Middletown Borough

Project Overview
June 2015

The Value of Water

WATER INFRASTRUCTURE RATED

$1.3 trillion to upgrade our water and waste water systems

over the next 25 years

The Value of Water

U.S. averages 700 water main

breaks daily, say experts
According to the American Society of
Civil Engineers, each day, leaking
pipes account for an estimated 7
billion gallons of water
According to the EPA, in biggest
systems across the country, 30% of
water pipes are 40 to 80 years old
There is approximately 184,000
feet of pipe in Middletown.
98,800 feet have been in the
ground since before 1961 (over
55 years)

Middletown Water & Sewer System

Water System
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Sewer System

United Water/ Suez Environnement

Full Service Management & Operation

Regulated
UWNJ
Water Utility

Provides water services in US

for over 140 years
Serves 5.7 million people
Revenue $900M
Total assets $2.5B
Three Business lines:
Regulated Services:
20 regulated utilities
Environmental Services:
90+ O&M contracts
Technology Solutions
O&M West Basin
Reuse Facility
5

O&M
Indianapolis
Wastewater System

Bayonne
Concession

United Water Pennsylvania

United Water
PA serves
the following
communities:

UWPA abuts it to the West

Middletown

Harrisburg
Bethel
Bloomsburg
Chambersburg
Dallas
Mechanicsburg
and now

Middletown!

KKR Overview
Established in 1976, Kohlberg Kravis Roberts & Co. L.P. (KKR) is a leading global
investment firm with industry-leading investment experience, in-depth industry
knowledge, sophisticated processes for growing and improving businesses, and a strong
culture committed to teamwork

Leading investment firm

Private Equity, Infrastructure & Natural Resources,
Credit & Mezzanine, Public Equity

Global presence
Offices in 15 major cities in 11 countries across 5 continents

One-firm culture that evolves, learns, and innovates

Adaptive to change

Relationship-driven approach
Sourcing investment opportunities
Partnering with clients

Aligned with our partners

Eat our own cooking
Economic incentives driven by results
Focused on managing stakeholder interests

Assets Under Management

As of December 31, 2012
($ in billions)

Middletown Water and Wastewater System Overview

Population served: 9,400 people

Customers: 2,700
Groundwater Wells: 6
Storage Tanks: 3
WWTP Capacity: 2.2 MGD
Service Area: 2.1 sq-miles
Water Main: 36.2 miles
Sewer Mains: 24.8 miles

Middletown System Overview

The Water and Wastewater systems are old, but in relatively
good shape for a municipal system
Water System
Groundwater source is of sufficient capacity
Flood Plain project for elevation of Wells # 1 and 2 and related equipment
out of flood plain
2,500 l.f. of water main replacement projects annually

Sewer System
WWTP is new
Separate Sewer System with high Infiltration/Inflow
Signs of illegal stormwater connections

Staffing
9 full-time employees and 1 part-time employees

Project Challenges & General Objectives

Challenges
Unfunded Pension Liability &
System-Related Debt
Credit quality: Borough needed
funds for other services
While highly qualified staff has
managed the utility there is not
a lot of bench strength

Objectives
Mechanisms for guaranteed
capital improvements
Improve asset condition and
customer service
Strengthen balance sheet and
retire debt
Steady and predictable rate
rises for consumers
Maintain utility jobs and
improve staff training

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Middletown Transaction Highlights

Upfront payment - $43 Million
Annual payments
Guaranteed capital funding
Borough still owns systems
Predictable rates
No layoffs
Professional system operator

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Long-term Contract Provisions Provide

Customers Greater Reliability And Stability

Revenue path stabilizes future rate increases and provides

flexibility to guarantee ongoing investment
ue
Actual Reven

irement
u
q
e
R
e
u
n
e
Defined Rev

Improved system
efficiency reduces
operating costs

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Capital investment
reduces risk of
service disruption
and protects the
environment

Uncompleted Work (Borough Implemented

Pre-Concession)

oFlood protection project for wells #1 and #2 and related

equipment
oGenerator installations
oStructural modifications to the old water treatment plant/
well #1 controls
oRt 230/Main Street water main replacement
oSpring Street water main replacement

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Capital Improvement Projects

Base CAPEX (Major
Maintenance Projects)

o Disinfection Systems - Gaseous

chlorine conversion
o Upgrades to Supervisory Control
and Data Acquisition (SCADA)
o Hydrant and valve replacements
o Geographic Information Systems
(GIS)
o Miscellaneous wastewater
equipment (pump replacements)
o Customer Service Window

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Capital Improvement Projects

Major CAPEX

oAgreement mandates 2,500 linear feet or water main

replacement per year and other capital improvements as

required to maintain the integrity and reliability of the
system

o Initial capital plan estimates this to be approximately $1.0

million a year
o A 5-year capital plan under development as stipulated in
the agreement

oProject by Project approval process

oThe Boroughs Required Capital Improvements trigger a
Capital Costs Recovery Charge (CCRC)
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Questions?

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