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<br />88 <br />Page 33 <br /> <br />CRITICAL ISSUES <br /> <br />ANALYSIS OF COMMODITY REVENUES AND THE REVENUE GUARANTEE <br /> <br />The RFP required proposers to guarantee to the SBWMA an annual minimum of $6.75M in <br />commodity sales revenues. After the Contractor has met the Revenue Guarantee, the SBWMA <br />and the Contractor share the commodity revenues 75:25 respectively. The Revenue Guarantee <br />is important because it assures revenue to the SBWMA during periods when commodity <br />markets drop below the guaranteed amount. Proposers were allowed to offer a Revenue <br />Guarantee above the required minimum. <br /> <br />Revenue Guarantee <br />HBC offered a Revenue Guarantee of $10.1 M while SBR offered $7.25M, a difference of <br />$2.85M. Tg better assess the value of the $2.85M difference between HBC and SBR, the $/too <br />point at which the Revenue Guarantee becomes effective has been calculated based on the <br />SBWMA's planned annual tonnage of 84,320. As illustrated in Table 4, this calculation <br />indicates that when commodity prices are at $119.78 per ton, HBR will generate $10.1 M in <br />commodity revenue, an amount sufficient to satisfy their proposed Revenue Guarantee. At <br />prices higher than $119.78, HBC will begin to share revenue with SBWMA at a ratio of 75:25. <br />Likewise, when commodity prices are at $85.98 per ton, SBR will generate $7.25M in <br />commodity revenue, an amount sufficient to satisfy their proposed Revenue Guarantee. At <br />prices higher than $85.98, SBR will begin to share revenue with SBWMA at a ratio of 75:25. <br /> <br />Table 4 <br /> <br /> Revenue Tonnage Rev <br /> Guarantee Guarantee <br /> $rron <br />HBC $10.10M 84,320 $119.78 <br />SBR $7.25M 84,320 $85.98 <br /> <br />It should be noted that the full benefit of HBC's $2.85M difference in Revenue Guarantee is only <br />effective when commodity prices are at or below $85.98 per ton. Because SBR shares 75% of <br />the commodity revenue above $7.25M, when commodity prices are at or above $85.98 per ton <br />the $2.85M difference between HBC and SBR's Revenue Guarantee is reduced gradually as <br />commodity prices rise until reaching $119.78 per ton. At commodity prices at or above $119.78 <br />per ton, the difference between HBC's and SBR's Revenue Guarantee is a constant $713K in <br />commodity revenue per year more than SBR. This equates to $8.45 per ton (see Figure A for a <br />pictorial presentation of this information). <br /> <br />SBWMA - EC Report <br /> <br />Page <br />15 <br /> <br />1/15/2009 <br />