Mr. Lynn Mueller reports

US$60 MILLION FINANCING COMMITMENT FOR 1,000 IWS SYSTEMS IN CALIFORNIA

International Wastewater Systems Inc. has arranged a joint venture with Renew Energy Partners LLC for the financing and installation of International Wastewater's world-leading thermal heat-recovery equipment in the United States. The joint venture will initially build projects in California for which Renew is committing financing of $60-million (U.S.) over five years, for the purpose of financing capital expenditures for 1,000 Piranha thermal heat-recovery systems to be built, installed and operated exclusively by International Wastewater.

Background

Renew is engaged in developing and financing energy and water efficiency retrofits and on-site clean energy projects through the use of innovative structures such as an energy services agreement (ESA) or power purchase agreement (PPA). Combining Renew's project finance expertise with International Wastewater's capabilities in the manufacturing, installation and servicing of thermal heat recovery equipment, enables the joint venture to offer a full suite of services for energy and water conservation projects and on-site clean energy projects. The joint venture aims to expand the implementation of energy efficiency and on-site clean energy projects throughout the United States.

The joint venture will finance and deploy International Wastewater's Piranha system, a self-contained heat pump that extracts thermal energy from waste water for hot water production. The Piranha has been optimized for residential buildings with 50 to 200 units as well as stand-alone commercial applications, and was the recipient of the 2016 Air Conditioning, Heating, Refrigerating Exposition innovation award for green building innovation. The AHR Expo is the world's largest HVACR (heating, ventilating, air conditioning and refrigeration) convention.

Stephen Pritchard, principal and co-founder of Renew, said: "The combination of IWS's expertise in the design, manufacture and operation of thermal heat recovery equipment, and Renew's project funding, deal structuring and project development expertise offers a new carbon reduction strategy for almost any building in the U.S. We view IWS as a world leader in the thermal energy recovery space, and are pleased to partner with them to accelerate the turnkey deployment of their exciting Piranha technology in California -- and the rest of the country. IWS and Renew see exponential growth ahead with the commensurate benefit to the building owners and to the planet."

Joint venture -- scope and schedule

The joint venture will finance, build, install and operate 1,000 Piranha systems, initially in the state of California and later extending to the rest of the U.S. Renew will provide financing of $60-million (U.S.) to finance the deployment of the Piranha systems over a period of five years.

The purpose of the $60-million (U.S.) program is to provide capital to finance turnkey installation and continuing operations and maintenance of Piranha systems for qualified residential and commercial buildings under a standardized thermal energy purchase agreement (TEPA) developed by Renew. Under the terms of the TEPA, customers will enter into long-term supply agreements for low-cost, efficient energy, with no capital investment.

The proposed schedule for the deployment of 1,000 Piranha systems in California in the next five years is estimated as follows:

• Approximately 50 Piranha systems in the first 12 months of the $60-million (U.S.) program;
• Approximately 120 Piranha systems in the second 12 months of the $60-million (U.S.) program;
• Approximately 240 Piranha systems in the third 12 months of the $60-million (U.S.) program;
• Approximately 300 Piranha systems per year thereafter.

International Wastewater and Renew will establish a special purpose vehicle (SPV) to own the individual Piranha projects financed by the $60-million (U.S.) program. The SPV will sign a master agreement with International Wastewater for the exclusive design, build and commissioning of Piranha systems and for the operation and maintenance services throughout the life of the systems.

The SPV will be the investing and operating entity for the joint venture. Renew and International Wastewater will jointly participate in the project returns from energy sales through cash flow distributions from the SPV, with the related terms of distribution to be included in a definitive agreement between International Wastewater and Renew.

Charles Lord, principal and co-founder of Renew, said: "Waiting to implement energy-efficiency projects costs building owners money and wastes precious time in the fight against climate change. So the pivotal question is -- why delay? With the Piranha thermal energy purchase agreement, we will deliver building owners lower energy costs with no capital investment and immediate lasting carbon reductions. Energy efficiency is one of the great weapons at our disposal to slow global warming. It is imperative that we put it to use immediately, and at scale, to limit the most dramatic effects of global climate change. Renew is thrilled to be partnering with IWS on a Renew it now funding program to drive the rapid deployment of IWS's thermal energy recovery systems throughout California -- and ultimately the entire United States."

Lynn Mueller, chief executive officer of International Wastewater, commented: "IWS is privileged to work with Renew and its principals; their expertise in the financing of alternative energy projects, and their access to capital, provides IWS with a strong platform to roll out IWS systems in the U.S. market. IWS will earn revenue from the design, build and commissioning of Piranha systems as well as recurring revenues for the ongoing operation and maintenance services throughout the life of the systems. In addition to these revenue streams, IWS will receive long-term income from its share of cash flow distributions from energy sales."

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