Pure Cycle Corporation · NASDAQ:PCYO
Pure Cycle — NYSSA Presentation (December 2004)
32 slides from Pure Cycle's conference presentation, Dec 2, 2004
Slide 1: PureCycle Corporation: A Water and Wastewater Management Company
PureCycle R Corporation A Water and Wastewater Management Company 1
Slide 2: Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
“SAFE HARBOR” STATEMENT UNDER THE UNITED STATES PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Statements that are not historical facts contained in this presentation are forward looking statements involving risk and uncertainties that could cause actual results to differ from projected results. F
Slide 3: Bottled water as delivery device
• Delivery device • Sales of bottled water exceed those of beer, coffee and milk – $8.3 Billion in 2003 • 60% of market held by Nestlé, Coca Cola and Pepsi 3
Slide 4: Public perception, source of supply, consumer advocacy
• Public’s perception of quality • Source of supply • Consumer advocacy protection of pricing at municipal level 4
Slide 5: Value: Debate about regulation
PureCycle Corporation Value Debate about regulation ¾ Unregulated – market forces govern commodity and supply and demand ¾ Regulated – water must be exempt from market forces; essential to life; a basic human right 5
Slide 6: Value: Investor Owned Utilities
PureCycle Corporation Value Investor Owned Utilities (Regulated Business Segments) ¾ Conflict between maximizing shareholder value and pricing pressures from area PUC ¾ Increasing regulation leads to increased cost of service 6
Slide 7: In Colorado water is a scarce commodity
PureCycle Corporation Value In Colorado water is a scarce commodity ¾ Water laws defined at the State level ¾ Ownership of water established as real property rights • Surface Water – Doctrine of Prior Appropriations • Groundwater – Mineral Interest 7
Slide 8: Prior Appropriation – Surface Water
Ownership of Water Prior Appropriation – Surface Water (First in time, First in right) Í Junior water rights Í Average flow of stream Í 1863 “senior” water right Í 1852 “senior” water right Gage of the River 8
Slide 9: Groundwater Law
Ownership of Water Groundwater Law Ownership of groundwater tied to ownership of land and other “mineral” interests beneath the surface. Water and other mineral rights are separable from property. 9
Slide 10: Colorado water is defined as a real property interest
PureCycle Corporation Value Colorado water is defined as a real property interest ¾ PUC has intentionally not interfered with real property interests and regulating what a willing buyer and willing seller transact for the interests. ¾ Water rights cannot be condemned and are not subject to eminent d
Slide 11: Business Drivers
PureCycle Corporation Business Drivers ¾ PureCycle holds the largest unallocated portfolio of water in the Denver area ¾ PureCycle’s business interests are in two primary segments: • Design, construction, operation and maintenance of our water systems • Growth - Adding new connections to our water s
Slide 12: Colorado Municipal Structures
PureCycle Corporation Colorado Municipal Structures ¾ Colorado is a sales tax driven state • Modest property taxes • Modest income taxes • 70% of municipal revenues derived from sales taxes ¾ Inefficient government: Denver metropolitan area has over 55 separate governing bodies, each with separate w
Slide 13: Water Supply Characteristics
PureCycle Corporation Water Supply Characteristics ¾ 1990 ~ 2000 produced the wettest 10-year period on record • Tremendous growth • Tightening water supplies • Conservation measures: • Smaller irrigated lawns • Low flow toilets • High efficiency showers • Xeriscaping • Reallocate demand characteris
Slide 14: Drought Impacts
PureCycle Corporation Drought Impacts ¾ 2001 ~ 2003 produced the worst drought in 300 years ¾ Water providers hit with increasing demands and reduced water availability ¾ Invalidated lower consumption trends ¾ Threat of over-allocated portfolios ¾ Cities/counties will not consider annexation or re-z
Slide 15: Business Drivers
PureCycle Corporation Business Drivers ¾ More properties looking for water than water available to serve properties ¾ Denver area growth patterns • Current population of 2.5 Million people • Projected 2025 population of 3.8 Million people resulting in the demand for an additional 350,000 SFE. 15
Slide 16: Lowry Range Vicinity Map
Denver I-76 Int’l Airport Interstate 70 Sky E-470 Ranch Lowry Range I-70 Vicinity Map Downtown E-470 I-70 Denver I-225 Aurora I-25 Aurora Lowry Range Denver Tech Center • Property is located 12 miles south of Denver International Airport in the southeast metropolitan area which is the fastest growin
Slide 17: Development Trends: Projected Land Absorption
Development Trends Denver I-76 Int’l Projected Land Airport Interstate 70 Absorption* Sky Ranch I-70 • 6 sections urbanize each I-70 Downtown year in the Denver Denver E-470 Metropolitan area I-225 Aurora I-25 • 20,000 single family equivalent permits Aurora Lowry obtained each year Range Denver Tec
Slide 18: Development Trends: Lowry Range Service Area
Adams County / City of Aurora Sky Ranch Interstate 70 Development Trends Weimer Visser 6th Ave. Hills at Visser Projected Land Absorption* Sky Ranch Haysemount Rd. City of Aurora Marsh Growth Area Unincorporated Arapahoe County Initial Export ¾ 70% of all development occurs south Water Pipeline Watk
Slide 19: Water Privatization Activities
PureCycle Corporation Water Privatization Activities • 1996 Water Privatization Agreement between the State of Colorado, Rangeview Metropolitan District, and PureCycle Corporation • 85-year contract which grants PureCycle the exclusive rights to provide water and wastewater service to the State Land
Slide 20: Lowry Range Water Assets
PureCycle Corporation Lowry Range Water Assets Lowry Range Service Area Customers • 16,000 acre feet/year Groundwater • 1,650 acre feet/year Surface Water Capacity of 46,500 SFE Export Water Customers • 10,000 acre feet/year Groundwater • 1,650 acre feet/year Surface Water Capacity of 33,600 SFE Com
Slide 21: Balance Water Revenue with Land Development
PureCycle Corporation Balance Water Revenue with Land Development ¾ Water Rates are Market Based - optimize royalty income (average of 3 neighboring municipalities) ¾ Competitive Pricing for Land Development - optimize land development income 21
Slide 22: Market Pricing
PureCycle Corporation Market Pricing 2004 2004 Service Charges Rate Base Tap Fee Base Fee Consumption* District [$/SFE] [$/mo/SFE] [$/1,000 gal] East Cherry Creek $15,000 $27.00 $2.88 Parker Water & San. $12,795 $21.18 $1.88 Town of Castle Rock $ 9,469 $11.30 $3.48 Averages $12,420 $19.80 $2.75 * Av
Slide 23: Two Principal Revenue Streams
PureCycle Corporation Water Management Market Fee Instruments Two Principal Revenue Streams One-Time System Recurring Service Development (or Tap) Fees and Usage Charges Water $12,420 per SFE $20 per month + $2.75* per 1,000 gallons (about $580/yr per SFE) Wastewater $4,883 per SFE $34/month per SFE
Slide 24: Tap Fee Revenue
PureCycle Corporation Tap Fee Revenue Lowry Service Area 46,550 Connections Export Water 33,600 Combined Service 80,150 Connections (less 4,850 for sewer Combined Service Gross Revenue Service Price (Millions) Water $12,420/SFE $ 996 Wastewater $4,883/SFE $ 368 Total $1,364 24
Slide 25: Annual Service Revenue
PureCycle Corporation Annual Service Revenue Lowry Service Area 46,550 Connections Export Water 33,600 Combined LR Asset Service 80,150 Connections (less 4,850 for sewer) Combined LR Revenue Asset Service per SFE (Millions) Water $580/yr +/- $46.5 Wastewater $405/yr +/- $30.5 Totals $77. 0 /yr 25
Slide 26: Development Responsibilities
PureCycle Corporation Development Responsibilities PureCycle Developer Wholesale Water System Retail Water System (wells, storage, treatment) (distribution lines, meters) Wholesale Wastewater System Retail Wastewater System (treatment plant, lift stations) (collection sewers) 26
Slide 27: Margin Analysis
PureCycle Corporation Margin Analysis CAPITAL REVENUE PROJECTIONS (as % of Tap Fees) Facilities Costs = 24% Royalties (through build out) = 22% Net Margin = 54% OPERATING REVENUE PROJECTIONS (as % of service fees) System Operating Expenses = 39% Royalties (through build out) = 16% Net Operating Marg
Slide 28: Current Water Service Contracts
PureCycle Corporation Current Water Service Contracts Denver Sky Interstate 70 Denver I-225 Hills at Ranch Sky Ranch Centennial Aurora Lowry Range Service Area I-25 Export Water Customers (4,850 SFE) Sky Ranch PUD & Hills at Sky Ranch PUD 28
Slide 29: Current Water Service Contracts: Sky Ranch
PureCycle Corporation Current Water Service Contracts Sky Ranch and Hills at Sky Ranch • 4,850 Water Taps @ $12,420/SFE = $60,000,000 • Water service/use charges (at build out) $2,800,000/year 29
Slide 30: Water Management / Water Reuse Technology
Water Management / Water Reuse Technology Box Elder Wastewater Reclamation Facility Coal Creek Wastewater Reclamation Facility ¾ Dual-pipe water distribution system (potable & nonpotable) ¾ Two drainages to capture irrigation return flows ¾ Wastewater reclamation plants with zero discharge 30
Slide 31: Colorado Surface Water
Colorado Surface Water (Historic Average annual stream flows in acre feet) Most of the State’s water is located west of the continental divide in the Colorado River Basin, but the vast majority of its population is on the dryer, eastern side. Altogether, the rivers located in Western Colorado accoun
Slide 32: Other Assets: Colorado River Water / Paradise Water
Other Assets Colorado River Water / Paradise Water Loveland Fort Collins Greeley Longmont Interstate Colorado River Proposed 76 Paradise Dam & Boulder Glenwood Springs Reservoir Platte River (Near DeBeque) Denver Interstate 70 Colorado Springs Grand Junction Pueblo Arkansas River Interstate 25 • 70,