THE FOSTER GROUP

TFG

GLWA Capital Improvement Program

Summary and Financing Observations

January 26, 2016

THE FOSTER GROUP

TFG

FY 2017 CIP Summary Definitions

2

• Two Separate CIP Plans

GLWA (Regional System)

DWSD-R (Local System)

• COMBINED CIP Financing

Requirements are still referenced

Programs for the Regional and Local

systems still need to be coordinated

Where not specified in this presentation,

figures refer to the COMBINED CIP

THE FOSTER GROUP

TFG

FY 2017 COMBINED Water CIP Recent CIP Financing Req’ts

3

• FY 2016 Approved CIP Approved by BOWC in March 2015

• POS Estimate Used for pursuit of bond consent and refunding

issue in December 2015

Reflects initial estimates from Master Plan Update (Water) and independent estimates in later years (Sewer)

• FY 2017 Preliminary CIP Presented today for review

Plan is for ultimate approval March 2016 as part of overall FY 2017 Financial Plan

THE FOSTER GROUP

TFG

FY 2017 COMBINED CIP Recent CIP Financing Req’ts

4

• We’ve been asked to review and provide

commentary on the PRELIMINARY

CIP’s, with specific focus on:

Alignment with / impact on existing financial

plans;

Comparisons to prior programs;

Alignment with cost of service categories;

Separation of distinct GLWA and DWSD-R

projects

THE FOSTER GROUP

TFG

FY 2017 COMBINED CIP Recent CIP Financing Req’ts

5

• In order to evaluate these overall CIP

plans, we have aligned the first 5 years

of these programs through FY 2020,

included an estimate for FY 2015, and

prepared resulting “6-year” programs for

comparative purposes

THE FOSTER GROUP

TFG

Water CIP Summary

THE FOSTER GROUP

TFG

FY 2017 GLWA Water CIP Total CIP Financing Requirements

7

• Six Year Financing Requirements for FY 2015* through FY 2020

FY 2016 Approved CIP = $587 million

POS Estimate = $674 million

FY 2017 Preliminary CIP = $697 million

• Increase is largely in “out” years, as short term financing requirements are actually lower

Increased Regional Transmission System projects

Additional Lake Huron Plant projects

THE FOSTER GROUP

TFG

FY 2017 COMBINED Water CIP 6-Year Financing Req’ts - $ millions

8

0

100

200

300

400

500

600

700

800

900

1,000

FY 2016 CIP Current Estimate FY 2017 Prelim CIP

GLWA Projects DWSD-R Projects

THE FOSTER GROUP

TFG

FY 2017 COMBINED Water CIP Comparison to Prior Plans - $ millions

9

0

50

100

150

200

250

2015 2016 2017 2018 2019 2020

FY 2016 Approved CIP

Estimate for POS

FY 2017 CIP

THE FOSTER GROUP

TFG

FY 2017 GLWA Water CIP Comparison to Prior Plans - $ millions

10

0

20

40

60

80

100

120

140

160

180

2015 2016 2017 2018 2019 2020

FY 2016 Approved CIP

Estimate for POS

FY 2017 CIP

THE FOSTER GROUP

TFG

FY 2017 DWSD-R Water CIP Comparison to Prior Plans - $ millions

11

0

5

10

15

20

25

30

35

40

45

50

2015 2016 2017 2018 2019 2020

FY 2016 Approved CIP

Estimate for POS

FY 2017 CIP

THE FOSTER GROUP

TFG

FY 2017 COMBINED Water CIP Major Category Breakdown

12

Springwells

Water Works Park

Lake Huron

NE & SW

Transmission Mains

Pumping Stations &

ReservoirsGeneral & Other

DWSD-R Local

THE FOSTER GROUP

TFG

FY 2017 GLWA Water CIP Potential Financial Plan Impact

13

• GLWA CIP will continue to be financed by a combination of bond proceeds and revenues

• The overall plan continues to focus on increasing the amount of CIP funded by revenues (and less through debt)

• The Preliminary 2017 CIP identifies a “preferred funding source”

Not intended to be definitive as future financing plans need to consider market and other conditions

THE FOSTER GROUP

TFG

FY 2017 GLWA Water CIP Preferred Funding Source Summary - $ millions

14

0

20

40

60

80

100

120

140

160

180

2016 2017 2018 2019 2020 2021

Debt Eligible

Preferred Revenue Funded

THE FOSTER GROUP

TFG

FY 2017 COMBINED Water CIP Potential Financial Plan Impact

15

• Current financing plan set forth in the consent pursuit / refunding bonds document

Projects a ~ $230 million bond sale Spring 2016

• Preliminary FY 2017 CIP does not significantly alter this plan

Next bond sale may be deferred a few months

Will not materially impact 2017 debt service projections

Will modify overall plan for subsequent bond sales

• Updated Financial Plan will have to reflect and accommodate separation of GLWA and DWSD-R financing requirements and sources

THE FOSTER GROUP

TFG

FY 2017 COMBINED Water CIP Potential Financial Plan Impact - $ millions

16

0

50

100

150

200

250

300

350

400

2016 2017 2018 2019 2020

FY 17 CIP

Revenue Transfers

Bond Proceeds

SRF Loans

Beginning Balance

Est CIP - POS

THE FOSTER GROUP

TFG

Sewer CIP Summary

THE FOSTER GROUP

TFG

FY 2017 GLWA Sewer CIP Total CIP Financing Requirements

18

• Six Year Financing Requirements for FY 2015* through FY 2020

FY 2016 Approved CIP = $587 million

Current Estimate = $674 million

FY 2017 Preliminary CIP = $697 million

• Increase is largely in “out” years, as short term financing requirements are actually lower

• Increased Regional Sewer System projects, including improvements to the NIEA

THE FOSTER GROUP

TFG

FY 2017 COMBINED Sewer CIP 6-Year Financing Req’ts - $ millions

19

0

100

200

300

400

500

600

700

800

900

1,000

FY 2016 CIP Current Estimate FY 2017 Prelim CIP

GLWA Projects DWSD-R Projects

THE FOSTER GROUP

TFG

FY 2017 COMBINED Sewer CIP Comparison to Prior Plans - $ millions

20

0

20

40

60

80

100

120

140

160

180

200

2015 2016 2017 2018 2019 2020

FY 2016 Approved CIP

Estimate for POS

FY 2017 CIP

THE FOSTER GROUP

TFG

FY 2017 GLWA Sewer CIP Comparison to Prior Plans - $ millions

21

0

20

40

60

80

100

120

140

160

180

200

2015 2016 2017 2018 2019 2020

FY 2016 Approved CIP

Estimate for POS

FY 2017 CIP

THE FOSTER GROUP

TFG

FY 2017 DWSD-R Sewer CIP Comparison to Prior Plans - $ millions

22

0

5

10

15

20

25

30

35

2015 2016 2017 2018 2019 2020

FY 2016 Approved CIP

Estimate for POS

FY 2017 CIP

THE FOSTER GROUP

TFG

FY 2017 COMBINED Sewer CIP Major Category Breakdown

23

WWTP

Regional Sewer System

Combined Sewer System

Sewer Lift Stations

General & Other

DWSD-R Local

THE FOSTER GROUP

TFG

FY 2017 GLWA Sewer CIP Potential Financial Plan Impact

24

• GLWA CIP will continue to be financed by a combination of bond proceeds and revenues

• A significant portion of the projected short term projects have SRF commitments

• The overall plan continues to focus on increasing the amount of CIP funded by revenues (and less through debt)

• The Preliminary 2017 CIP identifies a “preferred funding source”

Not intended to be definitive as future financing plans need to consider market and other conditions

THE FOSTER GROUP

TFG

FY 2017 GLWA Sewer CIP Preferred Funding Source Summary - $ millions

25

0

20

40

60

80

100

120

140

160

2016 2017 2018 2019 2020 2021

Debt Eligible

SRF Loans

Preferred Revenue Funded

THE FOSTER GROUP

TFG

FY 2017 COMBINED Sewer CIP Potential Financial Plan Impact

26

• Current financing plan set forth in the consent pursuit document

SRF Funding in short term defers any new “regular” bond issuances until at least FY 2019

• Preliminary FY 2017 CIP does not significantly alter this plan

Still no bond sale required in the short term

No change to 2017 debt service projections

Will modify overall plan for subsequent bond sales

• Updated Financial Plan will have to reflect and accommodate separation of GLWA and DWSD-R financing requirements and sources

THE FOSTER GROUP

TFG

FY 2017 COMBINED Sewer CIP Potential Financial Plan Impact - $ millions

27

0

50

100

150

200

250

300

2016 2017 2018 2019 2020

Prelim FY 2017 CIP

Revenue Transfers

Bond Proceeds

SRF Loans

Beginning Balance

Est CIP - POS