1. Eric S. Petersen Partner Hawkins Delafield & Wood LLP New York, NY 2450058.2 United States Conference of Mayors Mayors Water Council Meeting Washington, DC May 1, 2015 WATER PUBLIC-PRIVATE PARTNERSHIP UPDATE Hawkin s Delafield & Wood LLP

2. 2 HAWKINS PERSPECTIVE 90 Attorney Infrastructure Procurement, Contract and Finance Boutique Municipal Representation Exclusively All Infrastructure Sectors 100+ Water Projects in 25 States Alternative Project Delivery and P3 Project Overview Cranston, San Diego and San Antonio

3. CRANSTON CONCESSION PROFILE The Original Wastewater Concession Existing Treatment Plant, Collection System, IPP, System Upgrade’s Private Financing – Tax Exempt Private Operation, Maintenance, Repair, Replacement 25 year Term 3

4. CITY GOALS Improved Efficiency Single Point of Accountability Effluent Regulation Compliance Exit the Business Concession Fee What’s Old Is New: Cranston As Model For Rialto, Bayonne, Nassau County 4

5. CONCESSION FEE $50,000,000 Determined by City, Not Competed Present Value of Long-Term Operation, Maintenance, Repair and Replacement Savings Used to Repay General Fund Loan, and Outstanding City Debt 5

6. RATES Set by City – No PUC Regulation Revenues Remain Property of City “Rates Didn’t Increase Beyond Level Projected Under the No Project Alternative” No Use of Rate Hikes to Avoid a Tax Increase 6

7. 7 CARLSBAD P3 PROJECT San Diego County Water Authority Reverse Osmosis Seawater Desalination Project Technology Proven Internationally 50 MGD Plant and 11 Miles of Pipelines Co-located with Encina Power Station Privately Developed, Publicly Sponsored Structured as a “Water Purchase Contract”

8. DRIVERS California Water Availability and Allocation Uncertainties New Water Source Enhance Regional Water Resource Security Sustainability Transfer Development and Performance Risks Drought Prospects Overcame Cost Concerns Completion: Fall, 2015 California’s First Major Water P3 8

9. 9 KEY COMMITMENTS Poseidon Designs, Builds, Finances, Owns and Operates the Project (P3) 30-year Water Authority “Take or Pay” Water Purchase Agreement Water Authority Ownership at End-of-Term 56,000 Acre Feet Per Year $1800 Per Acre Foot Product Water Quality Guaranteed (Based on Assumed Raw Water Conditions) Electricity Usage Guaranteed

10. 10 PROTECTION OF THE PUBLIC INTEREST Establishment of Plant Design Requirements Pipeline Standards Water Quality Guarantees Water Delivery Guarantees State Water Permit Standards

11. SAN ANTONIO P3 Water Purchase Agreement – SAWS and Abengoa Raw Groundwater Wells 50,000 Acre Feet of Product Water 140 Miles of Transmission Pipeline Privately Developed, Publicly Sponsored Texas’s First Major Water P3 11

12. PROJECT COMPANY Obtain Lease Rights to Groundwater Secure Local Agency Production Permits Acquire Pipeline Right-of-Way Design, Build, Finance Operate, Maintain, Repair and Replace Comply with Performance Guarantees Right to Make Available Product Water 12

13. SAWS Design, Build, Finance and Maintain SAWS Interconnection Improvements Take Delivery of Product Water Made Available by Project Company Pay for Product Water Made Available But Not Taken for Any Reason No Off-Spec Water 13

14. SAWS GOALS Transfer Risk of Securing Water Rights Transfer Risk of Obtaining Groundwater Permits Transfer Risk of Future Permit Cutbacks Transfer Financing Risk Water Price - $2,000+/AF Commercial Close – 2014 Financial Close - 2016 14

15. CONTRAST TO TRADITIONAL DELIVERY Design-Bid-Build (DBB) Contracting Two Contracts Competition Only on Construction Price Public Operations Governmental Obligation Municipal Bonds (Revenue or Tax Secured) Projects Are Publicly Owned Design, Construction, Operation and Financing All Separate Functions 15

16. DBB DRAWBACKS Not Qualifications Based Forced Marriage of Designer, Builder Construction Price Is Only Selection Factor Slower Delivery Higher Cost Can Be Dispute Prone Limited Long Term Focus 16

17. ALTERNATIVE PUBLIC WORKS FINANCING AND CONTRACTING Design-build (DB) Design-build-finance (DBF) Design-build-operate (DBO) Design-build-finance-operate (DBFO) (P3) One Point of Accountability Performance-based Contracting RFQ and RFP Process Best Value Selection 17

18. 18 PRIVATE FINANCING DRIVERS Legal Debt Limits Government Debt Reduction Efforts Use of Debt Capacity For Other Projects Voter Debt Approval Rules Avoidance of Debt-Caused Rate Spikes Risk Transfer Strong Security for Performance Need for Concession Fee Projects Involving New or Proprietary Technology

19. BENEFITS OF ALTERNATIVE DELIVERY AND P3 Extensive Use in Private Sector Qualifications – Based Selection Life-Cycle Cost Perspective Long Term Contracts Substantial Risk Transfer Striking Success of APD, P3 Projects 10-20% Savings Against “Benchmark” “Faster, Better, Less Expensive” Consistent Success and Growing Acceptance 19

20. 20 THANK YOU Eric S. Petersen Hawkins Delafield & Wood LLP One Chase Manhattan Plaza New York, NY 10005 (212) 820-9401 epetersen@hawkins.com www.hawkins.com