Report to: General Committee Report
Date: June 7, 2010
SUBJECT: Markham
Enterprises Corporation Equity Injection
PREPARED BY: Mark Visser, Manager of Financial Strategy
& Investments
RECOMMENDATION:
1. That the report entitled “Markham Enterprises Corporation
Equity Injection” be received;
2. And that the Town of Markham subscribe for an additional
5,000 Common Shares of Markham Enterprises Corporation over the next two years,
at a price of approximately $20.5M, the actual price to be determined jointly
by the Treasurers of the Town of Markham and Markham Enterprises Corporation;
the funds for this purchase to be funded from the Lifecycle Reserve.
3. And that
staff be directed to do all things necessary to give effect to this report.
EXECUTIVE SUMMARY:
Not applicable
The purpose of this report is to obtain Council approval
for the Town to subscribe for an additional 5,000 Common Shares of Markham
Enterprises Corporation (MEC), at a price of approximately $20.5M, the actual
price to be determined jointly by the Treasurers of the Town of Markham and
Markham Enterprises Corporation. The
purpose of the equity injection is so MEC can fund Markham’s equity portion of
PowerStream’s Solar Photovoltaic (PV) project.
In 2009, PowerStream management mobilized a team to assess the
opportunities offered by the Green Energy
and Economy Act, 2009 in the areas of renewable generation and the
Feed-in-Tariffs (FIT) program, and concluded that PowerStream should invest in a
portfolio of solar generation projects.
In September, 2009, PowerStream indicated that it was
formulating a specific “ask” to
its shareholders (Markham, Vaughan, Barrie) for approval
of a funding mechanism that would allow PowerStream to invest in solar
generation.
The investment by PowerStream is proposed to be funded through external
debt and shareholder equity. The
shareholders contributions will be made in proportion to their existing
interest in PowerStream. MEC’s share of
that equity injection is approximately $20.5 million (34.19%). MEC’s further investment in PowerStream would
be funded by the Town’s purchase of additional MEC shares. MEC would use the proceeds of the Town’s share
purchase to, in its turn, purchase an equal dollar amount of new “Class A” non-voting
shares to be issued by PowerStream.
The equity injections will be linked to PowerStream’s signing of Ontario
Power Authority (OPA) contracts over the next 2 years, therefore the $20.5
million of equity would be injected in tranches over the next two years. The shareholder’s commitment to the equity
injection will be reviewed after two years if all the funds have not been
spent.
Based on the guaranteed FIT rate on the solar power
generation, it is estimated the Town will recoup its investment by 2019, with
additional FIT revenues being received until approximately 2030.
Therefore, it
is recommended that the Town (through MEC) support PowerStream’s Solar PV by providing
approximately $20.5 million in additional equity investment through MEC, by the
Town’s purchase of an additional 5,000 Common Shares of Markham Enterprises
Corporation over the next two years, at a price of approximately $20.5M, the
actual price to be determined jointly by the Treasurers of the Town of Markham
and Markham Enterprises Corporation. The
funds for this purchase to be funded from the Lifecycle Reserve. The proposed guideline will be to have the
total annual cash flows from PowerStream transferred to the Lifecycle reserve
until it is completely replenished.
Not
Applicable
Not Applicable
Not Applicable
Legal,
Finance
RECOMMENDED
BY: ________________________ ________________________
Joel Lustig, Treasurer Andy
Taylor, Commissioner,
Corporate
Services
________________________
Catherine
Conrad,
Town
Solicitor