City of Surrey 2019 Annual Financial Report

NOTESTOTHE CONSOLIDATED CITY OF SURREY  FINANCIAL STATEMENTS

For the year ended December 31, 2019 [tabular amounts in thousands of dollars]

11. TANGIBLE CAPITAL ASSETS (CONTINUED) b) Biofuel processing facility

The City entered into a 25-year agreement with Orgaworld Surrey Limited Partnership (the “Operator”) to design, build, finance, operate and maintain the Surrey Organics Biofuel Processing facility. The City provided the land upon which the facility was constructed. Under the agreement, the City guaranteed to deliver to the Operator a minimum tonnage of City Organic Waste (as defined in the Agreement) for processing. The City will make payments to the Operator for acceptance of City Organic Waste in accordance with a specified formula. The Operator will also have the right to earn revenue from the delivery/acceptance of organic waste from third parties. In return the City will receive 100% of the biomethane produced at the facility and will share in certain other revenues generated at the facility. Upon expiry of the lease term the facility will become the asset of the City. The facility was completed and commenced operation in 2018. The City recorded the facility on its financial statements as a tangible capital asset in the amount of its cost of construction being $50.0 million. The City also recorded an offsetting liability for an equal amount representing future obligations to the Operator. The liability will be reduced over the term of the agreement as payments are made to the Operator. c) Write-down of tangible capital assets No impairments were identified or recorded during the year ended December 31, 2019 or 2018.

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