Improvement Program

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FY 2011 Budget Sources and Uses of Funds

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FY 2011 Income Sources: Percentage

Base Rate Water/Wastewater 78%

Surcharge 8%

System Development Charge 4%

Grants 11%

Total: 100%

FY2011 Uses of Funds: Percentage

Labor 22.9%

Power 17.6%

Debt Service ( 2005 Bond, BOG ST) 16.2%

CIP ( Grants, Cash) 14.8%

Other 13.1%

Surcharge (GPA, Navy, Retiree) 8.2%

Purchased Water 7.2%

Total: 100.0%

GWA’s Capital Improvement Program

Only 65% of the CIP is being funded with revenue bonds

Future bond issue size may decrease substantially with additional sources from the military buildup anticipated

GWA’s CIP represents funding of necessary improvements unrelated to the buildup

GWA's Capital Improvement Program: Sources and Uses        

($000s) Fiscal Year Ending September 30 2010 2011 2012 2013 2014 Total

Capital Improvement Program (1)            

Water Production, Treatment and Distribution $9,212 $24,112 $34,032 $16,951 $25,146 $109,453

Wastewater Collection and Treatment 4,000 10,635 4,299 17,856 15,518 52,308

Electrical, Including Monitoring and Control 66 3,784 2,350 4,614 1,750 12,564

Miscellaneous 101 8,213 6,400 8,400 3,835 26,949

Total $13,379 $46,744 $47,081 $47,821 $46,249 $201,274             

Sources of Funds            

Current Revenues (2) $0 $500 $2,000 $2,500 $2,500 $7,500

Proceeds form the 2005 Bonds 4,730 4,797 0 0 0 9,527

Proceeds from the 2010 Bonds 0 27,798 36,432 19,872 0 84,102

Proceeds from Future Bonds (3) 0 0 0 16,800 20,500 37,300

Proceeds from Loans (4) 0 5,000 0 0 0 5,000

System Development Charges (5) 0 0 0 0 14,600 14,600

Grants 8,649 8,649 8,649 8,649 8,649 43,245

Total $13,379 $46,744 $47,081 $47,821 $46,249 $201,274

1. Escalated to future dollars using an assumed annual rate of escalation of 4%.

2. Revenues available for capital improvements after paying operating expenses and debt service.

3. Assumes bonds are issued in FY2013 to fund approximately $37.3 million of the remaining CIP through FY2014.

4. Amount in FY2011 represents a portion of the proceeds from the $30 million Bank of Guam loan obtained in June 2010.

5. Represents expenditure of amounts collected annually starting in 2010.

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Potable Water CIP Summary ( x 1,000)CIP # Name 2011 2012 2013 2014 2015

PW 05-01 Ground Water Disinfection $727

PW 05-02 Water Reservoir Condition Assessment $439

PW 05-03 Booster Pump Rehabilitation, Phase II $303 $125

PW 05-04 Ugum Water Treatment Plant Refurbishment $200

PW 05-05 “A” Series Well Transmission Line $745 $600 $59

PW 05-06 Water Booster Pump Station $500 $3,766

PW 05-07 Meter Replacement Program $3,500 $6,000

PW 05-08 Barrigada Tank Repair/Replacement $2,000

PW 05-09 Leak Detection / Line Replacement $3,077 $364

PW 05-10 Potable Water System Planning $200 $500 $800

PW 05-11 Implement Ground Water Rule

PW 05-12 Brigade II (Ugum Lift) BPS Upgrade $1,200

PW 05-13 Deep Well Rehabilitation $548

PW 05-14 New Deep Wells at Down Hard Well Sites $3,773

PW 05-15 Rehabilitation of Asan Springs Ground Reservoir $900

PW 05-16 Master Meters $100 $1,500

PW 09-01 Ugum Water Treatment Plant Intake Modifications $1,470 $2,200

PW 09-02 Water Wells $2,356 $1,000 $9,500 $5,500

PW 09-03 Water Distribution System Pipe Replacement $1,848 $5,384 $3,500 $5,698 $5,520

PW 09-04 Pressure Zone Realignment/Development 2005 Impr. $1,150 $2,400 $1,400

PW 09-05 Northern System Water Distribution System 2005 Impr. $2,425 $300 $875 $500

PW 09-06 Central Water Distribution System 2005 Improvements $600 $300 $600

PW 09-07 Southern Water Distribution System 2005 Improvements $500 $650 $1,300

PW 09-08 Mechanical/Electrical Equipment Replacement $500 $430 $860

PW 09-09 Water Reservoir Internal/External Corrosion Asmt. $500

PW 09-10 Water Reservoir Internal/External Corrosion Rehb. $800 $800 $800 $400 $400

PW 09-11 Water System Reservoirs 2005 Improvements $3,697 $8,000 $5,000 $3,000 $12,503

PW 11-01 Distribution System Upgrades $1,500 $1,682 $618

PW 11-02 Ugum Water Treatment Plant Reservoir Replacement $1,322 $2,350

Total $26,112 $34,032 $16,951 $25,146 $31,823

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Wastewater CIP Summary ( x $1,000)

CIP # Name 2011 2012 2013 2014 2015

WW 05-01 Old Agat Wastewater Collection (Phase II) $1,200

WW 05-02 Collection Line Upgrade/ Collection System Upgrades*

WW 05-03 NDWTP Diffuser Installation*

WW 05-04 Wastewater System Planning $1,500

WW 05-05 Wastewater Vehicles $235

WW 05-06 Wastewater Pump Station Upgrades*

WW 05-07 NDWWTP - Chlorine Tanks $250

WW 05-08 Umatac-Merizo STP Improvements*

WW 09-01 LS Priority 1 Upgrades*

WW 09-02 Moratorium $5,000

WW 09-03 Old Agat Collection Continuation (Phase III) $1,200

WW 09-04 Manhole Frame Seal Repair*

WW 09-05 Agat Manhole Rehabilitation

WW 09-06 Wastewater Collection System Repl./Rehabilitation*

WW 09-07 Sewer Upgrades $100

WW 09-08 Facilities Plan/Design for STP Repl. $2,575

WW 09-09 Facilities Plan/Design for the N. District STP Bio-solids*

WW 09-10 Facilities Plan/Design for Agat-Santa Rita STP Repl. $600 $1,624

WW 09-11 WWTP Priority 1 Upgrades $6,751

WW 11-01 Priority 1 Sewer Upgrades – Agat District $2,500

WW 11-02 Priority 1 Sewer Upgrades – Baza Garden District $650

WW 11-03 STP Replacement $3,567 $6,267 $12,078

WW 11-04 Facilities Plan/Design for the Umatac-Merizo STP Impr. $140

WW 11-05 Facilities Plan for Hagatna STP Impr. & Effluent WWPS*

WW 11-06 Hagatna STP Improvements and Effluent WWPS*

WW 11-07 Northern District STP Expansion – Biosolids Electrical*

WW 11-08 Agat/Santa Rita STP Replacement $14,289

Total $10,635 $4,299 $17,856 $15,518 $12,218

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Electrical and General Plant CIP Summary ( x $1,000)

CIP # Name 2011 2012 2013 2014 2015

EE 05-01 Well Electrical Protection $134

EE 05-02 SCADA Pilot Project $300

EE 09-01 Wastewater Pumping Station Electrical Upgrade $614

EE 09-02 Electrical Upgrade - Water Wells $500 $500 $2,000 $500

EE 09-03 Electrical Upgrade - Water Booster Pump Stations $650

EE 09-04 Electrical Upgrade -Water Booster Pump Stations $350

EE 09-05 Electrical Upgrade - Other Water Booster Pump Stations $250

EE 09-06 SCADA Improvements – Phase 1 $250

EE 09-07 SCADA Improvements – Phase 2 $1,100

EE 09-08 SCADA Improvements – Phase 3 $1,500 $1,000

EE 09-09 SCADA Improvements – Phase 4 $850 $750 $1,250

Total $3,784 $2,350 $4,614 $1,750

CIP # Name 2011 2012 2013 2014 2015

MC 05-01 Laboratory Modernization $400 $400 $400

MC 05-02 Land Survey $743 $500 $500 $493

MC 09-01 General Plant Improvements / Water Distribution System $7,070 $5,500 $7,500 $3,342 $997

Total $8,213 $6,400 $8,400 $3,835 $997

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5. Ongoing and upcoming initiatives

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Current Major Initiatives

Compliance with the current Stipulated Order and negotiation of a consent decree or a second Stipulated Order

Implement the recommendations of the management audit

Implement the capital improvement programs to improve operation reliability, production capability and reduce overall operational cost

Continue the training and certification programs to insure having adequate personnel to effectively and efficiently run the systems

Continue our CTP compensation program to attract and retain qualified and experienced employees

Continue to work with DoD to upgrade infrastructure utilizing federal family funding

Continue to work towards compliance with the Safe Drinking Water Act and the Clean Water Act

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6. Conclusion

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Conclusion

Utility is poised for significant growth due to military buildup

Elected CCU governance structure is working

Positive actions taken by the PUC has led to a return to financial health and credit rating agencies confidence

Experienced management and engineering team

Stable and increasing revenue base

2010 $118M bonds to trigger major infrastructure upgrades

Working collaboratively with USEPA on new Consent Decree to reflect the impact of military buildup

Military buildup to fund $580 Million in improvements at no cost to GWA ratepayers

Substantial engineering help needed in the Horizon

GWA’s has improved dramatically and is poised for even stronger performance in the coming years

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