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HomeMy WebLinkAboutCouncil Agenda - 2021-05-17J COUNCIL AGENDA 17.H>FR Electronic Meeting MONDAY, MAY 17, 2021 CITY OF KITCHENER 7:00 PM - ELECTRONIC MEETING (TELEVISED/LIVE STREAMED) 200 KING STREET WEST Due to COVID-19 and recommendations by Waterloo Region Public Health to exercise physical distancing, City Hall is open for select services. Members of the public are invited to participate in this meeting electronically by accessing the meeting live -stream video at kitchener.ca/watchnow. While in-person delegation requests are not feasible at this time, members of the public are invited to submit written comments or participate electronically in the meeting by contacting delegations@kitchener.ca. Delegates must register by 5:00 p.m. on Monday May 17, 2021, in order to participate electronically. Written comments will be circulated prior to the meeting and will form part of the public record. 1. COMMENCEMENT 1.a. Land Acknowledgement 1.b. Singing of "O Canada" 2. MINUTES 2.a. Minutes to be accepted as mailed to the Mayor and Councillors (regular meeting held April 26, 2021 and special meetings held April 26 and May 10, 2021) — Councillor M. Johnston 3. DISCLOSURE OF PECUNIARY INTEREST AND THE GENERAL NATURE THEREOF 4. COMMUNICATIONS REFERRED TO FILE - NIL 5. PRESENTATIONS - NIL 6. DELEGATIONS 6.a. Laura McQuillen, regarding Community Services Department report CSD -2021-5, listed as Item 12.b.4 on the Committee of the Whole agenda. 7. REPORTS OF COMMITTEES 7.a. HERITAGE KITCHENER — MAY 4, 2021 7.a.1. That pursuant to Section 29 of the Ontario Heritage Act, the Clerk be directed to publish a Notice of Intention to designate the property municipally addressed as 518 Bridgeport Road as being of cultural heritage value or interest, as outlined in Development Services Department report DSD -2021-58. 7.b. COMMUNITY AND INFRASTRUCTURE SERVICES COMMITTEE — MAY 10, 2021 7.b.1. That the Mayor and Clerk be authorized to sign an agreement with Signum Wireless, subject to the satisfaction of the City Solicitor, to enter a land lease for the purpose of installation of a telecommunications tower at 135 Homer Watson Blvd, as outlined in Corporate Services Department report COR -2021-16; and further, That the Mayor and Clerk be authorized to sign an agreement with Signum Wireless, subject to the satisfaction of the City Solicitor, to enter a land lease for the purpose of installation of a telecommunications tower at 35 Sportsworld Crossing. *Accessible formats and communication supports are available upon request. If you require* assistance to take part in a city meeting or event, please call 519-741-2345 or TTY 1-866-969-9994. COUNCIL AGENDA MONDAY, MAY 17, 2021 CITY OF KITCHENER 7:00 P.M. — ELECTRONIC MEETING - 2 - 200 KING STREET WEST 7.b.2. That Building staff along with Communications staff be directed to create a Termites Best Practice Guide for residents and future property owners to follow to reduce termite colonies and limit the impact of long-term damage and further spread into private or public property, as outlined in Development Services Department report DSD -2021-62; and further, That the Building Division continue to administer the Termite By-law. 7.c. PLANNING AND STRATEGIC INITIATIVES COMMITTEE — MAY 10, 2021 7.c.1. That consideration of the following recommendation be deferred to the June 14, 2021, Planning and Strategic Initiatives Committee meeting, as requested by the applicant: "That Official Plan Amendment Application OPA/20/002/E/KA for Rockway Holdings Ltd. requesting a change in designation from Low Rise Residential to Medium Rise Residential to permit 4 multiple dwelling buildings on the parcel of land specified and illustrated on Schedule 'A', be adopted, in the form shown in the Official Plan Amendment attached to Development Services Department report DSD -2021-41 as Appendix `A', and accordingly forwarded to the Region of Waterloo for approval; and, That Zoning By-law Amendment Application ZBA20/005/E/KA for Rockway Holding Ltd. be approved in the form shown in the "Proposed By-law", and "Map No. 1", attached to Report DSD -2021-41 as Appendix "B"; and, That in accordance with Planning Act Section 45 (1.3 & 1.4) that applications for minor variances shall be permitted for lands subject to Zoning By-law Amendment Application ZBA20/005/E/KA; and, That the Grand River South Community Plan be repealed in its entirety." 7.c.2. That the City -initiated Zoning By-law amendment ZBA1 9/011 /COK/TD to By-law 2019- 51 (CRoZBy Stage 2a -Residential Base Zones), be approved in the form shown in the "Proposed By-law" dated April 28, 2021, and included as Attachment 'A' to Development Services Department report DSD2021-42. 8. UNFINISHED BUSINESS - NIL 9. NEW BUSINESS 9.a. Regional Council Update — Mayor B. Vrbanovic 9.a.1. Mayor B. Vrbanovic has given notice that he will introduce the following motion for consideration this date with respect to housing support funding for people experiencing homelessness: That the City of Kitchener support the Regional Municipality of Waterloo and other area municipalities in their collective call for funding to respond to the urgent and growing need for housing support funding to end homelessness in Waterloo Region, as outlined in Region of Waterloo report CSD -HOU -21-06 — Housing Support Funding to End Homelessness, dated May 11, 2021; and further, That Kitchener City Council request the provincial government to dedicate specific and sustained health funding for housing supports to help people experiencing homelessness achieve housing stability and recover from homelessness; and finally, That the City Clerk be directed to send a copy of this resolution to the Honourable Doug Ford, Premier of Ontario; the Honourable Christine Elliott, Minister of Health; the Honourable Steve Clark, Minister of Municipal Affairs and Housing; the Association of Municipalities of Ontario (AMO); the Ontario Municipal Social Services Association (OMSSA); the Federation of Canadian Municipalities (FCM); local Members of the Provincial Legislature (MPPs); Federal Members of Parliament (MPs); and area municipalities within Waterloo Region. COUNCIL AGENDA MONDAY, MAY 17, 2021 CITY OF KITCHENER 7:00 P.M. — ELECTRONIC MEETING - 3 - 200 KING STREET WEST 10. QUESTIONS AND ANSWERS 11. BY-LAWS -1ST AND 2ND READING 11.a. Being a by-law to set and levy the rates of taxation for City purposes for the year 2021 and to provide for the payment of taxes after interim taxes. 11.b. To further amend By-law No. 2019-113, being a by-law to regulate traffic and parking on highways under the jurisdiction of the Corporation of the City of Kitchener. 11.c. Being a by-law to exempt certain lots from Part Lot Control - Block 45, Registered Plan 58M- 644 - 30 Saddlebrook Court. 11.d. Being a By-law to amend By-law 2019-077 to extend the time period for exemption from Part Lot Control - Part of Block 1, Plan 58M-505 - Forest Creek Drive. 11.e. Being a by-law to amend By-law 2019-079 to extend the time period for exemption from Part Lot Control - Part of Blocks 10, 11, 15, 16 and 17, Plan 58M-504 - Hollybrook Trail and Pondcliffe Court. 11.f. Being a by-law to amend By-law 2019-080 to extend the time period for exemption from Part Lot Control - Part of Blocks 7, 8, 25 and 26, Plan 58M-504 - Pondcliffe Drive and Hollybrook Trail. 11.g. Being a by-law to amend By-law 2019-082 to extend the time period for exemption from Part Lot Control - Part of Blocks 21, 22 and 23, Plan 58M-504 - Pondcliffe Drive and Doon Creek Street. 11.h. Being a by-law to amend By-law 2019-051 known as the Zoning By-law 2019 for the City of Kitchener - CRoZBy Stage 2a - Residential Base Zones. 12. COMMITTEE OF THE WHOLE 12.a. TENDERS 12.a.1. FIN -2021-31 - T21-055 Duke and Ontario Streets Parking Garage - Soffit and Interior Wall Painting That Tender T21-055 Duke and Ontario Streets Parking Garage - Soffit and Interior Wall Painting, be awarded to Across Canada Construction, Woodbridge, Ontario, at their tendered price of $311,805.00, including allowances of $5,000.00, plus H.S.T. of $40,534.65, for a total of $352,339.65. 12.a.2. FIN -2021-33 - Q21-067 RBJ Schlegel Park Heritage House Washroom Renovation That Quotation Q21-067 RBJ Schlegel Park Heritage House Washroom Renovation be awarded to Brook Restoration Ltd., Toronto, Ontario at their quoted price of $998,870.00, plus H.S.T. of $129,853.10, for a total of $1,128,723.10. 12.a.3. FIN -2021-34 - T21-060 Pattandon Avenue (Borden Parkway to Ottawa Street South) Reconstruction That Tender T21-060 - Pattandon Avenue (Borden Parkway to Ottawa Street South) Reconstruction , be awarded to 410754 Ontario Limited o/a Sousa Concrete, Cambridge, Ontario, attheirtendered price of $2,148,513.50, including provisional items and contingencies of $137,450.00, plus H.S.T. of $279,306.76, for a total of $2,427,820.26. COUNCIL AGENDA MONDAY, MAY 17, 2021 CITY OF KITCHENER 7:00 P.M. — ELECTRONIC MEETING - 4- 200 KING STREET WEST 12.b. ADMINISTRATIVE REPORTS 12.b.1. FIN -2021-30 - Downtown Kitchener BIA and Belmont BIA 2021 Budgets That the 2021 Budgets for the Downtown Kitchener Business Improvement Area (BIA) and the Belmont Business Improvement Area (BIA) be approved pursuant to Section 205 (2) of the Municipal Act, 2001. 12.b.2. FIN -2021-32 -Kitchener Power Corp. -Annual Business Matters That the audited financial statements of Kitchener Power Corp. for the year ended December 31, 2020 as audited by KPMG, LLP, and attached to report FIN -2021-32, be received; and further, That KPMG, LLP, be appointed as Auditors of Kitchener Power Corp. for the ensuing fiscal year and Directors are authorized to set their remuneration. 12.b.3. INS -2021-4 - Protective Bollard Installation at City Hall That protective bollards be approved for installation at specified locations along the perimeter of the City Hall block, as outlined in staff report INS -2021-4, in accordance with public safety guidance; and, That the protective bollard project be incorporated into the existing contract for City Hall outdoor works to realize efficiencies and cost savings by undertaking the Protective Bollard Project concurrently; and further, That the existing construction contract, awarded to Heritage Restoration Inc., be increased by $807,300, to be funded through the Gas Tax Reserve, to undertake the protective bollard project. 12.b.4. CSD -2021-5 -Exemption to Chapter 408 -Animals That the Deputy CAO be authorized to execute an agreement satisfactory to the City Solicitor, granting an exemption from section 408.2.11 of Chapter 408 of the City of Kitchener Municipal Code to a resident of the City to allow the keeping of ducks in the City provided the conditions set out in this report CSD -2021-5 are complied with. 12.b.5. COR -2021-17 - Mid -Term Appointment to Heritage Kitchener That Ilona Bodendorfer be appointed to Heritage Kitchener as the representative for the Civic Centre Heritage Conservation District for the term ending November 14, 2022. 13. REPORT OF THE COMMITTEE OF THE WHOLE 14. BY-LAWS - 3RD READING 14.a. Being a by-law to set and levy the rates of taxation for City purposes for the year 2021 and to provide for the payment of taxes after interim taxes. 14.b. To further amend By-law No. 2019-113, being a by-law to regulate traffic and parking on highways under the jurisdiction of the Corporation of the City of Kitchener. 14.c. Being a by-law to exempt certain lots from Part Lot Control - Block 45, Registered Plan 58M- 644 - 30 Saddlebrook Court. 14.d. Being a By-law to amend By-law 2019-077 to extend the time period for exemption from Part Lot Control - Part of Block 1, Plan 58M-505 - Forest Creek Drive. COUNCIL AGENDA MONDAY, MAY 17, 2021 CITY OF KITCHENER 7:00 P.M. — ELECTRONIC MEETING - 5 - 200 KING STREET WEST 14.e. Being a by-law to amend By-law 2019-079 to extend the time period for exemption from Part Lot Control - Part of Blocks 10, 11, 15, 16 and 17, Plan 58M-504 - Hollybrook Trail and Pondcliffe Court. 14.f. Being a by-law to amend By-law 2019-080 to extend the time period for exemption from Part Lot Control - Part of Blocks 7, 8, 25 and 26, Plan 58M-504 - Pondcliffe Drive and Hollybrook Trail. 14.g. Being a by-law to amend By-law 2019-082 to extend the time period for exemption from Part Lot Control - Part of Blocks 21, 22 and 23, Plan 58M-504 - Pondcliffe Drive and Doon Creek Street. 14.h. Being a by-law to amend By-law 2019-051 known as the Zoning By-law 2019 for the City of Kitchener - CRoZBy Stage 2a - Residential Base Zones. StaffRepod fa. Financia! Services Department www. kitchener: ca REPORT TO: Committee of the Whole DATE OF MEETING: 2021-05-17 SUBMITTED BY: Ryan Scott, Manager of Procurement, 519-741-2200 ext. 7214 PREPARED BY: Steve Rudak, Procurement Specialist, 519-741-2200 ext. 7213 WARD(S) INVOLVED: 10 DATE OF REPORT: 2021-05-07 REPORT NO.: FIN -2021-31 SUBJECT: T21-055 Duke and Ontario Streets Parking Garage - Soffit and Interior Wall Painting RECOMMENDATION: That Tender T21-055 Duke and Ontario Streets Parking Garage - Soffit and Interior Wall Painting, be awarded to Across Canada Construction, Woodbridge, Ontario, at their tendered price of $311,805.00, including allowances of $5,000.00, plus H.S.T. of $40,534.65, for a total of $352,339.65. REPORT HIGHLIGHTS: * The purpose of this report is to obtain approval to proceed with an award as per Purchasing By-law 2017-106; * The reason this report is coming forward is that the project is not specifically identified within the council approved budget; * There were ten (10) tenders received for this procurement; * This report supports the delivery of core services. BACKGROUND: Parking Services is proceeding with the re -painting of the soffits and interior walls of the Duke and Ontario Streets parking garage. The City completes structural monitoring and condition assessment reports every three (3) years. In the 2019 condition assessment report, the City's consultants noted the soffit painting to be in poor condition throughout the Duke & Ontario garage including peeling and flaking paint. The consultants recommended aesthetic repairs to the garage including full removal of the existing coatings followed by application of exterior latex paint. *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. 6 Paint mock-ups of three (3) different types of soffit coatings were completed at the slab -beam soffit area above the parking Level P4 South in the spring of 2018 to help determine the best coating applications. Demand for parking is quite low this year due to the COVID-19 pandemic. Now is an opportune time to complete the painting as impacts to existing customers is quite low. The phasing of the project is also easier as there are less vehicles in the garage. REPORT: As per clause 170.7.3 of the Purchasing By-law 2017-106, it states, "Regardless of Procurement Value, the Manager of Procurement shall submit a report to Council recommending award of a purchase greater than $100,000 if any one or more of the following conditions apply: b. the project is not specifically identified within the council approved budget; Tenders were advertised publicly on the City of Kitchener website. Documents were downloaded by twenty-five (25) interested parties and by the closing date of Monday April 19, 2021, ten (10) tenders had been received. The following tenders were received: Across Canada Construction Ltd. B.E. Construction Ltd. Rainforces Ltd. 2519181 Ontario Inc. Zero Defects Brook Restoration Ltd. Momentum Construction & Restoration Inc. Sibwest Building Restoration Inc. Injaz Construction Ltd. United Building Restoration Ltd. Bid Price (Incl. Taxes Woodbridge, ON $352,339.65 Etobicoke, ON $388,011.76 Toronto, ON $396,466.15 Brampton, ON $410,943.71 Toronto, ON $414,738.25 Toronto, ON $455,107.50 Burlington, ON $588,266.14 Mississauga, ON $653,521.94 Mississauga, ON $831,680.00 Toronto, ON $999,485.00 The tenders were reviewed by P. McCormick, Manager of Parking Enterprise and J. Ladd of Read Jones Christoffersen Limited, the City's Consultant for the project, who concur with the above recommendation. FINANCIAL IMPLICATIONS: The net cost for this tender (A), is fair and reasonable for a purchase of this scope and the upset limit is within the budget allowance (B) provided. Funding for this tender is allocated from the Structural Provision - Garages capital account. The estimated surplus (D) will remain within the capital account to fund future parking capital projects. 7 Tender T21-055 Duke and Ontario Street Parking Garage - Interior Soffit and Wall Painting Estimated Cost for this Tender Tender T21-055 costs including HST less: HST rebate on tender Net Cost Being Awarded Costs Incurred to Date Projected Additional Costs Total Estimated Cost for this Tender Budget for this Tender Funded from the Structural Provision - Garages capital account Estimated Surplus/(Deficit) for this Tender (B - C) COMMUNITY ENGAGEMENT: $ 352,339.65 4.q5L 311,805.00 A $ 311,805.00 C 350,000.00 B 38,195.00 D INFORM — This report has been posted to the City's website with the agenda in advance of the council / committee meeting. PREVIOUS REPORTS/AUTHORITIES: There are no previous reports/authorities related to this matter. APPROVED BY: Jonathan Lautenbach, Chief Financial Officer, Financial Services Department StaffRepott I I A} T -,,.i Financia! Services Department www.kitchener. ca REPORT TO: Committee of the Whole DATE OF MEETING: 2021-05-17 SUBMITTED BY: Ryan Scott, Manager of Procurement, 519-741-2200 ext. 7214 PREPARED BY: Adam Buchholtz, Associate Procurement Specialist, 519-741-2200 ext. 7217 WARD(S) INVOLVED: Ward 5 DATE OF REPORT: 2021-05-10 REPORT NO.: FIN -2021-33 SUBJECT: Q21-067 RBJ Schlegel Park Heritage House Washroom Renovation RECOMMENDATION: That Quotation Q21-067 RBJ Schlegel Park Heritage House Washroom Renovation be awarded to Brook Restoration Ltd., Toronto, Ontario at their quoted price of $998,870.00, plus H.S.T. of $129,853.10, for a total of $1,128,723.10. REPORT HIGHLIGHTS: The purpose of this report is to obtain approval to proceed with an award as per Purchasing By-law 2017-106. There were three quotations received for this procurement. This report supports the delivery of core services. BACKGROUND: The scope of work within this contract represents the continuation of RBJ Schlegel Park development since its initial Phase starting in November 2017 with Phase 1 park opening in August 2020. This is Phase 2 of 5 of the park development, with all remaining phases scheduled and budgeted between 2021 and 2027. Phase 2 was scoped to include three major components: 1. Heritage Residence Adaptive Re -use — interior and exterior renovations to the 1860's stone farmhouse, relocated to its current location during Phase 1 works; 2. Park Development — continued development of recreational features such as tennis and basketball courts, tree planting and landscaping; 3. New Operations and Maintenance Facility; *** This information is available in accessible formats upon request.. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. 9 Contract Q21-067 is inclusive of the Heritage Residence Adaptive Re -use scope of work. The work included in the heritage home restoration was determined to be specialized and warranted both a separate contract and pre -qualification process. The scope of work includes full structural restoration including masonry, roofing, windows and eaves. The adaptive re -use includes interior block walls framing 3 washrooms and 4 changerooms. The facilities will be gender neutral, fully accessible, and two of which equipped for universal use. Components #2 and #3 of Phase 2 scope above will be tendered in the near future. REPORT: As per clause 170.7.1 of the Purchasing By-law 2017-106, the Manager of Procurement shall submit a report to Council recommending award of a purchase greater than $750,000. Quotations were advertised privately to the five (5) pre -qualified contractors. Documents were downloaded by five (5) interested parties and by the closing date of Monday May 10, 2021, three (3) quotations had been received. The following quotes were received: Bid Price (incl. HSTF Brook Restoration Ltd. Toronto ON $1,128,723.10 Roof Tile Management Inc. Mississauga ON $1,227,067.00 Heritage Restoration Stouffville ON $1,724,380.00 The quotes were reviewed by M. Parris, Landscape Architect, P. Forrest, Construction Projects Manager, and S. Mawdsley, Principal Architect and Partner, A+ Link Architecture, the City's Consultant on the project, who concur with the above recommendation. STRATEGIC PLAN ALIGNMENT: This report supports the delivery of core services. FINANCIAL IMPLICATIONS: The net cost for this quotation (A), is fair and reasonable for a project of this scope and the upset limit is above the funding available (B) for this component of the project. Funding for this project is included within the approved capital budget. The estimated deficit (E) will be paid for out of the overall contingency for phase 2 construction. No additional funds are required as a result of this award. to Q21-067 RBJ Schlegel Park Heritage House Washroom Renovation Total Budget for Phase 2 Construction Estimated Cost for this Component of Phase 2 Quotation Q21-067 costs, including HST less: HST rebate Net Cost Being Awarded Costs incurred to date Projected Costs: Staff Time/Permitting/Signage Total Estimated Cost for this Phase of Work Budget for this Phase of Work Budget for this component of the work Total Budget for this Phase of Work Total Estimated Surplus/(Deficit) COMMUNITY ENGAGEMENT: $3,950,000.00 1,128,723.10 (112,272.94) 1,016,450.16 A 1,016,450.16 945,000.00 945,000.00 B (71,450.16) E INFORM — This report has been posted to the City's website with the agenda in advance of the council / committee meeting. PREVIOUS REPORTS/AUTHORITIES: There are no previous reports/authorities related to this matter. APPROVED BY: Jonathan Lautenbach, Chief Financial Officer, Financial Services Department StaffRepod Financia! Services Departimnt REPORT TO: Committee of the Whole DATE OF MEETING: 2021-05-17 www.A tchenerca SUBMITTED BY: Ryan Scott, Manager of Procurement, 519-741-2200 ext. 7214 PREPARED BY: Polina Semenov, Procurement Specialist, 519-741-2200 ext. 7037 WARD(S) INVOLVED: Ward 9 DATE OF REPORT: 2021-05-11 REPORT NO.: FIN -2021-34 SUBJECT: T21-060 Pattandon Avenue (Borden Parkway to Ottawa Street South) Reconstruction RECOMMENDATION: That Tender T21-060 - Pattandon Avenue (Borden Parkway to Ottawa Street South) Reconstruction , be awarded to 410754 Ontario Limited o/a Sousa Concrete, Cambridge, Ontario, at their tendered price of $2,148,513.50, including provisional items and contingencies of $137,450.00, plus H.S.T. of $279,306.76, for a total of $2,427,820.26. REPORT HIGHLIGHTS: • The purpose of this report is to obtain approval to proceed with an award as per Purchasing By-law 2017-106; There were five (5) tenders received for this procurement; • This report supports the delivery of core services. BACKGROUND: Engineering Services is proceeding with the reconstruction of Pattandon Avenue (from Borden Parkway to Ottawa Street South) approximately 385 m. The services were originally constructed in the 1950's and are in need of replacement. The administration, design and tendering of this project has been completed by IBI Group staff, the construction administration and inspection of this project will be completed by IBI Group staff as well. This work is being completed under the City's Water Infrastructure Program (WIP) for road reconstructions. The project is scheduled to begin June 28, 2021 weather permitting. *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. 12 REPORT: As per clause 170.7.1 of the Purchasing By-law 2017-106, the Manager of Procurement shall submit a report to Council recommending award of a purchase greater than $750,000. Tenders were advertised publicly on the City of Kitchener website. Documents were downloaded by twenty-nine (29) interested parties and by the closing date of Wednesday May 5, 2021, five (5) tenders had been received. The following tenders were received: 410754 Ontario Limited o/a Sousa Concrete Network Sewer and Watermain Ltd Steed and Evans Limited Oxford Civil Group Inc. Elgin Construction Cambridge ON Cambridge ON St. Jacobs ON Woodstock ON St. Thomas ON Bid Price $2,427,820.26 $2,567,400.25 $2,572,445.01 $2,897,251.28 $3,347,891.78 The tenders were reviewed Y. Bhattachan, Engineering Project Manager, who concurs with the above recommendation. STRATEGIC PLAN ALIGNMENT: This report supports the delivery of core services. FINANCIAL IMPLICATIONS: In addition to the costs anticipated in this tender, the design and implementation of these types of projects typically involves city staff and resources from across the corporation. These costs are included in the line item "Projected Costs: Staff Time/Permitting/Material testing", and will be itemized when they exceed $125,000. Included in this line item are staff time and expenses for all city staff in support of the project such as Engineering, Kitchener Utilities, and Transportation Planning. The line item also includes all regulatory permitting, geotechnical and material testing, detouring and traffic control, alternate access and parking requirements and any other miscellaneous costs. Projects utilizing in-house staff will include costs for inspection during construction and contract administration. The net cost for this tender (A), is fair and reasonable for a purchase of this scope and the upset limit is within the budget allowance (B) provided within the budget. Funding for this purchase is included within the approved capital forecast. The estimated surplus (E) will be returned to the WIP Road Reconstruction general account, and will be used to fund unexpected deficits in WIP Road Reconstruction projects. 13 Tender T21-060 Pattandon Avenue Reconstruction The total budget for all phases of this project is $ 2,741,000.00 Estimated Cost for this Phase of Work Tender T21-060 costs, including HST 2,427,820.26 less: HST rebate on tender (241,492.81) Net Cost Being Awarded 2,186,327.45 A Projected Costs: Staff Time/Material Testing 47,693.80 Total Estimated Cost for this Phase of Work $ 2,234,021.25 C Budget for this Phase of Work WIP - Road Reconstruction - Sanitary Utility 1,100,000.00 WIP - Road Reconstruction - Stormwater Utility 550,000.00 WIP - Road Reconstruction - Water Utility 742,000.00 Total Budget for this Phase of Work $ 2,392,000.00 B Estimated Surplus/(Deficit) for this Phase of Work (B - C) 157,978.75 D Estimated Surplus/(Deficit) from previous phases (11,735.38) Total Estimated Surplus/(Deficit) $ 146,243.37 E COMMUNITY ENGAGEMENT: INFORM — This report has been posted to the City's website with the agenda in advance of the council / committee meeting. PREVIOUS REPORTS/AUTHORITIES: There are no previous reports/authorities related to this matter APPROVED BY: Jonathan Lautenbach, Chief Financial Officer, Financial Services Department Staff Repoif Financial Services Department REPORT TO: COUNCIL DATE OF MEETING: May 17, 2021 SUBMITTED BY: Saleh Saleh, Director of Revenue, 519-741-2200 x 7346 PREPARED BY: John Sonser, Revenue Analyst, 519-741-2200 x 7954 www.kitchener.ca WARD (S) INVOLVED: Ward(s) 8 & 10 DATE OF REPORT: May 3, 2021 REPORT NO.: FIN -2021-30 SUBJECT: Downtown Kitchener BIA and Belmont BIA 2021 Budgets Referenced in the 2021 Tax Rate By-law RECOMMENDATION: That the 2021 Budgets for the Downtown Kitchener Business Improvement Area (BIA) and the Belmont Business Improvement Area (BIA) be approved pursuant to Section 205 (2) of the Municipal Act, 2001. BACKGROUND: Section 205 (2) of the Act states that the board of management shall submit the budget to council by the date and in the form required by the municipality and the municipality may approve it in whole or in part but may not add expenditures to it. REPORT: The Downtown Kitchener BIA 2021 Budget was reviewed by the Board on April 28, 2021 and includes the following: Levy $ 1,379,000 Other revenue $ 265,000 Expenses $ 1,617,298 (refer to Appendix A — Downtown Kitchener BIA) The Belmont BIA 2021 Budget was reviewed by the Board on April 28, 2021 and includes the following: Levy Other revenue Expenses 40,670 $ 8,500 $ 39,550 *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. 15 (refer to Appendix B — Belmont Business Improvement Area). The BIAs may adjust their detailed budget allocations based on COVID-19 response priorities as the year unfolds. Approving the budget is the last step required to be able to levy taxes on behalf of the BIAs. ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN: The recommendation of this report supports the achievement of the city's strategic vision through the delivery of core service. FINANCIAL IMPLICATIONS: The 2021 BIA levy, once approved, will be used to determine BIA tax rates to be incorporated into the 2021 tax rate by-law. COMMUNITY ENGAGEMENT: INFORM — This report has been posted to the City's website with the agenda in advance of the council / committee meeting. ACKNOWLEDGED BY: Jonathan Lautenbach, Chief Financial Officer, Financial Services 16 Appendix A Downtown Kitchener EIA 2721 Operating Budget EXP FMSF..9 ':11n$nan$ho�and o..�.c-..��. Frjjp"��• 2020 Budt! 2Q20►AhW 2021 LOr REVENUE 10,000 8201 12.000 BL4 Levy 1,379,000 1.372,000 1,379.0DD RT04 Grant 50,000 15,000 15.OD0 Injection kcn 00MD-12 Suq*js (transferred from reserve) 126.000 44,217 250,000 lnectiDnGom usfor 2WEic Waste Divefsion 20,000 330.625 15.000 rOTAL INCOME 1,399,000 1,394,000 1,644,00 EXP FMSF..9 ':11n$nan$ho�and o..�.c-..��. Frjjp"��• , Graffiti Removal 10,000 8201 12.000 Patio Program 15,000 26272 2.50.0DO Horticultural (Contribution to the City of Krtoherrer) 50,000 10,000 MODD AdvertjsirkWPrtxrw4on 126.000 44,217 220.ODD Ownit M3gazine - 330.625 15.000 Business SW -up Grant Program 10,000 8.011 20.000 Total Attracting Urban Shops and Restaurants-P!.pfity_x1.-- +� 210.000 79,39'] 532.4D0 Faster and Support Heatielt Urban Experiences - Prioffy#2 Large Event Sponsorship Fund Canada Day 30,000 Ok dxeest 25,000 6,512 10,0017 Kitchener Mies Festival 35,000 .,DDD 10.000 City of Krtahem Events 20,000 10,000 25,000 Holiday Season and CFristkndl Market 28,000 25,1315 35.0DD Holiday Window Dernratng 330.625 15.000 Daw bwn Dollars 10,000 8.011 20.000 Damm DDL-w support for UNZIPPED 20.070 ConvinhyBuilder Grant Program 115,000 28,387 90.000 Winter Pmgrarrming (February toApr]j 20,000 28,332 30.ODD Spring Art Celration J Art Walk and Artisan Market - PatiD Opening Art Walk Project 67.ODD Downt w Fsrtertairmerrt 15,000 33,970 70.ODD fatal Foster and SupportHeardeltUrban D eriences-Pftridy92 1 296,000 $ 146,071 367.0m -101on a Ca ft L Cows 0amma-hf- RdeW4 i Discovery Team 80,000 6D,0DD 30.OD0 KeWng Domwwn Clean {after Spm cllectianj 95,000 75,000 80.000 DTK New Pilot Program - Ambassadors 25,000 Organic Waste Diversico (dinAe rhangeinrtiative) 20,000 New 2020 Business Gmtinuity COVID-19 Fund 330.625 Total Caring 8 Col I3bo-ralive Comirmni y- Priority #3 1,75,000 S 465,625 1 1 5.1}Dt1 Menntw Relations GeneialMeetings (Town Hall.AGM) 3,500 i.+ 3Jd130 Member Netwr i g Events 17 Downtown Kitchener BIA 2721 Operating Budget 2020 Budget 2020 Act" 2021 Burl REVENUE Merrier Education f ProFessiD" Services MEmbers 3,060 3.0D0 3.000 Menter-4tirs I SubscF*bD s (Chamber. BLAAssodations) 4,000 4.900 4.000 1 otal Member Relations S 10,500 t 14,500 10.440 Downtown Improvement Queen Street Ptacernaking Prajecdt DawntDwn Impmvement Pr*ct (Capital Reserve) Total Downtown knprovements 5 166,000 75,606 1-15,900 iDD.DDD $ 100,000 Total General & Admin 115,198 $5,633 i 115,198 Total Meetings & Pralessional Developrnerrt S 8,600 $ 600 $ 3.600 Total Wages 32 900 309,000 385.999 Total Benefits S 41,702 $ 41,702 $ 44.590 notal Wages f Benefits 363,n2—$ 328,324 S 409.590 1 OTAL EXPENSES 1.354,000 $ 1,216,343 $ 1,572 98 1 ax Write UFf Reserve 45,900 $ 45,000 $ 45,090 Net Income S (0) 132,657 26.707 , .-L:''-':..,U a.. �WA,,.i r,,. f.r. is DovvNTOwN Ki UZ-fv rlr=f 131A 2021 Operating Budget Surnri ary of 2f12-}_ .haa .fi In 2020 the BIA Board of Directors approved changes to the annual operating budget in response to the CO}11D-19 global pandemic. The changes made were a result of cancelled programs and events due to restrictions and closures. It was at this time a new line item was created in the budget; COW&19 Business Continuity Fund. This fund was necessary to effectively pivot to changes that were impacting the Downtown Kitchener boundary_ This fund consisted ofi New marketing directed at attracting people to the core, with a message of confidence that we were operating safely under the regional guidelines. A grant for main -street businesses to apply for up -to $3,000 towards PPE, digital improvements, etc_ a An investment to the DTK Art Walk project, with the intention to attract people to safely walk and explore the core, and businesses when possible_ The total spent in 2020, under the COVID-19 Business Continuity fund was $330,625. Z021 Budget Process Explanation During the last quarter of 2020, the BIA was able to host membership meetings. These meetings were conducted in smaller groups outside, and with individual businesses through online consultations. The purpose of these meetings was to understand haw the BIA could best assist with business recovery in the 2021 budget Information gathered through these consultations was then shared with the BIA Board of Directors to form the 2021 operating budget. At the end of 2020, the BIA Board of Directors aq_reed that the 2021 operating budget would not be approved until the first quarter of 2021 _ The Board anticipated having better visibility on how businesses would be able to operate, as the pandernic was expected to last well into 2021 _ We did make an attempt to host an online virtual Town Hall, however, was unsuccessful due to lack of quorum. This was expected due to businesses under stress, and that those who wanted to engage had attended our one-on-one meetings. Based on the feedback gathered it was determined that the BIA would invest in an enhanced Patio Program given outside dining would likely provide optimurn results and revenue to businesses. Further this project will beautify our downtown streetscape. This program is financed with no interest charges over three years, commencing in Spring 2021. The injection of $250, 000 into the 2021 operating budget represents a transfer from the capital reserve plus funds not used during the pandemic. This injection will support the enhancements to outdoor dining and King Street beautification_ Figures and comments provided by the Downtown Kitchener BIA April 28, 2021 19 Appendix B BELMONT BUSINESS IMPROVEMENT AREA REVENUES B IA Levy Grants Other Revenue (Events) Total Revenue EXPENSES Admin & General Improvement Projects Marketing Total Expenses Net Revenue (Expenses) Accumulated Surplus, beginning of year Accumulated Surplus, end of year * Figures provided by the Belmont BIA April 28, 2021. Budget Actual Budget 2020 2020 2021 40,665 $ 40,616 $ 40,670 - 12,850 8,500 7,800 2,336 - 48,465 $ 55,802 $ 49,170 33,863 28,155 30,750 15,000 1,081 2,000 6,000 10,581 6,800 54,863 $ 39,817 $ 39,550 (6,398) $ 15,985 $ 9,620 40,179 39,923 55,908 33,781 $ 55,908 $ 65,528 Notes on Belmont BIA 2021 Proposed Budget REVENUE: The BIA Levy remains fairly consistent with last year and remains the main source of income for Belmont Village. In 2020, the BIA received an $12,850 Digital Main Street Grant, funding to expand the BIA's digital footprint. An additional $8,500 is anticipated for 2021. With the COVID shutdowns, there will be limited fundraising opportunities in 2021. We are hoping that we can have Christmas in the Village in November but that depends on restrictions. EXPENSES: The Administration and General Expense budget includes $5,000 to be paid to the City of Kitchener at $1,000 a month, starting in May, for help with garbage collection and patio plant watering. This assumes we are allowed to have patios, including $5,000 for flowers and flowerpots to replace the hanging baskets we used to have. The reduction of the Administration and General Expense in 2020 is due to the cancellation of flower baskets and planters and related summer maintenance costs. The budgeted Streetscape Improvement Project was not undertaken in 2020 due to Covid-19 restrictions. The Improvement Project for this year is to add to the lighting in the trees and around the proposed patio area to make it even more welcoming than last year. The patios were a huge success, and we are hopeful that they will be allowed again this year. Our marketing expenses are mainly our website expense. * Figures and comments provided by the Belmont BIA April 28, 2021 21 StaffRepofi Financia! Services Llepartment REPORT TO: DATE OF MEETING: SUBMITTED BY: PREPARED BY: WARD(S) INVOLVED: DATE OF REPORT: REPORT NO.: SUBJECT: RECOMMENDATION: Committee of the Whole May 17, 2021 Jonathan Lautenbach, Chief Financial Officer, 519-741-2200 ext. 7334 www.kitchenerca Sharon Gignac, Executive Assistant, 519-741-2200 ext. 7312 N/A May 10, 2021 FIN -2021-32 Kitchener Power Corp. — Annual Business Matters THAT the audited financial statements of Kitchener Power Corp. for the year ended December 31, 2020 as audited by KPMG, LLP, and attached to report FIN -2021-32, be received; and further, THAT KPMG, LLP, be appointed as Auditors of Kitchener Power Corp. for the ensuing fiscal year and Directors are authorized to set their remuneration. REPORT HIGHLIGHTS: Audited financial statements for Kitchener Power Corp. (KPC) are required to be provided to Council on an annual basis Approving the appointment of auditors for KPC is an annual requirement The KPC board is recommending that KPMG LLP be appointed as auditors for another year BACKGROUND: The purpose of this report is to enable Council to consider routine annual business matters related to Kitchener Power Corp., including the receipt of the audited financial statements and the approval of auditors for the 2021 fiscal year. REPORT: The Kitchener Power Corp. Shareholders' Agreement requires the annual circulation of audited financial statements and approval of the shareholders for the appointment of auditors for the ensuing fiscal year. *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. 22 The 2020 financial statements have been audited by KPMG LLP and are attached for Council's information. In addition, the Board of Directors of Kitchener Power Corp. has recommended that KPMG LLP be retained for another year as auditors of the corporation. The 2020 Annual Report of Kitchener -Wilmot Hydro has been circulated separately for information purposes. STRATEGIC PLAN ALIGNMENT: This report supports the achievement of the city's strategic vision through the delivery of core service. FINANCIAL IMPLICATIONS: None at this time. COMMUNITY ENGAGEMENT: INFORM — This report has been posted to the City's website with the agenda in advance of the council / committee meeting. PREVIOUS REPORTS/AUTHORITIES: There are no previous reports/authorities related to this matter. APPROVED BY: Jonathan Lautenbach, CFO ATTACHMENTS: Attachment A — KPC Consolidated Financial Statements 2020 Attachment B — KPC Unconsolidated Financial Statements 2020 Attachment C — Kitchener -Wilmot Hydro Inc. Financial Statements 2020 Attachment D — Kitchener -Wilmot Hydro Inc. Annual Report 2020 23 Financial Statements of Kitchener Power Corp. Consolidated And Independent Auditors' Report thereon Year ended December 31, 2020 (Expressed in thousands of dollars) 2,1 M's KPMG LLP 115 King Street South 2nd Floor Waterloo ON N2J 5A3 Canada Tel 519-747-8800 Fax 519-747-8830 INDEPENDENT AUDITORS' REPORT To the Shareholders of Kitchener Power Corp. Opinion We have audited the consolidated financial statements of Kitchener Power Corp. (the Entity), which comprise: 0 the consolidated statement of financial position as at December 31, 2020 49 the consolidated statement of comprehensive income for the year then ended the consolidated statement of changes in equity for the year then ended the consolidated statement of cash flows for the year then ended and notes to the consolidated financial statements, including a summary of significant accounting policies (Hereinafter referred to as the "financial statements"). In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Entity as December 31, 2020, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS). Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the "Auditors' Responsibilities for the Audit of the Financial Statements" section of our auditors' report. We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. © 2020 KPMG LLP, an Ontario limited liability partnership and a member arm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. 25 Page 2 Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards (IFRS), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Entity's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Entity's financial reporting process. Auditors' Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control. 26 Page 3 Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Entity to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group Entity to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. kAW44� /4*0 Chartered Professional Accountants, Licensed Public Accountants Waterloo, Canada March 26, 2021 7 KITCHENER POWER CORP. Consolidated Statement of Financial Position As at December 31, 2020, with comparative information for 2019 (Expressed in thousands of dollars) Note Assets Current assets 2020 2019 Cash 4 � 6,861 13,940 Accounts receivable 15,709 17,511 Unbilled revenue 29,865 27,648 Inventory B 2,458 2,324 Prepaid expenses 1,146 1,347 Income taxes receivable 5 131 Total current assets v 56,044 62,901 Non-current assets: Property, plant and equipment 7 275,014 259,864 Intangible assets 8 646 629 Deferred tax assets 9 211 173 Investment in subsidiaries and associates 838 763 Total non-current assets 276,709 261,429 Total assets 332,753 324,330 Regulatory deferral account debit balances 10 19,661 9,400 Deferred taxes associated with regulatory accounts - - Total assets and regulatory assets 352,414 333,730 28 KITCHENER POWER CORP. Consolidated Statement of Financial Position Year ended December 31, 2020, with comparative information for 2019 (Expressed in thousands of dollars) Non-current liabilities: Long-term debt Note 2020 2019 Liabilities and Shareholder's Equity Long-term customer deposits 13 5,833 Current liabilities: Deferred revenue 39,759 36,385 Accounts payable and accrued liabilities 0 4,415 37,744 $ 30,060 Income taxes payable 127,930 32 9 Current portion of long-term debt :1 607 Current portion customer deposits F:3 8,945 9,366 Current portion of deferred revenue 1,069 952 Total current liabilities 47,790 40,994 Non-current liabilities: Long-term debt 11 76,963 76,963 Employee future benefits 12 5,937 5,858 Long-term customer deposits 13 5,833 6,188 Deferred revenue 39,759 36,385 Deferred tax liablilty 0 4,415 2,536 Total non-current liabilities 132,907 127,930 Total liabilities 180,697 168,924 Shareholder's equity: Share capital - common shares i 66,389 66,389 Retained earnings 101,452 95,195 Accumulated other comprehensive loss (620) (620) Total shareholder's equity 167,221 160,964 Total liabilities and shareholder's equity 347,918 329,888 Regulatory deferral account credit balances s0 2,276 2,307 Deferred taxes associated with regulatory accounts 2,220 1,535 Impact of COVID-19 pandemic 26 Total equity, liabilities and shareholder's equity 352,414 333,730 The accompanying notes are an integral part of these financial statements. On behalf of the Board: Director Director KITCHENER POWER CORP. Consolidated Statement of Comprehensive Income Year ended December 31, 2020, with comparative information for 2019 (Expressed in thousands of dollars) 3 3 0 Note 2020 2019 Energy sales _ T 239,962 $ 206,409 Cost of energy sold 245,909 207,393 (5,947) (984) Other operating revenue Distribution sales 42,690 38,285 Other income `: 2,873 2,867 Net operating revenue 39,616 40,168 Expenses: Operations and maintenance 11,405 11,684 Customer services 5,313 4,474 Administration 5,542 4,341 Amortization 10,022 9,550 32,282 30,049 Other Energy conservation program revenue (727) (1,676) Energy conservation program expense 713 1,676 Net energy conservation programs (14) - Finance income (132) (433) Finance charges 2,981 4,119 Net finance costs 2,849 3,686 Income before income taxes 4,499 6,433 Income tax expense 9 907 870 Income for the year before movements in regulatory deferral account balances 3,592 5,563 Net movement in regulatory deferral account balances related to profit or loss and the related deferred tax movement 6,847 4,927 Income for the year and net movements in regulatory deferral account balances 10,439 10,490 Other comprehensive loss 1:f - (342) Total comprehensive income for the year 10,439 $ 10,148 The accompanying notes are an integral part of these financial statements. 3 3 0 KITCHENER POWER CORP. Consolidated Statement of Changes in Equity Year ended December 31, 2020, with comparative information for 2019 (Expressed in thousands of dollars) The accompanying notes are an integral part of these financial statements. 4 31 Accumulated Share capital other Retained Total comprehensive earnings income (loss) Balance at January 1, 2019 $ 66,389 $ (278) $ 88,739 $ 154,850 Net income before other comprehensNe income (loss) - - 10,490 10,490 Other comprehensive income (loss) - (342) (342) Diudends (4,034) (4,034) Balance at December 31, 2019 66,389 (620) 95,195 160,964 Net income before other comprehensive income (loss) - 10,439 10,439 Other comprehensive income (loss) - - Dividends - - (4,182) (4,182) Balance at December 31, 2020 5 66,389 $ (620) $ 101,452 $ 167,221 The accompanying notes are an integral part of these financial statements. 4 31 KITCHENER POWER CORP. Consolidated Statement of Cash Flows Year ended December 31, 2020, with comparative information for 2019 (Expressed in thousands of dollars) Change in non-cash operating working capital Accounts receivable 2020 2019 Cash flows from operating activities: (2,216) (5,526) Total comprehensive income for the year $ 10,439 $ 10,148 Adjustments to reconcile net income to cash provided by (used in) operations: 201 (302) Amortization 10,752 10,251 Amortization of deferred revenue (1,016) (908) Gain on disposal of property, plant and equipment (149) (36) Income tax expense 907 870 Income taxes paid (816) (1,360) Increase decrease in employee future benefits 77 551 Net cash from operating activities 20,194 19,516 Change in non-cash operating working capital Accounts receivable 1,802 1,029 Unbilled revenue (2,216) (5,526) Inventory (134) (375) Prepaid expenses 201 (302) Other current assets Accounts payable and accrued liabilities 7,683 7,410 Other current liabilities (303) 1,339 Change in regulatory assets (10,261) (2,038) Change in regulatory liabilities 654 (4,468) Change in deferred tax 1,900 489 Net cash from operating activities 19,520 17,074 Cash flows from investing activities: Proceeds on disposals of property, plant and equipment Purchase of property, plant and equipment Purchase of intangible assets Net cash used in investing activities Cash flows from financing activities: Net change in customer deposits Investments in subsidiaries and associates Dividends paid out Change in contributed capital received Repayment of long-term debt Net cash from financing activities Change in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year 151 40 (25,536) (24,487) (385) (315) (25,770) (24,762) The accompanying notes are an integral part of these financial statements. (355) 52 (75) 204 (4,182) (4,034) 4,390 4,383 (607) (1,176) (829) (571) (7,079) (8,259) 13,940 22,199 6,861 $ 13,940 5 32 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 1. Reporting entity: Kitchener Power Corp. (the "Corporation") is a holding company for the affiliate companies, Kitchener -Wilmot Hydro Inc. and Kitchener Energy Services Inc., and is itself wholly owned by the Corporation of the City of Kitchener and the Corporation of the Township of Wilmot. The Corporation oversees the operations of Kitchener -Wilmot Hydro Inc., a regulated distribution company, and Kitchener Energy Services Inc., an unregulated retail services company. The Corporation also owns 33% of Grand River Energy Solutions Corp. (GRE), a generation and renewable energy solutions company. It is located in the City of Kitchener. The address of the Corporation's registered office is 301 Victoria Street South, Kitchener, Ontario, Canada. The financial statements are for the Corporation as at and for the year ended December 31, 2020. 2. Basis of presentation: (a) Statement of compliance: The Corporation's financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"). The financial statements were approved by the Board of Directors on March 26, 2021. (b) Basis of measurement: The financial statements have been prepared on the historical cost basis except for the following: (i) Where held, financial instruments at fair value through profit or loss (ii) Contributed assets are initially measured at fair value. The methods used to measure fair values are discussed further in note 22. (c) Functional and presentation currency: These financial statements are presented in Canadian dollars, which is the Corporation's functional currency. All financial information presented in Canadian dollars has been rounded to the nearest thousand. 6 33 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 2. Basis of presentation (continued): (d) Use of estimates and judgments: The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses and disclosure of contingent assets and liabilities. Actual results may differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the year in which the estimates are revised and in any future periods affected. Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in these financial statements is included in the following notes: i) Note 3(b) — Determination of the performance obligation for contributions from customers and the related amortization period ii) Note 7 — Property, plant and equipment iii) Note 9 — Deferred tax assets iv) Note 12 — Employee future benefits v) Note 17 — Commitments and contingencies (e) Rate regulation: The Corporation is regulated by the Ontario Energy Board ("OEB"), under the authority granted by the Ontario Energy Board Act, 1998. Among other things, the OEB has the power and responsibility to approve or set rates for the transmission and distribution of electricity, providing continued rate protection for electricity consumers in Ontario, and ensuring that transmission and distribution companies fulfill obligations to connect and service customers. The OEB may also prescribe license requirements and conditions of service to local distribution companies ("LDCs"), such as the Corporation, which may include, among other things, record keeping, regulatory accounting principles, separation of accounts for distinct businesses, and filing and process requirements for rate setting purposes. Rate setting: Distribution revenue and electricity rates The OEB sets electricity prices for low-volume consumers twice each year based on an estimate of how much it will cost to supply the province with electricity for the next year. All low volume customers without a contract with an energy retailer are charged the OEB mandated rate for electricity. If a customer (regardless of volume) has a retailer agreement, then retailer rates are charged instead. All remaining consumers pay the market price for electricity. The 7 -34 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 2. Basis of presentation (continued): (e) Rate regulation (continued): Corporation is billed for the cost of the electricity that its customers use and passes this cost on to the customer at cost without a mark-up. For the distribution revenue included in electricity sales, the Corporation files a "Cost of Service" ("COS") rate application with the OEB every four years where rates are determined through a review of the forecasted annual amount of operating and capital expenses, debt and shareholder's equity required to support the Corporation's business. The Corporation estimates electricity usage and the costs to service each customer class to determine the appropriate rates to be charged to each customer class. The COS application is reviewed by the OEB and intervenors and rates are approved based upon this review, including any revisions resulting from that review. In the intervening years, an Incentive Rate Mechanism application ("IRM") is filed. An IRM application results in a formulaic adjustment to distribution rates that were set under the last COS application. The previous year's rates are adjusted for the annual change in the Gross Domestic Product Implicit Price Inflator for Final Domestic Demand (`GDP IPI -FDD") net of a productivity factor and a "stretch factor" determined by the relative efficiency of an electricity distributor. As a licensed distributor, the Corporation is responsible for billing customers for electricity generated by third parties and the related costs of providing electricity service, such as transmission services and other services provided by third parties. The Corporation is required, pursuant to regulation, to remit such amounts to these third parties, irrespective of whether the Corporation ultimately collects these amounts from customers. The Corporation filed a COS application on April 30, 2019 for rates effective January 1, 2020 to December 31, 2020. Electricity rates were impacted by the COVID-19 pandemic, distribution rates were unaffected, which has been discussed further in Note 26. (f) Investments Investments in subsidiary companies, associates and other long-term investments are accounted for by the equity method. Dividends received are recorded as a reduction of the carrying value of these investments. 8 S KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 3. Significant accounting policies: The accounting policies set out below have been applied consistently in all years presented in these financial statements unless otherwise indicated. (a) Financial instruments: At initial recognition, the Company measures its financial assets at fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss. Subsequent measurement of the financial asset depends on the classification determined on initial recognition. Financial assets are classified as either amortized cost, fair value through other comprehensive income or fair value through profit or loss, depending on its business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. Financial assets are not reclassified subsequent to their initial recognition, unless the Company changes its business model for managing financial assets. Financial liabilities are initially measured at fair value, net of transaction costs incurred. They are subsequently carried at amortized cost using the effective interest rate method; any difference between the proceeds (net of transaction costs) and the redemption value is recognized as an adjustment to interest expense over the period of the borrowings. The Corporation has not entered into derivative instruments. Hedge accounting has not been used in the preparation of these financial statements. Cash equivalents include short-term investments with maturities of three months or less when purchased. (b) Revenue recognition: Sale and distribution of electricity The performance obligations for the sale and distribution of electricity are recognized over time using an output method to measure the satisfaction of the performance obligation. The value of the electricity services transferred to the customer is determined on the basis of cyclical meter readings plus estimated customer usage since the last meter reading date to the end of the year and represents the amount that the Corporation has the right to bill. Revenue includes the cost of electricity supplied, distribution, and any other regulatory charges. The related cost of power is recorded on the basis of power used. For customer billings related to electricity generated by third parties and the related costs of providing electricity service, such as transmission services and other services provided by third parties, the Corporation has determined that it is acting as a principal for these electricity charges and, therefore, has presented electricity revenue on a gross basis. 3 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (b) Revenue recognition (continued): Capital contributions Developers are required to contribute towards the capital cost of construction of distribution assets in order to provide ongoing service. The developer is not a customer and therefore the contributions are scoped out of IFRS 15 Revenue from Contracts with Customers. Cash contributions, received from developers are recorded as deferred revenue. When an asset other than cash is received as a capital contribution, the asset is initially recognized at its fair value, with a corresponding amount recognized as deferred revenue. The deferred revenue, which represents the Corporation's obligation to continue to provide the customers access to the supply of electricity, is amortized to income on a straight-line basis over the useful life of the related asset. Certain customers are also required to contribute towards the capital cost of construction of distribution assets in order to provide ongoing service. These contributions fall within the scope of IFRS 15 Revenue from Contracts with Customers. The contributions are received to obtain a connection to the distribution system in order receive ongoing access to electricity. The Corporation has concluded that the performance obligation is the supply of electricity over the life of the relationship with the customer which is satisfied over time as the customer receives and consumes the electricity. Revenue is recognized on a straight-line basis over the useful life of the related asset. Other revenue Revenue earned from the provision of services is recognized as the service is rendered. Government grants and the related performance incentive payments under CDM programs are recognized as revenue in the year when there is reasonable assurance that the program conditions have been satisfied and the payment will be received. (c) Inventory: Inventory, comprising material and supplies, the majority of which is consumed by the Corporation in the provision of its services, is valued at the lower of cost and net realizable value, with cost being determined on a weighted average cost basis, and includes expenditures incurred in acquiring the material and supplies and other costs incurred in bringing them to their existing location and condition. Net realizable value is the estimated selling price in the ordinary course of business, less estimated selling expenses. (d) Property, plant and equipment: Items of property, plant and equipment ("PP&E") used in rate -regulated activities and acquired prior to January 1, 2015 are measured at deemed cost established on the transition date, less accumulated depreciation. All other items of PP&E are measured at cost, or, where the item is transferred from customers, its fair value, less accumulated depreciation. Consistent with IFRS 1, the Corporation elected to use the carrying amount as previously 10 37 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (d) Property, plant and equipment (continued): determined under Canadian GAAP as the deemed cost at January 1, 2015, the transition date to IFRS. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self -constructed assets includes the cost of materials, direct labour, and any other costs directly attributable to bringing the asset to a working condition for its intended use. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Gains and losses on the disposal of an item of PP&E are determined by comparing the proceeds from disposal, if any, with the carrying amount of the item of PP&E and are recognized net within other income in profit or loss. Major spare parts and standby equipment are recognized as items of PP&E. The cost of replacing a part of an item of property, plant and equipment is recognized in the net book value of the item if it is probable that the future economic benefits embodied within the part will flow to the Corporation and its cost can be measured reliably. In this event, the replaced part of property, plant and equipment is written off, and the related gain or loss is included in profit or loss. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred. Depreciation is calculated over the depreciable amount and is recognized in profit or loss on a straight-line basis over the estimated useful life of each part or component of an item of property, plant and equipment. The depreciable amount is cost. Land is not depreciated. Construction -in -progress assets are not amortized until the projects are complete and in service. The estimated useful lives are as follows: Buildings 20-50 years Transformer station equipment 15-50 years Distribution station equipment 15-50 years Distribution system 25-60 years Meters 15-25 years SCADA equipment 15 years Other capital assets 3-10 years Depreciation methods, useful lives, and residual values are reviewed at each reporting date and adjusted prospectively if appropriate. KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (e) Intangible assets (continued): (i) Computer software: Computer software that is acquired or developed by the Corporation, including software that is not integral to the functionality of equipment purchased which has finite useful lives, is measured at cost less accumulated amortization and accumulated impairment losses. (ii) Land rights: Payments to obtain rights to access land ('land rights") are classified as intangible assets. These include payments made for easements, right of access and right of use over land for which the Corporation does not hold title. Land rights are measured at cost less accumulated amortization and accumulated impairment losses. (iii) Amortization: Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The estimated useful lives are: Computer software 3-10 years Land rights 100 years Amortization methods and useful lives of all intangible assets are reviewed at each reporting date and adjusted prospectively if appropriate. (f) Impairment: (i) Financial assets: A loss allowance for expected credit losses on financial assets measured at amortized cost is recognized at the reporting date. The loss allowance is measured at an amount equal to the lifetime expected credit losses for the asset. 12 3 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (f) Impairment (continued): (ii) Non-financial assets: The carrying amounts of the Corporation's non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "cash -generating unit"). The recoverable amount of an asset or cash -generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognized if the carrying amount of an asset or its cash -generating unit exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. An impairment loss in respect of goodwill is not reversed. For assets other than goodwill, impairment recognized in prior periods is assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. (g) Provisions: A provision is recognized if, as a result of a past event, the Corporation has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. M 40 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 3e Significant accounting policies (continued): (h) Regulatory deferral accounts: Regulatory deferral account debit balances represent costs incurred in excess of amounts billed to the customer at OEB approved rates. These amounts have been accumulated and deferred in anticipation of their future recovery in electricity distribution rates. Regulatory deferral account credit balances represent amounts billed to the customer at OEB approved rates in excess of costs incurred by the Corporation. Regulatory deferral account debit balances are recognized if it is probable that future billings in an amount at least equal to the capitalized cost will result from inclusion of that cost in allowable costs for rate -making purposes. The offsetting amount is recognized in profit and loss. The debit balance is reduced by the amount of customer billings as electricity is delivered to the customer and the customer is billed at rates approved by the OEB for the recovery of the capitalized costs. Regulatory deferral account credit balances are recognized if it is probable that future billings in an amount at least equal to the credit balance will be reduced as a result of rate -making activities. The offsetting amount is recognized in profit and loss. The credit balance is reduced by the amounts returned to customers as electricity is delivered to the customer at rates approved by the OEB for the return of the regulatory account credit balance. The probability of recovery or repayment of the regulatory account balances are assessed annually based upon the likelihood that the OEB will approve the change in rates to recover or repay the balance. Any resulting impairment loss is recognized in profit and loss in the year incurred. Regulatory deferral accounts attract interest at OEB prescribed rates. With the exception of Pension and OEB Forecast Accrual accounts (OPEBs), the rates from January to June 2020 were 2.18%, and July to December 2020 were 0.57%. Prior year rates from January to March 2019 were 2.45%, April to December 2019 were 2.18%. In 2020, OPEBs were 2.88% for the period January to March, 2.48% for the period April to September and 2.03% for period October to December. In 2019, OPEBs were 3.82% for the period January to March, 3.39% for the period April — June and 2.88% for the period July to December. 14 41. KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (i) Employee future benefits: (i) Pension plan: The Corporation provides a pension plan for all its full-time employees through Ontario Municipal Employees Retirement System ("OMERS"). OMERS is a multi-employer pension plan which operates as the Ontario Municipal Employees Retirement Fund ("the Fund"), and provides pensions for employees of Ontario municipalities, local boards and public utilities. The Fund is a contributory defined benefit pension plan, which is financed by equal contributions from participating employers and employees, and by the investment earnings of the Fund. To the extent that the Fund finds itself in an under -funded position, additional contribution rates may be assessed to participating employers and members. OMERS is a defined benefit plan. However, as OMERS does not segregate its pension asset and liability information by individual employers, there is insufficient information available to enable the Corporation to directly account for the plan. Consequently, the plan has been accounted for as a defined contribution plan. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in net income when they are due. (ii) Post -employment benefits, other than pension: The Corporation provides some of its retired employees with life insurance and medical benefits beyond those provided by government sponsored plans. The cost of these benefits is expensed as earned by employees through employment service. The accrued benefit obligations and the current service costs are actuarially determined by applying the projected unit credit method and reflect management's best estimate of certain underlying assumptions. Actuarial gains and losses arising from defined benefit plans are recognized immediately in other comprehensive income and reported in retained earnings. When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognized in net income on a straight-line basis over the average period until the benefits become vested. In circumstances where the benefits vest immediately, the expense is recognized immediately in net income. 1F. 4 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): 0) Deferred revenue and assets transferred from customers: Certain customers and developers are required to contribute towards the capital cost of construction in order to provide ongoing service. When an asset is received as a capital contribution, the asset is initially recognized at its fair value, with the corresponding amount recognized as deferred revenue. Deferred revenue represents the Corporation's obligation to continue to provide customers access to the supply of electricity, and is amortized to income on a straight-line basis over the economic useful life of the acquired or contributed asset, which represents the period of ongoing service to the customer. (k) Leased assets: This policy is effective for periods before January 1, 2019. Refer to Note 24 for the change in accounting policy to IFRS 16. Leases, where the terms cause the Corporation to assume substantially all the risks and rewards of ownership, are classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. All other leases are classified as operating leases and the leased assets are not recognized on the Corporation's balance sheet. Payments made under operating leases are recognized in profit or loss on a straight-line basis over the term of the lease. (1) Finance income and finance costs: Finance income is recognized as it accrues in profit or loss, using the effective interest method. Finance income comprises interest earned on cash and cash equivalents and on regulatory assets. Finance charges comprise interest expense on borrowings, finance lease obligations, regulatory liabilities and unwinding of the discount on provisions and impairment losses on financial assets. Finance costs are recognized as an expense unless they are capitalized as part of the cost of qualifying assets. 16 43 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (m) Income taxes: The income tax expense comprises current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case, it is recognized in equity. The Corporation is currently exempt from taxes under the Income Tax Act (Canada) and the Ontario Corporations Tax Act (collectively the "Tax Acts"). Under the Electricity Act, 1998, the Corporation makes payments in lieu of corporate taxes to the Ontario Electricity Financial Corporation ("OEFC"). These payments are calculated in accordance with the rules for computing taxable income and taxable capital and other relevant amounts contained in the Income Tax Act (Canada) and the Corporations Tax Act (Ontario) as modified by the Electricity Act, 1998, and related regulations. Prior to October 1, 2001, the Corporation was not subject to income or capital taxes. Payments in lieu of taxes are referred to as income taxes. Current tax is the tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognized using the balance sheet method. Under this method, deferred income taxes reflect the net tax effects of temporary differences between the tax basis of assets and liabilities and their carrying amounts for accounting purposes, as well as for tax losses available to be carried forward to future years that are likely to be realized. Deferred tax assets and liabilities are measured using enacted or substantively enacted tax rates, at the reporting date, expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the year that includes the date of enactment or substantive enactment. -i7 44 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 4. Cash: Land and Distribution Other fixed Construction - 2020 2019 Cash $ 6,861 $ 13,940 5. Accounts receivable: Balance at January 1, 2020 $ 24,729 2020 $ 12,976 2019 Customer and other trade receivables $ 15,667 $ 17,397 Trade receivables from related parties 42 25,536 114 - S 15,709 $ 17,511 6. Inventory: The amount of inventory consumed by the Corporation and recognized as an expense during 2020 was $279 (2019 - $363). 7. Property, plant and equipment: (a) Cost or deemed cost: Land and Distribution Other fixed Construction - buildings equipment assets in -progress Total Balance at January 1, 2019 $ 24,463 $ 242,418 $ 8,850 $ 3,622 $ 279,353 Additions 279 17,723 4,614 1,865 24,481 Transfers - - - Disposals/Retirements (13) (132) (488) (633) Balance at December 31, 2019 $ 24,729 $ 260,009 $ 12,976 $ 5,487 $ 303,201 16 45 1 Land and Distribution Other fixed Construction - buildings equipment assets in -progress Total Balance at January 1, 2020 $ 24,729 $ 260,009 $ 12,976 $ 5,487 $ 303,201 Additions 1,709 17,846 5,631 350 25,536 Transfers - - - - Disposals/Retirements (5) (62) (1,182) - (1,249) Balance at December 31, 2020 $ 26,433 $ 277,793 $ 17,425 $ 5,837 $ 327,488 Land and Distribution Other fixed Construction - buildings equipment assets in -progress Total Balance at January 1, 2019 $ 24,463 $ 242,418 $ 8,850 $ 3,622 $ 279,353 Additions 279 17,723 4,614 1,865 24,481 Transfers - - - Disposals/Retirements (13) (132) (488) (633) Balance at December 31, 2019 $ 24,729 $ 260,009 $ 12,976 $ 5,487 $ 303,201 16 45 1 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 7. Property, plant and equipment (continued) (b) Accumulated depreciation: (d) Leased plant and equipment: The Corporation does not have leases for plant or equipment. (e) Security: At December 31, 2020, the Corporation had zero properties subject to a general security agreement. (f) Borrowing costs: During the year, borrowing costs of $nil (2019 - $nil) were capitalized as part of the cost of property, plant and equipment. .!9 46 Land and Distribution Other fixed Construction - buildings equipment assets in -progress Total Balance at January 1, 2020 $ 2,718 $ 37,766 $ 2,853 $ S 43,337 Depreciation charge 716 8,317 1,351 10,384 Disposals/Retirements (s) (62) (1,180) (1,247) Balance at December 31, 2020 $ 3,429 $ 46,021 $ 3,024 $ .3 52,474 Land and Distribution Other fixeif Construction - buildings equipment assets in -progress Total Balance at January 1, 2019 $ 2,053 $ 30,012 $ 2,059 $ $ 34,124 Depreciation charge 678 7,886 1,282 9,846 Disposals/Retirements (13) (132) (488) (633) Balance at December 31, 2019 $ 2,718 $ 37,766 $ 2,853 $ S 43,337 (c) Carrying amounts: Land and Distribution Other fixed Construction - buildings equipment assets in -progress Total At December 31, 2020 $ 23,004 $ 231,772 $ 14,401 $ 5,837 $ 275,014 At December 31, 2019 $ 22,011 $ 222,243 $ 10,123 $ 5,487 $ 259,864 (d) Leased plant and equipment: The Corporation does not have leases for plant or equipment. (e) Security: At December 31, 2020, the Corporation had zero properties subject to a general security agreement. (f) Borrowing costs: During the year, borrowing costs of $nil (2019 - $nil) were capitalized as part of the cost of property, plant and equipment. .!9 46 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 7. Property, plant and equipment (continued): (g) Allocation of depreciation and amortization: The depreciation of property, plant and equipment and the amortization of intangible assets has been allocated to profit or loss as follows: Operations Customer Energy and services Administration conservation Other Total maintenance expense expense expense expense December 31, 2020: Depreciation of property, plant and equipment 5 717 $ as S 7 $ 9,654 $ 10,384 Amortization of intangible assets 368 368 717 $ 6 $ S 7 $ 10,022 $ 10,752 Operations Customer Energy and &Vryices Adminlstrat3on consarvation Other Total maintenance expense expense expense expense December 31, 2019; Depreciation of property, plant and equipment $ 688 S 6 5 $ 7 S 9,145 $ 9,846 Amortization of intangible assets - 405 405 688 $ 7 S 9,550 $ 10,251 8. Intangible assets: (a) Cost or deemed cost: Balance at January 1, 2020 Additions Disposals Computer Land Software Rights Total $ 3,120 $ 385 d $ ;?,128 - 385 Balance at December 31, 2020 $ 3,5€ 5 $ 8 $ 3,513 Balance at January 1, 2019 $ 2,802 S 8 2,810 Additions 321 - 321 Additions 4 - 4 Balance at December 31, 2019 S 3,119 8 8 $ 3,127 47 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 8. Intangible assets (continued): (b) Accumulated amortization: Computer Land Software Rights Total Balance at January 1, 2020 S 2.119- S 8 2.11 9 Additions 368 368 Balance at December 31, 2020 2,869 8 8 2.80,7 Balance at January 1, 2019 $ 2,086 $ 8 $ 2,094 Additions 404 404 Balance at December 31, 2019 $ 2,490 $ 8 $ 2,498 (c) Carrying amounts: Computer Land Software Rights Total At December 31, 2020 646 $ S 646 At December 31, 2019 $ 629 $ - $ 4-29 21 4b KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 9. Income tax expense: Current tax expense: 2020 2019 Current period 1,297 $ 1,138 Adjustment for prior periods (332) (194) $ 965 $ .144 Deferred tax expense: 2020 2019 Original & reversal of temporary differences 9 (21) $ (47) Recognition of previously unrecognized tax losses (38) (26) Sq (59) $ (73) Reconciliation of effective tax rate: Total comprehensive income for the year Total income tax expense 2020 $ 10,715 $ 907 2019 10,148 870 Comprehensive income before income taxes 11,622 11,018 Income tax using the Corporation's statutory tax rate of 26.5% 3,080 2,920 Temporary differences not benefitted (1,841) (1,856) Under (over) provided in prior periods (332) (194) $ 907 $ 870 Significant components of the Corporation's deferred tax balances are as follows: Deferred tax assets (liabilities): Plant and equipment Non -vested sick leave Employee benefits IIIIa,1y isiU- 1azSuis � os -&-c ir'y-rYY oIaIc d• Ontario refundable tax credits Deferred tax liabU4 Deferred revenue - contributed capital 2020 2019 $ (16,989) $ (14,168) 168 168 1,573 1,552 204 U V 14 18 4 415 a 51F 10,819 9,894 $ 211 $ 173 22 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 10. Regulatory deferral account balance: The following is a reconciliation of the carrying amount for each class of regulatory deferral account balances: Remaining recovery/ Balances reversal arising in the Recovery/ period 2019 period Reversal Other 2020 (years) Regulatory deferral account debit balances Group 1 deferred accounts $ 1,239 $ 2,202 $ 5,428 $ ;':S3i g 8,716 Note 1, Note 3 Regulatory asset reco\,ery account 630 285 (141) 774 Note 1 Smart meter recoeery 13 - (13) Deferred tax asset x,790 2,585 - 8,375 Note 2 LRAM 837 1,728 (837) 1,728 1 Other 891 1j '1 (892) 6 -ti Total amount related to regulatory deferral account debit balances $ 9,400 $ 6,869 $ 3,545 $ (153) $ 19,661 2019 Regulatory deferral account credit balances Group 1 deferred accounts C5' Regulatory asset recovery account Deferred tax liability Other Remaining recovery/ Balances reversal arising In the Recovery/ period period Reversal Offiuf 2020 (years) r� (160) (152) Note - Nota - - Notu 2 2 (696) a?iii Total amount related to regulatory deferral account credit balances 2,307 977 (856) (152) 2,276 Movements In regulatory accounts Net change in regulatory deferral account debit and credit balances Less movement related to the balance sheet Deferred income tax Deferred revenue Amounts mo\ed to property, plant, equipment Net movement in regulatory deferral account balances related to profit or loss and the related deferral tax movement 2020 2019 10,292 6,677 (2,585) (933) (860) (817) 6,847 4,927 23 50 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 10. Regulatory deferral account balance (continued): Note 1 KWHI expects to be approved for collection of these amounts in its 2021 filing for 2022 rates. Note 2 KWHI has not sought approval for the disposition of this amount as changes in underlying assumptions may reduce the amounts recorded in the account. KWHI may seek refunds in the future. Note 3 In December 2020, KWHI was informed that beginning June 2015 charges for one delivery point were not included in the monthly power bill. KWHI has accrued a payable of $6 million, offset by a regulatory asset. These monies are expected to begin being collected through a Board approved rate rider in 2022. Note 4 COVID-19 Emergency Deferral The COVID-19 emergency deferral account comprises of five sub -accounts established to track incremental costs and lost revenues related to the COVID-19 pandemic: (i) Billing and System Changes as a Result of the Emergency Order Regarding Time -of -Use Pricing, (ii) Lost Revenues Arising from the COVID-19 Emergency, (iii) Other Incremental Costs, (iv) Foregone Revenues from Postponing Rate Implementation, and (v) Bad Debt. On December 16, 2020, the OEB Staff released their proposal on the COVID-19 deferral accounts which introduces certain criteria to that may need to be satisfied for amounts to be eligible for recovery. Based on this information, management believes there is high uncertainty in regards to the recoverability of costs and lost revenues related to government and OEB customer relief actions, and therefore a low probability of recovery. Costs directly related to the implementation of safety measures as a result of the COVID-19 pandemic were tracked. $69k has been recorded in the COVID-19 Emergency Deferral Account as at December 31, 2020. 24 -91. KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 11. Long-term debt: Effective August 1, 2000, the Corporation incurred unsecured promissory notes payable to the City of Kitchener and the Township of Wilmot, and have an interest rate of 3.23% per annum. Interest is payable in quarterly installments, in arrears, on March 31St, June 301, September 301 and December 31St. In 2019 the interest rate was 4.88%. Effective February 1, 2010, the Corporation incurred a ten year senior unsecured debenture payable to Ontario Infrastructure Projects Corporation. An initial payment of $7,000 was received February 1, 2010, followed by a second payment of $3,000 on May 17, 2010. The debenture had an interest rate of 4.28%, and interest was payable in equal semi-annual installments, in arrears, on May 17th and November 171 each year commencing November 17, 2010. The debenture was paid off in in 2020 in accordance with the payment schedule. 2020 2019 Senior unsecured debentures: City of Kitchener 5 70,998 :ti 70,998 Township of Wilmot 5,965 5,965 Ontario Infrastructure Projects Corporation - 607 Senior unsecured debentures, net proceeds 76,963 $ 77,570 Less: current portion of long-term debt Total long-term debt 12. Employee future benefits: - $ (607) 76,963 $ 76,963 The Corporation pays certain medical and life insurance benefits on behalf of some of its retired employees. The Corporation recognizes these post-retirement costs in the period in which employees' services were rendered. The accrued benefit liability at December 31, 2020 of $5,937 was based on an actuarial valuation completed in 2020 using a discount rate of 3.1% (3.1% in 2019). 2:,) 5 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 12. Employee future benefits (continued): Changes in the present value of the defined benefit unfunded obligation and the accrued benefit liability: Actuarial losses recognized in other comprehensive income: _ 2020 2019 Cumulative amount at January 1 (620) $ (278) Recognized during the year (342) Cumulative amount at December 31 (620) $ (620) t6 S3 2020 201'9 Defined benefit obligation, beginning of year 5,858 $ a.30 Current service cost 192 160 Interest cost 178 202 Benefits paid during the year (291) (274) Actuarial loss recognized in other - 465 comprehensive income Accrued benefit liability, end of year 5,937 $ 5,858 Components of net benefit expense recognized are as follows: 2020 2019 Current service cost S 192 $ 160 Interest cost 178 202 Net benefit expense recognized 370 $ 362 Actuarial losses recognized in other comprehensive income: _ 2020 2019 Cumulative amount at January 1 (620) $ (278) Recognized during the year (342) Cumulative amount at December 31 (620) $ (620) t6 S3 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 12. Employee future benefits (continued): The significant actuarial assumptions used in the valuation are as follows (weighted average): 2020 2019 Accrued benefit obligation: Discount rate 3.1% 3.1% Benefit cost for the year: Age Withdrawal rate 18-29 3.50% 3.50% 30-34 2.00% 2.00% 35-39 1.7% 1.7% 40-49 1.3% 1.3% 50-54 1.0% 1.0% Assumed health care cost trend rates: Initial health care cost trend rate Health 4.4% 4.2% Dental 4.7% 4.5% The approximate effect on the accrued benefit obligation of the entire plan and the estimated net benefit expense of the entire plan if the health care trend rate assumption was increased or decreased by 1 %, and all other assumptions were held constant, is as follows: Benefit Periodic Obligation Benefit Cost 1% increase in health care trend rate 215 $ 22 1% decrease in health care trend rate (193) $ (19) Historical Information Amounts for the current and previous year, for the entire plan, are as follows: Defined benefit obligation Experience adjustments 2020 2019 3 5,937 $ 5,858 - $. (342) 27 5 1 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 12. Employee future benefits (continued): The main actuarial assumptions utilized for the valuation are as follows: General inflation - future general inflation levels, as measured by the changes in the Consumer Price Index, were assumed at 2% in 2020, and thereafter (2019 - 2%). Discount (interest) rate - the discount rate used to determine the present value of future liabilities and the expense for the year ended December 31, 2020, was 3.1% (2019 - 3.1 %). Salary levels - future general salary and wage levels were assumed to increase at 3.3% (2019 - 3.3%) per annum. Medical costs - medical costs were assumed to be 4.4% for 2020, (2019 - 4.5%) increasing annually to 4.9% in 2022. Dental costs - dental costs were assumed to be 4.7% for 2020 increasing annually to 5.1 % in 2022. 13. Customer and IESO deposits: Customer deposits represent cash deposits from electricity distribution customers and retailers, as well as construction deposits. Deposits from electricity distribution customers are refundable to customers who demonstrate an acceptable level of credit risk as determined by the Corporation in accordance with policies set out by the OEB or upon termination of their electricity distribution service. Construction deposits represent cash prepayments for the estimated cost of capital projects recoverable from customers and developers. Upon completion of the capital project, these deposits are transferred to deferred revenue. The Corporation delivers conservation and demand management programs for its customers on behalf of the IESO. Prepayments received from the IESO have been recorded and will be transferred to revenue as programs are delivered and the revenue is earned. The deposits comprise: 2020 2019 Customer deposits 6,424 $ 7,414 Construction deposits 7,196 6,982 IESO deposit for energy conservation programs 1,158 1,158 Total customer and IESO deposits $ 14,778 $ 15,554 8 55 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 14. Share capital: 2020 2019 Authorized: Unlimited number of common shares Issued: 20,000 common shares $ 66,389 $ 66,389 Dividends: The holders of the common shares are entitled to receive dividends as declared from time to time. The Corporation paid aggregate dividends in the year on common shares of $4,182 (2019 - $4,034). 15. Other operating revenue: Other income comprises: 2020 2019 Specific service charges 3 1,875 $ 1,844 Deferred revenue 1,016 908 Scrap sales 101 190 Net gain on disposal of capital assets 149 36 Retailer services 48 i,4 Sundry (316) (155_) Total other income $ 2,873 $ 2,867 16. Finance income and expense: 2020 2019 Interest income on bank deposits $ 132 $ 433 Finance income 132 433 Interest expense on long-term debt 2,496 3,816 Interest expense on short-term debt 271 Interest expense on BMO Letter of Credit 123 122 Interest expense on deposits 91 170 Other 11 2,981 4,119 Net finance costs recognized in profit or loss S 2,849 $ 3,686 21-' 56 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 17. Commitments and contingencies: Contractual Obligations There are no contractual obligations General From time to time, the Corporation is involved in various litigation matters arising in the ordinary course of its business. The Corporation has no reason to believe that the disposition of any such current matter could reasonably be expected to have a materially adverse impact on the Corporation's financial position, results of operations or its ability to carry on any of its business activities. General Liability Insurance: The Corporation is a member of the Municipal Electric Association Reciprocal Insurance Exchange (MEARIE). MEARIE is a pooling of public liability insurance risks of many of the LDCs in Ontario. All members of the pool are subjected to assessment for losses experienced by the pool for the years in which they were members, on a pro -rata basis based on the total of their respective service revenues. As at December 31, 2020, no assessments have been made. 18. Guarantees: Kitchener Power Corp. is the guarantor for a line of credit issued by the Canadian Imperial Bank of Commerce on behalf of Grand River Energy Solutions Corp (GRE Corp). GRE Corp is one third owned by each of Kitchener Power Corp., Waterloo North Hydro Holding Corporation and Cambridge & North Dumfries Energy Plus Inc.; each of which has guaranteed a maximum of $6 million in the event of default by GRE Corp. This increased from $3 million to $6 million on April 1, 2020. 19. Pension agreement: The Corporation provides a pension plan for its employees through OMERS. The plan is a multi- employer, contributory defined pension plan with equal contributions by the employer and its employees. In 2020, the Corporation made employer contributions of $1,723 to OMERS (2019 - $1,661). The Corporation's net benefit expense has been allocated as follows: a) $449 (2019 - $459) capitalized as part of property, plant and equipment; b) $1,274 (2019 - $1,202) charged to net income. The Corporation estimates that a contribution of $1,739 to OMERS will be made during the next fiscal year. 30 57 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 20. Employee benefits: 21. Related party transactions: (a) Parent and ultimate controlling party: The Corporation is wholly-owned by the Corporation of the City of Kitchener and the Corporation of the Township of Wilmot. The City and the Township produce financial statements that are available for public use. (b) Entity with significant influence: The Corporation of the City of Kitchener exercises significant influence over the Corporation through its 92.25% ownership interest in the Corporation. (c) Key management personnel: The key management personnel of the Corporation have been defined as members of its board of directors and executive management team members, and is summarized below. Directors' fees Salaries and other short-term benefits Post employment benefits Other long-term benefits (OMERS) (d) Transactions with parent: 2020 2020 2019 Salaries, wages and benefits $ 19,684 $ 19,022 CPP and EI remittances 732 722 Contributions to OMERS 1,723 1,661 Expenses related to defined benefit plans 370 361 $ 22,509 $ 21,766 21. Related party transactions: (a) Parent and ultimate controlling party: The Corporation is wholly-owned by the Corporation of the City of Kitchener and the Corporation of the Township of Wilmot. The City and the Township produce financial statements that are available for public use. (b) Entity with significant influence: The Corporation of the City of Kitchener exercises significant influence over the Corporation through its 92.25% ownership interest in the Corporation. (c) Key management personnel: The key management personnel of the Corporation have been defined as members of its board of directors and executive management team members, and is summarized below. Directors' fees Salaries and other short-term benefits Post employment benefits Other long-term benefits (OMERS) (d) Transactions with parent: 2020 2019 S 67 $ 58 1,061 U93 19 18 90 84 $ 1,237 $ IJ 53 During the year the Corporation paid management and business development services to its parent in the amount of $nil (2019 - $nil) (e) Transactions with entity with significant influence: In the ordinary course of business, the Corporation delivers electricity to the Corporation of the City of Kitchener. Electricity is billed to the City of Kitchener at prices and under terms approved by the OEB. S8 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 21. Related party transactions (continued): (f) Transactions with ultimate parent (the City of Kitchener) In 2020, the Corporation had the following significant transactions with its ultimate parent, a government entity: • Construction, contracted through Kitchener Wilmot Hydro Inc. • Streetlight maintenance services contracted through Kitchener Energy Services Inc. 22. Financial instruments and risk management: Fair value disclosure Cash and cash equivalents are measured at fair value. The carrying values of receivables, and accounts payable and accrued charges approximate fair value because of the short maturity of these instruments. The carrying value of the customer deposits approximates fair value because the amounts are payable on demand. The fair value of the long-term debt (senior unsecured debentures issued by the shareholders (City of Kitchener and Township of Wilmot) approximates the carrying value due to the short term nature of the loan. The fair value of the long-term debt (senior unsecured debentures) issued by Ontario Infrastructure Projects Corporation at December 31, 2020 is zero (2019 - $607). The final loan balance was paid in full in 2020. The fair value prior to 2020 was calculated based on the present value of future principal and interest cash flows, discounted at the current rate of interest at the reporting date. The interest rate used to calculate fair value at was 4.28%. Financial risks The Corporation understands the risks inherent in its business and defines them broadly as anything that could impact its ability to achieve its strategic objectives. The Corporation's exposure to a variety of risks such as credit risk, interest rate risk, and liquidity risk, as well as related mitigation strategies are discussed below. (a) Credit risk: Financial assets carry credit risk that a counterparty will fail to discharge an obligation which could result in a financial loss. Financial assets held by the Corporation, such as accounts receivable, expose it to credit risk. The Corporation earns its revenue from a broad base of customers located in the City of Kitchener and the Township of Wilmot. As of December 31, 2020, two customers accounted for more than 1% of total accounts receivable, totaling $341 (or 2.2%) out of a total accounts receivable of $15,709. 32 5 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 22. Financial instruments and risk management (continued): (a) Credit risk (continued): The carrying amount of accounts receivable is reduced through the use of an allowance for impairment and the amount of the related impairment loss is recognized in net income. Subsequent recoveries of receivables previously provisioned are credited to net income. The balance of the allowance for impairment at December 31, 2020 is $500 (2019 - $250). The allowance was increased due to an expected increase in Covid-19 related bad debt. An impairment loss of $793 (2019 - $44) was recognized during the year. This included a significant loss of $385 as a result of the bankruptcy of a single customer in 2020, in addition to a general increase due to the pandemic lockdowns. The future impact of the pandemic remains uncertain. The Corporation's credit risk associated with accounts receivable is primarily related to payments from distribution customers. At December 31, 2020, approximately $314 (2019 - $245) is considered 60 days past due. The Corporation has over 99 thousand customers, the majority of whom are residential. Credit risk is managed through collection of security deposits from customers in accordance with directions provided by the OEB. As at December 31, 2020, the Corporation holds security deposits in the amount of $14,800 (2019 - $15,600). (b) Market risk: Market risks primarily refer to the risk of loss resulting from changes in commodity prices, foreign exchange rates, and interest rates. The Corporation currently does not have any material commodity or foreign exchange risk. The Corporation is exposed to fluctuations in interest rates as the regulated rate of return for the Corporation's distribution business is derived using a complex formulaic approach which is in part based on the forecast for long- term Government of Canada bond yields. This rate of return is approved by the OEB as part of the approval of distribution rates. A 1% increase in the interest rate at December 31, 2020 would have increased interest expense on the long-term debt by $nil (2019 - $6), assuming all other variables remain constant. A 1 % decrease in the interest rate would have an equal but opposite effect. (c) Liquidity risk: The Corporation monitors its liquidity risk to ensure access to sufficient funds to meet operational and investing requirements. The Corporation's objective is to ensure that sufficient liquidity is on hand to meet obligations as they fall due while minimizing interest exposure. The Corporation has access to a $35,000 credit facility and monitors cash balances daily to ensure that a sufficient level of liquidity is on hand to meet financial commitments as they come due. As at December 31, 2020, no amounts had been drawn under Bank of Montreal credit facility (2019 - $nil). The Corporation also has a bilateral facility for $35,000 (the "LC" facility) for the purpose of issuing letters of credit mainly to support the prudential requirements of the IESO, of which $35,000 has been drawn and posted with the IESO (2019 - $35,000). The majority of accounts payable, as reported on the balance sheet, are due within 30 days. 33 60 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 22. Financial instruments and risk management (continued): (c) Liquidity risk (continued): The Company's currently available liquidity is also expected to be sufficient to address any reasonably foreseeable impacts that the COVID-19 pandemic may have on the Company's cash requirements. (d) Capital disclosures: The main objectives of the Corporation, when managing capital, are to ensure ongoing access to funding to maintain and improve the electricity distribution system, compliance with covenants related to its credit facilities, prudent management of its capital structure with regard for recoveries of financing charges permitted by the OEB on its regulated electricity distribution business, and to deliver the appropriate financial returns. The Corporation's definition of capital includes shareholder's equity and long-term debt. As at December 31, 2020, shareholder's equity amounts to $167,496 (2019 - $160,964) and long- term debt amounts to $76,963 (2019 - $76,963). 23. Revenue from Contracts with Customers The Corporation generates revenue primarily from the sale and distribution of electricity to its customers. Other sources of revenue include performance incentive payments under CDM programs. 2020 2019 Revenue from Contracts with Customers S 284,230 $ 246,092 Other Revenue: CDM programs 727 1 676 Other 1,426 1.901 Total 5 286,383 $ 249,669 In the following table, revenue from contracts with customers is disaggregated by type of customer. 2020 2019 Residential 127,780 $ 93,701 Commercial 153,515 149,386 Large Users 1,346 1,448 Other 1,589 1,557 Total Revenue 284,230 $ 246,092 34 61 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 24. Change in Accounting Policy The International Accounting Standards Board (IASB) has issued the following Standards, Interpretations and Amendments to Standards that were adopted by the Company effective January 1, 2020: Amendments to Hedge Accounting Requirements - IBOR Reform and its Effects on Financial Reporting (Phase 1) • Amendments to References to the Conceptual Framework in IFRS Standards • Definition of a Business (Amendments to IFRS 3) Definition of Material (Amendments to IAS 1 and IAS 8) Covid-19-Related Rent Concessions (Amendment to IFRS 16) The amendments and clarifications did not have an impact on the financial statements. 25. Future accounting pronouncements: At the date of authorization of these financial statements, several new, but not yet effective, Standards and amendments to existing Standards, and Interpretations have been published by the IASB. None of these Standards or amendments to existing Standards have been adopted early by the Company and it is still to be determined if any will have a material impact on the Company's financial statements. (a) Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16) On May 14, 2020, the IASB issued Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16). The amendments clarify that proceeds from selling items before the related item of Property, Plant and Equipment is available for use should be recognized in profit or loss, together with the cost of producing those items. The amendments are effective for annual periods beginning on or after January 1, 2022. Early adoption is permitted. (b) Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37) On May 14, 2020, the IASB issued Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37). This amendment clarifies which costs are included as a cost of fulfilling a contract when determining whether a contract is onerous. The amendments are effective for annual periods beginning on or after January 1, 2022 and apply to contracts existing at the date when the amendments are first applied. Early adoption is permitted. 62 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 25. Future accounting pronouncements (continued): (c) Annual Improvements to IFRS Standards 2018 -2020 On May 14, 2020, the IASB issued Annual Improvements to IFRS Standards 2018 -2020. The amendments are effective for annual periods beginning on or after January 1, 2022. Early adoption is permitted. IFRS 9 Financial Instruments Clarifies which fees are included for the purpose of performing the '10 per cent test' for derecognition of financial liabilities. IFRS 16 Leases Removes the illustration of payments from the lessor relating to leasehold improvements. The impact of adoption of these improvements is not expected to have an impact on the business. (d) Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) On August 27, 2020, the IASB finalized its response to the ongoing reform of inter -bank offered rates and other interest rate benchmarks by issuing a package of amendments to IFRS Standards. The amendments are effective for annual periods beginning on or after January 1, 2021. Earlier application is permitted. The impact of adoption of these amendments is not expected to have an impact on the business. 26. Impact of COVID-19 pandemic: On March 11, 2020, the World Health Organization declared that the COVID-19 outbreak was a global pandemic. On March 17, 2020, the Ontario Government declared a State of Emergency pursuant to the Emergency Management and Civil Protection Act. The Ontario Government renewed the declaration, as required by the legislation, until July 24, 2020. During the State of Emergency, the Ontario Government issued emergency orders under the legislation and extended them as required by the legislation. On July 24, 2020, the Reopening Ontario (A Flexible Response to COVID-19) Act, 2020 came into effect, bringing the declared State of Emergency to an end. The Reopening Ontario Act also enabled the Ontario Government to extend, amend, and revoke the remaining emergency orders in order to facilitate a flexible response to the ongoing COVID-19 risks. 36 63 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 26. Impact of COVID-19 pandemic (continued): On March 19, 2020, the OEB extended the ban on disconnecting residential customers to July 31, 2020, in light of the COVID-19 pandemic. For the same reason, at the same time, the OEB also banned the disconnection of other low volume customers (as defined in the OEB Act) prior to July 31, 2020. In addition, the Corporation extended its ban on disconnecting residential and low volume customers until the transition back into the OEB's annual recurring winter disconnection ban on November 15, 2020. On March 24, 2020, the Ontario Government issued an emergency order setting TOU rates for on - peak, mid -peak, and off-peak at 10.1 cents per kWh, which prior to the emergency order was the TOU off-peak rate. That emergency order was effective through May 7, 2020. On May 6, 2020, the Ontario Government issued an emergency order extending those TOU rates through May 31, 2020. On May 30, 2020, the Ontario Government announced the COVID19 Recovery Rate, setting a fixed TOU electricity price at 12.8 cents per kWh, 24 hours a day, seven days a week, effective June 1, 2020 until October 31, 2020. On October 13, 2020, the OEB announced new TOU rates for on - peak, mid -peak, and off-peak, that once again vary according to when electricity is used, effective November 1, 2020. There was no impact to net income to the Corporation. On March 25, 2020, the OEB established a deferral account for regulatory balances to record the costs of changes to billing systems resulting from the Ontario Government's TOU emergency order, other incremental costs and lost revenues associated with the COVID-19 pandemic. On May 14, 2020, the OEB launched a consultation process to inform its decision-making with respect to how the account will operate, including eligibility requirements, land the process and timing for the disposition. On December 16, 2020, OEB staff issued a proposal with respect to the deferral account and related consultation [note 8]. On August 20, 2020, the Ontario Government amended O. Reg. 95/05 Classes of Consumers and Determination of Rates. Accordingly, customers on the RPP have the choice to pay TOU rates or tiered rates, effective November 1, 2020. By default, RPP customers will pay TOU rates. RPP customers who choose to pay tiered rates will pay a lower rate for consumption below a monthly threshold, and a higher rate for consumption above that threshold. The tiered rates and the threshold are set by the OEB twice per year, at the same time as the OEB sets TOU rates. There was no impact to net income to the Corporation. On December 15, 2020, the OEB announced new RPP TOU and tiered rates to reflect a decrease in supply cost resulting from the Ontario Government's decision to remove certain renewable generation costs from the global adjustment and funding them directly through the tax base. The reduction was accompanied by a corresponding reduction to the Ontario Electricity Rebate. There was no net income impact to the Corporation. 6 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 26. Impact of COVID-19 pandemic (continued): On December 22, 2020, the Ontario Government amended O. Reg. 95/05 Classes of Consumers and Determination of Rates, setting both the TOU rates for on -peak, mid -peak, and off-peak and tiered rates at the TOU off-peak rate of 8.5 cents per. kWh. That regulatory amendment was effective through January 28, 2021, and most recently extended until February 22, 2021. On February 23, 2021, residential and small business customers resumed paying TOU and tiered pricing under the RPP at prices that were set by the OEB on December 15, 2020. There was no net income impact to the Corporation. 5 Financial Statements of Kitchener Power Corp. (Unconsolidated) And Independent Auditors' Report thereon Year ended December 31, 2020 (Expressed in thousands of dollars) 66 KPMG LLP 115 King Street South 2nd Floor Waterloo ON N2J 5A3 Canada Tel 519-747-8800 Fax 519-747-8830 INDEPENDENT AUDITORS' REPORT To the Shareholders of Kitchener Power Corp. Opinion We have audited the non -consolidated financial statements of Kitchener Power Corp. (the Entity), which comprise: 41 the non -consolidated statement of financial position as at December 31, 2020 the non -consolidated statement of comprehensive income for the year then ended the non -consolidated statement of changes in equity for the year then ended + the non -consolidated statement of cash flows for the year then ended • and notes to the non -consolidated financial statements, including a summary of significant accounting policies (Hereinafter referred to as the "financial statements"). In our opinion, the accompanying financial statements present fairly, in all material respects, the non -consolidated financial position of the Entity as December 31, 2020, and its non - consolidated financial performance and its non -consolidated cash flows for the year then ended in accordance with Intemational Financial Reporting Standards (IFRS). Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the "Auditors' Responsibilities for the Audit of the Financial Statements" section of our auditors' report. We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG Canada provides services to KPMG LLP. 67 l�ffll�J Page 2 Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards (IFRS), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the non -consolidated financial statements, management is responsible for assessing the Entity's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Entity's financial reporting process. Auditors' Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the non -consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the non -consolidated financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: + Identify and assess the risks of material misstatement of the non -consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. B Page 3 • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Entity to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. kAwG Z4P Chartered Professional Accountants, Licensed Public Accountants Waterloo, Canada March 26, 2021 9 KITCHENER POWER CORP. Statement of Financial Position As at December 31, 2020, with comparative information for 2019 (Expressed in thousands of dollars) Assets Current assets Cash and cash equivalents Accounts receivable Total current assets Non-current assets: Deferred tax assets Imestment in subsidiaries and associates Total non-current assets Total assets Note 2020 2019 417 ?, 519 16 11 433 530 ri 211 173 7 166,639 160,266 166,850 160,439 167,283 $ 160,969 Note 2020 2019 Liabilities and Shareholder's Equity Current liabilities: Accounts payable and accrued liabilities 62 $ Total liabilities 62 5 Shareholder's equity: Share capital - common shares 66,389 66,389 Retained earnings 100,832 94,575 Total shareholder's equity 167,221 160,964 Total equity, liabilities and shareholder's equity "!y 167,283 $ 160,969 The accompanying notes are an integral part of these unconsolidated financial statements. On behalf of the Board: Director Director KITCHENER POWER CORP. Statement of Comprehensive Income Year ended December 31, 2020, with comparative information for 2019 (Expressed in thousands of dollars) Note 2020 2_019 Revenue Income from subsidiaries and associates 7 $ 10,555 $ 10,276 Net operating revenue Expenses: Administration Other 10,555 10,276 159 170 159 170 Finance income (5) (16) Net finance income (5) (16) Income before income taxes Income tax recovery 10,401 10,122 f (38) (26) Total comprehensive income for the year $ 10,439 $ 10,148 The accompanying notes are an integral part of these unconsolidated financial statements. 2 KITCHENER POWER CORP. Statement of Changes in Equity Year ended December 31, 2020, with comparative information for 2019 (Expressed in thousands of dollars) Balance at January 1, 2019 Net income Dividends Balance at December 31, 2019 Net income Dividends Balance at December 31, 2020 $ 66,389 $ - 10,439 10,439 (4,182) (4,182) - $ 100,832 $ 167,221 The accompanying notes are an integral part of these financial statements. Accumulated Share other Retained Total capital comprehensive earnings income (loss) $ 66,389 $ $ 88,461 $ 154,850 10,148 10,148 (4,034) (4,034) 66,389 - 94,575 160,964 Balance at December 31, 2020 $ 66,389 $ - 10,439 10,439 (4,182) (4,182) - $ 100,832 $ 167,221 The accompanying notes are an integral part of these financial statements. KITCHENER POWER CORP. Statement of Cash Flows Year ended December 31, 2020, with comparative information for 2019 (Expressed in thousands of dollars) Cash flows from operating activities: Total comprehensive income for the year Adjustments to reconcile net income to cash provided by (used in) operations: Income from subsidiaries Income tax recovery 2020 $ 10,439 $ (10,555) (38) 2019 10,148 (10,276) (26) The accompanying notes are an integral part of these unconsolidated financial statements. 4 73 (154) (154) Change in non-cash operating working capital: Accounts receivable (5) (6) Prepaid expenses - - Accounts payable and accrued liabilities 87 2 Net cash from operating activities (ID) (158) Cash flows from Investing activities: Dividends received 4,682 4,034 Net cash from investing activities 4,682 =4,034 Cash flows from financing activities: Investments in subsidiaries (510' Dividends paid out (4,18;, (4,034) Net cash from financing activities (4,682; (4,034) Change in cash and cash equivalents (1 2: (158) Cash and cash equivalents, beginning of year 51{r 677 Cash and cash equivalents, end of year 5 417 S 519 The accompanying notes are an integral part of these unconsolidated financial statements. 4 73 KITCHENER POWER CORP. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 1. Reporting entity: Kitchener Power Corp. (the "Corporation") is a holding company for the affiliate companies, Kitchener -Wilmot Hydro Inc. and Kitchener Energy Services Inc., and is itself wholly owned by the Corporation of the City of Kitchener and the Corporation of the Township of Wilmot. The Corporation oversees the operations of Kitchener -Wilmot Hydro Inc., a regulated distribution company and Kitchener Energy Services Inc., an unregulated retail services company. The Corporation also owns 33% of Grand River Energy Corp. ("GRE Corp"), a generation and renewable energy solutions company. It is located in the City of Kitchener. The address of the Corporation's registered office is 301 Victoria Street South, Kitchener, Ontario, Canada. The financial statements are for the Corporation as at and for the year ended December 31, 2020, unconsolidated. 2. Basis of presentation: (a) Statement of compliance: The Corporation's financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), with the exception that investments in subsidiary and associate companies are accounted for by the equity method. The financial statements were approved by the Board of Directors on March 26, 2021. (b) Basis of measurement: The financial statements have been prepared on the historical cost basis except for the following: (i) Where held, financial instruments at fair value through profit or loss (ii) Contributed assets are initially measured at fair value The methods used to measure fair values are discussed further in note 12. (c) Functional and presentation currency: These financial statements are presented in Canadian dollars, which is the Corporation's functional currency. All financial information presented in Canadian dollars has been rounded to the nearest thousand. (d) Investments Investments in subsidiary companies, associates and other long-term investments are accounted for by the equity method. Dividends received are recorded as a reduction of the carrying value of these investments. 5 KITCHENER POWER CORP. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 2. Basis of presentation (continued): (e) Use of estimates and judgments: The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses and disclosure of contingent assets and liabilities. Actual results may differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the year in which the estimates are revised and in any future periods affected. Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in these financial statements is included in the following notes: (i) Note 6 — Income tax expense (ii) Note 7 — Long term investments in subsidiaries and associates 3. Significant accounting policies: The accounting policies set out below have been applied consistently in all years presented in these financial statements unless otherwise indicated. (a) Financial instruments: At initial recognition, the Company measures its financial assets at fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss. Subsequent measurement of the financial asset depends on the classification determined on initial recognition. Financial assets are classified as either amortized cost, fair value through other comprehensive income or fair value through profit or loss, depending on its business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. Financial assets are not reclassified subsequent to their initial recognition, unless the Company changes its business model for managing financial assets. Financial liabilities are initially measured at fair value, net of transaction costs incurred. They are subsequently carried at amortized cost using the effective interest rate method; any difference between the proceeds (net of transaction costs) and the redemption value is recognized as an adjustment to interest expense over the period of the borrowings. The Corporation has not entered into derivative instruments. Hedge accounting has not been used in the preparation of these financial statements. Cash equivalents include short-term investments with maturities of three months or less when purchased. i7 75 KITCHENER POWER CORP. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (b) Impairment: (i) Financial assets: A loss allowance for expected credit losses on financial assets measured at amortized cost is recognized at the reporting date. The loss allowance is measured at an amount equal to the lifetime expected credit losses for the asset. (ii) Non-financial assets: The carrying amounts of the Corporation's non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "cash -generating unit"). The recoverable amount of an asset or cash -generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognized if the carrying amount of an asset or its cash -generating unit exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. An impairment loss in respect of goodwill is not reversed. For assets other than goodwill, impairment recognized in prior periods is assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. KITCHENER POWER CORP. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (c) Provisions: A provision is recognized if, as a result of a past event, the Corporation has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. (d) Finance income and finance costs: Finance income is recognized as it accrues in profit or loss, using the effective interest method. Finance income comprises interest earned on cash and cash equivalents and on regulatory assets. Finance charges comprise interest expense on borrowings, finance lease obligations, regulatory liabilities and unwinding of the discount on provisions and impairment losses on financial assets. Finance costs are recognized as an expense unless they are capitalized as part of the cost of qualifying assets. (e) Income taxes: The income tax expense is comprised of current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case, it is recognized in equity. The Corporation is currently exempt from taxes under the Income Tax Act (Canada) and the Ontario Corporations Tax Act (collectively the "Tax Acts"). Under the Electricity Act, 1998, the Corporation makes payments in lieu of corporate taxes to the Ontario Electricity Financial Corporation ("OEFC"). These payments are calculated in accordance with the rules for computing taxable income and taxable capital and other relevant amounts contained in the Income Tax Act (Canada) and the Corporations Tax Act (Ontario) as modified by the Electricity Act, 1998, and related regulations. Prior to October 1, 2001, the Corporation was not subject to income or capital taxes. Payments in lieu of taxes are referred to as income taxes. Current tax is the tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognized using the balance sheet method. Under this method, deferred income taxes reflect the net tax effects of temporary differences between the tax basis of assets and liabilities and their carrying amounts for accounting purposes, as well as for tax losses available to be carried forward to future years that are likely to be realized. Deferred tax assets and liabilities are measured using enacted or substantively enacted tax rates, at the reporting date, expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the year that includes the date of enactment or substantive enactment. 8 KITCHENER POWER CORP. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 4. Cash: 2020 2019 Cash 417 $ 519 5. Accounts receivable: 2020 2019 Accounts receivable 4; 16 $ 1 1 6. Income tax expense: The current tax expense for 2020 is $nil (2019 - $nil). Original & reversal of temporary differences Recognition of previously unrecognized tax losses Reconciliation of effective tax rate: 2020 2019 (38) $ (26) (38) $ (26) 2020 2019 Deferred tax assets (liabilities): Intangible assets 7 S 7 Loss carry -forward 204 166 2 -I -1 73 7B, 2020 2019 Profit for the period 10,439 $ 10,148 Total income tax expense (38) (26) Profit excluding income tax (10,401) (10,122) Income tax using the Corporation's statutory tax rate 2,756 2,682 Taxes associated with non-taxable equity income (2,793) (2,716) Other differences (1) _ 4. (38) $ (26) Significant components of the Corporation's deferred tax balances are as follows: 2020 2019 Deferred tax assets (liabilities): Intangible assets 7 S 7 Loss carry -forward 204 166 2 -I -1 73 7B, KITCHENER POWER CORP. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 7. Long-term investments in subsidiaries and associates: The Company owns 100% of Kitchener -Wilmot Hydro Inc., a regulated distribution company, and Kitchener Energy Services Inc., an unregulated retail services company. The Company also owns 33% of GRE Corp., an unregulated company. Investment in Investment in Investment in Kitchener -Wilmot Grand River Kitchener Energy Total 2020 Hydro Inc. Energy Corp. Services Inc. Investment Balance, beginning of year S 159,432 $ 763 $ 71 S 160,266 Investment in associate 500 500 Equity share of earnings 10,963 (425) 17 10,555 Dividends issued (4,682) - - (4,682) Balance, end of year $ 165,713 $ 838 $ 88 166,639 2019 Balance, beginning of year S 153,011 $ 967 $ 46 $ 154,024 Investment in associate - - Equity share of earnings 10,455 (204) 25 10,276 Dividends issued (4,034) - (4,034) Balance, end of year 159,432 $ 763 $ 7 i r 160,266 8. Share capital: 2020 2019 Authorized: Unlimited number of common shares Issued: 20,000 common shares $ 66,389 $ 66,389 Dividends: The holders of the common shares are entitled to receive dividends as declared from time to time. The Corporation paid aggregate dividends in the year on common shares of $4,682 (2019 - $4,034). 7 KITCHENER POWER CORP. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 9. Commitments and contingencies: Contractual Obligations: There are no contractual obligations. General: From time to time, the Corporation is involved in various litigation matters arising in the ordinary course of its business. The Corporation has no reason to believe that the disposition of any such current matter could reasonably be expected to have a materially adverse impact on the Corporation's financial position, results of operations or its ability to carry on any of its business activities. General Liability Insurance: The Corporation is a member of the Municipal Electric Association Reciprocal Insurance Exchange (MEARIE). MEARIE is a pooling of public liability insurance risks of many of the LDCs in Ontario. All members of the pool are subjected to assessment for losses experienced by the pool for the years in which they were members, on a pro -rata basis based on the total of their respective service revenues. As at December 31, 2020, no assessments have been made. 10. Guarantees: Kitchener Power Corp. is the guarantor for a line of credit issued by the Canadian Imperial Bank of Commerce on behalf of Grand River Energy Solutions Corp (GRE Corp). GRE Corp. is one third owned by each of Kitchener Power Corp., Waterloo North Hydro Holding Corporation and Cambridge & North Dumfries Energy Plus Inc.; each of which has guaranteed a maximum of $6 million in the event of default by GRE Corp. This increased from $3 million to $6 million on April 1, 2020. 11. Related party transactions: (a) Parent and ultimate controlling party: The Corporation is wholly-owned by the Corporation of the City of Kitchener and the Corporation of the Township of Wilmot. The City and the Township produce financial statements that are available for public use. (b) Entity with significant influence: The Corporation of the City of Kitchener exercises significant influence over the Corporation through its 92.25% ownership interest in the Corporation. (c) Key management personnel: The key management personnel of the Corporation is defined as members of its board of directors and is summarized below. S0 KITCHENER POWER CORP. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 11. Related party transactions (continued): (d) Transactions with shareholders: During the year, the Corporation paid management and business development services to its shareholders in the amount of $nil (2019 - $nil). (e) Transactions with entity with significant influence: In the ordinary course of business, the Corporation may issue dividends to the shareholders. Directors' remuneration 2020 2019 3 67 $ 58 CPP remittances 2 2 S Bg $ 60 12. Financial instruments and risk management: Fair value disclosure Cash and cash equivalents are measured at fair value. The carrying values of receivables, and accounts payable and accrued charges approximate fair value because of the short maturity of these instruments. The carrying value of the customer deposits approximates fair value because the amounts are payable on demand. Financial risks The Corporation understands the risks inherent in its business and defines them broadly as anything that could impact its ability to achieve its strategic objectives. The Corporation's exposure to a variety of risks such as interest rate risk, and liquidity risk, as well as related mitigation strategies are discussed below. (a) Market risk: Market risks primarily refer to the risk of loss resulting from changes in commodity prices, foreign exchange rates, and interest rates. The Corporation currently does not have any material commodity or foreign exchange risk. (b) Liquidity risk: The Corporation monitors its liquidity risk to ensure access to sufficient funds to meet operational and investing requirements. The Corporation's objective is to ensure that sufficient liquidity is on hand to meet obligations as they fall due while minimizing interest exposure. 12 KITCHENER POWER CORP. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 12. Financial instruments and risk management (continued): (c) Capital disclosures: The main objectives of the Corporation, when managing capital, are to ensure ongoing access to funding to deliver the appropriate financial returns. The Corporation's definition of capital includes shareholder's equity and long-term debt. As at December 31, 2020, shareholder's equity amounts to $167,497 (2019 - $160,964) and long- term debt amounts of $nil (2019 - $nil). 13. Future accounting pronouncements: At the date of authorization of these financial statements, several new, , but not yet effective, Standards and amendments to existing Standards, and Interpretations have been published by the IASB. None of these Standards or amendments to existing Standards have been adopted early by the Company and it is still to be determined if any will have a material impact on the Company's financial statements. (a) Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16) On May 14, 2020, the IASB issued Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16). The amendments clarify that proceeds from selling items before the related item of Property, Plant and Equipment is available for use should be recognized in profit or loss, together with the cost of producing those items. The amendments are effective for annual periods beginning on or after January 1, 2022. Early adoption is permitted. (b) Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37) On May 14, 2020, the IASB issued Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37). This amendment clarifies which costs are included as a cost of fulfilling a contract when determining whether a contract is onerous. The amendments are effective for annual periods beginning on or after January 1, 2022 and apply to contracts existing at the date when the amendments are first applied. Early adoption is permitted. M 82 KITCHENER POWER CORP. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 13. Future accounting pronouncements (continued): (c) Annual Improvements to IFRS Standards 2018 -2020 On May 14, 2020, the IASB issued Annual Improvements to IFRS Standards 2018 -2020. The amendments are effective for annual periods beginning on or after January 1, 2022. Early adoption is permitted. IFRS 9 Financial Instruments Clarifies which fees are included for the purpose of performing the '10 per cent test' for derecognition of financial liabilities. IFRS 16 Leases Removes the illustration of payments from the lessor relating to leasehold improvements. The impact of adoption of these improvements is not expected to have an impact on the business. (d) Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) On August 27, 2020, the IASB finalized its response to the ongoing reform of inter -bank offered rates and other interest rate benchmarks by issuing a package of amendments to IFRS Standards. The amendments are effective for annual periods beginning on or after January 1, 2021. Earlier application is permitted. The impact of adoption of these amendments is not expected to have an impact on the business. 14. Impact of COVID-19 pandemic: On March 11, 2020, the World Health Organization declared that the COVID-19 outbreak was a global pandemic. On March 17, 2020, the Ontario Government declared a State of Emergency pursuant to the Emergency Management and Civil Protection Act. The Ontario Government renewed the declaration, as required by the legislation, until July 24, 2020. During the State of Emergency, the Ontario Government issued emergency orders under the legislation and extended them as required by the legislation. On July 24, 2020, the Reopening Ontario (A Flexible Response to COVID-19) Act, 2020 came into effect, bringing the declared State of Emergency to an end. The Reopening Ontario Act also enabled the Ontario Government to extend, amend, and revoke the remaining emergency orders in order to facilitate a flexible response to the ongoing COVID-19 risks. 1,1 83 KITCHENER POWER CORP. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 14. Impact of COVID-19 pandemic (continued): On March 19, 2020, the OEB extended the ban on disconnecting residential customers to July 31, 2020, in light of the COVID-19 pandemic. For the same reason, at the same time, the OEB also banned the disconnection of other low volume customers (as defined in the OEB Act) prior to July 31, 2020. In addition, the Corporation extended its ban on disconnecting residential and low volume customers until the transition back into the OEB's annual recurring winter disconnection ban on November 15, 2020. On March 24, 2020, the Ontario Government issued an emergency order setting TOU rates for on -peak, mid -peak, and off-peak at 10.1 cents per kWh, which prior to the emergency order was the TOU off-peak rate. That emergency order was effective through May 7, 2020. On May 6, 2020, the Ontario Government issued an emergency order extending those TOU rates through May 31, 2020. On May 30, 2020, the Ontario Government announced the COVID19 Recovery Rate, setting a fixed TOU electricity price at 12.8 cents per kWh, 24 hours a day, seven days a week, effective June 1, 2020 until October 31, 2020. On October 13, 2020, the OEB announced new TOU rates for on -peak, mid -peak, and off-peak, that once again vary according to when electricity is used, effective November 1, 2020. There was no impact to net income to the Corporation. On March 25, 2020, the OEB established a deferral account for regulatory balances to record the costs of changes to billing systems resulting from the Ontario Government's TOU emergency order, other incremental costs and lost revenues associated with the COVID-19 pandemic. On May 14, 2020, the OEB launched a consultation process to inform its decision- making with respect to how the account will operate, including eligibility requirements, and the process and timing for the disposition. On December 16, 2020, OEB staff issued a proposal with respect to.the deferral account and related consultation [note 8]. On August 20, 2020, the Ontario Government amended O. Reg. 95/05 Classes of Consumers and Determination of Rates. Accordingly, customers on the RPP have the choice to pay TOU rates or tiered rates, effective November 1, 2020. By default, RPP customers will pay TOU rates. RPP customers who choose to pay tiered rates will pay a lower rate for consumption below a monthly threshold, and a higher rate for consumption above that threshold. The tiered rates and the threshold are set by the OEB twice per year, at the same time as the OEB sets TOU rates. There was no impact to net income to the Corporation. On December 15, 2020, the OEB announced new RPP TOU and tiered rates to reflect a decrease in supply cost resulting from the Ontario Government's decision to remove certain renewable generation costs from the global adjustment and funding them directly through the tax base. The reduction was accompanied by a corresponding reduction to the Ontario Electricity Rebate. There was no net income impact to the Corporation. 19 S 4 KITCHENER POWER CORP. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 14. Impact of COVID-19 pandemic (continued): On December 22, 2020, the Ontario Government amended O. Reg. 95/05 Classes of Consumers and Determination of Rates, setting both the TOU rates for on -peak, mid -peak, and off-peak and tiered rates at the TOU off-peak rate of 8.5 cents per kWh. That regulatory amendment was effective through January 28, 2021, and most recently extended until February 22, 2021. On February 23, 2021, residential and small business customers resumed paying TOU and tiered pricing under the RPP at prices that were set by the OEB on December 15, 2020. There was no net income impact to the Corporation. '16 5 Financial Statements of Kitchener -Wilmot Hydro Inc. And Independent Auditors' Report thereon Year ended December 31, 2020 (Expressed in thousands of dollars) 8 11vilimin KPMG LLP 115 King Street South 2nd Floor Waterloo ON N2J 5A3 Canada Tel 519-747-8800 Fax 519-747-8830 INDEPENDENT AUDITORS' REPORT To the Shareholder of Kitchener -Wilmot Hydro Inc. Opinion We have audited the financial statements of Kitchener -Wilmot Hydro Inc. (the Entity), which comprise: • the statement of financial position as at December 31, 2020 th the statement of comprehensive income for the year then ended the statement of changes in equity for the year then ended • the statement of cash flows for the year then ended + and notes to the financial statements, including a summary of significant accounting policies (Hereinafter referred to as the "financial statements"). In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Entity as December 31, 2020, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS). Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the "Auditors' Responsibilities for the Audit of the Financial Statements" section of our auditors' report. We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Q 2020 KPMG LLP, an Ontario limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. 7 mikv,mJv?, , I ll. Page 2 Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards (IFRS), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Entity's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Entity's financial reporting process. Auditors' Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. 88 Page 3 • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. 40 Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Entity to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. + Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. k�OWG L4#0 Chartered Professional Accountants, Licensed Public Accountants Waterloo, Canada March 26, 2021 89 KITCHEN ERMILMOT HYDRO INC. Statement of Financial Position As at December 31, 2020, with comparative information for 2019 (Expressed in thousands of dollars) Nrris 2020 2019 Assets Current assets Cash d S 6,363 $ 13,357 Accounts receivable 5 15,680 17,477 Unbilled revenue 29,865 27,648 Inventory i, 2,458 2,324 Prepaid expenses 1,146 1,347 Income taxes receivable - 131 Total current assets 55,512 62,284 Non-current assets: Property, plant and equipment 7 275,014 259,864 Intangible assets 19 646 629 Total non-current assets 275,660 260,493 331,172 322,777 Total assets Regulatory deferral account debit balances 10 19,661 9,400 Total assets and regulatory assets $ 350,833 5 332,177 2 KITCHENER-WILMOT HYDRO INC. Statement of Financial Position Year ended December 31, 2020, with comparative information for 2019 (Expressed in thousands of dollars) Note 2020 2019 Liabilities and Shareholder's Equity Current liabilities: Accounts payable and accrued liabilities S 37,670 3 30,048 Income taxes payable 32 - Current portion of long-term debt 11 607 Current portion customer deposits 13 8,945 9,366 Current portion of deferred revenue 1,069 952 Total current liabilities 47,716 40,673 Non-current liabilities: Long-term debt 1 76,963 76,963 Employee future benefits 12 5,937 5,858 Long-term customer deposits 1 5,833 6,188 Deferred re\,enue 39,759 36,385 Deferred tax liability 9 4,415 2,536 Total non-current liabilities 132,907 127,930 Total liabilities 180,623 168,903 Shareholder's equity: Share capital - common shares 14 63,689 63,689 Retained earnings 102,645 96,363 Accumulated other comprehensive loss (620) (620) Total shareholder's equity 165,714 159,432 Total liabilities and shareholder's equity 346,337 328,335 Regulatory deferral account credit balances 7t; 2,276 2,307 Deferred taxes associated with regulatory accounts 2,220 1,535 Impact of COVID-19 2C Total equity, liabilities and shareholder's a ui $ 350,833 $ 332,177 The accompanying notes are an integral part of these financial statements. On behalf of the Board: Director Director 3 91 KITCHENER-WILMOT HYDRO INC. Statement of Comprehensive Income Year ended December 31, 2020, with comparative information for 2019 (Expressed in thousands of dollars) Energy sales Cost of energy sold Other operating revenue Distribution revenue Other income Net operating revenue Expenses: Operations and maintenance Customer services Administration Amortization Other Energy conservation program revenue Energy conservation program expense Note 2020 239,962 245,909 (5,947) 42,690 151 2,975 Net energy conservation programs Finance income 1 Finance charges Net finance costs Income before income taxes 39,718 11,112 5,313 5,376 10,022 31,823 (727) 713 2,854 5,055 2019 206,409 207,393 (984) 38,285 2,601 39,902 11,253 4,474 4,165 9,550 29,442, (1,676) 1,676 (4'17) },119 3,702 6,758 Income tax expense {; U 833 Income for the year before movements in regulatory deferral account balances and OCI 4,117 5,870 Net movement in regulatory deferral account balances related to profit or loss and the related deferred tax movement 10 6,847 4,927 Other comprehensive loss 12 (342) Total comprehensive income for the year S 10,964 $ 10,455 The accompanying notes are an integral part of these financial statements. 4 9 KITCHEN ERMILMOT HYDRO INC. Statement of Changes in Equity Year ended December 31, 2020, with comparative information for 2019 (In thousands of Canadian dollars) Net income before other comprehensive income (loss) Other comprehensive income Dividends (4,682) (4,682) $ 63,689 $ (620) $ 102,645 $ 165,714 10,964 10,964 Balance at December 31, 2020 The accompanying notes are an integral part of these financial statements. 3 Accumulated Share capital other Retained Total comprehensive earnings income (loss) Balance at January 1, 2019 $ 63,689 $ (278) $ 89,600 $ 153,011 Net income before other comprehensive income (loss) - - 10,797 10,797 Other comprehensive income (loss) (342) - (342) Dividends - - (4,034) (4,034) Balance at December 31, 2019 63,689 (620) 96,363 159,432 Net income before other comprehensive income (loss) Other comprehensive income Dividends (4,682) (4,682) $ 63,689 $ (620) $ 102,645 $ 165,714 10,964 10,964 Balance at December 31, 2020 The accompanying notes are an integral part of these financial statements. 3 KITCHENER-WILMOT HYDRO INC. Statement of Cash Flows Year ended December 31, 2020, with comparative information for 2019 (Expressed in thousands of dollars) The accompanying notes are an integral part of these financial statements. 6 94 2020 2019 Cash flows from operating activities: Total comprehensive income for the year G 10, �4 �_'•, S Adjustments to reconcile net income to cash prodded by (used in) operations: Amortization 10,752 10,251 Amortization of deferred revenue (1,016) (908) Gain on disposal of property, plant and equipment (149) (36) Income tax expense 938 888 Income taxes paid (797) (1,515) Increase in employee future benefits 77 551 20,769 19,686 Change in non-cash operating working capital: Accounts receivable 1,797 1,055 Unbilled revenue (2,216) (5,526) Inventory (134) (375) Prepaid expenses 201 (302) Accounts payable and accrued liabilities 7,623 7,396 Other current liabilities (303) 1,339 Change in regulatory assets (10,261) (2,035) Change in regulatory liabilities 654 (4,348) Change in deferred tax 1,900 516 Net cash from operating activities 20,030 17,406 Cash flows from investing activities: Proceeds on disposals of property, plant and equipment 151 40 Purchase of property, plant and equipment (25,536) (24,487) Purchase of intangible assets (385) (315) Net cash used in investing activities (25,770) (24,762) Cash flows from financing activities: Net change in customer deposits (355) 51 Dividends paid out (4,682) (4,034) Change in contributed capital received 4,390 4,383 Repayment of long-term debt (607) (1,176) Net cash from financing activities (1,254) (775) Change in cash and cash equivalents (6,994) (8,131) Cash and cash equivalents, beginning of year 13,357 21,488 Cash and cash equivalents, end of year. 6,363 $ 13,357 The accompanying notes are an integral part of these financial statements. 6 94 KITCHEN ER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 1. Reporting entity: Kitchener -Wilmot Hydro Inc. (the "Corporation") is a rate regulated, municipally owned hydro distribution company incorporated under the laws of Ontario, Canada. The Corporation is located in the City of Kitchener. The address of the Corporation's registered office is 301 Victoria Street South, Kitchener, Ontario, Canada. The Corporation delivers electricity and related energy services to residential and commercial customers in the City of Kitchener and the Township of Wilmot. The Corporation is wholly owned by Kitchener Power Corporation, which is itself wholly owned by the Corporation of the City of Kitchener and the Corporation of the Township of Wilmot. The financial statements are for the Corporation as at and for the year ended December 31, 2020. 2. Basis of presentation: (a) Statement of compliance: The Corporation's financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"). The financial statements were approved by the Board of Directors on March 26, 2021. (b) Basis of measurement: The financial statements have been prepared on the historical cost basis except for the following: (i) Where held, financial instruments at fair value through profit or loss, including those held for trading, are measured at fair value. (ii) Contributed assets are initially measured at fair value. The methods used to measure fair values are discussed further in note 22. (c) Functional and presentation currency: These financial statements are presented in Canadian dollars, which is the Corporation's functional currency. All financial information presented in Canadian dollars has been rounded to the nearest thousand. (d) Use of estimates and judgments: The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses and disclosure of contingent assets and liabilities. Actual results may differ from those estimates. 7 5 KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 2_ Basis of presentation (continued): (d) Use of estimates and judgments (continued): Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the year in which the estimates are revised and in any future periods affected. Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in these financial statements is included in the following notes: Note 3(b) — Determination of the performance obligation for contributions from customers and the related amortization period ii) Note 7 — Property, plant and equipment iii) Note 9 — Deferred tax assets iv) Note 12 — Employee future benefits v) Note 17 — Commitments and contingencies (e) Rate regulation: The Corporation is regulated by the Ontario Energy Board ("OEB"), under the authority granted by the Ontario Energy Board Act, 1998. Among other things, the OEB has the power and responsibility to approve or set rates for the transmission and distribution of electricity, providing continued rate protection for electricity consumers in Ontario, and ensuring that transmission and distribution companies fulfill obligations to connect and service customers. The OEB may also prescribe license requirements and conditions of service to local distribution companies (LDCs"), such as the Corporation, which may include, among other things, record keeping, regulatory accounting principles, separation of accounts for distinct businesses, and filing and process requirements for rate setting purposes. Rate setting: Distribution revenue and electricity rates The OEB sets electricity prices for low-volume consumers based on an estimate of how much it will cost to supply the province with electricity for the next year. All low volume customers without a contract with an energy retailer are charged the OEB mandated rate for electricity. If a customer (regardless of volume) has a retailer agreement, then retailer rates are charged instead. All remaining consumers pay the market price for electricity. The Corporation is billed for the cost of the electricity that its customers use and passes this cost on to the customer at cost without a mark-up. el 9f KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 2. Basis of presentation (continued): (e) Rate regulation (continued): For the distribution revenue included in electricity sales, the Corporation files a "Cost of Service" ("COS") rate application with the OEB every five years where rates are determined through a review of the forecasted annual amount of operating and capital expenses, debt and shareholder's equity required to support the Corporation's business. The Corporation estimates electricity usage and the costs to service each customer class to determine the appropriate rates to be charged to each customer class. The COS application is reviewed by the OEB and intervenors and rates are approved based upon this review, including any revisions resulting from that review. In the intervening years, an Incentive Rate Mechanism application ("IRM") is filed. An IRM application results in a formulaic adjustment to distribution rates that were set under the last COS application. The previous year's rates are adjusted for the annual change in the Gross Domestic Product Implicit Price Inflator for Final Domestic Demand ("GDP IPI -FDD") net of a productivity factor and a "stretch factor" determined by the relative efficiency of an electricity distributor. As a licensed distributor, the Corporation is responsible for billing customers for electricity generated by third parties and the related costs of providing electricity service, such as transmission services and other services provided by third parties. The Corporation is required, pursuant to regulation, to remit such amounts to these third parties, irrespective of whether the Corporation ultimately collects these amounts from customers. The Corporation filed a COS application on April 30, 2019 for rates effective January 1, 2020 to December 31, 2020. Electricity rates were impacted by the COVID-19 pandemic, distribution rates were unaffected, which has been discussed further in Note 26. 9 97 KITCHEN ERMILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 3. Significant accounting policies: The accounting policies set out below have been applied consistently in all years presented in these financial statements unless otherwise indicated. (a) Financial instruments: At initial recognition, the Company measures its financial assets at fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss. Subsequent measurement of the financial asset depends on the classification determined on initial recognition. Financial assets are classified as either amortized cost, fair value through other comprehensive income or fair value through profit or loss, depending on its business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. Financial assets are not reclassified subsequent to their initial recognition, unless the Company changes its business model for managing financial assets. Financial liabilities are initially measured at fair value, net of transaction costs incurred. They are subsequently carried at amortized cost using the effective interest rate method; any difference between the proceeds (net of transaction costs) and the redemption value is recognized as an adjustment to interest expense over the period of the borrowings. The Corporation has not entered into derivative instruments. Hedge accounting has not been used in the preparation of these financial statements. Cash equivalents include short-term investments with maturities of three months or less when purchased. (b) Revenue recognition: Sale and distribution of electricity The performance obligations for the sale and distribution of electricity are recognized over time using an output method to measure the satisfaction of the performance obligation. The value of the electricity services transferred to the customer is determined on the basis of cyclical meter readings plus estimated customer usage since the last meter reading date to the end of the year and represents the amount that the Corporation has the right to bill. Revenue includes the cost of electricity supplied, distribution, and any other regulatory charges. The related cost of power is recorded on the basis of power used. For customer billings related to electricity generated by third parties and the related costs of providing electricity service, such as transmission services and other services provided by third parties, the Corporation has determined that it is acting as a principal for these electricity charges and, therefore, has presented electricity revenue on a gross basis. 98 KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 3_ Significant accounting policies (continued): (b) Revenue recognition (continued): Capital contributions Developers are required to contribute towards the capital cost of construction of distribution assets in order to provide ongoing service. The developer is not a customer and therefore the contributions are scoped out of IFRS 15 Revenue from Contracts with Customers. Cash contributions, received from developers are recorded as deferred revenue. When an asset other than cash is received as a capital contribution, the asset is initially recognized at its fair value, with a corresponding amount recognized as deferred revenue. The deferred revenue, which represents the Corporation's obligation to continue to provide the customers access to the supply of electricity, is amortized to income on a straight-line basis over the useful life of the related asset. Certain customers are also required to contribute towards the capital cost of construction of distribution assets in order to provide ongoing service. These contributions fall within the scope of IFRS 15 Revenue from Contracts with Customers. The contributions are received to obtain a connection to the distribution system in order receive ongoing access to electricity. The Corporation has concluded that the performance obligation is the supply of electricity over the life of the relationship with the customer which is satisfied over time as the customer receives and consumes the electricity. Revenue is recognized on a straight-line basis over the useful life of the related asset. Other revenue Revenue earned from the provision of services is recognized as the service is rendered. Government grants and the related performance incentive payments under CDM programs are recognized as revenue in the year when there is reasonable assurance that the program conditions have been satisfied and the payment will be received. (c) Inventory: Inventory, comprising material and supplies, the majority of which is consumed by the Corporation in the provision of its services, is valued at the lower of cost and net realizable value, with cost being determined on a weighted average cost basis, and includes expenditures incurred in acquiring the material and supplies and other costs incurred in bringing them to their existing location and condition. Net realizable value is the estimated selling price in the ordinary course of business, less estimated selling expenses. (d) Property, plant and equipment: Items of property, plant and equipment ("PP&E") used in rate -regulated activities and acquired prior to January 1, 2014 are measured at deemed cost established on the transition date, less accumulated depreciation. All other items of PP&E are measured at cost, or, where the item is transferred from customers, its fair value, less accumulated depreciation. Consistent with IFRS 1, the Corporation elected to use the carrying amount as previously 9 KITCHEN ER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 3, Significant accounting policies (continued): (d) Property, plant and equipment (continued): determined under Canadian GAAP as the deemed cost at January 1, 2014, the transition date to IFRS. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self -constructed assets includes the cost of materials, direct labour, and any other costs directly attributable to bringing the asset to a working condition for its intended use. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Gains and losses on the disposal of an item of PP&E are determined by comparing the proceeds from disposal, if any, with the carrying amount of the item of PP&E and are recognized net within other income in profit or loss. Major spare parts and standby equipment are recognized as items of PP&E. The cost of replacing a part of an item of property, plant and equipment is recognized in the net book value of the item if it is probable that the future economic benefits embodied within the part will flow to the Corporation and its cost can be measured reliably. In this event, the replaced part of property, plant and equipment is written off, and the related gain or loss is included in profit or loss. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred. Depreciation is calculated over the depreciable amount and is recognized in profit or loss on a straight-line basis over the estimated useful life of each part or component of an item of property, plant and equipment. The depreciable amount is cost. Land is not depreciated. Construction -in -progress assets are not amortized until the projects are complete and in service. The estimated useful lives are as follows: Buildings 20-50 years Transformer station equipment 15-50 years Distribution station equipment 15-50 years Distribution system 25-60 years Meters 15-25 years SCADA equipment 15 years Other capital assets 3-10 years Depreciation methods, useful lives, and residual values are reviewed at each reporting date and adjusted prospectively if appropriate. 12 100 KITCHEN ER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 3_ Significant accounting policies (continued): (e) Intangible assets (i) Computer software: Computer software that is acquired or developed by the Corporation, including software that is not integral to the functionality of equipment purchased which has finite useful lives, is measured at cost less accumulated amortization and accumulated impairment losses. (ii) Land rights: Payments to obtain rights to access land ('land rights") are classified as intangible assets. These include payments made for easements, right of access and right of use over land for which the Corporation does not hold title. Land rights are measured at cost less accumulated amortization and accumulated impairment losses. (iii) Amortization: Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The estimated useful lives are: Computer software Land rights 3-10 years 100 years Amortization methods and useful lives of all intangible assets are reviewed at each reporting date and adjusted prospectively if appropriate. (f) Impairment: (i) Financial assets: A loss allowance for expected credit losses on financial assets measured at amortized cost is recognized at the reporting date. The loss allowance is measured at an amount equal to the lifetime expected credit losses for the asset. 3 1.01 KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (f) Impairment (continued): (ii) Non-financial assets: The carrying amounts of the Corporation's non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "cash -generating unit"). The recoverable amount of an asset or cash -generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognized if the carrying amount of an asset or its cash -generating unit exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. An impairment loss in respect of goodwill is not reversed. For assets other than goodwill, impairment recognized in prior periods is assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. (g) Provisions: A provision is recognized if, as a result of a past event, the Corporation has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. l 1.02 KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (h) Regulatory deferral accounts: Regulatory deferral account debit balances represent costs incurred in excess of amounts billed to the customer at OEB approved rates. These amounts have been accumulated and deferred in anticipation of their future recovery in electricity distribution rates. Regulatory deferral account credit balances represent amounts billed to the customer at OEB approved rates in excess of costs incurred by the Corporation. Regulatory deferral account debit balances are recognized if it is probable that future billings in an amount at least equal to the capitalized cost will result from inclusion of that cost in allowable costs for rate -making purposes. The offsetting amount is recognized in profit and loss. The debit balance is reduced by the amount of customer billings as electricity is delivered to the customer and the customer is billed at rates approved by the OEB for the recovery of the capitalized costs. Regulatory deferral account credit balances are recognized if it is probable that future billings in an amount at least equal to the credit balance will be reduced as a result of rate -making activities. The offsetting amount is recognized in profit and loss. The credit balance is reduced by the amounts returned to customers as electricity is delivered to the customer at rates approved by the OEB for the return of the regulatory account credit balance. The probability of recovery or repayment of the regulatory account balances are assessed annually based upon the likelihood that the OEB will approve the change in rates to recover or repay the balance. Any resulting impairment loss is recognized in profit and loss in the year incurred. Regulatory deferral accounts attract interest at OEB prescribed rates. With the exception of Pension and OEB Forecast Accrual accounts (OPEBs), the rates from January to June 2020 were 2.18%, and July to December 2020 were 0.57%. Prior year rates from January to March 2019 were 2.45%, April to December 2019 were 2.18%. In 2020, OPEBs were 2.88% for the period January to March, 2.48% for the period April to September and 2.03% for period October to December. In 2019, OPEBs were 3.82% for the period January to March, 3.39% for the period April — June and 2.88% for the period July to December. 15 103 KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (i) Employee future benefits: (i) Pension plan: The Corporation provides a pension plan for all its full-time employees through Ontario Municipal Employees Retirement System ("OMERS"). OMERS is a multi-employer pension plan which operates as the Ontario Municipal Employees Retirement Fund ("the Fund"), and provides pensions for employees of Ontario municipalities, local boards and public utilities. The Fund is a contributory defined benefit pension plan, which is financed by equal contributions from participating employers and employees, and by the investment earnings of the Fund. To the extent that the Fund finds itself in an under -funded position, additional contribution rates may be assessed to participating employers and members. OMERS is a defined benefit plan. However, as OMERS does not segregate its pension asset and liability information by individual employers, there is insufficient information available to enable the Corporation to directly account for the plan. Consequently, the plan has been accounted for as a defined contribution plan. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in net income when they are due. (ii) Post -employment benefits, other than pension: The Corporation provides some of its retired employees with life insurance and medical benefits beyond those provided by government sponsored plans. The cost of these benefits is expensed as earned by employees through employment service. The accrued benefit obligations and the current service costs are actuarially determined by applying the projected unit credit method and reflect management's best estimate of certain underlying assumptions. Actuarial gains and losses arising from defined benefit plans are recognized immediately in other comprehensive income and reported in retained earnings. When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognized in net income on a straight-line basis over the average period until the benefits become vested. In circumstances where the benefits vest immediately, the expense is recognized immediately in net income. 1.04 KITCHEN ERMILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): 0) Deferred revenue and assets transferred from customers: Certain customers and developers are required to contribute towards the capital cost of construction in order to provide ongoing service. When an asset is received as a capital contribution, the asset is initially recognized at its fair value, with the corresponding amount recognized as deferred revenue. Deferred revenue represents the Corporation's obligation to continue to provide customers access to the supply of electricity, and is amortized to income on a straight-line basis over the economic useful life of the acquired or contributed asset, which represents the period of ongoing service to the customer. (k) Leased assets: This policy is effective for periods before January 1, 2019. Refer to Note 24 for the change in accounting policy to IFRS 16. Leases, where the terms cause the Corporation to assume substantially all the risks and rewards of ownership, are classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. All other leases are classified as operating leases and the leased assets are not recognized on the Corporation's balance sheet. Payments made under operating leases are recognized in profit or loss on a straight-line basis over the term of the lease. (1) Finance income and finance costs: Finance income is recognized as it accrues in profit or loss, using the effective interest method. Finance income comprises interest earned on cash and cash equivalents and on regulatory assets. Finance charges comprise interest expense on borrowings, finance lease obligations, regulatory liabilities and unwinding of the discount on provisions and impairment losses on financial assets. Finance costs are recognized as an expense unless they are capitalized as part of the cost of qualifying assets. 105 KITCHEN ERMILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (m) Income taxes: The income tax expense comprises current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case, it is recognized in equity. The Corporation is currently exempt from taxes under the Income Tax Act (Canada) and the Ontario Corporations Tax Act (collectively the "Tax Acts"). Under the Electricity Act, 1998, the Corporation makes payments in lieu of corporate taxes to the Ontario Electricity Financial Corporation ("OEFC"). These payments are calculated in accordance with the rules for computing taxable income and taxable capital and other relevant amounts contained in the Income Tax Act (Canada) and the Corporations Tax Act (Ontario) as modified by the Electricity Act, 1998, and related regulations. Prior to October 1, 2001, the Corporation was not subject to income or capital taxes. Payments in lieu of taxes are referred to as income taxes. Current tax is the tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognized using the balance sheet method. Under this method, deferred income taxes reflect the net tax effects of temporary differences between the tax basis of assets and liabilities and their carrying amounts for accounting purposes, as well as for tax losses available to be carried forward to future years that are likely to be realized. Deferred tax assets and liabilities are measured using enacted or substantively enacted tax rates, at the reporting date, expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the year that includes the date of enactment or substantive enactment. 4. Cash: Cash 5. Accounts receivable: Customer and other trade receivables Trade receivables from related parties 6. Inventory: 2020 2019 $ 6,363 $ 13,357 2020 2019 15,588 $ 17,252 92 225 15,680 $ 17,477 The amount of inventory consumed by the Corporation and recognized as an expense during 2020 was $279 (2019 - $363). .,, 8 106 KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 7. Property, plant and equipment: (a) Cost or deemed cost: Balance at January 1, 2020 Additions Transfers Disposals/Retirements Land and Distribution Other fixed Construction - Construction - buildings equipment assets in -progress Total in -progress $ 24,729 $ 260,009 $ 12,976 $ 5,487 $ 303,201 1,709 17,846 5,631 350 25,536 (5) (62) (1,182) - (1,249) Balance at December 31, 2020 $ 26,433 $ 277,793 $ 17,425 $ 5,837 $ 327,488 (b) Accumulated depreciation: Land and Distribution Other fixed Construction - Construction - buildings equipment assets in -progress Total assets in -progress Total Balance at January 1, 2019 $ 24,463 $ 242,418 $ 8,850 $ 3,622 $ 279,353 Additions 279 17,723 4,614 1,865 24,481 Transfers 8,317 1,351 Disposals/Retirements (13) (132) (488) - (633) Balance at December 31, 2019 $ 24,729 $ 260,009 $ 12,976 $ 5,487 $ 303,201 (b) Accumulated depreciation: 10 107 Land and Distribution Other fixed Construction - buildings equipment assets in -progress Total Balance at January 1, 2020 $ 2,718 $ 37,766 $ 2,853 $ 5 43,337 Depreciation charge 716 8,317 1,351 10,384 Disposals/Retirements (5) (62) (1,180) - (1,247) Balance at December 31, 2020 $ 3,429 $ 46,021 $ 3,024 $ 52,474 Land and Distribution Other fixed Construction - buildings equipment assets in -progress Total Balance at January 1, 2019 $ 2,053 $ 30,012 $ 2,059 $ $ 34,124 Depreciation charge 678 7,886 1,282 9,846 Disposals/Retirements (13) (132) (488) (633) Balance at December 31, 2019 $ 2,718 $ 37,766 $ 2,853 $ $ 43,337 10 107 KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 7. Property, plant and equipment (continued): (c) Carrying amounts: Land and Distribution Other fixed Construction - buildings equipment assets in -progress Total At December 31, 2020 $ 23,004 $ 231,772 $ 14,401 $ 5,837 $ 275,014 At December 31, 2019 $ 22,011 $ 222,243 $ 10,123 $ 5,487 $ 259,864 (d) Leased plant and equipment: The Corporation does not have leases for plant or equipment. (e) Security: At December 31, 2019, the Corporation had zero properties subject to a general security agreement. (f) Borrowing costs: During the year, borrowing costs of $ nil (2019 - $ nil) were capitalized as part of the cost of property, plant and equipment. (g) Allocation of depreciation and amortization: The depreciation of property, plant and equipment and the amortization of intangible assets has been allocated to profit or loss as follows: Operations and Customer General and Energy maintenance services administration Conservation expense expense expense expense Other Total December 31, 2020: Depreciation of property, plant and equipment 4, !' o :g 6 $ 7 w 9,654 $ 10,384 Amortization of intangible assets 368 368 7 v t: $ $ 7 $ 10,022 $ 10,752 December 31, 2019: Depreciation of property, plant and equipment $ 688 $ 6 7 a 9,145 $ 9,846 Amortization of intangible assets - 405 405 .h 688 $ L,a 7 5 9,550 $ 10,251 r±? 108 KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 8. Intangible assets: (a) Cost or deemed cost: Balance at January 1, 2019 2,802 $ 8 $ 2,810 Additions 321 - 321 Disposals 4 - 4 Balance at December 31, 2019 5 3,119 8 $ 3,127 (b) Accumulated amortization: Computer Land Software Rights Total Balance at January 1, 2020 S 2,491 S 8 S 2,499 Additions 368 - 368 Balance at December 31, 2020 $ 2,859 S 8 2,867 Balance at January 1, 2019 1 2.786 -S 8 $ 2,094 Additions 404 - 404 Balance at December 31, 2019 S 2e49C $ 8 $ 2,498 (c) Carrying amounts: Computer Land Software Rights Total At December 31, 2020 $ 648 $ $ 646 At December 31, 2019 $ 629 S - S 6129 21 109 Computer Land Software Rights Total Balance at January 1, 2020 S 3,120 S 8 8 3,128 Additions 385 385 Disposals - - Balance at December 31, 2020 $ 3,505 8 $ 3,513 Balance at January 1, 2019 2,802 $ 8 $ 2,810 Additions 321 - 321 Disposals 4 - 4 Balance at December 31, 2019 5 3,119 8 $ 3,127 (b) Accumulated amortization: Computer Land Software Rights Total Balance at January 1, 2020 S 2,491 S 8 S 2,499 Additions 368 - 368 Balance at December 31, 2020 $ 2,859 S 8 2,867 Balance at January 1, 2019 1 2.786 -S 8 $ 2,094 Additions 404 - 404 Balance at December 31, 2019 S 2e49C $ 8 $ 2,498 (c) Carrying amounts: Computer Land Software Rights Total At December 31, 2020 $ 648 $ $ 646 At December 31, 2019 $ 629 S - S 6129 21 109 KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 9. Income tax expense: (14,168) 168 168 1,573 1,429 14 2020 - 2019 Current period S 1,292 $ 1,129 Adjustment for prior periods (332) (194) 960 $ 935 Deferred tax expense: 2020 2019 Original & reversal of temporary differences (21) $ (47) Change in unrecognized deductible temporary differences (1) - (22) $ (47) Reconciliation of effective tax rate: 2020 2019- 019Total Totalcomprehensive income for the year $ 10,964 $ 10,455 Total income tax expense 938 888 Comprehensive income before income taxes 11,902 11,343 Income tax using the Corporation's statutory tax rate of 26.5% 3,154 3,006 Temporary differences not benefitted (1,884) (1,924) Under (over) provided in prior periods (332) (194) 938 $ 888 Significant components of the Corporation's deferred tax balances are as follows: Deferred tax assets (liabilities): Plant and equipment Non -vested sick leave Employee benefits Ontario refundable tax credits Actuarial gain/loss Deferred revenue - contributed capital 2020 2019 (16,989) $ (14,168) 168 168 1,573 1,429 14 18 - 123 10,819 9,894 (4,415) $ (2,536) 22 110 KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 10. Regulatory deferral account balance: The following is a reconciliation of the carrying amount for each class of regulatory deferral account balances: Balances Remalning arising In the Recovery/ recovery/ reversal 2019 period Reversal Other 2020 period (years) Regulatory deferral account debit balances Group 1 deferred accounts S 1,239 $ 2,202 $ 5,428 $ (153) $ 6,716 Note 1, Note 3 Regulatory asset recovery account 630 285 (141) 774 Note 1 Smart meter recovery 13 (13) - 1 Year Deferred tax asset 5x90 2,585 - 5,375 Note 2 LRIOA 837 1,728 (837) - 728 1 Year Other 991 t}9 (892) 68 1 Year Total amount related to regulatory deferral account debit balances $ 9,400 $ 6,869 $ 3,545 $ (153) $ 19,661 Balances Remaining arising in the Recovery/ recovery/ reversal 2019 period Reversal Other 2020 period (years) Regulatory deferral account credit balances Group 1 deferred accounts Regulatory asset recovery -account Other $ 1,057 $ 975 $ (160) $ (152) $ 1,720 1,250 2 (696) Total amount related to regulatory deferral account credit balances $ 2,307 $ 977 $ (856) $ (152) $ 2,276 Notr- I Note 1 1 Yea - 2020 201$ Movements In regulatory accounts Net change in regulatory deferral account debit and credit balances $ 10,292 $ 6,677 Less movement related to the balance sheet Deferred income tax (2,585) (933) Deferred revenue (860) (817) Net movement in regulatory deferral account balances related to profit or loss and the related deferral tax movement :j 6,847 $ 4,927 Note 1 KWHI expects to be approved for collection of these amounts in its 2021 filing for 2022 rates Note 2 KWHI has not sought approval for the disposition of this amount as changes in underlying assumptions may reduce the amounts recorded in the account. KWHI may seek refunds in the future. Note 3 In December 2020, KWHI was informed that beginning June 2015 charges were not included in the monthly power bill for one delivery point for Transmission Network Charges. KWHI has accrued a payable of $6 million, offset by a regulatory asset. These monies are expected to begin being collected through a Board approved rate rider in 2022. 23 KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 10. Regulatory deferral account balance (continued): Note 4 COVID-19 Emergency Deferral The COVID-19 emergency deferral account comprises of five sub -accounts established to track incremental costs and lost revenues related to the COVID-19 pandemic: (i) Billing and System Changes as a Result of the Emergency Order Regarding Time -of -Use Pricing, (ii) Lost Revenues Arising from the COVID-19 Emergency, (iii) Other Incremental Costs, (iv) Foregone Revenues from Postponing Rate Implementation, and (v) Bad Debt. On December 16, 2020, the OEB Staff released their proposal on the COVID-19 deferral accounts which introduces certain criteria to that may need to be satisfied for amounts to be eligible for recovery. Based on this information, management believes there is high uncertainty in regards to the recoverability of costs and lost revenues related to government and OEB customer relief actions, and therefore a low probability of recovery. Costs directly related to the implementation of safety measures as a result of the COVID-19 pandemic were tracked. $69k has been recorded in the COVID-19 Emergency Deferral Account as at December 31, 2020. 11. Long-term debt: Effective August 1, 2000, the Corporation incurred unsecured promissory notes payable to the Corporation of the City of Kitchener and the Corporation of the Township of Wilmot, and have an interest rate of 3.23% per annum. Interest is payable in quarterly installments, in arrears, on March 311t, June 30th, September 30th and December 31St. In 2019 the interest rate was 4.88% Effective February 1, 2010, the Corporation incurred a ten year senior unsecured debenture payable to Ontario Infrastructure Projects Corporation. An initial payment of $7,000 was received February 1, 2010, followed by a second payment of $3 million on May 17, 2010. The debenture had an interest rate of 4.28%, and interest was payable in equal semi-annual installments, in arrears, on May 17th and November 17th each year commencing November 17, 2010. The debenture was paid off in 2020 in accordance with the payment schedule. 2020 2019 Senior unsecured debentures: City of Kitchener $ 70,998 $ 70,998 Township of Wilmot 5,965 5,965 Ontario Infrastructure Projects Corporation - 607 Senior unsecured debentures, net proceeds $ 76,963 $ 77,570 Less: current portion of long-term debt $ - 5 (607) Total long-term debt $ 76,963 $ 76,963 �4 112 KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 12. Employee future benefits: The Corporation pays certain medical and life insurance benefits on behalf of some of its retired employees. The Corporation recognizes these post-retirement costs in the period in which employees' services were rendered. The accrued benefit liability at December 31, 2020 of $5,937 was based on an actuarial valuation completed in 2020 using a discount rate of 3.1% (3.1% in 2019). Changes in the present value of the defined benefit unfunded obligation and the accrued benefit liability: _ 2020 2019 Defined benefit obligation, beginning of year 5,858 $ 5,305 Current service cost 192 160 Interest cost 178 202 Benefits paid during the year (.291) (274'; Actuarial loss recognized in other - 465 comprehensive income Accrued benefit liability, end of year $ 5,937 $ 5,858 Components of net benefit expense recognized are as follows: 2020 2019 Current service cost 192 $ 160 Interest cost 178 202 Net benefit expense recognized 370 $ 362 Actuarial losses recognized in other comprehensive income: 2020 2019 Cumulative amount at January 1 (620) $ (278) Recognized during the year (net of tax) - (342) Cumulative amount at December 31 (620) $ (620) 75 1 1. 3 KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 12. Employee future benefits (continued): The significant actuarial assumptions used in the valuation are as follows (weighted average): 2020 2019 Accrued benefit obligation: Discount rate 3.1% 3.1% Benefit cost for the year: Age Withdrawal rate 18-29 3.50% 3.50% 30-34 2.00% 2.00% 35-39 1.7% 1.7% 40-49 1.3% 1.3% 50-54 1.0% 1.0% Assumed health care cost trend rates: Initial health care cost trend rate Health 44% 4.2% Dental 4.7% 4.5% The approximate effect on the accrued benefit obligation of the entire plan and the estimated net benefit expense of the entire plan if the health care trend rate assumption was increased or decreased by 1 and all other assumptions were held constant, is as follows: Benefit Periodic Obliqation Benefit Cost 1% increase in health care trend rate $ 215 $ 22 1% decrease in health care trend rate 3 (193) $ (19 Historical Information Amounts for the current and previous year, for the entire plan, are as follows: 2020 2019 Defined benefit obligation S 5,937 $ 5,858 Experience adjustments S - $ (342) 2x - I'll KITCHEN ER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 12. Employee future benefits (continued): The main actuarial assumptions utilized for the valuation are as follows: General inflation - future general inflation levels, as measured by the changes in the Consumer Price Index, were assumed at 2% in 2020, and thereafter (2019 - 2%). Discount (interest) rate - the discount rate used to determine the present value of future liabilities and the expense for the year ended December 31, 2020, was 3.1% (2019 - 3.1 %). Salary levels - future general salary and wage levels were assumed to increase at 3.3% (2019 - 3.3%) per annum. Medical costs - medical costs were assumed to be 4.4% for 2020, (2019 - 4.5%) increasing annually to 4.9% in 2022. Dental costs - dental costs were assumed to be 4.7% for 2020 increasing annually to 5.1 % in 2022. 13. Customer and IESO deposits: Customer deposits represent cash deposits from electricity distribution customers and retailers, as well as construction deposits. Deposits from electricity distribution customers are refundable to customers who demonstrate an acceptable level of credit risk as determined by the Corporation in accordance with policies set out by the OEB or upon termination of their electricity distribution service. Construction deposits represent cash prepayments for the estimated cost of capital projects recoverable from customers and developers. Upon completion of the capital project, these deposits are transferred to deferred revenue. The Corporation delivers conservation and demand management programs for its customers on behalf of the IESO. Prepayments received from the IESO have been recorded and will be transferred to revenue as programs are delivered and the revenue is earned. The deposits comprise: Customer deposits Construction deposits IESO deposit for energy conservation programs Total customer deposits 2020 2019 $ 6,424 $ 7,414 7,196 6,982 1,158 1,158 14,778 $ 15,554- 27 5,554 27 1 I. S KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 14. Share capital: Authorized: Unlimited number of common shares Issued: 10,000 common shares 2020 2019 $ 63,689 $ 63,689 Dividends: The holders of the common shares are entitled to receive dividends as declared from time to time. The Corporation paid aggregate dividends in the year on common shares of $4,682 (2019 - $4,034). 15. Other operating revenue: Other income comprises: 2020 2019_ Specific service charges 5 1,552 $ 1,375 Deferred revenue 1,016 908 Scrap sales 101 190 Net gain on disposal of capital assets 149 36 Retailer services 48 44 Sundry 109 48 Total other income $ 2,975 $ 2,601 16. Finance income and expense: Interest income on bank deposits Finance income Interest expense on long-term debt Interest expense on short-term debt Interest expense on BMO letter of credit Interest expense on deposits Other Net finance costs recognized in profit or loss I 2020 _ 127 $ 127 2,496 271 123 91 2,981 2,854 $ 2019 417 417 3,816 122 170 11 4,119 3,702 28 116 KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 17. Commitments and contingencies: Contractual Obligations There are no contractual obligations. General From time to time, the Corporation is involved in various litigation matters arising in the ordinary course of its business. The Corporation has no reason to believe that the disposition of any such current matter could reasonably be expected to have a materially adverse impact on the Corporation's financial position, results of operations or its ability to carry on any of its business activities. General Liability Insurance: The Corporation is a member of the Municipal Electric Association Reciprocal Insurance Exchange (MEARIE). MEARIE is a pooling of public liability insurance risks of many of the LDCs in Ontario. All members of the pool are subjected to assessment for losses experienced by the pool for the years in which they were members, on a pro -rata basis based on the total of their respective service revenues. As at December 31, 2020, no assessments have been made. 18. Guarantees: Guarantees are not applicable to the Corporation. 19. Pension agreement: The Corporation provides a pension plan for its employees through OMERS. The plan is a multi- employer, contributory defined pension plan with equal contributions by the employer and its employees. In 2020, the Corporation made employer contributions of $1,723 to OMERS (2019 - $1,661). The Corporation's net benefit expense has been allocated as follows: (a) $449 (2019 - $459) capitalized as part of property, plant and equipment; (b) $1,274 (2019 - $1,202) charged to net income. The Corporation estimates that a contribution of $1,739 to OMERS will be made during the next fiscal year. 20. Employee benefits: 2020 2019 Salaries, wages and benefits $ 19,684 $ 19,022 CPP and EI remittances 732 722 Contributions to OMERS 1,723 1,661 Expenses related to defined benefit plans 370 361 $ 22,509 $ 21,766 29 117 KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 21. Related party transactions: (a) Parent and ultimate controlling party: The sole shareholder of the Corporation is Kitchener Power Corp., which in turn is wholly- owned by the Corporation of the City of Kitchener and the Corporation of the Township of Wilmot. The City and the Township produce financial statements that are available for public use. (b) Entity with significant influence: The Corporation of the City of Kitchener exercises significant influence over the Corporation through its 92.25% ownership interest in the Corporation. (c) Key management personnel: The key management personnel of the Corporation have been defined as members of its board of directors and executive management team members, and is summarized below. Directors' fees Salaries and other short-term benefits Post employment benefits Other long-term benefits (OMERS) 2020 2019 67 $ 58 1,061 993 19 18 90 84 $ 1,237 $ 1,153 (d) Transactions with entity with significant influence: In the ordinary course of business, the Corporation delivers electricity to the Corporation of the City of Kitchener. Electricity is billed to the Corporation of the City of Kitchener at prices and under terms approved by the OEB. (e) Transactions with ultimate parent (the Corporation of the City of Kitchener): In 2020, the Corporation had the following significant transactions with its ultimate parent, a government entity: • construction • streetlight maintenance services under contract through a related party, Kitchener Energy Services Inc. IR its KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 22. Financial instruments and risk management: Fair value disclosure Cash and cash equivalents are measured at fair value. The carrying values of receivables, and accounts payable and accrued charges approximate fair value because of the short maturity of these instruments. The carrying value of the customer deposits approximates fair value because the amounts are payable on demand. The fair value of the long term debt (senior unsecured debentures issued by the shareholders (Corporation of the City of Kitchener and Corporation of the Township of Wilmot) approximates the carrying value due to the short term nature of the loan. The fair value of the long term debt (senior unsecured debentures) issued by Ontario Infrastructure Projects Corporation at December 31, 2020 is zero (2019 - $607). The final loan balance was paid in full in 2020. The fair value prior to 2020 was calculated based on the present value of future principal and interest cash flows, discounted at the current rate of interest at the reporting date. The interest rate used to calculate fair value at was 4.28%. Financial risks The Corporation understands the risks inherent in its business and defines them broadly as anything that could impact its ability to achieve its strategic objectives. The Corporation's exposure to a variety of risks such as credit risk, interest rate risk, and liquidity risk, as well as related mitigation strategies are discussed below. (a) Credit risk: Financial assets carry credit risk that a counterparty will fail to discharge an obligation which could result in a financial loss. Financial assets held by the Corporation, such as accounts receivable, expose it to credit risk. The Corporation earns its revenue from a broad base of customers located in the City of Kitchener and the Township of Wilmot. As of December 31, 2020, two customers accounted for more than 1 % of total accounts receivable, totaling $341 (or 2.2%) out of a total accounts receivable of $15,680. The carrying amount of accounts receivable is reduced through the use of an allowance for impairment and the amount of the related impairment loss is recognized in net income. Subsequent recoveries of receivables previously provisioned are credited to net income. The balance of the allowance for impairment at December 31, 2020 is $500 (2019 - $250). The allowance was increased due to an expected increase in Covid-19 related bad debt. An impairment loss of $793 (2019 - $44) was recognized during the year. This included a significant loss of $385 as a result of the bankruptcy of a single customer in 2020, in addition to a general increase due to the pandemic lockdowns. The future impact of the pandemic remains uncertain. 3.6 119 KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 22. Financial instruments and risk management (continued): (a) Credit risk (continued): The Corporation's credit risk associated with accounts receivable is primarily related to payments from distribution customers. At December 31, 2020, approximately $314 (2019 - $245) is considered 60 days past due. The Corporation has over 99 thousand customers, the majority of whom are residential. Credit risk is managed through collection of security deposits from customers in accordance with directions provided by the OEB. As at December 31, 2020, the Corporation holds security deposits in the amount of $14,800 (2019 - $15,600). (b) Market risk: Market risks primarily refer to the risk of loss resulting from changes in commodity prices, foreign exchange rates, and interest rates. The Corporation currently does not have any material commodity or foreign exchange risk. The Corporation is exposed to fluctuations in interest rates as the regulated rate of return for the Corporation's distribution business is derived using a complex formulaic approach which is in part based on the forecast for long- term Government of Canada bond yields. This rate of return is approved by the OEB as part of the approval of distribution rates. A 1% increase in the interest rate at December 31, 2020 would have increased interest expense on the long-term debt by $nil (2019 - $6), assuming all other variables remain constant as the Infrastructure Ontario loan was paid in full during the year. A 1 % decrease in the interest rate would have an equal but opposite effect. (c) Liquidity risk: The Corporation monitors its liquidity risk to ensure access to sufficient funds to meet operational and investing requirements. The Corporation's objective is to ensure that sufficient liquidity is on hand to meet obligations as they fall due while minimizing interest exposure. The Corporation has access to a $35,000 credit facility and monitors cash balances daily to ensure that a sufficient level of liquidity is on hand to meet financial commitments as they come due. As at December 31, 2020, no amounts had been drawn under Bank of Montreal credit facility (2019 - $nil). The Corporation also has a bilateral facility for $35,000 (the "LC" facility) for the purpose of issuing letters of credit mainly to support the prudential requirements of the IESO, of which $35,000 has been drawn and posted with the IESO (2019 - $35,000). The majority of accounts payable, as reported on the balance sheet, are due within 30 days. The Company's currently available liquidity is also expected to be sufficient to address any reasonably foreseeable impacts that the COVID-19 pandemic may have on the Company's cash requirements. 32 i 0 KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 22. Financial instruments and risk management (continued): (d) Capital disclosures: The main objectives of the Corporation, when managing capital, are to ensure ongoing access to funding to maintain and improve the electricity distribution system, compliance with covenants related to its credit facilities, prudent management of its capital structure with regard for recoveries of financing charges permitted by the OEB on its regulated electricity distribution business, and to deliver the appropriate financial returns. The Corporation's definition of capital includes shareholder's equity and long-term debt. As at December 31, 2020, shareholder's equity amounts to $165,714 (2019 - $159,432) and long- term debt amounts to $76,963 (2019 - $76,963). 23. Revenue from Contracts with Customers The Corporation generates revenue primarily from the sale and distribution of electricity to its customers. Other sources of revenue include performance incentive payments under CDM programs 2020 2019 Revenue from Contracts with Customers 284,230 $ 246,092 Other Revenue: CDM programs 727 1.676 Other 1,524 -1,620 Total 286,481 $ 249,388 In the following table, revenue from contracts with customers is disaggregated by type of customer. 2020 2019 Residential 127,780 $ 93,701 Commercial 153,515 149,386 Large Users 1,346 1,448 Other 1,589 1,557 Total Revenue 284,230 246,092 RE 171 KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 24. Change in Accounting Policy The International Accounting Standards Board (IASB) has issued the following Standards, Interpretations and Amendments to Standards that were adopted by the Company effective January 1, 2020: Amendments to Hedge Accounting Requirements - IBOR Reform and its Effects on Financial Reporting (Phase 1) • Amendments to References to the Conceptual Framework in IFRS Standards + Definition of a Business (Amendments to IFRS 3) Definition of Material (Amendments to IAS 1 and IAS 8) ■ Covid-19-Related Rent Concessions (Amendment to IFRS 16) The amendments and clarifications did not have an impact on the financial statements. 25. Future accounting pronouncements: At the date of authorization of these financial statements, several new, but not yet effective, Standards and amendments to existing Standards, and Interpretations have been published by the IASB. None of these Standards or amendments to existing Standards have been adopted early by the Company and it is still to be determined if any will have a material impact on the Company's financial statements. (a) Property, Plant and Equipment -- Proceeds before Intended Use (Amendments to IAS 16) On May 14, 2020, the IASB issued Property, Plant and Equipment -- Proceeds before Intended Use (Amendments to IAS 16). The amendments clarify that proceeds from selling items before the related item of Property, Plant and Equipment is available for use should be recognised in profit or loss, together with the cost of producing those items. The amendments are effective for annual periods beginning on or after January 1, 2022. Early adoption is permitted. (b) Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37) On May 14, 2020, the IASB issued Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37). This amendment clarifies which costs are included as a cost of fulfilling a contract when determining whether a contract is onerous. The amendments are effective for annual periods beginning on or after January 1, 2022 and apply to contracts existing at the date when the amendments are first applied. Early adoption is permitted. y}L 122 KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 25. Future accounting pronouncements (continued): (c) Annual Improvements to IFRS Standards 2018 -2020 On May 14, 2020, the IASB issued Annual Improvements to IFRS Standards 2018 -2020. The amendments are effective for annual periods beginning on or after January 1, 2022. Early adoption is permitted. IFRS 9 Financial Instruments Clarifies which fees are included for the purpose of performing the '10 per cent test' for derecognition of financial liabilities. IFRS 16 Leases Removes the illustration of payments from the lessor relating to leasehold improvements. The impact of adoption of these improvements is not expected to have an impact on the business. (d) Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) On August 27, 2020, the IASB finalized its response to the ongoing reform of inter -bank offered rates and other interest rate benchmarks by issuing a package of amendments to IFRS Standards. The amendments are effective for annual periods beginning on or after January 1, 2021. Earlier application is permitted. The impact of adoption of these amendments is not expected to have an impact on the business. 26. Impact of COVID-19 Pandemic On March 11, 2020, the World Health Organization declared that the COVID-19 outbreak was a global pandemic. On March 17, 2020, the Ontario Government declared a State of Emergency pursuant to the Emergency Management and Civil Protection Act. The Ontario Government renewed the declaration, as required by the legislation, until July 24, 2020. During the State of Emergency, the Ontario Government issued emergency orders under the legislation and extended them as required by the legislation. On July 24, 2020, the Reopening Ontario (A Flexible Response to COVID-19) Act, 2020 came into effect, bringing the declared State of Emergency to an end. The Reopening Ontario Act also enabled the Ontario Government to extend, amend, and revoke the remaining emergency orders in order to facilitate a flexible response to the ongoing COVID-19 risks. On March 19, 2020, the OEB extended the ban on disconnecting residential customers to July 31, 2020, in light of the COVID-19 pandemic. For the same reason, at the same time, the OEB also banned the disconnection of other low volume customers (as defined in the OEB Act) prior to July 31, 2020. In addition, the Corporation extended its ban on disconnecting residential and low volume customers until the transition back into the OEB's annual recurring winter disconnection ban on November 15, 2020. 319 KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2020 (Expressed in thousands of dollars) 26. Impact of COVID-19 Pandemic (continued): On March 24, 2020, the Ontario Government issued an emergency order setting TOU rates for on - peak, mid -peak, and off-peak at 10.1 cents per kWh, which prior to the emergency order was the TOU off-peak rate. That emergency order was effective through May 7, 2020. On May 6, 2020, the Ontario Government issued an emergency order extending those TOU rates through May 31, 2020. On May 30, 2020, the Ontario Government announced the COVID19 Recovery Rate, setting a fixed TOU electricity price at 12.8 cents per kWh, 24 hours a day, seven days a week, effective June 1, 2020 until October 31, 2020. On October 13, 2020, the OEB announced new TOU rates for on - peak, mid -peak, and off-peak, that once again vary according to when electricity is used, effective November 1, 2020. There was no impact to net income to the Corporation. On March 25, 2020, the OEB established a deferral account for regulatory balances to record the costs of changes to billing systems resulting from the Ontario Government's TOU emergency order, other incremental costs and lost revenues associated with the COVID-19 pandemic. On May 14, 2020, the OEB launched a consultation process to inform its decision-making with respect to how the account will operate, including eligibility requirements, and the process and timing for the disposition. On December 16, 2020, OEB staff issued a proposal with respect to the deferral account and related consultation [note 8]. On August 20, 2020, the Ontario Government amended O. Reg. 95/05 Classes of Consumers and Determination of Rates. Accordingly, customers on the RPP have the choice to pay TOU rates or tiered rates, effective November 1, 2020. By default, RPP customers will pay TOU rates. RPP customers who choose to pay tiered rates will pay a lower rate for consumption below a monthly threshold, and a higher rate for consumption above that threshold. The tiered rates and the threshold are set by the OEB twice per year, at the same time as the OEB sets TOU rates. There was no impact to net income to the Corporation. On December 15, 2020, the OEB announced new RPP TOU and tiered rates to reflect a decrease in supply cost resulting from the Ontario Government's decision to remove certain renewable generation costs from the global adjustment and funding them directly through the tax base. The reduction was accompanied by a corresponding reduction to the Ontario Electricity Rebate. There was no net income impact to the Corporation. On December 22, 2020, the Ontario Government amended O. Reg. 95/05 Classes of Consumers and Determination of Rates, setting both the TOU rates for on -peak, mid -peak, and off-peak and tiered rates at the TOU off-peak rate of 8.5 cents per kWh. That regulatory amendment was effective through January 28, 2021, and most recently extended until February 22, 2021. On February 23, 2021, residential and small business customers resumed paying TOU and tiered pricing under the RPP at prices that were set by the OEB on December 15, 2020. There was no net income impact to the Corporation. 36 1d COMMUNITY REPORT TABLE OF CONTENTS TS About Kitchener -Wilmot Hydro Inc. 3 Our Unwavering Commitment to Safety 10 Message from the CEO & Chair 4 Keeping Employees Connected 12 Financial Highlights 6 Giving Lack to {fur Communities 13 Reliable Power When You Need It 7 OridSrnartCity. Navigating the Future Together 14 A New Approach to Customer Care 6 Corporate Governance 15 Outstanding ,Achievement in Billing g P Vision J Empowered by a dodirated and regi) Niu te"110, Wo wlia be the pnaFerr-ed mr3r4y providr�r and trusoad Parinar frrr Gdr Mmmuni4r. ABOUT KITCH EN ER -WI LMOT HYDRO INC. Kitchener -Wilmot Hydro Inc. (Kitchener -Wilmot Hydro) delivers a safe, reliable supply of electricity to more than 99,000 homes and businesses over 1,993 kilometres of overhead wire and underground cable and more than 23,000 poles across 425 square kilometres in Kitchener and Wilmot Township. A wholly owned subsidiary of Kitchener Power Corp., Kitchener -Wilmot Hydro is proud to be one of the most efficient utilities in the province. The City of Kitchener and Township of Wilmot are the shareholders of Kitchener Power Corp. with ownership interests of 92.25 per cent and 7.75 per cent respectively. Service Area System Peaks Summer 2020 / All -Time Peak 382 MW July 2020/387 MW June 2005 Winter 2020 Year/All-Time Peak 292 MW January 2020/322 MW December 2004 Electricity Consumed Total — 1,820 gigawatt hours Residential — 740 gigawatt hours Commercial —1,080 gigawatt hours Customers 99,026 Residential 89,926 Small Business 8,134 Commercial 966 Employees Regular 181 178 Temporary 3 Assets Townehlp r1 k NA1mot 1,006 km f Underground Cable 987 km Transformer Stations $ Distribution Stations ix Transformers 11,120 System Peaks Summer 2020 / All -Time Peak 382 MW July 2020/387 MW June 2005 Winter 2020 Year/All-Time Peak 292 MW January 2020/322 MW December 2004 Electricity Consumed Total — 1,820 gigawatt hours Residential — 740 gigawatt hours Commercial —1,080 gigawatt hours Customers 99,026 Residential 89,926 Small Business 8,134 Commercial 966 Employees Regular 181 178 Temporary 3 Assets 0 Overhead Wire 1,006 km f Underground Cable 987 km Transformer Stations $ Distribution Stations 6 Transformers 11,120 ik Poles 23,264 kwhydro.ca 3 127 P - MESSAGE FROM THE CEO &CHAIR The year 2020 began with our usual expectations for the year ahead. We have capital plans in place to ensure we continue to deliver a safe, reliable supply of electricity that supports the growing needs of the communities we serve and we focus on operating efficiently to provide great value to our customers. We have regulatory requirements we must fulfill and are focused on improving the information and communications with our customers. We have training programs to ensure our employees are working with the most current standards and skill sets. We expect storms will cause power outages but are prepared to restore power safely and as quickly as we can. What we do not typically expect, however, is a global pandemic, but that was exactly what happened. While we did have some plans in place following the H1 N1 outbreak 10 years earlier, we could not anticipate all of the preparations that needed to be in place for the months that lay ahead. And yet, here we are. COVID-19 has been an emergency event unlike anything we have dealt with before. There was and is no guidebook to tell us what to expect next. In the face of uncertainty, our employees showed remarkable resilience and adapted quickly to new routines and structures. Within days of the pandemic being declared, our field crews shifted from reporting to our central operations centre each morning to reporting to the various transformer stations across our service territory to ensure we could maintain essential services by physical distancing and minimizing exposure for our employees. Processes and procedures were revised across the company to ensure public health and safety protocols were being met. Office employees adopted work from home routines, many balancing work demands and deadlines with childcare and home schooling. With our office closed to the public for several weeks over the spring and early summer, customers and 4 2020 Community Report contractors who were accustomed to coming into our office to manage their accounts adapted to business from a distance, completing account transactions remotely and online. Our Business Continuity Team met 75 times to work through rapidly changing protocols and to make decisions that would protect the health and wellness of our employees and their families. As always, our Joint Health and Safety Committee and our Ergonomics Wellness Team provided a thoughtful sounding board and provided valuable input for decisions we made. The pandemic also changed the way electricity was consumed in our communities. In 2019, commercial customers accounted for 62 per cent of electricity use in our service territory and 38 per cent of electricity use was in the residential sector, but in 2020 that balance shifted, with 56 per cent of electricity use attributed to commercial use and 44 per cent attributed to residential customers as businesses were forced to scale back or close for periods of time and more people shifted to working from home. By managing our business responsibly and prudently in 2020 and making adjustments where needed, 1.28 we kept expenses in line and projects on track, accomplishing most of what we set out to do at the beginning of the year. It might have been different from the way we had planned, but we were there to serve our customers as an essential workplace and continued to do so in a financially responsible manner The year was hard on our customers, too. Many people and businesses experienced hardship ranging from job and business losses to physical and mental health stresses. Our customer care team did an outstanding job supporting our customers through the pandemic by listening with compassion and working with them, sharing information and resources to help customers manage electricity costs and take advantage of programs and subsidies available, including an unprecedented number of rate changes and relief programs and grants. As we look back on a year unlike any other and unlike any we could have predicted, we are incredibly proud of the way our team persevered, bravely doing what needed to get done, continuing to serve our customers and the communities we serve with courage and resilience. On behalf of the board of directors, we send our sincere thanks to our team. It has been a long and difficult year, but their bravery and determination to work through the pandemic ensured that our customers continue to enjoy a reliable electricity system, electricity rates that are among the lowest in the province, and high-quality customer care. qsv-w-�s J. Phillips CHAIR, KITCHENER POWER CORP. g46�e J. Van Ooteghem PRESIDENT & CEO Dave Schnarr CHAIR, KITCHENER-WILMOT HYDRO INC. kwhydro.ca J 129 JI FINANCIAL HIGHLIGHTS Kitchener -Wilmot Hydro's prudent approach to financial management helps ensure our customers receive the best possible value for their dollars. During the pandemic, that approach helped minimize the impact to Kitchener -Wilmot Hydro Inc.'s balance sheet. While many businesses were forced to shut down due to the pandemic, Kitchener -Wilmot Hydro's Customer Care team worked closely with those customers to help them take advantage of support programs and funding programs that were available, keeping past -due balances minimal. Swift and timely response to many regulatory changes in 2020 presented an additional challenge for Kitchener - Wilmot Hydro's billing and finance team, but the talented team ensured that all programs were implemented on time and effectively. In addition, much of the team's attention has been on the delivery of Kitchener -Wilmot Hydro's new customer information system as well as an Enterprise Resource Planning System upgrade. Energy Sales $238M 84% Distribution Revenue $43.3M 15% CDM & Other Revenue $4,1 M 1% Community Value Interest and dividends paid to the City of Kitchener and Township of Wilmot Reforestation grants to the City of Kitchener and Township of Wilmot Contributions to Low Income Energy Assistance Program $6.7M $90,000 $82,500 Sponsorships & Community Support $26,000 In 2019, Kitchener -Wilmot Hydro's Operating, Maintenance, and Administration (OM&A) costs were among the lowest of Ontario's electricity distributors, and in 2019, our customers benefited from the second -lowest electricity bills in the province. OM&A COST PER CUSTOMER** 2019 RESIDENTIAL BILL COMPARISON* 2019 $1,200.00 S135.00 $130.00 Co E a E g r I, � $800.00 N Kitchener -Wilmot Hydro Inc. a $120.00 Kitchener Wilmot Hydro Inc. FL OM&A Cost per Customer 2019 $11501} Average Residential Bill 2019 $600.00 r $202.23 = Y $101.35 o U 5400.00 cm o p S200.00 II I �9� o ¢ m $160.130 i $ $95.00 Ontario Electricity Distributors Ontario Electricity Distributors "Source: Ontario Energy Board 2019 Yearbook of Electricity Distributors. 'Source: Ontario Energy Board 2019 Yearbook of Electricity Distributors. Rates shown exclude tax and the Bill 87 rebate. 6 2020 Community Report 130 As an essential workplace, Kitchener -Wilmot Hydro had to quickly develop and implement plans to keep employees healthy and safe while keeping the lights on and electricity flowing to Kitchener and Wilmot Township. 2020 Power Outages Equipment Failure 8% Weather Related 18% Planned Maintenance 14% Animal Contact 8% Other (includes tree contact & vehicle accidents) 11 Investments Investments in Capital Projects $25.9 Million Poles Installed or Replaced 491 New Services Connected 1,477 Our crews were deployed to work out of the transformer stations located throughout our service territory, which presented a unique challenge in getting convenient access to the tools and equipment our crews need to get work done. Vehicles from other departments were reassigned and more were rented to ensure crews were driving with one person per vehicle, limiting close contact between crew members. Much of our engineering team is working from home without access to the large drawing printers they use for planning available in the office. Despite the disruption, our highly talented teams kept all priority projects moving on time and on budget. kwhydro.ca 7 131 Fr ANEW APPROACH TO CUSTOMER CARE While the pandemic transformed how we do business across the board, we saw the biggest impact to the way we serve customers. We take great pride in our best -in -class customer service, offering in-person as well as online and telephone service in an age where in-person customer service is becoming increasingly rare. However, as COVID-19 began to spread across Waterloo Region, we were forced to close our doors for three months to keep our employees and customers safe and adapt many of our processes to accommodate more online and self -serve customer care. Our customer care team stepped up admirably. While in-person visits to our office dropped by 70 per cent from 2019, we saw incredible growth in our online channels. The number of emails we received increased by 30 per cent and the number of forms submitted online increased by 34 per cent, and website users increased 29 per cent. In addition, our customer care team successfully learned and applied multiple regulatory changes introduced to support customers through the pandemic. We saw an unprecedented five rate changes announced between March 24, 2020 and December 15, 2020, the introduction of customer choice between time -of -use and tiered pricing plans, and the launch of the COVID-19 Energy Assistance Program (CEAP) and the COVID-19 Energy Assistance Program for Small Business (CEAP-SB), which provide relief to customers who are behind in their bills as a result of the pandemic. Both programs were updated and revised throughout the year to accommodate changes as the pandemic continues, and our team adapted quickly to the changes. 8 2020 community Report Customer Service Calls Answered 72,280 Emails Received 23,092 no Mum Web Forms Processed 11,688 Website Visits 321,918 My Account Registrations 33,285 E -Bill Customers 23,109 Bills Issued 1.2 Million_ Pandemic Program Rollouts Rate Relief Roll Outs 2 Financial Support Programs 2 132 The awards recognize Kitchener -Wilmot Hydro's outstanding performance in billing and data synchronization with the Meter Data Management and Repository (MDM/R) system, which is the database that houses and maintains smart meter and billing data in the province. On their own, these awards are an impressive achievement. All electricity distributors must ensure that their billing systems are correctly transmitting smart meter data back and forth with the MDM/R, which is not an easy task. There are more than 95,000 smart meters installed in homes and businesses across our service area, and hourly consumption data from each meter is transmitted to the MDM/R daily to ensure customers are billed for their electricity use in each time -of -use period correctly. It also means that there are staff reviewing billing information every day to ensure the data was transmitted correctly. However, in 2020, these awards are particularly remarkable. In addition to quickly programming, testing and rolling out many new pricing and COVID-19 customer support programs, many of our billing team members are new to their roles as other team members focus on building the new customer information system (CIS). Adding additional challenge, both the billing and IT teams are rotating on a work -from -home schedule, which has meant introducing new tools and processes. We congratulate our team on this impressive achievement. 100% 0 Synchronization Success i Highest Billing Success Rate 9, kwhydro.ca 133 OUR UNWAVERING COMMITMENT TO SAFETY Like almost all electricity distributors in the province, the pandemic forcedKitchener- Wilmot Hydro to abruptly shift its safety focus from a routine of safety training, school safety presentations and community safety events to pandemic planning and controls. Early in the year, our safety team paid close attention as news started to spread about a mysterious new virus spreadlrtg around the world and began planning accardingly. By the end of January we had issued our first procedure to begin planning. Our first safety rneating with staff to discuss the developing coronavirus was held on January 31 and oijr first ccmmunication to all employees about the virus and how to protect yourself, Irtc€ading hand hygiene and maintaining phys€cal d€stance of two metres, was sent on l=ebmry 3, 2020, By the time the World Health 0gani tieti declared a pandemic on March 11, 2020, our team had issued six coronavirus -specific employee communioations. Twenty-one additional commur i!Wions were issued to staff before introducing a formal weekly update on Apr [ 2. r x ' i I it ! II i� �'�:�I'ry.�..f ;-ter � ��+1".•ll ti IR Q Preparing t" for a Pandemic New procedures issued and updated based on medical advice and ventilation KN95 Respirators improvements 14 N95 Respirators Plexiglass Barriers Surgical Masks at Customer Service Counters 4 Washable Masks Welding Curtains to Provide Barriers Pairs of Latex Gloves in Between Work Stations and Customers 5 Arc Flash Fire Resistant Washable Surface Cleaner Face Masks & Neck Tubes 1,100 Hand Sanitizer Powering Public Safety In 2020 we undertook our bi-annual Public Awareness of Electrical Safety Survey, surveying 400 people in Kitchener and Wilmot Township to assess their awareness and understanding of how to stay safe around electricity. The results of the survey reveal that most people in Kitchener and Wilmot Township know how to stay safe around electricity, but also showed that there is room for improvement. In 2021 Kitchener -Wilmot Hydro Inc. will be promoting electricity safety in these areas. School Safety Presentations FEJDEJEJEIOUQL, Students Reached 2,237 Presentations 50 Schools 37 4307 2,000 10,000 1,450 21,500 Lucky the Squirrel Safety Tips 120 L 700 L In 2017, Kitchener -Wilmot Hydro, in partnership with 30 other electrical utilities and the Electrical Safety Authority, released a series of electrical safety videos featuring Lucky the Squirrel. The videos have earned close to 45,000 views on Kitchener -Wilmot Hydro's YouTube channel. You can find the entire collection of Lucky the Squirrel videos on our YouTube channel, Kitchener -Wilmot Hydro. kwhydro.ca 11 135 F- r KEEPING EMPLOYEES CONNECTED Our Information Technology team hit the ground running in 2020. With some team members hard at work developing and programing Kitchener - Wilmot Hydro's new customer information system, the team was already working with tight resources. When the pandemic was declared, our IT team's incredible skill and resourcefulness shone as the team quickly shifted their attention to get all employees set up to work remotely and from home, and challenged our systems to perform tasks never done before, including programming to accommodate an unprecedented number of rate changes, financial support programs, and customer choice of rate plans. Our call centre had to be set up so that customer care representatives could respond to customer calls from home. The resourcefulness and ingenuity of our IT team cannot be understated. Without their amazing work we would not have been able to respond as quickly as we did to keep our employees healthy and safe. 12 2020 Community Report It7 , Keeping us Connected for Remote Work Laptops Configured and Deployed 53 Monitors Issued for Work from Home 11 Headsets Purchased and Deployed 13 Additional Printers g Additional RSA Security Tokens Purchased for VPN Access 65 Employees Trained to Use Remote Tools Over 11 Business Days Staff Equipped to Work from Home 110 Internet Speed Upgraded to 500 Mbps Additional Microsoft Team Licenses Deployed 75 13 GIVING BACK TO OUR COMMUNITIES While the pandemic has our employees dispersed and working remotely from home and across our service territory, our commitment to the well-being of the communities vire serve remains a priority. Many of our usual community events such as our Earth Day Clean Up, the Big Bike Ride for Heart and Stroke, Strong Start Reading Program and school safety presentations were cancelled, but fundraising continued where and how it could. In 2020 we were pleased to support the following organizations: Canadian Cancer Society ■ Centre in the Square: • Children's Safety Village • Community Energy Investment Strategy for Waterloo Region • Conestoga College Education Grants • The Foodbank of Waterloo Region • Heart and Stroke Foundation of Canada House of Friendship • The Humane Society of Kitchener Waterloo & Stratford Perth + Kitchener -Waterloo Symphony • Reep Green Solutions • Salvation Army Toy Mountain • St. Mary's General Hospital • Strong Start • THEMUSEUM • United Way Waterloo Region Communities • Victoria Park Christmas Fantasy �m NAVIGATING THE FUTURE E TOGETHE Grid art it reclenvin9 emrgy Collaboration is a key component of Kitchener -Wilmot Hydra's success, and its importance was highlighted in 2020. Kitchener -Wilmot Hydro is a proud member of the CridSmartCity Cooperative (LSCC), a cc opnrtative of wunicipally-owned eiectr city distributors that share resources, insights and systemsthat help run smarter companies while advancing innovatlon, rellabillty and efficiency across Ontario's electricity grid. GridSmartQty's 15 member electricity distributors manage approximate[y $2.7 billlon In assets, serving closo to 737,000 customers across snore than 25 communities. Many Kitchener -Wilmot Hydro employees represent the company on GridSmartCity sub- committees, which helps the utility realize the benefits of purchasing power, collaboration and innovation with other member utilities, and 1n 2020 we were abie to see those benefits shine. The Human Resources sub -committee was invaluable in helping each other create .and deliver policies and procedures to ensure employee and customer safety during the pandemic, and we continue to draw on the combined talent of the groups in 2821. CORPORATE GOVERNANCE Kitchener -Wilmot Hydro Inc. is a wholly owned subsidiary of Kitchener Power Corp. Kitchener Power Corp. was incorporated under the Business Corporations Act (Ontario) on July 1, 2000. The City of Kitchener and the Township of Wilmot are the shareholders of Kitchener Power Corp. with ownership interests of 92.25 per cent and 7.75 per cent respectively. Kitchener Power Corp. owns two subsidiary companies and is one-third owner in a third company: Kitchener -Wilmot Hydro Inc., a regulated distribution company. Kitchener Energy Services Inc., a corporation which provides streetlight maintenance services to our shareholder municipalities, and other future energy services. Grand River Energy Inc. (GRE), a non-regulated corporation investing in energy assets and services jointly owned by Kitchener Power Corp., Waterloo North Hydro Holding Corporation, and Cambridge and North Dumfries Energy Solutions Inc. Kitchener Power Corp. The directors for Kitchener Power Corp. are appointed by the shareholders for a term of one year. The Mayors and President and CEO hold a seat on this board of directors by right of office. Jim Phillips, Chair Rosa Lupo, Vice Chair Jerry Van Ooteghem, President & CEO & Secretary Mayor Berry Vrbanovic Mayor Les Armstrong Councillor Sarah Marsh Councillor Scott Davey Kitchener -Wilmot Hydro Inc. The directors for Kitchener -Wilmot Hydro Inc. are appointed by the Kitchener Power Corp, board of directors for a term of one year. The Mayors and President and CEO hold a seat on this board of directors by right of office. Dave Schnarr, Chair Sandra MacGillivray, Vice Chair Jerry Van Ooteghem, President & CEO Mayor Berry Vrbanovic Mayor Les Armstrong Jim Beingessner Jacinda Reitsma kwhydro.ca 15 139 t 519-745-4771 ® customercare@kwhydro.ca 301 Victoria Street South, Kitchener, Ontario, N2G 4L2 V @KWHydro Q @kwhydro U Kitchener -Wilmot Hydro kwhydro.ca 0 PI 140 Staff Repoi t Infrastructure Services Department REPORT TO: City Council DATE OF MEETING: May 17, 2021 SUBMITTED BY: Qureshi, Asad, Director, Facilities Management; 519-741-2600 ext. 4424 PREPARED BY: Chris Oke, Manager, Project Delivery 519-741-2600 ext. 4225 www.kitchener;ca Lynda Stewart, Manager, Project/ Energy Management 519-741-2600 ext. 4215 Grant Egerdeen, Supervisor, Corporate Security 519-741-2600 ext. 7578 WARD(S) INVOLVED: All DATE OF REPORT: May 12, 2021 REPORT NO.: INS -2021-4 SUBJECT: Protective Bollard Installation at City Hall RECOMMENDATION: That protective bollards be approved for installation at specified locations along the perimeter of the City Hall block, as outlined in staff report INS -2021-4, in accordance with public safety guidance; and, That the protective bollard project be incorporated into the existing contract for City Hall outdoor works to realize efficiencies and cost savings by undertaking the Protective Bollard Project concurrently; and further, That the existing construction contract, awarded to Heritage Restoration Inc., be increased by $807,300, to be funded through the Gas Tax Reserve, to undertake the protective bollard project. REPORT HIGHLIGHTS: The purpose of this report is to obtain approval to proceed with the Protective Bollard Project at City Hall based on public safety guidance. Proceeding with this project concurrent with the City Hall Outdoor Spaces project will results in savings of approximately $440,000 *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. 141 • The overall budget for the Protective Bollard Project is $807,300 to be funded from the Gas Tax Reserve • This report supports the delivery of core services. BACKGROUND: Public Safety Canada (PSC) conducts on-site risk assessments through the Regional Resilience Assessment Program to Critical Infrastructure as identified in Canada's National Strategy on Critical Infrastructure. The purpose of the National Strategy for Critical Infrastructure is to strengthen the resiliency of critical infrastructure in Canada. The strategy works towards this goal by setting the direction for enhancing the resiliency of critical infrastructure against current and emerging hazards. The strategy is also based on the recognition that enhancing the resiliency of critical infrastructure can be achieved through the appropriate combination of security measures to address intentional and accidental incidents, business continuity practices to deal with disruptions and ensure the continuation of essential services, and emergency management planning to ensure adequate response procedures are in place to deal with unforeseen disruptions and natural disasters. As part of the City's ongoing efforts to ensure the security and safety of property, customers and staff, Public Safety Canada's services were utilized for assessing City Hall. A high priority recommendation from Public Safety Canada was to install protective barriers around the perimeter of City Hall to mitigate any high-speed avenues of approach from vehicles. It was noted that the existing perimeter bollards do not provide this protection. Protective Barriers Around City Hall: City Hall is a prominent feature in the City of Kitchener, the focal point of local municipal government, providing open and accessible services to residents and businesses, and serves as a welcoming and inclusive space for the community. Carl Zehr Square makes the space unique to the downtown area whereby it is a gathering place for premier events, rallies, and protests as well as community recreational use. Carl Zehr Square is currently undergoing an extensive renovation to re -vitalize City Hall and bring people to the City centre. The square has been previously programmed as a fountain in the summer and ice-skating rink in the winter. The new design will replace the fountain with a splash pad in the summer for the public to enjoy. Gathering the public closer to King Street has many advantages to provide a sense of place and community, however the hazards increase from vehicle traffic. The new design incorporates a reinforced concrete seat wall along the length of the splash pad to provide limited protection from vehicles driving along King Street. Providing a safe and secure venue to gather is paramount to keep the public trust. 142 While City Hall has been fortunate to not have any major vehicle incident, whether intentional or deliberate, other critical infrastructure facilities have not. A few illustrative examples of incidents are listed below: In 2020, a vehicle was exploded on the road adjacent to the Waterloo Region Courthouse. Protective bollards are in place to prevent vehicles from entering onto the courthouse property. In 2019, a supporter of a group of yellow vest demonstrators drove a school bus on to the side walk near City Hall in Hamilton. As a result of this incident City of Hamilton will install bollards around City Hall to protect people from vehicle intrusion onto the City Hall grounds. In 2018, an impaired driver collided with multiple parked vehicles before crashing into the bus shelter near Union Station in Toronto. There have been at least 2 more vehicle related incidents at Union Station in the last 2 to 3 years. One incident was related to impaired driving and the other was after a robbery. City of Toronto has installed jersey barriers on a temporary basis around the perimeter of several facilities such as City Hall and Union Station until more permanent bollards can be implemented. In 2017, City of Edmonton experienced an attack on its citizens where a vehicle rammed into a crowded area injuring 4 and killing a police officer. In 2016, Kitchener Memorial Auditorium experienced a theft of an ATM machine from a vehicle driving into the lobby of the facility. In 2011, a car drove into the lobby of the Waterloo Region Police Headquarters, this was later discovered to be a targeted attack. Facilities Management engaged MTE consultants to review and provide various design options for installing protective barriers. MTE prepared a report with multiple options and opinion of cost, ranging from $807,300 to $4.9M. Careful consideration has been given to balancing aesthetics and cost with safety to the public. The preferred design option utilizes existing site features as barriers to minimize the extent of bollards placed around the perimeter of City Hall. All bollards in this design are rated to protect against high-speed vehicle approach and unintended vehicle access, which is consistent with municipal applications in other jurisdictions. Attachment 1 provides photo renderings of the bollard installation for both the King Street and Duke Street frontages. With the current City Hall Open Spaces construction underway, an opportunity arises to add this project as a change order to save money on procurement, re -mobilization, concrete re -work or the complexity of managing multiple contractors on site. The estimated cost saving to incorporate this project into City Hall Open Spaces project is $440,000. This includes a 30% mobilization cost and a 25% concrete re -work cost if this project is undertaken outside of the City Hall Open•Spaces project. Facilities Management and MTE have consulted with the contractor to ensure that the works can be integrated into the construction schedule without additional time burdens to the completion of phase one. The proposed additional bollards to protect the Duke and Young Street entrances will be completed during phase two construction. 143 STRATEGIC PLAN ALIGNMENT: This report supports the delivery of core services and contributes to the security and well- being of the public and staff. FINANCIAL IMPLICATIONS: The projected costs and proposed funding source for the installation of protective barriers around City Hall is shown in the table below. Item of Work Projected Cost Phase 1: Carl Zehr Square, intersection of King/College, King/Young and Bells Lane, all $576,500 new crash rated bollards. Phase 2: Duke Street entrance and Young _ Street entrance, all new crash rated bollards. $125,500 Contingency $105,300 TOTAL ESTIMATED COST $807,300 Funding Source Federal Gas Tax Federal Gas Tax Federal Gas Tax The Gas Tax Reserve has a sufficient balance of $1.2M to fund the cost of the protective barriers. PREVIOUS REPORTS/AUTHORITIES: There are no previous reports/authorities related to this matter. APPROVED BY: Denise McGoldrick, General Manager, Infrastructure Services 144 Attachment 1 — Photo Renderings Figure 1: King Street Photo Rendering Figure 2: Duke Street Photo Rendering 145 1 Staff Report Community Services Department www.kitchener.ca REPORT TO: Committee of the Whole DATE OF MEETING: May 17, 2021 SUBMITTED BY: MacNeil, Gloria, Director of Enforcement 519-741-2200 ext. 7952 PREPARED BY: MacNeil, Gloria, Director of Enforcement 519-741-2200 ext. 7952 WARD (S) INVOLVED: 5 DATE OF REPORT: May 11, 2021 REPORT NO.: CSD -2021-5 SUBJECT: Exemption to Chapter 408 - Animals RECOMMENDATION: That the Deputy CAO be authorized to execute an agreement satisfactory to the City Solicitor, granting an exemption from section 408.2.11 of Chapter 408 of the City of Kitchener Municipal Code to a resident of the City to allow the keeping of ducks in the City provided the conditions set out in this report CSD -2021-5 are complied with. REPORT HIGHLIGHTS: • The City's Animals By-law (Chapter 408 of The City of Kitchener Municipal Code) prohibits the keeping of certain animals, including ducks, within the City of Kitchener. The City has received a request from a homeowner to allow them to keep ducks in their yard through an exemption to the City's Animals by-law. The resident is willing to comply with all regulations currently applicable to backyard hens as well as any additional requirements necessary. • Staff have spoken to the immediate neighbours on either side of the resident and both are supportive and have no concerns. BACKGROUND: The City's Animals By-law (Chapter 408 of The City of Kitchener Municipal Code) prohibits the keeping of certain animals, including ducks, within the City of Kitchener. REPORT: On March 22, 2021, Laura McQuillen came before Council as a delegation requesting an exemption to Chapter 408 (Animal Regulation) of the City of Kitchener Municipal Code to keep ducks where they are identified as prohibited. At that time Council directed staff to consider this request and return to Council with a recommendation. *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. 14(--) Staff have had an opportunity to do some generic research on ducks and to consult with the Humane Society to get a better understanding of the level of care required. It appears that most of the regulations that we currently have in place for backyard hens, are appropriate and applicable to the keeping of ducks, therefore staff would suggest the same approach and apply the same requirements as backyard hens to Ms. McQuillen's request for ducks, with the exception of removing the required dust bath for chickens and instead requiring that a water source be kept available at all times which is required to keep their eyes, bills, feet and feathers in good condition. Staff recommends that an exemption be granted to allow Laura McQuillen to keep ducks at her current address provided the following conditions are met and maintained; the owner shall ensure that the ducks remain in a coop or enclosed run at all times and are not permitted to run on the property or at large and shall comply with the provisions of Chapter 408 of The City of Kitchener Municipal Code with respect to keeping of hens as if the ducks were a permitted animal thereunder; • the owner will keep the ducks on the owner's property associated with the residence except as necessary for veterinary care, or as otherwise contemplated by this exemption; • the owner will ensure that the ducks are kept in a clean and healthy manner and that they do not create a nuisance (including bothersome smells or noises) for neighbours or other residents of Kitchener; the owner shall ensure that a water source be kept available at all times which is required to keep the ducks eyes, bills feet and feathers in good condition; the owner shall dispose of waste material associated with the ducks in a responsible manner to ensure that the waste does not create a nuisance to neighbours or other residents of Kitchener; the Owner shall keep the City informed of any change in address by providing written notice to the By-law Enforcement division at the City of Kitchener and agreeing to a reinspection of the coop and run at the new address; - the Owner shall allow the City and its agents including the Humane Society, upon reasonable notice, to attend and inspect the ducks and their living conditions from time to time, and; - this exemption may be modified or revoked by Council of the City at any time if Council reasonably believes that the Owner has failed to comply with any of the conditions contained herein. 1.47 ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN: The recommendation of this report supports the achievement of the city's strategic vision through the delivery of core service. FINANCIAL IMPLICATIONS: None. COMMUNITY ENGAGEMENT: Staff have spoken to the immediate neighbours on either side of the resident and both are supportive and have no concerns. Additionally, this report has been posted to the City's website with the agenda in advance of the Council meeting. PREVIOUS REPORTS/AUTHORITIES: There are no previous reports/authorities related to this matter. APPROVED BY: Michael May, Deputy Chief Administrative Officer ]. 4 B StaffRepott Corporate Services Department www.kitchener. ca REPORT TO: Committee of the Whole DATE OF MEETING: May 17, 2021 SUBMITTED BY: Tarling, Christine, Director of Legislated Services/City Clerk, 519- 519-741-2200 ext. 7809 PREPARED BY: Tarling, Christine, Director of Legislated Services/City Clerk, 519- 519-741-2200 ext. 7809 WARD(S) INVOLVED: Ward 10 DATE OF REPORT: May 10, 2021 REPORT NO.: COR -2021-17 SUBJECT: Mid -Term Appointment to Heritage Kitchener RECOMMENDATION: That Ilona Bodendorfer be appointed to Heritage Kitchener as the representative for the Civic Centre Heritage Conservation District for the term ending November 14, 2022. REPORT HIGHLIGHTS: • The purpose of this report is to appoint a representative for the Civic Centre Heritage Conservation District on Heritage Kitchener in response to a resignation. • The financial implications are none. 4 Community engagement included posting this report online. • This report supports the delivery of core services. BACKGROUND: On November 23, 2020, Council approved appointments to various advisory committees including Heritage Kitchener for the term ending November 14, 2022. For mid-term vacancies, the selection process is for staff to reach out to applicants who had previously applied but who had not been appointed, as well as to accept new applications if any have been received. Staff determine the eligibility of all applicants and once their eligibility is confirmed, their names are put forward for consideration. If there are more applications than vacancies, the applications are forwarded to the Nominating Committee to make a recommendation for Council's decision. If there are not, the Director of Legislated Services/City Clerk makes a recommendation directly to Council. *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. 149 REPORT: On November 23, 2020, Council approved the appointment of a citizen to Heritage Kitchener (HK) as the representative for the Civic Centre Heritage Conservation District (CCHCD) as per the Terms of Reference for HK. The appointed individual has since resigned creating a mid-term sector specific vacancy and Ilona Bodendorfer has applied to fill that vacancy. Since there are no other eligible applicants for this specific vacancy, Council is asked to approve this appointment. STRATEGIC PLAN ALIGNMENT: This report supports the delivery of core services. FINANCIAL IMPLICATIONS: Capital Budget — The recommendation has no impact on the Capital Budget. Operating Budget — The recommendation has no impact on the Operating Budget. COMMUNITY ENGAGEMENT: INFORM — This report has been posted to the City's website with the agenda in advance of the council / committee meeting. PREVIOUS REPORTS/AUTHORITIES: COR -20-016 — Nominating Committee — Citizen Appointments to Advisory/Quasi- judicial Committees and Boards (2020-2022) APPROVED BY: Victoria Raab, General Manager, Corporate Services Department ATTACHMENTS: None iso