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.
7.2 Follow the Money
Container Recycling Fees
When the revenue from unclaimed deposits and from sales of collected material are insufficient to cover the cost of recovering and recycling a specific container type, a non-refundable recycling fee is added to the container to make up for the shortfall.
Revenues from service provider contracts.
Sale of Processed Containers
A portion of the cost of recovering aluminum and plastic containers, the two largest product categories, is covered by the value of the commodity collected. The prices for aluminum and plastic declined in 2016 and remained weak. However, the weakening dollar helped to offset the negative effect of the low commodity prices denominated in US dollars. The average price for aluminum was $0.76 per pound ($0.85 in 2015) and plastic was $0.13 per pound ($0.18 in 2015).
Encorp is paid a deposit on every container sold. Deposits unclaimed are used to fund the system.
|Container Recycling Fees||45.3 Million||53.3%|
|Other Fees and Income*||11.5 Million||13.3%|
|Sale of Processed Containers||11.0 Million||12.9%|
|Unredeemed Deposits||17.5 Million||20.4%|
|Total Revenues||85.3 Million||100%|
Note: Calculations may show slight variances due to rounding.
Transportation and Processing
Contracted trucking companies collect containers from depots and grocery retailers and take them to processors where they are compacted for shipment.
Management of contracts, collection of revenues and payment of expenses.
Consumer Education & Awareness
Programs that encourage consumers to return containers for recycling.
Container Handling Fees
Per-unit fees paid, in addition to deposit reimbursement, to depots for collecting containers.
Paid to depots and grocery retailers to reimburse them for the deposits they have refunded to consumers.
|Operations Expenses||28.7 Million||31.3%|
|Administration Expenses||4.5 Million||4.9%|
|Consumer Awareness||4.3 Million||4.7%|
|Handling Fees||53.5 Million||58.4%|
|Other Expenses**||0.6 Million||0.7%|
|Total Expenditures||91.6 Million||100%|
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. Reserves can also be reduced 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.
Reserve / (Deficit)
Reserve / (Deficit)
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 $6.3 million.
Including Deposit Refunds
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 customers, depots, transporters and processors. Experience shows that our reserve level needs to be based on the cash flow requirements for six weeks’ during the peak season. The board of directors has set Encorp’s appropriate reserve range between $21 and $31 million. The optimum reserve level has been established at $26 million. 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.
7.5 Container Recycling Fees
CRF stands for Container Recycling Fee. This is the fee Encorp charges to cover the net cost of recycling a beverage container type after any unredeemed deposits and commodity revenues for that container type have been used.
CRFs have been in place for beverage containers in British Columbia for more than 17 years. The CRF varies for each beverage container category. As a not-for-profit product stewardship agency, Encorp Pacific only charges the net cost for recovering and recycling beverage containers. The CRF reflects current economic conditions such as commodity prices and beverage volumes.
|Aluminum||1.0 cent||1.0 cent|
|Plastic ≤ 1L||3.0 cents||3.0 cents|
|Plastic > 1L||4.0 cents||4.0 cents|
|Glass ≤ 1L||10.0 cents||9.0 cents|
|Glass > 1L||35.0 cents||40.0 cents|
|Bi-Metal ≤ 1L||4.0 cents||3.0 cents|
|Bi-Metal > 1L||4.0 cents||3.0 cents|
|Drink Boxes ≤ 500 ml||1.0 cent||1.0 cent|
|Drink Boxes 501 ml - 1L||6.0 cents||5.0 cent|
|Gable Top > 1L||6.0 cents||6.0 cent|
|Glass Wine & Spirits ≤ 1L||12.0 cents||11.0 cent|
|Glass Wine & Spirits> 1L||22.0 cents||16.0 cent|
|Non-Refillable Beer, Cider, Cooler Glass ≤1L||9.0 cents||7.0 cent|
|Non-Refillable Beer, Cider, Cooler Glass > 1L||15.0 cents||23.0 cent|
|Liquor Plastic ≤ 1L||4.0 cents||4.0 cent|
|Liquor Plastic > 1L||10.0 cents||8.0 cent|
|Liquor Bag-In-Box||N/A||1.0 cent|