HomeMy WebLinkAboutCouncil Agenda - 2021-10-04 SSpecial Council Meeting
Agenda
Monday, October 4, 2021, 4:30 p.m.
Electronic Meeting
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/watch now.
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
delegation6jNtchener.ca. Please refer to the delegations section on the agenda below for registration
deadlines. Written comments will be circulated prior to the meeting and will form part of the public
record.
*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*
Re: Special Council Meeting
Notice is hereby given that Mayor B. Vrbanovic has called a special meeting of City Council to be held
electronically to consider the following:
Pages
1. Commencement
The electronic meeting will begin with a Land Acknowledgement given by the
Mayor.
2. Delegations
Pursuant to Council's Procedural By-law, delegations are permitted to address
the Committee for a maximum of five (5) minutes. Delegates must register by
2:30 p.m. on October 4, 2021, in order to participate electronically.
3. Staff Reports
3.1. FIN -2021-56 - Proposed Merger Between 30 r11
Kitchener Wilmot Hydro and Waterloo North
Hydro
That the Memorandum of Understanding regarding a proposed
merger between Kitchener Wilmot Hydro and Waterloo North
Hydro, attached as appendix B, be approved.
3.2. FIN -2021-54 - Q21-119 Dell Data Domain 5 rn
Virtual Edition (DDVE) Licenses
That Q21-119 Dell Data Domain Virtual Edition (DDVE) Licenses, be
awarded to CDW Canada Corp., Toronto, Ontario, at their quoted price
of $132,029.00, plus H.S.T. of $17,163.77 for a total of $149,192.77.
3.3. FIN -2021-55 - 2022 Budget Schedule Revision 5 rn
- Update
That November 30, 2021 be added to the 2022 Budget Meeting
Schedule, as outlined in report FIN -2021-55.
4. In -camera Meeting Authorization
Note: Any member of Council may question the appropriateness of a listed in -
camera item. This may be done during the special Council meeting or at the
beginning of the in -camera session.
Council is asked to enact the following resolution to authorize an in -camera
meeting:
"That an in -camera meeting of City Council be held immediately following
the special council meeting this date to consider a labour relations matter
and a solicitor -client privilege matter as authorized by Section 239 (d) and
(f) of the Municipal Act, 2001, respectively.
Items for Consideration:
4.1. Vaccine Strategies for Third Parties accessing 30 m
indoor areas of City facilities (Solicitor -Client
Privilege - Section 239 (2) (f))
Staff will provide information and seek direction related to this matter.
4.2. Staffing Resources (Labour Relations - 30 in
Section 239 (2) (d))
Staff will provide information and seek direction related to this matter.
5. By-laws
5.1. Three Readings
5.1.a. To confirm all actions and proceedings of the Council.
6. Adjournment
3
0
30
Page 2 of 31
StaffRepoit
REPORT TO: Council
DATE OF MEETING: Oct 4, 2021
SUBMITTED BY: Jonathan Lautenbach, Chief Financial Officer
PREPARED BY: Jonathan Lautenbach, Chief Financial Officer
WARD(S) INVOLVED: All Wards
DATE OF REPORT: Oct 1, 2021
REPORT NO.: FIN -2021-56
www.kitchener, ca
SUBJECT: Proposed Merger Between Kitchener Wilmot Hydro and Waterloo
North Hydro
RECOMMENDATION:
That the Memorandum of Understanding regarding a proposed merger between
Kitchener Wilmot Hydro and Waterloo North Hydro, attached as appendix B, be
approved
REPORT HIGHLIGHTS:
• A proposed merger between Kitchener Wilmot Hydro and Waterloo North Hydro was
announced on October 1, 2021
* The City of Kitchener is the majority shareholder of KWH and any proposed merger
requires shareholder approval
A Memorandum of Understanding has been prepared that outlines the main elements
of a merger between the two utilities
• The City of Kitchener would hold a 53.39% ownership share in the new entity under the
proposed merger
BACKGROUND:
Kitchener Wilmot Hydro (KWH) and Waterloo North Hydro (WNH) have been in discussions
regarding moving forward with a proposed merger of the two utilities. A public
announcement regarding the proposed merger was made on October 1, 2021. The City of
Kitchener is currently the majority shareholder of KWH with a 92.25% ownership share and
as such, any merger involving KWH would require City of Kitchener approval.
Under a proposed merger, the City of Kitchener would continue to be the majority
shareholder of the larger newly formed entity with a 53.39% ownership share.
A Memorandum of Understanding (MOU) has been developed between all parties that
outlines the main elements of the proposed transaction. The MOU is a non-binding
agreement that helps set the general understanding and expectations regarding the
*** This information is available in accessible formats upon request. ***
Please call 519-741-2345 or TTY 1-866-969-9994 for assistance.
Page 3 of 31
proposed merger. Following approval of the MOU by municipal shareholders, a public
engagement process will launch on October 5, 2021 giving the public an opportunity to learn
more about the proposed merger and to provide feedback. It's anticipated that final approval
from municipal shareholders to proceed with the proposed merger would be requested
through a separate report that would come back to Council for consideration in December
2021.
The Boards of the respective utilities support proceeding with a merger of the two utilities
and approval of the MOU is being requested from the municipal shareholders of KWH and
WNH.
REPORT:
The electricity distribution landscape in Ontario has been changing, with more mergers and
acquisitions taking place involving Local Distribution Companies (LDCs) in recent years.
Recent and proposed transactions include Veridian and Whitby Hydro, Guelph Hydro and
Alectra, Peterborough Hydro and Hydro One, Orillia Power and Hydro One, Energy Plus
and Brantford Power. This trend in mergers and acquisitions is a result new regulatory and
policy changes that has made merger opportunities more attractive for LDCs. In addition,
consolidation of LDCs has been encouraged by the Province in order to ensure stable and
reliable energy distribution for communities across Ontario.
KWH and WNH have been in discussions regarding a potential merger and the potential
benefits that it could provide for the two utilities. Grant Thornton was engaged by the utilities
to explore what a potential merger may look like and to better understand the benefits that
it could provide, both from an individual utility and an existing shareholder perspective.
Municipal shareholders were engaged early in the process as any merger involving both
parties would require approval of municipal shareholders.
The City of Kitchener is currently the majority shareholder of KWH with 92.25% ownership
share. The Township of Wilmot is the minority shareholder with a 7.75% equity stake.
The City of Waterloo is currently the majority shareholder of WNH with a 73.2% ownership
share. The Township of Woolwich and Township of Wellesley own 20.2% and 6.6% equity
stake respectively.
Page 4 of 31
Under the proposed merger the ownership share for municipal shareholders would be
adjusted as follows:
Ak-
WOOLWICH
'C*I h -F
3f"ic �i
.10.8
.
2.78% u5 FLL. s ,Er
-V+ Wllffdt 4.49%
Kitchener will remain a majority shareholder of the new utility with a 53.39% ownership
share. Making sure that the new entity continues to be locally owned is an important
consideration. By merging with WNH now, it is expected that the new utility will remain
responsive to community and customer needs.
As indicated in the summary of comments provided by Grant Thornton (see Appendix A), a
merger between KPC and WNH would result in the 7th largest LDC in Ontario.
The MOU attached (see appendix B) outlines several objectives/benefits that the merger
between KWH and WNH is expected to achieve:
• Customers will enjoy ten-year distribution rate stability and distribution rates as low
or lower than in a standalone alternative
• Distribution rates of the former KWH and WNHI service territories will harmonize over
time
• Continued excellence in customer service
• Total cost savings to be shared amongst the Municipal Shareholders and customers
Stronger and more sustainable cash flow to Municipal Shareholders via interest and
dividends
• The ability to dedicate significant leadership and focus on innovation and growth
A larger entity with a stronger balance sheet capable of supporting future growth
• Improved service reliability leveraging best practices and capabilities of both LDCs
A stronger energy and infrastructure partner for local businesses and communities
• Alignment with provincial government policies encouraging consolidation in the
electricity distribution sector
• Increased ability to access financial and other resources available to invest in non-
regulated energy services, businesses and solutions for customers
From a shareholder perspective, the newly formed utility will provide additional dividends
for Kitchener which are outlined in the financial implications section of this report. These
additional dividends will be allocated through the City's annual budget process.
Page 5 of 31
Proceeding with a merger between KWH and WNH will ensure that customers of both
utilities continue to receive reliable service at competitive rates , both now and in the future.
Jerry Van Ooteghem, CEO of KWH, and Jim Phillips, KPC Board Chair, will be in attendance
to provide a presentation for Council and answer any questions that Council may have
regarding the proposed merger.
STRATEGIC PLAN ALIGNMENT:
This report supports the delivery of core services.
FINANCIAL IMPLICATIONS:
The City of Kitchener currently receives approximately $6 million in annual dividends and
interest from KWH.
Under the proposed merger it is estimated that the City of Kitchener will receive
incremental returns of $9.6M over a 20 -year timeframe.
In addition to the incremental returns that are a direct result of a proposed merger, a
dividend policy change that would be required to align with WNH's dividend policy will
provide an increase of an estimated $28.9 million for Kitchener over a 20 -year timeframe.
Dividends from ownership of the hydro utility are allocated through the City's annual
budget process help address both the City's operating and capital need.
COMMUNITY ENGAGEMENT:
INFORM — This report has been posted to the City's website with the agenda in advance of
the council / committee meeting.
The approval of the MOU will start the public engagement process regarding the proposed
merger. A website con nectinglocal power. ca has been set up for members of the community
to learn more about the proposed merger and to provide their feedback.
APPROVED BY: Dan Chapman, CAO
ATTACHMENTS:
Appendix A — Business Case - Summary Comments from Grant Thornton LLP
Appendix B — Memorandum of Understanding
Page 6 of 31
Business Case
Proposed Merger
between
Kitchener Power Corp
and
Waterloo North Hydro Holding Corporation
Summary Comments
Prepared by: Grant Thornton LLP
Date: September 16, 2021
Page 7 of 31
Project Background and Summary
Kitchener Power Corporation (KPC) and Waterloo North Hydro Holding Corporation
(WNHHC) (collectively, the Participants) have jointly retained Grant Thornton LLP
(GT) to act as independent financial advisor for evaluating a potential merger between
the two entities, which operate as holding companies for Kitchener -Wilmot Hydro Inc.,
and Waterloo North Hydro Inc. (the Proposed Merger).
The senior management of both entities have been working together with GT to
evaluate the financial as well as the business case benefits of merging the two utilities.
These findings have been presented to the Boards and Shareholders who have
separately retained financial and legal advisors to undertake a financial Peer Review
of the work performed by GT and legal due diligence of the Proposed Merger.
Peer Review
The PEER Review and financial due diligence activities began in early 2021 and were
substantially completed in June 2021. The legal due diligence has significant work
completed and is expected to be substantially complete by the end of 2021. The
following is some of the key work undertaken during the PEER review and due
diligence processes:
• Develop a twenty-year model to assess valuation and shareholder cash flows
taking into account growth rates in each respective region.
Model and study customer rate harmonization.
The independent financial advisors:
Reviewed and scrutinized the financial business model;
Checked assumptions for reasonableness, and tested the model for
technical accuracy.
• The independent legal advisors:
Reviewed legal documents including: minute books, contracts,
agreements, insurances, litigation and environmental obligations to
determine any potential liabilities.
Efficiencies and Synergies
Management identified several opportunities across different functional areas of the
business, which we would reasonably expect to generate significant efficiencies and
cost savings. For the first 10 years (sit -out period), the merged utility would be able to
pass on the cost savings to its shareholders. Beyond the 10 years, the cost savings
will be passed on to customers.
Cost savings are expected to be realized primarily through voluntary employee
retirement and attrition over the first three years, as well as the elimination of duplicate
work and systems such as administrative, financial, and billing and collection systems.
Further synergies are expected in the consolidation of Control Rooms, IT Networks,
and Call Centres and the adoption of best practices of each utility. Management was
able to identify approximately $2.9 million of potential annual cost savings.
Page 8 of 31
NewCo
The table below provides key metrics for each standalone entity, as well as what
would be the combined LDC ("NewCo").
Distribution Revenue'
42,982
34,940
77,922
# of customers'
99,026
58,438
157,464
kWH sold (000s)'
1,836,454
1,439,103
3,275,557
KM of lines'
1,993
1,654
3,847
Service area (sq. km)'
42�i
683
1,108
'Source: 2020 OEB Yearbook
Elexicon Energy'
169,489
78,645
Utility Size
A merger between the Participants would currently result in the seventh largest
electricity distribution utility in Ontario by customer count and make it almost as large
as Elexicon and London Hydro who rank fifth and sixth largest, respectively. An
overview of Ontario LDCs, ranked by customer count, is presented in the chart below.
(Source 2020 statistics from OEB Yearbook)
Rank
Entity Number
of Customers
Distribution Revenue ($CAD)
i
Hydro One'
1,361,102
$1,571,292
Alectra Utilities'
1,062,040
567,145
Toronto Hydro- Electric'
779,176
711,740
Hydro Ottawa Limited'
346,347
183,817
5
Elexicon Energy'
169,489
78,645
6
London Hydro Inc.
162,140
70,124
7
NewCo
157,464
77,922
3
Energy+ Inc. & Brantford
Power Inez
107,965
53,394
10
EnWin Utilities Ltd.
Oakville Hydro
All Other LDCs combined
90,104
74,001
992,735
43,338
42,017
497,640
' Denotes entities who have previously undergone consolidation
2 Assumes that a MAAD application for the proposed merger of Energy+ Inc. and Brantford Power Inc. is filed
and approved by the OEB
Page 9 of 31
Customer Benefits
The Proposed Merger would result in the following benefits for customers:
1) Retaining Local Ownership
By merging the two utilities, a strong local solution, with municipal ownership,
will ensure local workers are employed and the company is well positioned to
meet the challenges and opportunities of the future.
2) Cost Effectiveness
Savings from reduced operating costs and an increased customer base can be
used to ensure the local distribution system remains reliable, efficient and up-
to-date.
3) Ten-year rate stability
During the first ten -years (Sit -out Period), each utility would continue with its
current rate zones which will grow at an annual inflationary rate established by
the Ontario Energy Board (OEB). This provides rate stability to all customers.
4) Gradual phase-in to rate harmonization after Sit -out Period
It is a key commitment that customer rates will be carefully harmonized to
ensure that all customers benefit from a merger as compared to where they
would have otherwise been had the LDCs utilities operated in the status quo.
Innovation and Technology Developments
By leveraging a stronger balance sheet, the merged utility will have the ability to
dedicate significant resources, leadership, and focus towards innovation and future
growth. This will allow the new utility to become a stronger energy and infrastructure
partner for local businesses and communities.
Shareholder Outcomes
Our work looked at total Shareholder cash flows, and not just dividends. Shareholder
cash flows are generated in the form of both interest income (received from
shareholder loans) and dividends. Total Shareholder cash flows for all Shareholders
are expected to increase under the Proposed Merger.
Based on our model developed in collaboration with Management and subsequently
reviewed by the financial advisors, the Proposed Merger shows increased cash flows
to each shareholder which in turn are reinvested into each municipality. The estimated
increase in cash flows to each Shareholder over the first 20 years post -merger are
presented below:
City of Kitchener
$9,600,000
City of Waterloo
$3,100,000
Township of Woolwich
$1,200,000
Township of Wellesley
$279,000
Township of Wilmot
$806,000
Page 10 of 31
Valuations - Ownership
The below chart shows the ownership for each shareholder based on relative
valuations of the utilities and their respective holding companies.
WOOLWICH 8.51%
'UT -5,F
t
aeric 30.83%
2.78% WELLESLEY
'VV wllffibt 4.49%
Conclusion
53.39/o I NFR
Based on the work undertaken by GT and the due diligence done by independent
advisors, the business case outlines that merging the two utilities gains considerable
benefits (both qualitative and quantitative) for customers and shareholders.
Page 11 of 31
MEMORANDUM OF UNDERSTANDING
THIS MEMORANDUM OF UNDERSTANDING ("MOU") made as of the _ day of
.2021
BETWEEN:
THE CORPORATION OF THE CITY OF KITCHENER
a corporation incorporated under the laws
of the Province of Ontario, Canada
("Kitchener")
and —
THE CORPORATION OF THE CITY OF WATERLOO
a corporation incorporated under the laws
of the Province of Ontario, Canada
("Waterloo")
-and-
THE CORPORATION OF THE TOWNSHIP OF
WELLESLEY
a corporation incorporated under the laws
of the Province of Ontario, Canada
("Wellesley")
-and-
THE CORPORATION OF THE TOWNSHIP OF WILMOT
a corporation incorporated under the laws
of the Province of Ontario, Canada
("Wilmot")
-and-
THE CORPORATION OF THE TOWNSHIP OF
WOOLWICH
a corporation incorporated under the laws
of the Province of Ontario, Canada
("Woolwich")
-and-
K0563638\ACTIVE CA\ 47134923\7
Page 12 of 31
KITCHENER POWER CORPORATION
a corporation incorporated under the laws
of the Province of Ontario, Canada
("Y&C-)
and -
WATERLOO NORTH HYDRO HOLDING CORPORATION
a corporation incorporated under the laws
of the Province of Ontario, Canada
("WNH")
(each a "Party" and collectively, the "Parties")
WHEREAS KPC owns all of the issued and outstanding shares in the capital of Kitchener -
Wilmot Hydro Inc. ("KWH") (an OEB-regulated electricity distributor) and Kitchener Energy
Services Inc. ("KESI" ), and has minority interest in Grand River Energy Solutions Inc.;
AND WHEREAS WNH owns all of the issued and outstanding shares in the capital of Waterloo
North Hydro Inc. ("WNHI") (an OEB-regulated electricity distributor) (together with KWH the
"LDCs") and Alliance Metering Solutions Inc. ("AMS"), (together with KESI, the
("Unregulated Affiliates") and has a minority interest in Grand River Energy Solutions Inc. and
Eyedro Green Solutions Inc.;
AND WHEREAS KPC and WNH have taken into account factors including distribution
electricity rate mitigation, cost savings, sustainable cash flows, promotion of innovation, growth
and sound longer-term strategic planning, customer service, promotion of local businesses and
communities, and the policies of the Government of Ontario to encourage consolidation of
distribution utilities in assessing strategic alternatives;
AND WHEREAS KPC and WNH have developed a business case for, and carried out due
diligence in respect of, their potential merger and the potential merger of the LDCs (together, the
"Transactions") that has been presented to Kitchener and Wilmot (in the case of KPC) and to
Waterloo, Wellesley and Woolwich (in the case of WM) (Kitchener, Wilmot, Waterloo,
Wellesley and Woolwich are collectively referred to as the "Municipal Shareholders");
AND WHEREAS the Municipal Shareholders of KPC have directed KPC and the Municipal
Shareholders of WNH have directed WNH to proceed with discussions relating to the
Transactions on the basis of the business case;
AND WHEREAS the Parties wish to set out, on a non -legally binding basis (except as otherwise
expressly provided herein), the principles, objectives, processes and documentation that the
_2v
K0563638\ACTIVE_CA\ 47134923\7
Page 13 of 31
Parties intend to pursue and prepare in connection with the evaluation and, subject to approval by
the boards of directors of KPC and WNH and by the municipal councils of each of the Municipal
Shareholders, in their sole and absolute discretions, commitment to and implementation of the
Transactions.
NOW THEREFORE this MOU sets out certain understandings and agreements between the
Parties.
i. Transaction Structure
The Parties will negotiate, and if acceptable, execute and deliver a definitive merger participation
agreement between the Parties and the LDCs (the "Merger Participation Agreement"), with a
form of unanimous shareholders' agreement (the "Shareholders' Agreement") with respect to
Holdco Mergeco (as defined below) scheduled thereto, to be executed immediately following the
Transactions. WNH and KPC, on the one hand, and the LDCs, on the other hand, will be
amalgamated pursuant to the provisions of the Business Corporations Act (Ontario). The
Transactions are intended to create a single holding corporation ("Holdco Mergeco") and a single
corporation licensed by the OEB to distribute electricity ("LDC Mergeco"), which would be
wholly owned by Holdco Mergeco.
2. Merger Objectives
The Transactions would result in an entity or entities able to achieve the following objectives:
(a) Customers will enjoy ten year distribution rate stability and distribution rates as
low or lower than in a standalone alternative;
(b) Distribution rates of the former KWH and WNHI service territories will harmonize
over time;
c) Continued excellence in customer service;
(d) Total cost savings to be shared amongst the Municipal Shareholders and
customers;
(e) Stronger and more sustainable cash flow to Municipal Shareholders via interest
and dividends;
(f) The ability to dedicate significant leadership and focus on innovation and growth;
(g) A larger entity with a stronger balance sheet capable of supporting future growth;
(fir) Improved service reliability leveraging best practices and capabilities of both
LDCs;
(i) A stronger energy and infrastructure partner for local businesses and communities;
K0563638\ACTIVE_CA\ 47134923\7
Page 14 of 31
(j) Alignment with provincial government policies encouraging consolidation in the
electricity distribution sector; and
(k) Increased ability to access financial and other resources available to invest in non-
regulated energy services, businesses and solutions for customers.
3. Valuation and Share Allocation
Upon completion of the Transactions, each of the Municipal Shareholders would receive shares in
the capital of Holdco Mergeco based on the current valuation of KPC and WNH and their
Subsidiaries, including the LDCs and the Unregulated Affiliates, as follows (rounded):
City of Kitchener
53.4%
City of Waterloo
30.8%
Township of Woolwich
8.5%
Township of Wilmot
4.5%
Township of Wellesley
2.8%
The above ownership percentages are based on the valuation and financial model developed jointly
by KPC and WNH as at the date hereof and are intended to be incorporated into the Merger
Participation Agreement and the Unanimous Shareholders' Agreement as fixed ownership
percentages. Any adjustments based on (a) completion of due diligence; (b) the occurrence of one
or more events occurring from the date hereof to the date of the Transaction and resulting,
individually or in the aggregate, in a positive or negative material change in the business, condition
(financial or otherwise), operations, performance, properties or prospects of KPC or WNH,
together with their respective Subsidiaries such that it would result in a material change of the
valuation of KPC or WNH and the ownership percentages noted above; and/or (c) typical post -
closing adjustments based on the financial condition of KPC and WNH at the closing of the
Transactions; will be made by way of cash payment.
4, Governance
The Shareholders' Agreement will provide for a governance structure whereby each Municipal
Shareholder has the right to nominate (and have elected) a number of directors of Holdco Mergeco
approximately proportional to its share ownership percentage in Holdco Mergeco. Certain
directors will be required to be "independent" i.e. not councillors or employees of the appointing
Municipal Shareholder. Of its nominee directors, each Municipal Shareholder may nominate a
maximum number of non -independent directors. The Townships of Woolwich, Wilmot and
Wellesley (collectively, the "Townships") will nominate two directors. Therefore, the board of
directors of Mergeco Holdco would consist of thirteen directors, elected on the basis of the
following:
-4-
K05636MACTIVE_CA\ 47134923\7
Page 15 of 31
Number of Directors Nominated by
Kitchener
4 Waterloo
2 Townships
Max. Non -Independent Directors
2
The LDC Mergeco board of directors would consist of nine directors, five of which would be
nominated by Holdco Mergeco and the remainder nominated by the Municipal Shareholders, as
follows:
Number of Directors Nominated by
5 Holdco Mergeco
2 Kitchener
Waterloo
1 Townships
Max. Non -Independent Directors
0
2
l
1
In addition, the Townships will be entitled to two non-voting observer positions on the boards of
Holdco Mergeco and LDC Mergeco, on rotation.
Due Diligence
(a) KPC and its financial, legal and other advisors, as it considers reasonably
necessary, (the "KPC Parties") have undertaken and may continue to undertake
due diligence investigations with respect to WNH, WNHI and AMS in relation to
the Transactions and WNH and its financial, legal and other advisors, as it
considers reasonably necessary, (the "WNH Parties") have undertaken and may
continue to undertake due diligence investigations with respect to KPC, KWH and
KESI in relation to the Transactions.
) Due diligence has included or may include matters customary to such transactions
including, financial, tax, legal, environmental, employment and labour, regulatory,
and real estate issues and the condition of the distribution system and such other
matters as determined by the Parties, acting reasonably, that are material to the
Transactions.
(c) KPC agrees to continue to provide, and shall cause its Subsidiaries to continue to
provide, reasonable access to the WNH Parties to their premises, employees and
books and records as the WNH Parties may reasonably require to conduct such
due diligence.
K0563638\ACTIVE_CA\ 47134923\7
Page 16 of 31
(d) WNH agrees to continue to provide, and shall cause its Subsidiaries to continue to
provide, reasonable access to the KPC Parties to their premises, employees and
books and records as the KPC Parties may reasonably require to conduct such due
diligence.
(e) Any information obtained by any Party as a result of due diligence conducted in
relation to the Transactions will be maintained by each Party in confidence subject
to the terms of the Confidentiality Agreement. The Parties will cooperate to
complete due diligence expeditiously.
6. Condition Precedent to Merger Participation Agreement
The execution and delivery by the Parties of the Merger Participation Agreement (and the form of
Shareholders' Agreement scheduled thereto) will be subject to the prior approval of the boards of
directors of WNH, VRH , KPC, and KWH and the councils of the Municipal Shareholders, which
approval in each case may be withheld or granted in the sole and absolute discretion of each board
or council, as the case may be.
7. Merger Participation Agreement and Shareholders' Agreement
All of the terms and conditions of the proposed Transactions shall be provided in the Merger
Participation Agreement and the Shareholders' Agreement and related principal agreements to be
negotiated, agreed, executed and delivered by the Parties. The Merger Participation Agreement
will contain such representations, warranties and covenants regarding the parties thereto and their
respective businesses, such conditions to closing the Transactions, and such indemnities from the
Municipal Shareholders as are customary for transactions such as the Transactions.
. Employees and Labour Relations
The Merger Participation Agreement will provide that any reduction in employment as in
connection with the Transactions are primarily to be carried out on a voluntary basis, including
retirement and attrition and each of KPC and WNH will cause their respective subsidiaries to
work diligently to resolve in a timely manner any outstanding labour relations matters to be
addressed in connection with the proposed Transactions under the applicable collective
bargaining agreements or otherwise.
9. Location of Facilities
The Merger Participation Agreement and the Unanimous Shareholders' Agreement will provide
that: (a) Holdco Mergeco will cause LDC Mergeco to continue to have a substantial physical and
functional presence in each of the two historic service areas of KWHI and WNHI; (b) Holdco
Mergeco and LDC Mergeco will maintain their head offices at the current head office of KPC
located at 301 Victoria Street South, Kitchener, Ontario N2M 3A2 for an indefinite period from
the date of closing of the Transactions or at such other location within the City of Kitchener as
may be approved by Kitchener; and (c) Holdco Mergeco will cause LDC Mergeco to maintain a
second office at the current head office of WNH, located at 526 Country Squire Road, Waterloo,
Ontario N2J 4G8, at which activities will include leading innovation and new technology
-6-
K0563638\ACTIVE_CA\ 47134923\7
Page 17 of 31
development, for an indefinite period from the date of closing of the Transactions, or at such other
location within the municipalities of Waterloo, Woolwich or Wellesley area as may be approved
by Waterloo, Woolwich and Wellesley.
10. Timetable
The Parties will assess the potential Transactions and, subject to Section 5, if the Transactions are
considered acceptable and desirable, endeavour to enter into the Merger Participation Agreement
by no later than December 31, 2021 and satisfy or cause to be satisfied all conditions precedent
to and complete the Transactions on or before a date that is not later than six months following
Ontario Energy Board approval of the amalgamation of the LDCs. The Merger Participation
Agreement will establish the obligations of the Parties with respect to timing and deliverables to
the completion of the Transactions.
11. Exclusivity and Conduct of Business
(a) Each Party acknowledges that pursuit of the Transactions will involve the
expenditure of substantial time and money by the Parties. Subject to all the terms
of this Section 11, each Party agrees that commencing on the date hereof to and
including the date of termination of this MOU pursuant to Section 12 it will not,
without the prior written consent of the other Party, directly or indirectly (including
through any Affiliate, employee, officer, director, shareholder, agent or other
person acting on its behalf or at its direction) have, initiate or continue any
communications, discussion or negotiations of any nature, or respond to any
proposal or request for information relating to the purchase, sale or other transfer,
whether in one transaction or a series of transactions, of the whole or any part of
the business or non -surplus assets of the Party or its OEB-regulated or unregulated
Subsidiaries, or of any third party.
(b) Each Party shall be responsible for any breach of this Section 11 by its Affiliates,
employees, officers, directors, shareholders, agents or other persons acting on its
behalf or at its direction. The Parties agree that monetary damages may not be a
sufficient remedy for any breach of this Section 11 and that the non -breaching
Parties shall be entitled to equitable relief, including injunction and specific
performance, as a remedy for any such breach. Such remedies shall not be deemed
to be the exclusive remedies for a breach of this Section 11 but shall be in addition
to all other remedies available at law or equity, including, in the event of litigation,
recovery of reasonable legal fees and expenses by the prevailing party (as
determined by a court of competent jurisdiction in a final, non -appealable order).
(c} It is the intent of the Parties that, during the period beginning on the date hereof
and ending at the date of the Merger Participation Agreement or such earlier date
as this MOLT may terminate in accordance with Section 12, the businesses of KPC
and WNHI and their respective Subsidiaries be carried on in the ordinary course
and in a manner that minimizes the likelihood of such events and changes as
_7_
K0563638\ACTIVE_CA\ 47134923\7
Page 18 of 31
would materially affect and cause changes to the valuations and share percentages
set out in Section 3.
12. Termination
(a) This MOU will terminate upon the earlier of:
(i) the execution of the Merger Participation Agreement;
(ii) the mutual written agreement of the Parties;
(iii) written notice from KPC (if it and its Municipal Shareholders are the non -
breaching Parties) or WNH (if it and its Municipal Shareholders are the non -
breaching Parties) to the other Parties if WNH or its Municipal Shareholders
or KPC or its Municipal Shareholders breaches any of their respective
obligations under Section 11(a) or (b); or
(iv) seven (7) days' written notice by KPC or WNH to the other Parties.
(b) Except with respect to any liabilities that may be incurred or suffered by a Party in
connection with a breach by another Party of any provision referenced in Section
15, termination of this MOU prior to full execution and delivery of the Merger
Participation Agreement shall be without liability and no Party will be entitled to
any form of relief whatsoever, including injunctive relief or damages.
13. Transaction Expenses
Expenses of the Parties incidental to this MOU, the Shareholders' Agreement, the Merger
Participation Agreement and otherwise to the Transactions (the "Transaction Expenses") will be
borne by the Party incurring them.
14. Notices
Any notice or communication to be made or given hereunder shall be in writing and may be made
or given by personal delivery or email addressed to the respective Party at the below address or
such other address or email as a Party may from time to time notify the other Party.
To: Kitchener
The Corporation of the City of Kitchener
200 King Street West
Kitchener, ON N2G 497
Attention: Dan Chapman, Chief Administrative Officer
Email: dan.chapman@kitchener.ca
-8-
K0563638\ACTIVE_CA\ 47134923\7
Page 19 of 31
And to: Waterloo
The Corporation of the City of Waterloo
100 Regina Street South
Waterloo, ON N2J 4A8
Attention: Tim Anderson, Chief Administrative Officer
Email: Tim.Anderson@waterloo.ca
And to: Wellesley
Township of Wellesley
4639 Lobsinger Line
St. Clements, ON NOB 2M0
Attention: Rik Louwagie, Chief Administrative Officer
Email: rlouwagie@wellesley.ca
And to: Woolwich
Township of Woolwich
24 Church Street West
Elmira, ON N3B 2Z6
Attention: David Brenneman, Chief Administrative Officer
Email: dbrenneman@woolwich.ca
And to: Wilmot
Township of Wilmot
60 Snyder's Road West
Baden, ON N3A lAl
Attention: Sandy Jackson, Acting Chief Administrative Officer
Email: sandy.jackson@wilmot.ca
Kitchener Power Corporation
301 Victoria Street South,
-9-
K0563638WCTIVE_CA\ 47134923\7
Page 20 of 31
Kitchener, ON N2G 4L2
Attention: Jerry Van Ooteghem, President and CEO
Email: jvanooteghem@kwhydro.ca
• TI MNi% i�
Waterloo North Hydro Holding Corporation
526 Country Squire Road,
Waterloo, ON N2J 4G8
Attention: Rene Gatien, President and CEO
Dual']: rgatien@wnhydro.com
15. Binding Effect
This MOU is not intended to constitute a legally binding agreement, nor is it to be relied upon as
constituting a final agreement for the transactions contemplated herein. This MOU is written with
the understanding that no Parry will be bound by any of its terms until negotiations have been
concluded and definitive agreements have been executed and delivered. Notwithstanding the
foregoing, the Parties agree that the following provisions are legally binding and enforceable
against each of them: Sections 5 (Due Diligence), 8 (Labour Relations), 9 (Location of Facilities),
11(a) and (b) (Exclusivity and Conduct of Business), 12 (Termination), 13 (Transaction Expenses),
14 (Notices), 15 (Binding Effect), 16 (Interpretation), 17 (Governing Law), 18 (Successors and
Assigns), 19 (Invalidity) and 20 (Entire Agreement).
16. Interpretation
Capitalized terms have the meanings given to such terms in Schedule 1 attached to and forming
part of this MOU. Each reference in this MOU to a statute is deemed to be a reference to such
statute as amended, re-enacted or replaced from time to time. In this MOU, unless otherwise
expressly provided herein or unless the context otherwise requires, words importing the singular
number include the plural and vice versa.
17. Governing Law
This MOU shall be governed by and construed in accordance with the laws of the Province of
Ontario and the federal laws of Canada applicable therein. The Parties hereto irrevocably attorn to
the exclusive jurisdiction of the courts of the Province of Ontario to resolve any dispute which
may arise among them concerning this MOU and the subject matters hereof.
_10
K0563638WCTIVE_CA\ 47134923\7
Page 21 of 31
18. Successors and Assigns
All covenants and agreements of each Party in this MOU shall bind its permitted successors and
permitted assigns.
19. Invalidity
Each of the provisions contained in this MOU is distinct and severable and a declaration of
invalidity, illegality or unenforceability of any such provision or part thereof by a court of
competent jurisdiction shall not affect the validity or enforceability of any other provision of this
MOU.
20. Entire Agreement
This MOU constitutes the entire agreement among the Parties with respect to the matters
contemplated herein and supersede any prior negotiations, understandings or agreements with
respect thereto.
21. Execution and Delivery
This MOU may be executed in one or more counterparts and delivered in an original form, by
facsimile, or by email (.PDP format), each of which shall be deemed an original, and all which
together shall constitute one and the same instrument.
[remainder of page intentionally left blank]
K0563638\ACTIVE_CA\ 47134923\7
Page 22 of 31
The Parties have executed this MOU as of the date first written above.
THE CORPORATION OF THE CITY OF
KITCHENER
Per: _
Name:
Title:
Per:
Name:
Title:
THE CORPORATION OF THE CITY OF
WATERLOO
Per:
Name:
Title:
Per:
Name:
Title:
THE CORPORATION OF THE TOWNSHIP
OF WELLESLEY
Per:
Name:
Title:
Per:
Name:
Title:
-12-
K0563638\ACTIVE_CA\ 47134923\7
Page 23 of 31
THE CORPORATION OF THE TOWNSHIP
OF WILMOT
Per:
Name:
Title:
Per:
Title:
THE CORPORATION OF THE TOWNSHIP
OF WOOLWICH
Per:
Name:
Title:
Per:
Title:
KITCHENER POWER CORPORATION
Per:
Name:
Title:
Per:
Name:
Title:
WATERLOO NORTH HYDRO HOLDING
CORPORATION
Per:
Name:
Title:
Per:
Name:
I+
K0563638\ACTIVE_CA\ 47134923\7
Page 24 of 31
Title:
l4-
K0563638\ACTIVE_CA\ 47134923\7
Page 25 of 31
SCHEDULE I
DEFINITIONS
"Affiliate" has the meaning given to it in the OBCA.
"including" means including without limitation.
"LDCs" has the meaning given to it in the Recitals hereto.
"OEB" means the Ontario Energy Board.
"Party" and "Parties" have the meanings given to them in the Recitals hereto.
"Transactions" has the meaning given to it in the Recitals hereto.
"Unregulated Affiliate" has the meaning given to it in the Recitals hereto.
45786198.4
45874609.3
K0563638\ACTIVE_CA\ 47134923\7
Page 26 of 31
StaffRepott
Financial Services Giepartment
REPORT TO: Special Council
DATE OF MEETING: 2021-10-04
www.kitchener: ca
SUBMITTED BY: Ryan Scott, Manager, Procurement, 519-741-2200 ext. 7214
PREPARED BY: Brad Kowaleski, Procurement Specialist, 519-741-2200 ext. 7063
WARD(S) INVOLVED: N/A
DATE OF REPORT: 2021-09-27
REPORT NO.: FIN -2021-54
SUBJECT: Q21-119 Dell Data Domain Virtual Edition (DDVE) Licenses
RECOMMENDATION:
That Q21-119 Dell Data Domain Virtual Edition (DDVE) Licenses, be awarded to CDW
Canada Corp., Toronto, Ontario, at their quoted price of $132,029.00, plus H.S.T. of
$17,163.77 for a total of $149,192.77.
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 only one (1) bid was received in
response to this solicitation;
This report supports the delivery of core services.
BACKGROUND:
The Technology Innovation and Services department has initiated a project to modernize its
backup system. As part of this modernization project, the plan is to store backup data in the
cloud. The City currently uses Dell Data domain as the backup system and it stores long
term backups on tapes.
Moving the backup system to cloud achieves several benefits including, instant data
recovery, security, scalability, verification, and disaster recovery.
The City currently stores the backup tapes at KOF. In case of a city wide disaster, it is
possible that the tapes stored at KOF may become unusable. With the proposed system,
backups will be stored across various Microsoft Azure datacenters in Toronto. This ensures
that data will be available when needed.
*** This information is available in accessible formats upon request. ***
Please call 519-741-2345 or TTY 1-866-969-9994 for assistance.
Page 27 of 31
This Request for Quotation was issued to request pricing for the Dell Data Domain Virtual
Edition (DDVE), software -only storage appliance licenses and its associated components
which will be required to move our backup storage from tapes to the cloud.
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:
d. only one Bid was received in response to a Solicitation".
Quotations were advertised publicly on the City of Kitchener website. Documents were
downloaded by two (2) interested parties and by closing date of Wednesday September 18,
2021, one (1) quotation had been received.
The following Quotation were received:
Bid Price
CDW Canada Corp. Toronto, ON $ 149,192.77
The quotation was reviewed by C. Hassarajani, Manager of Digital Infrastructure and
Support, who concurs with the above recommendation.
STRATEGIC PLAN ALIGNMENT:
This report supports the delivery of core services.
Page 28 of 31
FINANCIAL IMPLICATIONS:
The net cost for this Quotation (A), is fair and reasonable for a purchase of this scope and
the upset limit is within the budget allowance provided within the budget (B). Funding for
this purchase is included within the approved capital budgets. The estimated surplus (D)
will remain within the reserve account to fund future upgrades/purchases.
Q21-119
Dell Data Domain Virtual Edition (DDVE) Licenses
Estimated Cost for this Quotation
Dell Data Domain Virtual Edition (DDVE) Licenses $149,192.77
less: HST rebate on Quotation (14,340.06�_
Net Cost Being Awarded 134,352.71 A
Projected Additional Costs -
Total Estimated Cost for this Quotation 134,352.71 C
Budget for this Quotation
Technology Infrastructure reserve (Computer Equip Purch &
Replacements) $357,000.00
Total Budget for this Quotation 357,000.00 B
Estimated Surplus/(Deficit) for this Quotation (B - C) 222,647.29 D
PREVIOUS REPORTS/AUTHORITIES:
There are no previous reports/authorities related to this matter.
APPROVED BY: Jonathan Lautenbach, Chief Financial Officer, Financial Services
Department
Page 29 of 31
Staff Repott
REPORT TO: Council
DATE OF MEETING: October 4, 2021
www.kitchenerca
SUBMITTED BY: Ryan Hagey, Director of Financial Planning & Reporting
PREPARED BY: Debbie Andrade, Manager of Budgets
WARD(S) INVOLVED: All Wards
DATE OF REPORT: September 10, 2021
REPORT NO.: FIN -2021-55
SUBJECT: 2022 Budget Schedule Revision - Update
RECOMMENDATION:
That November 30, 2021 be added to the 2022 Budget Meeting Schedule, as outlined
in report FIN -2021-55.
REPORT HIGHLIGHTS:
• The purpose of this report is to finalize the 2022 budget schedule, by adding November
30, 2021 as a date for budget meetings.
• This report supports the delivery of core services.
BACKGROUND:
Each year the City establishes its financial priorities and sets rates (e.g. tax, utility, user fee)
through the annual budget process. This includes a series of reports/presentations
providing information and recommendations on user fees, operating budgets, and capital
budgets, as well as an opportunity for the public to provide their input on the proposed
budget and associated rate changes.
REPORT:
In setting the budget dates as part of a previous report, Council identified some potential
conflicts with the City's budget meetings scheduled for November 29. A number of
alternatives were briefly discussed, but there was not consensus as each of the alternatives
created a different scheduling conflict. Based on the conversation during the meeting, staff
have developed an alternative schedule that splits the November 29 meetings over two
dates as follows.
November 29
Capital Budget Presentation from 9:30 —12:30
This meeting includes the presentation of the proposed capital budget, including a review of
planned projects as well as capital funding sources such as debt, reserves, and
development charges. For context, the 2021 capital meeting took 2 hours and 20 minutes.
*** This information is available in accessible formats upon request. ***
Please call 519-741-2345 or TTY 1-866-969-9994 for assistance.
Page 30 of 31
November 30
Public Input Part 2 (tentative) from 1:00 — 2:00
A public input session is already planned for November 15. During the discussion about the
budget schedule, there was a suggestion that the City plan a second session in case the
number of delegates is large. This second session would be held only if there were too
many delegates to be accommodated on the November 15 session.
WIP Utility Rates and Gas Utility Rate Approval from 2:00 — 3:00
Approval of the Water Infrastructure Program (WIP) utility rates (water, sanitary and
stormwater) and the Natural Gas utility would occur on November 30. This allows enough
time to notify customers and update software to start charging the new rates on January 1,
2022.
The revised budget schedule, including the proposed changes (dates marked with a *), is
shown in the table below.
November 8
November 15
November 15
November 22
November 29*
November 30*
November 30*
December 16
Revised 2022 Budget Meeting Schedule
Monday (day)
User fee presentation
Monday (day)
Operating Budget presentation
Monday (night)
Public Input
Monday (night)
_User fees approval
Monday (day)
Capital Budget presentation
Tuesday (day)
Public Input (tentative)
Tuesday (day)
WIP Utility rates &
Gas rates approval
Thursday (day)
Final Budget approval
STRATEGIC PLAN ALIGNMENT:
This report supports the delivery of core services.
FINANCIAL IMPLICATIONS:
None.
FCSC
FCSC (Special)_
FCSC (Special)
Council
FCSC (Special)
FCSC (Special)
Council (Special)
FCSC (Special) &
Council (Special)
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:
• FIN -2021-53 2022 Budget Schedule Revision
APPROVED BY: Jonathan Lautenbach, Chief Financial Officer
Page 31 of 31