ERCI Products and Services

Clients sometimes ask ERCI to manage our software and provide periodic reports. Others license our software and further modify it to meet their internal deployment objectives.

Outcomes

• Independent baseline forecast of environmental liabilities
• Reliable system for updating environmental reserves and asset retirement obligations

Typical engagements

1. An external auditor advised an environmental liability portfolio manager the properties acquired in a recent merger lack a forecast compliant with existing reserve policy and company practices. Within six months, a new portfolio forecast is needed for the acquired sites to meet purchase accounting and post-merger integration timelines. There is no time to complete comprehensive site assessments, let alone detailed cost engineering on each site. Ongoing and future cleanups will need forecasts for remediation and asset retirement obligations using the acquirer's approach. Incumbent vendors will need a place and process to explain their strategies on larger sites. In this situation, ERCI will deploy Defender for 1-10 years, forecasting liabilities at new sites to meet the acquirer's standards of care and working from any existing "cost-to complete" project estimates. Over the first several years, ERCI will conduct facilitated site strategic plan exercises for each major site and document the history and long-term issues. ERCI will recommend adjusting accounting entry recommendations for reserves, AROs, watch lists and budgets on a regular basis. ERCI will document and explain the differences between liability forecasts and "cost to complete" project estimates. ERCI will retain services of departed project and portfolio managers to document team knowledge.
2. Client sees that company has never consistently booked asset retirement obligations; peer companies have already booked $300M in ARO liabilities and that these values are increasing by 10%-15%/yr. In the next five years, company expects to periodically acquire or spin off major portions of the enterprise, and a "due diligence surprise" to adjust the ARO values will never be acceptable. ERCI will conduct a transitional analysis, to forecast the opening balance and annual accretion values. ERCI will recommend adjustments over the transition period (two months to three years), and defend the initial valuation.
3. Client notes that a historic divestiture did not work out as planned, and some properties may be coming back from the acquirer into the portfolio. The manager needs probabilities of comeback, based on the current financial health and financial disclosures of the acquirer, and an independent cost forecast for each site without attracting attention from incumbent vendors or the acquirer. ERCI will review the compliance status of the identified sites, and assess the financial condition of the environmental counterparty. Using data from comparable liabilities, ERCI will calculate and report on the comeback liabilities.
4. A Superfund PRP group is funding the cleanup work on a site through cash calls to the ten participating PRPs. The PRP group's common counsel noticed that two PRPs have been paying their assessments slowly and stopped contributing in-kind labor at regular project conference calls. At annual meetings, representatives from these two PRPs ask about cashing out the site, and are pessimistic about their PRP's ability to pay. A web search of the PRPs notes that they have been taken private or hired restructuring advisors. ERCI will conduct an ability to pay analysis and credit check and recommend a time-sensitive strategy if negative information is found. ERCI will work with the individual PRP representatives to assemble a financial assurance instrument acceptable to the PRP group. ERCI will report on the aggregate financial health of the group to any request coordinated by common counsel. ERCI will promptly write an affidavit on the liability share of any party entering bankruptcy.