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HomeMy WebLinkAboutCouncil Agenda - 2022-05-091 KiTc�ivER Council Meeting Agenda Monday, May 9, 2022, 7:00 p.m. Electronic Meeting Beginning March 1, 2022, the City of Kitchener has aligned with provincial changes to COVID-19 restrictions and City Hall is now open for in person services, but appointments are still being encouraged. The City remains committed to safety of our patrons and staff and continue to facilitate electronic meeting participation for members of the public. Those people interested in participating in this meeting can register to participate electronically by completing the online delegation registration form at www.kitchener.ca/delegation or via email at delegation (a)kitchener.ca. For those who are interested in accessing the meeting live -stream video it is available at www.kitchener.ca/watchnow. Please refer to the delegations section on the agenda below for registration deadlines. Written comments will be circulated prior to the meeting and will form part of the public record. *Accessible formats and communication supports are available upon request. If you require assistance to take part in a city meeting or event, please call 519-741-2345 or TTY 1-866-969-9994.* Pages 1. COMMENCEMENT The electronic meeting will begin with a Land Acknowledgement given by the Mayor and the singing of "O Canada." 2. MINUTES FOR APPROVAL Minutes to be accepted as mailed to the Mayor and Councillors (regular meeting held April 11, 2022 and special meetings held April 11 and 25, 2022) - Councillor S. Marsh. 3. DISCLOSURE OF PECUNIARY INTEREST AND THE GENERAL NATURE THEREOF 4. COMMUNICATIONS REFERRED TO FILE 4.1. Flag Request under Policy MUN-FAC-442 4.1.a. Against Parental Alienation Canada - April 25 - 29, 2022 5. PRESENTATIONS - NIL 6. DELEGATIONS Pursuant to Council's Procedural By-law, delegations are permitted to address Council for a maximum of five (5) minutes. Delegates must register by 5:00 p.m. on May 9, 2022, in order to participate electronically. 6.1. Kitchener Power Corp. Annual Business Matters, FIN -2022-194, listed as item 12.1.a 6.1.a. Jerry Van Ooteghem, President and CEO, Kitchener -Wilmot Hydro and Jim Phillips, Chair, Kitchener Power Corp. 6.2. Ktchener Power Corp. and Waterloo North Hydro Merger - New Board Considerations, FIN -2022-201, listed as item 12.1.b 6.2.a. Jerry Van Ooteghem, President and CEO, Kitchener -Wilmot Hydro and Jim Phillips, Chair, Kitchener Power Corp. 7. REPORTS OF COMMITTEES 7.1. HERITAGE KITCHENER - May 3, 2022 7.1.a. Notice of Intention to Demolish - Former Old Men's Residence, Grand River Hospital Freeport Campus - 3570 King Street East, DSD -2022- 169 That, in accordance with Section 27(3) of the Ontario Heritage Act, the Notice of Intention to Demolish received on March 17, 2022, regarding the Old Men's Residence located on the property municipally addressed as 3570 King Street East, as outlined in Development Services Department report DSD -2022-169, be received for information and that the notice period run its course, as outlined in Development Services Department report DSD -2022-169; and, That the City arrange to have the Old Men's Residence properly documented through photographs prior to any demolition activity. 7.2. FINANCE AND CORPORATE SERVICES COMMITTEE - April 25, 2022 7.2.a. Digital Service Squad Funding 2022 - 2024, DSD -2022-166 That the Mayor and Clerk be authorized to sign a funding agreement, subject to the satisfaction of the City Solicitor, with the Ontario Business Improvement Area Association (OBIAA) to enable the Small Business Centre to deliver the Digital Service Squad program, in accordance with Development Services Department report DSD - 2022 -166; and further, That the General Manager, Development Services be authorized to Page 2 of 131 execute on behalf of the City of Kitchener any amendments to the funding agreement provided such amendments are to the satisfaction of the City Solicitor. 7.2.b. 2022 Development Charges (DC) Study & Bylaw - Public Input, FIN - 2022 -189 That the Finance and Corporate Services Committee meeting dated April 25, 2022, be deemed as the statutory public meeting for the 2022 Development Charges By-law update and it is determined that no further public meetings will be held in respect to the passage of the By-law, as outlined in Financial Services Department report FIN -2022- 189. 7.2.c. ADDENDUM Report to DSD -2022-192 Province of Ontario More Homes for Everyone Plan (Bill 109), DSD -2022-199 That Development Services Department report DSD -2022-199 titled "Addendum Report to DSD -2022-192 Province of Ontario More Homes for Everyone Plan (Bill 109)" be submitted together with report DSD -2022-192 to the Province as the City of Kitchener's comments on the More Homes for Everyone Plan which includes Bill 109; proposed guidelines for the Community Infrastructure and Housing Accelerator; and the Missing Middle Housing and Gentle Density Discussion Paper; and, That staff be directed to prepare an interim update regarding the Province of Ontario More Homes for Everyone Plan (Bill 109) in the third quarter of 2022 and a fulsome report in the fourth quarter of 2022. 8. UNFINISHED BUSINESS 9. NEW BUSINESS 9.1. REGIONAL COUNCIL UPDATE — MAYOR B. VRBANOVIC 9.2. Notice of Motion - D. Chapman - Energy Performance Tiers Councillor D. Chapman has given notice to introduce the following motion for consideration this date: "WHEREAS the Province of Ontario adopted greenhouse gas reduction targets of 30% by 2030, and emissions from buildings represented 22% of the province's 2017 emissions, WHEREAS all Waterloo Region municipalities, including the City of Kitchener, adopted greenhouse gas reduction targets of 80% below 2012 levels by 2050 and endorsed in principle a 50% Page 3 of 131 reduction by 2030 interim target that requires the support of bold and immediate provincial and federal actions, WHEREAS greenhouse gas emissions from buildings represent 45% of all emissions in Waterloo Region, and an important strategy in the Transform WR community climate action strategy, adopted by all Councils in Waterloo Region, targets new buildings to be net -zero carbon or able to transition to net -zero carbon using region -wide building standards and building capacity and expertise of building operators, property managers, and in the design and construction sector, WHEREAS the City of Kitchener recently adopted a policy requiring new City buildings greater than 500m2 to have an energy intensity -based target of 25% energy improvement above Ontario Building Code Regulation 388/18 or NetZero Ready/NetZero energy, where site conditions allow; WHEREAS buildings with better energy performance provide owners and occupants with lower energy bills, improved building comfort, and resilience from power disruptions that are expected to be more common in a changing climate, tackling both inequality and energy poverty; WHEREAS while expensive retrofits of the current building stock to achieve future net zero requirements could be aligned with end - of -life replacement cycles to be more cost-efficient, new buildings that are not constructed to be net zero ready will require substantial retrofits before end -of -life replacement cycles at significantly more cost, making it more cost-efficient to build it right the first time. THEREFORE BE IT RESOLVED THAT Council request the Province of Ontario to include energy performance tiers and timelines for increasing minimum energy performance standards step-by-step to the highest energy performance tier in the next edition of the Ontario Building Code, consistent with the intent of the draft National Model Building Code and the necessity of bold and immediate provincial action on climate change; THEREFORE BE IT RESOLVED THAT Council request the Province of Ontario to adopt a more ambitious energy performance tier of the draft National Model Building Code as the minimum requirement for the next edition of the Ontario Building Code than those currently proposed; Page 4 of 131 THEREFORE BE IT RESOLVED THAT Council request the Province of Ontario encourage and provide authority to municipalities to adopt higher energy performance tiers than the Ontario Building Code and Green Development Standards; THEREFORE BE IT FURTHER RESOLVED THAT Council request the Province of Ontario to facilitate capacity, education and training in the implementation of the National Model Building Code for municipal planning and building inspection staff, developers, and homebuilders to help build capacity; and THEREFORE BE IT FINALLY RESOLVED THAT this resolution be provided to the Minister of Municipal Affairs and Housing, to area MPPs, and to all Ontario Municipalities." 10. QUESTIONS AND ANSWERS 11. BY-LAWS 11.1. 1 STAND 2ND READING 11.1.a. To further amend By-law No. 88-171, being a by-law to designate private roadways as fire routes and to prohibit parking thereon. 11.1.b. To further amend By-law No. 2008-117, being a by-law to authorize certain on -street and off-street parking of vehicles for use by persons with a disability, and the issuing of permits in respect thereof. 11.1.c. To further amend By-law No. 2010-190, being a by-law to prohibit unauthorized parking of motor vehicles on private property. 11.1.d. Being a by-law to exempt certain lots from Part Lot Control — Blocks 185, 185, 187, 188, 189 and 190, Registered Plan 58M-682 — Grassbourne Avenue, Roywood Street, Broadacre Drive and Beckview Drive. 11.1.e. Being a by-law to set and levy the rates of taxation for City purposes for the year 2022 and to provide for the payment of taxes after interim taxes. 11.1.f. Being a bylaw to assume certain lands within the City of Kitchener as public highway. 11.1.g. To confirm all actions and proceedings of Council for May 9, 2022. 12. COMMITTEE OF THE WHOLE Page 5 of 131 12.1. ADMINISTRATIVE REPORTS 12.1.a. Kitchener Power Corp. Annual Business Matters, FIN -2022-194 8 That KPMG, LLP, be appointed as auditors of Kitchener Power Corp. for the ensuing fiscal year and Directors are authorized to set their remuneration. 12.1.b. Kitchener Power Corp. and Waterloo North Hydro Merger - New 112 Board Considerations, FIN -2022-201, FIN -2022-201 THAT 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. anticipated to be finalized this year, and subject to the transaction closing, the following recommendations regarding Kitchener board representatives be approved: • Current KPC Board members Jim Phillips and Rosa Lupo, be appointed to serve as independent board members on the new Holdco Board as outlined in this report, and; • New Board candidates Susan Taves and Brian Unrau be appointed to serve as independent board members on the new Holdco Board, based on recommendations of the KPC recruitment committee as outlined in this report, and; • Councillors previously nominated to serve on the KPC Board starting June 1, 2022, Councillor Kelly Galloway-Sealock, and Councillor Bill loannidis, continue to serve and be appointed to the new Holdco Board during the "transition year" as outlined in this report, and further; • Councillor be appointed to serve on the new Wiresco Board during the "transition year" as outlined as outlined in this report. 12.1.c. Downtown Kitchener Business Improvement Area (BIA) and Belmont 119 BIA 2022 Budgets, FIN -2022-216 That the 2022 Budgets for the Downtown Kitchener Business Improvement Area (BIA) and the Belmont Business Improvement Area (BIA) be approved pursuant to Section 205 (2) of the Municipal Act, 2001. 12.1.d. Housekeeping Confirmatory By-law - November 2020, COR -2022- 124 223 That the actions and proceedings of Special Council held November 2, 2020, included in the minutes attached as Attachment A of Corporate Services Department report COR -2022-223 be here by confirmed by By-law and numbered sequentially by the Clerk. Page 6 of 131 13. 14. 15. 12.2. FOR INFORMATION 12.2.a. Summary of Bid Solicitations Approved by the Manager of Procurement (Jan 1, 2022 — Mar 31, 2022), FIN -2022-217 REPORT OF THE COMMITTEE OF THE WHOLE BY-LAWS 14.1. 3RD READING 14.1.a. To further amend By-law No. 88-171, being a by-law to designate private roadways as fire routes and to prohibit parking thereon. 14.1.b. To further amend By-law No. 2008-117, being a by-law to authorize certain on -street and off-street parking of vehicles for use by persons with a disability, and the issuing of permits in respect thereof. 14.1.c. To further amend By-law No. 2010-190, being a by-law to prohibit unauthorized parking of motor vehicles on private property. 14.1.d. Being a by-law to exempt certain lots from Part Lot Control — Blocks 185, 185, 187, 188, 189 and 190, Registered Plan 58M-682 — Grassbourne Avenue, Roywood Street, Broadacre Drive and Beckview Drive. 14.1.e. Being a by-law to set and levy the rates of taxation for City purposes for the year 2022 and to provide for the payment of taxes after interim taxes. 14.1.f. Being a bylaw to assume certain lands within the City of Kitchener as public highway. 14.1.g. To confirm all actions and proceedings of Council for May 9, 2022. ADJOURNMENT 128 Page 7 of 131 Staff Report Financia( Services Department www.kitchener.ca REPORT TO: Committee of the Whole DATE OF MEETING: April 25, 2022 SUBMITTED BY: Jonathan Lautenbach, Chief Financial Officer, 519-741-2200 ext. 7334 PREPARED BY: Sharon Gignac, Executive Assistant, 519-741-2200 ext. 7312 WARD(S) INVOLVED: N/A DATE OF REPORT: April 13, 2022 REPORT NO.: FIN -2022-194 SUBJECT: Kitchener Power Corp. — Annual Business Matters RECOMMENDATION: THAT the audited financial statements of Kitchener Power Corp. for the year ended December 31, 2021 as audited by KPMG, LLP, and attached to report FIN -2022-194, be received; and further, That KPMG, LLP, be appointed as auditors of Kitchener Power Corp. for the ensuing fiscal year and Directors are authorized to set their remuneration. REPORT HIGHLIGHTS: • Audited financial statements for Kitchener Power Corp. (KPC) are required to be provided to Council on an annual basis • Approving the appointment of auditors for KPC is an annual requirement • The KPC board is recommending that KPMG, LLP be appointed as auditors for another year • This report supports the delivery of core services. BACKGROUND: The purpose of this report is to enable Council to consider routine annual business matters related to Kitchener Power Corp., including the receipt of the audited financial statements and the approval of auditors for the 2022 fiscal year. REPORT: The Kitchener Power Corp. Shareholders' Agreement requires the annual circulation of audited financial statements and approval of the shareholders for the appointment of auditors for the ensuing fiscal year. *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. Page 8 of 131 The 2021 financial statements have been audited by KPMG, LLP and are attached for Council's information. In addition, the Board of Directors of Kitchener Power Corp. has recommended that KPMG, LLP be retained for another year as auditors of the corporation. STRATEGIC PLAN ALIGNMENT: This report supports the delivery of core services. FINANCIAL IMPLICATIONS: None at this time. COMMUNITY ENGAGEMENT: INFORM — This report has been posted to the City's website with the agenda in advance of the council / committee meeting. PREVIOUS REPORTS/AUTHORITIES: There are no previous reports/authorities related to this matter. APPROVED BY: Jonathan Lautenbach, CFO ATTACHMENTS: Attachment A — KPC Consolidated Financial Statements 2021 Attachment B — KPC Unconsolidated Financial Statements 2021 Attachment C — Kitchener -Wilmot Hydro Inc. Financial Statements 2021 Page 9 of 131 Financial Statements of Kitchener Power Corp. Consolidated Year ended December 31, 2021 (Expressed in thousands of dollars) Page 10 of 131 -1 if "M 1� I KPMG LLP 115 King Street South 2nd Floor Waterloo ON N2J 5A3 Canada Tel 519-747-8800 Fax 519-747-8830 INDEPENDENT AUDITORS' REPORT To the Shareholders of Kitchener Power Corp. Opinion We have audited the consolidated financial statements of Kitchener Power Corp. (the Entity), which comprise: • the consolidated statement of financial position as at December 31, 2021 • the consolidated statement of comprehensive income for the year then ended • the consolidated statement of changes in equity for the year then ended • the consolidated statement of cash flows for the year then ended • and notes to the consolidated financial statements, including a summary of significant accounting policies (Hereinafter referred to as the "financial statements"). In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position of the Entity as December 31, 2021, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS). Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the "Auditors' Responsibilities for the Audit of the Financial Statements" section of our auditors' report. We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. KPMG LLP, an Ontario limited liability partnership and member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. KPMG Canada provides services to KPMG LLP. Page 11 of 131 -1 if 10 1� I Page 2 Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards (IFRS), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Entity's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Entity's financial reporting process. Auditors' Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Page 12 of 131 -1 if "M 1� I Page 3 • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Entity to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group Entity to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. kAWG «P Chartered Professional Accountants, Licensed Public Accountants Waterloo, Canada April 11, 2022 Page 13 of 131 KITCHENER POWER CORP. Consolidated Statement of Financial Position As at December 31, 2021, with comparative information for 2020 (Expressed in thousands of dollars) Regulatory deferral account debit balances 10 25,396 19,661 Total assets and regulatory assets $ 363,483 $ 352,414 1 Page 14 of 131 Note 2021 2020 Assets Current assets Cas h 4 $ 6,079 $ 6,861 Accounts receivable 5 21,287 15,709 Unbilled revenue 14,705 29,865 Inventory 6 3,080 2,458 Prepaid expenses 1,082 1,146 Income taxes receivable 30 5 Total current assets 46,263 56,044 Non-current assets: Property, plant and equipment 7 279,444 267,581 Intangible assets 8 11,185 8,079 Deferred tax assets 9 302 211 Investment in subsidiaries and associates 893 838 Total non-current assets 291,824 276,709 Total assets 338,087 332,753 Regulatory deferral account debit balances 10 25,396 19,661 Total assets and regulatory assets $ 363,483 $ 352,414 1 Page 14 of 131 KITCHENER POWER CORP. Consolidated Statement of Financial Position Year ended December 31, 2021, with comparative information for 2020 (Expressed in thousands of dollars) Non-current liabilities: Note 2021 2020 Liabilities and Shareholder's Equity 76,963 76,963 Current liabilities: 12 6,012 5,937 Accounts payable and accrued liabilities $ 32,821 $ 37,744 Income taxes payable 17 - 32 Current portion of lease liabilities 17 42 - Current portion customer deposits 13 8,530 8,945 Current portion of deferred revenue 1,185 1,069 Total current liabilities 42,578 47,790 Non-current liabilities: Long-term debt 11 76,963 76,963 Employee future benefits 12 6,012 5,937 Long-term customer deposits 13 5,675 5,833 Long-term portion of lease liabilities 17 556 - Deferred revenue 44,451 39,759 Deferred tax liablilty 9 8,675 4,415 Total non-current liabilities 142,332 132,907 Total liabilities 184,910 180,697 Shareholder's equity: Share capital - common shares 14 66,389 66,389 Retained earnings 108,261 101,452 Accumulated other comprehensive loss -620 -620 Total shareholder's equity 174,030 167,221 Total liabilities and shareholder's equity 358,940 347,918 Regulatory deferral account credit balances 10 779 2,276 Deferred taxes associated with regulatory accounts 3,764 2,220 Impact of COVID-19 pandemic 27 Total equity, liabilities and shareholder's equity $ 363,483 $ 352,414 The accompanying notes are an integral part of these financial statements. On behalf of the Board: Director Director 2 Page 15 of 131 KITCHENER POWER CORP. Consolidated Statement of Comprehensive Income Year ended December 31, 2021, with comparative information for 2020 (Expressed in thousands of dollars) Total comprehensive income for the year $ 11,195 $ 10,439 The accompanying notes are an integral part of these financial statements. 3 Page 16 of 131 Note 2021 2020 Energy sales $ 205,727 $ 239,962 Cost of energy sold 208,472 245,909 (2,745) (5,947) Other operating revenue Distribution sales 45,033 42,690 Other income 15 3,319 2,873 Net operating revenue 45,607 39,616 Expenses: Operations and maintenance 11,552 11,405 Customer services 5,674 5,313 Administration 6,452 5,542 Amortization 10,977 10,022 34,655 32,282 Other Energy conservation program revenue (1,262) (727) Energy conservation program expense 1,277 713 Net energy conservation programs 15 (14) Finance income 16 (39) (132) Finance charges 16 2,509 2,981 Net finance costs 2,470 2,849 Income before income taxes 8,467 4,499 Income tax expense 9 (520) 907 Income for the year before movements in regulatory deferral account balances 8,987 3,592 Net movement in regulatory deferral account balances related to profit or loss and the related deferred tax movement 10 2,208 6,847 Income for the year and net movements in regulatory deferral account balances 11,195 10,439 Total comprehensive income for the year $ 11,195 $ 10,439 The accompanying notes are an integral part of these financial statements. 3 Page 16 of 131 KITCHENER POWER CORP. Consolidated Statement of Changes in Equity Year ended December 31, 2021, with comparative information for 2020 (Expressed in thousands of dollars) The accompanying notes are an integral part of these financial statements. 4 Page 17 of 131 Accumulated Share capital other Retained Total comprehensive earnings income (loss) Balance at January 1, 2020 $ 66,389 $ (620) $ 95,195 $ 160,964 Net income before other comprehensive income (loss) - - 10,439 10,439 Dividends - - (4,182) (4,182) Balance at December 31, 2020 66,389 (620) 101,452 167,221 Net income before other comprehensive income (loss) - - 11,195 11,195 Dividends - - (4,386) (4,386) Balance at December 31, 2021 $ 66,389 $ (620) $ 108,261 $ 174,030 The accompanying notes are an integral part of these financial statements. 4 Page 17 of 131 KITCHENER POWER CORP. Consolidated Statement of Cash Flows Year ended December 31, 2021, with comparative information for 2020 (Expressed in thousands of dollars) Cash flows from investing activities: Proceeds on disposals of property, plant and equipment 2021 2020 Cash flows from operating activities. - (500) Total comprehensive income for the year $ 11,195 $ 10,439 Adjustments to reconcile net income to cash provided by (used in) operations: (3,733) (4,565) Amortization 11,690 10,752 Amortization of deferred revenue (1,140) (1,016) Gain on disposal of property, plant and equipment (51) (149) Income tax expense (520) 907 Income taxes paid 353 (816) Interest on Lease Liability 24 - Income from subsidiaries and associates (55) 425 Increase decrease in employee future benefits 75 77 21,571 20,619 Change in non-cash operating working capital: Accounts receivable (5,580) 1,802 Unbilled revenue 15,159 (2,216) Inventory (622) (134) Prepaid expenses 64 201 Accounts payable and accrued liabilities (4,923) 7,683 Other current liabilities (299) (303) Change in regulatory debit balances (5,735) (10,261) Change in regulatory credit balances 47 654 Change in deferred tax 4,282 1,900 Net cash from operating activities 23,964 19,945 Cash flows from investing activities: Proceeds on disposals of property, plant and equipment 370 151 Investments in subsidiaries and associates - (500) Purchase of property, plant and equipment (22,644) (21,356) Purchase of intangible assets (3,733) (4,565) Net cash used in investing activities (26,007) (26,270) Cash flows from financing activities: Net change in customer deposits (158) (355) Dividends paid out (4,386) (4,182) Change in contributed capital received 5,832 4,390 Repayment of long-term debt - (607) Payment of lease liability (27) - Net cash from financing activities 1,261 (754) Change in cash and cash equivalents (782) (7,079) Cash and cash equivalents, beginning of year 6,861 13,940 Cash and cash equivalents, end of year $ 6,079 $ 6,861 The accompanying notes are an integral part of these financial statements. 5 Page 18 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 1. Reporting entity: Kitchener Power Corp. (the "Corporation") is a holding company for the affiliate companies, Kitchener -Wilmot Hydro Inc. and Kitchener Energy Services Inc., and is itself wholly owned by the Corporation of the City of Kitchener and the Corporation of the Township of Wilmot. The Corporation oversees the operations of Kitchener -Wilmot Hydro Inc., a regulated distribution company, and Kitchener Energy Services Inc., an unregulated retail services company. The Corporation also owns 33% of Grand River Energy Solutions Corp. (GRE), a generation and renewable energy solutions company. It is located in the City of Kitchener. The address of the Corporation's registered office is 301 Victoria Street South, Kitchener, Ontario, Canada. The financial statements are for the Corporation as at and for the year ended December 31, 2021. Mergers of the holding companies, Kitchener Power Corp. and Waterloo North Hydro Holding Corporation and the local distribution companies, Kitchener -Wilmot Hydro Inc. and Waterloo North Hydro Inc. were proposed in 2021. The proposals have been agreed to by the City of Kitchener and Township of Wilmot councils. A Mergers, Amalgamations, Acquisitions and Divestitures (MAADs) application was filed on February 4, 2022 seeking permission from the Ontario Energy Board ("OEB") to proceed with the proposed merger. 2. Basis of presentation: (a) Statement of compliance: The Corporation's financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"). The financial statements were approved by the Board of Directors on March 25, 2022. (b) Basis of measurement: The financial statements have been prepared on the historical cost basis except for the following: (i) Where held, financial instruments at fair value through profit or loss (ii) Contributed assets are initially measured at fair value. The methods used to measure fair values are discussed further in note 23. (c) Functional and presentation currency: These financial statements are presented in Canadian dollars, which is the Corporation's functional currency. All financial information presented in Canadian dollars has been rounded to the nearest thousand. 6 Page 19 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 2. Basis of presentation (continued): (d) Use of estimates and judgments: The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses and disclosure of contingent assets and liabilities. Actual results may differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the year in which the estimates are revised and in any future periods affected. Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in these financial statements is included in the following notes: i) Note 3(b) — Determination of the performance obligation for contributions from customers and the related amortization period ii) Note 7 — Property, plant and equipment iii) Note 9 — Deferred tax assets iv) Note 12 — Employee future benefits v) Note 18 — Commitments and contingencies (e) Rate regulation: The Corporation is regulated by the Ontario Energy Board ("OEB"), under the authority granted by the Ontario Energy Board Act, 1998. Among other things, the OEB has the power and responsibility to approve or set rates for the transmission and distribution of electricity, providing continued rate protection for electricity consumers in Ontario, and ensuring that transmission and distribution companies fulfill obligations to connect and service customers. The OEB may also prescribe license requirements and conditions of service to local distribution companies ("LDCs"), such as the Corporation, which may include, among other things, record keeping, regulatory accounting principles, separation of accounts for distinct businesses, and filing and process requirements for rate setting purposes. Rate setting: Distribution revenue and electricity rates The OEB sets electricity prices for low-volume consumers twice each year based on an estimate of how much it will cost to supply the province with electricity for the next year. All low volume customers without a contract with an energy retailer are charged the OEB mandated rate for electricity. If a customer (regardless of volume) has a retailer agreement, then retailer rates are charged instead. All remaining consumers pay the market price for electricity. The 7 Page 20 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 2. Basis of presentation (continued): (e) Rate regulation (continued): Corporation is billed for the cost of the electricity that its customers use and passes this cost on to the customer at cost without a mark-up. For the distribution revenue included in electricity sales, the Corporation files a "Cost of Service" ("COS") rate application with the OEB every four years where rates are determined through a review of the forecasted annual amount of operating and capital expenses, debt and shareholder's equity required to support the Corporation's business. The Corporation estimates electricity usage and the costs to service each customer class to determine the appropriate rates to be charged to each customer class. The COS application is reviewed by the OEB and intervenors and rates are approved based upon this review, including any revisions resulting from that review. In the intervening years, an Incentive Rate Mechanism application ("IRM") is filed. An IRM application results in a formulaic adjustment to distribution rates that were set under the last COS application. The previous year's rates are adjusted for the annual change in the Gross Domestic Product Implicit Price Inflator for Final Domestic Demand ("GDP IPI -FDD") net of a productivity factor and a "stretch factor" determined by the relative efficiency of an electricity distributor. As a licensed distributor, the Corporation is responsible for billing customers for electricity generated by third parties and the related costs of providing electricity service, such as transmission services and other services provided by third parties. The Corporation is required, pursuant to regulation, to remit such amounts to these third parties, irrespective of whether the Corporation ultimately collects these amounts from customers. The Corporation filed a COS application on April 30, 2019 for rates effective January 1, 2020 to December 31, 2020. The GDP IPI -FDD for 2021 is 3.3%, the Corporation's productivity factor is 0% and the stretch factor is 0.15%, resulting in a net adjustment of 3.15% to the previous year's rates. Electricity rates were impacted by the COVID-19 pandemic, distribution rates were unaffected, which has been discussed further in Note 27. (f) Investments Investments in subsidiary companies, associates and other long-term investments are accounted for by the equity method. Dividends received are recorded as a reduction of the carrying value of these investments. 8 Page 21 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies: The accounting policies set out below have been applied consistently in all years presented in these financial statements unless otherwise indicated. (a) Financial instruments: At initial recognition, the Company measures its financial assets at fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss. Subsequent measurement of the financial asset depends on the classification determined on initial recognition. Financial assets are classified as either amortized cost, fair value through other comprehensive income or fair value through profit or loss, depending on its business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. Financial assets are not reclassified subsequent to their initial recognition, unless the Company changes its business model for managing financial assets. Financial liabilities are initially measured at fair value, net of transaction costs incurred. They are subsequently carried at amortized cost using the effective interest rate method; any difference between the proceeds (net of transaction costs) and the redemption value is recognized as an adjustment to interest expense over the period of the borrowings. The Corporation has not entered into derivative instruments. Hedge accounting has not been used in the preparation of these financial statements. Cash equivalents include short-term investments with maturities of three months or less when purchased. (b) Revenue recognition: Sale and distribution of electricity The performance obligations for the sale and distribution of electricity are recognized over time using an output method to measure the satisfaction of the performance obligation. The value of the electricity services transferred to the customer is determined on the basis of cyclical meter readings plus estimated customer usage since the last meter reading date to the end of the year and represents the amount that the Corporation has the right to bill. Revenue includes the cost of electricity supplied, distribution, and any other regulatory charges. The related cost of power is recorded on the basis of power used. For customer billings related to electricity generated by third parties and the related costs of providing electricity service, such as transmission services and other services provided by third parties, the Corporation has determined that it is acting as a principal for these electricity charges and, therefore, has presented electricity revenue on a gross basis. 9 Page 22 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (b) Revenue recognition (continued): Capital contributions Developers are required to contribute towards the capital cost of construction of distribution assets in order to provide ongoing service. The developer is not a customer and therefore the contributions are scoped out of IFRS 15 Revenue from Contracts with Customers. Cash contributions, received from developers are recorded as deferred revenue. When an asset other than cash is received as a capital contribution, the asset is initially recognized at its fair value, with a corresponding amount recognized as deferred revenue. The deferred revenue, which represents the Corporation's obligation to continue to provide the customers access to the supply of electricity, is amortized to income on a straight-line basis over the useful life of the related asset. Certain customers are also required to contribute towards the capital cost of construction of distribution assets in order to provide ongoing service. These contributions fall within the scope of IFRS 15 Revenue from Contracts with Customers. The contributions are received to obtain a connection to the distribution system in order receive ongoing access to electricity. The Corporation has concluded that the performance obligation is the supply of electricity over the life of the relationship with the customer which is satisfied over time as the customer receives and consumes the electricity. Revenue is recognized on a straight-line basis over the useful life of the related asset. Other revenue Revenue earned from the provision of services is recognized as the service is rendered. Government grants and the related performance incentive payments under CDM programs are recognized as revenue in the year when there is reasonable assurance that the program conditions have been satisfied and the payment will be received. (c) Inventory: Inventory, comprising material and supplies, the majority of which is consumed by the Corporation in the provision of its services, is valued at the lower of cost and net realizable value, with cost being determined on a weighted average cost basis, and includes expenditures incurred in acquiring the material and supplies and other costs incurred in bringing them to their existing location and condition. Net realizable value is the estimated selling price in the ordinary course of business, less estimated selling expenses. (d) Property, plant and equipment: Items of property, plant and equipment ("PP&E") used in rate -regulated activities and acquired prior to January 1, 2015 are measured at deemed cost established on the transition date, less accumulated depreciation. All other items of PP&E are measured at cost, or, where the item is transferred from customers, its fair value, less accumulated depreciation. Consistent with IFRS 1, the Corporation elected to use the carrying amount as previously 10 Page 23 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (d) Property, plant and equipment (continued): determined under Canadian GAAP as the deemed cost at January 1, 2015, the transition date to IFRS. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self -constructed assets includes the cost of materials, direct labour, and any other costs directly attributable to bringing the asset to a working condition for its intended use. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Gains and losses on the disposal of an item of PP&E are determined by comparing the proceeds from disposal, if any, with the carrying amount of the item of PP&E and are recognized net within other income in profit or loss. Major spare parts and standby equipment are recognized as items of PP&E. The cost of replacing a part of an item of property, plant and equipment is recognized in the net book value of the item if it is probable that the future economic benefits embodied within the part will flow to the Corporation and its cost can be measured reliably. In this event, the replaced part of property, plant and equipment is written off, and the related gain or loss is included in profit or loss. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred. Depreciation is calculated over the depreciable amount and is recognized in profit or loss on a straight-line basis over the estimated useful life of each part or component of an item of property, plant and equipment. The depreciable amount is cost. Land is not depreciated. Construction -in -progress assets are not amortized until the projects are complete and in service. The estimated useful lives are as follows: Buildings 20-50 years Transformer station equipment 15-50 years Distribution station equipment 15-50 years Distribution system 25-60 years Meters 15-25 years SCADA equipment 15 years Other capital assets 3-10 years Depreciation methods, useful lives, and residual values are reviewed at each reporting date and adjusted prospectively if appropriate. 11 Page 24 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (e) Intangible assets (continued): (i) Computer software: Computer software that is acquired or developed by the Corporation, including software that is not integral to the functionality of equipment purchased which has finite useful lives, is measured at cost less accumulated amortization and accumulated impairment losses. (ii) Land rights: Payments to obtain rights to access land ("land rights") are classified as intangible assets. These include payments made for easements, right of access and right of use over land for which the Corporation does not hold title. Land rights are measured at cost less accumulated amortization and accumulated impairment losses. (iii) Amortization: Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The estimated useful lives are: Computer software 3-10 years Land rights 100 years Amortization methods and useful lives of all intangible assets are reviewed at each reporting date and adjusted prospectively if appropriate. (f) Impairment: (i) Financial assets: A loss allowance for expected credit losses on financial assets measured at amortized cost is recognized at the reporting date. The loss allowance is measured at an amount equal to the lifetime expected credit losses for the asset. 12 Page 25 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (f) Impairment (continued): (ii) Non-financial assets: The carrying amounts of the Corporation's non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "cash -generating unit"). The recoverable amount of an asset or cash -generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognized if the carrying amount of an asset or its cash -generating unit exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. An impairment loss in respect of goodwill is not reversed. For assets other than goodwill, impairment recognized in prior periods is assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. (g) Provisions: A provision is recognized if, as a result of a past event, the Corporation has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. 13 Page 26 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (h) Regulatory deferral accounts: Regulatory deferral account debit balances represent costs incurred in excess of amounts billed to the customer at OEB approved rates. These amounts have been accumulated and deferred in anticipation of their future recovery in electricity distribution rates. Regulatory deferral account credit balances represent amounts billed to the customer at OEB approved rates in excess of costs incurred by the Corporation. Regulatory deferral account debit balances are recognized if it is probable that future billings in an amount at least equal to the capitalized cost will result from inclusion of that cost in allowable costs for rate -making purposes. The offsetting amount is recognized in profit and loss. The debit balance is reduced by the amount of customer billings as electricity is delivered to the customer and the customer is billed at rates approved by the OEB for the recovery of the capitalized costs. Regulatory deferral account credit balances are recognized if it is probable that future billings in an amount at least equal to the credit balance will be reduced as a result of rate -making activities. The offsetting amount is recognized in profit and loss. The credit balance is reduced by the amounts returned to customers as electricity is delivered to the customer at rates approved by the OEB for the return of the regulatory account credit balance The probability of recovery or repayment of the regulatory account balances are assessed annually based upon the likelihood that the OEB will approve the change in rates to recover or repay the balance. Any resulting impairment loss is recognized in profit and loss in the year incurred. Regulatory deferral accounts attract interest at OEB prescribed rates. With the exception of Pension and OEB Forecast Accrual accounts (OPEBs), the rate for 2021 was 0.57%. Prior year rates from January to June 2020 were 2.18%, July to December 2020 were 0.57%. In 2021, OPEB rates were 2.03% for the period January to March, and 2.29% for the period April to December. In 2020, OPEBs were 2.88% for the period January to March, 2.48% for the period April to September and 2.03% for the period October to December. 14 Page 27 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (i) Employee future benefits: (i) Pension plan: The Corporation provides a pension plan for all its full-time employees through Ontario Municipal Employees Retirement System ("OMERS"). OMERS is a multi-employer pension plan which operates as the Ontario Municipal Employees Retirement Fund ("the Fund"), and provides pensions for employees of Ontario municipalities, local boards and public utilities. The Fund is a contributory defined benefit pension plan, which is financed by equal contributions from participating employers and employees, and by the investment earnings of the Fund. To the extent that the Fund finds itself in an under -funded position, additional contribution rates may be assessed to participating employers and members. OMERS is a defined benefit plan. However, as OMERS does not segregate its pension asset and liability information by individual employers, there is insufficient information available to enable the Corporation to directly account for the plan. Consequently, the plan has been accounted for as a defined contribution plan. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in net income when they are due. (ii) Post -employment benefits, other than pension: The Corporation provides some of its retired employees with life insurance and medical benefits beyond those provided by government sponsored plans. The cost of these benefits is expensed as earned by employees through employment service. The accrued benefit obligations and the current service costs are actuarially determined by applying the projected unit credit method and reflect management's best estimate of certain underlying assumptions. Actuarial gains and losses arising from defined benefit plans are recognized immediately in other comprehensive income and reported in retained earnings. When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognized in net income on a straight-line basis over the average period until the benefits become vested. In circumstances where the benefits vest immediately, the expense is recognized immediately in net income. 15 Page 28 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): Q) Deferred revenue and assets transferred from customers: Certain customers and developers are required to contribute towards the capital cost of construction in order to provide ongoing service. When an asset is received as a capital contribution, the asset is initially recognized at its fair value, with the corresponding amount recognized as deferred revenue. Deferred revenue represents the Corporation's obligation to continue to provide customers access to the supply of electricity and is amortized to income on a straight-line basis over the economic useful life of the acquired or contributed asset, which represents the period of ongoing service to the customer. (k) Leased assets: At inception of a contract, the Corporation assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Corporation assess whether: (a) The contract involves the use of an identified asset — this may be specified explicitly or implicitly and should be physically distinct or represent substantially all the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; (b) The Corporation has the right to obtain substantially all the economic benefits from the use of the asset throughout the period of use; and (c) The Corporation has the right to direct the use of the asset. The Corporation has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Corporation has the right to direct the use of the asset if either the Corporation has the right to operate the asset, or the Corporation designed the asset in a way that predetermines how and for what purpose it will be used. The Corporation recognizes a right -of -use asset and a lease liability at the lease commencement date. The right -of -use asset is initially measured at cost, which comprises the initial amount of the lease liability, adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or the site on which it is locate, less any lease incentives received. The right -of -use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right -of -use asset or the end of the lease term. The estimated useful life of a right -of -use asset is determined on the same basis as those for property, plant and equipment. In addition, the right -of -use asset is periodically reduced by impairment losses, if any, and adjusted for certain re -measurements of the lease liability. 16 Page 29 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (1) Finance income and finance costs: Finance income is recognized as it accrues in profit or loss, using the effective interest method. Finance income comprises interest earned on cash and cash equivalents and on regulatory assets. Finance charges comprise interest expense on borrowings, finance lease obligations, regulatory liabilities and unwinding of the discount on provisions and impairment losses on financial assets. Finance costs are recognized as an expense unless they are capitalized as part of the cost of qualifying assets. (m) Income taxes: The income tax expense comprises current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case, it is recognized in equity. The Corporation is currently exempt from taxes under the Income Tax Act (Canada) and the Ontario Corporations Tax Act (collectively the "Tax Acts"). Under the Electricity Act, 1998, the Corporation makes payments in lieu of corporate taxes to the Ontario Electricity Financial Corporation ("OEFC"). These payments are calculated in accordance with the rules for computing taxable income and taxable capital and other relevant amounts contained in the Income Tax Act (Canada) and the Corporations Tax Act (Ontario) as modified by the Electricity Act, 1998, and related regulations. Prior to October 1, 2001, the Corporation was not subject to income or capital taxes. Payments in lieu of taxes are referred to as income taxes. Current tax is the tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognized using the balance sheet method. Under this method, deferred income taxes reflect the net tax effects of temporary differences between the tax basis of assets and liabilities and their carrying amounts for accounting purposes, as well as for tax losses available to be carried forward to future years that are likely to be realized. Deferred tax assets and liabilities are measured using enacted or substantively enacted tax rates, at the reporting date, expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the year that includes the date of enactment or substantive enactment. 17 Page 30 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 4. Cash: 2021 2020 Cash $ 6,079 $ 6,861 5. Accounts receivable: 2021 2020 Customer and other trade receivables $ 21,027 $ 15,667 Trade receivables from related parties 260 42 $ 21,287 $ 15,709 6. Inventory: The amount of inventories consumed by the Corporation and recognized as an expense during 2021 was $373 (2020 - $279). 7. Property, plant and equipment: (a) Cost or deemed cost: 18 Page 31 of 131 Land and Distribution Other fixed construction- Right -of -use buildings equipment assets in -progress assets Total Balance at January 1, 2021 $ 26,433 $ 277,793 $ 9,992 $ 5,837 $ - 320,055 Transfer to Intangible Assets 1,380 2,316 1,099 17,849 601 23,245 Transfers 692 19,982 28 (20,702) - - Disposals/Retirements (65) 11 (3,683) (230) - (3,967) Balance at December 31, 2021 $ 28,440 $ 300,102 $ 7,436 $ 2,754 $ 601 $ 339,333 Land and Distribution Other fixed construction- Right -of -use buildings equipment assets in -progress assets Total Balance at January 1, 2020 $ 24,729 $ 260,009 $ 9,723 $ 5,487 $ 299,948 Additions 1,709 17,846 1,451 350 21,356 Disposals/Retirements (5) (62) (1,182) - (1,249) Balance at December 31, 2020 $ 26,433 $ 277,793 $ 9,992 $ 5,837 $ $ 320,055 18 Page 31 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 7. Property, plant and equipment (continued): (b) Accumulated depreciation: Land and Distribution Other fixed construction- Right -of -use buildings equipment assets in -progress assets Total Balance at January 1, 2021 $ 3,429 $ 46,021 $ 3,024 $ $ 52,474 Depreciation charge 758 8,818 1,467 20 11,063 Disposals/Retirements (65) 11 (3,594) (3,648) Balance at December 31, 2021 $ 4,122 $ 54,850 $ 897 $ $ 20 59,889 Land and Distribution Other fixed construction- Right -of -use buildings equipment assets in -progress assets Total Balance at January 1, 2020 $ 2,718 $ 37,766 $ 2,853 $ $ 43,337 Depreciation charge 716 8,317 1,351 10,384 Disposals/Retirements (5) (62) (1,180) (1,247) Balance at December 31, 2020 $ 3,429 $ 46,021 $ 3,024 $ $ 52,474 (c) Carrying amounts: Land and Distribution Other fixed construction- Right -of -use buildings equipment assets in -progress assets Total At December 31, 2021 $ 24,318 $ 245,252 $ 6,539 $ 2,754 $ 581 279,444 At December 31, 2020 $ 23,004 $ 231,772 $ 6,968 $ 5,837 $ - 267,581 (d) Leased plant and equipment: In May 2021, the Corporation entered into a lease agreement with Grand River Energy Solutions Corp., an associated company, for the construction and lease of solar PV roof -top equipment located at the Corporation's registered office. A right -of -use asset and corresponding lease liability of $601 were recorded. (e) Security: At December 31, 2021, the Corporation had zero properties subject to a general security agreement. (f) Borrowing costs: During the year, borrowing costs of $ nil (2020 - $ nil) were capitalized as part of the cost of property, plant and equipment. 19 Page 32 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 7. Property, plant and equipment (continued): (g) Allocation of depreciation and amortization: The depreciation of property, plant and equipment and the amortization of intangible assets has been allocated to profit or loss as follows: Operations Customer Energy and services Administration conservation Other Total maintenance expense expense expense expense December 31, 2021: Depreciation of property, plant and equipment $ 702 $ 9 $ $ 2 $ 10,350 $ 11,063 Amortization of intangible assets - 627 627 $ 702 $ 9 $ $ 2 $ 10,977 $ 11,690 Operations Customer Energy and services Administration conservation Other Total maintenance expense expense expense expense December 31, 2020: Depreciation of property, plant and equipment $ 717 $ 6 $ $ 7 $ 9,654 $ 10,384 Amortization of intangible assets - 368 $ 368 $ 717 $ 6 $ $ 7 $ 10,022 $ 10,752 8. Intangible assets: (a) Cost or deemed cost Included within Computer Software is $250 (2020 - $7,433) of intangible assets under development. 20 Page 33 of 131 Computer Land Software Rights Total Balance at January 1, 2021 $ 10,938 $ 8 $ 10,946 Additions 3,733 - 3,733 Disposals (2,833) - (2,833) Balance at December 31, 2021 $ 11,838 $ 8 $ 11,846 Balance at January 1, 2020 $ 6,373 $ 8 $ 6,381 Transfers in from CIP 4,565 - 4,565 Balance at December 31, 2020 $ 10,938 $ 8 $ 10,946 Included within Computer Software is $250 (2020 - $7,433) of intangible assets under development. 20 Page 33 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 8. Intangible assets (continued): (b) Accumulated amortization: Computer Land Software Rights Total Balance at January 1, 2021 $ 2,859 $ 8 $ 2,867 Additions 627 - 627 Disposals (2,833) - (2,833) Balance at December 31, 2021 $ 653 $ 8 $ 661 Balance at January 1, 2020 $ 2,491 $ 8 $ 2,499 Additions 368 - 368 Balance at December 31, 2020 $ 2,859 $ 8 $ 2,867 (c) Carrying amounts: Computer Land Software Rights Total At December 31, 2021 $ 11,185 $ - $ 11,185 At December 31, 2020 $ 8,079 $ - $ 8,079 21 Page 34 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 9. Income tax expense: Current tax expense: 22 Page 35 of 131 2021 2020 Current period $ 291 $ 1,297 Adjustment for prior periods (700) (332) $ (409) $ 965 Deferred tax expense: 2021 2020 Original & reversal of temporary differences $ (20) $ (21) Recognition of previously unrecognized tax losses (91) (38) $ (111) $ (59) Reconciliation of effective tax rate: 2021 2020 Total comprehensive income for the year $ 11,195 $ 10,439 Total income tax expense (520) 907 Comprehensive income before income taxes 10,675 11,346 Income tax using the Corporation's statutory tax rate of 26.5% 2,829 3,007 Temporary differences not benefitted (2,649) (1,768) Under (over) provided in prior periods (700) (332) $ (520) $ 907 Significant components of the Corporation's deferred tax balances are as follows: 2021 2020 Deferred tax assets (liabilities): Plant and equipment $ (22,536) $ (16,989) Non -vested sick leave 168 168 Employee benefits 1,593 1,573 Intangible assets 7 7 Loss carry -forward 295 204 Ontario refundable tax credits 6 14 Deferred revenue - contributed capital 12,094 10,819 $ (8,373) $ (4,204) 22 Page 35 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) Regulatory deferral account balance: The following is a reconciliation of the carrying amount for each class of regulatory deferral account balances: Remaining recovery/ Balances reversal arising in the Recovery/ period 2020 period Reversal Other 2021 (vears) Regulatory deferral account debit balances Group 1 deferred accounts $ 8,716 $ (1,174) $ 1,657 $ 231 $ 9,430 Note 1, Note 3 Regulatory asset recovery account 773 281 (232) - 822 Note 1 Deferred tax asset 8,375 5,826 - 14,201 Note 2 LRAM 1,728 874 (1,728) 874 1 Other 69 - - - 69 Note 2 Total amount related to regulatory deferral account debit balances $ 19,661 $ 5,807 $ (303) $ 231 $ 25,396 Remaining recovery/ Balances reversal arising in the Recovery/ period 2020 period Reversal Other 2021 (years) Regulatory deferral account credit balances Group 1 deferred accounts 1,718 (976) (754) 230 218 Note 1 Other 558 3 - - 561 3 Year Total amount related to regulatory deferral account credit balances 2,276 (973) (754) 230 779 2021 2020 Movements in regulatory accounts Net change in regulatory deferral account debit and credit balances 7,232 10,292 Less movement related to the balance sheet Deferred income tax (5,826) (2,585) Deferred revenue 802 (860) Amounts moved to property, plant, equipment - - Net movement in regulatory deferral account balances related to profit or loss and the related deferral tax movement 2,208 6,847 Note 1 KWHI has been approved for collection of these amounts in its 2021 filing for 2022 rates. 23 Page 36 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 10. Regulatory deferral account balance (continued): Note 2 KWHI has not sought approval for the disposition of this amount as changes in underlying assumptions may reduce the amounts recorded in the account. KWHI may seek refunds in the future Note 3 In December 2020, KWHI was informed that beginning June 2015 charges were not included in the monthly power bill for one delivery point for Transmission Network Charges. KWHI has accrued a payable of $6 million, offset by a regulatory asset. These monies will be collected through an OEB approved rate rider in 2022 Note 4 COVID-19 Emergency Deferral The COVID-19 emergency deferral account comprises of four sub -accounts established to track incremental costs and lost revenues related to the COVID-19 pandemic: (i) Impacts from Complying with Government/OEB-initiated Customer Relief Programs, (ii) Bad Debt, (iii) Capital Related Revenue Requirement Impacts, and (iv) Other Costs and Savings. June 17, 2021, the OEB Staff released their report on the COVID-19 deferral accounts which introduces certain criteria to that need to be satisfied for amounts to be eligible for recovery. $69 has been recorded in the COVID-19 Emergency Deferral Account as at December 31, 2021 (2020 - $69). 11. Long-term debt: Effective August 1, 2000, the Corporation incurred unsecured promissory notes payable to the City of Kitchener and the Township of Wilmot and have an interest rate of 3.23% per annum. Interest is payable in quarterly installments, in arrears, on March 31St, June 30th, September 30th and December 31 St 2021 2020 Senior unsecured debentures: City of Kitchener $ 70,998 $ 70,998 Township of Wilmot 5,965 5,965 Senior unsecured debentures, net proceeds $ 76,963 $ 76,963 Less: current portion of long-term debt $ - $ - Total long-term debt $ 76,963 $ 76,963 12. Employee future benefits: The Corporation pays certain medical and life insurance benefits on behalf of some of its retired employees. The Corporation recognizes these post-retirement costs in the period in which employees' services were rendered. The accrued benefit liability at December 31, 2021 of $6,012 was based on an actuarial valuation completed in 2020 using a discount rate of 3.1% (3.1% in 2020). 24 Page 37 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 12. Employee future benefits (continued): Changes in the present value of the defined benefit unfunded obligation and the accrued benefit liability: 2021 2020 Defined benefit obligation, beginning of year Current service cost Interest cost Benefits paid during the year $ 5,937 191 180 (296) $ 5,858 192 178 (291) Accrued benefit liability, end of year $ 6,012 $ 5,937 Components of net benefit expense recognized are as follows: 2021 2020 Current service cost Interest cost $ 191 180 $ 192 178 Net benefit expense recognized $ 371 $ 370 Actuarial losses recognized in other comprehensive income: 2021 2020 Cumulative amount at January 1 Cumulative amount at December 31 $ $ (620) (620) $ (620) $ (620) 25 Page 38 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 12. Employee future benefits (continued): The significant actuarial assumptions used in the valuation are as follows (weighted average): 2021 2020 Accrued benefit obligation: Discount rate 3.1% 3.1% Benefit cost for the year: Age Withdrawal rate 18-29 3.50% 3.50% 30-34 2.00% 2.00% 35-39 1.7% 1.7% 40-49 1.3% 1.3% 50-54 1.0% 1.0% Assumed health care cost trend rates: Initial health care cost trend rate Health 4.7% 4.4% Dental 4.9% 4.7% The approximate effect on the accrued benefit obligation of the entire plan and the estimated net benefit expense of the entire plan if the health care trend rate assumption was increased or decreased by 1 %, and all other assumptions were held constant, is as follows: Benefit Periodic Obligation Benefit Cost 1% increase in health care trend rate $ 218 $ 27 1% decrease in health care trend rate $ (196) $ (23) 26 Page 39 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 12. Employee future benefits (continued): The main actuarial assumptions utilized for the valuation are as follows: General inflation - future general inflation levels, as measured by the changes in the Consumer Price Index, were assumed at 2% in 2021, and thereafter (2020 - 2%). Discount (interest) rate - the discount rate used to determine the present value of future liabilities and the expense for the year ended December 31, 2021, was 3.1 % (2020 — 3.1 %). Salary levels - future general salary and wage levels were assumed to increase at 3.3% (2020 - 3.3%) per annum. Medical costs - medical costs were assumed to be 4.7% for 2021 (4.4% for 2020) Dental costs - dental costs were assumed to be 4.9% for 2021 (4.7% for 2020) 13. Customer and IESO deposits: Customer deposits represent cash deposits from electricity distribution customers and retailers, as well as construction deposits. Deposits from electricity distribution customers are refundable to customers who demonstrate an acceptable level of credit risk as determined by the Corporation in accordance with policies set out by the OEB or upon termination of their electricity distribution service. Construction deposits represent cash prepayments for the estimated cost of capital projects recoverable from customers and developers. Upon completion of the capital project, these deposits are transferred to deferred revenue. The Corporation delivers conservation and demand management programs for its customers on behalf of the IESO. Prepayments received from the IESO have been recorded and will be transferred to revenue as programs are delivered and the revenue is earned. The deposits comprise: 2021 2020 Customer deposits $ 5,623 $ 6,424 Construction deposits 7,424 7,196 IESO deposit for energy conservation programs 1,158 1,158 Total customer and IESO deposits $ 14,205 $ 14,778 27 Page 40 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 14. Share capital: 2021 2020 Authorized: Unlimited number of common shares Issued: 20,000 common shares $ 66,389 $ 66,389 Dividends: The holders of the common shares are entitled to receive dividends as declared from time to time. The Corporation paid aggregate dividends in the year on common shares of $4,386 (2020 - $4,182). 15. Other operating revenue: Other income comprises: 2021 2020 Specific service charges $ 1,748 $ 1,875 Deferred revenue 1,140 1,016 Scrap sales 187 101 Net gain on disposal of capital assets 51 149 Non -Utility Operation 4 - Retailer services 39 48 Sundry 150 (316) Total other income $ 3,319 $ 2,873 16. Finance income and expense: 2021 2020 Interest income on bank deposits $ 39 $ 132 Finance income 39 132 Interest expense on long-term debt 2,472 2,496 Interest expense (recovery) on short-term debt (256) 271 Interest expense on BMO Letter of Credit 123 123 Interest expense on deposits 35 91 Interest expense on capital lease 24 - Other 111 - 2,509 2,981 Net finance costs recognized in profit or loss $ 2,470 $ 2,849 28 Page 41 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 17. Lease Liabilities: The Corporation has entered into a lease agreement for solar PV roof -top equipment representing right - of -use assets (note 7). The right -of -use assets are recognized at the present value of the minimum lease payments, plus any extensions estimated to be exercised, with the corresponding equivalent lease liability recognized. The Corporation has determined the lease terms based on all available information as at the reporting date. Maturity Analysis - contractual undiscounted cash flows 2021 2020 Less than one year $ One to five years More than five years 42 $ - 228 - 799 - Total undiscounted lease liabilities at December 31, 2021 1,069 - Interest included on the liabilities included in the statement of financial position at December 31, 2021 (471) - Lease Liabilities - current 42 - Lease Liabilities - non-current $ 556 $ - 18. Commitments and contingencies: Contractual Obligations KWHI entered into a lease agreement with Grand River Energy Solutions Corp for a rooftop solar PV system (see note 17 for details). General From time to time, the Corporation is involved in various litigation matters arising in the ordinary course of its business. The Corporation has no reason to believe that the disposition of any such current matter could reasonably be expected to have a materially adverse impact on the Corporation's financial position, results of operations or its ability to carry on any of its business activities. General Liability Insurance: The Corporation is a member of the Municipal Electric Association Reciprocal Insurance Exchange (MEARIE). MEARIE is a pooling of public liability insurance risks of many of the LDCs in Ontario. All members of the pool are subjected to assessment for losses experienced by the pool for the years in which they were members, on a pro -rata basis based on the total of their respective service revenues. As at December 31, 2021, no assessments have been made. 29 Page 42 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 19. Guarantees: Kitchener Power Corp. is the guarantor for a line of credit issued by the Canadian Imperial Bank of Commerce on behalf of Grand River Energy Solutions Corp. (GRE Corp). GRE Corp. is one third owned by each of Kitchener Power Corp., Waterloo North Hydro Holding Corporation and Cambridge & North Dumfries Energy Plus Inc.; each of which has guaranteed a maximum of $6 million in the event of default by GRE Corp. 20. Pension agreement: The Corporation provides a pension plan for its employees through OMERS. The plan is a multi- employer, contributory defined pension plan with equal contributions by the employer and its employees. In 2021, the Corporation made employer contributions of $1,681 to OMERS (2020 - $1,723). The Corporation's net benefit expense has been allocated as follows: a) $439 (2020 - $449) capitalized as part of property, plant and equipment; b) $1,242 (2020 - $1,274) charged to net income. The Corporation estimates that a contribution of $1,721 to OMERS will be made during the next fiscal year. 30 Page 43 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 21. Employee benefits: 2021 2020 Salaries, wages and benefits $ 19,657 $ 19,684 CPP and EI remittances 782 732 Contributions to OMERS 1,681 1,723 Expenses related to defined benefit plans 371 370 $ 22,491 $ 22,509 22. Related party transactions: (a) Parent and ultimate controlling party: The Corporation is wholly-owned by the Corporation of the City of Kitchener and the Corporation of the Township of Wilmot. The City and the Township produce financial statements that are available for public use. (b) Entity with significant influence: The Corporation of the City of Kitchener exercises significant influence over the Corporation through its 92.25% ownership interest in the Corporation. (c) Key management personnel: The key management personnel of the Corporation have been defined as members of its board of directors and executive management team members and is summarized below. 2021 2020 Directors' fees $ 93 $ 67 Salaries and other short-term benefits 1,106 1,061 Post employment benefits 20 19 Other long-term benefits (OMERS) 91 90 $ 1,310 $ 1,237 (d) Transactions with parent: During the year the Corporation paid management and business development services to its parent in the amount of $ nil (2020 - $ nil) (e) Transactions with entity with significant influence: In the ordinary course of business, the Corporation delivers electricity to the Corporation of the City of Kitchener. Electricity is billed to the City of Kitchener at prices and under terms approved by the OEB. 31 Page 44 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 22. Related party transactions (continued): (f) Transactions with ultimate parent (the City of Kitchener) In 2021, the Corporation had the following significant transactions with its ultimate parent, a government entity: • Construction, contracted through Kitchener Wilmot Hydro Inc. • Streetlight maintenance services contracted through Kitchener Energy Services Inc. • Pre -merger costs paid by the City of Kitchener on behalf of KWHI and reimbursed in 2022 23. Financial instruments and risk management: Fair value disclosure Cash and cash equivalents are measured at fair value. The carrying values of receivables, and accounts payable and accrued charges approximate fair value because of the short maturity of these instruments. The carrying value of the customer deposits approximates fair value because the amounts are payable on demand. The fair value of the long term debt (senior unsecured debentures issued by the shareholders (City of Kitchener and Township of Wilmot) approximates the carrying value due to the short term nature of the loan. Financial risks The Corporation understands the risks inherent in its business and defines them broadly as anything that could impact its ability to achieve its strategic objectives. The Corporation's exposure to a variety of risks such as credit risk, interest rate risk, and liquidity risk, as well as related mitigation strategies are discussed below. (a) Credit risk: Financial assets carry credit risk that a counterparty will fail to discharge an obligation which could result in a financial loss. Financial assets held by the Corporation, such as accounts receivable, expose it to credit risk. The Corporation earns its revenue from a broad base of customers located in the City of Kitchener and the Township of Wilmot. As of December 31, 2021, no customers accounted for more than 1 % of total accounts receivable, $21,287. 32 Page 45 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 23. Financial instruments and risk management (continued): (a) Credit risk (continued): The carrying amount of accounts receivable is reduced through the use of an allowance for impairment and the amount of the related impairment loss is recognized in net income. Subsequent recoveries of receivables previously provisioned are credited to net income. The balance of the allowance for impairment at December 31, 2021 is $250 (2020 - $500). The allowance was decreased due to an expected decrease in Covid-19 related bad debt. An impairment gain of $127 (2020 loss of $793) was recognized during the year. This is due to lower than expected bad debt related to COVID-19 and a reduction of the allowance for bad debt from $500 to $250 resulting from the lessening of economic impacts caused by the pandemic The Corporation's credit risk associated with accounts receivable is primarily related to payments from distribution customers. At December 31, 2021, approximately $112 (2020 - $314) is considered 60 days past due. The Corporation has over 100 thousand customers, the majority of whom are residential. Credit risk is managed through collection of security deposits from customers in accordance with directions provided by the OEB. As at December 31, 2021, the Corporation holds security deposits in the amount of $14,205 (2020 - $14,778). (b) Market risk: Market risks primarily refer to the risk of loss resulting from changes in commodity prices, foreign exchange rates, and interest rates. The Corporation currently does not have any material commodity or foreign exchange risk. The Corporation is exposed to fluctuations in interest rates as the regulated rate of return for the Corporation's distribution business is derived using a complex formulaic approach which is in part based on the forecast for long- term Government of Canada bond yields. This rate of return is approved by the OEB as part of the approval of distribution rates. The Corporation does not hold any long-term debt that is subject to market rates. Consequently a 1 % increase or decrease in the interest rate at December 31, 2021 would have no financial impact. (c) Liquidity risk: The Corporation monitors its liquidity risk to ensure access to sufficient funds to meet operational and investing requirements. The Corporation's objective is to ensure that sufficient liquidity is on hand to meet obligations as they fall due while minimizing interest exposure. The Corporation has access to a $35,000 credit facility and monitors cash balances daily to ensure that a sufficient level of liquidity is on hand to meet financial commitments as they come due. As at December 31, 2021, no amounts had been drawn under Bank of Montreal credit facility (2020 - $ nil). The Corporation also has a bilateral facility for $35,000 (the "LC" facility) for the purpose of issuing letters of credit mainly to support the prudential requirements of the IESO, of which $35,000 has been drawn and posted with the IESO (2019 - $35,000). The majority of accounts payable, as reported on the balance sheet, are due within 30 days. 33 Page 46 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 23. Financial instruments and risk management (continued): (c) Liquidity risk (continued): The Company's currently available liquidity is also expected to be sufficient to address any reasonably foreseeable impacts that the COVID-19 pandemic may have on the Company's cash requirements. (d) Capital disclosures: The main objectives of the Corporation, when managing capital, are to ensure ongoing access to funding to maintain and improve the electricity distribution system, compliance with covenants related to its credit facilities, prudent management of its capital structure with regard for recoveries of financing charges permitted by the OEB on its regulated electricity distribution business, and to deliver the appropriate financial returns. The Corporation's definition of capital includes shareholder's equity and long-term debt. As at December 31, 2021, shareholder's equity amounts to $174,830 (2020 - $167,221) and long- term debt amounts to $76,963 (2020 - $76,963). 24. Revenue from Contracts with Customers The Corporation generates revenue primarily from the sale and distribution of electricity to its customers. Other sources of revenue include performance incentive payments under CDM programs. 34 Page 47 of 131 2021 2020 Revenue from Contracts with Customers $ 252,110 $ 284,230 Other Revenue: CDM programs 1,262 727 Other 2,007 1,426 Total $ 255,379 $ 286,383 In the following table, revenue from contracts with customers is disaggregated by type of customer. 2021 2020 Residential $ 111,252 $ 127,780 Commercial 137,661 153,515 Large Users 1,565 1,346 Other 1,632 1,589 Total Revenue $ 252,110 $ 284,230 34 Page 47 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 25. Change in Accounting Policy The International Accounting Standards Board (IASB) has issued the following Standards, Interpretations and Amendments to Standards that were adopted by the Corporation effective January 1, 2021: a) Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS9, IAS 39, IFRS 7, IFRS 4, and IFRS 16) b) COVID-19 Related Rent Concessions (Amendment to IFRS 16) The amendments and clarifications did not have an impact on the financial statements. 26. Future accounting pronouncements: At the date of authorization of these financial statements, several new, but not yet effective, Standards and amendments to existing Standards, and Interpretations have been published by the IASB. None of these Standards or amendments to existing Standards have been adopted early by the Company and it is still to be determined if any will have a material impact on the Company's financial statements. (a) Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16) On May 14, 2020, the IASB issued Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16). The amendments clarify that proceeds from selling items before the related item of Property, Plant and Equipment is available for use should be recognized in profit or loss, together with the cost of producing those items. The amendments are effective for annual periods beginning on or after January 1, 2022. Early adoption is permitted. (b) Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37) On May 14, 2020, the IASB issued Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37). This amendment clarifies which costs are included as a cost of fulfilling a contract when determining whether a contract is onerous. The amendments are effective for annual periods beginning on or after January 1, 2022 and apply to contracts existing at the date when the amendments are first applied. Early adoption is permitted. 35 Page 48 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 26. Future accounting pronouncements (continued): (c) Annual Improvements to IFRS Standards 2018 -2020 On May 14, 2020, the IASB issued Annual Improvements to IFRS Standards 2018 -2020. The amendments are effective for annual periods beginning on or after January 1, 2022. Early adoption is permitted. I FRS 9 Financial Instruments Clarifies which fees are included for the purpose of performing the '10 per cent test' for derecognition of financial liabilities. I FRS 16 Leases Removes the illustration of payments from the lessor relating to leasehold improvements. The impact of adoption of these improvements is not expected to have an impact on the business. (d) Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) On February 12, 2021, the IASB issued amendments to IAS 1 Presentation of Financial Statements and an update to IFRS Practice Statement 2 Making Materiality Judgements to help companies provide useful accounting policy disclosures. The key amendments to IAS 1 include a requirement for companies to disclose their material accounting policies rather than their significant accounting policies; clarifying that accounting policies related to immaterial transactions, other events or conditions are themselves immaterial and as such need not be disclosed; and clarifying that not all accounting policies that relate to material transactions, other events or conditions are themselves material to a company's financial statements. The amendments are effective for annual periods beginning on or after January 1, 2023. Early adoption is permitted. (e) Definition of Accounting Estimate (Amendments to IAS 8) On February 12, 2021, the IASB issued Definition of Accounting Estimates (Amendments to IAS8). The amendments introduce a new definition for accounting estimates, clarifying that they are monetary amounts in the financial statements that are subject to measurement uncertainty. The amendments also clarify the relationship between accounting policies and accounting estimates by specifying that a company develops an accounting estimate to achieve the objective set out by an accounting policy. The amendments are effective for annual periods beginning on or after January 1, 2023. Early adoption is permitted. 36 Page 49 of 131 KITCHENER POWER CORP. - CONSOLIDATED Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 27. Impact of COVID-19 pandemic: On March 11, 2020, the World Health Organization declared that the COVID-19 outbreak was a global pandemic. In response, the Ontario Government implemented a number of emergency orders and/or other legislation to address the COVID related risks and support customers. On March 25, 2020, the OEB established a deferral account for regulatory balances to record the costs of changes to billing systems resulting from the Ontario Government's TOU emergency order, other incremental costs and lost revenues associated with the COVID-19 pandemic. On June 17, 2021, the OEB Staff released their report on the COVID-19 deferral accounts which introduces certain criteria to that may need to be satisfied for amounts to be eligible for recovery. On December 22, 2020, the Ontario Government amended O. Reg. 95/05 Classes of Consumers and Determination of Rates, setting both the TOU rates for on -peak, mid -peak, and off-peak and tiered rates at the TOU off-peak rate of 8.5 cents per kWh. That regulatory amendment was effective through February 22, 2021. On February 23, 2021, residential and small business customers resumed paying TOU and tiered pricing under the RPP at prices that were set by the OEB. In light of the COVID-19 pandemic, new stay at home measures were introduced in Ontario on April 8, 2021 and the OEB ordered a ban on issuing disconnection notices to residential customers until May 6, 2021, which was extended until June 2, 2021. The Corporation extended its ban on disconnecting residential and low volume customers until the transition back into the OEB's annual recurring winter disconnection ban on November 15, 2020. On June 17, 2021, the OEB issued its report on the Regulatory Treatment of Impacts Arising from the COVID-19 Emergency. The Corporation has assessed the balances recorded in the deferral account and has made no changes as a result of the report. The financial impacts of COVID have been reflected in the financial statements. While the pandemic has resulted in incremental operating costs and lost revenues, the Company has evaluated the impact on the financial results as at and for the year ended December 31, 2021 and has determined that there was no material impact. The Company continues to monitor and assess the impact of COVID to the Company's financial results and operations. Potential adverse impacts of the pandemic include, but are not limited to changes in cash flows, working capital and debt requirements. 28. Comparative Figures: Certain comparative figures have been reclassified for conform with the current period's presentation. 37 Page 50 of 131 Financial Statements of Kitchener Power Corp. (Unconsolidated) Year ended December 31, 2021 (Expressed in thousands of dollars) Page 51 of 131 KPMG LLP 115 King Street South 2nd Floor Waterloo ON N2J 5A3 Canada Tel 519-747-8800 Fax 519-747-8830 INDEPENDENT AUDITORS' REPORT To the Shareholders of Kitchener Power Corp. Opinion We have audited the non -consolidated financial statements of Kitchener Power Corp. (the Entity), which comprise: • the non -consolidated statement of financial position as at December 31, 2021 • the non -consolidated statement of comprehensive income for the year then ended • the non -consolidated statement of changes in equity for the year then ended • the non -consolidated statement of cash flows for the year then ended • and notes to the non -consolidated financial statements, including a summary of significant accounting policies (Hereinafter referred to as the "financial statements"). In our opinion, the accompanying financial statements present fairly, in all material respects, the non -consolidated financial position of the Entity as December 31, 2021, and its non - consolidated financial performance and its non -consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS). Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the "Auditors' Responsibilities for the Audit of the Financial Statements" section of our auditors' report. We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. KPMG LLP, an Ontario limited liability partnership and member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. KPMG Canada provides services to KPMG LLP. Page 52 of 131 -1 if 10 1� I Page 2 Emphasis of Matter- Basis of Preparation We draw attention to Note 2(a) to the separate financial statements which describes the basis of preparation used in these separate financial statements and the purpose of the financial statements. Our opinion is not modified in respect of this manner. Other Matter - Consolidated Financial Statement The Entity has prepared a consolidated set of financial statements as at and for the year ended December 31, 2021 in accordance with relevant financial reporting framework on which we issued an auditors' report addressed to the Shareholder of the Entity dated April 11, 2022. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards (IFRS), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the non -consolidated financial statements, management is responsible for assessing the Entity's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Entity's financial reporting process. Auditors' Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the non -consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the non -consolidated financial statements. Page 53 of 131 -1 if "M 1� I Page 3 As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the non -consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Entity to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. kAwG «P Chartered Professional Accountants, Licensed Public Accountants Waterloo, Canada April 11, 2022 Page 54 of 131 KITCHENER POWER CORP. Statement of Financial Position As at December 31, 2021, with comparative information for 2020 (Expressed in thousands of dollars) Note 2021 2020 Assets Current assets Cash and cash equivalents 4 Accounts receivable 5 Total current assets $ 562 $ 417 13 16 575 433 Non-current assets: Deferred tax assets 6 302 211 Investment in subsidiaries and associates 7 173,255 166,639 Total non-current assets 173,557 166,850 Total assets $ 174,132 $ 167,283 Note Liabilities and Shareholder's Equity 2021 2020 Current liabilities: Accounts payable and accrued liabilities $ 102 $ 62 Total liabilities 102 62 Shareholder's equity: Share capital - common shares 8 Retained earnings Total shareholder's equity 66,389 66,389 107,641 100,832 174,030 167,221 Total equity, liabilities and shareholder's equity $ 174,132 $ 167,283 The accompanying notes are an integral part of these unconsolidated financial statements. On behalf of the Board: q, / C�L Director Director 1 Page 55 of 131 KITCHENER POWER CORP. Statement of Comprehensive Income Year ended December 31, 2021, with comparative information for 2020 (Expressed in thousands of dollars) Note 2021 2020 Re\nenue Income from subsidiaries and associates 7 $ 11,502 $ 10,555 Net operating re\,enue 11,502 10,555 Expenses: Administration 402 159 402 159 Other Finance income (4) (5) Net finance income (4) (5) Income before income taxes 11,104 10,401 Income tax recovery 6 (91) (38) Total comprehensive income for the year $ 11,195 $ 10,439 The accompanying notes are an integral part of these unconsolidated financial statements. 2 Page 56 of 131 KITCHENER POWER CORP. Statement of Changes in Equity Year ended December 31, 2021, with comparative information for 2020 (Expressed in thousands of dollars) The accompanying notes are an integral part of these financial statements. 3 Page 57 of 131 Accumulated Share other Retained Total capital comprehensive earnings income (loss) Balance at January 1, 2020 $ 66,389 $ - $ 94,575 $ 160,964 Net income - 10,439 10,439 Dividends - (4,182) (4,182) Balance at December 31, 2020 66,389 - 100,832 167,221 Net income - 11,195 11,195 Dividends - (4,386) (4,386) Balance at December 31, 2021 $ 66,389 $ - $ 107,641 $ 174,030 The accompanying notes are an integral part of these financial statements. 3 Page 57 of 131 KITCHENER POWER CORP. Statement of Cash Flows Year ended December 31, 2021, with comparative information for 2020 (Expressed in thousands of dollars) The accompanying notes are an integral part of these unconsolidated financial statements. 4 Page 58 of 131 2021 2020 Cash flows from operating activities: Total comprehensive income for the year $ 11,195 $ 10,439 Adjustments to reconcile net income to cash provided by (used in) operations: Income from subsidiaries (11,502) (10,555) Income tax recovery (91) (38) (398) (154) Change in non-cash operating working capital: Accounts receivable 3 (5) Accounts payable and accrued liabilities 40 57 Net cash from operating activities (355) (102) Cash flows from investing activities: Dividends received 4,886 4,682 Net cash from investing activities 4,886 4,682 Cash flows from financing activities: Investments in subsidiaries - (500) Dividends paid out (4,386) (4,182) Net cash from financing activities (4,386) (4,682) Change in cash and cash equivalents 145 (102) Cash and cash equivalents, beginning of year 417 519 Cash and cash equivalents, end of year $ 562 $ 417 The accompanying notes are an integral part of these unconsolidated financial statements. 4 Page 58 of 131 KITCHENER POWER CORP. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 1. Reporting entity: Kitchener Power Corp. (the "Corporation") is a holding company for the affiliate companies, Kitchener -Wilmot Hydro Inc. and Kitchener Energy Services Inc., and is itself wholly owned by the Corporation of the City of Kitchener and the Corporation of the Township of Wilmot. The Corporation oversees the operations of Kitchener -Wilmot Hydro Inc., a regulated distribution company and Kitchener Energy Services Inc., an unregulated retail services company. The Corporation also owns 33% of Grand River Energy Corp. (GRE Corp), a generation and renewable energy solutions company. It is located in the City of Kitchener. The address of the Corporation's registered office is 301 Victoria Street South, Kitchener, Ontario, Canada. The financial statements are for the Corporation as at and for the year ended December 31, 2021, unconsolidated. Mergers of the holding companies, Kitchener Power Corp. and Waterloo North Hydro Holding Corporation and the local distribution companies, Kitchener -Wilmot Hydro Inc. and Waterloo North Hydro Inc. were proposed in 2021. The proposals have been agreed to by the City of Kitchener and Township of Wilmot councils. A Mergers, Amalgamations, Acquisitions and Divestitures (MAADs) application was filed on February 4, 2022 seeking permission from the Ontario Energy Board ("OEB") to proceed with the proposed merger. 2. Basis of presentation: (a) Statement of compliance: The Corporation's financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), with the exception that investments in subsidiary and associate companies are accounted for by the equity method. The financial statements were approved by the Board of Directors on March 25, 2022. (b) Basis of measurement: The financial statements have been prepared on the historical cost basis except for the following: (i) Where held, financial instruments at fair value through profit or loss (ii) Contributed assets are initially measured at fair value The methods used to measure fair values are discussed further in note 12. (c) Functional and presentation currency: These financial statements are presented in Canadian dollars, which is the Corporation's functional currency. All financial information presented in Canadian dollars has been rounded to the nearest thousand. 5 Page 59 of 131 KITCHENER POWER CORP. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 2. Basis of presentation (continued): (d) Investments Investments in subsidiary companies, associates and other long-term investments are accounted for by the equity method. Dividends received are recorded as a reduction of the carrying value of these investments. (e) Use of estimates and judgments: The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses and disclosure of contingent assets and liabilities. Actual results may differ from those estimates Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the year in which the estimates are revised and in any future periods affected. Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in these financial statements is included in the following notes: (i) Note 6 — Income tax expense (ii) Note 7 — Long term investments in subsidiaries and associates 3. Significant accounting policies: The accounting policies set out below have been applied consistently in all years presented in these financial statements unless otherwise indicated. (a) Financial instruments: At initial recognition, the Company measures its financial assets at fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss Subsequent measurement of the financial asset depends on the classification determined on initial recognition. Financial assets are classified as either amortized cost, fair value through other comprehensive income or fair value through profit or loss, depending on its business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. Financial assets are not reclassified subsequent to their initial recognition, unless the Company changes its business model for managing financial assets. Financial liabilities are initially measured at fair value, net of transaction costs incurred. They are subsequently carried at amortized cost using the effective interest rate method; any difference between the proceeds (net of transaction costs) and the redemption value is recognized as an adjustment to interest expense over the period of the borrowings. The Corporation has not entered into derivative instruments. 6 Page 60 of 131 KITCHENER POWER CORP. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): Hedge accounting has not been used in the preparation of these financial statements. Cash equivalents include short-term investments with maturities of three months or less when purchased. (b) Impairment: (i) Financial assets: A loss allowance for expected credit losses on financial assets measured at amortized cost is recognized at the reporting date. The loss allowance is measured at an amount equal to the lifetime expected credit losses for the asset. (ii) Non-financial assets: The carrying amounts of the Corporation's non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "cash -generating unit"). The recoverable amount of an asset or cash -generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognized if the carrying amount of an asset or its cash -generating unit exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. An impairment loss in respect of goodwill is not reversed. For assets other than goodwill, impairment recognized in prior periods is assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. (c) Provisions: A provision is recognized if, as a result of a past event, the Corporation has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. 7 Page 61 of 131 KITCHENER POWER CORP. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (d) Finance income and finance costs: Finance income is recognized as it accrues in profit or loss, using the effective interest method. Finance income comprises interest earned on cash and cash equivalents and on regulatory assets. Finance charges comprise interest expense on borrowings, finance lease obligations, regulatory liabilities and unwinding of the discount on provisions and impairment losses on financial assets. Finance costs are recognized as an expense unless they are capitalized as part of the cost of qualifying assets. (e) Income taxes: The income tax expense is comprised of current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case, it is recognized in equity. The Corporation is currently exempt from taxes under the Income Tax Act (Canada) and the Ontario Corporations Tax Act (collectively the "Tax Acts"). Under the Electricity Act, 1998, the Corporation makes payments in lieu of corporate taxes to the Ontario Electricity Financial Corporation ("OEFC"). These payments are calculated in accordance with the rules for computing taxable income and taxable capital and other relevant amounts contained in the Income Tax Act (Canada) and the Corporations Tax Act (Ontario) as modified by the Electricity Act, 1998, and related regulations. Prior to October 1, 2001, the Corporation was not subject to income or capital taxes. Payments in lieu of taxes are referred to as income taxes. Current tax is the tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognized using the balance sheet method. Under this method, deferred income taxes reflect the net tax effects of temporary differences between the tax basis of assets and liabilities and their carrying amounts for accounting purposes, as well as for tax losses available to be carried forward to future years that are likely to be realized. Deferred tax assets and liabilities are measured using enacted or substantively enacted tax rates, at the reporting date, expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the year that includes the date of enactment or substantive enactment. 8 Page 62 of 131 KITCHENER POWER CORP. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 4. Cash: Cash 5. Accounts receivable: 2021 $ 562 2020 $ 417 2021 2020 Accounts receivable $ 13 $ 16 6. Income tax expense: The current tax expense for 2021 is nil (2020 - nil). 2021 2020 Original & reversal of temporary differences $ (91) $ (38) $ (91) $ (38) Reconciliation of effective tax rate: 2021 2020 Profit for the period Total income tax expense Profit excluding income tax Income tax using the Corporation's statutory tax rate Taxes associated with non-taxable equity income Other differences $ 11,195 (91) 11,104 2,943 (3,042) 8 $ 10,439 (38) 10,401 2,756 (2,793) (1) $ (91) $ (38) Significant components of the Corporation's deferred tax balances are as follows: 2021 2020 Deferred tax assets (liabilities): Intangible assets Loss carry -forward $ 7 295 $ 7 204 $ 302 $ 211 9 Page 63 of 131 KITCHENER POWER CORP. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 7. Long-term investments in subsidiaries and associates: The Company owns 100% of Kitchener -Wilmot Hydro Inc., a regulated distribution company, and Kitchener Energy Services Inc., an unregulated retail services company. The Company also owns 33% of GRE Corp., an unregulated company. Investment in Investment in Investment in Kitchener -Wilmot Grand River Kitchener Energy Total 2021 Hydro Inc. Energy Corp. Services Inc. Investment Balance, beginning of year $ 165,713 $ 838 $ 88 $ 166,639 Investment in associate - - Equity share of earnings 11,425 55 22 11,502 Dividends issued (4,886) - - (4,886) Balance, end of year $ 172,252 $ 893 $ 110 $ 173,255 2020 Balance, beginning of year $ 159,432 $ 763 $ 71 $ 160,266 Investment in associate - 500 - 500 Equity share of earnings 10,963 (425) 17 10,555 Dividends issued (4,682) - - (4,682) Balance, end of year $ 165,713 $ 838 $ 88 $ 166,639 8. Share capital: Authorized: Unlimited number of common shares Issued: 20,000 common shares Dividends: 2021 2020 $ 66,389 $ 66,389 The holders of the common shares are entitled to receive dividends as declared from time to time. The Corporation paid aggregate dividends in the year on common shares of $4,386 (2020 - $4,182). 10 Page 64 of 131 KITCHENER POWER CORP. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 9. Commitments and contingencies: Contractual Obligations: There are no contractual obligations General: From time to time, the Corporation is involved in various litigation matters arising in the ordinary course of its business. The Corporation has no reason to believe that the disposition of any such current matter could reasonably be expected to have a materially adverse impact on the Corporation's financial position, results of operations or its ability to carry on any of its business activities. General Liability Insurance: The Corporation is a member of the Municipal Electric Association Reciprocal Insurance Exchange (MEARIE). MEARIE is a pooling of public liability insurance risks of many of the LDCs in Ontario. All members of the pool are subjected to assessment for losses experienced by the pool for the years in which they were members, on a pro -rata basis based on the total of their respective service revenues. As at December 31, 2021, no assessments have been made. 10. Guarantees: Kitchener Power Corp. is the guarantor for a line of credit issued by the Canadian Imperial Bank of Commerce on behalf of Grand River Energy Solutions Corp (GRE Corp). GRE Corp. is one third owned by each of Kitchener Power Corp., Waterloo North Hydro Holding Corporation and Cambridge & North Dumfries Energy Plus Inc.; each of which has guaranteed a maximum of $6 million in the event of default by GRE Corp. 11. Related party transactions: (a) Parent and ultimate controlling party: The Corporation is wholly-owned by the Corporation of the City of Kitchener and the Corporation of the Township of Wilmot. The City and the Township produce financial statements that are available for public use. (b) Entity with significant influence: The Corporation of the City of Kitchener exercises significant influence over the Corporation through its 92.25% ownership interest in the Corporation. (c) Key management personnel: The key management personnel of the Corporation is defined as members of its board of directors and is summarized below. 11 Page 65 of 131 KITCHENER POWER CORP. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 11. Related party transactions (continued): (d) Transactions with shareholders: During the year, the Corporation paid management and business development services to its shareholders in the amount of nil (2020 - nil). (e) Transactions with entity with significant influence: In the ordinary course of business, the Corporation may issue dividends to the shareholders. 2021 2020 Directors' remuneration $ 62 $ 67 CPP remittances 2 2 $ 64 $ 69 12. Financial instruments and risk management: Fair value disclosure Cash and cash equivalents are measured at fair value. The carrying values of receivables, and accounts payable and accrued charges approximate fair value because of the short maturity of these instruments. The carrying value of the customer deposits approximates fair value because the amounts are payable on demand. Financial risks The Corporation understands the risks inherent in its business and defines them broadly as anything that could impact its ability to achieve its strategic objectives. The Corporation's exposure to a variety of risks such as interest rate risk, and liquidity risk, as well as related mitigation strategies are discussed below. (a) Market risk: Market risks primarily refer to the risk of loss resulting from changes in commodity prices, foreign exchange rates, and interest rates. The Corporation currently does not have any material commodity or foreign exchange risk. (b) Liquidity risk: The Corporation monitors its liquidity risk to ensure access to sufficient funds to meet operational and investing requirements. The Corporation's objective is to ensure that sufficient liquidity is on hand to meet obligations as they fall due while minimizing interest exposure. 12 Page 66 of 131 KITCHENER POWER CORP. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 12. Financial instruments and risk management (continued): (c) Capital disclosures: The main objectives of the Corporation, when managing capital, are to ensure ongoing access to funding to deliver the appropriate financial returns. The Corporation's definition of capital includes shareholder's equity and long-term debt. As at December 31, 2021, shareholder's equity amounts to $174,030 (2020 - $167,221) and long- term debt amounts of nil (2020 - nil). 13. Future accounting pronouncements: At the date of authorization of these financial statements, several new, but not yet effective, Standards and amendments to existing Standards, and Interpretations have been published by the IASB. None of these Standards or amendments to existing Standards have been adopted early by the Company and it is still to be determined if any will have a material impact on the Company's financial statements. (a) Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16) On May 14, 2020, the IASB issued Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16). The amendments clarify that proceeds from selling items before the related item of Property, Plant and Equipment is available for use should be recognized in profit or loss, together with the cost of producing those items. The amendments are effective for annual periods beginning on or after January 1, 2022. Early adoption is permitted. (b) Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37) On May 14, 2020, the IASB issued Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37). This amendment clarifies which costs are included as a cost of fulfilling a contract when determining whether a contract is onerous. The amendments are effective for annual periods beginning on or after January 1, 2022 and apply to contracts existing at the date when the amendments are first applied. Early adoption is permitted. 13 Page 67 of 131 KITCHENER POWER CORP. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 13. Future accounting pronouncements (continued): (c) Annual Improvements to IFRS Standards 2018 -2020 On May 14, 2020, the IASB issued Annual Improvements to IFRS Standards 2018 -2020. The amendments are effective for annual periods beginning on or after January 1, 2022. Early adoption is permitted. I FRS 9 Financial Instruments Clarifies which fees are included for the purpose of performing the '10 per cent test' for derecognition of financial liabilities. I FRS 16 Leases Removes the illustration of payments from the lessor relating to leasehold improvements. The impact of adoption of these improvements is not expected to have an impact on the business. (d) Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) On February 12, 2021, the IASB issued amendments to IAS 1 Presentation of Financial Statements and an update to IFRS Practice Statement 2 Making Materiality Judgements to help companies provide useful accounting policy disclosures. The key amendments to IAS 1 include a requirement for companies to disclose their material accounting policies rather than their significant accounting policies; clarifying that accounting policies related to immaterial transactions, other events or conditions are themselves immaterial and as such need not be disclosed; and clarifying that not all accounting policies that relate to material transactions, other events or conditions are themselves material to a company's financial statements. The amendments are effective for annual periods beginning on or after January 1, 2023. Early adoption is permitted. (e) Definition of Accounting Estimate (Amendments to IAS 8) On February 12, 2021, the IASB issued Definition of Accounting Estimates (Amendments to IAS8). The amendments introduce a new definition for accounting estimates, clarifying that they are monetary amounts in the financial statements that are subject to measurement uncertainty. The amendments also clarify the relationship between accounting policies and accounting estimates by specifying that a company develops an accounting estimate to achieve the objective set out by an accounting policy. The amendments are effective for annual periods beginning on or after January 1, 2023. Early adoption is permitted. 14 Page 68 of 131 KITCHENER POWER CORP. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 13. Future accounting pronouncements (continued): (a) Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction - Amendments to IAS 12 Income Taxes. On May 7, 2021, the IASB issued Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12). The amendments narrow the scope of the initial recognition exemption so that it does not apply to transactions that give rise to equal and offsetting temporary differences. As a result, companies will need to recognize a deferred tax asset and a deferred tax liability for temporary differences arising on initial recognition of a lease and a decommissioning provision. The amendments are effective for annual periods beginning on or after January 1, 2023. Earlier adoption is permitted. 14. Impact of COVID-19 pandemic: On March 11, 2020, the World Health Organization declared that the COVID-19 outbreak was a global pandemic. In response, the Ontario Government implemented a number of emergency orders and/or other legislation to address the COVID related risks and support customers. On March 25, 2020, the OEB established a deferral account for regulatory balances to record the costs of changes to billing systems resulting from the Ontario Government's TOU emergency order, other incremental costs and lost revenues associated with the COVID-19 pandemic. On June 17, 2021, the OEB Staff released their report on the COVID-19 deferral accounts which introduces certain criteria to that may need to be satisfied for amounts to be eligible for recovery. On December 22, 2020, the Ontario Government amended O. Reg. 95/05 Classes of Consumers and Determination of Rates, setting both the TOU rates for on -peak, mid -peak, and off-peak and tiered rates at the TOU off-peak rate of 8.5 cents per kWh. That regulatory amendment was effective through February 22, 2021. On February 23, 2021, residential and small business customers resumed paying TOU and tiered pricing under the RPP at prices that were set by the OEB. In light of the COVID-19 pandemic, new stay at home measures were introduced in Ontario on April 8, 2021 and the OEB ordered a ban on issuing disconnection notices to residential customers until May 6, 2021, which was extended until June 2, 2021. The Corporation extended its ban on disconnecting residential and low volume customers until the transition back into the OEB's annual recurring winter disconnection ban on November 15, 2020. On June 17, 2021, the OEB issued its report on the Regulatory Treatment of Impacts Arising from the COVID-19 Emergency. The Corporation has assessed the balances recorded in the deferral account and has made no changes as a result of the report. 15 Page 69 of 131 KITCHENER POWER CORP. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 14. Impact of COVID-19 pandemic (continued): The financial impacts of COVID have been reflected in the financial statements. While the pandemic has resulted in incremental operating costs and lost revenues, the Company has evaluated the impact on the financial results as at and for the year ended December 31, 2021 and has determined that there was no material impact. 16 Page 70 of 131 Financial Statements of Kitchener -Wilmot Hydro Inc. Year ended December 31, 2021 (Expressed in thousands of dollars) Page 71 of 131 -1 if "M 1� I KPMG LLP 115 King Street South 2nd Floor Waterloo ON N2J 5A3 Canada Tel 519-747-8800 Fax 519-747-8830 INDEPENDENT AUDITORS' REPORT To the Shareholder of Kitchener -Wilmot Hydro Inc. Opinion We have audited the financial statements of Kitchener -Wilmot Hydro Inc. (the Entity), which comprise: • the statement of financial position as at December 31, 2021 • the statement of comprehensive income for the year then ended • the statement of changes in equity for the year then ended • the statement of cash flows for the year then ended • and notes to the financial statements, including a summary of significant accounting policies (Hereinafter referred to as the "financial statements"). In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Entity as December 31, 2021, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS). Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the "Auditors' Responsibilities for the Audit of the Financial Statements" section of our auditors' report. We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. KPMG LLP, an Ontario limited liability partnership and member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. KPMG Canada provides services to KPMG LLP. Page 72 of 131 -1 if 10 1� I Page 2 Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards (IFRS), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Entity's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Entity's financial reporting process. Auditors' Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Page 73 of 131 -1 if "M 1� I Page 3 • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Entity to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Chartered Professional Accountants, Licensed Public Accountants Waterloo, Canada April 11, 2022 Page 74 of 131 KITCHENER-WILMOT HYDRO INC. Statement of Financial Position As at December 31, 2021, with comparative information for 2020 (Expressed in thousands of dollars) Non-current assets: Property, plant and equipment 7 279,444 267,581 Intangible assets 8 11,185 8,079 Total non-current assets 290,629 275,660 Total assets 336,207 331,172 Regulatory deferral account debit balances 10 25,396 19,661 Total assets and regulatory assets $ 361,603 $ 350,833 2 Page 75 of 131 Note 2021 2020 Assets Current assets Cash 4 $ 5,412 $ 6,363 Accounts receivable 5 21,269 15,680 Unbilled revenue 14,705 29,865 Inventory 6 3,080 2,458 Prepaid expenses 1,082 1,146 Income taxes receivable 30 - Total current assets 45,578 55,512 Non-current assets: Property, plant and equipment 7 279,444 267,581 Intangible assets 8 11,185 8,079 Total non-current assets 290,629 275,660 Total assets 336,207 331,172 Regulatory deferral account debit balances 10 25,396 19,661 Total assets and regulatory assets $ 361,603 $ 350,833 2 Page 75 of 131 KITCHENER-WILMOT HYDRO INC. Statement of Financial Position Year ended December 31, 2021, with comparative information for 2020 (Expressed in thousands of dollars) Non-current liabilities: Note 2021 2020 Liabilities and Shareholder's Equity Long-term debt 11 Current liabilities: 76,963 Employee future benefits Accounts payable and accrued liabilities $ 32,718 $ 37,670 Income taxes payable - 32 Current portion of lease liabilities 17 42 - Current portion customer deposits 13 8,530 8,945 Current portion of deferred revenue 1,185 1,069 Total current liabilities 42,475 47,716 Non-current liabilities: Long-term debt 11 76,963 76,963 Employee future benefits 12 6,012 5,937 Long-term customer deposits 13 5,675 5,833 Long term portion of lease liabilities 17 556 - Deferred revenue 44,451 39,759 Deferred tax liability 9 8,675 4,415 Total non-current liabilities 142,332 132,907 Total liabilities 184,807 180,623 Shareholder's equity: Share capital - common shares 14 63,689 63,689 Retained earnings 109,184 102,645 Accumulated other comprehensive loss (620) (620) Total shareholder's equity 172,253 165,714 Total liabilities and shareholder's equity 357,060 346,337 Regulatory deferral account credit balances 10 779 2,276 Deferred taxes associated with regulatory accounts 3,764 2,220 Total equity, liabilities and shareholder's equity $ 361,603 $ 350,833 The accompanying notes are an integral part of these financial statements. On behalf of the Board: Director Director 3 Page 76 of 131 KITCHENER-WILMOT HYDRO INC. Statement of Comprehensive Income Year ended December 31, 2021, with comparative information for 2020 (Expressed in thousands of dollars) The accompanying notes are an integral part of these financial statements. 4 Page 77 of 131 Note 2021 2020 Energy sales $ 205,727 $ 239,962 Cost of energy sold 208,472 245,909 (2,745) (5,947) Other operating revenue Distribution revenue 45,033 42,690 Other income 15 2,849 2,975 Net operating revenue 45,137 39,718 Expenses: Operations and maintenance 11,176 11,112 Customer services 5,674 5,313 Administration 6,041 5,376 Amortization 10,977 10,022 33,868 31,823 Other Energy conservation program revenue (1,262) (727) Energy conservation program expense 1,277 713 Net energy conservation programs 15 (14) Finance income 16 (35) (127) Finance charges 16 2,509 2,981 Net finance costs 2,474 2,854 Income before income taxes 8,780 5,055 Income tax expense 9 (437) 938 Income for the year before movements in regulatory deferral account balances and OCI 9,217 4,117 Net movement in regulatory deferral account balances related to profit or loss and the related deferred tax movement 10 2,208 6,847 Total comprehensive income for the year $ 11,425 $ 10,964 The accompanying notes are an integral part of these financial statements. 4 Page 77 of 131 KITCHENER-WILMOT HYDRO INC. Statement of Changes in Equity Year ended December 31, 2021, with comparative information for 2020 (In thousands of Canadian dollars) The accompanying notes are an integral part of these financial statements. 5 Page 78 of 131 Accumulated Share capital other Retained Total comprehensive earnings income (loss) Balance at January 1, 2020 $ 63,689 $ (620) $ 96,363 $ 159,432 Net income before other comprehensive income - - 10,964 10,964 Dividends - - (4,682) (4,682) Balance at December 31, 2020 63,689 (620) 102,645 165,714 Net income before other comprehensive income - - 11,425 11,425 Dividends - - (4,886) (4,886) Balance at December 31, 2021 $ 63,689 $ (620) $ 109,184 $ 172,253 The accompanying notes are an integral part of these financial statements. 5 Page 78 of 131 KITCHENER-WILMOT HYDRO INC. Statement of Cash Flows Year ended December 31, 2021, with comparative information for 2020 (Expressed in thousands of dollars) Cash flows from investing activities: Proceeds on disposals of property, plant and equipment 370 151 Purchase of property, plant and equipment (22,644) (21,356) Purchase of intangible assets (3,733) (4,565) Net cash used in investing activities (26,007) (25,770) Cash flows from financing activities: Net change in customer deposits (158) (355) Dividends paid out (4,886) (4,682) Change in contributed capital received 5,832 4,390 Repayment of long-term debt - (607) Payment of lease liability (27) - Net cash from financing activities 761 (1,254) Change in cash and cash equivalents (951) (6,994) Cash and cash equivalents, beginning of year 6,363 13,357 Cash and cash equivalents, end of year $ 5,412 $ 6,363 The accompanying notes are an integral part of these financial statements. 6 Page 79 of 131 2021 2020 Cash flows from operating activities: Total comprehensive income for the year $ 11,425 $ 10,964 Adjustments to reconcile net income to cash provided by (used in) operations: Amortization 11,690 10,752 Amortization of deferred revenue (1,140) (1,016) Gain on disposal of property, plant and equipment (51) (149) Income tax expense (437) 938 Income taxes paid 353 (797) Interest on Lease liability 24 - Increase in employee future benefits 75 77 21,939 20,769 Change in non-cash operating working capital: Accounts receivable (5,589) 1,797 Unbilled revenue 15,160 (2,216) Inventory (622) (134) Prepaid expenses 64 201 Accounts payable and accrued liabilities (4,952) 7,623 Other current liabilities (299) (303) Change in regulatory debit balances (5,735) (10,261) Change in regulatory credit balances 47 654 Change in deferred tax 4,282 1,900 Net cash from operating activities 24,295 20,030 Cash flows from investing activities: Proceeds on disposals of property, plant and equipment 370 151 Purchase of property, plant and equipment (22,644) (21,356) Purchase of intangible assets (3,733) (4,565) Net cash used in investing activities (26,007) (25,770) Cash flows from financing activities: Net change in customer deposits (158) (355) Dividends paid out (4,886) (4,682) Change in contributed capital received 5,832 4,390 Repayment of long-term debt - (607) Payment of lease liability (27) - Net cash from financing activities 761 (1,254) Change in cash and cash equivalents (951) (6,994) Cash and cash equivalents, beginning of year 6,363 13,357 Cash and cash equivalents, end of year $ 5,412 $ 6,363 The accompanying notes are an integral part of these financial statements. 6 Page 79 of 131 KITCHEN ER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 1. Reporting entity: Kitchener -Wilmot Hydro Inc. (the "Corporation") is a rate regulated, municipally owned hydro distribution company incorporated under the laws of Ontario, Canada. The Corporation is located in the City of Kitchener. The address of the Corporation's registered office is 301 Victoria Street South, Kitchener, Ontario, Canada. The Corporation delivers electricity and related energy services to residential and commercial customers in the City of Kitchener and the Township of Wilmot. The Corporation is wholly owned by Kitchener Power Corp., which is itself wholly owned by the Corporation of the City of Kitchener and the Corporation of the Township of Wilmot. The financial statements are for the Corporation as at and for the year ended December 31, 2021. Mergers of the holding companies, Kitchener Power Corp. and Waterloo North Hydro Holding Corporation and the local distribution companies, Kitchener -Wilmot Hydro Inc. and Waterloo North Hydro Inc. were proposed in 2021. The proposals have been agreed to by the City of Kitchener and Township of Wilmot councils. A Mergers, Amalgamations, Acquisitions and Divestitures (MAADs) application was filed on February 4, 2022 seeking permission from the Ontario Energy Board ("OEB") to proceed with the proposed merger. 2. Basis of presentation: (a) Statement of compliance: The Corporation's financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"). The financial statements were approved by the Board of Directors on March 25, 2022. (b) Basis of measurement: The financial statements have been prepared on the historical cost basis except for the following: (i) Where held, financial instruments at fair value through profit or loss, including those held for trading, are measured at fair value. (ii) Contributed assets are initially measured at fair value. The methods used to measure fair values are discussed further in note 22. (c) Functional and presentation currency: These financial statements are presented in Canadian dollars, which is the Corporation's functional currency. All financial information presented in Canadian dollars has been rounded to the nearest thousand. (d) Use of estimates and judgments: The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses and disclosure of contingent assets and liabilities. Actual results may differ from those estimates. 7 Page 80 of 131 KITCHEN ERMILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 2. Basis of presentation (continued): (d) Use of estimates and judgments (continued): Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the year in which the estimates are revised and in any future periods affected. Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in these financial statements is included in the following notes: i) Note 3(b) — Determination of the performance obligation for contributions from customers and the related amortization period ii) Note 7 — Property, plant and equipment iii) Note 9 — Deferred tax assets iv) Note 12 — Employee future benefits v) Note 17 — Commitments and contingencies (e) Rate regulation: The Corporation is regulated by the Ontario Energy Board, under the authority granted by the Ontario Energy Board Act, 1998. Among other things, the OEB has the power and responsibility to approve or set rates for the transmission and distribution of electricity, providing continued rate protection for electricity consumers in Ontario, and ensuring that transmission and distribution companies fulfill obligations to connect and service customers. The OEB may also prescribe license requirements and conditions of service to local distribution companies ("LDCs"), such as the Corporation, which may include, among other things, record keeping, regulatory accounting principles, separation of accounts for distinct businesses, and filing and process requirements for rate setting purposes. Rate setting: Distribution revenue and electricity rates The OEB sets electricity prices for low-volume consumers based on an estimate of how much it will cost to supply the province with electricity for the next year. All low volume customers without a contract with an energy retailer are charged the OEB mandated rate for electricity. If a customer (regardless of volume) has a retailer agreement, then retailer rates are charged instead. All remaining consumers pay the market price for electricity. The Corporation is billed for the cost of the electricity that its customers use and passes this cost on to the customer at cost without a mark-up. 8 Page 81 of 131 KITCHEN ER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 2. Basis of presentation (continued): (e) Rate regulation (continued): For the distribution revenue included in electricity sales, the Corporation files a "Cost of Service" ("COS") rate application with the OEB every five years where rates are determined through a review of the forecasted annual amount of operating and capital expenses, debt and shareholder's equity required to support the Corporation's business. The Corporation estimates electricity usage and the costs to service each customer class to determine the appropriate rates to be charged to each customer class. The COS application is reviewed by the OEB and intervenors and rates are approved based upon this review, including any revisions resulting from that review In the intervening years, an Incentive Rate Mechanism application ("IRM") is filed. An IRM application results in a formulaic adjustment to distribution rates that were set under the last COS application. The previous year's rates are adjusted for the annual change in the Gross Domestic Product Implicit Price Inflator for Final Domestic Demand ("GDP IPI -FDD") net of a productivity factor and a "stretch factor" determined by the relative efficiency of an electricity distributor. As a licensed distributor, the Corporation is responsible for billing customers for electricity generated by third parties and the related costs of providing electricity service, such as transmission services and other services provided by third parties. The Corporation is required, pursuant to regulation, to remit such amounts to these third parties, irrespective of whether the Corporation ultimately collects these amounts from customers. The Corporation filed a COS application on April 30, 2019 for rates effective January 1, 2020 to December 31, 2020. The GDP IPI -FDD for 2021 is 3.3%, the Corporation's productivity factor is 0% and the stretch factor is 0.15%, resulting in a net adjustment of 3.15% to the previous year's rates for the 2021 rates. Electricity rates were impacted by the COVID-19 pandemic, distribution rates were unaffected, which has been discussed further in Note 26. 9 Page 82 of 131 KITCHEN ERMILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies: The accounting policies set out below have been applied consistently in all years presented in these financial statements unless otherwise indicated. (a) Financial instruments: At initial recognition, the Company measures its financial assets at fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss Subsequent measurement of the financial asset depends on the classification determined on initial recognition. Financial assets are classified as either amortized cost, fair value through other comprehensive income or fair value through profit or loss, depending on its business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. Financial assets are not reclassified subsequent to their initial recognition, unless the Company changes its business model for managing financial assets. Financial liabilities are initially measured at fair value, net of transaction costs incurred. They are subsequently carried at amortized cost using the effective interest rate method; any difference between the proceeds (net of transaction costs) and the redemption value is recognized as an adjustment to interest expense over the period of the borrowings. The Corporation has not entered into derivative instruments. Hedge accounting has not been used in the preparation of these financial statements. Cash equivalents include short-term investments with maturities of three months or less when purchased. (b) Revenue recognition: Sale and distribution of electricity The performance obligations for the sale and distribution of electricity are recognized over time using an output method to measure the satisfaction of the performance obligation. The value of the electricity services transferred to the customer is determined on the basis of cyclical meter readings plus estimated customer usage since the last meter reading date to the end of the year and represents the amount that the Corporation has the right to bill. Revenue includes the cost of electricity supplied, distribution, and any other regulatory charges. The related cost of power is recorded on the basis of power used. For customer billings related to electricity generated by third parties and the related costs of providing electricity service, such as transmission services and other services provided by third parties, the Corporation has determined that it is acting as a principal for these electricity charges and, therefore, has presented electricity revenue on a gross basis. 10 Page 83 of 131 KITCHEN ERMILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (b) Revenue recognition (continued): Capital contributions Developers are required to contribute towards the capital cost of construction of distribution assets in order to provide ongoing service. The developer is not a customer and therefore the contributions are scoped out of IFRS 15 Revenue from Contracts with Customers. Cash contributions, received from developers are recorded as deferred revenue. When an asset other than cash is received as a capital contribution, the asset is initially recognized at its fair value, with a corresponding amount recognized as deferred revenue. The deferred revenue, which represents the Corporation's obligation to continue to provide the customers access to the supply of electricity, is amortized to income on a straight-line basis over the useful life of the related asset. Certain customers are also required to contribute towards the capital cost of construction of distribution assets in order to provide ongoing service. These contributions fall within the scope of IFRS 15 Revenue from Contracts with Customers. The contributions are received to obtain a connection to the distribution system in order receive ongoing access to electricity. The Corporation has concluded that the performance obligation is the supply of electricity over the life of the relationship with the customer which is satisfied over time as the customer receives and consumes the electricity. Revenue is recognized on a straight-line basis over the useful life of the related asset. Other revenue Revenue earned from the provision of services is recognized as the service is rendered. Government grants and the related performance incentive payments under CDM programs are recognized as revenue in the year when there is reasonable assurance that the program conditions have been satisfied and the payment will be received. (c) Inventory: Inventory, comprising material and supplies, the majority of which is consumed by the Corporation in the provision of its services, is valued at the lower of cost and net realizable value, with cost being determined on a weighted average cost basis, and includes expenditures incurred in acquiring the material and supplies and other costs incurred in bringing them to their existing location and condition. Net realizable value is the estimated selling price in the ordinary course of business, less estimated selling expenses. (d) Property, plant and equipment: Items of property, plant and equipment ("PP&E") used in rate -regulated activities and acquired prior to January 1, 2014 are measured at deemed cost established on the transition date, less accumulated depreciation. All other items of PP&E are measured at cost, or, where the item is transferred from customers, its fair value, less accumulated depreciation. Consistent with IFRS 1, the Corporation elected to use the carrying amount as previously 11 Page 84 of 131 KITCHENERMILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (d) Property, plant and equipment (continued): determined under Canadian GAAP as the deemed cost at January 1, 2014, the transition date to I FRS. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self -constructed assets includes the cost of materials, direct labour, and any other costs directly attributable to bringing the asset to a working condition for its intended use. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Gains and losses on the disposal of an item of PP&E are determined by comparing the proceeds from disposal, if any, with the carrying amount of the item of PP&E and are recognized net within other income in profit or loss. Major spare parts and standby equipment are recognized as items of PP&E. The cost of replacing a part of an item of property, plant and equipment is recognized in the net book value of the item if it is probable that the future economic benefits embodied within the part will flow to the Corporation and its cost can be measured reliably. In this event, the replaced part of property, plant and equipment is written off, and the related gain or loss is included in profit or loss. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred. Depreciation is calculated over the depreciable amount and is recognized in profit or loss on a straight-line basis over the estimated useful life of each part or component of an item of property, plant and equipment. The depreciable amount is cost. Land is not depreciated. Construction -in -progress assets are not amortized until the projects are complete and in service. The estimated useful lives are as follows: Buildings 20-50 years Transformer station equipment 15-50 years Distribution station equipment 15-50 years Distribution system 25-60 years Meters 15-25 years SCADA equipment 15 years Other capital assets 3-10 years Depreciation methods, useful lives, and residual values are reviewed at each reporting date and adjusted prospectively if appropriate. 12 Page 85 of 131 KITCHEN ERMILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (e) Intangible assets (i) Computer software: Computer software that is acquired or developed by the Corporation, including software that is not integral to the functionality of equipment purchased which has finite useful lives, is measured at cost less accumulated amortization and accumulated impairment losses. (ii) Land rights: Payments to obtain rights to access land ("land rights") are classified as intangible assets. These include payments made for easements, right of access and right of use over land for which the Corporation does not hold title. Land rights are measured at cost less accumulated amortization and accumulated impairment losses. (iii) Amortization: Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The estimated useful lives are: Computer software 3-10 years Land rights 100 years Amortization methods and useful lives of all intangible assets are reviewed at each reporting date and adjusted prospectively if appropriate. (f) Impairment: (i) Financial assets: A loss allowance for expected credit losses on financial assets measured at amortized cost is recognized at the reporting date. The loss allowance is measured at an amount equal to the lifetime expected credit losses for the asset. (ii) Non-financial assets: The carrying amounts of the Corporation's non-financial assets, other than inventories and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the "cash -generating unit"). The recoverable amount of an asset or cash -generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. 13 Page 86 of 131 KITCHEN ERMILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (f) Impairment (continued): (ii) Non-financial assets (continued): An impairment loss is recognized if the carrying amount of an asset or its cash -generating unit exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. An impairment loss in respect of goodwill is not reversed. For assets other than goodwill, impairment recognized in prior periods is assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. (g) Provisions: A provision is recognized if, as a result of a past event, the Corporation has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. 14 Page 87 of 131 KITCHENERMILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (h) Regulatory deferral accounts: Regulatory deferral account debit balances represent costs incurred in excess of amounts billed to the customer at OEB approved rates. These amounts have been accumulated and deferred in anticipation of their future recovery in electricity distribution rates. Regulatory deferral account credit balances represent amounts billed to the customer at OEB approved rates in excess of costs incurred by the Corporation. Regulatory deferral account debit balances are recognized if it is probable that future billings in an amount at least equal to the capitalized cost will result from inclusion of that cost in allowable costs for rate -making purposes. The offsetting amount is recognized in profit and loss. The debit balance is reduced by the amount of customer billings as electricity is delivered to the customer and the customer is billed at rates approved by the OEB for the recovery of the capitalized costs. Regulatory deferral account credit balances are recognized if it is probable that future billings in an amount at least equal to the credit balance will be reduced as a result of rate -making activities. The offsetting amount is recognized in profit and loss. The credit balance is reduced by the amounts returned to customers as electricity is delivered to the customer at rates approved by the OEB for the return of the regulatory account credit balance. The probability of recovery or repayment of the regulatory account balances are assessed annually based upon the likelihood that the OEB will approve the change in rates to recover or repay the balance. Any resulting impairment loss is recognized in profit and loss in the year incurred. Regulatory deferral accounts attract interest at OEB prescribed rates. With the exception of Pension and OEB Forecast Accrual accounts (OPEBs), the rate for 2021 was 0.57%. Prior year rates from January to June 2020 were 2.18%, July to December 2020 were 0.57%. In 2021, OPEB rates were 2.03% for the period January to March, and 2.29% for the period April to December. In 2020, OPEBs were 2.88% for the period January to March, 2.48% for the period April to September and 2.03% for the period October to December. 15 Page 88 of 131 KITCHENERMILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (i) Employee future benefits: (i) Pension plan: The Corporation provides a pension plan for all its full-time employees through Ontario Municipal Employees Retirement System ("OMERS"). OMERS is a multi-employer pension plan which operates as the Ontario Municipal Employees Retirement Fund ("the Fund"), and provides pensions for employees of Ontario municipalities, local boards and public utilities. The Fund is a contributory defined benefit pension plan, which is financed by equal contributions from participating employers and employees, and by the investment earnings of the Fund. To the extent that the Fund finds itself in an under -funded position, additional contribution rates may be assessed to participating employers and members. OMERS is a defined benefit plan. However, as OMERS does not segregate its pension asset and liability information by individual employers, there is insufficient information available to enable the Corporation to directly account for the plan. Consequently, the plan has been accounted for as a defined contribution plan. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in net income when they are due. (ii) Post -employment benefits, other than pension: The Corporation provides some of its retired employees with life insurance and medical benefits beyond those provided by government sponsored plans. The cost of these benefits is expensed as earned by employees through employment service. The accrued benefit obligations and the current service costs are actuarially determined by applying the projected unit credit method and reflect management's best estimate of certain underlying assumptions. Actuarial gains and losses arising from defined benefit plans are recognized immediately in other comprehensive income and reported in retained earnings. When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognized in net income on a straight-line basis over the average period until the benefits become vested. In circumstances where the benefits vest immediately, the expense is recognized immediately in net income. Q) Deferred revenue and assets transferred from customers: Certain customers and developers are required to contribute towards the capital cost of construction in order to provide ongoing service. When an asset is received as a capital contribution, the asset is initially recognized at its fair value, with the corresponding amount recognized as deferred revenue. Deferred revenue represents the Corporation's obligation to continue to provide customers access to the supply of electricity and is amortized to income on a straight-line basis over the economic useful life of the acquired or contributed asset, which represents the period of ongoing service to the customer. 16 Page 89 of 131 KITCHEN ERMILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (k) Leased assets: At inception of a contract, the Corporation assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Corporation assess whether: i. The contract involves the use of an identified asset — this may be specified explicitly or implicitly and should be physically distinct or represent substantially all the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; ii. The Corporation has the right to obtain substantially all the economic benefits from the use of the asset throughout the period of use; and iii. The Corporation has the right to direct the use of the asset. The Corporation has this right when it has the decision-making rights that are most relevant to changing how and forwhat purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Corporation has the right to direct the use of the asset if either the Corporation has the right to operate the asset, or the Corporation designed the asset in a way that predetermines how and for what purpose it will be used. The Corporation recognizes a right -of -use asset and a lease liability at the lease commencement date. The right -of -use asset is initially measured at cost, which comprises the initial amount of the lease liability, adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or the site on which it is locate, less any lease incentives received. The right -of -use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right -of -use asset or the end of the lease term. The estimated useful life of a right -of -use asset is determined on the same basis as those for property, plant and equipment. In addition, the right -of -use asset is periodically reduced by impairment losses, if any, and adjusted for certain re -measurements of the lease liability. (1) Finance income and finance costs: Finance income is recognized as it accrues in profit or loss, using the effective interest method. Finance income comprises interest earned on cash and cash equivalents and on regulatory assets. Finance charges comprise interest expense on borrowings, finance lease obligations, regulatory liabilities and unwinding of the discount on provisions and impairment losses on financial assets. Finance costs are recognized as an expense unless they are capitalized as part of the cost of qualifying assets. 17 Page 90 of 131 KITCHEN ERMILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 3. Significant accounting policies (continued): (m) Income taxes: The income tax expense comprises current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case, it is recognized in equity. The Corporation is currently exempt from taxes under the Income Tax Act (Canada) and the Ontario Corporations Tax Act (collectively the "Tax Acts"). Under the Electricity Act, 1998, the Corporation makes payments in lieu of corporate taxes to the Ontario Electricity Financial Corporation ("OEFC"). These payments are calculated in accordance with the rules for computing taxable income and taxable capital and other relevant amounts contained in the Income Tax Act (Canada) and the Corporations Tax Act (Ontario) as modified by the Electricity Act, 1998, and related regulations. Prior to October 1, 2001, the Corporation was not subject to income or capital taxes. Payments in lieu of taxes are referred to as income taxes. Current tax is the tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognized using the balance sheet method. Under this method, deferred income taxes reflect the net tax effects of temporary differences between the tax basis of assets and liabilities and their carrying amounts for accounting purposes, as well as for tax losses available to be carried forward to future years that are likely to be realized. Deferred tax assets and liabilities are measured using enacted or substantively enacted tax rates, at the reporting date, expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the year that includes the date of enactment or substantive enactment. 4. Cash: 2021 2020 Cas h $ 5,412 $ 6,363 5. Accounts receivable: 2021 2020 Customer and other trade receivables $ 21,009 $ 15,588 Trade receivables from related parties 260 92 $ 21,269 $ 15,680 6. Inventory: The amount of inventories consumed by the Corporation and recognized as an expense during 2021 was $373 (2020 - $279). 18 Page 91 of 131 KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 7. Property, plant and equipment: (a) Cost or deemed cost: Land and Distribution Other fixed construction- Right -of -use buildings equipment assets in -progress assets Total Balance at January 1, 2021 26,433 277,793 9,992 5,837 - 320,055 Additions 1,380 2,316 1,099 17,849 601 23,245 Transfers 692 19,982 28 (20,702) - - Disposals/Retirements (65) 11 (3,683) (230) - (3,967) Balance at December 31, 2021 28,440 300,102 7,436 2,754 601 339,333 Land and Distribution Other fixed construction- Right -of -use buildings equipment assets in -progress assets Total Balance at January 1, 2020 24,729 260,009 9,723 5,487 299,948 Additions 1,709 17,846 1,451 350 21,356 Disposals/Retirements (5) (62) (1,182) - (1,249) Balance at December 31, 2020 26,433 277,793 9,992 5,837 320,055 (b) Accumulated depreciation: Land and Distribution Other fixed construction- Right -of -use buildings equipment assets in -progress assets Total Balance at January 1, 2021 3,429 46,021 3,024 52,474 Depreciation charge 758 8,818 1,467 20 11,063 Disposals/Retirements (65) 11 (3,594) (3,648) Balance at December 31, 2021 4,122 54,850 897 20 59,889 Land and Distribution Other fixed construction- Right -of -use buildings equipment assets in -progress assets Total Balance at January 1, 2020 2,718 37,766 2,853 43,337 Depreciation charge 716 8,317 1,351 10,384 Disposals/Retirements (5) (62) (1,180) (1,247) Balance at December 31, 2020 3,429 46,021 3,024 52,474 19 Page 92 of 131 KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 7. Property, plant and equipment (continued): (c) Carrying amounts: Land and Distribution Other fixed Construction- Right -of -use buildings equipment assets in -progress assets Total At December 31, 2021 24,318 245,252 6,539 2,754 581 279,444 At December 31, 2020 23,004 231,772 6,968 5,837 - 267,581 (d) Leased plant and equipment: In May 2021, the Corporation entered into a lease agreement with Grand River Energy Solutions Corp., an associated company, for the construction and lease of solar PV roof -top equipment located at the Corporation's registered office. A right -of -use asset and corresponding lease liability of $601 were recorded. (e) Security: At December 31, 2021, the Corporation had zero properties subject to a general security agreement. (f) Borrowing costs: During the year, borrowing costs of $ nil (2020 - $ nil) were capitalized as part of the cost of property, plant and equipment. (g) Allocation of depreciation and amortization: The depreciation of property, plant and equipment and the amortization of intangible assets has been allocated to profit or loss as follows: 20 Page 93 of 131 Operations and Customer General and Energy maintenance services administration Conservation expense expense expense expense Other Total December 31, 2021: Depreciation of property, plant and equipment $ 702 $ 9 $ $ 2 $ 10,350 $ 11,063 Amortization of intangible assets - 627 627 $ 702 $ 9 $ $ 2 $ 10,977 $ 11,690 December 31, 2020: Depreciation of property, plant and equipment $ 717 $ 6 $ $ 7 $ 9,654 $ 10,384 Amortization of intangible assets - 368 368 $ 717 $ 6 $ $ 7 $ 10,022 $ 10,752 20 Page 93 of 131 KITCHEN ERMILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 8. Intangible assets: (a) Cost or deemed cost: Computer Software Land Rights Total Balance at January 1, 2021 $ 10,938 $ 8 $ 10,946 Additions 3,733 - 3,733 Disposals (2,833) - (2,833) Balance at December 31, 2021 $ 11,838 $ 8 $ 11,846 Balance at January 1, 2020 $ 6,373 $ 8 $ 6,381 Additions 4,565 - 4,565 Balance at December 31, 2020 $ 10,938 $ 8 $ 10,946 Included within Computer Software is $250 (2020 - $7,433) of intangible assets underdevelopment. (b) Accumulated amortization: Computer Software Land Rights Total Balance at January 1, 2021 $ 2,859 $ 8 $ 2,867 Additions 627 - 627 Disposals (2,833) - (2,833) Balance at December 31, 2021 $ 653 $ 8 $ 661 Balance at January 1, 2020 $ 2,491 $ 8 $ 2,499 Additions 368 - 368 Balance at December 31, 2020 $ 2,859 $ 8 $ 2,867 (c) Carrying amounts: Computer Software Land Rights Total At December 31, 2021 $ 11,185 $ - $ 11,185 At December 31, 2020 $ 8,079 $ - $ 8,079 21 Page 94 of 131 KITCHEN ERMILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 9. Income tax expense: 2021 2020 Current period Adjustment for prior periods $ 285 (700) $ 1,292 (332) $ (415) $ 960 Deferred tax expense: 2021 2020 Original & reversal of temporary differences Change in unrecognized deductible temporary differences $ (20) (2) $ (21) (1) $ (22) $ (22) Reconciliation of effective tax rate: 2021 2020 Total comprehensive income for the year Total income tax expense $ 11,425 (437) $ 10,964 938 Comprehensive income before income taxes 10,988 11,902 Income tax using the Corporation's statutory tax rate of 26.5% Temporary differences not benefitted Under (over) provided in prior periods 2,912 (2,649) (700) 3,154 (1,884) (332) $ (437) $ 938 Significant components of the Corporation's deferred tax balances are as follows: 2021 2020 Deferred tax assets (liabilities): Plant and equipment Non -vested sick leave Employee benefits Ontario refundable tax credits Deferred revenue - contributed capital $ (22,536) 168 1,593 6 12,094 $ (16,989) 168 1,573 14 10,819 $ (8,675) $ (4,415) 22 Page 95 of 131 KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 10. Regulatory deferral account balance: Balances Remaining The following is a reconciliation of the carrying amount for each class of regulatory deferral account balances: recovery/ reversal 2020 period Reversal Other 2021 Balances Regulatory deferral account credit balances Remaining arising in the Recovery/ Group 1 deferred accounts $ 1,720 recovery/ reversal 2020 period Reversal Other 2021 period (years) Regulatory deferral account debit balances Note 1 Other 556 3 - - Group 1 deferred accounts $ 8,716 $ (1,174) $ 1,657 $ 231 $ 9,430 Note 1, Note 3 Regulatory asset recovery account 773 281 (232) - 822 Note 1 Deferred tax asset 8,375 5,826 - 14,201 Note 2 LRAM 1,728 874 (1,728) 874 1 Year Other 69 - 69 1 Year Total amount related to regulatory deferral account debit balances $ 19,661 $ 5,807 $ (303) $ 231 $ 25,396 Note 1 KWHI has been approved for collection of these amounts in its 2021 filing for 2022 rates Note 2 KWHI has not sought approval for the disposition of this amount as changes in underlying assumptions may reduce the amounts recorded in the account. KWHI may seek refunds in the future Note 3 In December 2020, KWHI was informed that beginning June 2015 charges were not included in the monthly power bill for one delivery point for Transmission Network Charges. KWHI has accrued a payable of $6 million, offset by a regulatory asset. These monies will be collected through an OEB approved rate rider in 2022 23 Page 96 of 131 Balances Remaining arising in the Recovery/ recovery/ reversal 2020 period Reversal Other 2021 period (years) Regulatory deferral account credit balances Group 1 deferred accounts $ 1,720 $ (976) $ (754) $ 230 $ 220 Note 1 Regulatory asset recovery account - - - - - Note 1 Other 556 3 - - 559 3 Year Total amount related to regulatory deferral account credit balances $ 2,276 $ (973) $ (754) $ 230 $ 779 2021 2020 Movements in regulatory accounts Net change in regulatory deferral account debit and credit balances $ 7,232 $ 10,292 Less movement related to the balance sheet Deferred income tax (5,826) (2,585) Deferred reeenue 802 (860) Net movement in regulatory deferral account balances related to profit or loss and the related deferral tax movement $ 2,208 $ 6,847 Note 1 KWHI has been approved for collection of these amounts in its 2021 filing for 2022 rates Note 2 KWHI has not sought approval for the disposition of this amount as changes in underlying assumptions may reduce the amounts recorded in the account. KWHI may seek refunds in the future Note 3 In December 2020, KWHI was informed that beginning June 2015 charges were not included in the monthly power bill for one delivery point for Transmission Network Charges. KWHI has accrued a payable of $6 million, offset by a regulatory asset. These monies will be collected through an OEB approved rate rider in 2022 23 Page 96 of 131 KITCHENERMILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 10. Regulatory deferral account balance (continued): Note 4 COVID-19 Emergency Deferral The COVID-19 emergency deferral account comprises of four sub -accounts established to track incremental costs and lost revenues related to the COVID-19 pandemic: (i) Impacts from Complying with Govern ment/OEB-initiated Customer Relief Programs, (ii) Bad Debt, (iii) Capital Related Revenue Requirement Impacts, and (iv) Other Costs and Savings. June 17, 2021, the OEB Staff released their report on the COVI D-19 deferral accounts which introduces certain criteria that need to be satisfied for amounts to be eligible for recovery. $69 has been recorded in the COVID-19 Emergency Deferral Account as at December 31, 2021 (2020 - $69). 11. Long-term debt: Effective August 1, 2000, the Corporation incurred unsecured promissory notes payable to the Corporation of the City of Kitchener and the Corporation of the Township of Wilmot, that have an interest rate of 3.23% per annum. Interest is payable in quarterly installments, in arrears, on March 31, June 30, September 30 and December 31. 2021 2020 Senior unsecured debentures: City of Kitchener $ 70,998 $ 70,998 Township of Wilmot 5,965 5,965 Senior unsecured debentures, net proceeds $ 76,963 $ 76,963 Less: current portion of long-term debt $ - $ - Total long-term debt $ 76,963 $ 76,963 24 Page 97 of 131 KITCHEN ERMILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 12. Employee future benefits: The Corporation pays certain medical and life insurance benefits on behalf of some of its retired employees. The Corporation recognizes these post-retirement costs in the period in which employees' services were rendered. The accrued benefit liability at December 31, 2021 of $6,012 was based on an actuarial valuation completed in 2019 using a discount rate of 3.1% (3.1% in 2020). Changes in the present value of the defined benefit unfunded obligation and the accrued benefit liability: 2021 2020 Defined benefit obligation, beginning of year $ 5,937 $ 5,858 Current service cost 191 192 Interest cost 180 178 Benefits paid during the year (296) (291) Accrued benefit liability, end of year $ 6,012 $ 5,937 Components of net benefit expense recognized are as follows: 2021 2020 Current service cost $ 191 $ 192 Interest cost 180 178 Net benefit expense recognized $ 371 $ 370 Actuarial losses recognized in other comprehensive income: 2021 2020 Cumulative amount at January 1 $ (620) $ (620) Recognized during the year (net of tax) - - Cumulative amount at December 31 $ (620) $ (620) 25 Page 98 of 131 KITCHEN ERMILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 12. Employee future benefits (continued): The significant actuarial assumptions used in the valuation are as follows (weighted average): 2021 2020 Accrued benefit obligation: Discount rate 3.1% 3.1% Benefit cost for the year: Age Withdrawal rate 18-29 3.50% 3.50% 30-34 2.00% 2.00% 35-39 1.7% 1.7% 40-49 1.3% 1.3% 50-54 1.0% 1.0% Assumed health care cost trend rates: Initial health care cost trend rate Health 4.7% 4.4% Dental 4.9% 4.7% The approximate effect on the accrued benefit obligation of the entire plan and the estimated net benefit expense of the entire plan if the health care trend rate assumption was increased or decreased by 1 %, and all other assumptions were held constant, is as follows: Benefit Periodic Obligation Benefit Cost 1% increase in health care trend rate $ 218 $ 27 1% decrease in health care trend rate $ (196) $ (23) 26 Page 99 of 131 KITCHEN ER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 12. Employee future benefits (continued): The main actuarial assumptions utilized for the valuation are as follows: General inflation - future general inflation levels, as measured by the changes in the Consumer Price Index, were assumed at 2% in 2021, and thereafter (2020 - 2%). Discount (interest) rate - the discount rate used to determine the present value of future liabilities and the expense for the year ended December 31, 2021, was 3.1 % (2020 — 3.1 %). Salary levels - future general salary and wage levels were assumed to increase at 3.3% (2020 - 3.3%) per annum. Medical costs - medical costs were assumed to be 4.7% for 2021 (4.4% for 2020) Dental costs - dental costs were assumed to be 4.9% for 2021 (4.7% for 2020) 13. Customer and IESO deposits: Customer deposits represent cash deposits from electricity distribution customers and retailers, as well as construction deposits. Deposits from electricity distribution customers are refundable to customers who demonstrate an acceptable level of credit risk as determined by the Corporation in accordance with policies set out by the OEB or upon termination of their electricity distribution service. Construction deposits represent cash prepayments for the estimated cost of capital projects recoverable from customers and developers. Upon completion of the capital project, these deposits are transferred to deferred revenue. The Corporation delivers conservation and demand management programs for its customers on behalf of the IESO. Prepayments received from the IESO have been recorded and will be transferred to revenue as programs are delivered and the revenue is earned. The deposits comprise: 2021 2020 Customer deposits $ 5,623 $ 6,424 Construction deposits 7,424 7,196 IESO deposit for energy conservation programs 1,158 1,158 Total customer deposits $ 14,205 $ 14,778 27 Page 100 of 131 KITCHEN ERMILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 14. Share capital: 2021 2020 Authorized: Unlimited number of common shares Issued: 10,000 common shares $ 63,689 $ 63,689 Dividends: The holders of the common shares are entitled to receive dividends as declared from time to time. The Corporation paid aggregate dividends in the year on common shares of $4,886 (2020 - $4,682). 15. Other operating revenue: Other income comprises: 2021 2020 Specific service charges $ 1,333 $ 1,552 Deferred revenue 1,140 1,016 Scrap sales 187 101 Net gain on disposal of capital assets 51 149 Non-Utilitiy Operation 4 - Retailer services 39 48 Sundry 95 109 Total other income $ 2,849 $ 2,975 16. Finance income and expense: 2021 2020 Interest income on bank deposits $ 35 $ 127 Finance income 35 127 Interest expense on long-term debt 2,472 2,496 Interest expense (recovery) on short-term debt (256) 271 Interest expense on BMO letter of credit 123 123 Interest expense on deposits 35 91 Interest expense on capital lease 24 - Other 111 2,509 2,981 Net finance costs recognized in profit or loss $ 2,474 $ 2,854 28 Page 101 of 131 KITCHEN ER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 17. Lease Liabilities: The Corporation has entered into a lease agreement for solar PV roof -top equipment representing right - of -use assets (note 7). The right -of -use assets are recognized at the present value of the minimum lease payments, plus any extensions estimated to be exercised, with the corresponding equivalent lease liability recognized. The Corporation has determined the lease terms based on all available information as at the reporting date. Maturity Analysis - contractual undiscounted cash flows 2021 2020 Less than one year $ One to five years More than five years 42 $ - 228 - 799 - Total undiscounted lease liabilities at December 31, 2021 1,069 - Interest included on the liabilities included in the statement of financial position at December 31, 2021 (471) - Lease Liabilities - current 42 - Lease Liabilities - non-current $ 556 $ - 18. Commitments and contingencies: Contractual Obligations KWHI entered into a lease agreement with Grand River Energy Solutions Corp for a rooftop solar PV system (see note 17 for details). General From time to time, the Corporation is involved in various litigation matters arising in the ordinary course of its business. The Corporation has no reason to believe that the disposition of any such current matter could reasonably be expected to have a materially adverse impact on the Corporation's financial position, results of operations or its ability to carry on any of its business activities. General Liability Insurance: The Corporation is a member of the Municipal Electric Association Reciprocal Insurance Exchange (MEARIE). MEARIE is a pooling of public liability insurance risks of many of the LDCs in Ontario. All members of the pool are subjected to assessment for losses experienced by the pool for the years in which they were members, on a pro -rata basis based on the total of their respective service revenues. As at December 31, 2021, no assessments have been made. 29 Page 102 of 131 KITCHEN ERMILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 19. Guarantees: Guarantees are not applicable to the Corporation. 20. Pension agreement: The Corporation provides a pension plan for its employees through OMERS. The plan is a multi- employer, contributory defined pension plan with equal contributions by the employer and its employees. In 2021, the Corporation made employer contributions of $1,681 to OMERS (2020 - $1,723). The Corporation's net benefit expense has been allocated as follows: (a) $439 (2020 - $449) capitalized as part of property, plant and equipment; (b) $1,242 (2020 - $1,274) charged to net income. The Corporation estimates that a contribution of $1,721 to OMERS will be made during the next fiscal year. 21. Employee benefits: 30 Page 103 of 131 2021 2020 Salaries, wages and benefits $ 19,657 $ 19,684 CPP and EI remittances 782 732 Contributions to OMERS 1,681 1,723 Expenses related to defined benefit plans 371 370 $ 22,491 $ 22,509 30 Page 103 of 131 KITCHEN ERMILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 22. Related party transactions: (a) Parent and ultimate controlling party: The sole shareholder of the Corporation is Kitchener Power Corp., which in turn is wholly- owned by the Corporation of the City of Kitchener and the Corporation of the Township of Wilmot. The City and the Township produce financial statements that are available for public use. (b) Entity with significant influence: The Corporation of the City of Kitchener exercises significant influence over the Corporation through its 92.25% ownership interest in the Corporation. (c) Key management personnel: The key management personnel of the Corporation have been defined as members of its board of directors and executive management team members and is summarized below. 2021 2020 Directors' fees $ 93 $ 67 Salaries and other short-term benefits 1,106 1,061 Post employment benefits 20 19 Other long-term benefits (OMERS) 91 90 $ 1,310 $ 1,237 (d) Transactions with entity with significant influence: In the ordinary course of business, the Corporation delivers electricity to the Corporation of the City of Kitchener. Electricity is billed to the Corporation of the City of Kitchener at prices and under terms approved by the OEB. (e) Transactions with ultimate parent (the Corporation of the City of Kitchener): In 2021, the Corporation had the following significant transactions with its ultimate parent, a government entity: • Construction, contracted through Kitchener -Wilmot Hydro Inc. • Streetlight maintenance services contracted through Kitchener Energy Services Inc. • Pre -merger costs paid by the City of Kitchener on behalf of Kitchener -Wilmot Hydro Inc. and reimbursed in 2022 31 Page 104 of 131 KITCHEN ERMILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 23. Financial instruments and risk management: Fair value disclosure Cash and cash equivalents are measured at fair value. The carrying values of receivables, and accounts payable and accrued charges approximate fair value because of the short maturity of these instruments. The carrying value of the customer deposits approximates fair value because the amounts are payable on demand. The fair value of the long term debt (senior unsecured debentures issued by the shareholders (Corporation of the City of Kitchener and Corporation of the Township of Wilmot) approximates the carrying value due to the short term nature of the loan. Financial risks The Corporation understands the risks inherent in its business and defines them broadly as anything that could impact its ability to achieve its strategic objectives. The Corporation's exposure to a variety of risks such as credit risk, interest rate risk, and liquidity risk, as well as related mitigation strategies are discussed below. (a) Credit risk: Financial assets carry credit risk that a counterparty will fail to discharge an obligation which could result in a financial loss. Financial assets held by the Corporation, such as accounts receivable, expose it to credit risk. The Corporation earns its revenue from a broad base of customers located in the City of Kitchener and the Township of Wilmot. As of December 31, 2021, no customers accounted for more than 1 % of total accounts receivable, $21,269. The carrying amount of accounts receivable is reduced through the use of an allowance for impairment and the amount of the related impairment loss is recognized in net income. Subsequent recoveries of receivables previously provisioned are credited to net income. The balance of the allowance for impairment at December 31, 2021 is $250 (2020 - $500). The allowance was decreased due to an expected decrease in Covid-19 related bad debt. An impairment gain of $127 (2020 loss of $793) was recognized during the year. This is due to lower than expected bad debt related to COVID-19 and a reduction of the allowance for bad debt from $500 to $250 resulting from the lessening of economic impacts caused by the pandemic 32 Page 105 of 131 KITCHEN ER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 23. Financial instruments and risk management (continued): (a) Credit risk (continued): The Corporation's credit risk associated with accounts receivable is primarily related to payments from distribution customers. At December 31, 2021, approximately $112 (2020 - $314) is considered 60 days past due. The Corporation has over 100 thousand customers, the majority of whom are residential. Credit risk is managed through collection of security deposits from customers in accordance with directions provided by the OEB. As at December 31, 2021, the Corporation holds security deposits in the amount of $14,205 (2020 - $14,778). (b) Market risk: Market risks primarily refer to the risk of loss resulting from changes in commodity prices, foreign exchange rates, and interest rates. The Corporation currently does not have any material commodity or foreign exchange risk. The Corporation is exposed to fluctuations in interest rates as the regulated rate of return for the Corporation's distribution business is derived using a complex formulaic approach which is in part based on the forecast for long- term Government of Canada bond yields. This rate of return is approved by the OEB as part of the approval of distribution rates. The Corporation does not hold any long-term debt that is subject to market rates. Consequently a 1 % increase or decrease in the interest rate at December 31, 2021 would have no financial impact. (c) Liquidity risk: The Corporation monitors its liquidity risk to ensure access to sufficient funds to meet operational and investing requirements. The Corporation's objective is to ensure that sufficient liquidity is on hand to meet obligations as they fall due while minimizing interest exposure. The Corporation has access to a $35,000 credit facility and monitors cash balances daily to ensure that a sufficient level of liquidity is on hand to meet financial commitments as they come due. As at December 31, 2021, no amounts had been drawn under Bank of Montreal credit facility (2020 - $ nil). The Corporation also has a bilateral facility for $35,000 (the "LC" facility) for the purpose of issuing letters of credit mainly to support the prudential requirements of the IESO, of which $35,000 has been drawn and posted with the IESO (2020 - $35,000). The majority of accounts payable, as reported on the balance sheet, are due within 30 days. The Company's currently available liquidity is also expected to be sufficient to address any reasonably foreseeable impacts that the COVID-19 pandemic may have on the Company's cash requirements. 33 Page 106 of 131 KITCHEN ERMILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 23. Financial instruments and risk management (continued): (d) Capital disclosures The main objectives of the Corporation, when managing capital, are to ensure ongoing access to funding to maintain and improve the electricity distribution system, compliance with covenants related to its credit facilities, prudent management of its capital structure with regard for recoveries of financing charges permitted by the OEB on its regulated electricity distribution business, and to deliver the appropriate financial returns. The Corporation's definition of capital includes shareholder's equity and long-term debt. As at December 31, 2021, shareholder's equity amounts to $172,253 (2020 - $165,714) and long- term debt amounts to $76,963 (2020 - $76,963). 24. Revenue from Contracts with Customers: The Corporation generates revenue primarily from the sale and distribution of electricity to its customers. Other sources of revenue include performance incentive payments under CDM programs 34 Page 107 of 131 2021 2020 Revenue from Contracts with Customers $ 252,110 $ 284,230 Other Revenue: CDM programs 1,262 727 Other 1,534 1,524 Total $ 254,906 $ 286,481 In the following table, revenue from contracts with customers is disaggregated by type of customer. 2021 2020 Residential $ 111,252 $ 127,780 Commercial 137,661 153,515 Large Users 1,565 1,346 Other 1,632 1,589 Total Revenue $ 252,110 $ 284,230 34 Page 107 of 131 KITCHEN ER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 25. Changes in accounting policies: The International Accounting Standards Board (IASB) has issued the following Standards, Interpretations and Amendments to Standards that were adopted by the Corporation effective January 1, 2021: a) Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS9, IAS 39, IFRS 7, IFRS 4, and I FRS 16) b) COVID-19 Related Rent Concessions (Amendment to IFRS 16) The amendments and clarifications did not have an impact on the financial statements. 26. Future accounting pronouncements: At the date of authorization of these financial statements, several new, but not yet effective, Standards and amendments to existing Standards, and Interpretations have been published by the IASB. None of these Standards or amendments to existing Standards have been adopted early by the Company and it is still to be determined if any will have a material impact on the Company's financial statements. (a) Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16) On May 14, 2020, the IASB issued Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16). The amendments clarify that proceeds from selling items before the related item of Property, Plant and Equipment is available for use should be recognized in profit or loss, together with the cost of producing those items. The amendments are effective for annual periods beginning on or after January 1, 2022. Early adoption is permitted. (b) Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37) On May 14, 2020, the IASB issued Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37). This amendment clarifies which costs are included as a cost of fulfilling a contract when determining whether a contract is onerous. The amendments are effective for annual periods beginning on or after January 1, 2022 and apply to contracts existing at the date when the amendments are first applied. Early adoption is permitted. 35 Page 108 of 131 KITCHEN ER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 26. Future accounting pronouncements (continued): (c) Annual Improvements to IFRS Standards 2018 -2020 On May 14, 2020, the IASB issued Annual Improvements to IFRS Standards 2018 -2020. The amendments are effective for annual periods beginning on or after January 1, 2022. Early adoption is permitted. I FRS 9 Financial Instruments Clarifies which fees are included for the purpose of performing the '10 per cent test' for derecognition of financial liabilities. I FRS 16 Leases Removes the illustration of payments from the lessor relating to leasehold improvements. The impact of adoption of these improvements is not expected to have an impact on the business. (d) Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) On February 12, 2021, the IASB issued amendments to IAS 1 Presentation of Financial Statements and an update to IFRS Practice Statement 2 Making Materiality Judgements to help companies provide useful accounting policy disclosures. The key amendments to IAS 1 include a requirement for companies to disclose their material accounting policies rather than their significant accounting policies; clarifying that accounting policies related to immaterial transactions, other events or conditions are themselves immaterial and as such need not be disclosed; and clarifying that not all accounting policies that relate to material transactions, other events or conditions are themselves material to a company's financial statements. The amendments are effective for annual periods beginning on or after January 1, 2023. Early adoption is permitted. (e) Definition of Accounting Estimate (Amendments to IAS 8) On February 12, 2021, the IASB issued Definition of Accounting Estimates (Amendments to IAS8). The amendments introduce a new definition for accounting estimates, clarifying that they are monetary amounts in the financial statements that are subject to measurement uncertainty. The amendments also clarify the relationship between accounting policies and accounting estimates by specifying that a company develops an accounting estimate to achieve the objective set out by an accounting policy. The amendments are effective for annual periods beginning on or after January 1, 2023. Early adoption is permitted. 36 Page 109 of 131 KITCHENER-WILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 26. Future accounting pronouncements (continued): (f) Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction - Amendments to IAS 12 Income Taxes. On May 7, 2021, the IASB issued Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12). The amendments narrow the scope of the initial recognition exemption so that it does not apply to transactions that give rise to equal and offsetting temporary differences. As a result, companies will need to recognize a deferred tax asset and a deferred tax liability for temporary differences arising on initial recognition of a lease and a decommissioning provision. The amendments are effective for annual periods beginning on or after January 1, 2023. Earlier adoption is permitted. 27. Impact of COVID-19 Pandemic On March 11, 2020, the World Health Organization declared that the COVID-19 outbreak was a global pandemic. In response, the Ontario Government implemented a number of emergency orders and/or other legislation to address the COVID related risks and support customers. On March 25, 2020, the OEB established a deferral account for regulatory balances to record the costs of changes to billing systems resulting from the Ontario Government's TOU emergency order, other incremental costs and lost revenues associated with the COVID-19 pandemic. On June 17, 2021, the OEB Staff released their report on the COVID-19 deferral accounts which introduces certain criteria to that may need to be satisfied for amounts to be eligible for recovery. On December 22, 2020, the Ontario Government amended O. Reg. 95/05 Classes of Consumers and Determination of Rates, setting both the TOU rates for on -peak, mid -peak, and off-peak and tiered rates at the TOU off-peak rate of 8.5 cents per kWh. That regulatory amendment was effective through February 22, 2021. On February 23, 2021, residential and small business customers resumed paying TOU and tiered pricing under the RPP at prices that were set by the OEB. In light of the COVID-19 pandemic, new stay at home measures were introduced in Ontario on April 8, 2021 and the OEB ordered a ban on issuing disconnection notices to residential customers until May 6, 2021, which was extended until June 2, 2021. The Corporation extended its ban on disconnecting residential and low volume customers until the transition back into the OEB's annual recurring winter disconnection ban on November 15, 2020. On June 17, 2021, the OEB issued its report on the Regulatory Treatment of Impacts Arising from the COVID-19 Emergency. The Corporation has assessed the balances recorded in the deferral account and has made no changes as a result of the report. The financial impacts of COVID have been reflected in the financial statements. While the pandemic has resulted in incremental operating costs and lost revenues, the Company has evaluated the impact on the financial results as at and for the year ended December 31, 2021 and has determined that there was no material impact. 37 Page 110 of 131 KITCHEN ERMILMOT HYDRO INC. Notes to Financial Statements Year ended December 31, 2021 (Expressed in thousands of dollars) 27. Impact of COVID-19 Pandemic (continued): The Company continues to monitor and assess the impact of COVID to the Company's financial results and operations. Potential adverse impacts of the pandemic include, but are not limited to changes in cash flows, working capital and debt requirements. 28. Comparative Figures: Certain comparative figures have been reclassified for conform with the current period's presentation. 38 Page 111 of 131 Staff Report Financia( Services Department www.kitchener.ca REPORT TO: Committee of the Whole DATE OF MEETING: May 9, 2022 SUBMITTED BY: Jonathan Lautenbach, Chief Financial Officer, 519-741-2200 ext. 7334 PREPARED BY: Jonathan Lautenbach, Chief Financial Officer, 519-741-2200 ext. 7334 WARD(S) INVOLVED: N/A DATE OF REPORT: April 20, 2022 REPORT NO.: FIN -2022-201 SUBJECT: KPC and WNH Merger — New Board Considerations RECOMMENDATION: THAT 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. anticipated to be finalized this year, and subject to the transaction closing, the following recommendations regarding Kitchener board representatives be approved: • Current KPC Board members Jim Phillips and Rosa Lupo, be appointed to serve as independent board members on the new Holdco Board as outlined in this report, and; • New Board candidates Susan Taves and Brian Unrau be appointed to serve as independent board members on the new Holdco Board, based on recommendations of the KPC recruitment committee as outlined in this report, and; • Councillors previously nominated to serve on the KPC Board starting June 1, 2022, Councillor Kelly Galloway-Sealock, and Councillor Bill loannidis, continue to serve and be appointed to the new Holdco Board during the "transition year" as outlined in this report, and further; • Councillor _ be appointed to serve on the new Wiresco Board during the "transition year" as outlined as outlined in this report *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. Page 112 of 131 REPORT HIGHLIGHTS: • 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. is anticipated to be finalized later this year • There is a need to appoint representatives to serve as initial board members on new Holdco and Wiresco Boards to ensure proper governance for the new larger utility • Some independent board representatives from both the current KPC and WNH boards are recommended to serve on the new Holdco board for continuity purposes • Two new independent Kitchener board candidates are being recommended to serve on the new Holdco Board • As part of the "transition year", Councillors previously nominated to serve on the KPC Board are being recommended to serve on the new Holdco Board • One additional Councillor is required to be nominated to serve on the new Wiresco Board BACKGROUND: On December 131h, Council approved proceeding 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., authorizing staff to execute the necessary legal agreements, including the Merger Participation Agreement (MPA) and Unanimous Shareholders' Agreement (USA). The MPA was executed by all parties in January and work has continued on the next steps in the process, including preparing a joint Mergers, Amalgamations, Acquisitions, Divestitures (MAADs) application that was submitted to the Ontario Energy Board (OEB) for approval. Anticipating that the merger will be approved and finalized later this year, work has continued to prepare for a successful transition to the newly formed entity, including a process to establish the new Boards that will be required to provide governance for the new corporation once the transaction is approved and closes. The draft USA agreement has been agreed to by all parties and will be executed after approval of the merger is granted from the OEB. The USA outlines the Board structure for both new Holdco and Wiresco Boards. In accordance with the draft USA, the new Boards will include both independent and non - independent directors. During the "transition year" it will be important to maintain some continuity of Board members from both the existing Kitchener Power Corp. and Waterloo North Hydro Holding Corporation Boards. This report outlines the recommended Board representatives to serve as the initial representatives on the new Holdco and Wiresco Boards. REPORT: During merger discussions between Kitchener Power Corp. (KPC) and Waterloo North Hydro Holding Corporation (WNHH)., a Joint Steering Committee (JSC) was established to work through details related to a potential merger. The committee included representation from both KPC and WNHH, including the Chairs and Vice Chairs of the respective Boards and the CEOs of both utilities. Following the execution of the MPA, the JSC has been focused on transition Page 113 of 131 considerations, including outlining a process for establishing the new initial Holdco and Wiresco Boards that will be needed to provide proper governance for the new larger utility once the merger is approved. A process was established by the JSC to identify candidates to serve on the new boards with an agreement that the KPC representatives would provide candidate recommendations for the Kitchener Board members, WNH representatives would develop candidate recommendations for the Waterloo Board members, and the Township CAO's would develop Township candidate recommendations. In accordance with the draft USA, the new Holdco Board will include 7 independent board members and 6 non -independent board members, with Kitchener having a total of 7 representatives on the board (4 independent, 3 non -independent). The new Wiresco Board will include 5 independent board members and 4 non -independent members, with the Holdco Board appointing the independent members, and Kitchener having a total of 2 non -independent representatives on the Board. Independent Board Members The KPC members of the JSC are recommending that the following individuals serve as the initial City of Kitchener independent Board members for the new utility. The City of Kitchener representatives include both current KPC board members and as well as two new candidates that are being recommended after a recruitment process was conducted by a recruiting committee established by the KPC JSC members (see appendix A). Jim Phillips I Rosa Lupo Susan Taves* Brian Unrau* Board Chair - The JSC has recommended that Rosa Lupo serve as the initial Chair of the Holdco Board *Recommended candidates based on a recruitment process conducted the KPC recruitment committee The JSC has recommended that other existing board members from both KPC and WNH serve as independent representatives on the new Wiresco Board for the initial Board term. They are also recommending that Steve McCartney serve as the initial Chair of the Wiresco Board The KPC Board members that are recommended to continue to serve on the new Holdco and Wiresco Board will provide continuity for the Board during the transition year and during the initial Board term. Continuity on the Board was identified as being an important consideration as both KPC and WNH merge to form a larger entity. Page 114 of 131 Non -Independent Board Members The current KPC Board includes three City of Kitchener non -independent board members, the Mayor and two Council members. The current Wiresco Board includes only the Mayor as the Ione City of Kitchener non -independent board member. Under the new Holdco Board structure, the City of Kitchener maintains three non -independent positions on the Board, one of which will continue to be held by the Mayor. Going forward, it is recommended that the two other non -independent positions continue to be held by Councillors rotating on the basis of one-year terms. The City of Kitchener has gained one additional position for a non -independent member on the new Wiresco Board, for a total of two seats on the Board. It is recommended that this new seat be filled by a Councillor also subject to a one-year term, commencing and ending at each Annual General Meeting. The Mayor would continue to hold the other non -independent seat on the new Wiresco Board. Two Council members, Councillor Kelly Galloway-Sealock and Councillor Bill loannidis, have already been nominated by Council to serve on the KPC Board effective June 1, 2022. With the merger anticipated to be finalized potentially by August or September of this year, it is recommended that the Councillors on the KPC board at the time of closing, continue to serve on the new Holdco Board during the transition year serving out their one-year term (ending spring of 2023). With the upcoming municipal election this fall, in the event that a current Council member serving on the Board is not re-elected, the Councillor would resign from the Board and Council would go through a new nomination process for the Board position following the inauguration day. The appointment to the new Holdco Board is conditional on the nominated Councillors acknowledging that they would resign from the Board if not re-elected. In addition to recommending that Councillors serving on the KPC Board at the time of merger continue to serve on the new Holdco Board, there is also a need to nominate one Councillor that will serve on the new Wiresco Board for a term running from the date of the merger through to the Annual General Meeting in spring 2023. At the May 9t" Council meeting, Council will be asked to nominate one Councillor to serve on the new Wiresco Board for the initial term that will commence once the merger is finalized. If the Councillor nominated is not re-elected during the upcoming municipal election, the Councillor would resign from the Board and Council would go through a new nomination process for the Board position following the inauguration day. The appointment to the new Wiresco Board is conditional on the nominated Councillor acknowledging that they would resign from the Board if not re-elected. It is recommended that the Councillor nominated to the new Wiresco Board be different from the Councillors nominated to serve on the new Holdco Board. Page 115 of 131 STRATEGIC PLAN ALIGNMENT: This report supports the achievement of the city's strategic vision through the delivery of core service. FINANCIAL IMPLICATIONS: Operating Budget Considerations — N/A Capital Budget Considerations — N/A COMMUNITY ENGAGEMENT: INFORM — This report has been posted to the City's website with the agenda in advance of the council / committee meeting. PREVIOUS REPORTS/AUTHORITIES: There are no previous reports/authorities related to this matter. APPROVED BY: Dan Chapman, CAO ATTACHMENTS: Attachment A — Letter from KPC recruitment committee Page 116 of 131 K C Kitchener Power May 5, 2022 To: Members of Council From: Kitchener Power Corp. Recruitment Committee Re: Recommendations for Two Independent Board Members to Serve as Kitchener Representatives on New Holdco Board of Directors The purpose of this report is to provide you with recommendations for two (2) Independent director candidates to represent the City of Kitchener on the new Holdco Board of Directors effective the date of merger. The recommendations have been prepared by the Recruitment Committee of Kitchener Power Corp consisting of Chair Jim Phillips, Vice -Chair Rosa Lupo and President & CEO Jerry Van Ooteghem. The recommendations are based on a Board Competency Framework which has been developed to ensure that the appropriate depth and breadth of knowledge, skills and experience are represented on the Board, and which gives due consideration to Diversity, Equity and Inclusion. An advertisement for two Kitchener Directors was placed in The Record on March 5th, 9th and 12th. The Position was also posted on our website and on Linkedln. Approximately 40 applications were received for the position and from these applications five (5) candidates were selected for an interview. On the basis of these interviews and follow-up reference checks, the Recruitment Committee is recommending the following independent candidates for the vacant positions on the new Holdco Board subject to and effective the date of merger. 1. Susan Taves, CPA, CA, ICD.D Susan is a Chartered Professional Accountant with extensive experience in merger/acquisition transactions and corporate transformation. Susan retired in 2015 as Managing Partner at BDO Canada LLP and previously worked at Price Waterhouse as Manager of Financial Advisory Services. Susan is a certified and active Corporate Director who serves on three corporate boards which includes the TSX Trust Company, Skyline Group of Companies and Kindred Credit Union (in Kitchener). Page 117 of 131 2. Brian Unrau, CPA, CMA, MBA, BED, FCUIC Brian is a Chartered Professional Accountant with over 20 years of multi -disciplinary experience in areas including design and construction, information technology and finance. Brian also has experience in mergers and acquisitions and in structuring and raising capital for new investments. Brian is the President of VCT Group Inc. in Kitchener and is also President of Community Energy Development Co-operative in Kitchener with over 800 members. Brian serves on the Board of Directors of MennoHomes Inc. and previously served on the Board of the Federation of Community Power Co-operatives. The Recruitment Committee of Kitchener Power Corp. is pleased to recommend these candidates to serve on the new Holdco Board of Directors as Independent Directors effective the date of merger. Sincerely, 4 James C. Phillips, Chair, Kitchener Power Corp. Page 118 of 131 Staff Report Financia( Services Department www.kitchener.ca REPORT TO: Committee of the Whole DATE OF MEETING: May 9, 2022 SUBMITTED BY: Saleh Saleh, Director of Revenue, 519-741-2200 x 7346 PREPARED BY: John Sonser, Revenue Analyst, 519-741-2200 x 7954 WARD(S) INVOLVED: Ward(s) 8 & 10 DATE OF REPORT: May 2, 2022 REPORT NO.: FIN -2022-216 SUBJECT: Downtown Kitchener BIA and Belmont BIA 2022 Budgets Referenced in the 2022 Tax Rate By-law RECOMMENDATION: That the 2022 Budgets for the Downtown Kitchener Business Improvement Area (BIA) and the Belmont Business Improvement Area (BIA) be approved pursuant to Section 205 (2) of the Municipal Act, 2001. BACKGROUND: Section 205 (2) of the Act states that the board of management shall submit the budget to council by the date and in the form required by the municipality and the municipality may approve it in whole or in part but may not add expenditures to it. REPORT HIGHLIGHTS: This report supports the delivery of core services. REPORT: The Downtown Kitchener BIA 2022 Budget was reviewed by the Board on April 19, 2022 and includes the following: Levy $ 1,379,000 Other revenue $ 315,000 Expenses $ 1,694,000 (refer to Appendix A — Downtown Kitchener BIA) *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. Page 119 of 131 The Belmont BIA 2022 Budget was reviewed by the Board on April 26, 2022 and includes the following: Levy Other revenue From Surplus Expenses $ 41,890 $ 35,000 $ 10,960 $ 87,850 (refer to Appendix B — Belmont Business Improvement Area). Approving the budget is the last step required to be able to levy taxes on behalf of the BIAs. STRATEGIC PLAN ALIGNMENT: The recommendation of this report supports the achievement of the city's strategic vision through the delivery of core service. FINANCIAL IMPLICATIONS: The 2022 BIA levy, once approved, will be used to determine BIA tax rates to be incorporated into the 2022 tax rate by-law. COMMUNITY ENGAGEMENT: INFORM — This report has been posted to the City's website with the agenda in advance of the council / committee meeting. PREVIOUS REPORTS/AUTHORITIES: There are no previous reports/authorities related to this matter. APPROVED BY: Jonathan Lautenbach, Chief Financial Officer, Financial Services ATTACHMENTS: Attachment A — Downtown Kitchener BIA Attachment B — Belmont Business Improvement Area Page 120 of 131 Appendix A Downtown Kitchener BIA Downtown Kitchener BIA Proposed Budget 2022 2022 Draft Budget REVENUE BIA Levy 1,379,000 RT04 Grant (2022 DTK Art Walk) 95,000 Injection from Surplus 220,000 Injection from surplus for Organic Waste Diversion TOTAL INCOME $ 1,694,000 EXPENSES Attracting Urban Shops and Restaurants - Priority#1 Graffiti Removal 12,000 Patio Program 290,000 Horticultural (Contribution to the City of Kitchener) 50,000 Advertising/Promotion 170,000 Own It Magazine Business Start-up Grant Program Total Attracting Urban Shops and Restaurants - Priority #1 $ 522,000 Foster and Support Heartfelt Urban Experiences - Priority #2 Canada Day Kitchener -Waterloo Oktoberfest 10,000 Kitchener Blues Festival 35,000 City of Kitchener Events 50,000 December Programming 35,000 Holiday Window Decorating 8,000 Downtown Dollars 11,000 Downtown Dollar support for UNZIPPED Community Builder Grant Program 50,000 Winter Programming (February to April) 12,000 Art Walk Project 180,000 Live Music/Entertainment 70,000 Total Foster and Support Heartfelt Urban Experiences - Priority #2 $ 461,000 Champion a Caring & Collaborative Community - Priority #3 Discovery Team Keeping Downtown Clean (After Spm collection) 60,000 DTK Pilot Program - Ambassadors (New) 38,000 Organic Waste Diversion (Climate change initiative) 30,000 COVID-19 Fund - Business Continuity (DTK Artwalk, and grant funding for main street level businesses Total Caring & Collaborative Community - Priority #3 $ 128,000 Total Member Relations $ 10,000 Downtown Improvement Queen Street Placemaking Project Downtown Improvement Project (Capital Reserve) Total Downtown Improvement Total General & Admin $ 106,500 Total Meetings & Professional Development $ 4,000 Total wages / Benefits $ 417,500 Levy Claw Back (tax adjustment) $ 45,000 TOTAL EXPENSES $ 1,694,000 Net Income $ - 2022 Budget Preparation Page 121 of 131 Page 1 of 1 Appendix B BELMONT BUSINESS IMPROVEMENT AREA Belmont Business Improvement Area (Belmont BIA) *Figures provided by the Belmont BIA April 26, 2022. Deficit will be funded from the accumulated surplus. Page 122 of 131 Budget Actual Budget 2021 2021 2022 REVENUES City of Kitchener BIA Levy $ 40,670 $ 40,670 $ 41,890 Grants 8,500 18,000 Other Revenue 5,840 35,000 Total Revenue $ 49,170 $ 64,510 $ 76,890 EXPENSES Admin & General 30,750 29,526 39,400 Improvement Projects 2,000 15,277 40,300 Marketing 6,800 12,485 8,150 Total Expenses $ 39,550 $ 57,288 $ 87,850 Net Revenue (Expenses) $ 9,620 $ 7,222 $ (10,960) Accumulated Surplus, beginning of year 55,908 55,908 63,130 Accumulated Surplus, end of year $ 65,528 $ 63,130 $ 52,170 *Figures provided by the Belmont BIA April 26, 2022. Deficit will be funded from the accumulated surplus. Page 122 of 131 Notes on Belmont BIA 2022 Proposed Budget REVENUE: The BIA Levy includes a $1,220 increase over last year's amount and remains the main source of income for Belmont Village. In 2021, the BIA received an $18,000 Digital Main Street Grant for funding to expand the BIA's digital footprint. There will be a Digital Main Street Grant for 2022 and at this time the amount is unknown The $5,840 Other Revenue in 2021 is a policy holder dividend received from the demutualization of the Economical Mutual Insurance Company. The BIA has begun fundraising to help offset patio expenses in 2022. They have secured donation pledges totaling $35,000. EXPENSES: The increase in the Administration and General Expense Budget compared to the 2021 Actuals is largely tied to two factors. First, the snow removal costs are anticipated to be $3,000 higher in 2022, mainly due to the frequent snow days already experienced between January and March this year. Second, the storage costs will increase from $798 in 2021 to $4,650 in 2022. The BIA has two storage units on Gage Street for the patios. In 2021, storage was provided by a local business at a nominal fee. The Improvement Project expense line includes streetscape/patio costs. In 2021, the City provided the BIA with $45,000 worth of patio related services for $5,000. Beginning with 2022, the BIA is now responsible for those expenses which include patio slip -lane setup/takedown, garbage/litter/maintenance and watering costs. Those costs amount to $37,400 which makes up the majority of the 2022 $40,300 budget. The balance of the total expenses, $10,960, will come from surplus funds. The patios were a huge success, and we are hopeful we will be able to continue them. Our marketing expenses are mainly our website expense. * Figures and comments provided by the Belmont BIA April 26, 2022 Page 123 of 131 Staff Report Corporate Services Department www.kitchener.ca REPORT TO: Committee of the Whole DATE OF MEETING: May 9, 2022 SUBMITTED BY: Dianna Saunderson, Manager, Council & Committee Services / Deputy Clerk, 519-741-2022 ext. 7278 PREPARED BY: Dianna Saunderson, Manager, Council & Committee Services / Deputy Clerk, 519-741-2022 ext. 7278 WARD(S) INVOLVED: All DATE OF REPORT: May 3, 2022 REPORT NO.: COR -2022-223 SUBJECT: Housekeeping Confirmatory By-law — November 2, 2020 RECOMMENDATION: That the actions and proceedings of Special Council held November 2, 2020, included in the minutes attached as Attachment A of Corporate Services Department report COR - 2022 -223 be here by confirmed by By-law and numbered sequentially by the Clerk. REPORT HIGHLIGHTS: • The purpose of this report is to confirm the actions and proceedings of Council from a Special Council meeting held on November 2, 2020. • This report supports the delivery of core services. BACKGROUND: Following every meeting of Council as per the Municipal Act, City Council is required to pass a by-law to confirm (commonly referred to as a confirmatory by-law), to enact all of the decisions rendered up until the point the by-law is introduced. It has since been identified that a confirmatory by-law was inadvertently missed during the November 2, 2020 Special Council meeting. REPORT: November 2, 2020 Council held a Special Council meeting. Minutes of that meeting, were approved at the November 23, 2020 Council meeting and have been included as an attachment to this report. Council as per the Municipal Act, enacts a confirming by-law to confirm all of the decisions made up until the point the by-law is introduced. It has since been identified that the confirmatory by-law for the Special Council meeting on November 2, 2020 was inadvertently missed and to ensure legitimacy and accountability of those decisions, Council is being requested to pass a confirmatory by-law this date to confirm the decisions rendered at that meeting, which are outlined in the minutes attached as Attachment A of this report. *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. Page 124 of 131 STRATEGIC PLAN ALIGNMENT: This report supports the delivery of core services. FINANCIAL IMPLICATIONS: Capital Budget — The recommendation has no impact on the Capital Budget. Operating Budget — The recommendation has no impact on the Operating Budget. COMMUNITY ENGAGEMENT: INFORM — This report has been posted to the City's website with the agenda in advance of the council / committee meeting. PREVIOUS REPORTS/AUTHORITIES: There are no previous reports/authorities related to this matter. APPROVED BY: Dan Chapman, CAO ATTACHMENTS: Attachment A — Special Council Minutes — November 2, 2022 Page 125 of 131 SPECIAL COUNCIL MINUTES NOVEMBER 2, 2020 CITY OF KITCHENER A special electronic meeting of City Council was held in the Council Chamber at 10:35 a.m. this date, chaired by Mayor B. Vrbanovic with all members present. Notice of this meeting had been previously given to all members of Council by the City Clerk pursuant to Chapter 25 (Council Procedure) of the Municipal Code. COR -20-009 — 2021 COUNCIL AND STANDING COMMITTEE SCHEDULE Council considered Corporate Services Department report COR -20-009 (J. Bunn), dated October 29, 2020. Moved by Councillor S. Marsh Seconded by Councillor M. Johnston "That the 2021 Meeting Schedule attached to report COR -20-009, be approved as the 2021 schedule of Council and Standing Committee meetings; and further, That Council be permitted to amend the calendar as necessary by resolution." Carried. [WI Will ►117:49:11NM1Will :/11ry:1►1:11:aMill 0ICIA 3M01WD] INW1yX1J:1 Council considered Community Services Department report CSD -20-008 (K. Kugler), dated October 29, 2020. Councillor D. Schnider declared a pecuniary interest with respect to Community Services Department report CSD -20-008, due to his employment relationship with the Kitchener Rangers; accordingly, he did not participate in any discussion or voting regarding this matter. Moved by Councillor S. Davey Seconded by Councillor K. Galloway-Sealock "That approval be granted to defer the Kitchener Rangers Hockey Club's 2020 and 2021 principal loan payments related to the 2012 Kitchener Memorial Auditorium Complex expansion; and further, That upon maturity of the 2012 municipal debenture related to the Kitchener Memorial Auditorium Complex expansion, the planned outstanding principal balance of $4,323,000 be issued as a municipal debenture for a term not to exceed 10 years; and further, That the Mayor and Clerk be authorized to sign an amendment to the loan agreement, with said agreement to be to the satisfaction of the City Solicitor." Carried. IN -CAMERA MEETING AUTHORIZATION Moved by Councillor M. Johnson Seconded by Councillor K. Galloway-Sealock "That an in -camera meeting of City Council be held immediately following the special council meeting this date to consider a land acquisition/disposition matter which also relates to plans/instructions for negotiations, and a litigation/potential litigation matter that is also subject to solicitor -client privilege as authorized by Sections 239 (2) (c), (k), (e) and (f) of the Municipal Act, 2001." Carried. Page 126 of 131 SPECIAL COUNCIL MINUTES NOVEMBER 2, 2020 -128- CITY OF KITCHENER On motion the meeting adjourned at 10:51 a.m. MAYOR CLERK Page 127 of 131 Staff Report Financia( Services Department www.kitchener.ca REPORT TO: Committee of the Whole DATE OF MEETING: May 9, 2022 SUBMITTED BY: Ryan Scott, Manager, Procurement, 519-741-2200 ext. 7214 PREPARED BY: Ryan Scott, Manager, Procurement, 519-741-2200 ext. 7214 WARD(S) INVOLVED: N/A DATE OF REPORT: May 2, 2022 REPORT NO.: FIN -2022-217 SUBJECT: Summary of Bid Solicitations Approved by the Manager of Procurement (January 1, 2022 — March 31, 2022) RECOMMENDATION: For Information REPORT HIGHLIGHTS: • The purpose of this report is to provide a quarterly update on Procurements that have been approved through delegated authority in accordance with the Purchasing By-law 2017-106 • There were ten (10) approved bid solicitations in this quarter. • There was one (1) bid solicitation that was approved in accordance with FIN -2022-149 Temporary Measures — Supply Chain and Inflationary Trends • This report supports the delivery of core services. BACKGROUND: In accordance with the Purchasing By-law 2017-106 (Chapter 170 Municipal Code), section 170.7.4 "the City's Director of Supply Services shall prepare a quarterly information only report to Council on Solicitations awarded where the Procurement Value is between $100,000 and $750,000 and the Director of Supply Services approved the award." In March 2022, Council approved FIN -2022-149 Temporary Measures — Supply Chain and Inflationary Trends. By removing the need to bring projects already approved by Council through the budget process back to Council for award, this has reduced overall timing of award of projects from 20-60 days down to under 7 days. *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. Page 128 of 131 REPORT: Appendix 1 is a listing of the ten (10) approved bid solicitations for Council's information. STRATEGIC PLAN ALIGNMENT: This report supports the delivery of core services. FINANCIAL IMPLICATIONS: All bid solicitations awarded by the Manager, Procurement, were within approved budgets. COMMUNITY ENGAGEMENT: INFORM — This report has been posted to the City's website with the agenda in advance of the council / committee meeting. PREVIOUS REPORTS/AUTHORITIES: There are no previous reports/authorities related to this matter. 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