district heat project august 2012

7/31/2019 District Heat Project August 2012

1/23

DISTRICT HEAT PROJECT

August 22, 2012


2/23

Key Points

Project is within budget

Ongoing operation is viable Citys risks are addressed

Project goals are met


3/23

Recommended Action

Authorize City Manager to proceed with project Notify the State and DOE of this decision Continue signing up customers

Issue bids in September for receipt in October Review bids in November, consider project adjustments.

Award contract.

Consider options for use of available funds, possibleadditional assistance for connections.

Begin construction in spring of 2013 Provide Thermal Energy to Customers on 10/1/13


4/23

Presentation

Overall Project Description and Funding Summary Project Costs

Customer Commitments City/School heating costs Financing Package Citys Risk System Management, City Goals and Master Plan,

Assumptions and Projections, City Votes

Recommended Action


5/23

Project Goals

Reduce emissions

Replace oil with regional fuel source

Stabilize heating costs for city/school

Economic development opportunity for downtown

Citys project costs within current expenses


6/23

Project Summary

State Central Heating Plant 40.2 MMBTU capacity

City Distribution System 9.71 MMBTU (24%) of stateplant, ability to purchase up to 16.3 MMBTU

Both Public and Private Customers

Primarily Wood Chips for winter fuel (Oct April)

Summer Hot Water through system boilers


7/23


8/23

Overall Funding Summary

Federal Department of Energy $8.00 million State of Vermont Capital Funds $7.00 million State of Vermont In Kind $1.20 million City of Montpelier 2011 Bond $2.00 million CEDF Grant $1.00 million CEDF Loan, 1%, deferred payment $0.75 million Forest Service Grant (new) $0.248 million Village Green Grant (new) $0.10 million TOTAL $20.298 million


9/23

Funding Allocation

State Funds for heat plant $8.200 million DOE Grant to state for heat plant $3.249 million DOE Grant to state for city capacity $2.558 million

City/CEDF funds to state for capacity $1.077 million DOE Grant to city for dist. system $2.193 million City/CEDF funds for dist. system $2.673 million Other grant funds for dist. system $0.348 million Total for Central Heating Plant $15.047 million Total for Distribution System $5.214 million


10/23

Overall City Funding Status

TOTAL Distribution System $ $5,214,419

Spent/Committed to date $899,651

Available Balance for Project $4,314,768

Revised Project Cost Estimate $3,732,351

Project Balance $582,417 (17.71%) Contingencies (included in estimate) $393,739 (11.97%) Combined cushion $976,156 (29.68%) May only need $1.45 M Bond instead of $2.0 M


11/23

Annual System Budget (2014)

2011 Bond Payment @ $2.0 M $169,191 (highest)Bond @ $1.45 M = $122,663

Contract with State $68,032 2009 Bond Payment $20,376 (highest) Operations $10,228 CEDF Loan Interest $7,500 Total Must Pay Obligations $275,327 (w/ $2 M Bond)

$228,799 (w/$1.45 M Bond)

Cash Reserve (5% of rev.) $12,992 Operating/Admin 10 customers $46,026 ($65,348 max) TOTAL $334,345

With $1.45 M Bond $287,817


12/23

Customer Commitments using 2014

Capacity Rates City Complex (City Hall, Fire, Police) $46,009 Union Elementary School $77,350 Vermont Mutual $151,830 prorated $30,366 GSA $40,656 County (Court House, Sheriff) $14,738 Everett (52, 46 & 27 State St) $26,934 Nedde (City Center) $26,257

NECI/Nick (118 Main St) $12,949Jacobs (22 Elm/Jailhouse Common) $8,165 Beard (15 E. State St) $6,776 TOTAL $290,200


13/23

Customer Base

10 Customers involve 15 Connections

Initial System design = 34 Connections

Commitments for 44% of connections

Additional connections create additional financial stability.


14/23

10 Cust. $3.73 M Project. $1.45 M Bond

($100,000)

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033

District Heat

Annual Operating BudgetProjection

Annual Revenues

Annual Expenses

Annual Budget BalanceTotal Cash on Hand


15/23

City/School Fuel at $2.99/gallon

City & UES use 60,600 gallons per year of oil

Combined DH capacity fee = $123,359

Combined DH energy fee = $58,063

Total Combined DH cost = $181,422

$181,422/60,600 gallons = $2.99 per gallon


16/23

Comparison to Oil

$3,515,833

$4,384,564

$5,555,435

$3,034,069

$481,764

$1,350,495

$2,521,366

$120,695$298,248 $447,936

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

City/School Oil@ 3% increase

City/School Oil@ 5.25%

increase

City/School Oil@ 8% increase

City/School DH,2.5% wood

increase

NPV COSTS & SAVINGS

of Oil and District Heat for City/School

20 Year NPV Cost - Oil & DH

20 Yr NPV savings with DH

10 year NPV savings with DH


17/23

Financing for Customer Connections

Partnership with VT Economic Dev. Authority (VEDA)

Village Green grant pays 10% of cost

VEDA finances remaining 90% at 4% over 5-7 years

Effective rate = 0% for 5 years, 1% for 7 years

City will include repayment on DH bill


18/23


19/23

Citys Risks for Proceeding

Project Costs running over

Under budget, sufficient contingency, current bid climate,project sectioning options

Stuck with Annual Operating Cost

Full $2.0 M Bond. Minimal Customers GSA, County,VM, Everett.


20/23

Bad Case Scenario

Must Pay Obligations $275,327 City/School Energy Fees $58,063 TOTAL MUST PAY $333,390 Income (4 customers) $112,694 Net For City to Pay $220,696

Less City/School Capacity $123,359 Less City/School Energy $58,063 TOTAL City paying $181,422Net Added DH Costs for City $39,274


21/23

City Risk Comparison

City/School Oil prices

$3.00/gallon for 60,600 gallons = $181,422



2009 Bond payment = $20,376

City Costs with no DH = $201,798 to $232,476Net Cost under Bad DH = $220,696


22/23

Other Considerations

Operating costs and responsibilities are manageable Consistent with City Council 2012 Goals Consistent with Citys 2010 Master Plan Citys analysis reasonable as to method and assumptions

and the substance of the agreements to be reasonable inlight of normal energy purchase and sale agreements

Public votes on this project: 2003 Bond $250,000 1,273-875 59% 2009 Re-use of the 03 bond 1,024-745 57% 2010 Charter amendments 2,826-755 78% 2011 Bond $2,000,000 963-609 61%


23/23

Recommended Council Action

Authorize City Manager to proceed with project Notify the State and DOE of this decision Continue signing up customers Issue bids in September for receipt in October Review bids in November, consider project adjustments.

Award contract.

Consider options for use of available funds, possibleadditional assistance for connections.

Begin construction in spring of 2013 Provide Thermal Energy to Customers on 10/1/13

district heat project august 2012

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