Plan Performance
7.1 How Money Flows

The arrows show the direction of payments for deposits and container recycling fees (CRF) and the movement of beverage containers.


Plan Performance
7.2 Follow the Money

Plan Performance
7.3 Operating Reserves

Purpose of the Operating Reserves

Encorp’s reserves are built upon the corporation’s fundamental principles of no cross-subsidization of container types and equitable treatment of brand owners. The operating reserves are required to provide stability to the system over the long term, to avoid cross-subsidization of container types, and to facilitate and stabilize the frequency of Container Recycling Fee (CRF) changes.

CRF's may be raised, reduced or even eliminated in any given year to keep reserves within their targeted ranges. We can also reduce the reserve by increasing spending on activities designed to improve the recovery rate for a specific container type. The table shows the levels of reserves over the past years.

Revenue and Reseves ($,000)
2012
YEAR
2012
BALANCE
2013
YEAR
2013
BALANCE
2014
YEAR
2014
BALANCE
2015
YEAR
2015
BALANCE
Operating
Reserve

$7,397,210

$26,213,351

$3,326,999

$29,540,350

$3,085,401

$32,625,751

$(1,267,354)

$31,358,397
Restricted
Reserve / (Deficit)

(329,637)

1,194,920

3,520

1,198,440

(18,058)

1,180,382

344

1,180,726
Total
Reserve

$7,067,573

$27,408,271

$3,330,519

$30,738,790

$3,067,343

$33,806,133

$(1,267,010)

$32,539,123

Management of the Operating Reserves

Encorp’s financial model requires a reasonable level of operating reserves to provide stability to the system. When these reserves rise above the amount deemed to be reasonable, measures are taken to reduce them to the appropriate level.

These reserves have been used to fund system costs that may otherwise have been reflected in consumer prices.

Encorp’s operating reserves are maintained to meet the corporation’s cash flow requirements, recognizing normal business volatility balanced over a period of three to five years. This year, the operation reserve was reduced by $1.3 million.

  Gross Revenue
Including Deposits
(millions)
Total Expenses
Including Deposit Refunds
(millions)
Results
 
(millions)
Operating Reserves
Year end
(millions)
2008 152.4 155.2 (2.8) 1.8
2009 158.9 162.1 (3.2) (1.4)
2010 168.6 159.5 9.1 7.7
2011 170.1 157.4 12.7 20.4
2012 164.0 156.9 7.1 27.4
2013 161.7 158.4 3.3 30.7
2014 162.7 159.6 3.1 33.8
2015 162.0 163.3 (1.3) 32.5

Plan Performance
7.4 Frequently Asked Questions

Encorp’s reserve guideline is built upon two core principles: (a) we do not “cross-subsidize” container types or fee categories; and (b) we treat brand owners equally.

Our operating reserves provide stability to our depot system by providing adequate cash flow for day-to-day operations. They also help us avoid cross-subsidization of container types and help smooth out revenue in the event of container recycling fee changes.

  • Question: Why does Encorp need reserves?

    Our weekly expenses including paying for deposit refunds, handling fee payments to depots, transportation and processing costs must be met without interruption. The many small businesses that rely on our cash payments could not be viable if there was any kind of disruption or delay in our regular and predictable pattern of payments. However, our revenues are not as reliable, as they depend on the volatility of the beverage and recycling markets. The reserves are the cushion we need to ride through the up and down cycles in these markets.

  • Question: How does Encorp create reserves?

    Each year we forecast the expected sales of beverages in the province and our rate of collection of containers to estimate our revenues and expenses. To ensure that we can cover our costs, we determine the level of fees we will have to charge our brand owners. By setting the appropriate fees, we can create, increase or decrease a reserve for each type of container. The individual container reserves combined represent our total overall reserves.

  • Question: What size of reserve is required?

    On average we pay out about $3 million per week to consumers, depots, transporters and processors. Experience shows that on average we should have reserves of about eight weeks’ cash needs, or $24 million. At a minimum our reserves should not generally go below $17 million, or six weeks’ needs. Our actual reserves will fluctuate above and below the average because of the volatility of key influences on our cash flow, including recovery rates, commodity prices, beverage sales and exchange rates.


Plan Performance
7.5 Container Recycling Fees (CRF)
Container Type 01-Feb-13 01-Feb-14 01-Feb-15
Aluminum 1.0 cent 1.0 cent 1.0 cent
Plastic ≤ 500 ml 3.0 cents 3.0 cents 3.0 cents
Plastic 501 ml - 1L 3.0 cents 3.0 cents 3.0 cents
Plastic > 1L 6.0 cents 5.0 cents 4.0 cents
Polystyrene 3.0 cents 3.0 cents 3.0 cents
Glass ≤ 500 ml 12.0 cents 10.0 cents 10.0 cents
Glass 501 ml - 1L 12.0 cents 10.0 cents 10.0 cents
Glass > 1L 25.0 cents 30.0 cents 35.0 cents
Bi-Metal ≤ 500 ml 6.0 cents 5.0 cents 4.0 cents
Bi-Metal 501 ml - 1L 6.0 cents 5.0 cents 4.0 cents
Drink Boxes ≤ 500 ml 2.0 cents 2.0 cents 1.0 cent
Drink Boxes 501 ml - 1L 7.0 cents 7.0 cents 6.0 cents
Gable Top > 1L 6.0 cents 6.0 cents 6.0 cents
Glass Wine & Spirits ≤ 1L 15.0 cents 13.0 cents 12.0 cents
Glass Wine & Spirits> 1L 23.0 cents 24.0 cents 22.0 cents
Non-Refillable Beer, Cider, Cooler Glass ≤1L 11.0 cents 10.0 cents 9.0 cents
Non-Refillable Beer, Cider, Cooler Glass > 1L 11.0 cents 13.0 cents 15.0 cents
Liquor Plastic ≤ 1L 4.0 cents 4.0 cents 4.0 cents
Liquor Plastic > 1L 10.0 cents 10.0 cents 10.0 cents