project report: achieving value for money britannia mine ... · pdf fileproject report:...

Project Report:Achieving Value for Money

Britannia Mine Water Treatment Plant

March 2005

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Purpose of this Document

As part of its commitment to public accountability,the Province releases a project report,demonstrating how value for money has beenachieved for each major public private partnershipagreement it enters on behalf of British Columbians.Value for money is a broad term that captures bothquantitative factors, such as costs, and qualitativefactors, such as service quality and protection ofpublic interests.

Value for money is one of six key principles guidingpublic sector capital asset management in BritishColumbia. The others are:

• sound fiscal and risk management;• strong accountability in a flexible and streamlined

process;• emphasis on service delivery;• serving the public interest; and• competition and transparency.

Since 2002, these principles have guided the B.C.public sector’s approach to acquiring and managingassets such as roads, bridges and health carefacilities. Under the Capital Asset ManagementFramework, ministries and other public bodies suchas health authorities are encouraged to consider allavailable options for meeting their serviceobjectives. They analyze the options and, afterconsidering the qualitative and quantitativeadvantages and disadvantages of each, choose theone that overall best meets service delivery needsand makes the best use of taxpayers’ dollars.

In some cases, the best option may be traditionalprocurement – where assets are purchased entirelywith taxpayers’ money and operated exclusively bythe public sector. In other cases, agencies may findinnovative ways to meet their service needs withoutacquiring capital assets. In all cases, agencies arepublicly accountable through regular budgeting,auditing and reporting processes.

In all of its procurement processes, including publicprivate partnership agreements, the Province iscommitted to a high standard of public disclosure toensure accountability. This report describes therationale, objectives and processes that led to theuse of a public private partnership for the BritanniaMine Water Treatment Plant Project, giving thepublic a clear sense of how and why the decisionwas reached to proceed with that option. It explainshow value for money was measured, and how it wasachieved, in the context of current marketconditions. Where applicable, it also compares keyaspects of the final agreement to other optionsconsidered for the project.

For more on the Province’s Capital AssetManagement Framework, go tohttp://www.fin.gov.bc.ca/tbs/camf.htm

For more on public private partnerships in B.C., goto www.partnershipsbc.ca

Project Report: Achieving Value for Money – Britannia Mine Water Treatment Plant

Highlights

The Britannia Mine water treatment plant is anintegral part of the Ministry of Sustainable ResourceManagement’s (MSRM) environmental remediationof an abandoned mine site between Vancouver andWhistler. Left untreated, contaminated water fromthe mine site would continue to deposit on average,600 kilograms of metals into Howe Sound on a dailybasis. The water treatment plant will treat up to500,000 cubic metres per year of contaminatedmine water before it drains into Howe Sound.

The Province’s approach to treating the water at theBritannia Mine site is a remarkable achievement fora number of reasons.

• The project is the first of its kind in B.C. – solving theproblem of contaminated water from an abandonedmine site through a public private partnership.

• The private partner, EPCOR Britannia Water Inc.(EPCOR), has introduced innovation related to thewater treatment process, plant operation andwater quality monitoring.

• The Province has successfully protectedtaxpayers from the risks involved with developingand implementing ways to effectively treat themine water, by sharing these risks with EPCOR.

• This project demonstrates that value for moneycan be achieved with smaller scale publicprivate partnerships. The net present valuelifecycle cost of the project is $27.2 million,which is $10 million less than the estimated cost ofcompleting the plant through traditional methods.

Achieving Value for Money

The Britannia Mine water treatment plant will bedesigned, built, financed and operated as a publicprivate partnership, and is part of a largerremediation effort being managed by the Ministry ofSustainable Resource Management (MSRM).

When compared to traditional delivery of the treatmentplant, the partnership agreement with EPCOR:

• reflects lifecycle savings because of EPCOR’sexperience in water treatment;

• provides technological innovation that reducescosts by, for example, reducing the amount ofchemicals needed to treat the water, and reducingsite electricity costs by developing a small hydrogeneration plant that will produce electricity fromthe contaminated water as it flows from the mineand into the water treatment plant;

• ensures regulatory compliance by transferring the risk of financial penalties for non-complianceto EPCOR.

In short, the Province will have a better watertreatment plant, at a lower cost and with less risk totaxpayers, by entering into a partnership with EPCORBritannia Water Inc.

Key Terms of the Agreement

The Britannia Mine Water Treatment Plant Projectinvolves the design, construction, financing andoperation of a water treatment plant, over a 21 yearperiod. Through a public private partnership betweenMSRM and EPCOR:

• EPCOR will design and build the plant within one year,and operate the plant for 20 years after construction;

• EPCOR will finance the design, construction,operation and maintenance of the plant;

• MSRM will provide performance-based payments toEPCOR, with the amount calculated based on thevolume of water processed, and the ability of theplant to meet environmental regulations;

• Performance payments will not begin until the plantis in operation;

• EPCOR will take on responsibility for much of therisk associated with designing, building andoperating the plant, such as the risk of incurringfinancial penalties if the plant is not built and inoperation on time, or if the treatment of water is notin compliance with environmental regulations.

EPCOR works with municipalities and companiesacross western Canada. In B.C., the company provideswater and wastewater services to the District of Sooke,the District of Port Hardy and the town of Lytton.

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Table of Contents

1. Project Background and Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

2. Competitive Selection Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

3. The Final Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

4. Ongoing Monitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

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1. Project Background and Objectives

Background

Contaminated water from the abandoned BritanniaMine site has been flowing into Howe Sound.

The Britannia Mine is located approximately 48 kilometres north of Vancouver at Britannia Beach,on the east shore of Howe Sound. The BritanniaMine was one of the biggest copper producers inthe British Empire, operated from 1904 to 1963 bythe Britannia Mining and Smelting Company Ltd.

and by AnacondaMining Companyfrom 1963 untilpermanent shutdownin 1974.

During operation,approximately 80kilometres ofunderground

workings and five open pits were excavated, withthe ore processed in the milling facilities at BritanniaBeach. Exposure of the excavations to air and waterresults in the generation of acid rock drainage(ARD), which has been flowing into Howe Soundand adversely affecting the marine habitat offshoreof Britannia Creek. The heavy metals in the water,such as copper, zinc and cadmium, are toxic to themarine life on the foreshore and to juvenile salmonwhich use the area for feeding.

In 2001, the Province entered into an agreementwith the former mine operators where the operatorscontributed $30 million toward the remediation of thesite, in exchange for a provincial guarantee that theywould not be held liable for future issues with the site.This agreement transferred the portion of responsibilityfor site remediation, which previously belonged tothe mine operators, to the Province. Responsibilityfor managing the Britannia Mine Remediation Projectwas assigned to the Ministry of SustainableResource Management early in 2003, with theMinistry of Water, Land and Air Protection retainingregulatory responsibility under the EnvironmentalManagement Act.

The Province is proceeding with a comprehensiveremediation project, including the development andoperation of a water treatment plant.

One of the key components of the Britannia MineRemediation Project is the water treatment plantwhich will treat the ARD before the water entersHowe Sound. Most of the ARD is generated withinthe mine workings, and requires ongoing treatment.Other remedial actions being implemented byMSRM are addressing other aspects of minerehabilitation and clean up, leaving water treatment asthe primary aspect requiring long term management.

Project Objectives

MSRM defined objectives related to the outcomesthe water treatment plant needs to achieve.

In its development of the overall remediationproject, MSRM specified objectives for the watertreatment plant. These objectives formed the basisfor the requirements of the proponents’ proposals,as well as for the evaluation criteria used in thecompetitive selection process. The developmentand operation of a water treatment plant isexpected to achieve the following objectives:

• ensure the quality of treated water is compliantwith regulations under the EnvironmentalManagement Act;

• minimize any residual potential environmentalliabilities to the Province;

• establish public confidence in the treatment ofARD at the site;

• optimize the Province’s lifecycle investment; and• protect taxpayers from cost over-runs, schedule

delays, and costs related to water treatmenttechnology and plant operation.

The historic Britannia Mine site

2 Project Report: Achieving Value for Money – Britannia Mine Water Treatment Plant

Options Analysis

The government considered two options fordesigning, building, financing and operating the plant.

Given the size, scope and risks involved with thewater treatment plant, two delivery options wereconsidered feasible by MSRM for this project.

Traditional Delivery:

For the water treatment plant, traditional deliverywould have involved selecting a private sector firmto work in the Province’s best interests to deliver theproject as efficiently as possible. The private sectorfirm would not select the technology to beimplemented, but would design the plant based onthe technology and effluent standards selected bythe Province. The private firm would coordinateengineers, designers and constructors. The longterm risks associated with the design, constructionand performance of the plant would remain with theProvince.

Responsibility for operating the plant would remainwith the Province after the completion of the project.Under this model, the Province would likely havecontracted operations of the plant to the privatesector for short, renewable terms.

Alternative Delivery

Design, Build, Finance, and Operate – Through along term agreement with the Province, the privatesector would finance, design, build and operate thewater treatment plant. This alternative delivery modelincludes the following features:

• private sector teams compete for the work,providing competitive proposals includingproposed performance payments to cover theircapital and operating costs;

• private sector teams compete to determine thebest technology and are incented to applycontinuous upgrades as technology evolves;

• because the private partner invests their ownequity, and relies on performance-basedpayments, they have more incentive to deliver thelong term outcomes the Province requires. Theirreturn on investment is based on their performance.

Preferred Option

In October 2003, the Province approved therecommendation that delivery of the Britannia Minewater treatment plant be pursued as a publicprivate partnership.

Expected Benefits

As part of the options analysis process, expectedbenefits of the delivery models were considered.The primary expected benefits of using the publicprivate partnership model were:

• significant cost savings over the life of the project;• using the financing and payment structures to link

payments to performance. This allows effectivesharing of the risks associated with treating thewater, between the province and the privatesector partner; and

• the application of technological innovationsrelated to the design of the plant, the treatmentof the water, and the management of theresulting sludge.

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2. Competitive Selection Process

EPCOR was chosen from an initial field of six teams.

EPCOR Water Services Inc. was chosen through a fair, transparent, and competitive selection process,consistent with provincial practices and policies. All competitive selection documents are available atwww.partnershipsbc.ca

Competitive Selection Process

Competitive Selection Stage

Request for Expressions ofInterest issued

Request for Proposals issued

Request for Proposals closed

Preferred proponent selected

Negotiations

Agreement signed

Process

The request for expressions ofinterest was advertised nationally.Expressions of interest were received,evaluated, and short-listed.

The short-listed teams were invited tosubmit proposals.

Proposals were evaluated.

The draft concession agreement wasproduced.

A final project agreement wasnegotiated with the proponent.

Number ofProponent Teams

Six

Three

One

Timing

January 2004

May 2004

September 2004

November 2004

November 2004 –January 2005

January 2005

The Expressions of Interest were evaluated by anevaluation committee, accountable to the BritanniaMine Water Treatment Plant Project steeringcommittee. The steering committee includedmembers from Partnerships BC and from MSRM.The evaluation committee included MSRM,Partnerships BC and expert private sector advisorswho provided expertise in competitive selectionprocess, water treatment plant engineering andoperation, environmental remediation, and projectfinancing. Expressions of Interest were evaluatedbased on qualifications; experience; use ofdemonstrated, innovative technology; proponent teamorganization and structure; and financial capacity.

Three qualified teams were short-listed to move to thenext stage in the selection process. The short-listedteams included a combination of local, national andinternational companies, and are listed below:

• AMEC Americas Ltd., Ledcor Projects Inc. andSquamish First Nations;

• EPCOR Water Services Inc. and Team,including Stantec Consulting Ltd., LockerbieStanley Inc., CEMI and BioteQ EnvironmentalTechnologies;

• Terasen Utility Services Inc., including MapleReinders Inc., Knight Piesold Ltd., Earth TechCanada Ltd., Toby Russell Buckwell & partnersarchitects, and Unipure Europe Ltd.

The three teams submitted proposals in September2004. Proposals were reviewed to ensure they metall the mandatory requirements, policies andprocedures and were then reviewed by theevaluation committee, reporting to the projectsteering committee, as described above.


Evaluation was based primarily on cost, with atechnical pass/fail component, and a number ofqualitative criteria. Evaluation criteria are defined indetail in the Request for Proposals. Evaluationteams completed quantitative and qualitativeevaluations, and submitted their recommendationsto the evaluation committee. The evaluationcommittee used these reports to select thepreferred proponent.

Fairness Auditor

MSRM and Partnerships BC engaged a fairnessauditor to observe the evaluation process. Theauditor’s mandate was to act as an independentobserver to the competitive selection process toensure the process was fair and without bias. Thefairness auditor did not raise any concerns.

A conflict of interest adjudicator was also appointedfor the evaluation process, to ensure there were noperceived or actual conflicts of interest.

Competitive selection results

In November 2004, EPCOR Water Services wasselected as the preferred proponent and detailednegotiations led to a final agreement beingreached on January 12, 2005.

Competitive Selection Costs

True cooperation between MSRM, PartnershipsBC, and EPCOR helped to reduce thecompetitive selection costs.

The Ministry engaged a number of advisors to assistin the competitive selection process. The associatedcost of all advisors, including Partnerships BC, isapproximately $900,000. This representsapproximately three per cent of the project’s netpresent value, or six per cent of the project’s capitalcost. Competitive selection costs are similar to theestimated cost of traditional procurement. Theproject team developed a draft project agreementas the basis for negotiation with the preferredproponent. By having the agreement at a nearly finalstage when negotiations began, and through thecooperative approach of MSRM and EPCOR, theproject team was able to keep competitive selectioncosts relatively low. As a result, the final agreementand the relationship between MSRM and EPCORreflects strong partnering.

One of the benefits gained in this project is theability to apply the model developed for theBritannia Mine water treatment plant to similarprojects. Partnerships BC expects to apply bestpractices gained on this project to future projects,thereby reducing costs for future projects.

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3. The Final Agreement

The Partner

EPCOR works with municipalities and companies across western Canada. In B.C., the company provideswater and wastewater services to the District of Sooke, the District of Port Hardy and the town of Lytton.Visit www.EPCOR.ca for more company details. The EPCOR team includes Stantec Consulting Ltd.,Lockerbie Stanley Inc., CEMI and BioteQ Environmental Technologies.

3D renderings of theWater Treatment Plant


Terms ofContract

Overall Terms

Future RevenueSharing

Legal andCommercialStructure

ContractTerminationProvisions

End of TermProvisions

Guarantees andIndemnities

IntellectualProperty

Audits

Key Terms of the Project Agreement

• A one year design and construction term is followed by a 20 year operations and maintenance term.• The total cost of the contract (discounted at 8.12 per cent) is $27.2 million, plus cash allowance

items in the amount of $1.9 million.• This cost can fluctuate based on water volume, future prices of specific inputs (such as chemicals,

utilities, and transportation costs of sludge) and the actual costs of the cash allowance itemswhich are outside of the scope of the final agreement.

• Throughout the term of the agreement, the Province owns the plant and all associatedinfrastructure involved in the project.

• EPCOR is solely responsible for obtaining financing as and when it may be required to design,build and operate the plant.

• EPCOR will construct the plant within one year.• Once the plant is producing water at the required compliance standard, the Province will pay

EPCOR a monthly payment based on volume of water treated and specific performanceindicators, such as water quality.

• The Province will share in any revenue generated by future innovations.

• EPCOR Britannia Water Inc. is a wholly owned subsidiary of EPCOR Water Services Inc., whichis an Alberta company with assets in excess of $740 million.

• The B.C. head office of EPCOR Water Services Inc. is located in Richmond, B.C.

• The project agreement can be terminated by the Province, by operator default or by mutualagreement.

• The plant must be in an acceptable condition at the end of the agreement, recognizing that it willbe a 20 year old plant.

• At the end of the agreement, the Province can: - renew the contract with EPCOR;- assume operational responsibility for the plant; or- put the contract out to tender, using a traditional or alternative delivery model.

• EPCOR Water Services has provided a parental guarantee to EPCOR Britannia Water Inc.• The permits for the effluent discharge and sludge disposal will be in the Province’s name;

however, EPCOR assumes full responsibility for its actions under these permits.

• In the event of a default, the Province has all rights to intellectual property involved in theBritannia Mine water treatment plant – to be used only in the Britannia Mine plant.

• The Province has the right to conduct spot audits on the plant whenever it likes, providing anotice period of approximately 24 hours.

• The Province will complete annual reviews as specified in the project agreement.

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Financial Summary

The Britannia Mine Water Treatment Plant Projectachieves value for money because EPCOR WaterServices Inc. has committed to finance, design andbuild the plant in one year, and operate it for 20years, for a cost of $27.2 million (net present value).This compares favourably to the Province’s estimateof $39.7 million to complete and operate the plantunder traditional delivery methods. In addition, asexplained throughout this report, the public privatepartnership model is expected to deliver betterresults for the key criteria for this project: regulatorycompliance, innovation and creativity, risk managementand lifecycle cost.

Comparison of Costs

The table above shows the final net present value1

for both traditional delivery and the final agreementnegotiated with EPCOR. Costs of traditional deliveryare estimated through the use of a public sectorcomparator (PSC). A PSC is a risk-adjusted estimateof overall project costs in today’s dollars, if theproject were delivered wholly by the public sector.Net present value was calculated with a discountrate of 8.12 per cent. In developing public sectorcomparators, Partnerships BC recommends using adiscount rate that is as close as possible to theestimated private sector weighted average cost ofcapital for projects with a similar scale, businesstype and comparable risk profile. The discount rate

Capital Cost Operating Cost Total*

EPCOR $15.5 million $11.6 million $27.2 million

Traditional $18.2 million $21.5. million $39.7 millionDelivery

*Net present value, discounted at 8.12 per cent.

used in this analysis is based upon an assumedreal risk rate of six per cent per year plus annualaverage inflation of two per cent per year. The PSCwas discounted at a rate of 8.12 per cent, to accountfor a higher level of risk. This rate was provided tothe proponents and they were required to use it inthe financial component of their proposals.

The public sector comparator capital costs weredefined in June 2004 and adjusted for inflation toalign with the date provided to proponents. EPCORcapital costs are as proposed, including changesas a result of negotiations.

Operating costs of the water treatment plant duringthe first year of operations were developed for thePSC and then compared to the proposals received.The operating term for both EPCOR and the PSC is20 years and operating costs are inflated by two percent per year. The project agreement links operationspayments to the Vancouver-based Consumer PriceIndex, as published by Statistics Canada.

Changes to the Project

Major public sector capital projects are typicallyapproved at the business case stage. During thetime between this approval and signing the finalagreement, various factors affecting the project costmay change. Changes are generally in the areas ofscope, market and negotiated changes.

For this project, there were no significant changes inthe market. However, two changes were maderelated to scope, resulting in increased costs:

• An increase in the capital costs for enhancedarchitectural design for the plant;

• An alternative plan for sludge disposal whichincreased transportation costs, and was requiredbecause of geotechnical concerns with the initialproposed site.

1 Net present value means the discounting of projected cash flows to express future amounts in today’s dollars.


Performance Payments

The Province will pay EPCOR a monthly paymentwhich is comprised of:

• A base payment to cover predefined lifecyclecapital costs. These costs include return on andreturn of capital, repair and replacement, labourcosts and overhead. This amount wascompetitively bid and EPCOR is contractuallybound to deliver and maintain the water treatmentplant within the boundaries of this price. EPCORwill pay for any cost over-runs and will retain anysavings. Effectively, the capital cost risk of theplant has been transferred to EPCOR.

• In addition to the monthly base payment,adjustments will be made with respect tooperating costs related to chemicals, utilities andthe cost of sludge transportation and disposal.These costs are all variable inputs to the process.The levels of usage are directly related to thevolume of water the plant processes. The morewater processed, the higher the usage ofchemicals, utilities and sludge transport anddisposal. The above listed operating costs arebased on efficiency factors which werecompetitively bid during the selection process.For example, EPCOR will use no more than aspecified volume of lime per cubic meter of waterprocessed. If EPCOR has underestimated thisratio, it must pay the cost of additional lime. Thisprotects the Province from expenses related to aninefficiently operated plant. If EPCOR canincrease its efficiencies and in effect, lower itscosts, it can retain the revenue gained as a result.

• A performance payment linked to the waterquality and other performance specifications.

Risk Allocation

Risks have been allocated to the partner bestable to cost-effectively manage them.

Sharing risks between the public and privatepartners is a fundamental goal of public privatepartnerships. Sharing of risks leads to a morecost-effective project overall, because the partnerwho bears the risk has a strong financial incentiveto reduce the probability or severity of the riskwherever possible.

For example, the public sector is better able toassume the risks of long term environmentalliabilities, the possibility of major catastrophicevents, changes to laws and regulation, and theunpredictable nature of the amount of water that willflow through the plant. Similarly, the private partneris better able to manage construction, operations,maintenance and repair costs related to the plant;issues with the water treatment technology, andfinancing of the project.

The following table provides an overview of riskallocation. Detailed risk allocation is defined in theproject agreement.

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Comparisons

Proposals received were compared to ahypothetical traditional delivery model to assesswhether value for money could be achieved.

Value for money is a term that captures bothquantitative factors, such as costs, and qualitativefactors such as service quality. Partnerships BCrecommends looking at a broad range of factors indetermining whether a project offers value formoney. For the water treatment plant project,proposals received were compared against theexpected results of a hypothetical traditional publicsector delivery model, to confirm the expectedbenefits of the public private partnership approach.

The criteria used in this analysis, based on theproject objectives, were:

• regulatory compliance;• innovation and creativity;• risk management; and• financial analysis.

Risk Description EPCOR Province

Operations, maintenance and repair costs ✔

Construction costs and schedules ✔

Water treatment technology (effectiveness and efficiency) ✔

Project financing ✔

Catastrophic events ✔

Project scope definition and changes, including changes to government regulations ✔

Risks associated with the existing mine infrastructure, such as the possible ✔

collapse of the inner workings

Volume Risk: the performance payment to EPCOR is dependent on the volume ✔

of water treated. This means that as volume of water treated increases, so does the payment to EPCOR.

Environmental Liability: EPCOR is environmentally liable throughout the water ✔ ✔

treatment process. Once the treatment process is complete and the sludge is disposed of in an appropriate manner, the Province remains ultimately liable under the Energy and Mines Act as owner of the site.

Inflation Risk ✔ ✔

Risk associated with the water chemistry ✔ ✔

Geotechnical Risk ✔ ✔

• Unanticipated subsurface conditions for plant site only transferred to EPCOR• Geotechnical risk associated with outfall (the pipe that discharges the treated

water into Howe Sound) remains with the Province.


Regulatory Compliance

Both the traditional and alternative delivery modelsprovided financial incentive to ensure the plantwould meet the permit requirements for waterquality, because the operator would be paid forachieving compliance and financially penalized fornon-compliance. The approximate daily penalty fornot complying with the permit is $7,700.

However, under the traditional model, the operatorwould not have made a capital investment in theproject. Under the alternative model, the financialpenalty would directly affect the private partner’sreturn on investment.

Additionally, under the alternative delivery model,the private partner would have the ability toinfluence the design and construction of the plant,resulting in a more effective transfer of risk withless opportunity for the operator to dispute plantnon-compliance.

MSRM and Partnerships BC concluded that theagreement with EPCOR would result in the bestregulatory compliance because EPCOR would havethe responsibility to design, construct, and operatethe plant over the long term, and would bear thefinancial risk of non-compliance.

Innovation and Creativity

Under traditional delivery, the Province’s projectteam would determine and define the watertreatment technology and the contractor wouldmanage the design and construction process,working in the Province’s best interests to deliver theproject as efficiently as possible. However, theeventual plant operators would have no input intothe design and construction of the plant. In addition,due to the short term nature of such operatingcontracts, the operator would not have a sufficientperiod of time to introduce, and realize gains from,efficiencies in operations.

Under alternative delivery, the competitive selectionprocess would be managed to maximize innovationin both plant design and water treatment technology.

The private partner would be financially motivated todesign, build and maintain the plant so that it couldbe operated as efficiently as possible.

The final agreement with EPCOR provided the bestopportunity for innovation.

• EPCOR will install a state of the art SCADA(supervisory control and data acquisition) systemwhich will use computers to monitor the plantoperations and water quality on a continuousbasis. The system displays data in real-time and this data will be available to the Province ona secure website. Additionally, historic data andanalysis will be available to the public, over the Internet.

• EPCOR will use a standard high density sludgeprocess to treat the water, but expects tominimize the use of treatment chemical (lime) andlower overall costs.

• EPCOR will build and operate a small hydroelectric plant that will use the contaminated waterflowing from the mine workings to generate someof the electricity needed to run the treatmentplant. This clean power source will substantiallyreduce the costs of electricity for the plant.

• EPCOR will test the feasibility of metal recoveryand sludge re-use.

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Risk Management

Under traditional delivery, there would be minimaltransfer of risk during the design and constructionphase of the project. Although the contractor wouldwork to provide the best value to the Province, thecompany would not be financially accountable forlong term construction and design risks to the sameextent as a partner under a DBFO agreement.Under traditional delivery, during periods of plantnon-compliance, the operator could claim that thenon-compliance was the result of either the designor construction of the plant.

Under the alternative delivery process, the operatorwould have involvement in the design andconstruction of the plant on a whole lifecycle costingbasis, resulting in a more effective allocation of risk.

Based on this analysis, Partnerships BC concludedthat the final agreement with EPCOR provided betterrisk management, since risk sharing is inherent inthe public private partnership model.

Financial Analysis

Financial analysis was completed through the use ofa public sector comparator, or PSC.

The PSC estimated that the net present valuelifecycle cost of the project under traditional deliverywould be $39.7 million. EPCOR’s final price was$27.2 million. Additionally, the alternative deliverymodel would result in the private partner beingfinancially motivated to guarantee regulatorycompliance. Use of the alternative delivery modelwould commit the private partner over the long term,providing stability to the project.

Budget and Accounting Treatment

A liability associated with the remediation hasalready been recorded on the Province’s financialstatements. This means that all expenses associatedwith the project are classified as operating expensessince the funds will be used to work towardsrestoring the land to its original state. Due to theremediation aspect of this project, the plant will notbe a capital asset and annual depreciation expensesare not required.

The impacts of the Britannia Mine water treatmentplant on government financial reporting would havebeen the same under either the traditional oralternative delivery model.


4. Ongoing Monitoring

MSRM is responsible for ongoing management ofthe project agreement, to ensure delivery andoperation of the plant, and compliance withenvironmental standards.

The Province will receive monthly reports fromEPCOR detailing the operation of the plant. Thesereports will provide information about the volume ofwater treated, and the quality of the water. Therequired water quality is defined in the Province’sdischarge permit, issued and managed by theMinistry of Water, Land and Air Protection.

EPCOR will continuously measure and electronicallyrecord the volume of water processed by the plant.EPCOR is required to perform frequent analysis forlevels of copper, zinc and aluminum, and for phlevels and turbidity. All analysis will be completed incompliance with provincial regulations andrequirements. All of these measurements will beavailable online in real time; historical results willalso be available online. If EPCOR fails to meetmonitoring and reporting requirements as definedin the final agreement, it will be subject toadjustments to the monthly payment formula,resulting in a lower payment.

The Province will conduct long term monitoring to ensure that the overall remediation activities are effective.

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