Item - 2019.IE10.9

The Infrastructure and Environment Committee recommends that:

1.  City Council authorize the General Manager, Toronto Water, to finalize negotiations with Enwave Energy Corporation ("Enwave") and enter into and execute an amending agreement to the Energy Transfer Agreement between the City and Enwave dated January 18, 2002, as amended by the amending agreement dated August 20, 2007, the second amending agreement dated September 1, 2010, and the heat exchanger amendment authorized by City Council by its adoption of Item IE8.4 at its meeting on October 29 and 30, 2019 (collectively, the "Energy Transfer Agreement"), to permit the expansion of the Deep Lake Water Cooling system capacity, predicated on increasing the flow of cool water from the City's Island Water Treatment Plant to a new raw water diversion system terminating at the John Street Pumping Station, substantially consistent with the commercial principles outlined in the Term Sheet set out in Attachment A to the report ( November 21, 2019) from the General Manager, Toronto Water, and otherwise on terms and conditions satisfactory to the General Manager, Toronto Water, (the "Deep Lake Water Cooling Expansion"), and in a form satisfactory to the City Solicitor.

2.  City Council authorize the General Manager, Toronto Water, on behalf of the City, to undertake any necessary related environmental assessment(s), including either as a sole proponent or a co-proponent with Enwave, as may be required for the Deep Lake Water Cooling Expansion at Enwave's sole expense.

3.  City Council authorize, subject to the adoption of Recommendation 1, above, the General Manager, Toronto Water to negotiate, enter into and execute any other related agreement(s) as may be necessary to give effect to Recommendation 1 on terms and conditions satisfactory to the General Manager, Toronto Water, and in a form satisfactory to the City Solicitor.

This report seeks City Council authority for the General Manager, Toronto Water, to finalize negotiations with Enwave Energy Corporation ("Enwave"), and to enter into and execute an amending agreement to the Energy Transfer Agreement between Enwave and the City dated January 18, 2002, as subsequently amended (the "ETA") substantially consistent with the commercial principles outlined in the Term Sheet set out in Attachment A to this report (the "Term Sheet") to permit the expansion of the Deep Lake Water Cooling ("DLWC") system  based on Enwave's 2019 DLWC expansion proposal (the “DLWC Expansion Project”). This report also seeks City Council authority for the City, as represented by the General Manager, Toronto Water, to undertake, on behalf of the City, any necessary related environmental assessment(s) as may be required for the DLWC Expansion Project, at Enwave's sole expense.

Back in 2013, City Council authorized the General Manager, Toronto Water, to enter into without prejudice negotiations with Enwave regarding Enwave's then proposed expansion of the DLWC system based on a raw water diversion system originating at the Island Water Treatment Plant ("IFP") and terminating at the John Street Pumping Station (“JSPS”), and to report back on the outcome of the negotiations once concluded.

Since 2013, the City has negotiated with Enwave on various technical solutions and business terms, culminating in the Term Sheet which, City staff is recommending in this report and, reflects the negotiated commercial principles intended to serve as a framework for the final negotiations between the parties and an amendment to the ETA to give effect to the DLWC Expansion Project, if approved. The purpose of the DLWC Expansion Project is to increase the capacity of the DLWC system to meet the growing demand for cooling in the downtown City core. The key technical difference in Enwave's 2013 and 2019 DLWC expansion proposals is the proposed addition of a fourth intake at the IFP before the proposed expanded DLWC system branches-off to a new raw water diversion system separate and independent from the City's municipal drinking water infrastructure and supply.

Similar to its 2013 DLWC expansion proposal, Enwave's 2019 DLWC Expansion Project provides many benefits to the City including increased revenues, operational cost savings, new infrastructure at no cost to the City (including the repurposing of currently unused infrastructure), and environmental benefits such as significant carbon emission reductions and improved air quality in Toronto's environment.