March 16, 1998
To: The Corporate Services Committee
From: Commissioner of Corporate Services
Subject: Amendment to Contract between Rose Technology Group Limited and the former Municipality of Metropolitan Toronto
Purpose:
To amend the existing energy services contract between Rose Technology and the former Municipality of Metropolitan Toronto in order to save the City of Toronto unnecessary expenditures.
Financial Implications:
N/A
Recommendations:
It is recommended that:
(1) the contract between the former Municipality of Metropolitan Toronto and Rose Technology be amended as outlined in this report subject to agreement of the City Solicitor; and
(2) the appropriate City officials be authorized to take any action to give effect thereto.
Background:
The former Metropolitan Council, by adoption of Clause No. 8 of Report No. 2 of The Management Committee on January 12th, 1994, authorized Metro to enter into an energy service agreement with Rose Technology to undertake energy efficiency improvements in Metro=s Homes for the Aged. An agreement was entered into in May 1996 to complete energy efficiency improvements in six of the Homes.
Through this agreement Rose Technology provided a Aturnkey@ energy management package which included all engineering, installation, project management and training of Metro staff. Rose Technology undertook the construction of the project at its expense and guaranteed to recover all capital costs through actual energy savings being realized from the project over a contract term of 72 months. In other words all savings being realized from the project would be used to pay down the cost of the project over a six year period. Financing of the project following construction was to be arranged through a third party or by Metro.
Rose Technology has completed energy saving installations in four of the Homes. (Two Homes had to be deleted from the project due to high payback periods). The energy saving installations have been successful and the energy savings are higher than anticipated.
Discussion:
Since the project is performing better than anticipated there is no need for the savings guarantees provided for in the contract and therefore could be deleted. The contracted savings guarantees will cost approximately $125,000.00 out of a total project cost of approximately $1,358,000.00. Eliminating the savings guarantees and the associated guarantee premiums effectively releases Rose Technology from further obligations on this project, other than the usual construction and equipment guarantees. The savings guarantees were included in this project as an insurance against an under performance in the amount of savings being achieved. In addition, post construction costs of approximately $44,000.00, associated with monitoring and administrating the contract, included in the total project cost above, would also be avoided.
The annual energy savings from the project were anticipated to be $233,000.00. Based on results to-date, the annual savings will amount to approximately $260,000.00. Once the energy savings have been established there is no reason why the savings cannot be sustained. If the saving guarantee premiums and the post construction costs are eliminated the payback period will be reduced from 5.2 years to 4.5 years. The City=s energy management program, residing in the Corporate Services Department, will monitor and provide ongoing oversight of the project to ensure that savings are maintained.
Discussions have taken place between Rose Technology, Homes for the Aged and Corporate Services= Manager of Energy Management and it was agreed that eliminating the guarantee premiums and releasing Rose Technology from the contract would be to the benefit of the City of Toronto.
Financing of the project will be arranged by the Finance Department and the actual savings realized will be used to pay down the financing.
The Finance Department has reviewed the existing contract and does not see any problems in making the amendments. The General Manager of the Homes for the Aged concurs with the recommendations in this report.
Contact Name:
Jim Kamstra
Tel: 392-8954, Fax: 397-0825
Margaret Rodrigues
Commissioner of Corporate Services
