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ERCI Capabilities Summary
- 1. Environmental Risk Communications, Inc.
2012 Capabilities
Contact:
John Rosengard
(415) 982-3100
www.erci.com
CONFIDENTIAL
© 2012 Environmental Risk Communications, Inc.
- 2. 2 ERCI Background
Who
Wh we are and what we do
d h t d
Provide environmental liability management software solutions
Develop advanced decision analysis and strategic planning for individual
sites and portfolios of environmental liabilities
Perform tracking and detailed financial analysis of environmental
counterparties
Products and services include:
Defender™ (Remedy & Portfolio)
Historical And Legacy Operations (HALO) Database
Site Strategic Planning
Environmental Counterparty Tracking
Representative Clients
© 2012 Environmental Risk Communications, Inc.
- 3. 3 Product and Service Offerings
Defender™ is ERCI’s principal software tool, built for efficient and auditable cost engineering
and management of environmental liabilities. Key features include probabilistic cost estimating,
reserve forecasting, decision analysis, and watch list calculation for single sites and portfolios.
Defender™ Our software users have found that environmental reserve audits, project manager transitions,
budgeting, and reserve validation are all easier when using Defender™. Better decisions,
improved capital and environmental stewardship, more informed stakeholders, and retained
portfolio k
tf li knowledge h
l d have b
been iimproving our clients’ bottom lines since 1994.
i li t ’ b tt li i 1994
ERCI’s HALO database provides long-term storage for institutional knowledge about past and
HALO future environmental liabilities. Historical spending, decisions, past strategies, counterparties,
PRP allocations, and other site background are stored. Key benefits include shortened future
ll ti d th it b k d t d K b fit i l d h t df t
Database response times, higher reliability in responding to regulatory notices, PRP group invoices, press
attention, and environmental reserve audits.
Our f l
facilitated approach to complex, h h
d h l high-cost environmental remediation projects h h l d
l d has helped
our clients:
Understand escalation risks
Site Strategic Know financial impact of a strategy or project decision
Planning Archive site at decision phase gates using standardized data points (e.g., past strategies /
spending, site history, regulatory status, and source-receptor pathway conceptual model)
Develop key performance metrics and end state vision
Using Dun & Bradstreet’s credit scores and USEPA’s ability to pay models, ERCI pioneered a
Environmental tracking process used by Fortune 500 companies and CERCLA sites’ common counsel to
understand and document the counterparty (bankruptcy). Through objective metrics and
Counterparty enforcement, ERCI has prevented losses to PRP groups and former site owners. We prevent
Tracking cost reallocation by ensuring that all PRPs are guaranteed by a viable corporate entity or
guaranty instrument at all times.
© 2012 Environmental Risk Communications, Inc.
- 4. 4 Defender™
Environmental Liability Management Software
Reserve Forecasting
Probabilistic Cost Estimating
Decision Analysis
Reporting and Business Planning
Defender User Needs
Compliance – Documentation of site-specific liabilities and recoveries, along with significant
probabilities to calculate reserves as expected values
Consistency – Uniform testing of future costs under new GAAP ASC 410 criteria; quantification of
project-specific issues, alternatives, and desired outcome; timing and nature of liability settlement,
reopeners and cost recoveries; counterparty risk(s)
Accuracy – Delineation between environmental remediation liability, asset retirement obligation,
operating expenses, and capitalized environmental compliance costs; differentiation between
budgets, reserves, and lifecycle cost-to-close; separation of reimbursements, and future possible
reserve increases (“watch list”); alignment to enterprise software (e.g., SAP, Oracle, JDE)
Clarity – Project issues, risks, and decisions; reserve increase trigger points, comparison of
scenarios
Speed – Respond to any audit concerns promptly
Low-risk Deployment – Use off-the-shelf technology, minimize cost, have high flexibility in
customizing the system, low / no learning curve for software
© 2012 Environmental Risk Communications, Inc.
- 5. 5 Defender™
© 2012 Environmental Risk Communications, Inc.
- 6. 6 Historical And Legacy Operations (HALO)
Needs answered by HALO
Store select parameters (e.g., sunk costs, decisions, contracts, consent decrees, guarantees, etc.)
Prevent “project reset” costs (e.g., deep dive to file rooms, entrenched / legacy consultants)
Survive turnover and transitions
Balance “knowledge is power” with current information saturation
Apply best practices and lessons learned to prevent new liabilities
What is environmental program institutional knowledge?
Regulatory Compliance – When and how were the cleanup goals set? Why are we involved in this
CERCLA multiparty cleanup project?
Cost History – What are transactional costs for this site? Any trends over the last five years? Are all
de minimis and insurance recovery projects complete? When was our allocation adjusted? When did
trust funds run out? Did we cash out of this site already? Which legacy entities?
Transaction / Counterparty Knowledge – When and how did we transfer a facility to a successor
owner? Any reopener terms for the environmental costs? When and how did we acquire this facility
from a previous owner? Any provisions for taking back property, or the liability reverting back to us?
Property Knowledge – Wh owned th site? I it being redeveloped?
P t K l d Who d the it ? Is b i d l d?
Remediation Knowledge – Did we survey for asbestos and USTs already? Which landfill was used
for soil disposal? Where did we get the import backfill?
Project Manager Notes – What correspondence took place with other PRPs, stakeholders, or
common counsel? Which documents should be reviewed? What was the timeline of this project?
Were any action items completed? Is there any, otherwise undocumented, information?
© 2012 Environmental Risk Communications, Inc.
- 7. 7 Historical And Legacy Operations (HALO)
What Liability
Exists?
Regulatory Project Manager
History Notes
Remediation
Knowledge Cost History
Transaction /
Property Counterparty
Knowledge Knowledge
l d
© 2012 Environmental Risk Communications, Inc.
- 8. 8 Site Strategic Planning
What i i
Wh t is in a Site Strategic Plan (SSP)?
Sit St t i Pl
Documentation of how we got here, what we have
tried, and what has been spent to date
What problems remain today?
What options are available today?
What it will take to work?
What risks will be left?
Why is this work useful?
y
Provides enduring, flexible reference for people new to a site’s liabilities
Provides assurances that the current level of site and strategy documentation will
endure changes in site ownership, contractor resources, and employee turnover
Confirms
Confi ms that management can articulate a singular strategy for answering the short-
a tic late sing la st ateg fo ans e ing sho t
and long-term risks to successfully extinguishing the liability
Stores any significant ideas to improve the cost, quality, pace, sustainability, and
finality of a given site’s strategy
Explains if counterparties pose a significant risk t the strategy
E l i t ti i ifi t i k to th t t
© 2012 Environmental Risk Communications, Inc.
- 9. 9 Site Strategic Planning
© 2012 Environmental Risk Communications, Inc.
- 10. 10 Environmental Counterparty Tracking
What need Environmental Counterparty Tracking (ECT) meet?
All environmental liabilities involve counterparties, whether they are former or successor owners of a
facility, insurers, neighbors, or disposal sites – Not every counterparty has a material allocation or
financial depth to share costs, but some counterparties are in transition from viability to dissolution
Our ECT service efficiently:
Watches for credit downgrades, changes to corporate structures, bankruptcy filings, and other
triggers
Tests all PRPs against common financial reference points, and justifies pre-bankruptcy cashouts
or weaker PRPs
Provides the “probability of default” needed for FASB 157f calculations of counterparty risks
Anticipates PRP reallocation due to bankruptcies
Key b
K benefits:
fit
Enables clients to passively track the
financial health of unrelated entities /
properties and anticipate risks
At CERCLA sites prevention of cost
sites,
escalations due to peer bankruptcies
Proactively allows steps to be taken prior
to CERCLA 104(e) inquiries and proposed NPL
listings
© 2012 Environmental Risk Communications, Inc.
- 11. 11 Environmental Counterparty Tracking
How would Environmental
Counterparty Tracking help my
company?
Identify weak and weakening
counterparties
Document moment when
counterparty passes into the
riskiest “bottom 10%” of
When does Environmental
companies
Counterparty Tracking add value?
Provide a validated “probability
of default” for FASB 157f
determinations of counterparty
Your company is a Potentially
risks
Responsible Party (PRP) at a site
Provide a deadline and
with future costs >$5 million
discount basis for cashing out a What does Environmental
Any single counterparty (PRP)’s
counterparty from an Counterparty Tracking entail?
share of the future costs exceeds
environmental liability
$1 million
There are more than five
ERCI evaluates each
counterparties named at the site
counterparty’s financials
Remediation of the site –
monthly
including O&M – will not be
If a counterparty fails the
finished for ten years
tests, ERCI recommends cash
Agency financial assurance
out negotiations or requests
obligations are likely / active
additional financial assurance
(e.g.
(e g letter of credit, surety
credit
obligation, parent guaranty)
ERCI provides quarterly
updates to the PRP group,
indicating the financial status
of each PRP
Cost to monitor a 12-party PRP
p y
group is $12,000 / annually
1 Dun and Bradstreet (D&B) Financial Stress Model, “Incidence of Financial Stress” © 2012 Environmental Risk Communications, Inc.
- 12. 12 ERCI Payback Period
Payback Period
of Initial Cost
9 months
HALO
Defender
4 months Watchlist
SSP
1 month
1 month 4 months 9 months
Time to Deliver
© 2012 Environmental Risk Communications, Inc.