CT2015-165 Collateral Change Approval

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D N R COLORADO 1313 Sherman Street John Hickenlooper, Governor Denver, CO 80203 CO Colorado Water Mike King, DNR Executive Director Conservation Board P (303)866-3441 Department of Natural Resources F(303)866-4474 James Eklund, CWCB Director TO: Colorado Water Conservation Board Members FROM: Kirk Russell, P.E., Finance Section Chief 11-�� Peg Mason, Loan Contracts Manager DATE: September 15-17, 2015 Board Meeting (Updated September 18, 2015) AGENDA ITEM: 24a. Change to Existing Loans Bull Creek Reservoir, Canal and Power Company - Collateral Change CT2015-165 (C150240) Introduction At the January 2007 CWCB Board meeting, the Board approved a loan to the Bull Creek Reservoir, Canal and Power Company (Company) to rehabilitate and enlarge Reservoir#4. The collateral for the Loan required shareholders in the Company to convey a security interest in their personal shares of Company stock. This extreme measure was due to CWCB staff's concern that the Company's increased assessments were not sustainable. At the time, Project costs were continuing to escalate, raising more concerns that the Project may not be affordable or even completed. Without Reservoir#4 the Company would likely have dissolved. The Project was substantially completed in September of 2011, considerably over budget and two years late. At the time of substantial completion, a lien was placed on the Company by the contractor that went bankrupt and by its subcontractors. The lien was settled out of court and the Company began repaying the loan per the repayment schedule as outlined in the contract. The Company has been in compliance with the Loan Contract for four years and has requested CWCB remove the requirement to have its shareholders personally secure the loan with personal stock certificates. (See attached J. Groo Letter) During the last couple of years, the shareholders have bought and sold shares of Company stock and found the complexities related to the CWCB collateral to be confusing, which impacts buyer confidence and price. It is staff's opinion that making the change as requested may reduce the risk of default by allowing shareholders the ability to sell shares as necessary to those that can afford them. Since Reservoir#4 construction is complete and the Company has proven the ability to repay the loan, staff agrees that the excess collateral is no longer necessary to secure the loan. The Company has demonstrated a history of annual assessments at a level high enough to operate and repay the CWCB loan. In September 2015, the Company made an advance principal payment, further demonstrating the ability to repay the loan. The original borrowed amount was $1,801,630 it now has a current balance of $1,699,038.94. Staff Recommendation to Change Collateral (Board approved Staff Recommendation on September 17, 2015) Upon payment of the 2016 annual payment, the Loan Contract collateral shall be changed to a pledge of assessment revenues backed by an assessment covenant and the Company's storage water rights. This is in compliance with the CWCB Financial Policy#5. of Coto Interstate Compact Compliance • Watershed Protection • Flood Planning a Mitigation • Stream a Lake Protection I Water Project Loans Et Grants •Water Modeling • Conservation a Drought Planning •Water Supply Planning I * � .1876 4-