NARC 53 RD ANNUAL CONFERENCE June 11 2019

NARC 53 RD ANNUAL CONFERENCE June 11, 2019 Omaha, NE

MISSION STATEMENT The Water Infrastructure Finance and Innovation Act (WIFIA) program accelerates investment in our nation’s water and wastewater infrastructure by providing long -term, low-cost, supplemental credit assistance under customized terms to creditworthy water and wastewater projects of national and regional significance. WWW. EPA. GOV/WIFIA | 2

FEDERAL CREDIT PROGRAM A small amount of federal funds supports a much larger amount of infrastructure investment • Congress only appropriates money to cover the estimated losses for projects • The remaining loan amount is borrowed from and repaid to Treasury • Since WIFIA loans finance up to 49%, they stimulate additional investment in the project $60 MILLION IN APPROPRIATIONS $6 BILLION IN LOANS WWW. EPA. GOV/WIFIA | 3 $12 BILLION IN INFRASTRUCTURE INVESTMENT

ELIGIBILITY Eligible borrowers Eligible projects • Local, state, tribal, and federal government entities • Partnerships and joint ventures • Corporations and trusts • Clean Water and Drinking Water State Revolving Fund (SRF) programs • Projects that are eligible for the Clean Water SRF, not withstanding the public ownership clause • Projects that are eligible for the Drinking Water SRF • Enhanced energy efficiency projects at drinking water and wastewater facilities • Brackish or seawater desalination, aquifer recharge, alternative water supply, and water recycling projects • Drought prevention, reduction, or mitigation projects • Acquisition of property if it is integral to the project or will mitigate the environmental impact of a project • A combination of projects secured by a common security pledge or submitted under one application by an SRF program WWW. EPA. GOV/WIFIA | 4

IMPORTANT PROGRAM FEATURES Minimum project size for large communities. Maximum time that repayment may be deferred after substantial completion of the project. Minimum project size for small communities (population of 25, 000 or less). Interest rate will be equal to or greater than the U. S. Treasury rate of a similar maturity. Maximum portion of eligible project costs that WIFIA can fund. Projects must be creditworthy. Maximum final maturity date from substantial completion. NEPA, Davis-Bacon, American Iron and Steel, and all federal cross-cutter provisions apply. WWW. EPA. GOV/WIFIA | 5

BENEFITS OVERVIEW WIFIA’s benefits can serve various borrower needs Cheaper than alternatives • Low, fixed interest rate • Low fees Flexible financial terms • • • Customized repayment schedule Customized disbursements No penalty for prepayment Flexible co-financing No rate lock or commitment fees Can attract other borrowers and allow for more senior debt • Can take a lower lien priority, freeing up coverage for affordable senior debt • Improves the position and confidence of other lenders WWW. EPA. GOV/WIFIA | 6

APPLICATION PROCESS Project Review, Negotiation, and Closing Project Selection • • Notice of Funding Availability Letter of Interest submission Letter of Interest evaluation Invitation to apply WWW. EPA. GOV/WIFIA | 7 • • • Application submission Application evaluation Due diligence Term sheet negotiation Loan agreement negotiation Closing

SUMMARY Project Selection Project Review, Negotiation, and Closing Notice of Funding Availability (NOFA) Letter of Interest Submission Letter of Interest Evaluation Project Selection April 5, 2019 July 5, 2019 3 months Fall 2019 WWW. EPA. GOV/WIFIA | 8

PROJECT SELECTION IS COMPETITIVE Project selection is a competitive process to identify projects to invite to apply which are: • • Eligible Creditworthy Technically feasible Meet the public policy goals outlined in the WIFIA statute and regulation WWW. EPA. GOV/WIFIA | 9

GENERAL TIPS • Use the letter of interest form available at https: //www. epa. gov/wifia/how-apply-wifia-assistance-0#materials • Read the instructions in the NOFA and the program handbook prior to completing your letter of interest • Answer every question, when relevant provide additional supporting material to support your answer • Provide specific references when pointing to supporting documents • Remember your audience is learning about your system for the first time and needs contextual information to understand your project • Submit early in order to avoid issues with large file sizes at the deadline • Attend one of the webinars offered following the NOFA release • Ask questions– contact WIFIA program staff at wifia@epa. gov W W W. E P A. G O V / W I F I A | 10

INVITATION TO APPLY EPA intends to loan to the projects that it invites to apply Selected projects • Notified in writing of selection • Within 30 days of the invitation, EPA will meet with the entity to discuss the application process • The application deadline is 365 days from the notification date • EPA will publicly announce selected projects Non-selected projects • Notified in writing that they were not selected • May request a de-brief • Must re-submit their LOI to be considered in future rounds W W W. E P A. G O V / W I F I A | 11

APPLICATION PROCESS Each application review is tailored to reflect the complexity and risk of the proposed project Each project is reviewed for: • Creditworthiness • Engineering due diligence • Legal aspects of the proposed project and credit structure W W W. E P A. G O V / W I F I A | 12

APPLICATION PROCESS Example Project Y: $250 M low to medium risk capital project PLEDGE APPLICATION EVALUATION Existing Lien of System Revenues TERM SHEET & LOAN AGREEMENT DEVELOPMENT APPROVAL & CLOSING 4 Months WIFIA FEES $250, 000 Example Project Z: $1, 000 M innovative high risk capital project PLEDGE APPLICATION EVALUATION Public-Private Partnership with Customized Terms W W W. E P A. G O V / W I F I A | 13 TERM SHEET & LOAN AGREEMENT DEVELOPMENT 12 Months APPROVAL & CLOSING WIFIA FEES $500, 000+

FY 2018 SELECTED PROJECTS W W W. E P A. G O V / W I F I A | 14 Information about selected projects is available at: https: //www. epa. gov/wifia-selected-projects

FY 2018 SELECTED PROJECTS Number of projects selected: 39 Total invited loan amount: Approximately $5 billion Total infrastructure investment: Over $10 billion Number of projects reducing lead or other contaminants: 12 Number of projects addressing repair, rehabilitation, or replacement: 37 • Population served by the projects: 22 million people in 16 states and Washington, D. C. • Types of borrowers: private corporations, public entities, and publicprivate partnerships • Types of projects: wastewater collection and treatment, drinking water distribution and treatment, stormwater management, desalination, and water recycling projects • • • W W W. E P A. G O V / W I F I A | 15

LESSONS LEARNED FROM FIRST 2 FUNDING ROUNDS Process can be fast and relatively easy! o Program is willing to take risk, but we need to understand it o Be prepared for negotiation if you’re asking WIFIA for highly customized terms o Average timeline to loan execution is about 4 -8 months from application submission o NEPA approval has not been a gating item to reach close o Credit quality has ranged from ratings of AAA to BBB o Borrowers generally take longer to submit their applications than they expect when initially submitting an LOI W W W. E P A. G O V / W I F I A | 16

WIFIA FOR REGIONAL INITIATIVES We can have creative and innovative loan structuring arrangements o One project with two borrowers: one application but with each borrower with its own loan and security pledge. o One project, one loan through a JPA: multiple municipalities developing regional infrastructure through a common borrowing entity. o One project, one borrower, multiple ‘wholesalers’: regional water supply system with the bigger city acting as borrower and smaller cities as customers. o Bundle of projects: WIFIA ‘project’ is the whole 5 -year CIP W W W. E P A. G O V / W I F I A | 17

RESOURCES General information https: //www. epa. gov/wifia/learn-about-wifia-program • Program overview • Program benefits • Links to laws and regulations • Frequently asked questions Application materials https: //www. epa. gov/wifia/how-apply-wifia-assistance-0#materials • Letter of Interest form • Letter of Interest FAQ • Letter of Interest checklist • Sample financial pro forma • Sample Letter of Interest Resources https: //www. epa. gov/wifia-resources • Program Handbook • Recordings and presentations from past webinars • Template Term Sheet W W W. E P A. G O V / W I F I A | 18

CONTACT US Website: www. epa. gov/wifia Email: wifia@epa. gov Sign-up to receive announcements about the WIFIA program at https: //tinyurl. com/wifianews W W W. E P A. G O V / W I F I A | 19