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