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88 Page 38 Facility Operations Contractor Selection Committee Report dated January 15, 2009 Updated pages 15-19 CRITICAL ISSUES ANALYSIS OF COMMODITY REVENUES AND THE REVENUE GUARANTEE The RFP required proposers to guarantee to the SBWMA an annual minimum of $6.75M in commodity sales revenues. After the Contractor has met the Revenue Guarantee, the SBWMA and the Contractor share the commodity revenues 75:25 respectivel y. The Revenue Guarantee is important because it assures revenue to the SBWMA during periods when com modity markets drop below the gu aranteed amount. Proposers were allowed to offer a Revenue Guarantee above the required minimum. Revenue Guarantee HBC offered a Revenue Guarantee of $1 0.1M while SBR offered $7.25M, a difference of $2.85M. To better assess the value of the $2.85M difference between HBC and SBR, the $/ton point at which the Revenue Guarantee becomes effective has been calculated based on the SBWMA's planned annual tonnag e of 84,320. As illustrated in Table 4, this calculation indicates that when com modity prices are at $119.78 per ton, HBR will generate $10.1 M incommodity revenue, an amount sufficient to satisfy their proposed Revenue Guarantee. At prices higher than $119.78, HBC will begin to share revenue with SBWMA at a ratio of 75:25. Likewise. when com modity prices are at $85.98 per ton, SBR will generate $7.25M in commodity revenue, an amount sufficient to satisfy their proposed Revenue Guarantee. At prices higher than $85.98, SBR will begin to share revenue with SBWMA at a ratio of 75:25. Table 4 R........... ::gJJ>>J~~;... '''.,. ....;HGu~~:hr:~ .: :. ,..':.:.. : . . ":. :;. .:.:.:. : , . : : < .:.:,.,..:.... ..:,. ',:.. :. '.:, ',.,:.. : .. HaC $1 o. 1 OM 84,320 $1 1 9.78 SBR $7.25 M 84,320 $85 .98 It should be noted that the full benefit of HBC's $2.85M difference in Revenue Guarantee is only effective when com modity prices are at or below $85.98 per ton. Because S BR shares 75% of the commodity revenue above $7.25M. w hen commodity prices are at or above $85.98 per ton the $2.85M difference between HBC and SBR's Revenue Guarantee is reduced gradually as commodity prices rise until reaching $119.78 per ton. At commodity prices at or above $119.78 per ton. the difference between HB C's and SBR's Revenue Guarantee is a constant $713K in commodity revenue per year more than SBR. This equates to $8.45 per ton (see Figure A for a pictorial presentation of this information). Commodity Revenue Section Uodated 3-30-09.doc~y-g~ ~2000 9:23 AM~2-f2M 1