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.
APPROVED BY: Jonathan Lautenbach, Chief Financial Officer, Financial Services
Department
ATTACHMENTS:
Attachment 1 — Listing of Approved Bid Solicitations (January 1, 2022 — March 31, 2022)
Page 129 of 131
N
N
O
N
T
M
t
V
L
cu
2
N
N
O
N
T
cu
_
N
0
m
a)
O
L
Q
Q
a
O
Za_
J
.W
-Y
O
-k
-k-k
-k
O
-k
-k
�
O
O
-k
O
m
0
N
co
O
CD
O
O
'T
O
C14
E O
0)
00
O
Op
LO
Lq
C\j
M
IT
O'
N
a >
cm
N
Cfl
c�
~
N
00
co
co
Efi
Efl
Efl
Mco3X
co
Efl O
Ei}
N
Q9
QD
N
QD
aW
co
Ef}
��
0 �
�+
O
O
O
o C'
O
0a)
O
O
O
O
O}
O
O
0- 7 O
Co
O
O}
O
O
O
O
O
O
O
70 a)
O
O
O
O
a)
-0 U to
O
O
O
O
_0 a)
a
�
�
Q
70
O
LO
Z
�
Q
O
�+
O')
CD
O'
Z.O
co
LO
c
m
m
QD
U-
Q9
6rk
L.L CU
Q9
> O
U
m
U
cu
Q
O
L
(/)
Z
a)
cucu
a)
�cu
O
(�
_0
E
_
—
LO O
Q
a)
0
06 p
_
J
>
�Q
(O� O
0
�Z—
cu
�U
M �
O
+
o
Ucn z
+ L
O
�O
O
ZoOCU~'z
o
0�ZCUZ
oO�-+�J
m
L3
>
cB
O
o
'Z— p
o
ZcB :B
�
O-
c
O
0 W
4—
o°
':
2 o
_CD
u o
UO
W
-'
m
S
C
C:L
O
�O
a 0_ 0~
¢
O.
O co
to N
O O OU
a) J
�J(n>
>O
a) O
co co)
2
F U
L �zm�-71z
a)
(n to
O > O
U)CDYcocoU
-�
z—, O
O
N
a)
O
a)
cu
Y
U
L
U
J
U
O
L
Z
a)
(n
co
D
U
m
co
�
_0
cn
N
pp
a)
W
—1
_
a)
uj
!LC
(n
mU U
Uc
>
E(D
O
N>'
(mD
('
p
>
1^)
^W
L J
.W
a)
O
EZ
c
Co
n
>II
> U
a
O
70
0
co
O
m
Q L
> W
co
O
U
m
�
cn
},
cn
_0
a)
/
B
+� U
m
>
5
GCD
O
LL
CO
>O
0 C
0
0)
L
JO
O :t --
1
U
Co
�w
yl
co
N O
ti p
0
N
O w
0)
Q
�V/J
IT
O O
O
N
O
N
—O
CO .
co
a)
O 0)OO
O
N c
N
N m
NN
a.
co
0
O
0 r-
0 0
0
H I—
0 U
0
co
O
O
co
()
O)
m
a.
Qa
oQ-
M
4- o
M
4-��
�U
o CO
-0M
a i
O fN
cB
CO
U O
LL -
6
m N
i U
Q
U
N
Q)
L
M
CO