San Antonio Water System - SAWS Municipally-Owned Public Water Utility

Innovative Successes Largest Recycle System in the Nation First in Nation conversion from gas to energy Largest groundwater based ASR System in nation Largest inland desalination plant just completed International recognition for water conservation

40% Reduction in the last 30 years Gallons per Person per Day (GPCD) Continued Focus on Conservation 16,500 acre feet water savings planned by 2020 225 40% Reduction in the last 30 years Gallons per Person per Day (GPCD) 121 2014

Water Management - Planning for the Future Meeting water demands to sustain Regional economy Population Growth Drought and Sustainability Diversification Continued Water Conservation Maintaining Financial Strength Regulatory and Legal Uncertainty

Water Supply Investments Being Funded Add 63,440 Acre Feet of Supply to Water Supply Portfolio by 2020 Vista Ridge – Up to 50,000 AF by 2020 Brackish Desalination First Phase - 13,440 AF

Previously Planned Projects Project Name Year Planned Planned Yield (Ac-Ft) Net Yielded Applewhite Reservoir 1989 35,000 Simsboro Groundwater 1998 55,000 Regional Carrizo Groundwater 2000 62,600 11,688 Lower Guadalupe Project 2001 94,500 LCRA – SAWS Reservoir 2002 150,000 Vista Ridge 2011 50,000 TBD??

New Project Delivery Approach Recognize other tools available Limited experience with alternative project delivery Pursue private sector involvement Minimize or transfer risks Capital exposure Regulatory risk Construction and operational risk Local opposition Recognize cost to transfer risk

Vista Ridge Regional Water Project Long Term Diversified Supply Request for Competitive Sealed Proposals Issued in 2011 Nine Respondents to Public Bid 3 Finalists were interviewed in 2013 Vista Ridge Consortium (Abengoa & BlueWater) Long Term Production & Export Permits Localized Support with over 3,400 leases

Texas’ First Major Water P3 Project Components Wells, Transmission Pipeline, Pumps, Storage 50,000 Acre Feet 140 Mile Pipeline “Water Transmission and Purchase Agreement” Participants San Antonio Water System (Buyer) Vista Ridge LLC (Seller) Equity, Builder and Operator Entities Blue Water (Groundwater Lessee) Central Texas Regional Water Supply Corporation (Non-profit for Eminent Domain, Tax Exemptions)

Contract Provisions Up to 50,000 ac-ft / Yr of water for 30+ years - as early as 2020 SAWS pays only for water made available Risk Transfer Vista Ridge builds all infrastructure to San Antonio Debt - $853 Million Equity - $74 Million SAWS build interconnection infrastructure $143 Million

Proposal Costs and Assumptions Price Components Escalation 2020 Cost of Infrastructure and Water(1) None $1,606 Power(2) Pass-Through $191 O&M(2) $196 Total Price of Project $1,993 (1) Assumed $1852/AF at contract execution (2) Variable based on actual cost

Project Timeline Asset Transfer to SAWS Financial Close ~ 2050 Financial Close November 2, 2016 Debt Service Drops Off SAWS pays lower price Commercial Close November 4, 2014 Water Delivery Begins ~ 2020 Rate Lock ($1,606/AF) May 17, 2016

Risks Transferred Design and Construction Completion Risk (Delay and Efficacy) Construction Cost Overruns Designer/Builder/Operator disputes Site Conditions Regulatory Compliance O&M Costs – Jointly Determined Uncontrollable Risks Transferred Change in Law, Permitting, Force Majeure Pumping Permit Cut-Backs Price; not schedule Interest Rate Capped at 6.04%

Project Financing Private Project Financing For Public Infrastructure Special Purpose Entity Formed Entity Issues Debt For Project Construction Debt Is “Non-recourse” to Government or Entity Financing Integrated With DBO Work SAWS Makes No Construction Payments Project Agreement Pledged to Project Debt Bank Loan or Bond Issue? Investment Grade Credit Rating Sought

Long-Term Financing Strategy Multiple Options for Long-Term Financing Bank Facility is expected to be refinanced with either bonds or another credit facility prior to maturity Upon Substantial Completion, Project Company anticipates being able to achieve an investment grade bond rating Interest rate swaps can be broken in the event of a long-term fixed rate refinancing Should a bond takeout prove infeasible, the lenders would consider an extension or rollover of the Credit Facility and continuation of swap agreements

Tax-Exempt Interest Rates Commercial Close to Current Locked in 36 Basis Points off All-Time Low and 126 Basis Points Less than 12/1/16

Millions of Dollars in Savings Interest Rate Lock Saved SAWS ~ $1.9 Million a Year Compared to Financial Close Rate Date/Contractual Determined Rate Capital & Raw Groundwater Unit Price Annual Cost for 50,000 AF* Maximum 6.04% $1,959 $97,950,000 11/4/2014 4.83% $1,739 $86,950,000 7/22/2015 4.97% $1,760 $88,000,000 2/19/2016 4.45% $1,680 $84,000,000 3/7/2016 4.59% $1,702 $85,100,000 4/12/2016 4.24% $1,649* $82,450,000 5/17/2016 3.92% $1,606 $80,300,000 6/10/2016 3.77% $1,586* $79,300,000 11/2/2016 4.19% $1,643* $82,150,000 12/1/2016 5.18% $1,794 $89.700,000 * Staff estimates.

November 2nd Project Company Locked in Rates Financial Close Avoided Post-Election Increase in Interest Rates

Vista Ridge Regional Water Project Tomorrow’s Water at Today’s Price Unprecedented Risk-shifting Potential Regional Partnerships Balanced Planning: Conservation & New Supplies Secure Water Future Bexar

Success Factors Courageous and Wise Public Sector Leadership With Long Term Vision Mayors Taylor and Castro Trustees Guerra and Williams CEO Puente and Management Team Extraordinarily Determined and Experienced Private Entrepreneurs Historically Low Interest Rates Generally Compelling Public Purpose, Willingness to Pay