The URL can be used to link to this page

Home My WebLink AboutFIN-2021-68 - Final Shareholder Approval of Kitchener-Wilmot Hydro and Waterloo North Hydro MergerStaff Report REPORT TO: Council DATE OF MEETING: December 13, 2021 SUBMITTED BY: Jonathan Lautenbach, Chief Financial Officer PREPARED BY: Jonathan Lautenbach, Chief Financial Officer WARD(S) INVOLVED: All Wards DATE OF REPORT: Dec 9, 2021 REPORT NO.: FIN -2021-68 www. kitchener ca SUBJECT: Final Shareholder Approval of Kitchener -Wilmot Hydro and Waterloo North Hydro Merger RECOMMENDATION: That Council provide final approval to proceed with the proposed merger between Kitchener Power Corp. and Waterloo North Hydro Holding Corporation and their subsidiaries Kitchener -Wilmot Hydro Inc. and Waterloo North Hydro Inc.; WHEREAS on October 4, 2021 Council of The Corporation of the City of Kitchener approved the Memorandum of Understanding (MOU) between The Corporation of the City of Kitchener, The Corporation of the Township of Wilmot, The Corporation of the City of Waterloo, The Corporation of the Township of Woolwich, The Corporation of the Township of Wellesley, Kitchener Power Corp. (KPC), and Waterloo North Hydro Holding Corporation (WNH), regarding the proposed merger between Kitchener Power Corp. and Waterloo North Hydro Holding Corporation and their subsidiaries Kitchener -Wilmot Hydro Inc. and Waterloo North Hydro Inc.; AND WHEREAS The Corporation of the City of Kitchener is the beneficial and registered owner of 92.25% of the issued and outstanding shares in the capital of KPC and The Corporation of the Township of Wilmot is the beneficial and registered owner of 7.75% of the issued and outstanding shares in the capital of KPC; AND WHEREAS the Corporation of the City of Waterloo is the beneficial and registered owner of 73.2% of the issued and outstanding shares in the capital of WNH, the Corporation of the Township of Woolwich is the beneficial and registered owner of 20.2% of the issued and outstanding shares in the capital of WNH, and The Corporation of the Township of Wellesley is the beneficial and registered owner of 6.6% of the issued and outstanding shares in the capital of WNH; *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. AND WHEREAS KPC owns all of the issued and outstanding shares in the capital of Kitchener -Wilmot Hydro Inc. ("KWHI") (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) and Alliance Metering Solutions Inc. ("AMS"), and has a minority interest in Grand River Energy Solutions Inc. and Eyedro Green Solutions Inc. AND WHEREAS the conditions set out in the MOU have been satisfied and incorporated into a more detailed "Merger Participation Agreement" (MPA), to be signed by all parties; AND WHEREAS KPC and WNH recently completed a public input process related to the proposed merger, referred to as "Connecting Local Power", with no major concerns being raised by members of the public that would prevent the parties from proceeding with the proposed transaction; AND WHEREAS all parties agree that it is beneficial for KPC and WNH to proceed with a proposed merger to amalgamate KPC and WNH and related subsidiaries under a new municipally owned corporation (Amalco Holdco) with municipal ownership share 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% AND WHEREAS a Unanimous Shareholders' Agreement (USA) has been prepared, to be signed by all parties after the merger has been approved by the Ontario Energy Board, that outlines governance and other corporate considerations for the newly formed entity; NOW THEREFORE IT BE RESOLVED that the Council of The Corporation of the City of Kitchener hereby grants its approval as Shareholder, to proceed with the proposed merger between Kitchener Power Corp. and Waterloo North Hydro Holding Corporation and their subsidiaries Kitchener -Wilmot Hydro Inc. and Waterloo North Hydro Inc.; in accordance with the provisions of the MPA and USA Agreements; and further That the Mayor and Clerk be authorized to execute the MPA and USA agreements as well as any incidental documentation determined to be necessary, by their Legal Counsel in consultation with the City's Chief Administrative Officer, to complete this merger; said agreements /documentation to be to the satisfaction of the City's Legal Counsel; and Further that an application (MAADs application) under the Ontario Energy Board Act 1998 be submitted jointly by KWHI and WNHI to seek approval of the merger and related relief from the Ontario Energy Board. 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 Kitchener -Wilmot Hydro and any proposed merger requires shareholder approval • A Memorandum of Understanding was approved by Kitchener on October 41" and signed by all parties that outlined the main elements of the proposed merger • A Merger Participation Agreement has been prepared that further outlines the details of the proposed transaction and is a required to be submitted with as part of a MAADs application to the Ontario Energy Board for final merger approval • A draft Unanimous Shareholder's Agreement has been prepared for the new entity that would be signed once approval of the merger is provided by the Ontario Energy Board • 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) announced on October 1, 2021 that they intended to move forward with a merger of the two utilities. The City of Kitchener is currently the majority shareholder of KWH with a 92.25% ownership share and as such, any merger involving KWH requires City of Kitchener approval. A Memorandum of Understanding (MOU) that outlined the main elements of the proposed merger was approved by Kitchener Council on October 4th and signed by two utilities and their respective municipal shareholders. A public consultation process was also launched on October 5t" by the utilities to provide the public with an opportunity to learn more about the proposed merger and to provide feedback. This consultation process is now complete, with no major concerns being raised that would prevent the parities from moving forward with the proposed transaction. 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. The proposed merger is expected to be beneficial for both utilities, municipal shareholders, and KWH and WNH customers. A Merger Participation Agreement (MPA) has been drafted that outlines specific details of the proposed transaction and is a legal document that is required to be signed by all parties, prior to seeking final merger approval from Ontario Energy Board (OEB). As a final step in the process, the Kitchener Power Corp (KPC) Board and Staff are recommending that Council provide Kitchener Shareholder approval to move forward with the proposed merger by adopting the resolution outlined in the recommendation of this report. 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 mergers 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. Preliminary discussions regarding the proposed merger between KWH and WNH, and the potential benefits that a merger could provide, began in 2019. 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. Under the proposed merger the ownership share for municipal shareholders would be adjusted as follows - 'WOOLWICH '016111F Wdtd7rk)ow.a3% 2.78° wEEY XV ilftjvt 4.49% 3 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. After completing financial and legal due diligence process, an MOU was approved by Kitchener Council on October 4t" and entered into by all parties on October 5th. The MOU outlined 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 WNH 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. The signing of the MOU signaled the intent of all parties to proceed with the proposed transaction and a public consultation process was launched by the utilities on October 5cn This public engagement process, referred to as "Connecting Local Power", provided an opportunity for the public to learn more about the planned merger and to provide feedback regarding the proposed transaction. The summary of the activities that were included as part of the consultation process are included in an appendix to this report (see attached public engagement report — Appendix A). The feedback from the public consultation process was mostly positive with no major concerns being raised that would prevent the parties from moving forward with the proposed merger. An MPA has been drafted that outlines the specific details of the proposed transaction. The MPA is a legally binding agreement that is required to be signed by all parties prior to seeking final approval from the OEB. Kitchener Council has had the opportunity to review this draft agreement prior to bringing this report forward to seek final shareholder approval. Some of the key elements that are included in the MPA have been outlined in a letter provided by the City's legal counsel (see attached letter —Appendix B) In addition to the MPA, a Unanimous Shareholder Agreement (USA) has been drafted and will be signed by all parties once the OEB provides approval of the proposed merger. The USA is also a binding legal agreement that outlines important corporate governance considerations for the newly merged utility. Some elements that this agreement covers are outlined in Appendix B. Proceeding with a merger between KWH and WNH will ensure that customers of both utilities continue to receive reliable and stable electricity distribution, both now and in the future. After extensive discussions, the completion of financial and legal due diligence, and finalization of legal agreements that are required to proceed with the proposed merger, staff are recommending that Council provide final shareholder approval to move forward with the proposed merger by adopting the resolution included in the recommendation of this report. The KPC board has already approved moving forward with the proposed merger and are also recommending that Council provide shareholder approval for Kitchener (see attached letter - Appendix C). If the shareholders for KWH and WNH provide final approval to move forward with the proposed merger, authorizing the signing of the MPA, a joint Mergers, Acquisitions, Amalgamations, and Divestitures (MAADs) application would be prepared by the utilities as the next step in the process and submitted to the OEB for final merger approval. If the merger is approved by the OEB the USA would then be executed by all parties as the final step in the process. Jerry VanOoteghem, 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 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. It is anticipated that increased incremental returns from the merger will be considered through the City's 2024 budget process. COMMUNITY ENGAGEMENT: INFORM — This report has been posted to the City's website with the agenda in advance of the council / committee meeting. A public engagement process, "Connecting Local Power", was launched by the two utilities on October 5t". A public engagement report that summarizes the activities and feedback received regarding the proposed merger is attached as Appendix A APPROVED BY: Dan Chapman, CAO ATTACHMENTS: Appendix A — Public Engagement Report — Prepared by National PR Appendix B — Summary of Legal Agreements — Prepared by BLG Appendix C — Letter from KPC Board — Prepared by Jim Phillips, KPC Board Chair Connecting Local Power Consulting the Community on the Proposed Merger of Kitchener -Wilmot Hydro and Waterloo North Hydro Public Engagement Report Prepared for : Kitchener -Wilmot Hydro and Waterloo North Hydro Prepared by: NATIONAL Public Relations November 2021 Table of Contents PublicEngagement Report..................................................................................................................3 Appendix 1: Public Communications..................................................................................................8 Appendix 2: Resident Inquiry Responses.........................................................................................16 Appendix3: Media Coverage.............................................................................................................21 Appendix 4: Website Analytics..........................................................................................................23 Appendix 5: Social Media Insights.....................................................................................................28 �os�� Connecting Local Power — Consulting the Community on the Proposed Merger of Kitchener -Wilmot Hydro and Waterloo North Hydro Public Engagement Report November 2021 Executive Summar On October 1, 2021, Kitchener Power Corporation and Waterloo North Hydro Holding Corporation made a public announcement about the proposed merger of Kitchener -Wilmot Hydro and Waterloo North Hydro. The announcement launched the public engagement phase of this proposed merger. The objectives of the communications strategy and public engagement plan were: 1. Inform and engage customers, residents, and employees. 2. Raise awareness and understanding of the rationale, details, and benefits of the merger. Key messages and various communications products, such as a news releases and FAQs were developed to support the announcement. A microsite — www.connectinglocalpower.ca — was launched to be the public hub for all communications and engagement with the public. The announcement was made in a virtual news conference where media reporters were invited to participate, and a subsequent public information session was held to inform residents, ensure a high level of transparency, and answer any questions residents had about the proposed merger. Conclusion All communications and public engagement activities have been met with relatively positive community feedback, as well as fair and factual media coverage. Based on interactions and questions received during the four-week public engagement effort, we conclude that there are no major community concerns related to this proposed merger. Background Like several other local power utilities in communities across Ontario, Kitchener -Wilmot Hydro and Waterloo North Hydro decided to take the next step in their ongoing collaboration efforts by combining operations to create a larger, local, and publicly owned power utility. In October 2021, a public announcement was made about the proposed merger between Kitchener - Wilmot Hydro and Waterloo North Hydro. All five municipalities that would be impacted by the merger approved the commencement of the merger process during their respective municipal council meetings on October 4 or 5. A communications campaign — Connecting Local Power — was launched, including the website, with the primary objective being to keep residents and key stakeholders informed while seeking public input. Communications Before the public announcement on October 1, presentations were delivered to each of the five municipal shareholder councils to outline the communications approach and public engagement phase. On October 1 and in the subsequent days and weeks, internal and external communications materials were prepared and/or distributed including: • Key messages. • Communications package for municipal Councillors. • FAQs. • Media release. • Social media posts. • Ads in local newspapers including the Waterloo Region Rural Post, Waterloo Chronicle, Woolwich Observer and New Hamburg Independent. See Appendix 1 for a copy of select public communications. In addition, the Connecting Local Power website was launched with graphics, external resources, and other informative content. Two versions of the site were developed, one with preliminary information for the October 1 announcement, and then the full website, which was launched following the October 4 and 5 municipal Council approvals of the merger, including a call to action for residents to submit questions and provide feedback on the proposed merger News Conference A virtual news conference was held on October 1 through Zoom to announce the proposed merger and featured prepared remarks from: • David Petras, Board Chair, Waterloo North Hydro Holding Corporation • Jim Phillips, Board Chair, Kitchener Power Corporation The following officials were available for media Q&A session following the remarks: • Les Armstrong, Mayor of Township of Wilmot • Rene Gatien, Chief Executive Officer of Waterloo North Hydro • Dave Jaworsky, Mayor of Waterloo • Joe Nowak, Mayor of Township of Wellesley • Sandy Shantz, Mayor of Township of Woolwich • Jerry Van Ooteghem, Chief Executive Officer of Kitchener -Wilmot Hydro • Berry Vrbanovic, Mayor of Kitchener Five local journalists attended the conference. Following the announcement, coverage was picked up by CBC, CTV Kitchener, The Record, and more. See Appendix 3 for media coverage. 4 Website A website, www.connectinglocalpower.ca, was developed ahead of the official announcement and launched on October 1. Users could visit the site to find key stats, the official news release sharing details about the proposed merger, external resources, and were presented with an option to submit inquiries. The website also hosted the public information session registration and related information. Following the municipal council approvals of the Memorandum of Understanding on October 4 and 5, an updated version of the website was made available with additional information and resources, as well as a timeline to help residents understand what the next steps would entail. The update also included the call to action for public input. As of November 23, the website has received a total of 16 inquiries from residents with comments and questions. See Appendix 2 for a list of responses for each resident inquiry received. Within the first month of the website launch (October 1- November 11) there were a total of 3,806 visitors to the connectinglocalpower.ca website. The highest number of users were from the following five municipalities: Kitchener, Toronto, (City of) Waterloo, Cambridge, and Brampton. The single largest number of website visitors came from Kitchener, at 407. About 173 users downloaded files, which were available as resources on the site. See Appendix 4 for a full website analytics report, including a breakdown of website visitors by region. Social Media Content and graphics were created for social media posts related to the proposed merger and the public information sessions. These posts were shared with all five municipalities, as well as Kitchener -Wilmot Hydro and Waterloo North Hydro, who then shared these posts on their Twitter and Facebook pages. The social media posts were also included in a communications package that was shared with municipal Councillors. See Appendix 5 for a thorough overview of engagement across Twitter and Facebook for the period of October 1-19. Earned Media Earned media is any placement or publicity that is gained without paid advertising. From October 1 to shortly after the public information session on October 19, various outlets covered the proposed merger. The estimated total media reach is approximately 5,462,600 unique visitors for all online, print and broadcast media hits. A full list of media coverage since October 1 can be found in the Appendix. Paid Advertising Ads were placed in local newspapers that promoted the announcement of a proposed merger and encouraged readers to visit con nectinglocalpower.ca to learn more. The local newspapers were the Waterloo Region Rural Post, Waterloo Chronicle, Woolwich Observer and New Hamburg Independent. The average reach of these ads was approximately 83,499 people. Engagement A virtual public information session was held on October 19 at 7:00 PM. Residents could register through www.connectinglocalpower.ca, by email info@connectinglocalpower.ca or a designated phone line. The session was held on Zoom. Residents who attended received an overview of the proposed merger and had their questions answered by the following panelists: • Jim Phillips, Board Chair, Kitchener Power Corporation • Rene Gatien, Chief Executive Officer of Waterloo North Hydro • Jerry Van Ooteghem, Chief Executive Officer of Kitchener -Wilmot Hydro There were 25 residents who RSVP'd to the information session. There were 23 people in attendance, 17 of whom were residents, and six who were speakers, tech support, a note -taker, and the moderator. Of the 17 residents in attendance, nine were from Kitchener, three were from Waterloo, two were from Woolwich, and two were from Toronto. One identified their municipality as 'Other'. The session consisted of a steady flow of questions, with three attendees submitting theirs in advance. Following the launch of the website, there have been a total of 16 inquiries submitted via the 'Have Your Say' section. Of these inquiries, seven residents were located in Waterloo, five in Kitchener, two in Wilmot and two in Woolwich. Questions have been received consistently and the majority are focused on rates increasing following the merger. Other inquiries include: • Electric vehicle rebates • Service impacts • Investments in innovation and climate change Key Themes and Community Feedback While community engagement with residents is ongoing, the proposed merger has received relatively positive feedback and limited opposition from community members. Residents of all five municipalities raised several key concerns in their inquiries through the website form and questions posed at the information session. Sixteen inquiries were received via info@connectinglocalpower.ca and responses were emailed directly to the residents. The questions and feedback from residents and full answers provided are in Appendix 2. Key themes from the information session and the website are summarized below. Rates Hydro distribution rates are by far the largest concern of community members. Concerns that the merger would increase rates and how the harmonization between Kitchener -Wilmot Hydro and Waterloo North Hydro's would affect certain customers' rates were frequent questions. Solar Panels Some customers of both utility companies were concerned that their existing contracts related to solar panels would expire under a new entity. Impact on Service Customers posed questions about how the merger will impact their quality -of -service. Other Mergers Residents of the five municipalities are aware of other hydro mergers happening across Ontario including in nearby Brantford and Cambridge. There were several questions related to this theme. Innovation and Climate Change While not being directly mentioned, innovation and climate change were themes of many inquiries, including ones related to solar panels and electric vehicles. Jobs A question related to jobs and staffing challenges was posed at the information session. Electric Vehicles A resident inquired about how this merger will affect any factors as they consider purchasing an electric vehicle. Timeline At the information session, a few residents inquired about next steps and the proposed name for the new entity. Next Steps Over the next few weeks, each of the five municipalities will have to make a final decision on the status of the proposed merger. If approved by all municipalities, in January of 2022, the utility companies must submit an application for approval to the Ontario Energy Board (OEB). Following approval, it is anticipated that operations will commence in the summer of 2022. There will be continued monitoring of traditional and social media to assess public perception of the process. As well, replies will be issued consistently for all resident inquiries that come in through the website and designated email. Connecting Local Power — Consulting the Community on the Proposed Merger of Kitchener -Wilmot Hydro and Waterloo North Hydro Public Communications — Appendix 1 November 2021 1) Media Releases (1) October 1 Release — Proposed Merger Official Announcement Kitchener Power Corporation and Waterloo North Hydro Holding Corporation Announce Proposed Merger October 1, 2021 Combined local and publicly -owned utility to benefit customers through innovation, enhanced service and operational efficiencies After thorough discussions and in-depth analysis, Kitchener Power Corporation and Waterloo North Hydro Holding Corporation today announced a proposed merger of their local power utilities, Kitchener Wilmot Hydro and Waterloo North Hydro. The municipalities of Kitchener, Waterloo, Wellesley, Wilmot and Woolwich are the shareholders of the two holding corporations. Like several other local power utilities in communities across Ontario, Kitchener -Wilmot Hydro and Waterloo North Hydro are considering taking the next step in their ongoing collaboration efforts by combining operations to create a larger, local and publicly -owned power utility that will provide reliable service, invest in new technologies, generate cost savings through operational efficiencies and keep local jobs in our communities. If approved by the five municipal councils and the Ontario Energy Board, combining the two utilities would create the seventh largest utility in Ontario by number of customers. A larger customer base will allow the combined utility to focus on efficiency and innovation to better provide for the needs of our growing communities. With a proposed contiguous service territory serving the municipalities of Kitchener, Waterloo, Wellesley, Wilmot and Woolwich, customers will benefit from having a larger, local and publicly -owned utility that can maintain the highest quality of service for customers while having the capacity to modernize and adapt to significant changes in Ontario's electricity sector. The combined utility will have more resources to invest in new technologies that benefit customers, such as managing smart home and energy data, automated restoration of power outages, microgrids and local renewable generation. "By combining with Kitchener -Wilmot Hydro, our board believes this is a good deal for Waterloo North Hydro customers and our shareholders in Waterloo, Woolwich, and Wellesley. Ontario's electricity sector is changing quickly and this proposed merger is a local solution that will help our communities adapt to these changes and thrive in the years ahead. This larger, locally -owned utility will have more resources to invest in technologies that benefit customers while helping our communities' transition to a lower carbon economy." David Petras, Chair, Waterloo North Hydro Holding Corporation E3 The size and stability of the combined utility will help ensure distribution rates remain competitive and stable for customers. Distribution rates for all customers are projected to increase at less than the rate of inflation over the 10 years following the merger, leaving more money in customers' pockets. Thereafter, the combined utility will harmonize distribution rates over time between Kitchener -Wilmot Hydro and Waterloo North Hydro customers. Residents stand to benefit from the larger, local and publicly -owned utility as municipalities are projected to receive an increase in incremental dividends and interest on their investment over the 10 - year period following the merger. Municipalities can re -invest these dividends into local services that residents rely on. Residents, through the five municipal stakeholders involved in the merger, will continue to have oversight of their local power utility. Each municipality will receive proportional ownership in the combined utility and representation on the new Board of Directors. This announcement is accompanied by the launch of a community website, connectinglocalpower.ca, where residents of all five municipalities can visit to learn more. "Waterloo North Hydro is a natural merger partner for Kitchener -Wilmot Hydro given the utilities' shared values, strong record of dedicated service to customers and vision to build a stronger utility that can invest in our future. This is a win -win-win scenario for customers, municipal shareholders and employees. When it comes to service, customers will benefit from having the same reliable service — and more — as the combined utility will have greater resources to invest in new technologies. From a financial standpoint, this merger is a win for customers and municipal shareholders as the combined utility will keep rates competitive while reducing costs through operational efficiencies. And when it comes to employees, this local merger will keep jobs here in our community." - Jim Phillips, Chair, Kitchener -Power Corp Layoffs are not expected at either utility company because of the merger. There are vacancies that have not been filled and some pending retirements. The head office will be the current Kitchener -Wilmot Hydro office in the City of Kitchener, with a second work location at the current Waterloo North Hydro office, at which activities will include leading innovation and new technology development. A Memorandum of Understanding (MOU) for the proposed merger will be presented to all five participating municipal councils for approval on Monday, October 4 and Tuesday, October 5. Kitchener -Wilmot Hydro and Waterloo North Hydro are committed to engaging customers and employees through timely, respectful, transparent, and reliable communication throughout this entire merger process. Community engagement is expected to begin the first week of October 2021, subject to municipal council approvals of the MOU. The planned community engagement will include public information sessions and information available on a new community website: con nectinglocaIpower.ca. Following the community information and engagement initiative, the five municipal councils are expected to make a final decision on the proposed merger in December 2021. If approved by the municipal councils, the merger application will be submitted thereafter to the Ontario Energy Board for regulatory approval, which is expected in the third quarter of 2022. The new company is expected to begin operations soon after regulatory approval. (II) October 6 Release — Municipal Councils approve MOU for proposed merger Municipal councils approve Memorandum of Understanding for proposed Kitchener -Wilmot Hydro and Waterloo North Hydro merger October 6, 2021 Public information session on October 19 The municipal councils of Kitchener, Waterloo, Wellesley, Wilmot and Woolwich have approved a Memorandum of Understanding (MOU) as a first step in the proposed merger of Kitchener -Wilmot Hydro and Waterloo North Hydro. The approvals, which came on October 4 and 5, follow the October 1 announcement that Kitchener Power Corporation and Waterloo North Hydro Holding Corporation are moving forward on a proposed merger of the utilities. Now that all five participating municipal councils have passed the MOU, community engagement on the proposed merger begins. Customers and residents of the municipalities of Kitchener, Waterloo, Wellesley, Wilmot and Woolwich are encouraged to visit www.connectinglocalpower.ca to learn more about the proposed merger and provide feedback. "Our board welcomes the news that Waterloo North Hydro's municipal shareholders, the councils of Waterloo, Woolwich, and Wellesley, have passed the Memorandum of Understanding supporting this proposed merger. We believe this a good deal for the three municipalities and Waterloo North Hydro's customers. This larger, locally -owned utility will have more resources to invest in technologies that benefit customers while helping our communities' transition to a lower carbon economy. We look forward to hearing from customers and community members in the coming weeks." David Petras, Chair, Waterloo North Hydro Holding Corporation Kitchener -Wilmot Hydro and Waterloo North Hydro will host joint public information session on Tuesday, October 19 at 7 p.m. Due to the COVID-19 pandemic, the public information session will be held online along with access by telephone. Customers and residents can register for the virtual public information session at www.connectinglocalpower.ca or by email at info@connectinglocalpower.ca or by telephone at 519 747-6334 ext. 78334. "Kitchener -Wilmot Hydro welcomes the approval of a Memorandum of Understanding by the municipal councils of Kitchener and Wilmot. Waterloo North Hydro is a natural merger partner for Kitchener - Wilmot Hydro given the utilities' shared values, strong record of dedicated service to customers and vision to build a stronger utility that can invest in our future. This is a win -win-win scenario for customers, municipal shareholders and employees. We're excited to start our public engagement and receive feedback from community members of all five municipalities." Jim Phillips, Chair, Kitchener -Power Corp Following the public information session and community engagement initiative, the five municipal councils are expected to make a final decision on the proposed merger in December 2021. If approved by the five municipal councils, the merger application will be submitted thereafter to the Ontario Energy 10 Board for regulatory approval, which is expected by the third quarter of 2022. The new company is expected to begin operations soon after regulatory approval. Like several other local power utilities in communities across Ontario, Kitchener -Wilmot Hydro and Waterloo North Hydro are planning to take the next step in their ongoing collaboration efforts by combining operations to create a larger, local and publicly -owned power utility that will provide reliable service, invest in new technologies, generate savings through operational efficiencies and keep local jobs in our communities. 2) Links to virtual news conference and public information session recordings Latest News — Connecting Local Power (Virtual News Conference — October 1, 2021) Public Information Sessions — Connecting Local Power (Virtual Public Information Session — October 19, 2021) 11 3) Ads in local newspapers Connecting Local Power A Proposed Merger Between Kitchener -Wilmot Hydros and Waterloo North Hydro Virtual Public Information Sessions October 19th 3p.m.&7p.m. �` y Visit connecting localpower.ca to register and learn more. Connecting Local Power Kitchener -Wilmot Hydro and Waterloo North Hydro are planning to combine operations and create a larger, local, and publicly owned power utility. ✓ Putting customers first Reinvesting in local communities ✓ Keeping jobs in our region o Visit con nectinglocalpower.ca to learn how this will benefit your community. Ad placed in the Woolwich Observer and The New Hamburg Independent. Connecting Local Power Kitchener -Wilmot Hydro and Waterloo North Hydro are planning to combine operations and create a larger, local, and publicly owned power utility. ✓ Putting customers first ✓ Reinvesting in local communities ✓ Keeping jobs in our region 0 0 175 Visit connectinglocalpower.ca to learn how this will benefit your community. Ads placed in the Waterloo Chronicle and the Waterloo Region Rural Post. 12 4) Website FAQs Question Answer Why merge now? Ontario's electricity sector is changing quickly, and this proposed merger is a local solution that will help our communities adapt to these changes and thrive in the years ahead. This larger, local, publicly owned utility will have more resources to invest in technologies that benefit customers while helping our communities' transition to a lower carbon economy. Of all electric utilities in the province, why is a This proposed merger is about Kitchener -Wilmot merger between Kitchener -Wilmot Hydro and Hydro and Waterloo North Hydro taking the next Waterloo North Hydro the best solution? step in their ongoing collaboration efforts by combining operations to create a larger, local and publicly -owned power utility that will provide reliable service, invest in new technologies, generate cost savings through operational efficiencies and keep local jobs in our communities. Kitchener -Wilmot Hydro and Waterloo North Hydro are natural merger partners given the utilities' contiguous service areas, shared values, strong record of dedicated service to customers and vision to build a stronger utility that can invest in our future. What's going to happen with our hydro rates? The size and stability of the combined utility will Are they eventually going to go up? help ensure distribution rates remain competitive and stable for customers. Distribution rates for all customers are projected to increase at less than the rate of inflation over the 10 years following the merger, leaving more money in customers' pockets. Thereafter, the combined utility will harmonize distribution rates over time, between Kitchener - Wilmot Hydro and Waterloo North Hydro customers. 13 How does this merger align with climate change action? Having a larger customer base will boost our capacity for collective climate action. The larger, combined utility will allow for greater investments in new technologies and services that will benefit customers and help reduce emissions, such as managing smart home and energy data, automated restoration of power outages, renewable microgrids and supporting local renewable generation. What's going to happen to my billing cycle? Will Initially, your billing cycle will not be affected by there be any service changes? the merger. The municipalities of Kitchener, Waterloo, Wellesley, Wilmot, and Woolwich are committed to ensuring the smoothest transition possible through the merger process. We will ensure that there are no impacts on service reliability to customers because of the merger. Our commitment to affordable, reliable power is why we're always looking at new and innovative solutions, including this merger and streamlining of operations, to improve our service to the communities we serve. How many jobs will be lost because of this Layoffs are not expected at either utility company merger? Which utility company is expected to because of the merger. There are vacancies that lose the most jobs? have not been filled and some pending retirements. There may be adjustments made to work locations and day-to-day duties as we combine the assets and services of Kitchener - Wilmot Hydro and Waterloo North Hydro. The head office will be the current Kitchener - Wilmot Hydro office in the City of Kitchener, with a second work location at the current Waterloo North Hydro office, at which activities will include leading innovation and new technology development. 14 How will this affect collective bargaining Kitchener -Wilmot Hydro and Waterloo North agreements at both utility companies? Hydro will work with IBEW Local 636 and PWU Local 1000 to ensure a smooth transition to the new utility company. Both companies will support all unionized and non -unionized employees throughout this process and will be open and transparent with employees along the way. The head office will be the current Kitchener - Where will the head office be? Wilmot Hydro office in the City of Kitchener, with a second work location at the current Waterloo North Hydro office, at which activities will include leading innovation and new technology development. What's your brand? What will this new company What we're focused on right now is engaging be called? with the community, and if approved, seeing this merger through to a successful completion. Once approved, the new utility will unveil a new company name and brand. What's next in the process? Community engagement will begin the first week of October 2021. Following the community information and engagement initiative, the five municipal councils are expected to make a final decision on the proposed merger in December 2021. If approved by the municipal councils, the merger application will be submitted thereafter to the Ontario Energy Board for regulatory approval, which is expected in the third quarter of 2022. The new company is expected to begin operations soon after regulatory approval. 15 Connecting Local Power — Consulting the Community on the Proposed Merger of Kitchener -Wilmot Hydro and Waterloo North Hydro Resident Inquiry Responses —Appendix 2 November 2021 Resident Inquiry Response Waterloo Resident: Thank you for sharing your feedback, it has been noted. If you have any additional comments or questions, please feel free to submit them again I think that the merger makes a lot of through this website. sense. Go for it. Kitchener Resident: Thank you for sharing your feedback, it has been noted. If you have any additional comments or questions, please feel free to submit them again I am very much in favour of the through this website. merger — have been for many years. Waterloo Resident: Thank you for sharing your feedback on the proposed merger between Kitchener -Wilmot Hydro and Waterloo North Hydro. Rate structures are This appears to be a reasonable determined and set by the Ontario Energy Board. For residential initiative, but I have a couple of points customers, the distribution charge on the bill, from your local utility, is a I wish to make. fixed charge per month and is not impacted by the amount of electricity used. Your point is noted, however, that residents who work from home, Given the increasing number of those likely have higher bills due to higher consumption, as well as seniors who working from home due to the are not working. pandemic (a situation I do not think will change in the foreseeable future), Your point is noted regarding the expense of installing electric vehicle I believe adjustment to the billing chargers and the need for incentives especially considering our climate structure needs to be made. I suspect, change goals, which electrical vehicles help us achieve. but have no data to check this, that due to increased day -time demand, the electrical companies have done If you have any additional comments or questions, please feel free to rather well during the pandemic. submit them again through this website. Under the circumstances, I believe charges should be reduced. I personally have changed from TOU to constant billing because I believed it would offer a small saving. That seems to be the case, but I will not be able to confirm until we are into the winter season. This raises a further issue. I think that seniors (i.e., retired folks) should have a lower rate than others. This should be easy to put in place and would be much fairer. Finally, I would like to know that incentives will be made available to those who opt for either fully electric or hybrid electric vehicles. My next vehicle will be one of those and I am 16 concerned about both the cost of installing an adequate supply line as well as increased use of electricity. Thank you. Waterloo Resident: Thank you for sharing your feedback, it has been noted. I am concerned about prices The size and stability of the combined utility will help ensure distribution increasing even more. rates remain competitive and stable. Distribution rates for all customers are projected to increase at less than the rate of inflation over the next 10 years, leaving more money in your pocket. If you have any additional comments or questions, please feel free to submit them again through this website. Kitchener Resident: Thank you for your inquiry and feedback, which has been noted. With Kitchener Wilmot having the The size and stability of the combined utility combined with operational lowest rates, and Waterloo North savings will help ensure distribution rates remain competitive and stable having the highest, how will merger for customers. Distribution rates for all customers are projected to this be a saving to the residents of increase at less than the rate of inflation over the 10 years following the Kitchener and Wilmot? merger, leaving more money in customers' pockets. Has there been any other offers to buy Kitchener Wilmot Hydro and Waterloo North Hydro are constantly Kitchener Wilmot? having conversations with other utilities to see how we can provide more value to our customers and municipal shareholders. Over the years, we have been approached by other utilities, however the municipalities of Kitchener, Waterloo, Wellesley, Wilmot, and Woolwich decided on a local solution through this merger process and are committed to ensuring the smoothest transition possible. If you have any additional comments or questions, please feel free to submit them again through this website. Kitchener Resident: Thank you for your inquiry. I currently have solar panels on my Your contract with Kitchener Wilmot Hydro will not be impacted at this roof and a contract with Kitchener time. This proposed merger strives to provide the same, if not better Wilmot Hydro as per the MicroFIT quality of service. program. Will this impact that contract or will it be terminated? For specific information related to your contract, it is recommended you contact the hydro company directly. If you have any additional comments or questions, please feel free to submit them again through this website. Waterloo Resident: Thank you for sharing your feedback, it has been noted. If you have any additional comments or questions, please feel free to submit them again I am in full support of this proposed through this website. merger. 17 Wilmot Resident: Thank you for your feedback and inquiry. It has been noted, As a former customer of Waterloo The facility was built in 2011 and was a necessary move for the North Hydro and now a customer of continued growth and expansion of Waterloo North Hydro. Kitchener Wilmot my query surrounds the assumption of debt. Waterloo The existing debt (including any outstanding amount for the new facility) North built a new facility costing millions and was it seemed always in and promissory notes with each of the municipalities, will be assumed debt. Is this paid for and if not how by the new corporation and is reflected in the ownership shares for each will this be allocated? municipality. Through streamlining and efficiencies, an additional $15 million in incremental dividends over the first 20 years, is projected to be available for municipalities in proportion to their ownership shares, which can be re -invested into local services that residents rely on. If you have any additional comments or questions, please feel free to submit them again through this website. Waterloo Resident: Thank you for sending in an inquiry. Kitchener Utilities is responsible for Kitchener Utilities is responsible for water and natural gas services while electricity, water, and natural gas Kitchener Wilmot Hydro is responsible for electricity distribution services. Will customers in Waterloo services. The proposed merger of Kitchener -Wilmot Hydro and Waterloo see any changes to their water (City of North Hydro will not result in any changes to your current water or Waterloo) or natural gas (Enbridge) natural gas service providers. service providers? If you have any additional comments or questions, please feel free to submit them again through this website. Waterloo Resident: Thank you for sharing your feedback. While I will support the merger, it is Kitchener -Wilmot Hydro and Waterloo North Hydro are working to based on the assumption that the rate ensure that distribution rates remain competitive and stable for payers will benefit from these customers. Savings from efficiencies will offset rate increases so that efficiencies. The savings should be rates in the merged entity will be lower than what they would be on a used to offset the need for rate stand-alone basis. increases. Broadly, I feel the costs of municipal services (property tax, Distribution rates for all customers are projected to increase at less than water, etc.) have routinely increased the rate of inflation over the next 10 years. Thereafter, the combined ata rate in excess of inflation, and some benefit to the rate payer would utility will harmonize distribution rates overtime, between Kitchener - be a nice benefit and is being stated Wilmot Hydro and Waterloo North Hydro customers. The utility portion here. The commitment should be met represents about 25% of the typical total bill for a residential customer, and kept. with the remainder being the energy consumed by a customer. If you have any additional comments or questions, please feel free to submit them again through this website. Kitchener Resident: Thank you for your inquiry. As a business owner, what will this Kitchener -Wilmot Hydro and Waterloo North Hydro are working to merger mean for my hydro rates? A ensure that distribution rates remain competitive and stable for lot of my business/services are done customers. Distribution rates for all customers are projected to increase during peak rate times and that is not at less than the rate of inflation over the next 10 years. Thereafter, the something I can change. Kitchener combined utility will harmonize distribution rates over time, between Wilmot's lower hydro rates are Kitchener -Wilmot Hydro and Waterloo North Hydro customers. The important to me and my business, I utility portion represents about 25% of the typical total bill for a don't want to see that jeopardized. residential customer and less than that for a business customer, with the remainder being the energy consumed by a customer. Advisors at KWH 18 19 and at the new utility would be pleased to discuss energy efficiency initiatives that may help our customers to reduce their energy consumption and their total bill. If you have any additional comments or questions, please feel free to submit them again through this website. Kitchener Resident: Thank you for your inquiry. What are the projected hydro rates for The size and stability of the combined utility will help ensure distribution Kitchener Wilmot customers after the rates remain competitive and stable for customers. Distribution rates for proposed merger? My concern is my all customers are projected to increase at less than the rate of inflation rates increasing after the merger, this over the 10 years following the merger, leaving more money in would not be acceptable. customers' pockets. Thereafter, the combined utility will harmonize distribution rates overtime, between Kitchener -Wilmot Hydro and Waterloo North Hydro customers. The utility portion represents about 25% of the typical total bill for a residential customer, with the remainder being the energy consumed by a customer. If you have any additional comments or questions, please feel free to submit them again through this website. Woolwich Resident: Thank you for sharing your feedback. Having a larger, local and publicly - owned utility will help deliver reliable and affordable service. If this action is going to make my hydro more reliable and doesn't If you have any additional comments or questions, please feel free to increase the price . I support this submit them again through this website. merger. Woolwich Resident: Thank you for your feedback. The proposed merger should only be This proposed merger will help to ensure distribution rates remain done to benefit those that pay thecompetitive and stable for customers. Distribution rates for all fees. In one section above it states "to customers are expected to increase at less than the rate of inflation over ensure distribution rates remain stable the next 10 years, leaving more money in your pocket. and competitive ...... while returning higher dividends to municipalities." If We project the combined utility could save as much as $2.9 million/year this merger is returning higher dividends then that means rates or through streamlining and efficiencies. As you stated, this will result in monthly connection charges can be additional dividends that can be reinvested into every municipality that lowered. The electrical service was will be impacted by this proposed merger. The five municipalities in never designed to be a revenue source aggregate are projected to receive a return of approximately $15 million for the municipalities, but a service in incremental dividends and interest over the 20 -year period following provider. Stop using rate payers as a the merger. Each municipality will receive its share based on their cash cow to support unnecessary ownership in new company. Municipalities can re invest these dividends projects for cities. Any benefit of this into local services that residents and rate payers, such as yourself, can should be for the rate payers benefit. rely on. Being in Woolwich, we will get the short end of the profits while If you have any additional comments or questions, please feel free to Waterloo, Kitchener and Cambridge submit them again through this website. will benefit the most. Wilmot Resident: Thank you for your feedback. Hello, I am hoping that this proposed The larger, combined utility will allow for greater investments in new merger will lead to a greater capacity technologies and services that will boost capacity for collective climate for innovation in terms of greening our action and help to reduce emissions. power supply, specifically an investment in more solar panels and It will help municipalities achieve their climate change goals by having a batteries at the home or microgrid larger customer base that will allow the combined utility to focus on level. Green Mountain Power (in efficiency and innovation. 19 Vermont) is doing very innovative things with virtual battery -based microgrids using batteries and solar panels in residences. I would love to see that level of innovation here. Investments in new technologies and services that will benefit customers and help reduce emissions include the management of smart home and energy data, the automated restoration of power outages, renewable microgrids and local renewable generation such as solar panels and battery storage as you suggested. If you have any additional comments or questions, please feel free to submit them again through this website. Waterloo Resident: Thank you for sharing your feedback. We appreciate your thoughtful consideration on reinvestments within our local community. We have This sounds like a great plan. I suggest received similar inquiries/suggestions before. that the money saved be reinvested in improvements to the electricity This merger is good news for local climate action. The larger, combined transmission grid, including energy utility will allow for greater investments in new technologies and storage that complements renewable services that will boost capacity for collective climate action and help energy projects. Such investments to reduce emissions. would support the emissions - reduction efforts that have been It will help municipalities achieve their climate change goals by having a undertaken by the region's eight larger customer base that will allow the combined utility to focus on municipalities, specifically efficiency and innovation such as energy storage and renewable TransformWR and 50by30. These generation. plans call for fuel switching for heating of buildings, replacing natural gas with Both utilities have and will continue to invest in the necessary electrically -powered heat pumps. This distribution system upgrades to enable new technologies as we move will require careful attention and towards a low carbon future. coordination to ensure the electricity supply and transmission can power If you have any additional comments or questions, please feel free to the heating of buildings. It would submit them again through this website. make sense to use the savings of this merger to invest in the necessary uoerades. Other feedback and inquiries that were raised during the public info session and News Conference include: • Can you speak to what the projected impacts are if the two companies do not merge? • Will this merger slow down your efforts to provide solar customers with a feature that allows them to use mid -peak or peak rates? • As a solar owner, Waterloo North Hydro allows the solar credit to be applied to the administrative and distribution fees. Will this continue for solar customers such as myself that have taken advantage of this program? • Would the new entity consider merging with the new entity that will be formed by Energy+ and Brantford Hydro? • Why are Kitchener -Wilmot Hydro and Waterloo North Hydro pursuing a merger together and not with other utilities nearby? I know London Hydro expressed an interest publicly a few years ago about acquiring local distribution companies. What happened to those discussions? • Why is now a good time for this merger? • Are you experiencing staffing challenges across your organizations or within specific areas such as unionized field staff, engineering, administration, etc.? • Are there any proposed names for the new entity or timelines? 20 Connecting Local Power — Consulting the Community on the Proposed Merger of Kitchener -Wilmot Hydro and Waterloo North Hydro Media Coverage - Appendix 3 November 2021 The numbers in bold brackets provide an average circulation number for each publication. Online/Print 1. October 1 - Waterloo Region hydro companies announce plan to merge (800,000) 2. October 1- Kitchener and Waterloo power utilities announce merger (175,000) 3. October 1- Proposed merger between Kitchener -Wilmot Hydro and Waterloo North Hydro (320,000) 4. October 1 - Kitchener -Wilmot Hydro, Waterloo North Hydro eyeing potential merger (64,000) 5. October 1 - Merger proposed for Kitchener -Wilmot Hydro and Waterloo North Hydro (75,000) 6. October 1- Waterloo Region hydro companies announce plan to merge (1,550,000) 7. October 4 - Kitchener Power Corporation and Waterloo North Hydro Holding Corporation Announce Proposed Merger (150,000) 8. October 6 - Area councils approve MOU for proposed hydro merger (64,000) 9. October 7 - Local power utilities to move ahead with formal merger (5,000) 10. October 20 - Waterloo Region power plants say no gob cuts in planned merger I CTV News (74,000) 11. October 2021 -.Kitchener and Waterloo power utilities plan to merge (8,500) Broadcast October 1: 1. 570 News, 1:00 pm (5,000) 2. 570 News, 12:30 pm (5,000) 3. CBC Kitchener -Waterloo, 12:30 pm (6,000) 4. CTV News Kitchener, 12:20 pm (320,000) 5. 570 News, 12:00 pm (5,000) 6. 570 News, 11:30 pm (5,000) 7. CBC Kitchener -Waterloo, 11:30 pm (20,000) 8. 570 News, 6:40 pm (6,500) 21 9. 570 News, 6:25 pm (6,500) 10. 570 News, 6:05 pm (6,500) 11. 570 News, 5:35 pm (6,500) 12. 570 News, 5:06 pm (6,500) 13. 570 News, 4:50 pm (3,700) 14. 570 News, 4:38 pm (3,700) 15. 570 News, 4:05 pm (3,700) 16. CHYM FM, 4:00 pm (16,000) 17. 570 News, 3:44 pm (3,700) 18. 570 News, 3:39 pm (3,700) 19. 570 News, 3:24 pm (3,700) 20. 570 News, 3:05 pm (3,700) 21. CBC Radio One, 2:30 pm (6,000) 22. 570 News, 2:30 pm (3,700) 23. CBC Radio One, 1:30 pm (6,000) 24. CTV News Kitchener, 6:38 pm (295,000) 25. CTV News Kitchener, 5:45 pm (295,000) October 2: October 4: October 6: October 7: 26. CTV News Kitchener 6:15 am (250,000) 27. 1460 CJOY 6:00 am (1,800) 28. CTV News Kitchener, 6:57 pm (295,000) 29. 570 News, 4:37 pm (3,700) 30. 570 News, 5:10 pm (6,500) 31. 570 News, 6:09 pm (6,500) 32. 570 News 6:42 pm (6,500) 33. FM 98.5 CKWR, 6:00 am (4,000) 34. FM 98.5 CKWR, 7:00 am (1,000) 35. FM 98.5 CKWR, 7:52 am (1,000) 37. CTV News Kitchener, 7:49 am (250,000) 22 Connecting Local Power — Consulting the Community on a Proposed Hydro Merger Website Metrics - Appendix 4 November 2021 Summary Report + Events Users Event count Conversions Total revenue tD 1.4K 12K 0 $0.00 500 400 306 200 100 0 103t0 17 24 31 07 Oat Nov Custom Oct 1 - Nov 11, 2C21 WHERE DO YOUR NEW USERS COME ER OM7 New users by First user source platform {none] relerral organic' reforra17rssa D 200 400 600 a00 1K View user acquisition -4 WHAT ARE YOUR TOP CAMPAIGNS? WHICH PAGES AND SCREENS GET THE MOST VIEWS? Sessions - by Session source Views by Page title and screen class Users - by City SESSION SOURCE SFSSICNS PAGE TITLE AND SCREEN CLASS VIEWS CITY USERS (direct) 1.2K Connecting Local Power 2.8K Kitchener 407 t.co 176 Public Information- cting Local Power 295 Taranto 15g kitchener.ctvnews.ca 116 Latest News - Connecting Local Power 256 Waterloo 127 kitchenertoday.com 108 FAQ- Connecting Local Power 233 Cambridge 11i therecordcom 84 Resocrces- Connecting Local Power 148 Brampton 63 kwhi sharel co m 60 Municip of council...cting Local Power 63 Ashburn 42 waterioo.ca 46 Kitchener Power C-. ting Local Power 27 Quebec City 38 View traffic acquisition -, View pages and screens -> View cities --)� 23 Users - by ©evlce category Event count by Event name EVENT NAME EVENT COUNT pege_view 3.8K engagement 2.7K sessio rLstart 2K scroll 1.9K first -visit 1.3K file download 173 • DESKTOP • MOBILE • TABLET CACI( 9S 64.9% 32.5% 2.6% View device categories -� View events -4 24 8❑ Website User Breakdown — Regional (Canadian Cities) The following website user visit tracking is based on IP addresses that Google can detect. Municipality Number of Visitors Kitchener 407 Toronto 159 Waterloo 127 Cambridge 111 Brampton 63 Ashburn 42 Quebec City 38 Unknown Region 35 Hamilton 33 London 20 Baden 18 Guelph 17 Mississauga 13 New Hamburg 13 Montreal 11 Halifax 10 Windsor 9 Elmira 8 Ottawa 8 Markham 7 Burlington 6 Halifax 6 Kawa rtha 6 Oakville 6 Whitby 6 Barrie 5 Milverton 4 Newmarket 4 Ajax 3 Brantford 3 Chatham - Kent 3 Erin 3 Kingston 3 Oshawa 3 Stratford 3 Calgary 2 Dartmouth 2 Fergus 2 Georgina 2 Greater Sudbury 2 25 Grimsby 2 Kincardine 2 Lakefield 2 Lambton 2 Langley 2 Listowel 2 Milton 2 Orangeville 2 Peterborough 2 Pickering 2 Port Elgin 2 Quinte West 2 Richmond 2 Saugeen Shores 2 Sault Ste. Marie 2 Vancouver 2 Vaughan 2 Woodstock 2 Aurora 1 Bradford 1 Brant 1 Brighton 1 Caledon 1 Collingwood 1 Courtice 1 Dublin 1 Elora 1 Enfield 1 Fort Erie 1 Goderich 1 Halton Hills 1 Hanover 1 Hawkesbury 1 Lakeshore 1 Leamington 1 Lincoln 1 Longueuil 1 Niagara Falls 1 Parksville 1 Pelham 1 Penetanguishene 1 Regina 1 Richmond 1 Sainte -Adele 1 Sarnia 1 Si mcoe 1 26 Smithville 1 South Bruce Peninsula 1 St-Bruno-de-Montarville 1 Strathroy 1 Surrey 1 Thunder Bay 1 Utica 1 Victoria 1 Welland 1 27 Connecting Local Power — Consulting the Community on the Proposed Merger of Kitchener -Wilmot Hydro and Waterloo North Hydro Social Media Insights -Appendix 5 November 2021 OBJECTIVE The objective ofthis report is to provide a summary oftop social media conversations around the proposed merger between Kitchener -Wilmot Hydro and Waterloo North Hydro, with coverage focusing on: • Posts published by The City of Waterloo, Waterloo North Hydro, City of Kitchener, Kitchener -Wilmot Hydro, and Wilmot Township • Breakdown of coverage engagement, as well as key metrics • Posts with the largest engagement and reach (likes, shares, comments) METHODOLOGY Timeframe: October 1 – 19, 2021 Location: Canada Language: English Social Media ':Twitter, Facebook, Linkedl n 1 Twitter posts were captured using Meltwater, while all other social pasts required the use of manual reward,. Th— is an espedally limited line ofsight on linkedln and Facebook cant—, as majorityof it is private media whidi means it is not available for publicviewing. TWEET BREAKDOWN BY IMPRESSIONS 400,000 sso,000 355,790 Z 300,000 0 250,000 w 200,000 155,495 35,642 101,927 150,000 100,000 13,457 g 518 14,310 6,665 50,000 3,588 18,509 89 0 O�� O'ti�� p3� OR'�� 05� Objo� O�jo� 0$jo� 09jo� y0� 110' y,LAb 1''SJ6 ypAE 1hp6 10D6 1 AO 1�D6' y9A6 TWEET BREAKDOWN BY VOLUME 20 16 15 10 7 7 ~ 5 1 2 2 1 4 4 1 0 1 O,pb 0 pe- o"'pb Oppcs O jots o�acs o acX oapa p9pe- yopb y1pa "jots1''Ocs 10.acX 1hpa "o, y pb "D, "j" 28 KEY METRICS 96 To[alTwee[s (250riginaf Twee[s) 0 User 714KImpres s 472K Read, n HIGHEST ENGAGEMENT (DIRECT) 's r,,=* en * The municipal councils of Kitchener, Waterloo. Wellesley, Wilmot and Waalwich have approved a Memcrarldum of Understanding {MCU) as a first step In [he proposed merger of Kitchener -Wil mat Hydra and Waterloo North Hydro. - _ HIGHEST ENGAGEMENT (INDIRECT) 9pfAkfik� rbir Bki, l ey �N re jsl ✓ trrtiiu d <ttinl [9bePer r we ww[inue a IG�erered orxrGnexnA�oB�enN�c1NYV�lNIn:- u-lxmr+reg.4bmealmOctl+ra*11r / il City of Kltchon4rID -�Ly.Suerr...tilic:ieiearif—I emperors feel. Reace[ 5IW41-234524J7 -,W, - nor. f}+tKrla, r:aard® I� +°rch.:+,ar.c � k'ron MwO+29f U a,IKng p.6K Fall—, CMy W KNMenr� .. � �Iy/ilt+9wnAr NEWS: Municipal councils approve Memorandum of Understanding for proposed Kitchener -Wilmot Hydro and WaterlooNorth Hydro merger. Public information sessions on October 19. Read more: bit.ly/3AjQaOi_ 5;34 rpt Orr 9.1021 . *.ut Social 1 F t—t 1 DIx b ti Q mike rlehln L'bahic-aml - Do 0 r qt'- t.r(iS+Afirf.IKlwr I look to—I to the savings of not having w per Im rwa slits N arzeC Ows 0 * Hover over images for direct link to posts TOP TWITTER AUTHORS 1 y'� ®STerawa a 100 2�rilyk'Rdlener 2 84k 9 5 dcdl — arloa 1 Sek 4 ji� abanyonllna 1 21k 5 4815thebear 1 151, 5 R[filekw 1 13k 7 &k Ihytm 4 8k 8 = 01—hydra 4 Tk 8 M1075davergcks 1 Tk 1n Vmichaelha—pa 1 9k TOP KEYWORDS municipal service beat deal reminder future council colleagues memorandum of under... pudic information... news merger municipalcouncils evening. story proposed merger halves local hvul proposal questions VISItfirst step public informabon... b—Irin memorandum cf under... 9 lnfo stage head Process contiguous urban ar... exciting announcers, SUMMARY — l The City of Kitchener published a total oftwo posts, which were engaged with 4 times (2 likes, 2 retweets) The reach ofthe @City Kitchener Twitter platform is 83.8K are., N.—IN REMINDER: Join us this eveningto ask questions and learn more about tho proposed merger between Kitchener -Wilmot Hydra and Waterloo North Hydra. To register for our public information session at 7 p.m. today, visit con neatinglacalpower.calpublic-info! Connecting Local Power AFroBaaeel Mager Berwoen Khchma- Wrmar Hyd. and Warnlea Nmw Hy— � o[taeer 19th ;"I, �oapm. nnectinglo[elpower �regrster ann learn more. � 00:58 PA9 aci xg. ROM OyraH SocrJ lldvreet lube 29 Krtl{•yd�� ...,.. .•...,: cer-�imat Hydro atnut.stvices.cros�vatia..acy r--;: -, autaiges. We twee[ Al -F $;30-4:30. 4o repot P pmren wnego. call i519i 4S41M. ca ''2 hoed U—q 2014 0 -.1r �n>M,� Join us this evening to ask questions and learn more about the proposed merger between Kitchener -Wilmot Hydra and Waterloo North Hydro. To registerfor our public information session at 7 p.m. on October 10. visit connectinglocalpower.ca/puhllc-infof Connecting Local Power r 1'eopmoPnnecti gloe,tpPwer.w * Hover over images for direct link to posts SUMMARY KWHydro published a total offour posts, with a combined engagement of 8 (5 likes, 3 retweets) The reach of the @KWHydro Twitter platform is 7.6K r.•s fmn qp' isn w nnOcni•r nP m aJ, w.wi utr a.mre ^'eF AmvnNNtn,oe Npm aidlmtaW Nato -onnecting al Power Kobk •..,.xergmenpe.n :. Yla rin[m nor Lom ve+' X:n �e.r• OeteNr d w mh ems•• TOx;Nti..axa.�r.yem..n wpw»>rA.rn �fprpa pPlp Ink.n.Wnbn iwronp Connecting LOC a. i 06^rt'n ,/ MY!,nnbAN lWrif�pl.na•rmG^- e�m rAr�n grtlur. aRbwrt Hµa a.H ri: . M/tlia br•FAa N oxr n� mlmmx, Connecting x At Power IVYaeurle.un mN J ReewaXy nbcel m,nneeMb J aaprp pr •, our r•pn Wilmot Township SUMMARY ••...r6ciy arca+ntla Towrghip nv.Ps andinrprmptipn. Admin .5t9-634-g4.p4lrom Wilmot Township published a total ofone post, which was engaged 11 ...: am-1,30pm Mon to Fri. Thi. account is cut mork—d 24/T The roes likes, retweets, 1 quote tweet) • The reaacc h of the @WilmotTownship Twitter platform is 3.6K ; der, On—ia. Ca acb r9 .m„ 0 bine J-2010 MRA—g 3,esor-„w,- 4nd►aWtlYytbpc�W k6ivrtr i4limn IryYic Connecting e s nnawsa.mn•w.aM � �..�.nneMiperm,rn„n.w f •.«nwkr mps...rn. *Hover over images for direct link to posts 30 City of Watarloo O y'D[itynster+oa City of WaT I s of -a socauat_ staffed e nig t..,sina_ lii>va. Fm serNce ata':. 1Ile- ^a'l 5"9 ?.1? 8795 (6yl") o. 519 8813.22316 ("Ih"ng ilio). waiwkv. ra ra"^i liw..gM Inired lanan.y 7PI11 3:12 - S. 5K=anewera (-icy of IMnarloe� The municipal councils of Kitchener, Waterloo. Wellesley. Wilmot and Woolwich have approved a Memorandum of Understanding (M©U) as a first step in the proposed merger of Kitchener -Wilmot Hydro and Waterloo North Hydra- - +neae,laa.ca Mrn urakip, I pui 4 app — Nano red— yr llndmFrar ,_ I'i t4a�. irdllrmurunr .—inn,.flr.lntnn 1V Ian rryri.e;i1NM nrs:lln id Kdrhniwr. Walnrsu,, Wnlln.luy, WI4rn.Y �nul .. 9 Reu eeta 10c"a *Hover over images for direct link to posts Watarloe North Hydro 1-1. ham Wsturbu North Ilydm ad -1 nrwigyc:nnanvarbun 8 mde. WD Ia11D1 41 F 8:56 4;30. Fa cl®r— =ar. ar m r re- a pmr+a ow p: 519-SM509a WererlDn, Ornara & wnhyd•c.— M-!! forced 7eccrn6er 2012 964 FcAuwy, 8"999 FnAmrary SUMMARY • The City of Waterloo published a total of one post, which received 15 pieces of engagement (5 retweets, 10 likes) • The reach of the@ City Waterloo Twitter p la farm is 58.5K SUMMARY • WN Hydro published a total offour posts, with a combined engagement of 17 (11 likes, 6 retweets) • The reach of the@ KWHydro Twitter platform is 6.6K i, rma.wr.n R.. ..-. � ,11s, +Yi.r, xr.ro .-..-. .r•. - 4Wy/Rm tyFr Romyait 1pFyF0n6u.Aoa l99.oa� �\9rCE4: ldn„¢tnea-..•.outmov.gzaawv rhe 'Ne..nemner Lmm yw^.nue. on i]emow ➢9enw. yp.p�ep�hpt.�l�yi,pDp�glp,�1. d.YepY ➢MlWnmura Nelfa orape+m rnaYi L nniuia almttefs'e lMEW.•1d mIrIW. ENwn 4ytYuiane Yana r.w.�4ti.rtlh.I —a. aWnp— edlhl ma(er Wee—CtVh -9fiin Hy&. aM Ww.l Narh ��4—t Hrdm-1 NMwlw Naeh rge.n. T. 1--l4in:lx.nniWFoe r+ydo a'd 1Yel�doD Nvtl" Ianxwn plehaar:K9lner He&. anO W-1 Meth P!/d.D.7g1w/Mp'Iprpa gtl.F'mlpnm'1q. atf»e. riy ' fee— PWweralmfEOnfnIIET FR PD.m.T NydfD. 76. Cr lo) dp DJMGeMCmrDbOnSnlbnn,SnvyM.elvreaD.IHie'mhwm�limaewivw.- rrae r•••:' +'... i,•' R[•tnr 1D rIV.. ll', ... r ,•.r. r. x [ '."Alo r. Yildt[ .,,., .dam+ n... .._.... ., .,..... Connecting LOCdl POWe'' - ConnectingConnect • Local -'ow2f n9 Local Power' Connecting _C?Cil F .,.r .....� 1. ••-..-�....�.,...� ...,,P ti.,.r..r.�..::«'"".r.,., 9u— * Hover over images for direct link to posts 31 axwbaaa mntptl� owl tmorwr�p,mir m�lwmmaima.mo. vmtamnwn nm,,..ma+ glaar.,..�:arucn.l„ry Connecting Local Power , aproena vir Iu Ibllla,o ahon Seo Mt � cwfnecUn9laCel Wwer.sa � reRreler.ne team mine. �. �d rar�4ener • ,,, d WWS: CNKntener Wanwt Hydro and W.I. k North rtnitp rr tudeekq "ng Ilhe next step o I"] engoing collaR AM eltol is by weaning we'd s to create. wge local and Oe ty owned p uuty. UetalK'—Pbt y Wjieu Ir Khcherler Fv— Corporal— and Waterloo North rtydro Holding COMOratran Announce proposed Merger 0120 . . `1rylbi� re A am <I NfN15M-i[Ipaluun[ilsapprove laemoratNwm ornrme,slaMing Thswwla iR like mrgitg Ki[tr:e:xr mMWarenu, Rba:g Mtrouble. Iq ya.p..d l— W116.0Hy4ru eel WalaiYw N11h t�pt nanU wd0 al - SedV6R+' a 11.1.49. Ren] mere - AIpxJ)b t.Igrl�iSaanr ampeaaan ls'a gwCtlwrg moi TU to i sac tyre azpi renueaus In tM nmyearnno+ { t w ry * Hover over images for direct link to posts *V ciryafwmdoo �l tlKake*h CiH Ckt T 0 Waterloo North Hydro and Kitchener -Wilmot Hydro are planning to mmbine ova Wrs and create a larger, local and publicly owned power utility. Tb learn how this will benefit ye- wmmunay, vl ft oonnedingI.-Ipwer.ca 111 AGty of Waterloo. . ,� ormo.a r d l(Kche -Wilmot Hydre and Waierkap Nonh Hydro are considering taking the null step in thew ongoatg collabwaltbon efforts by combining operations to C.eate a 1',wlaced and vubkdr awned power tailely 1 Katchener power Corporation and Waterloo North Hydro Holding Corporation Annow)ce Proposed... :lu...uyh N enlra i J cperatiwsel e#f cienciAfW through dimussions and in ., 1 Lonnn—t C3 Commarte FD Share SUMMARY • The City of Kitchener Facebook posts were engaged with 34 times (5 comments, 22 reactions, and 9 shares) • Ofthe S comments, two were not relevant to the announcement and one was deleted/is no longer visible to the public • The City of Kitchener Facebook group has a reach of 35K :r.tor%mawr..m reare tterur, loam e' N-u annaig to povreratlllry ao Inm tuv tlrswlll renenywmmmu:ky, vlPl econ9rerepwwu Connecting _aced Power Pmb�nm a reg renateea4pewe« w�+ women roa:o aaa wm�rvonn roma are plon��s la ombi ea ma antl.re�4eeleme.tvzlm owmltiva^'^aa xn u'Ey io mil Lz m unityn ro.r@ni�,l�nra, Connecting .. Local Power loin V/nm rvv as wa n�a®. Qat SUMMARY The City of Waterloo's three Facebook posts aboutthe proposed mergerwere engaged with 10 times (I comment an d 9 reactions) City Of Waterloo•• The mu ninpal councils of Kitchener, Waterloo, Wdles3ey, Wilmot and Woolwich have approved a Memorandum of Understanding (MOLE} as a first .Ran the proposed merger of Kitchener -Wilmot Hydro and Waterloo North Hydro. WRTEkLOn �R Municipal councils approve Memorandum of Understandingfor proposed Kitchene... r'ubl Inform -on sessons on October 19 The municipal councils of Kitchener, Waterloo, We11a53eq, Wd mot and W—Wich have approved. 3 05 Like CJ Commant ;;� Share 32 6`" BREAKING-Thec—p-9 nnniryg?K'.vllYdroand elwwyd,a have propaaed a merger of the two" Nothirkg "Is official at this stage, as the proposal will go to aeyerat eWpa, "mciuding to the —kipal wunciFs. If P., it would head to the g0mn Ererg; 3ca rd, a,57Q FWS axw wa.ar.wrsn. ctrl . a•.nM4m, V.a.P.+dtwrlmm.�..• �.iro. sa* nrry. rrr enJe vale m Po� laaw Mrs A�..•., �` - .Iraw+r llne�egllw nVe.Ila.-�I r�lnita4 yd..w. w�ay�P. wK*4 wvIM6 �� w.w•>��.n .cn, eO AlT3. W�M.�peaww�p/IrNrg inw«. i..nvm+�Ilia r,yr. v * cr www /•wears. Iw, ... �Nwavr �r,aro nYr.nalm»a�Wab'u•�xa n�pfr � ti. rnKrynP�c.d ,al.non.� M�v+wotK+n Ma••rem Orme wnow.d mwpr>'fea Yva tan l,r,r..lewa�n ! The five municipal couflcils connected with the proposed merger of Kitchener-Wilmat Hydro and Waterloo North Hyera all approved a me —Jul r. urdemmrdir.8sadist this week_ �w..rlr.l al.raa ml..mm I: - n:la nx, ur, r.._oxe aaawvw. wwwFwr �mn«w/ FIORV Klteheaer-WI tHvjra. l'. boNc•-1- A...:hc eye ng Potent BREMING= This RM, I was ptaasad to pl. local hydro & council ceilea t— as ww announced a prnpneed matger of akwhydrn &4 The proposol will oe cafteidafed by our Oouncde an October 4 & 5th & utti matey the .0rtE nergyfioard. FM info, pis cisi 1: ._ J"IHepiln gKoealpowor.aa. c maninq i cxrm,�.�..I ..•a.I ..I .�. n.. 4M r, a.41 , W,EhP 9 t1 �va. *rrroldom.a �Ivv.rvewxsln . tirr.,�..•�waa,aw.dmrw�w all. "he five municipal caurcilscpnnected with the pfoposod mrnger of Kitchaner•Wllmot "o and Waterina North Hydm all approved a memomrdum of Il rdnstandirg earlier this week. 1 I. rn. ma.f a[nar. r•rl ar naieaa`brvn,.. ower r ala rawer. �erwrmlw.. O u C n.5 n.rww/ ••. The five muru cipal councils cannected with the proposed merger of Kitcheror-Mmot Hydra and Waterloo North Hydfo all approved a memorandum of understanding earlier this week. Br. 1 §>e :b k ► G 33 J.Mark Rodger Borden Ladner Gervais LLP T: 416-367-6190 Bay Adelaide Centre, East Tower mrodger@blg.com 22 Adelaide Street West Toronto, ON, Canada M5H 4E3 T 416.367.6000 F 416.367.6749 blg.com December 6, 2021 DELIVERED BY EMAIL Mr. Dan Chapman City of Kitchener 200 King Street West Kitchener, ON N2G 4G7 Dear Mr. Chapman LMG Borden Ladner Gervais Re: Amalgamation of Kitchener Power Corp. and Waterloo North Hydro Holding Corporation The City of Kitchener (the "City") retained Borden Ladner Gervais LLP (`BLG") to provide legal advice with respect to a proposed merger between Kitchener Power Corp. ("KPC") and Waterloo North Hydro Holding Corporation ("WNHHC") (the "Proposed Transaction" or "New Holdco"). Specifically, New Holdco will own 100% of the issued and outstanding shares of the newly amalgamated electricity local distribution company ("New LDC"), which will be regulated and licensed by the Ontario Energy Board (the "OEB"), along with other existing subsidiary corporations. Due Diligence Report As part of BLG's mandate, the City instructed us to carry out legal due diligence as more particularly described in Section IV of our due diligence report. Extensive legal due diligence was undertaken and our due diligence report was delivered to the City on August 9, 2021. Since the due diligence report is a confidential document which is subject to solicitor -client privilege, this letter has been prepared at the City's request to provide a public summary of the relevant legal documents based, in part, on our due diligence. Amalgamation Related Legal Agreements The proposed mergers constitute legally binding commercial transactions. Two legal agreements have been developed and negotiated over the past several months that prescribe and chart the future relationship between the various municipal shareholders and the proposed merged companies. These agreements are known as the Merger Participation Agreement and the Unanimous Shareholders' Agreement. BLG provided advice to the City on both Agreements. Lawyers I Patent & Trademark Agents BLG Barden Ladner Gervais The Merger Participation Agreement The Merger Participation Agreement (the "MPA") is the agreement that describes key elements of the amalgamation mechanics and the rights and responsibilities of the municipal shareholders and the companies pertaining to the implementation of the mergers. Among other things, the MPA sets out the equity ownership between the five municipal shareholders at the New Holdco company level as follows: Kitchener 53.39% Wilmot 4.49% Waterloo 30.83% Woolwich 8.51% Wellesley 2.78% A number of months will pass after all the municipal councils approve the legal agreements and before the mergers actually close. For example, Ontario Energy Board approval is required before the distribution company mergers can take place and this regulatory process will take several months. Accordingly, the financial position of each of the companies involved in the transactions will change over this period. To manage these typical financial fluctuations the MPA includes price adjustment mechanisms to ensure that these changes are accounted for. The net result will be an additional dividend payment to the Kitchener -Wilmot municipalities or to the Waterloo et al municipalities depending on the net gain or loss arising from these adjustments. The payment will be made through a special share class dividend. Note that these closing adjustments are typical for utility mergers of this type and will have no impact on the equity allocations set out above. The MPA also sets out the representations, warranties and covenants of the parties addressing issues such as confirming the municipal ownership of shares in the existing companies, the absence of undisclosed liabilities, compliance with laws, statements about environmental conditions of the businesses, disclosure of material contacts, carrying on business in the normal course and other typical and traditional vendor representations and covenants. The location of the head office and executive functions is also mandated in the MPA. This includes the requirement that the new merged holding company and distribution company maintain its administration and operations buildings, including executive functions, at 301 Victoria Street South, Kitchener. This location will be for an indefinite period and can only be changed with Kitchener's approval. Under the MPA, the signatories agree to indemnify each other against violations of promises made such as representations, warranties and covenants. The maximum exposure has been capped at $15 million (pro -rated to reflect the ownership level of each municipality) which can only be triggered if a claims threshold of $250,000 has been met. As directed by Kitchener Council, the MPA also includes a section on regulatory approvals that mandates that the Ontario Energy Board will be asked to approve, as a separate and distinct head of relief sought, that legacy distribution rate classes be maintained for a minimum period of 20 years 2 BLG Borden Ladner Gervais after closing to ensure that Kitchener's electricity distribution rates are comparable to status quo rates if no merger had occurred. Finally, Kitchener and Wilmot's tree reforestation grants program will continue post -merger consistent with past practice. Kitchener Council also will be consulted with respect to the new merged company name. The MPA will executed after this agreement have been approved by all municipal shareholders. Thereafter the MPA will be filed with the Ontario Energy Board as part of the supporting evidence for the New LDC and New Holdco mergers. The Unanimous Shareholder's Agreement Where the MPA focuses largely on merger implementation, the Unanimous Shareholder's Agreement (the "USA") sets out the relationship between the municipal owners and the new companies. The USA includes various corporate governance requirements including the composition of the new 13 member parent holding company board (7 directors to be appointed by Kitchener with a minimum of 4 independent Kitchener directors) and the new 9 member distribution utility company board (2 directors to be appointed by Kitchener both of whom may be non - independent). The majority of the New LDC board will be comprised of independent directors. Under Ontario law, shareholders can remove certain decision-making powers from the board of directors in order for the municipal councils to decide these matters. Special Majority Shareholder Approval (66 2/3) will be required for changes such as new auditors, buying or selling assets or other transactions with an economic value greater than 10% of the consolidated book value of parent holding company and its subsidiaries. Super Majority Shareholder Approval (90%) will be required for any action that would dilute a shareholder's ownership percentage, changing the debt/equity rate beyond certain levels and changing the geographic extent of the distributors operations. The USA also includes various rights and duties with respect to conveyance of a municipalities interests in the company including pre-emptive rights for new share offerings, a right of first refusal if another shareholder receives an offer on their shares, piggy back rights to allow other shareholders to require their shares to be acquired as part of an offer to another shareholder, drag along rights and options with respect to the sale of surplus assets. The USA also contains a non -competition clause designed to allow the municipalities to continue to own and operate separate existing businesses (such as Kitchener's natural gas franchise) and other designated activities on municipal owned sites (such as district energy and solar panels ) within the municipality. The newly merged companies agree not to pursue a current designated business activity within a municipal shareholder's borders without first obtaining that municipality's written consent. Prior to a municipality undertaking a new energy-related venture within its borders, that municipality agrees to explore, on a good faith basis, possible collaboration on such ventures with the appropriate merged utility company. BLG Borden Ladner Gervais Finally, the USA includes a dividend policy including target dividend payments for the First three financial years of the new companies' existence, including a target dividend of 50% payout of the net operating income of the merged companies. Ontario Energy Board Approval If all municipal shareholders of KPC and WHNHC approve the MPA and USA, an application must be made to the Ontario Energy Board to approve the merger of the Kitchener -Wilmot and Waterloo electricity distribution companies. This approval is required before the New LDC amalgamation can be completed. The Ontario Energy Board filing is known as a MAADs application (MAAD stands for Mergers, Amalgamations, Acquisitions and Divestitures). In deciding whether to approve the merger of the two electricity distribution companies, the Board applies what is known as the "no harm" test. This test is articulated in the OEBs Handbook to Electricity Distributor and Transmitter Consolidation and associated MAADs Filing Requirements issued January 19, 2016. This Handbook is intended to provide guidance to applicants and stakeholders on MAADs applications. In order to demonstrate "no harm", the distributor applicants must show that there is a reasonable expectation based on underlying cost structures that the costs to serve customers following a consolidation will be no higher than they otherwise would have been. In other words, customers cannot be made worse off than compared with the status quo (i.e. if no merger would have taken place). It is anticipated that the OEB regulatory process will take approximately 6 months to complete. If the OEB approves the merger, then the amalgamation transactions will close, generally within 60 days from the date of such approval. At closing, Articles of Amalgamation will be filed with the Province to create the new companies that shall bring the new corporations into effect. Yours Very Truly, Borden Ladner Gervais LLP original signed by Mark Rodger J.Mark Rodger* *Jonathan Rodger Professional Corporation 126025657:v2 4 K C Kitchener Power December 3, 2021 To: Members of Council From: Kitchener Power Corp. Board of Directors Subject: Update on Proposed Merger At our last meeting on October 4, 2021, Council approved the Memorandum of Understanding (MOU) for the proposed merger of Kitchener Power Corporation (KPC) and Waterloo North Hydro Holding Corporation (WNH HoldCo) and their two Subsidiaries, Kitchener -Wilmot Hydro Inc. and Waterloo North Hydro Inc. The MOU sets out the basic terms of the transaction at a high level. The MOU is generally non-binding and does not commit the parties to a transaction although the provisions within the MOU generally require both parties to honour the terms in the binding Merger Participation Agreement if the transaction does proceed. Council also directed the KPC Board of Directors and staff to proceed with negotiating and finalizing the Merger Participation Agreement and the Unanimous Shareholders' Agreement; and to launch the Customer Engagement process with a report back to Council prior to December 31, 2021, for final merger approval. Following is a summary of our progress since our last Council presentation. Merger Participation Agreement The Merger Participation Agreement (MPA) is a comprehensive binding agreement that sets out the rights and obligations of all parties with respect to the merger and addresses important post -closing matters. The MPA is a merger implementation contract that is superseded by the Unanimous Shareholders' Agreement once the transaction is completed, and all closing matters are fulfilled. The key terms of the Merger Participation Agreement include the Equity Allocation amongst the five shareholders, the terms regarding Post -Closing adjustments, the provision of Common and Special Share classes, Representations and Warranties, and Customary and Specific Covenants relevant to each shareholder. Page 11 Since the MOU was approved by Council in early October, extensive discussions and negotiations have occurred between the CEO's of Waterloo North Hydro and Kitchener -Wilmot Hydro as well as the CAO's of the five Shareholder municipalities and our respective legal counsels. Agreement has now been reached by all parties on the final language for all clauses in the Merger Participation Agreement, including certain terms required by the shareholders of Kitchener Power Corp. The proposed MPA is now presented to Council for final approval. The MPA, if approved by Council, will be filed as evidence in support of the Ontario Energy Board's MAADs application. Unanimous Shareholders' Agreement The Unanimous Shareholders' Agreement (USA) is a binding agreement that governs the new corporation, once the merger transaction is completed, and is intended to carry on indefinitely or until amended by the municipal shareholders. The key terms of the Unanimous Shareholders' Agreement include the business of the Corporation, governance structure and composition of the boards, matters that require Shareholder approval, Shareholder rights with respect to the purchase and sale of shares and the Dividend policy. As with the MOU, after extensive discussions and negotiations between the parties and their respective legal counsels, agreement has been reached on the final language for all clauses in the Unanimous Shareholders' Agreement including certain terms required by the shareholders of Kitchener Power Corp. The proposed USA is now presented to Council for final approval and, if approved, will be appended to the MPA and filed as evidence in support of the Ontario Energy Board's MAADs application. Community Engagement As directed by Councils at the October meeting, a Customer Engagement process was launched following approval of the Memorandum of Understanding by all Councils. A microsite was developed called "Connecting Local Power" as a hub to provide the public with information on the proposed merger and to provide feedback. In addition to the public announcement on October 1, a virtual public information session was held on October 19 for residents to receive an overview of the proposed merger and to have their questions answered. Each organization also communicated messages through social media. According to National PR, who was engaged to lead the public engagement process, the overall community feedback was relatively positive and media coverage was fair and factual. Page 12 Recommendation The Board of Directors of Kitchener Power Corp., Kitchener -Wilmot Hydro Inc. and Kitchener Energy Services Inc. has considered the proposed Merger Participation Agreement, the Unanimous Shareholders' Agreement and the Community Engagement report at a meeting of each board on December 3, 2021, and is recommending to proceed with the proposed merger. It is recommended that: a) Each of the Municipalities authorize each of Kitchener Power Corp., Kitchener - Wilmot Hydro Inc. and Kitchener Energy Services Inc. to enter into the Merger Participation Agreement. b) Each of the Municipalities enters into the Merger Participation Agreement. Jerry Van Ooteghem and I look forward to the discussion with Council at our upcoming meeting. Regards, 9,-- ��- James C. Phillips, Chair, Kitchener Power Corp.