Mark J. Kropilak, Esq. United Water December 2, 2009

Spectrum of Options – for Municipal Utilities

Borough / County Seat for Chester County, Pa − Large % of property was tax exempt Borough had previously formed Authority that owned water system − Customer Accounts: > 8,000 Facing Capital Improvements; time to evaluate options Executive Director, Neil Phillips: Sold for about $24 M in 1998 / Asset Transfer / now regulated rates in place Debt paid off of $10 M Walk-away Proceeds $14 M to the Borough − Proceeds placed in reserve by Ordinance: conserve Principal -- live off Interest and combine with matching grants / Improved credit worthiness Urban Renewal − Municipal Building − Streets / Tree Planting, etc Attracts Restaurants and Professional Offices, etc. Example of Transfer: West Chester, PA December 2,

1. Effect of Private Operation December 2,

2. Effect of Integrated Capital Management December 2,

Sample System--with Potential Savings and Trapped Equity Abbreviated and Hypothetical Income Statement # of customer accounts 50,000 Population ≈ 120,000 people Average annual rate $800 Residential Rate: $ ≤ 400 Revenues $ 40 million Operating Expense$ 30 million EBITDA$ 10 million Reduced Operating Expenses$ 25 million EBITDA$ 15 million Abbreviated and Hypothetical Balance Sheet Net Plant$ 100 million ›Debt $ 50 million ›Equity $ 50 million December 2,

Options to Monetize a Municipal Utility