HomeMy WebLinkAboutAELP Tariff Advice No.271; Snettisham Power Sales Agreement 1997ALASKA ELECTRIC LIGHT AND POWER COMPANY
December 23 , 1997
Alaska Public Utilities Commission
1016 West 6th Avenue, Suite 400
Anchorage, Alaska 99501
(907) 780-2222 FAX (907) 463-3304
5601 Tonsgard Court , Juneau . AK 99801 -7201
Tariff Advice No. 271: Snettisham Power Sales Ae:reement
Ladies and Gentlemen:
In compliance with the Alaska Public Utilities Commission Act, and
Sections 3 AAC 48.200 - 3 AAC 48 .390 and 3 AAC 52.470 of the Alaska
Administrative Code, a contract entitled "Agreement for the Sale and Purchase of
the Electric Capability of the Snettisham Hydroelectric Project (Snettisham)
between the Alaska Electric Light and Power Company (AELP) and the Alaska
Industrial Development and Export Authority (AIDEA)" (see Attachment (1)) is
hereby submitted for approval. Hereafter the contract will be referred to as the
Power Sales Agreement (PSA).
Separately, AELP will file with the Commission a special contract for sale
of Snettisham energy to the Alaska Department of Fish & Game (ADF&G) for its
fish hatchery located at Snettisham and a related amendment to AELP's Certificate
of Public Convenience and Necessity. AELP asks that the electric power sales
provisions of the proposed special contract and the certificate amendment be
considered in the same Commission docket as approval of the PSA.
AELP understands that AIDEA intends to ask the Commission for an
exemption from certification requirements for AIDEA in its prospective capacity
as the owner of Snettisham, and that AIDEA will communicate directly and
separately with the Commission with respect to this request.
Background
Snettisham is a hydroelectric generating facility currently owned by the
U.S. Government and operated by the Alaska Power Administration (APA), a
Federal power marketing administration. AELP in turn operates and maintains
Alaska Public Utilities Commission
December 23, 1997
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Snettisham under contract with the AP A. Snettisham is located approximately 28
miles south of, and across Taku Inlet from, the AELP service territory.
Construction of the Long Lake portion of Snettisham, with a firm energy capability
of 179 million kwh and 47 MW capacity, was completed in 1973. With the
exception of the ADF&G fish hatchery at the Snettisham site, AELP is currently
the only purchaser of power from Snettisham.
Initially AELP purchased Snettisham energy under U.S. Government
Contract No. 14-15-0001-SN-1, dated November 19, 1973, as approved by the
Commission. In 1990 the Crater Lake Addition to Snettisham became operational
and added capability of 105 million kwh of firm energy and 31 MW of capacity.
In 1993 Contract No. 14-15-0001-SN-1 expired and was replaced by another 20
year agreement, Contract No. DE-SC85-93AP10034, approved by the Commission
in Tariff Advice No. 236-1. Both contracts with the APA were "take and pay" (no
power, no pay) type power sales agreements. From 1973 until today the cost of
firm Snettisham energy has increased from 1.56 cents per kwh to 3.47 cents per
kwh.
AELP also purchases Snettisham interruptible energy from AP A under
Contract No. DE-SC85-93AP10034 and resells it under various tariffs designed to
improve AELP's total system load factor or encourage utilization of hydroelectric
surplus energy.
In total, Snettisham currently supplies approximately eighty-five percent
(85%) of AELP's annual energy requirements.
AELP has operated the Thane Substation, which dispatches Snettisham and
other AELP generation facilities, for APA since 1973. In 1992 AELP assumed
responsibility for routine maintenance of the Snettisham transmission line. In
1996 AELP assumed responsibility for operation and maintenance of the
Snettisham generation plant and water works, and in 1997 AELP was assigned the
AP A's engineering and purchasing functions.
The U.S. Government has been trying to sell the APA assets since April1,
1987 when the APA issued requests for proposals (see Attachment (2)) to
purchase Snettisham and the Eklutna Hydroelectric Project, located near Palmer.
(The sale of Eklutna to three Alaska electric utilities was consummated on October
2, 1997.) The City and Borough of Juneau (CBJ) with AELP assistance carefully
analyzed various ownership scenarios and concluded that ownership by the State's
Alaska Power Authority (APAuth) would provide the lowest long term stable
energy rates for Juneau. In addition AP Auth had the fmancial strength and
expertise to oversee Snettisham operations. Consequently, on July 20, 1987 the
Alaska Public Utilities Commission
December 23, 1997
Page3
CBJ Assembly passed Resolution No. 1256 asking the State of Alaska to purchase
Snettisham and sell its energy to AELP (see Attachment (3)). APAuth and APA
subsequently negotiated the Snettisham Purchase Agreement which was signed on
February 10, 1989 (see Attachment (4)). AELP and the CBJ were parties to the
negotiations.
From 1989-1996 the approval of the sale of Snettisham and Eklutna worked
its way through the U.S. Congress. During this period the AP Auth's name was
changed to the Alaska Energy Authority and later AIDEA asswned the State of
Alaska's responsibility for the Snettisham purchase. On November 6, 1995 the
Congress, along with removing restrictions on exporting of North Slope oil,
approved the sale of Snettisham and Eklutna. The President subsequently signed
the legislation into law on November 28, 1995 (see Attachment (5)).
The Snettisham Purchase Agreement establishes the procedures to
determine the purchase price, and specifies that the price will be set on the date of
the sale. The price will be based on the discounted value of Snettisham cash flows
the U.S. Government would have expected to receive under continued Federal
ownership until all of its investment and interest were recovered. The discount
rate will be the actual interest rate AIDEA pays on the tax-exempt revenue bonds
that AIDEA issues to purchase Snettisham, plus 2%. The specific cash flows the
U.S. Government would have received have been established and included as a
table in the Snettisham Purchase Agreement. There is a price "floor" in the
Snettisham Purchase Agreement protecting the U.S. Government from the
purchase price falling below 85% of the predicted Snettisham discounted cash
flows, using a discount rate of the average 30-year U.S. Treasury bond yields for
the 90 days immediately preceding the closing date. The net effect is that, unless
the price floor provision kicks in, the Snettisham purchase price will vary with
interest rates but the annual debt service to repay the bonds will remain relatively
constant.
Several other pieces of legislation were necessary in order for the
Snettisham purchase to be consummated. On June 27, 1996 the Governor of
Alaska signetl HB 526, which among other things authorized AIDEA to purchase
Snettisham and to issue up to $100 million of bonds to complete the purchase (see
Attachment (6)). On August 20, 1996 the President signed H.R. 3448 addressing
various tax matters including making specific exception allowing AIDEA to sell
tax-exempt bonds to fmance the Snettisham transaction even though Snettisham
already exists and therefore cannot meet the "new facility" test generally
applicable to tax-exempt bond fmancing (see Attachment (7)).
Alaska Public Utilities Commission
December 23, 1!>97
Page4
As previously discussed, to purchase Snettisham AIDEA will issue tax-
exempt revenue bonds. The sole source of security for the AIDEA bonds will be
the "take or pay" PSA between AIDEA and AELP submitted for Commission
approval. The bond issue will include moneys for a debt service reserve, R & R
Fund, financing costs (including due diligence investigations) and installation of a
redundant set of submarine cables crossing Taku Inlet (see Attachment (8)). The
bond issue will be based on the fmancial strength and credit worthiness of AELP
and will not be backed by the moral obligation of the State of Alaska.
The Snettisham bonds are expected to receive a Baa rating. The following
is a breakout of the bond issue assuming the bonds were rated Baa and based upon
a 5.72% yield that probably would have been effective on December 17, 1997:
Purchase Price
Cable Cost (net)
Debt Service Reserve
R&RFund
Cost ofFinance-2%
Total
$X 1000
$74,438
14,400
7,015
3,081
2,019
$100,955
As previously stated, the State's authorization for Snettisham bonds is $100
million. Interest rates at the time of the sale will be different from today's
estimate. If the total value of the moneys required to consummate the transaction
exceeds $100 million, then AELP will fund the difference.
Submarine Cable
The submarine cable portion of the Snettisham transmission line is three
miles long and reaches depths of 600 feet. Presently there are four cables rated at
138 kV cooled by an oil circulation system. This is the most vulnerable portion of
Snettisham as major failure would take around twelve months to repair and be
expensive. In the meantime AELP would mostly have to rely on its standby diesel
generation facilities. During such a Snettisham outage period AELP's customers,
in addition to the "take or pay" debt service requirement, could expect substantial
rate increases due to fuel costs which would be passed on through the existing
Emergency Fuel Cost Rate Adjustment (see Schedule 98, AELP Tariff Sheet 172).
The due diligence investigations, conducted in preparation for the bond
sale, discovered that the underwater transmission cables were in a high risk
condition -corrosion of the exterior aluminum shield and risk of mechanical
failure due to long and unsupported catenary spans over steep underwater cliffs.
Alaska Public Utilities Commission
December 23, 1997
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One of the cables was later found to have a small oil leak. AP A, in AELP' s
opinion, has not properly repaired that leak.
Investigations have been carried out regarding installation of the new
cables. The installation of 138 kV submarine cables requires long lead times for
fabrication and is expensive. There are only six ( 6) companies in the world which
manufacture 138 kV submarine cables, all located overseas. Because 138 kV is a
relatively high voltage for submarine cables, a circulating cooling system is
required, which adds to the cost and complexity of the installation. Normally,
special cable laying ships are necessary and cables must be loaded aboard using
heavy duty equipment not available in Juneau.
Raytheon Engineers and Constructors estimates the cost to purchase and
install four 138 kV, 86 MW capacity cables to be $16.9 million. The most reliable
cost estimates come from comparing the proposed project with other similar
projects and adjusting for dissimilarities. In the case of 138 kV oil cooled
submarine cables there are few installations and recent construction cost data is
sparse. AELP believes Raytheon's cost estimate to be liberal and that the cost of
the new cables may be less. AELP and AIDEA also believe the cables may be
purchased and installed less expensively if accomplished outside of the Federal
procurement· system. There is also the possibility that the U.S. Government may
help pay for. the cost of the new cable installation in excess of the $2.5 million
already committed. AELP is pursuing further Federal funding, but it will not be
known whether it will be forthcoming until the Fall of 1998.
The bond underwriters, John Nuveen & Co., Goldman Sachs and Prudential
Securities, have reviewed the precarious cable situation. The underwriters are
unwilling to proceed, and AELP and AIDEA are unwilling to fmance the change
of Snettisham ownership, unless there is satisfaction that a redundant set of cables
will be installed to ensure the reliability of the Snettisham energy supply for
Juneau. In addition, as provided in the proposed Operation and Maintenance
Agreement (see Attachment (9)), AELP will obtain debt service insurance for the
event of any Snettisham submarine cable failure which precludes Juneau use of
Snettisham energy. However, the insurance coverage will not begin paying until
after the frrst 90 days of a failure. Such insurance coverage is available today but
under different insurance market conditions may not be, or might be prohibitively
expenstve.
To reiterate, to protect the technical integrity of the Snettisham
transmission system another four redundant cables will be installed that will
address some of the technical shortcomings of the existing cables, e.g., better
sheathing to prevent corrosion, and bathymetric surveys to determine the
Alaska Public Utilities Commission
December 23, 1997
Page6
appropriate alignment to minimize risk of mechanical failure. This, coupled with
presently available debt service insurance, should provide cost effective protection
for AELP's customers against (or in the event of) loss of the Snettisham energy
supply.
Power Sales Agreement
To provide further understanding of the PSA, also included for information
in this filing are the proposed Operation and Maintenance Agreement and the
Power Revenue Bond Resolution (see Attachment (10)), among other documents
that may be useful to the Commission. (As is customary in fmancings of this sort,
the Bond Resolution effectively remains in draft form until just before the actual
bond sale, at which time it will be finalized.)
The following is a discussion of the important concepts of the PSA from
AELP's perspective:
1. The PSA submitted for Commission approval is substantially
different from the 20 year agreement, Contract No. DE-SC85-
93AP10034, approved by the Commission in Tariff Advice No. 236-
1. This PSA is a "take or pay" agreement, which means AELP will
be obligated to make debt service payments whether or not
Snettisham is providing energy to AELP. This type of commitment
by AELP is necessary in order for AIDEA to sell bonds to raise the
money to purchase the project from the Federal government. In
return AELP will receive all of the output of Snettisham on an
assured long-term (and probably permanent) basis under terms and
conditions AELP believes to be favorable. AELP will also have the
right to increased Snettisham output resulting from improvements.
Under previous contractual arrangements with the AP A, AELP
purchased Snettisham energy on a "take and pay" basis. AELP paid
a prescribed cost per kwh as specified in the APA Tariff. If
Snettisham was not operating, AELP paid AP A nothing. The new
PSA will indeed represent a major increase in AELP's contractual
obligation to purchase Snettisham energy.
2. AELP will be responsible for the total operation and
maintenance of Snettisham including the generation plant, water
works, transmission line and underwater cables and the Thane
Substation at Juneau. In November of each year AELP will submit
an Operations and Maintenance Budget for the following calendar
year for AIDEA approval.
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December 23, 1997
Page7
3. An R & R Flm.d will be established for the purpose of paying
the cost of Snettisham repairs that are classified as capital
expenditures. During the due diligence process a capital expenditure
program for the next 35 years was prepared by AIDEA's consultant,
Raytheon Engineers & Constructors. The R & R Fund initially will
be funded from the Snettisham bond sale at an agreed level, which
will probably be the maximum level allowed by IRS regulations.
Thereafter annual contributions will be required of AELP starting
out at $653,000 per year (under current estimates). The annual
contribution thereafter will be escalated for inflation. At least every
three (3) years the R & R Fund will be reviewed and the annual
contribution adjusted up or down to account for experience and
· changed circumstances.
4. The PSA requires that AELP obtain various types of
Snettisham insurance including property coverage for normally
insured electrical facilities and liability insurance. When available at
reasonable costs, debt service insurance will be obtained to cover the
cost of Snettisham "take or pay" debt service payments during
periods when the Snettisham underwater cable or generating plant
has failed and cannot deliver energy to the Juneau load center.
5. To assure the reliability of Snettisham, as the primary energy
source for Juneau and a revenue stream to satisfy the "take or pay"
debt service requirement, four new redundant cables will be installed
across Taku Inlet, tentatively in the summer of 1999. The new
cables will be paid from the proceeds of the bond issue and some
Federal assistance.
6. The PSA provides AELP the flexibility to operate Snettisham
within the limits of prudent utility practice and allows for fmancing
improvements and major repairs with bonds secured on a parity basis
with the Snettisham bonds.
7. Disputes between AELP and AIDEA would normally be
addressed through a process involving an Independent Consultant,
and, if necessary, arbitration.
8. AELP will have the option to purchase the entire Snettisham
project from AIDEA five (5) years after the purchase from the U.S.
Government is consummated. Such a future transaction is
contemplated in the authorization legislation passed by Congress.
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December 23, 1997
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AELP' s purchase price will be the Snettisham debt outstanding at the
time. Because AELP would most likely assume direct responsibility
for the AIDEA issued bonds originally sold to purchase Snettisham,
a second round of fmancing will not be necessary.1
Rate Impacts
The estimated 1998 total annual cost of Snettisham energy, including the
cost of the new cables--assuming (I) the sale were consummated on January 1,
1998, (2) a "take or pay" arrangement, and (3) a $100,955,000 bond issue --is
estimated to be $9,129,000, as broken out below:
Debt Service
AELP Operation & Maintenance Cost
AIDEA Administration Costs
Insurance
AELP Administration Costs
R & R Fund Contribution (est.)
Less: Interest on Debt Service Reserve
Total
$X 1000
7,015
1,472
100
190
100
653
-401
9,129
The APA/AIDEA Snettisham Purchase Agreement, signed in 1989, was
negotiated with the intention of making the transfer of Snettisham ownership a
relatively rate-neutral transaction. That would be the case today if it were not for
the need to install a redundant set of submarine cables. AELP is currently paying
the AP A, on a "take and pay" arrangement, 3.4 7 cents per KWH for firm
Snettisham energy. But to make past rates comparable to the "take or pay"
arrangement with AIDEA, Snettisham energy costs should be viewed on an
annualized basis with the debt service impact of the new cables deducted.
1 AELP's option to purchase the Project (an option that may be exercised either by AELP or an affiliate) is
described in the Option Agreement attached to the PSA as Exhibit D. The Parties contemplate that any
exercise of the option and purchase of the Project by AELP or an affiliate would be governed by a Project
Sale Agreement. The Parties intend to draft the Project Sale Agreement in the weeks ahead so that a final
version will be in place in 1998 prior to A1DEA's sale of the Snettisham acquisition bonds. AELP
recognizes that exercise of the option and acquisition of the Project by AELP or an affiliate would be
subject to Commission review and approval, and that (under existing law) any affiliate that acquired the
Project from A1DEA and sold the Project capability to AELP under the PSA would also require either a
Certificate of Public Convenience & Necessity or a Commission exemption from that requirement.
Alaska Public Utilities Commission
December 23, 1997
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AELP's total cost for Snettisham energy for the calendar years 1990-1997
and estimated for 1998 are summarized below:
Year
1990
1991
1992
1993
1994
1995
1996
1997-budget
1998-est.,no cables
Firm Energy
Purchases-MWH
212,637
210,565
211,660
215,732
223,912
245,041
253,036
244,333
1998-est., with new cables -
Total Cost
$X 1000
6,124
6,259
6,794
6,925
7,188
8,260
8,781
8,478
7,983
9,129
The gross increase in annual debt service requirements due to moneys
borrowed to install the redundant cables is estimated at $1,146,000 (see
Attachment (8)). If Snettisham remained under Federal ownership, redundant
cables would still be needed, and, in all likelihood, such cables would be installed
and the additional incremental Federal debt service would be added to the
Snettisham rates that AELP would pay. If replacement of the cables under both
Federal and non-Federal ownership is assumed--that is, if the cost of the cables is
separated out as an unavoidable expense in any event --then the change of
Snettisham ownership can still be said to be rate-neutral.
It is anticipated that any initial increase in the cost of Snettisham electric
energy will be passed on to AELP customers on an interim basis through the Cost
of Power Adjustment (COPA) Clause (see Schedule 98, AELP Tariff Sheets 167-
171). The purchased power cost used for the COPA computation would be
AELP's actual costs of buying Snettisham power from AIDEA; this would include
the total of debt service, Snettisham operation and maintenance costs, AIDEA
administration, insurance, AELP administrative costs, and the R & R Contribution,
minus the interest earned on the debt service resetve fund and electric revenues
received from the Snettisham fish hatchery.
If the Snettisham transaction were to close on January 1, 1998 the impact
on AELP's COPA would be 0.09 cents per kwh as estimated in the sample COPA
calculation (see Attachment (11)). Based upon AELP's estimated 1997 average
revenue per kwh of 8.51 cents, the short term impact of the Snettisham ownership
transfer on average retail electric rates --assuming that cable replacement costs are
Alaska Public Utilities Commission
December 23, 1997
])age 10
those estimated above --would be a 1.1% increase. (This would be independent
of the rate impact of any non-Snettisham COP A adjustments occurring at the same
time.)
The major factors subject to further change that affect Snettisham electric
rates under State ownership would be the interest rate on bonds sold by AIDEA to
consummate the purchase, the installed cost of the redundant underwater
transmission cables, and whether further Federal aid to help pay for the new cables
is received. It is expected that the cables will be installed in the summer of 1999.
AELP expects to file a new revenue requirement approximately one year
after installation of the cables and, if necessary, a general AELP rate proceeding
can be conducted at that time, based on initial operating experience following the
change in Snettisham ownership and installation of the new cables. As previously
stated, in the meantime AELP proposes to use the COP A to address Snettisham
energy cost fluctuations, but only as an interim measure.
Recommendation
It is recommended the Commission approve the PSA for the following
reasons:
1. AELP believes that in the long run the cost of Snettisham
power under State ownership will be less than under continued
Federal ownership. Presently, under Federal ownership money is
borrowed at 3%, for 50 years, and with flexibility to repay principal.
In the past there have been calls within and outside of the Federal
Government for "rate reform," meaning that interest rates on all
Federally owned power projects should reflect prevailing market
rates, debt should be repaid over a shorter term, and/or more
discipline should be required in assuring timely repayment of
principal and accrued interest. Such "rate reform" might or might
not require an Act of Congress, but it undoubtedly would result in
substantial rate increases for Federal projects, particularly standalone
projects like Snettisham. With the present national emphasis on
reducing the Federal debt and balancing the Budget, some form of
"rate reform" in the long run may well be inevitable.
2. The cost to construct the Long Lake portion of Snettisham
(including the transmission line and Thane Substation) in 1973 was
$98.6 million. The Crater Lake Addition was completed in 1989 for
$71.8 million. Total Federal investment in Snettisham as of
Alaska Public Utilities Commission
December 23, 1997
Page 11
September 30, 1997 was therefore at least $170.4 million. The
purchase price based on the bond underwriter's interest rate estimate
of 5.72%, assuming the bonds were sold today, would be
$74,438,000. Looking to the future, it is likely that further sales of
Federal Power Marketing Administrations' hydroelectric assets will
not be on an electric rate neutral basis. With the 1995 and 1996
APA legislation, the U.S. Department of Energy, AIDEA and
Alaska's Congressional Delegation have effected a favorable
transaction for AELP 's customers that is unlikely to be duplicated in
the event the Snettisham purchase is not consummated now.
3. In the past AP A and AELP hydroelectric utilization policies
sometimes conflicted. APA's objective was to sell as much
Snettisham energy as possible. AELP owns three. hydroelectric
projects -Gold Creek, Annex Creek and Salmon Creek. It has been
difficult for AELP to coordinate energy production of its three
projects and Snettisham in a manner so as to optimize overall
hydroelectric energy production. This will become more important
as AELP's load grows and existing hydroelectric resources are more
fully utilized to meet AELP customers' annual energy requirements.
Under State ownership, AELP will have full operational control of
Snettisham and will be able to better optimize overall hydroelectric
production for its customers.
4. As previously discussed, the Snettisham cables crossing Taku
Inlet are in high risk condition and bring into question the reliability
of AELP's primary energy source. After extensive evaluations by
AELP, AIDEA and AIDEA's consultant, Raytheon Engineers and
Constructors, AELP believes redundant cables should be installed as
soon as possible. In order for AP A to repair all four cables a
Congressional appropriation would be required and a time
consuming process initiated to install redundant cables. During the
foreseeable period of delay in that Federal process, Juneau's power
supply would be vulnerable unnecessarily. Under AIDEA control
and through the single bond issue, the moneys for the new cables
will be provided along with the proceeds to purchase Snettisham.
AELP and AP A are convinced that the cables can be installed for
less money and more quickly by AIDEA/AELP than APA.
5. In an overall sense, approval of the PSA will make AELP able
to provide lower cost and more reliable electric service over the long
run. AELP will have control of its primary source of energy which
Alaska Public Utilities Commission
December 23, 1997
Page 12
will be insulated from Federal rate change vicissitudes that are not
subject to State regulation, and which could be expected under
continued Federal ownership.
It is requested that the Commission approve the PSA no later than April 1,
1998 to facilitate the timely and economical installation of the new submarine
cables and so that Snettisharn replacements and improvements planned for 1998
can proceed.
Communications
Copies of all communications with respect to this matter should be directed
to (1) the undersigned at the address indicated on this letterhead, and (2) counsel
for AELP in this matter:
Eric Redman
Heller Ehrman White & McAuliffe
701 Fifth Avenue, #61 00
Seattle, Washington 98104 ·
(206) 389-6000 (phone)
(206) 447-0849 (fax)
eredrnan@hewrn.com (e-mail)
Very truly yours,
w~~.~
William A. Corbus ~~
President
Attachments
cc (with Attachments):
Rodney Adelman, Alaska Power Administration
Randy Simmons, Alaska Industrial Development & Export Authority
Ron. Dennis Egan, Mayor, City & Borough of Juneau
The Juneau Empire
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TABLE OF CONTENTS
Agreement for the Sale and Purchase of the Electric Capability of
the Snettisham Hydroelectric Project ("Power Sales Agreement")
between Alaska Electric Light and Power Company and the Alaska
Industrial Development and Export Authority
Alaska Power Administration's Invitation For Proposals To
Purchase The Snettisham Hydroelectric Project, April1, 1987
Resolution of the City and Borough of Juneau (CBJ), Serial No.
1256, August 3, 1987
Snettisham Purchase Agreement between the Alaska Power
Administration (U.S. Department of Energy) and the Alaska Power
Authority (State of Alaska), February 10, 1989
Alaska Power Administration Asset Sale and Termination Act, Pub.
L. 104-58, November 28, 1995 (S. 395)
State Authorizing Legislation (HB 526), 1996 SLA Ch. 111,
effective June 28, 1996
Small Business Job Protection Act of 1996, Section 1804, Pub. L.
104-188, August 20, 1996 (H.R. 3448)
Letter from R. LeResche, John Nuveen & Company, Inc., dated
December 18, 1997 (with attachments)
Snettisham Hydroelectric Project Operations and Maintenance
Agreement between Alaska Electric Light and Power Company and
Alaska Industrial Development and Export Authority
Alaska Industrial Development and Export Authority Power
Revenue Bond Resolution
AELP' s Sample COPA Calculation
a)SllM Jawnsuoo JSOd %0C: .n\
Jaded papk:>al:l uo pa)U!Jd '%1
--·-----------------------------------------------------=
SNETTISHAM HYDROELECTRIC PROJECT
AGREEMENT FOR THE SALE AND PURCHASE OF THE
ELECTRIC CAP ABILITY OF THE SNETTISHAM HYDROELECTRIC PROJECT
("POWER SALES AGREEMENT")
between
ALASKA ELECTRIC LIGHT AND POWER COMPANY
(''Purchaser")
and
THE ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY
A Public Corporation of the State of Alaska
("Authority")
Section 1
Section 2
(a)
(b)
(c)
(d)
Section 3
Section 4
(a)
(b)
(c)
(d)
Section 5
(a)
(b)
(c)
(d)
(e)
Section 6
(a)
(b)
(c)
(d)
(e)
Section 7
(a)
(b)
(c)
(d)
Section 8
(a)
(b)
267887.15
TABLE OF CONTENTS
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Term Of Agreement; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Conditions Precedent to Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . 7
Commencement of Payment Obligations . . . . . . . . . . . . . . . . . . . . . . . 8
Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Decommissioning of Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
The Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Sale and Purchase of Electrical Power . . . . . . . . . . . . . . . . . . . . . . . . . 9
Title to Project Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Independent Consultant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Best Efforts Regarding Project Costs . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Project Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Project Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Additional Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0
Parity Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Assignment of Payments to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Refinancing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Purchaser's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Management of Project Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Costs of Project Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Payments of Project Costs by the Purchaser to Authority . . . . . . . . . . . . 11
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Replacement Power When Project Power Is Unavailable . . . . . . . . . . . . 13
Renewal and Replacement Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Establishment and Purposes of R & R Fund . . . . . . . . . . . . . . . . . . . . . 14
Title to R & R Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Annual R & R Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Disposition of R & R Fund on Termination . . . . . . . . . . . . . . . . . . . . . 14
Budgets and Oversight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Annual Operating Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Snettisham Project Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1
Section 9
(a)
(b)
Section 10
(a)
(b)
(c)
(d)
Section 11
(a)
(b)
(c)
(d)
(e)
Section 12
Section 13
(a)
(b)
(c)
(d)
Section 14
(a)
(b)
Section 15
(a)
(b)
(c)
(d)
Sec1cion 16
(a)
(b)
Section 17
(a)
(b)
(c)
2678~7.15
Proceeds of a Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Taking of Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Taking of Purchaser's System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Obligations In The Event Of Default . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Dispute Resolution; Obligation of Continued Performance . . . . . . . . . . . 16
Additional Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Removal and Restoration of the Purchaser as Project Operator . . . . . . . . 17
Disruption of Project Operations or Purchaser's System Due to Labor
Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Purchaser's System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Purchaser's Rate Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Operation and Maintenance of the Purchaser's System . . . . . . . . . . . . . . 19
Limitation on Certain Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Mergers, Consolidations and Sale of System by the Purchaser . . . . . . . . 19
Records and Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Compliance with Laws and Regulations . . . . . . . . . . . . . . . . . . . . . . . . 21
Compliance With Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Status of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Compliance with Continuing Disclosure Requirements . . . . . . . . . . . . . . 21
Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Assignment Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Assignment by Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
End of Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Determination of the End of Project ........................... 22
Election to Purchase Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Decommissiomng . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Purchaser's Payment Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Representations and Warranties .............................. 23
Representations of Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Representations of the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Independent Consultant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Judicial Review/Binding Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11
(d)
(e)
(f)
(g)
(h)
Section 18
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
EXHIBITS
Exhibit A
Exhibit B
Exhibit C
Exhibit D
2678n.IS
Selection of Arbitrator(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 2 5
Hearing -Law - Appeal Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Provisional Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Attorneys' Fees and Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Notices, Computation Of Time And Holidays . . . . . . . . . . . . . . . . . . . . 26
Applicable Law/Forum and Venue ............................ 27
Availability Of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Waiver Not Continuing ................................... 27
Construction of Agreement ................................. 27
Covenant To Act In Good Faith ............................. 27
No Third-Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Multiple Copies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Description of the Project and Included Assets;
Necessary Approvals
Resolution
Option Agreement
iii
POWER SALES AGREEMENT
THIS AGREEMENT is executed this __ day of , 1998, by
ALASKA ELECTRIC LIGHT AND POWER COMPANY (the "Purchaser"), an Alaska
corporation, and the ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT
AVTHORITY, a public corporation of the State of Alaska (the "Authority") and is effective
as ·::>f the Effective Date (as defined below).
A. Pursuant to the Alaska Power Administration Asset Sale and Termination Act,
the United States Department of Energy, Alaska Power Administration (''USDOE") is
authorized to sell to the Authority the Snettisham hydroelectric project (the "Project"). The
Authority has entered into an agreement with USDOE dated February 10, 1989, together with
amendments thereto, expressing the terms and conditions for the purchase and sale of the
project ("the Purchase Agreement").
B. The Purchaser currently owns and operates electric generating plants and power
transmission and distribution systems and purchases power from USDOE generated by the
Project.
C. As of the Effective Date, the Authority is closing the purchase of the Project
under the Purchase Agreement and is issuing its bonds for purposes of financing the purchase
price and certain related costs and expenses.
D. The Authority desires to sell, and the Purchaser desires to buy, all of the
Capability of the Project (as defined below) pursuant to this Agreement. It is understood by
the: parties that this Agreement is intended, without limitation, to secure the payment of debt
service on all Bonds and Parity Obligations (as defined below) issued to finance the purchase
of the Project and to pay for Project Work (as defined below), to be collaterally assigned to
the Trustee as security for payment of the Bonds and Parity Obligations, and to survive any
taldng of Purchaser's System as an obligation of the Purchaser and/or condemnor.
E. The parties intend and agree that (1) the Purchaser shall have responsibility for
operating the Project, except as otherwise provided herein; (2) the Authority's responsibilities
under this Agreement shall be primarily those related to Project finance, as distinct from
Project operations; and, therefore (3) this Agreement shall be implemented and interpreted at
all times in a manner that allows the Purchaser the maximum Project-related operating
flexibility consistent with the Authority's responsibilities under · this Agreement and the
Re:solution (as defmed below).
NOW, THEREFORE, the parties agree as follows:
26'1SS7.15
1
Section 1
definitions apply:
Definitions. For the purposes of this Agreement, the following
"Act" or references to AS 44.88 mean Title 44, Chapter 88 of the Alaska Statutes
(AS 44.88) as the same may be amended or supplemented from time to time.
"Additional Bonds" means any bonds of the Authority (including any bonds
issued to refund the Bonds) issued pursuant to the Resolution on a parity of lien with the
Bonds on the Project and Project revenues.
"Affiliate" means Snettisham Electric Company, a corporation that is a wholly
owned subsidiary of Alaska Energy and Resources Company and is under common control
with the Purchaser.
"Agreement" means this Power Sales Agreement.
"Annual Operating Budget" has the meaning set forth in Section 8(a).
"Annual R & R Contribution" means the annual amount to be deposited each
Fiseal Year into the R & R Fund, as set forth in Section 7(c).
"APUC" means the Alaska Public Utilities Commission and/or any successor
thereto.
"Authority" means the Alaska Industrial Development and Export Authority as
established by the Act, and/or any successor agency thereto.
"Bonds" means all bonds, notes, or other evidences of indebtedness issued by the
Authority pursuant to the Resolution, the proceeds of which are used to finance or refinance
the acquisition of the Project and pay and/or reimburse related costs of acquisition of the
Project and Project Work.
"Capability of the Project" means the entire capability of the Project to generate
and transmit Electric Power at any and all times, including periods when the Project is
inoperable, is curtailed, or is not operating, in each case in whole or in part for any reason
whatsoever.
"Code" means the Internal Revenue Code of 1986, as amended.
"Debt Service Fund" means the fund established with the Trustee for purposes
of paying debt service on the Bonds and Parity Obligations and into which the Purchaser is to
deposit all or a portion of the payments to be made pursuant to Section 6(c) hereof, payable
directly to the Trustee.
267~•87.15
2
"Debt Service Reserve Fund" means the fund of that name established by the
Re~~olution and to be held by the Trustee as security for Bonds and Parity Obligations.
"Decommissioning Costs" means all expenditures (including without limitation
capital items, labor, administrative, fees and expenses of the Independent Consultant and other
advisers) that are specific to the Project and which are either: (1) required by law to
dec:ommission the Project in accordance with all Necessary Approvals and all federal, state and
local laws and regulations then applicable to the Project; or (2) necessary to protect human
health or public safety. Where this Agreement permits decommissioning before the end of the
Term hereof, Decommissioning Costs shall include the costs to retire the Bonds and Parity
ObRigations, if any.
"Dimute Resolutionn means the process described in Section 17.
"Effective Date" means the date on which all of the conditions precedent set forth
in Section 2(a) have been satisfied or waived by the parties.
"Electric Power" or "Power" means electric energy or electric capacity or both.
Where the context of this Agreement requires a distinction, electric energy is specified and/or
expressed in kilowatthours or megawatthours and electric capacity is specified and/or expressed
in kilowatts or megawatts.
"FERC" means the Federal Energy Regulatory Commission and/or any successor
thereto.
"Fiscal Year" means that twelve-month period starting January 1 of a calendar
year through and including December 31 of the same calendar year. The initial Fiscal Year
for purposes of this Agreement is that portion of the twelve-month period starting on the
Effective Date through and including the following December 31. If that portion of the
calendar year is shorter than ninety (90) days the parties shall determine the initial Fiscal Year,
which must end on a December 31 and may not be longer than 456 days. The last Fiscal Year
for purposes of this Agreement shall be that portion of the twelve-month period between the
end of the last full (i.e., 12-month) Fiscal Year and the expiration of this Agreement.
11 lndependent Consultant" means an independent individual or firm of engineers
or any other consultant that is nationally recognized and has expertise with respect to electric
pmver projects comparable to the Project, or other consultant, selected by agreement of the
Authority and the Purchaser and, if applicable, meeting the requirements of the Resolution.
For purposes hereof, "independent" means a person who is in fact independent and does not
have any substantial interest, direct or indirect, in the Authority or the Purchaser.
"Initial R & R Contribution" is the amount of [$1.9 million] to be contributed
to the Renewal & Replacement Fund from proceeds of the Bonds.
2671•.87.15
3
"Insurance Consultant" means a nationally recognized insurance broker or
consultant with expertise in insuring projects comparable to the Project, selected by agreement
of the Authority and the Purchaser and meeting the requirements of the Resolution.
"Margin" has the meaning specified in Section 5(b)(iv).
"Minimum R & R Fund Requirement" means $. ____ _
"Necessary Approvals" means all ofthe permits, conveyances, actions or consents
required under applicable local, state or federal law in order for (a) this Agreement or any
am(mdment thereof to become enforceable and (b) the Project to be acquired and operated in
accordance with this Agreement, as set forth in Exhibit B.
"Operations and Maintenance Agreement" or "O&M Agreement" means the
Op(:rations and Maintenance Agreement dated the date hereof between the Purchaser and the
Authority, as the same may be amended, supplemented and modified from time to time.
"Option Agreement" means that certain Snettisham Option Agreement dated the
date hereof between the Authority and the Affiliate in substantially the form attached hereto
as Exhibit D, as the same may be amended, supplemented and modified from time to time.
"Parity Obligations" means any bonds, notes or other evidences of indebtedness
(including any such indebtedness issued to refund outstanding Parity Obligations) issued by the
Purehaser, or by any issuer other than the Authority for the Purchaser, that are authenticated
and delivered by the Trustee and are to be secured by the Project and Project revenues on a
parity of lien with outstanding Bonds.
"Project" means the Snettisham hydroelectric project and all assets comprising
the project, including all transmission lines and cable, all as more particularly described in
Exhibit A.
"Project Costs" means the amounts referred to in Section 6( c) of this Agreement.
"Project Expansions" means Project improvements, betterments, additions and
exp;msions (other than Project Repairs) that are consistent with Prudent Utility Practice.
"Project Repairs" means repairs, maintenance or replacements of existing parts,
fixt11res or equipment with respect to the Project, which (i) are required by federal or state law
or !his Agreement or are otherwise necessary to keep the Project in good and efficient
operating condition, consistent with Prudent Utility Practice, and (ii) are chargeable to the
capital account of the Project under the Code. Repairs, maintenance or replacements of
existing parts, fixtures or equipment which result in improvement of the Project are not
exc!tuded from this definition.
2678!.7.15
4
"Project Sale Agreement" shall mean the agreement or several related agreements
that are entered into pursuant to the Option Agreement, meet the requirements of the
Resolution and the Option Agreement, provide for the sale by the Authority to the Affiliate or
the Purchaser of all or substantially all of the property, facilities and assets comprising the
Project, evidence the obligation to pay the Purchase Price of the Project and provide security
for the payment and performance of all obligations of the purchaser thereunder, which
agr€~ement or agreements may be in the form or forms of a sale agreement, installment sale
agrf~ement, financing contract, loan agreement, bond, note, guaranty, security agreement,
mortgage, deed of trust or any similar form of agreement or agreements.
"Proiect Work" means Project Repairs and/or Project Expansions.
"Prudent Utility Practice" shall mean at a particular time any of the practices,
methods and acts engaged in or approved by a significant portion of the electric utility industry
at such time, or which, in the exercise of reasonable judgment in light of facts known at such
time::, could have been expected to accomplish the desired results at the lowest reasonable cost
consistent with good business practices, reliability, safety and reasonable expedition. Prudent
Utility Practice is not required to be the optimum practice, method or act to the exclusion of
all others, but rather to be a spectrum of possible practices, methods or acts which could have
been expected to accomplish the desired result at the lowest reasonable cost consistent with
reliability, safety and expedition. Prudent Utility Practice includes due regard for
manufacturers' warranties and the requirements of governmental agencies of competent
jurisdiction and shall apply not only to functional parts of the Project, but also to appropriate
strut::tures, landscaping, painting, signs, lighting and other facilities. In evaluating whether any
matter conforms to Prudent Utility Practices, the parties shall take into account, among other
things, (a) the nature of the parties hereto under the laws of the State of Alaska and their
statutory duties and responsibilities and (b) the objectives of (i) complying with environmental
and safety regulations and management agreements, (ii) minimizing the financial risk of the
parties hereto and (iii) providing the Purchaser with flexibility in the conduct of its business
affairs. For purposes of this Agreement, "national standards for the industry" means Prudent
Utility Practice.
"Purchase Agreement" means that certain agreement between the Authority and
the U.S. Department of Energy dated February 10, 1989 relating to the purchase and sale of
the Project to the Authority, as amended.
"Purchase Price .. means, with respect to any sale of the Project pursuant to the
Option Agreement, an amount equal to the sum of (a) (i) the aggregate total principal amount
of all outstanding Bonds and Parity Obligations, plus (ii) accrued interest thereon (including,
with respect to any Additional Bonds issued by the Authority, the Margin) to the earliest
pos:,ible date following the targeted sale date on which each series of outstanding Bonds and
Pari.ty Obligations may be redeemed or prepaid, plus (iii) any premium payable on such
red<~mption or prepayment date, plus (iv) any accrued and unpaid liabilities for arbitrage rebate
or other costs related to or otherwise payable under the Bonds and Parity Obligations, and (b)
2678~7.15
5
any unreimbursed Project Costs that are required to be paid by the Purchaser to the Authority
hereunder.
"Purchaser" means Alaska Electric Light and Power Company and/or any
pennitted successor thereto.
"Purchaser's Systemu or "System" means the Purchaser's electric utility system
within the City and Borough of Juneau or any other system directly interconnected thereto for
the distribution, transmission, and generation of Electric Power, which is owned and operated
by the Purchaser. "Purchaser's System" does not include the Project.
"Reimbursable Administrative Costs" means those reimbursable expenses of the
Authority specific to the Project as set forth in the Operations and Maintenance Agreement.
"Reimbursable Extraordinary Administrative Costs" means those unbudgeted
Reimbursable Administrative Costs which result from an unexpected event and/or an
emc::rgency, as set forth in the Operations and Maintenance Agreement.
"Renewal and Rc;mlacement Fund" or "R & R Fund" means the Renewal and
Replacement Fund established by the Authority pursuant to the Resolution and Section 7 of
this Agreement.
"Resolution" means the Power Revenue Bond Resolution adopted by the
Authority on , 199_, a copy of which is attached hereto as Exhibit C, as
the same may be amended, modified or supplemented from time to time pursuant to
Supplemental Resolutions (as defined in the Resolution) adopted in accordance with the
provisions of the Resolution.
"Snettisham Project Committee" means the committee described in Section 8(b)
of this Agreement.
"Term" means the term of this Agreement provided by Section 2(c) of this
Agreement.
"Total Taking" means, with respect to the Purchaser's System or the Project, a
taking by any state or federal government agency, or subdivision thereof, of all or substantially
all ,;:>f the capability or output from or assets comprising the System or the Project.
"Transition Plan" means that plan adopted by the USDOE and the Authority
des1:ribing the arrangements and timetable for completing the sale and transfer of the Project
to the Authority.
"Trustee.. means the Trustee which may at any time be designated as Trustee
und.er the Resolution.
2678!17.15
6
"USDOE" means the United States Department of Energy, Alaska Power
Administration.
Section 2 Term Of Aareement; Amendment
(a) Conditions Precedent to Effectiveness. This Agreement shall become
effe:ctive upon the fulfillment of the following conditions:
2678:·:7.15
(i) Approval of this Agreement, the Operations and Maintenance
Agreement, the Option Agreement and related transactions by the Board of Directors
and shareholders, to the extent required, of the Purchaser and the Affiliate;
(ii) Delivery to the Authority and the purchasers of the first series of
Bonds issued under the Resolution of an opinion by legal counsel for the Purchaser that
(A) the Purchaser and the Affiliate are duly organized and validly existing and have the
corporate power and authority to execute, deliver and perform their respective
obligations under this Agreement, the O&M Agreement and the Option Agreement; (B)
the execution and delivery of, and performance of the respective obligations of the
Purchaser and the Affiliate under, this Agreement, the O&M Agreement and the Option
Agreement have been duly authorized by all necessary corporate action; (C) this
Agreement, the O&M Agreement and the Option Agreement have been duly executed
and delivered by the Purchaser and the Affiliate and constitute the valid and binding
obligations of the Purchaser and the Affiliate, enforceable against the Purchaser and the
Affiliate, as applicable, in accordance with their respective terms; and (D) such other
matters as the Authority may reasonably request or as may be reasonably requested in
connection with the issuance of the first series of Bonds under the Resolution.
(iii) Approval of this Agreement, the Operations and Maintenance
Agreement, the Option Agreement and related transactions, including necessary bond
approval and authority, by the Authority's Board of Directors;
(iv) Conveyance of Project real and personal property interests to the
Authority, including, but not limited to, the following:
(A) USDOE private and permitted lands;
(B) Bureau of Land Management transmission line rights-of-way and
communication sites;
(C) U.S. Forest Service transmission line rights-of-way;
(D) Main Project area lands selected by the State of Alaska (includes
title conveyance to State of Alaska and subsequent conveyance to the Authority
pursuant to Alaska Statute 38.05.810); and
7
(E) State of Alaska, Department of Natural Resources tideland leases;
(v) To the extent legally required, issuance or assignment of necessary
environmental permits or authorities;
(vi) Purchaser, Authority, and Alaska Department of Fish and Game
approval and execution of Snettisham Hydroelectric Project Hatchery Coordination
Agreement;
(vii) Satisfaction of purchaser's obligations under the Purchase Agreement
between the Authority and USDOE;
(viii) The closing of the Authority's purchase of the Project under the
Purchase Agreement, including but not limited to agreement with USDOE on adequate
assurances with respect to environmental and other liabilities;
(ix) The issuance of all other Necessary Approvals as set forth in
Exhibit B, including but not limited to approval of this Agreement and any other
approvals required from the APUC; and
(x) The closing of the issuance and sale of the first series of
Bonds pursuant to the Resolution.
(b) Commencement ofPayment Obligations. The payment obligations of the
Purchaser under this Agreement shall commence on the Effective Date. The Purchaser's
payment obligations shall be as specified in Section 6.
(c) Term. The Term of this Agreement shall begin on the Effective Date
and .. unless earlier terminated pursuant to the Option Agreement, end on the date on which all
Bonds and Parity Obligations are retired.
(d) Amendment. No amendment of this Agreement shall be effective without
(i) applicable Necessary Approvals, if any, and (ii) the written approval(s) of the Trustee and
holders of the Bonds and Parity Obligations, if and to the extent such written approval(s) may
be required by the Resolution.
Section 3 Decommissionine of Project
If the Project has not been purchased, pursuant to the Option Agreement, prior to the
date identified in Section 2 of the Option Agreement, and if the Purchaser or Affiliate gives
nohce pursuant to Section 2 of the Option Agreement that it does not elect to purchase the
Project (or if both the Purchaser and Affiliate fail to deliver any notice prior to the deadline
specified in Section 2 ofthe Option Agreement), the parties shall proceed to negotiate in good
faith a plan for the decommissioning of the Project in an orderly manner as soon as possible.
Suc:h plan shall include, among other things, the funding of a reserve account to be established
26781:7.15
8
and maintained by the Authority for purposes of paying all Decommissioning Costs and a
timetable for conducting the work necessary to decommission the Project. The Purchaser shall
be solely responsible for funding such reserve account, and shall commence no later than
eighteen (18) months prior to the last day of the Term to make monthly payments to the
Authority (as part of the Project Costs payable pursuant to Section 6(c)) in such amounts as
are determined by the parties to be necessary and appropriate for decommissioning the Project.
In the event the parties are unable to agree on the decommissioning plan, including the amount
and timing of the funding of a reserve account, either party may submit the matter for Dispute
Resolution. Any and all obligations of the Purchaser with respect to decommissioning of the
Proj,ect, including those set forth in the decommissioning plan, shall survive the Term of this
Agreement.
Section 4 The Project
(a) Sale and Purchase of Electrical Power. The Authority hereby sells and
the Purchaser hereby purchases all of the Capability of the Project. The Purchaser shall have
the right to purchase any additional Capability of the Project that may be produced if the
Project is ever expanded or upgraded, provided that the Purchaser pays any additional debt
service and any additional operation and maintenance expense relating to any Project
Expansions.
(b) Title to Project Work. Title to any assets acquired or constructed in
connection with any Project Work shall be vested in the Authority, until such time (if any) as
the Project (including such assets) is sold to Affiliate or the Purchaser pursuant to the Option
Agrr.~ement.
(c) Independent Consultant. The Purchaser and the Authority shall appoint
an Independent Consultant to provide services with respect to the Project as set forth in this
Agreement, the Operations and Maintenance Agreement and the Resolution. Except as
provided in Section 17(h), the fees and expenses of the Independent Consultant shall be
operation and maintenance expenses to be borne by the Purchaser under the Operations and
Maintenance Agreement. Subject to provisions in the Resolution, the contract with the initial
and each successor Independent Consultant shall provide, among other things, that the
Independent Consultant (i) may not resign or terminate its contract on less than one hundred
twenty (120) days notice, unless a successor Independent Consultant shall have been appointed
by the Authority and the Purchaser and shall have assumed the obligations of the resigning
Independent Consultant; (ii) may be removed by the Purchaser, with the consent of the
Authority, at any time on ten (10) days notice; and (iii) shall receive payment only for services
with respect to the Project that are actually performed. If the Purchaser and the Authority
cannot agree on the appointment or removal of the initial Independent Consultant or on any
suc<::essor Independent Consultant, such dispute shall be subject to binding arbitration described
in Sections 17(d) through 17(h) below.
(d) Best Efforts Regarding Project Costs. In their performance and
interpretation of this Agreement, the parties agree to use their reasonable best efforts to assure
267887.15
9
that the Project provides power to the Purchaser at the lowest reasonable cost, taking into
account the obligations imposed by the Act, this Agreement, the Resolution, Prudent Utility
Pra,:tice, and the characteristics of the Purchaser's System.
Section 5 Project Financin~:
(a) Project Acquisition. The Authority shall pay the costs of acquisition of
the Project and related assets, including submarine transmission cables, from the proceeds of
the first series of Bonds.
(b) Additional Bonds. The Authority shall have the option, but not the
obligation, to issue Additional Bonds. In addition to any requirements applicable to the
issuance of Additional Bonds set forth in the Resolution, any Additional Bonds issued by the
AUithority shall be subject to the following terms and conditions:
267887.15
(i) The proceeds thereof shall not be used to finance O&M
Costs (as defined in the O&M Agreement), except for Project Repairs.
(ii) The principal amount of such Additional Bonds shall not
exceed (A) the Authority's estimate of the reasonable cost of the Project Work
to be financed with the proceeds of such Additional Bonds, plus (B) the cost of
issuance of such Additional Bonds, plus (C) capitalized interest thereon (if any),
plus (D) the amount of funds (if any) required to be deposited into any reserve
funds required by the Resolution or any other instrument or agreement pursuant
to which the Additional Bonds were issued.
(iii) If the Project Work to be financed consists of Project
Expansions, the Independent Consultant shall have delivered a certificate to the
Authority and the Trustee to the effect that (A) the net proceeds of the
Additional Bonds will be sufficient to acquire, construct and install the Project
Expansions and (B) after giving effect to the increased Project Costs payable by
the Purchaser following the issuance of such Additional Bonds and increased
revenues from additional Capability of the Project created by the Project
Expansion(s), the Purchaser will have substantially the same or greater ability
to produce sufficient revenues to meet its payment obligations hereunder as it
had prior to the issuance of such Additional Bonds.
(iv) For purposes of Project Costs payable by the Purchaser
pursuant to Section 6(c)(i)(A), interest on such Additional Bonds shall include
a margin (expressed as a percentage or portion thereof) which, when added to
the interest rate that would otherwise be borne or charged with respect to the
Additional Bonds, will compensate the Authority for the use of its credit or
funds (the nMargin"). For any particular issue of Additional Bonds, the Margin
shall be commensurate with margins charged by the Authority with respect to
10
financings of similar principal amount and obligors of comparable
creditworthiness.
(v) The Purchaser shall provide such documentation as the
Authority may reasonably request in order to provide for payment by the
Purchaser of the Additional Bonds (including the Margin) on the due dates
therefor.
(c) Pari tv Obligations. If the Authority declines to issue Additional Bonds
for purposes of financing the costs of Project Work on terms satisfactory to the Purchaser, the
Purchaser shall have the option to cause Parity Obligations to be issued in accordance with the
requirements of the Resolution to pay such costs, and the option of obtaining financing in any
other manner consistent with the limitations upon any such other financing contained in the
Resolution, the 0 & M Agreement and this Agreement.
(d) Assignment ofPayments to Trustee. The parties recognize and agree that
(i) the Authority may be required to collaterally assign to the Trustee, as security for the
payment of the Bonds and Parity Obligations, its rights to receive certain payments under this
Agreement, and (ii) the Purchaser shall pay directly to the Trustee for deposit into the Debt
Service Fund or other Fund held by the Trustee such portion of the payments required to be
made hereunder, as the Authority may direct.
(e) Refinancing. Consistent with the obligations of the parties under
Section 4(d), the Authority (with respect to the outstanding Bonds) or the Purchaser (with
respect to the Parity Obligations) may cause the outstanding Bonds and the Parity Obligations
to be refunded or refinanced from time to time if such refunding or refinancing would reduce
the Purchaser's cost of Electric Power from the Project.
Section 6 Purchaser's Obligations
(a) Management of Project Operations. The Purchaser and the Authority
shaH enter into the Operations and Maintenance Agreement.
(b) Costs of Project Operation. Commencing on the Effective Date, the
Pur1:haser shall bear all costs of managing, operating, maintaining and improving the Project,
including without limitation all costs of performing the obligations of the operator under the
Operations and Maintenance Agreement.
(c) Payments of Project Costs by the Purchaser to Authority. In addition to
costs to be borne by the Purchaser under subsection (b) of this Section, during the Term, the
Pur,:haser unconditionally and irrevocably agrees to pay to the Authority or reimburse the
Authority for the following amounts, which shall constitute Project Costs, notwithstanding a
suspension or reduction in the Capability of the Project or any interruption, interference, or
curtailment in whole or in part of Power supplied by the Project. Such payments shall not be
su~:iect to any reduction, by defense, counterclaim, offset or otherwise, and the Purchaser shall
267887.15
11
be unconditionally obligated to make such payments as provided herein notwithstanding the
existence or pendency of any dispute between the parties under this Agreement, the Operations
and Maintenance Agreement or otherwise.
267887.15
(i) Commencing on the [ ] day of the month following
the date hereof, and on the I ] day of each month thereafter:
(A) An amount equal to one-sixth (1/6) of the interest
payment due on the immediately succeeding interest payment date for all
Bonds and Parity Obligations, plus an amount equal to one-twelfth (1/12)
of the principal payment due on the immediately succeeding principal
payment date for all Bonds and Parity Obligations; provided that semi-
annually on each and the monthly amounts
payable pursuant to this clause (i)(A)(l) shall be adjusted to give the
Purchaser credit for the income earned during the immediately preceding
six months on amounts on deposit in the Debt Service Fund; and
(B) (1) The Reimbursable Administrative Costs of the
Authority included in the Annual Operating Budget for the preceding
month, (2) any Reimbursable Extraordinary Administrative Costs incurred
by the Authority during the preceding month, as invoiced by the Authority
to the Purchaser, and (3) the Margin with respect to any issue of
Additional Bonds, in equal monthly installments; provided. that the
Authority shall give the Purchaser such advance notice of any
Reimbursable Extraordinary Administrative Costs as is reasonable under
the circumstances.
(C) An amount equal to 1112 of the then applicable
Annual R & R Contribution (or, in the case of the first Fiscal Year, the
Annual R & R Contribution therefor divided by the number of months in
such first Fiscal Year).
(D) Any additional amount required so that the amount
available in the Fiscal Year to pay principal and interest on the Bonds and
Parity Obligations will be not less than 100 percent of the amount
required therefor.
(E) An amount necessary to pay any costs of operating
and maintaining the Project that have not been paid by Purchaser pursuant
to the O&M Agreement or otherwise, or by the Authority and reimbursed
as herein provided.
(ii) The amount, if any, required to increase the amount on
deposit in the Debt Service Reserve Fund to an amount not less than the Debt
Service Reserve Requirement not later than the date specified by the Resolution
12
and/or to reimburse the provider of any Reserve Fund Credit Facility for any
draws on a Reserve Fund Credit Facility as required by the terms thereof.
(iii) The amount, if any, required to increase the amount on
deposit in the R & R Fund to an amount not less than the Minimum R & R
Fund Requirement not later than the end of any Fiscal Year in which the amount
on deposit in the R & R Fund shall be less than the Minimum R & R Fund
Requirement.
(iv) Commencing on the date specified in Section 16(c) and on
the same day of each month thereafter, the amount determined in accordance
with Section 16( c) as necessary to fund a reserve for Decommissioning Costs.
(v) The amount necessary to discharge any Project-related liens
on Project assets and to pay other costs as may be incurred under the Resolution
in connection with the Bonds and Parity Obligations, including but not limited
to costs of calculation and payment of arbitrage rebate amounts and fees and
expenses of the Trustee.
(d) Insurance. The Purchaser shall have the primary responsibility for
obtaining insurance coverage for the Project as provided in the Operations and Maintenance
Agreement, including such insurance as may be determined by the State of Alaska Division
of Risk Management and/or its successor agency; provided. that the amount of any premiums
payable with respect to any insurance coverage that is specific to the Project and obtained by
the: Authority as provided in the Operation and Maintenance Agreement shall be included in
Reimbursable Administrative Costs. Subject to the requirements of the Resolution, the
proceeds of insurance coverage on Project assets, including real and personal property, shall
be payable under such arrangements as may be reasonably approved by the Authority to ensure
that the proceeds are used to repair, replace, or otherwise restore the Project to at least as good
condition or state of repair as it was in prior to the occurrence with respect to which such
proceeds were payable.
(e) Rq?lacement Power When Project Power Is Unavailable. At any time
when Power from the Project is unavailable, it shall be the Purchaser's responsibility to obtain
and provide such replacement power for the Purchaser's System as the Purchaser reasonably
determines may be appropriate or required under the circumstances to obtain adequate revenues
for the payment of Project Costs under Section 6(c). The parties recognize and agree that
(i) the load requirements of Purchaser's System during any time when Power from the Project
is unavailable may be less that those which the Purchaser would meet when Power from the
Project is available, and (ii) in no event shall the Purchaser be obligated under this Agreement
to obtain and provide such replacement power in amounts in excess of that which would be
available to the Purchaser from the Project if the Project were operating.
267887.15
13
Section 7 Renewal and Replacement Fund
(a) Establishment and Putposes ofR & R Fund. On or prior to the Effective
Datf.~, the Authority shall establish, as provided in the Resolution, the Renewal and
Replacement Fund as an interest-bearing account exclusively for Project purposes and deposit
the Initial R & R Contribution therein. The R & R Fund is created for the purpose of paying
or reimbursing the cost of Project Repairs and associated engineering, construction and
administration costs, which under standard accounting practices and the Code is treated as a
capital cost or which the parties otherwise agree is to be funded from the R & R Fund.
(b) Title to R & R Fund. The R & R Fund shall be owned by the Authority
and administered by the Authority in a manner to protect the fund and its earnings from federal
taxes and state appropriation. All earnings from the investment of amounts in the R & R Fund
shall be retained in the Fund. The R & R Fund is a Project asset and shall be transferred along
with other Project assets to any purchaser of the Project.
(c) Annual R & R Contribution. The Annual R & R Contribution for the
first full Fiscal Year is [$624,000 (to be readjusted immediately prior to the Effective Date)],
and the Annual R & R Contribution for each subsequent Fiscal Year shall be the amount of
the Annual R & R Contribution for the immediately preceding Fiscal Year increased by an
amount equal to three percent (3%) thereof. Commencing on the third anniversary of the
Effe:ctive Date and every three years thereafter, the Independent Consultant shall evaluate the
then applicable Annual R & R Contribution and the projected levels of future Annual R & R
Contributions and recommend such adjustments thereto as are necessary to maintain the R & R
Fund at an appropriate amount consistent with the requirements of the Resolution, in light of
the prior three years' Project experience and the condition of the Project. The Authority and
the Purchaser by mutual agreement also may propose to make adjustments to the Annual R &
R Contribution by notifying the Independent Consultant in writing of the amount of the
proposed adjustment and the reasons therefor. If the proposed adjustment is not objected to
in Vlrriting by the Independent Consultant within thirty (30) days following receipt of notice of
the proposed adjustment, the adjustment shall be deemed approved, but ifthe adjustment would
reduce the level of the R & R Fund below the amount of the Independent Consultant's current
recommended amount and the Independent Consultant objects in writing to the recommended
adjustment within such thirty (30) day period, such adjustment shall not be made. Following
any adjustment, the "Annual R & R Contribution" shall mean the amount of each annual
deposit, as so adjusted. Notwithstanding any other provision in this Section 7(c), the amount
on deposit in the R & R Fund shall not be reduced to an amount less than the Minimum R &
R Fund Requirement.
(d) Disposition of R & R Fund on Termination. Upon the retirement of all
Bonds and Parity Obligations, and the determination of Decommissioning Costs, if any, any
amount remaining in the R & R Fund shall be paid, unless otherwise provided in the
Resolution, first to the Authority for any unreimbursed Project Costs hereunder, and second
to the Purchaser.
26781':7.1 s
14
Section 8 Budg:ets and Oversig:bt
(a) Annual Operating Budget. In accordance with the procedures more
particularly described in the Operations and Maintenance Agreement, on or before the date
each year specified in such Agreement, the Purchaser shall prepare and submit to the Authority
for its review an operating and maintenance plan and budget for the next Fiscal Year (each an
"Ar~nual Operating Budget"). Each Annual Operating Budget shall detail (i) the Purchaser's
expected operating, maintenance, fuel and other out·of-pocket expenses incurred for, or
properly allocated, to the Project and administrative costs properly allocated to the Project and
(ii) based on information previously provided by the Authority, the Authority's anticipated
Reimbursable Administrative Costs and, if known, Reimbursable Extraordinary Administrative
Costs which are reimbursable under Section 6(c)(i)(B). Each Annual Operating Budget shall
be adopted by the parties in accordance with the procedures set forth in the Operations and
Maintenance Agreement. Pending resolution of any disputes regarding a proposed Annual
0p<:rating Budget, the prior year's Annual Operating Budget shall be used by the Parties.
(b) Snettisham Project Committee. A Snettisham Project Committee shall
be created and members appointed to facilitate the exchange of information and opinion
bervveen the parties and the Combined City and Borough of Juneau. One member shall be
appointed by each of the Authority and the Purchaser and the City and Borough of Juneau
Assembly shall be invited to appoint a member. Each member shall serve until removed and
a successor is appointed by its respective appointing entity.
Section 9 Proceeds of a Taking:
(a) Taking of Project. In the event of a taking of the Project or the
Capability of the Project, the proceeds thereof shall be applied as follows:
(i) In the event of a Total Taking of the Project or the
Capability of the Project, any proceeds received by the Authority shall be used
in the following order of priority: (A) to pay and redeem or defease all
outstanding Bonds and Parity Obligations in accordance with the Resolution, and
(B) to pay Project Costs owed to the Authority pursuant to Section 6(c)(i)(B) or
Section 6( c )(iii). Any excess proceeds remaining following the foregoing
applications shall be paid to the Purchaser.
(ii) In the event of any taking (other than a Total Taking) of
the output or capacity of the Project or any assets comprising the Project, the
proceeds thereof shall be applied in the same manner as proceeds of insurance
are required to be applied under the Resolution.
Notwithstanding any partial or Total Taking, the Purchaser shall remain liable for the
performance of all its obligations under this Agreement, including without limitation payment
of Project Costs under Section 6(c), until all such obligations have been satisfied in full and
this Agreement has been terminated.
15
(b) Taking of Purchaser's System.
(i) The Purchaser and the Authority have entered into this
Agreement in reliance on the fact that the Purchaser owns and controls and,
subject to the provisions of Section 11 (d), will at all times during the Term, own
and control the Purchaser's System. The parties acknowledge and agree that the
Authority and the holders of the Bonds and Parity Obligations will be
irreparably harmed if the Purchaser is prevented, for any reason, from
performing its obligations under this Agreement. Accordingly, the parties shall
use their reasonable best efforts to prevent a condemnation of the Purchaser's
System while any Bonds or Parity Obligations is outstanding. Notwithstanding
any taking of the output or capacity from or the assets of the Purchaser's System
(whether or not such taking constitutes a Total Taking), the Purchaser shall
remain liable for the performance of all of its obligations under this Agreement,
including without limitation payment of Project Costs under Section 6(c), until
all such obligations have been satisfied in full and this Agreement has been
terminated.
(ii) The condemnor may assume the obligations of the Purchaser
under this Agreement, and Purchaser shall thereupon be released from those
obligations; provided, that the Independent Consultant determines that the
condemnor has the financial ability to assume such obligations without impairing
the security for the outstanding Bonds and Parity Obligations. In all other cases,
the Purchaser's future payment obligations under the Agreement shall be
accelerated and shall become due and payable to the Authority upon
condemnation, which amount shall be included among the Purchaser's severance
damages resulting from condemnation, and such condemnation proceeds shall
be used and applied first to pay and redeem or defease all outstanding Bonds
and Parity Obligations in accordance with the Resolution, and any and all such
condemnation proceeds not required for such purpose shall be paid over to the
Purchaser.
Section 10 Obli2ations In The Event Of Default
(a) Dispute Resolution: Obligation of Continued Performance. Upon failure
of c::ither the Purchaser or the Authority to perform any covenant, agreement or obligation
contained in this Agreement, the other party may submit the matter for Dispute Resolution.
Both parties shall continue to perform all of their covenants, agreements and obligations
contained in this Agreement while any Dispute Resolution is pending. The Purchaser shall
continue to make payments in the event of any dispute regarding performance of any obligation
by any party under this Agreement and this obligation of continued payment pending resolution
of disputes shall be immediately enforceable by the Authority and the Trustee, as the
Authority's assignee.
267887.15
16
(b) Additional Rights and Remedies. In addition to the Authority's rights
unde:r this Agreement, if the Purchaser has for any reason suspended or reduced, or has failed
to make or has been prevented from making, payments required under this Agreement, the
Authority may:
(i) Terminate or suspend the delivery of Power to the Purchaser
and offer any Power not delivered to the Purchaser because of non-payment to
any other person on terms and conditions deemed favorable by the Authority;
provided. that any payments received by the Authority from any such other
person shall be deemed to be received in mitigation of the Authority's claim for
damages against the Purchaser; and/or
(ii) Terminate or suspend the Operations and Maintenance
Agreement, remove the Purchaser as operator of the Project and appoint a
replacement operator. In the event the Authority removes the Purchaser as
Operator of the Project, Purchaser shall reimburse the Authority for all
reasonable costs under the circumstances of managing, operating and
maintaining the Project for the duration of any period of default by the
Purchaser, including without limitation costs incurred by the Authority or a
qualified operator appointed by the Authority in connection with the
performance of the Purchaser's obligations under the Operations and
Maintenance Agreement.
No exercise by the Authority of any of its rights (or any failure by the Authority
to exercise any of its rights) under this Section lO(b) shall relieve the Purchaser of any
payment obligation under this Agreement or relieve the Purchaser of any liability for damages
resulting from non-payment.
2678:::7.15
(c) Removal and Restoration of the Purchaser as Project Operator.
(i) So long as the Purchaser continues to make timely payment
of Project Costs, the Authority shall have the power to remove the Purchaser as
operator of the Project only upon a finding by a court of competent jurisdiction
that:
(A) The Purchaser has materially breached its duty to operate
the Project in accordance with Prudent Utility Practice;
(B) The Authority has given written notice of the breach to
Purchaser and Purchaser has failed to cure the breach within thirty (30) days of
the date written notice was given; provided. that if the breach is incapable of
being cured within the thirty (30) day period, the Authority may not remove the
Purchaser as operator so long as the Purchaser has commenced and is diligently
pursuing a cure;
17
(C) As a result of the breach, the Authority reasonably
believes that the Purchaser's ability to continue making timely payment of
Project Costs in accordance with this Agreement is or will be jeopardized; and
(D) Substitution of a different entity as operator of the
Project is necessary to assure the Purchaser's ability to continue making timely
payment of Project Costs in accordance with this Agreement.
(ii) If the Authority removes the Purchaser as operator of the
Project under clause (i) above, then the Authority shall be obligated to restore
the Purchaser as operator upon a finding by a court of competent jurisdiction
that:
(A) The Purchaser is capable of operating the Project
in accordance with Prudent Utility Practice;
(B) The Purchaser is capable of making timely
payments of Project costs in accordance with this Agreement; and
(C) The default is cured.
(d) Disruption of Project Operations or Purchaser's System Due to Labor
Disputes. In the event of a labor dispute, including strikes or lockouts, which result in the
disruption of either the Purchaser's operation and maintenance of the Project or the delivery
of Power from the Project to the Purchaser's customers, the Authority shall have the right, but
not the obligation, to temporarily replace the Purchaser as operator of the Project and/or to
temporarily assume operation and maintenance of the Purchaser's System to assure the delivery
of Power to is customers and the collection of revenues necessary to pay Project Costs under
this Agreement. Any such replacement or assumption of operations and maintenance by the
Authority, or its designee, shall occur only for the duration of the disruption caused by the
labor dispute. The Purchaser shall reimburse the Authority for all costs reasonable under the
circ:umstances of managing, operating and maintaining the Project for the duration of any such
disruption, including without limitation all costs reasonable under the circumstances incurred
by the Authority or a qualified operator appointed by the Authority in connection with the
performance of the Purchaser's obligations under the Operations and Maintenance Agreement.
Section 11 Purchaser's System
(a) Operating Expenses. The amounts payable under this Agreement are
op(~rating expenses of the Purchaser's System, and are valid and binding general obligations
of the Purchaser, payable from the gross revenues of said Purchaser's System as a cost of
purchased electric power.
(b) Purchaser's Rate Covenants. In order to afford, permit and make timely
payments as specified in this Agreement, the Purchaser agrees that it will establish, charge and
267!187.15
18
collect rates, fees, and charges with respect to the Purchaser's System in accordance with
applicable law and subject to applicable regulatory approvals to provide revenues sufficient to
meet its obligations under this Agreement and sufficient to pay, together with any other funds
or money available therefor, any and all other amounts payable from or which constitute or
may constitute a charge and lien upon such revenues including, but not limited to, amounts
sufficient to pay all Project Costs. Purchaser will affirmatively and promptly pursue all
remedies necessary to secure APUC approval of retail rates required to meet the terms of this
Agreement where APUC approval is required.
(c) Operation and Maintenance of the Purchaser's System. The Purchaser
covenants and agrees that it will operate and maintain its System in good repair, working order
and condition, in accordance with Prudent Utility Practice. Purchaser will take all necessary
steps to (i) comply with applicable federal and state laws and regulations, licenses and permits
relating to the use and operation of, and the Purchaser's sale of electric power to retail
consumers over, the Purchaser's System, and (ii) maintain in good standing its certificate of
public convenience and necessity issued by APUC for the Purchaser's System.
(d) Limitation on Certain Contracts. The Purchaser covenants and agrees not
to enter voluntarily into any contract or agreement to take or to take or pay for power, other
than this Agreement, payable from the revenues of the Purchaser's System on a parity with or
superior to the payment of its obligations under this Agreement. The limitations of this
Sec:tion ll(c) shall not apply to contracts or agreements creating obligations on a parity with
obhgations under this Agreement if a written opinion from the Independent Consultant is
rendered that (i) the contract or agreement is reasonably expected to contribute to the conduct
of 1he business of the Purchaser's System in an efficient and economical manner consistent
with Prudent Utility Practice and (ii) the contract or agreement will not impair the ability of
the Purchaser to raise revenues sufficient to meet its obligations under this Agreement.
(e) Mergers, Consolidations and Sale of System by the Purchaser. The
Pw:chaser shall not (i) abandon, sell, lease or otherwise dispose of the Purchaser's System or
substantially all of the assets of that System (any of the foregoing, a "transfer"), or (ii) enter
into any merger, consolidation or share exchange with any other entity, unless (x) such
transaction is permitted under the Resolution and (y) if not otherwise prohibited under the
Resolution, such transaction is consented to in writing by the Authority, which consent shall
not be unreasonably withheld, and, without limiting the generality of the foregoing, the
Pw·chaser has provided the Authority with:
267~87.1S
(A) In the case of a transaction described in clause (i) or (ii)
above in which the Purchaser is not the surviving entity, the report of the
Independent Consultant concluding that the successor in interest to the Purchaser
has experience in the business of electric power generation and supply at lease
equivalent to that of the Purchaser; and
(B) The report of an independent, nationally recognized financial
advisory firm, investment banking firm or accounting firm with experience in
19
utility finance that, in the opinion of such firm, the Purchaser or, in the case of
a transaction described in the foregoing clause (i) or clause (ii), the successor in
interest to the Purchaser can be reasonably expected to have substantially the
same or greater ability (1) to produce revenues sufficient to meet all payment
obligations and (2) to perform all other obligations under this Agreement and the
Operations and Maintenance Agreement as the Purchaser would have had absent
the transaction.
Any permitted successor in interest to the Purchaser pursuant to a
transaction described in clause (i) or clause (ii) above must assume in writing all of the
assigning Purchaser's obligations hereunder, must pay any amounts due and owing from the
Pur<:haser hereunder and must provide the Authority and the Purchaser with an opinion of
counsel that this Agreement is enforceable against such successor in interest. Notwithstanding
the foregoing, no transaction described in this Section ll(e) shall be permitted if giving effect
thereto would impair or jeopardize the exemption from federal income tax of interest on the
Bonds.
Section 12 Records and Reporting
(a) The Authority shall have the right to review and audit all records and
othc~r documents in the Purchaser's possession used in the calculation of any amount calculated
or payable by the Purchaser, and to determine compliance with any covenant, under this
Agreement. The Purchaser shall have the right to review and audit all records and other
documents in the Authority's possession that relate to the Project, including but not limited to
Reimbursable Administrative Costs and Reimbursable Extraordinary Administrative Costs
payable by the Purchaser to the Authority.
26n&7.Js
(b) The Purchaser shall deliver to the Authority:
(i) within ten (10) days after the Purchaser's receipt thereof, but in any
event within 120 days after the end of each Fiscal Year a consolidated balance sheet
and consolidated statement of income and a consolidated statement of cash flow of the
Purchaser and its subsidiaries (if any), setting forth in comparative form corresponding
figures from the preceding Fiscal Year, all in reasonable detail and scope, and audited
and certified by an independent public accounting firm of recognized national standing
selected by the Purchaser, and prepared in accordance with generally accepted
accounting principles; and
(ii) promptly upon their becoming available, copies of (A) all financial
statements, reports and proxy statements sent or made available generally by the
Purchaser to its security holders (including its bondholders) and (B) all regular and
periodic reports and all registration statements and prospectuses, if any, filed by the
Purchaser with any securities exchange or with the Securities and Exchange
Commission; and
20
(iii) with reasonable promptness, such other infonnation and financial
data relating to the Purchaser as the Authority may reasonably request.
Section 13 Compliance with Laws and Regulations
(a) Compliance With Law. The Purchaser shall take all necessary steps to
comply with applicable federal and state laws and regulations, licenses and pennits relating to
the use and operation of the Project and the Purchaser's System.
(b) Status ofBonds. The parties shall not take any action which would cause
the interest on any Bond which is originally issued on a tax-exempt basis to become taxable
under the Code.
(c) Licenses and Pennits. The Authority and the Purchaser shall take all
necessary steps within their control to comply with applicable federal and state laws and
regulations, and to obtain and thereafter comply with all applicable licenses and pennits
relating to the use and operation of the Project.
(d) Compliance with Continuing Disclosure Requirements. To meet the
conditions of paragraph ( d)(2) of United States Securities and Exchange Commission Rule
15c2-12 (the "Rule"), as applicable to a participating underwriter for the Bonds and any Parity
Obligations that constitute municipal securities under the Rule, the Purchaser covenants and
agrees to enter into an agreement with the Trustee or other dissemination agent under which
the Purchaser shall undertake (the "Purchaser's Undertaking") for the benefit of holders of
Bonds and Parity Obligations that constitute municipal securities under the Rule to provide or
cause to be provided the annual financial infonnation and notices of material events to the
persons, at the times and in the manner required by the Rule. The Purchaser's Undertaking
sha.ll inure to the benefit of the Purchaser, the Authority and any holder of Bonds and Parity
Obligations that constitute municipal securities under the Rule, and shall not inure to the
benefit of or create any rights in any other person. No failure by the Purchaser or other
obligated person to comply with the Purchaser's Undertaking shall constitute a default in
respect of the Bonds or Parity Obligations. The sole remedy of any holder of a Bond or Parity
Obligation that constitutes a municipal security under the Rule shall be to take such actions as
that holder deems necessary and appropriate, including seeking a writ of mandate or order of
specific perfonnance from an appropriate court, to compel the Purchaser or other obligated
person to comply with the Purchaser's Undertaking.
Section 14 Assignment
(a) Assignment Generally. This Agreement shall inure to the benefit of, and
shall be binding upon the respective successors and assigns of the parties to this Agreement;
ptpvided, that this Agreement or any interest herein may be transferred or assigned by the
Purchaser only in connection with a transaction pennitted under Section ll(e) of this
Agreement.
267387.15
21
(b) Assignment by Authority. The Authority may assign its rights hereunder
as follows:
(i) The Authority may collaterally assign this Agreement,
together with all of its rights hereunder, to the Trustee for the pwpose of
securing the Bonds and Parity Obligations;
(ii) The Authority may assign this Agreement, together with
all of its rights and obligations hereunder, to a successor government entity
created by and under authority of the State of Alaska, in which event the
successor entity shall assume, and the Authority shall be released from, all of
the Authority's obligations under this Agreement; and
(iii) The Authority may assign this Agreement, together with
the 0 & M Agreement, to Affiliate at the time of a sale of the Project to
Affiliate pursuant to the Option Agreement, in which event Affiliate shall
assume, and the Authority shall be released from, all of the Authority's
obligations under this Agreement and the 0 & M Agreement at the time of such
assignment.
Section 15 End of Project
(a) Determination of the End of Project. The Project shall end if the
Autl:1ority and the Purchaser agree that (i) the Project can no longer be operated in accordance
with Prudent Utility Practice or (ii) the Project cannot be operated in a manner consistent with
Prudent Utility Practice absent Project Work and either such Project Work is not cost effective
in comparison with other Power sources available to the Purchaser or neither party is willing
to ficnance the cost of such Project Work. If the parties cannot agree as to whether the Project
should end, either party may submit the matter for Dispute Resolution.
(b) Election to Purchase Project. After a determination has been made
pur:mant to Section 15(a) to end the Project, Affiliate or the Purchaser may elect to purchase
the Project from the Authority on the terms set forth in the Option Agreement by giving the
Authority written notice of such election within thirty (30) days of the date on which the
determination to end the Project is made. If Affiliate or the Purchaser elects to purchase the
Project, the parties will proceed in good faith and as expeditiously as possible to fulfill the
applicable requirements set forth in the Option Agreement.
(c) Decommissioning. If Affiliate or the Purchaser fails to give notice of its
election to purchase the Project within the period of time set forth in Section 15(b), the parties
shall decommission the Project. The parties shall prepare a decommissioning plan as
contemplated by Section 3 hereof. To the maximum extent possible, the decommissioning plan
shall provide for the prepayment of any outstanding Bonds and Parity Obligations. If the
parties are unable to agree on a decommissioning plan, either party may submit the matter for
Dispute Resolution.
2678:!7.15
22
(d) Purchaser's Payment Obligations. Notwithstanding any determination to
end or decommission the Project, the Purchaser shall continue to be obligated to pay all Project
Costs until all Bonds and Parity Obligations have been paid or provision has been made for
the payment of the Bonds in accordance with the Resolution and for payment of the Parity
Obligations in accordance with the terms thereof; provided. that from the date on which the
Project is declared ended, Project Costs shall no longer include costs for operation and
maintenance of the Project or the Annual R & R Contribution.
Section 16 Representations and Warranties
(a) Rmresentations of Authority. The Authority represents and warrants as
follc1WS:
(i) The Authority is a public corporation of the State of
Alaska duly created, organized and existing pursuant to AS 44.88.
(ii) The Authority is authorized, and has taken all steps
necessary pursuant to the Constitution and laws of the State of Alaska and the
regulations and by-laws of the Authority, to enter into this Agreement and to
comply fully with the terms hereof.
(iii) The Authority's execution and performance of this
Agreement will not conflict with, violate, or constitute an event of default under
any other resolution, contract, agreement, bond, note, mortgage, or other
obligation of the Authority, or with respect to any order, ruling, or decree of any
court or regulatory agency to which the Authority is subject at the time the
Authority executes this Agreement.
(b) Rmresentations of the Purchaser. The Purchaser represents and warrants
as follows:
2678:17.15
(i) The Purchaser is a corporation duly authorized, created, and
existing under and by virtue of the laws of the State of Alaska.
(ii) The Purchaser is authorized, and has taken all steps
necessary pursuant to its articles of incorporation and by-laws and applicable
laws and regulations, to enter into this Agreement and to comply fully with the
terms hereof.
(iii) The Purchaser's execution and performance of this
Agreement will not conflict with, violate, or constitute an event of default under
any other resolution, indenture, contract, agreement, bond, note, mortgage, or
other obligation of the Purchaser, or with respect to any order, ruling, or decree
of any court or regulatory agency to which the Purchaser is subject at the time
the Purchaser executes this Agreement.
23
(iv) The Purchaser is a certificated public utility, and its certificate of
public convenience and necessity includes the City and Borough of Juneau metropolitan
area.
Section 17 Dispute Resolution
(a) General. In the event that (i) the Authority and the Operator shall fail
to r1esolve a material issue or dispute or (ii) a dispute arises between the Authority and the
Ope:rator regarding the application or interpretation of any provision of this Agreement, the
provisions of this Section 17 shall apply.
(b) lndtmendent Consultant. In the event of a dispute or issue referred to in
Section 17( a) above (other than a dispute regarding the selection or removal of the Independent
CorJsultant, which dispute shall be subject to binding arbitration described in Sections 17(d)
through 17(h) below), upon written notice given by one party to the other and to the
Independent Consultant, the issue or dispute shall be submitted to the Independent Consultant
for resolution. Within ten (10) days after delivery of such notice, each party shall submit to
the Independent Consultant a written statement setting forth such party's position with respect
to the issue in question. Within twenty-five (25) days following delivery of such notice or
such longer period as the Independent Consultant shall deliver to the parties its written
determination of the issue. Unless a party elects to have the determination of the Independent
Consultant reconsidered through judicial review or binding arbitration, as provided in Sections
17(G) through (i) below, the Operator and the Authority shall abide by the decision of the
Ind!~endent Consultant. Any decision by the Independent Consultant with respect to an issue
or dispute submitted hereunder shall be consistent with Prudent Utility Practice and shall, to
the greatest extent reasonably possible under the circumstances, have the effect of protecting
and preserving the revenues necessary to pay debt service on all outstanding Bonds and Parity
Obligations.
(c) Judicial Review/Binding Arbitration. If either party chooses to not abide
by the decision of the Independent Consultant or if the Independent Consultant declines to
mal1c:e a determination, then the parties may mutually agree to submit the issue or dispute to
binding arbitration described in Sections 17(d) through 17(h) below; however, the parties may
mumally agree to modify any provision or procedure regarding binding arbitration. If the
parities do not mutually agree to resolve the issue or dispute through binding arbitration, then
either party may file suit in an Alaska State Court of competent jurisdiction to obtain a de novo
review of the issue or dispute. Either party may call the Independent Consultant as a witness
or submit affidavits of the Independent Consultant as part of its case.
(d) Selection of Arbitrator(s). If the expenditure or other amount in question
is Jess than $250,000, there shall be one neutral arbitrator; if the expenditure or other amount
in question is $250,000 or more, there shall be three neutral arbitrators. The arbitrator(s) shall
be selected and qualified as follows:
267!:87.15
24
(i) Promptly following the demand for arbitration, each party
shall submit to the other party a list of names of firms or individuals who
would be acceptable to such party. If the parties cannot agree on the
identity of the arbitrator(s) within ten (10) days of the arbitration demand,
the arbitrator(s) shall be selected by the administrator of the American
Arbitration Association ("AAA") regional office for Anchorage.
(ii) Each of the arbitrators shall be an individual with
demonstrated experience in electric utility operations and finance.
(e) Procedures. The arbitration shall be conducted in accordance with the
AAA Commercial Arbitration Rules with Expedited Procedures, in effect on the date hereof,
as modified by this Agreement. There shall be no dispositive motion practice. As may be
shown to be necessary to ensure a fair hearing, the arbitrator(s) may authorize limited
discovery and may enter pre-hearing orders regarding (without limitation) scheduling, document
exchange, witness disclosure and issues to be heard. The arbitrator( s) shall not be bound by
the rules of evidence or of civil procedure, but may consider such writings and oral
presentations as reasonable business people would use in the conduct of their day-to-day
affairs, and may require the parties to submit some or all of their case by written declaration
or such other manner of presentation as the arbitrator(s) may determine to be appropriate. The
pardes intend to limit live testimony and cross-examination to the extent necessary to ensure
a fair hearing on material issues. Either party may call the Independent Consultant as a witness
or submit affidavits of the Independent Consultant as part of its case. All statutes of limitations
which would otherwise be applicable shall apply to any arbitration proceeding hereunder.
(f) Hearing-Law-Appeal Limited. The arbitrator(s) shall take such steps
as maybe necessary to hold a private hearing within ninety (90) days of the initial demand for
arb~tration and to conclude the hearing within three (3) days; and the written decision of the
arbitrator(s) shall be made not later than fourteen (14) calendar days after the hearing. The
parties have included these time limits in order to expedite the proceeding, but they are not
jurisdictional, and the arbitrator(s) may for good cause afford or permit reasonable extensions
or delays, which shall not affect the validity of the award. The written decision shall contain
a brief statement of the claim(s) determined and the award made on each claim. In making
the decision and the award, the arbitrator{s) shall apply applicable substantive law. Absent
fraud, collusion or willful misconduct by an arbitrator, the award shall be final, and judgment
may be entered in any court having jurisdiction thereof. The arbitrator(s) may award injunctive
relief or any other remedy available from a judge, (including the joinder of parties or
consolidation of this arbitration with any other arbitration arising under the Operations and
Maintenance Agreement or the Power Sales Agreement involving common issues of law or fact
or which may promote judicial economy, but shall not have the power to make any award
payable by the Authority (except an award for attorneys' fees and costs under Section 17(h)
or :m award determining that an amount is properly payable out of the R & R Fund), and shall
not have the power to award punitive or exemplary damages. The decision and award of the
arbitrators need not be unanimous; rather, the decision and award of two arbitrators shall be
2678;!7.15
25
final. The parties confirm that by agreeing to binding arbitration, that they intend to give up
their right to have such disputes decided in court by a judge or jury.
(g) Provisional Remedies. Pending selection of the arbitrator(s), either party
may request the AAA to appoint unilaterally an arbitrator for the limited purpose of awarding
temporary or preliminary relief, however the arbitrator appointed for this purpose shall cease
to have any power to enter orders after the arbitrator(s) is selected pursuant to paragraph (d)
above. Any temporary or preliminary relief shall be limited to relief that the arbitrator(s) could
award. This award may be immediately entered in any federal or state court having jurisdiction
over the parties even though the decision on the underlying dispute may still be pending. Once
the arbitrator(s) is selected pursuant to paragraph (d) above, the arbitrator(s) may, upon request
of a party, issue a superseding order to modify or reverse such temporary or preliminary relief
or may confirm such relief pending a full hearing on the merits on the underlying dispute.
Any such initial or superseding order of temporary or preliminary relief may be immediately
entered in any federal or state court having jurisdiction over the parties even though the
decision on the underlying dispute may remain pending. Such relief may be granted by the
arbitrator(s) only after notice to and opportunity to be heard by the opposing party unless the
party applying for such relief demonstrates that its purpose would be rendered futile by giving
notice.
(h) Attorneys' Fees and Costs. If the party submitting a matter for resolution
to the Independent Consultant, arbitration, or court does not prevail, such party shall pay all
of the costs and expenses of the Independent Consultant, the arbitration and the other party
(induding such other party's reasonable attorney's fees). If the party submitting a matter for
res,olution to the Independent Consultant, arbitration, or court prevails, such party shall pay
one-half of all of the costs and expenses of the Independent Consultant and arbitration, and the
other party shall pay the other one-half; and each party shall be responsible for its own costs
and expenses (including attorneys' fees). If the party submitting a matter for resolution to the
Independent Consultant prevails before the Independent Consultant but loses in arbitration or
judicial review requested by the other party, such party shall pay one-half of all of the costs
and expenses of the Independent Consultant and arbitration, and the other party shall pay the
other one-half; and each party shall be responsible for its own costs and expenses (including
attorneys' fees). If more than one issue or dispute are submitted for resolution, the award of
attorneys' fees and costs shall be separately made for each issue or dispute on a prorated basis.
Section 18 Miscellaneous
(a) Notices. Computation Of Time And Holidays. Any notice required by
thi:; Agreement to be given to any party shall be effective when it is received by such party,
and in computing any period of time from such notice, such period shall commence at 12:01
p.m. prevailing time at the place of receipt on the date of receipt of such notice. Whenever
this Agreement calls for notice to or notification by any party the same (unless otherwise
specifically provided) shall be in writing directed to the Authority's executive director or the
Purchaser's general manager. If the date for making any payment or performing any act is a
da)' on which banking institutions are closed in the place where payment is to be made or a
2671:87.15
26
legal holiday, payment may be made or the act performed on the next succeeding day which
is neither a legal holiday nor a day when banking institutions are closed in such place.
(b) Applicable Law/Forum and Venue. The laws of the State of Alaska shall
govern the interpretation and application of this Agreement. Any actions or judicial
proceedings arising out of this Agreement shall be filed and prosecuted in the Superior court
for the State of Alaska, Third Judicial District, at Anchorage.
(c) A vailabilitv Of Information. The parties shall make available to each
other, for inspection and copying during business hours, all books, records, plans and other
information relating to any calculation or determination to be made pursuant to this Agreement.
(d) Severability.
(i) Severability Generally. If any section, paragraph, clause
or provision of this Agreement or any agreement referred to in this Agreement
shall be finally adjudicated by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of this Agreement shall be unaffected by such
adjudication and all the remaining provisions of this Agreement shall remain in
full force and effect as if such section, paragraph, clause or provision or any part
thereof so adjudicated to be invalid had not been included herein.
(ii) Correction and Substitution. If any section, paragraph,
clause or provtston of this Agreement or any agreement referred to in this
Agreement shall be finally adjudicated by a court of competent jurisdiction to
be invalid or unenforceable, then and in such event the parties agree that they
shall exercise their reasonable best efforts to correct such invalidation and
substitute appropriate agreements and contractual arrangements to achieve the
intent of this Agreement.
(e) Waiver Not Continuing. Any waiver at any time by either party to this
Agt'eement of its rights with respect to any default of the other party hereto, or with respect
to any other matter arising in connection with this Agreement, shall not be considered a waiver
with respect to any subsequent default, right or matter.
(f) Construction of Agreement. Both the Authority and Purchaser have
panicipated in the drafting of this Agreement and have been advised by separate counsel.
Neither party shall be considered the drafter for purposes of applying rules of construction in
any disputes arising under this Agreement. This Agreement shall be construed in harmony
witl1 the Resolution; however, where the terms cannot be harmonized, the terms of the
Resolution shall control wherever it is material to the security of the bondholders.
(g) Covenant To Act In Good Faith. In order to permit this Agreement,
throughout its term, to be fully effective in accordance with the original intent of the parties,
2678:~7.15
27
each party agrees that it shall at all times act in good faith and with fair dealing in performing
its c1bligations and in exercising its rights under this Agreement.
(h) No Third-Party Beneficiary. Notwithstanding that the operation of this
Agr1eement may and is intended to confer benefits on third parties who are not signatories to
this Agreement, this Agreement shall be enforceable only in accordance with its provisions
expressly governing enforcement. In promising performance to one another under this
Agreement, the parties intend to create binding legal obligations to and rights of enforcement
in (i) one another, and (ii) such assignees or successors in interest of the parties as may enjoy
a right to enforce this Agreement by virtue of provisions of this Agreement that expressly
create such a right in such assignees or successors in interest. By entering into this Agreement,
the parties expressly do not intend to create any obligation or promise any performance to any
oth~::r third party, nor have the parties created for any other third party any right to enforce this
Agreement.
(i) Section Headings. The section headings in this Agreement are for
convenience only, and do not purport to, and shall not be deemed to, define, limit or extend
the scope or intent of the section to which they pertain.
G) Multiple Copies. This Agreement shall be executed in several
cou11terparts, each of which shall be an original, but all of which shall constitute one and the
same instrument
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed the
day and year first above written.
2678~7.15
ALASKA ELECTRIC LIGHT AND POWER
COMPANY
By:
[Print Name]
Its:
28
2678o!7.1S
ALASKA INDUSTRIAL DEVELOPMENT AND
EXPORT AUTHORITY
By: ----------~~~r-----------------!Priilt Name)
Its:
29
Exhibit A
DESCRIPTION OF THE PROJECT AND INCLUDED ASSETS
[NOTE: This Exhibit A is for reference only. A final
Exhibit A will be prepared and filed with the Commission for
attachment to the Power Sales Agreement upon completion of
work by AIDEA and USDOE under the Transition
Agreement.]
The Snettisham Hydroelectric Project consists of the following features, assets,
structures, facilities, and equipment, among others (including, in all cases, associated lands,
rights of way, water rights, permits, etc.):
1. Long Lake Reservoir and Crater Lake Reservoir
2. Waterworks, including power tunnel
3. Powerhouse, including three (3) generators and associated structures, facilities,
and equipment
4. Generation switchyard, including transformers and associated structures, facilities,
and equipment
5. Warehouses, dormitories, machine shop, aviation-related equipment and facilities,
and other structures, facilities, and equipment in the vicinity of the powerhouse and generation
swi 1:chyard
6. Rolling stock, equipment, and tools
7. Overhead transmission structures, facilities, and conductor (138kV) between the
generation site and Tak:u Inlet
8. Submarine cables under Tak:u Inlet (138kV)
9. Overhead transmission structures, facilities, and conductor (138kV) between Tak:u
Inlet and Thane Substation
10. Thane Substation, including structures, facilities, transformers, switches, and
SCI\DA equipment
2678S7.15
Exhibit B
NECESSARY APPROVALS
As of the date of execution of this Agreement, the Necessary Approvals include
but are not limited to the items listed below. The parties agree that this Exhibit B shall be
updated from time-to-time prior to the Effective Date to clarify or add further Necessary
Approvals that may be required.
1. APUC approval of this Agreement.
2. Certificate of Public Convenience and Necessity issued by APUC to the
Authority as owner of the Project, or grant of exemption from such requirement.
26~887.15
267817.15
Exhibit C
RESOLUTION
2678~7.15
Exhibit D
OPTION AGREEMENT
Exhibit D
SNETTISHAM OPTION AGREEMENT
THIS AGREEMENT is executed this __ day of , 1998, by the
ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY, a public
corporation of the State of Alaska (the "Authority"), and SNETTISHAM ELECTRIC
COMPANY, an Alaska corporation ("Affiliate"), and approved by ALASKA ELECTRIC
LIGHT AND POWER CO:MPANY, an Alaska corporation (the "Power Purchaser").
A. Pursuant to the Alaska Power Administration Asset Sale and Termination Act,
the United States Department of Energy, Alaska Power Administration ("USDOE") is
authorized to sell to the Authority the Snettisham hydroelectric project (the "Project"). The
Aulhority has entered into an agreement with USDOE dated February 10, 1989, together with
amt~ndments thereto, expressing the terms and conditions for the purchase and sale of the
Project.
B. Pursuant to its Power Revenue Bond Resolution and a First Supplemental
Resolution each adopted on , 1998 (together, the "Resolution"), the Authority
has authorized the issuance of its Power Revenue Bonds, First Series, in the principal amount
of $ to finance the purchase price of the Project and certain related costs and
expenses.
C. Pursuant to that certain Agreement for the Sale and Purchase of the Electric
Capability of the Snettisham Hydroelectric Project of even date herewith between the Authority
and the Power Purchaser (the "Power Sales Agreement"), the Authority has agreed to sell, and
the Power Purchaser has agreed to buy, all of the Capability of the Project as defined in the
Power Sales Agreement. The Power Sales Agreement, among other things, secures the
payment of debt service on all Bonds and Parity Obligations issued to finance the purchase of
the Project and to pay for Project Work (as such terms are defined in the Resolution) and has
been collaterally assigned to the Trustee as security for payment of such Bonds and Parity
Obligations.
D. Both the Power Purchaser and Affiliate are wholly owned subsidiaries under the
common control of Alaska Energy and Resources Company, an Alaska corporation, and the
Authority desires, subject to the requirements of the Resolution and the terms and conditions
of this Agreement, to grant to Affiliate an option to purchase the Project at any time after five
(5} years after the issue date of the Bonds.
03:5943.02
E. The parties intend that a sale of the Project to Affiliate or Power Purchaser
pursuant to this Agreement shall not, by itself, constitute a default under, or require mandatory
redemption of, or result in a change in the payment terms and conditions of Bonds and Parity
Obligations then Outstanding or in a change in the payment expectations of the Holders of such
Bonds and Parity Obligations, and that such Bonds and Parity Obligations shall continue to be
subJect to redemption (including redemptions pursuant to any defeasance plan pursuant to this
Agteement) only in accordance with their terms.
F. Any capitalized term used and not otherwise defined in this Agreement has the
meuning given such term in the Power Sales Agreement or the Resolution.
NOW, THEREFORE, the parties agree as follows:
Section 1. Option to Purchase Project Prior to End of Term
(a) Affiliate's Option Prior to End of Term. At any time after five (5) years
from the Effective Date until the end of the Term of the Power Sales Agreement, Affiliate shall
have an option to purchase the Project from the Authority subject to the requirements of
Section 7.7.2(c) of the Resolution and the terms and conditions of this Agreement. To exercise
this option, Affiliate shall deliver to the Authority written notice of the Affiliate's election to
do so at least 120 days prior to a purchase date specified in such notice (the "Purchase Date").
Upon Affiliate's delivery of such notice to the Authority, the Authority shall sell the Project
to the Affiliate on the Purchase Date, subject to the requirements of Section 7.7.2(c) of the
Resolution and the terms and conditions of this Agreement.
(b) Purchase Price of Project. The purchase price of the Project (the
"Purchase Price") shall be an amount equal to the sum of (a) (i) the aggregate total principal
amount of all outstanding Bonds and Parity Obligations, plus (ii) all unpaid interest accrued
and to accrue thereon (including, with respect to any Additional Bonds issued by the Authority,
the Margin) to the date that all outstanding Bonds and Parity Obligations have been paid,
red·:~emed and retired in full, whether upon redemption or prepayment prior to maturity or at
the scheduled maturity thereof, plus (iii) any premium payable on any such redemption or
prepayment date, plus (iv) all unpaid liabilities accrued and to accrue for arbitrage rebate or
other costs related to or otherwise payable in respect of the Bonds and Parity Obligations to
the date that all outstanding Bonds and Parity Obligations have been paid, redeemed and retired
in lull, whether upon redemption or prepayment prior to maturity or at the scheduled maturity
thereof, and (b) any unreimbursed Project Costs that are required to be paid by the Power
Pmchaser to the Authority pursuant to the Power Sales Agreement. The Purchase Price shall
be payable in installments at the same times and in the same amounts as the foregoing elements
of the Purchase Price are required to be paid under the terms and in respect of all outstanding
Bonds and Parity Obligations and otherwise in accordance with the terms of the Project Sale
Agreement.
0315943.02 -2-
(c) Special Conditions to Affiliate's Purchase of Project. A purchase of the
Project by Affiliate (but not by Power Purchaser as assignee of Affiliate) shall be subject to
the following special conditions in addition to the general conditions specified in Section 1 (d):
(i) The Authority shall transfer and assign to Affiliate and be released from,
and Affiliate shall accept, assume and agree to be bound by, all of the Authority's
rights and obligations in, to and under the Power Sales Agreement and the 0 & M
Agreement, subject to a first priority lien and security interest in favor of the Trustee
on all amounts payable by the Power Purchaser for Project Costs pursuant to the Power
Sales Agreement and the 0 & M Agreement;
(ii) There shall have been delivered to the Authority and the Trustee an
opinion of counsel to Affiliate and the Power Purchaser to the effect that the Power
Sales Agreement and the 0 & M Agreement are the legal, valid and binding obligations
of Affiliate and the Power Purchaser enforceable in accordance with their respective
terms, except as such enforcement may be limited by bankruptcy, insolvency,
moratorium or other laws affecting creditors' rights generally; and
(iii) To secure payment and performance of Affiliate's obligations under the
Project Sale Agreement, Affiliate shall have granted to the Authority, and the Authority
shall have assigned to the Trustee as security for all Bonds and Parity Obligations, a
first priority mortgage on and security interest in the Project, subject to no other liens
or encumbrances except permitted encumbrances specified by the Project Sale
Agreement and the reversionary interest described in subparagraph (d)(v) below.
(d) General Conditions to Purchase of Project by Affiliate or the Power
Purchaser. Any purchase of the Project either by Affiliate or by the Power Purchaser shall be
sub}~ct to the following general conditions:
(i) The purchaser shall have executed and delivered to the Authority, and the
Authority shall have assigned to the Trustee as security for all Bonds and Parity
Obligations, the Project Sale Agreement, which shall, among other things:
0315943.02
(A) Evidence the obligation of the purchaser to pay the Purchase Price
of the Project and perform all other obligations under the Project Sale
Agreement, and
(B) Set forth the following covenants to be observed and performed
in respect of the Project by the purchaser as owner of the Project on and after
the Purchase Date:
(I) not to create liens on the Project other than any lien in favor of
the Trustee or permitted encumbrances specified by the Project Sale Agreement;
-3-
0315943.02
(2) not to sell, lease, transfer or otherwise dispose of any property or
facilities constituting the Project except as pennitted by the Project Sale
Agreement;
(3) not to pennit any other person to use any property or facilities
constituting the Project under any contract, license, easement or other use
arrangement except as permitted by the Project Sale Agreement;
( 4) to cause an Independent Consultant to be selected and employed
to carry out the duties imposed on the Independent Consultant under the
Resolution;
(5) to prepare and file (or cause to be prepared and filed) with the
Authority and the Trustee an annual budget for the Project that meets the
requirements of the Resolution;
( 6) to use its best efforts to operate and maintain the Project (or cause
the Project to be operated and maintained) in an efficient and economical
manner consistent with Prudent Utility Practice and the Project Sale Agreement,
the Power Sales Agreement and/or the 0 & M Agreement, as applicable, and
applicable federal and state laws and regulations;
(7) not to incur or permit the incurrence of Project operating expenses
or expenditures from the Renewal and Replacement Fund in excess of the
reasonable and necessary amounts of such expenditures or in excess of such
budgeted expenditures except as otherwise pennitted by the Project Sale
Agreement;
(8) to collect or otherwise cause the Project to produce, and pay or
cause to be paid to the Trustee, revenues at least sufficient to pay the Purchase
Price of the Project and all Project Costs in full when due, including but not
limited to debt service on all outstanding Bonds and Parity Obligations, amounts
required to maintain the Debt Service Reserve Fund at the Debt Service Reserve
Requirement or reimburse the provider of any Reserve Fund Credit Facility for
draws thereon, amounts required to maintain the Renewal and Replacement Fund
at the level recommended by the Independent Consultant and in any event not
less than the Minimum R & R Fund Requirement, and all other Project Costs
payable in respect of the Project and outstanding Bonds and Parity Obligations;
(9) not to furnish or supply (or permit to be furnished or supplied)
any use, output, capacity or service of the Project free of charge to any person
and to enforce payment of all amounts owing therefor;
-4-
0315943.02
(1 0) to perform its obligations and enforce performance by other
parties of their obligations under the Project Sale Agreement, the Power Sales
Agreement and the 0 & M Agreement, as applicable, and not to permit or agree
to any termination or amendment of or action thereunder that would in any
manner lessen, postpone or restrict payment obligations thereunder or that
otherwise would materially impair or materially adversely affect the rights or
security of the holders of Bonds and Parity Obligations;
(11) to insure the Project (or cause the Project to be insured) at all
times against such risks and in such amounts, with such deductible provisions,
as required by the Resolution;
(12) to cause any useful portion of the Project that is damaged or
destroyed to be reconstructed or replaced as expeditiously as possible in the
manner and to the extent required by the Resolution;
(13) to keep or cause to be kept proper books and records of all
transactions relating to the Project and the Power Sales Agreement and the
0 & M Agreement, as applicable, subject to inspection by the Authority and
the Trustee and by the holders of Bonds and Parity Obligations as required by
the Resolution, and to timely provide the Authority and the Trustee with the
financial and operating reports and notices of events as required by the
Resolution;
(14) to do or cause to be done all things required to maintain the
exclusion of interest on the Bonds and any tax-exempt Parity Obligations from
gross income of the holders thereof for federal income tax purposes, and not to
use or permit the use of the Project or proceeds of the Bonds or tax-exempt
Parity Obligations or other amounts treated as proceeds thereof or take any other
action that would cause interest on the Bonds or any tax-exempt Parity
Obligations to cease to be excluded from gross income of the holders thereof for
federal income tax purposes;
(15) to timely pay and discharge (or cause to be paid and discharged)
all taxes, assessments and other governmental charges, or required payments in
lieu thereof, imposed on the Project and the revenues thereof, and all lawful
claims for labor and materials and supplies, except such as are contested in good
faith by proper legal proceedings;
(16) to maintain (or cause to be maintained) the Renewal and
Replacement Fund with respect to the Project as required by the Project Sale
Agreement or the Power Sales Agreement, as applicable; and
-5-
( 17) to cause the electric utility system of the Power Purchaser within
the City and Borough of Juneau, Alaska. together with any other system directly
interconnected therewith for the distribution, transmission and generation of
Electric Power that is owned by the Power Purchaser, to be maintained in good
standing under the Power Purchaser's certificate of public convenience and
necessity issued by APUC, and to be operated and maintained in accordance
with Prudent Utility Practice in such manner as will permit the purchaser to
timely pay in full all payments required by the Power Sales Agreement and the
Project Sale Agreement;
(ii) The purchaser shall have delivered to the Authority satisfactory evidence
that it has received all regulatory approvals legally required at the time of purchase for
the purchaser to own the Project, including without limitation a license issued by FERC
and a certificate of public convenience and necessity issued by APUC;
(iii) The purchaser shall have caused to be delivered to the Authority and the
Trustee an opinion of nationally recognized bond counsel to the effect that the transfer
of the Project to the purchaser pursuant to the Project Sale Agreement will not
adversely affect the exclusion of interest on outstanding Bonds and tax-exempt Parity
Obligations from gross income of the holders thereof for federal income tax purposes
(other than any holders that are substantial users of the Project or related persons);
(iv) The purchaser shall have paid or reimbursed the Authority for all
reasonable costs and expenses incurred by it in connection with the sale of the Project,
including without limitation all attorneys' fees, fees and expenses of the Trustee,
transfer taxes and title insurance premiums;
(v) The Project shall be sold, and the purchaser shall accept title to Project
assets, including real property, "as is" without any warranties or indemnities from the
Authority (except a limited warranty of title against the Authority's acts only) or the
State of Alaska, including without limitation, without any warranties or indemnities
regarding Pollution or Hazardous Substances, as such terms are defined in the O&M
Agreement. The purchaser acknowledges that the Authority's title to the real property
may be encumbered with a condition that it be used for purposes of generating electric
power, that the grantor Alaska Department of Natural Resources has a reversionary
interest in the real property to the extent that it is not used for said purpose, and that
failure to meet said condition could result in the reverter of title to the Alaska
Department of Natural Resources according to the laws of the State of Alaska.
(e) Special Conditions to Power Purchaser's Purchase ofProject. If Affiliate
asS;lgns its rights under this Agreement to the Power Purchaser, a purchase of the Project by
the Power Purchaser shall be subject to the following special conditions in addition to the
general conditions specified in Section l(d):
0315943.02 -6-
(i) To evidence the Power Purchaser's obligation to pay the Purchase Price
of the Project, the Power Purchaser shall, pursuant to that certain First Mortgage
Indenture dated September 1, 1962, of the Power Purchaser to The Bank of California,
National Association, and Robert F. Dewey, and their respective successors thereunder,
as trustees, as amended (the "First Mortgage Indenture"), issue to the Trustee for the
benefit and security of the holders of all outstanding Bonds and Parity Obligations a
bond of the Power Purchaser {the "Corporate Bond") that is secured pursuant to the
First Mortgage Indenture by a first priority mortgage on all of the properties owned by
the Power Purchaser, including the Project, equally with all outstanding senior debt
obligations of the Power Purchaser secured thereby, without preference, priority or
distinction of any other such senior debt obligation of the Power Purchaser over the
Corporate Bond;
{ii) The Power Purchaser shall have delivered to the Authority and the
Trustee an opinion of counsel to the Power Purchaser to the effect that {A) the
Corporate Bond is the legal, valid and binding obligation of the Power Purchaser
enforceable against the Power Purchaser in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency moratorium or other laws
affecting creditors' rights generally, and (B) the Corporate Bond is entitled to all of the
benefits and security provided by the First Mortgage Indenture, equally with all
outstanding senior debt obligations of the Power Purchaser, without preference, priority
or distinction of any other such senior debt obligation of the Power Purchaser over the
Corporate Bond; and
(iii) The Power Sales Agreement and the 0 & M Agreement shall be
terminated as of the Purchase Date.
(f) Pavment of Purchase Price by Defeasance of Outstanding Bonds and
Parity Obligations. If Affiliate or the Power Purchaser shall have delivered to the Authority,
the issuers of all Parity Obligations and the Trustee a written plan for defeasing all outstanding
Bonds and Parity Obligations in accordance with the requirements of the Resolution and shall
haYe caused the Purchase Price to be paid or provided for by the irrevocable deposit in trust
wi1h the Trustee or other Fiduciary on the Purchase Date of cash and/or Federal Obligations
(as such terms are defined in the Resolution) sufficient to defease all outstanding Bonds and
Pmity Obligations in accordance with the requirements of the Resolution, and shall have paid
{or caused to be paid) to the Authority any portion of the Purchase Price constituting
Re[mbursable Administrative Costs or Reimbursable Extraordinary Administrative Costs then
owed to the Authority under the Power Sales Agreement, the option to purchase the Project
may be exercised upon compliance only with the conditions set forth in Section 1 { d)(ii), {iii),
{iv) and (v) of this Agreement.
03J 5943.02 -7-
Section 2. Option to Purchase Project at End of Term
If the Project has not been purchased earlier, at least three (3) years prior to the last day
of the Term of the Power Sales Agreement, Affiliate shall deliver to the Authority written
notice stating whether or not Affiliate elects to purchase the Project on the last day of the Term
at ·:he Purchase Price calculated as of such date. If Affiliate gives notice of its election to
pwchase the Project, Affiliate shall be irrevocably obligated to purchase, and the Authority
shall be irrevocably obligated to sell, the Project on the last day of the Term at the Purchase
Pri·:e, upon compliance only with the conditions set forth in Section l(d)(ii), (iv) and (v) of
thin Agreement. Any and all obligations of the purchaser with respect to such purchase and
sal~~ of the Project shall survive the term of the Power Sales Agreement.
Section 3. Action by Authority
The Authority shall not be required to take any action or incur any cost or expense in
cotmection with the sale of the Project to Affiliate or the Power Purchaser or the defeasance
and redemption or prepayment of the outstanding Bonds or Parity Obligations unless and until
the Authority shall have received written notice of Affiliate's intention to exercise the option
granted by this Agreement and Affiliate shall have made arrangements satisfactory to the
Authority (which may include the deposit of funds in escrow) for the payment of all costs and
expenses of the Authority as required by this Agreement, whether or not the purchase is
actually consummated.
Section 4. Successors; Assianment
This Agreement shall be binding upon and inure to the benefit of the Authority and any
go·v-emmental successor thereto, and also shall be binding upon and inure to the benefit of
Affiliate and its corporate successors. This Agreement shall not be assignable by Affiliate to
an:l other person or entity, and any such purported assignment shall be void; provided, that
prior to any exercise by Affiliate of its option to purchase the Project, Affiliate's rights under
this Agreement may be assigned to the Power Purchaser with written notice to, but without the
coJlsent of, the Authority solely for the purpose of permitting the Power Purchaser to exercise
this option to purchase the Project.
0315943.02 -8-
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed the
day and year first above written.
ALASKA INDUSTRIAL DEVELOPMENT AND
EXPORT AUTHORITY
By:
Its:
SNETTISHAM ELECTRIC COMPANY
By: ----------------------------------
Its: -------------------------------
APPROVED:
ALASKA ELECTRIC LIGHT AND POWER COMPANY
By:
Its:
03:.5943.02 -9-
INVITATION FOR PROPOSALS TO PURCHASE
THE SNETTISHAM HYDROELECTRIC PROJECT
SYIOPSIS
April 1, 1987
The Alaska Power Administration (APAd) is soliciting proposals to
purchase the Snettisham Hydroelectric Project. As described in
the January 14, 1987, •Revised Work Plan and Proposed Sale
Structure•:
o The solicitation is liaited to electric utilities who now
purchase power from Snettisham, the City ' Borough of
Juneau, the State of Alaska, or combination of these
entities:
o Proposals are to be returned to APAd by August 3, 1987;
o Proposals must meet minimum payment criteria (payment within
five years of enactment of Federal legislation authorizing
the sale, and payment not less than present value of future
interest and principal payments the Treasury would receive
under continued Federal ownership).
Proposals received will be evaluated by APAd to determine which
best satisfies the published sale objectives and guidelines.
There would follow detailed negotiation of conditional purchase
agreements, which would then be presented to the Congress along
with proposed legislation to authorize the sale.
The January 14 •Revised Work Plan• anticipated that invitations
for proposals to purchase the Eklutna Hydroelectric Project would
be extended at the same time as the Snettisham invitations.
However, on recommendation from the Municipality of Anchorage,
Chugach Electric Association, and Matanuska Electric Association,
the Eklutna invitations have been delayed for an estimated two
months.
PBOURTIIS PBQPQSIP lOR DmSTI!'UBI
It is proposed to divest all Federal property and interests in
the Snettishaa Hydroelectric Project, including:
o Certain Federal lands withdrawn or acquired for Project
purposes and essential to continued operation:
o Easements obtained for transmission, access, and other
purposes;
o Project facilities including dams, waterways, poverplants,
transmission systems,
and inventories of
property owned by the
maintenance facilities, and vehicles,
spare parts, materials, and other
Federal qovernment for the Project.
The divestiture is to include the Crater Lake Unit of Snettisham
Project which is nov in construction.
COlfDtl'1 Ol PBOPOSALS
The proposals are to be submitted in five parts, namely:
Part I
Part II
Price, payment teras, and conditions.
Representations as to soundness of proposals and
qualifications to assume ownership.
- 2 -
fort III Information on allocation and pricing of power.
Part IV Protection of non-power users.
Part Y Supplemental information.
Further detail on each part is provided subsequently.
P&rt I. This part is to contain the proposed purchase price and
payment terms, or specific formula for determining such price and
payment terms, and any conditions the proposer wishes to attach
with respect to price and payment teras.
Part II. This part is to contain sufficient information for APAd
to make determination that the proposal is valid and that the
proposed owner is qualified to assume ownership responsibilities.
The information is to be organized under the following sub-parts:
A. Planned organization for operation, maintenance, power
marketing, and administration.
B. Financial plan for the purchase and subsequent operation and
maintenance of facilities.
c. Reservations (for example: the extent to which the proposal
is contingent upon subsequent approvals).
D. Technical, administrative, and financial qualifications to
assume owner responsibilities.
fart III, This part is to contain sufficient information for
APAd to evaluate probable impacts on interests of APAd's present
wholesale power customers. The information is to be organized in
the following sub-parts:
- 3 -
A. Provisions for allocating power and any anticipated impacts
on the preference in sale of Project power to public bodies
and cooperatives (a provision of the 1962 Snettisham Project
authorization).
B. Provisions for setting power ~ates and estimated impacts on
Project wholesale power rates.
c. Provisions to assure lowest costs to consumer, consistent
with sound business principles.
D. Provisions to assure efficient use of Project enerqy and
power resources.
Part IV. Protection of non-power users. This section is to
describe bow the proposed new owner will ensure that interests of
non-power users of Project lands and water will be protected in
the future. Among the important non-power users are:
o Public access to lands and water;
o State of Alaska Snettisham Hatchery;
o Forest Service access to rock spoil material stored at
Snettisham; and
o Tbe Federal land management responsibilities of the Forest
service and Bureau of Land Management.
The above list is not all-inclusive. For example, there are some
other permitted uses of APAd rights-of-way.
Part y. This part is to contain any other information that the
proposer believes will be of use to APAd in evaluating impact on
the Treasury, present power customers, APAd employees (especially
-4 -
the extent to which there aay be post
opportunities for present APA4 employees),
benefits associated with the Projects.
DQPOSAL ACCIPD!!CI UBIQP
aale employment
an4 the public
Each proposal is to be accompanied by representations that the
proposal, including its terms and conditions, will remain in
effect for a period of not to exceed six aonths beyond Auqust 3,
1987, unless such terms and conditions are modified by
negotiations between the proposer and APAd.
The purpose of this provision is to assure that proposals remain
valid durinq negotiations of the conditional purchase agreements.
IBSTRPC1IOHS lOR SQBMITTIIG PROPOSAL@
The proposals are to be submitted in duplicate in securely sealed
envelopes or packages:
(1) Addressed to:
~dministrator
Alaska Power Administration
P.O. Box 020050
Juneau, AK 99802-0050
(2) Clearly indicating the name and address of the offerer and
that the contents are in response to APAd's invitation for
proposals to purchase the Eklutna and snettisham Hydro-
electric Projects.
- 5 -
Proposals are due at 2:00 p.m. on Monday, August 3, 1987, at
APAd's Headquarter Offices, Room 835, Juneau Federal Building,
709 West 9th Street, Juneau, Alaska. Proposals received after
that time will be returned, unopened.
IDLUITIOR
APAd will evaluate proposals received using the evaluation
criteria published at pages 22 and 23 in the January 14, 1987,
APAd report, "Revised Work Plan and Proposed Sale Structures•.
The purpose of this evaluation is to determine which proposal or
proposals best satisfy the objectives and guidelines and
priorities which are also published in the January 14 report.
There are three areas of evaluation criteria:
o Soundness of proposal.
o Qualification to assume owner responsibility.
o Degree to which proposal satisfies guidelines.
The first two areas (soundness of proposal, qualification) would
be used only to determine whether individual proposals are
responsive and responsible. There would not be competitive
ranking in these areas.
The criteria involving applications of guidelines involve both
quantitative and qualitative aspects. Federal costs, proceeds
from the sale, and ratepayer impacts will be estimated for each
proposal and summarized in both nominal dollars and present value
amounts. For present value purposes, APAd intends to use a range
of discount rates reflecting likely long-term borrowing costs to
the Federal Treasury during the time of the sale.
- 6 -
For each of the qualitative areas of criteria, proposals will be
ranked in descending order shoving which best satisfies the
guidelines, with a supporting narrative explanation of the
ranking for purposes of completing the evaluation. If necessary,
APAd will request clarifications and additional information.
The evaluation process will lead to a judgment determination by
the APAd Administration as to which bid best satisfies the
guidelines.
Requests for additional information should be directed to:
Administrator
Alaska Power Administration
P.O. Box 020050
Juneau, AK 99802-0050
Telephone: (907) 586-7405
All of APAd's records on Snettisham Project will be available for
inspection in Juneau during the period of proposal preparation.
-7-
Presented by:
Introduced:
Drafted by:
The Manager
08/03/87
Ad Hoc Snettisham
Committee
RESOLUTION OF THE CITY AND BOROUGH OF JUNEAU, ALASKA
Serial No. 1256
A RESOLUTION REQUESTING THE GOVERNOR OF THE STATE OF ALASKA
TO REQUEST THE ALASKA POWER AUTHORITY TO PREPARE A PROPOSAL
TO PURCHASE THE SNETTISHAM HYDROELECTRIC POWER GENERATION
FACILITY FROM THE U.S. DEPARTMENT OF ENERGY.
WHEREAS, the President of the United States has made
several proposals to the Congress for rate reform for
federally-owned power generation facilities, and
WHEREAS, these proposals, if implemented, would
drastically increase the wholesale price of electricity
produced by the Snettisham Hydroelectric Power Generation
Facility, with a resultant severe impact on retail
customers, and
WHEREAS, on
Energy, the owner
issued a request
facility, and
April 1, 1987, the u.s. Department of
and operator of the Snettisham faci 1 i ty,
for proposals for the purchase of the
WHEREAS, the Ad Hoc Snettisham Committee, comprised of
representatives from the City and Borough of Juneau, the
Alaska Electric Light and Power Co., and the Glacier Highway
Electric Association, with the assistance of the Alaska
Power Authority and the Juneau Energy Advisory Committee,
ha~ been reviewing the request for proposals to determine
the feasibility of purchase of the Snettisham facility, and
WHEREAS, the committee has prepared a report which
indicates that, under certain circumstances, the Snettisham
facility could be purchased and operated in a manner which
results in wholesale power rates approximating those under
continued federal ownership without rate reform, and
WHEREAS, the committee has determined that the JllOSt
appropriate entity to own and operate the facility would be
the Alaska Power Authority, an agency of the State of
Alaska, and
WHEREAS, the boards of directors of the Alaska Electric
Light and Power Co. and the Glacier Highway Electric
Association have adopted resolutions endorsing the purchase
of the facility under the conditions described by the
committee in its report, and
WHEREAS, the Capital Improvement Projects Committee of
the Assembly has reviewed the committee's report and
unanimously recommended adoption of the report by the
Assembly;
NOW, THEREFORE, BE IT RESOLVED BY THE ASSEMBLY OF THE
CITY AND BOROUGH OF JUNEAU, ALASKA:
1. That the Assembly hereby adopts the report of the
Ad Hoc Snettisham Committee.
2. That the Assembly respectfully requests that the
Honorable Steve Cowper, Governor of the State of Alaska,
request the Board of Directors of the Alaska Power Authority
to submit a proposal to the u.s. Department of Energy for
the purchase of the Snettisham Hydroelectric Generation
Facility under the general terms and conditions of the
committee report.
3. Effective Date. This resolution shall be
effective immediately upon adoption.
Adopted this 3rd day of August, 1987.
Attest:
-2-Res. 1256
....• JCQ)JP-sr
j
February 10, 1989
Snettisham Purchase Agreement
Alaska Power Administration
United States Department of Energy
Alaska Power Authority
State of Alaska
L.J:..
. •. I
-. # I ·I ~
---,
J
Snettisham Purchase Agreement
Table of Contents
1. Parties to the Agreement .•....•••..•.......•.••••.•.••.. 1
2 .. Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . • • • . . . . . . . 1
3.. Definitions. . . . . . . . . . . . . . . . . . . . . . . • . • • • • . • . . . . . . • • . . . . . . 1
4. Assets to be Sold or Transferred •..•••••••••••.•••...... 2
5. Sales Price............................................. 4
6. Transfer. . . . . . • . . • . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
7. Liabilities and Responsibilities ...............•........ 5
8. Operation and Maintenance Expenses, Revenues ..•••.....•. 5
9. Non-Power Users. • . . . . . . • . . . . . . . • . . . . . . • . . . . . . . . • . . . . . . . . 6
10. Transition Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1 ::l. Interim Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . • • . . . . . . . 7
12. Post-sale Operation, Maintenance and
Power Marketing Arrangements ..•...•......•..•...•..... 9
13. Effective Date.......................................... 10
14. Environmental Management .•......... ~ •••••.••••.•..•..••• 10
1.5. Severability............................................ 10
J .. 6. Tenn. .............................•..........•........... 10
17. Disputes Resolution..................................... 11
:La • .Amendment. . • • • • • • • . . • . . . .. . . . . . . . . . . . . • . • • • . • . • • • • • . • . . . . 11
19. Continuing Support and Assistance •.••....•...••......... 11
~ppended Material:
_} Exhibit A: Lands, Easements and Rights-of-Ways
Exhibit B: Future Principal & Interest Payments
Sample Projected Floor Selling Price
sample Projected Formula Selling Price
Sales Price Determination
)
/
February 10, 1989
SNETTISHAM PURCHASE AGREEMENT
1. Parties to the Agreement.
The parties to this agreement are the Alaska Power
Administration (APAd), a unit of the United States Department of
Energy, and the Alaska Power Authority (APAu), a corporate entity
of the state of Alaska.
2. Purpose.
This agreement sets out arrangements, terms, and
conditions for sale of the Snettisham hydroelectric project
("Snettisham11 ) to APAu, such arrangements, terms, and conditions
to be implemented if the United States Congress authorizes such
sale and the APAu receives all necessary approvals and is able to
sell revenue bonds in an amount sufficient to pay the Sales
Price.
3. Definitions. As used in this Agreement:
"ADF&G" means the Alaska Department of Fish and Game.
"APAd" means the Alaska Power Administration, a unit of
the United States Department of Energy.
"APAu" means the Alaska Power Authority, a corporate
entity of the State of Alaska.
"BLM" means the Bureau of Land Management, a unit of
the United States Department of Interior.
"Corps of Engineers" means the United states Army Corps
oE Engineers.
"Crater Lake" or "Crater Lake addition" means the
Crater Lake portion of Snettisham now under construction by the
Corps of Engineers and described in section 4 of this agreement
(Assets to be Sold or Transferred).
"DOE" means the United States Department of Energy.
"Federal authorization" means legislation by the United
States Congress authorizing the transfer of Snettisham to the
l\PAu.
"Final Interest Rate" means the net interest cost on
the date of sale of the Snettisham Bonds.
)
snettisham Purchase Agreement February 10, 1989
Page 2
"Sales Price" means the price set out in section 5
{Sales Price).
"Exhibit B Payments" means the schedule of interest and
principal payments shown in Exhibit B to this agreement.
"Snettisham" means the Snettisham hydroelectric project
and includes both the Long Lake portion and the Crater Lake
portion as well as all other assets generally described in
section 4 (Assets to be Sold or Transferred).
"Snettisham Bonds" means the APAu revenue bonds to be
issued to finance the purchase of Snettisham by the APAu.
"Transaction Date" means the date on which ownership of
Sne:ttisham is to be transferred to the APAu as discussed in
section 6 (Transfer).
"USFS" means the United States Forest Service.
) 4. Assets to be Sold or Transferred.
The Snettisham assets to be transferred comprise the
po•..,er production, transmission, and all other facilities and
assets constructed or otherwise provided and held by the Corps of
En,:;Jineers and APAd for the "Crater-Long Lakes Division of the
Snettisham project" authorized in Section 204 of the Flood
Control Act of 1962 (76 Stat. 1194, as amended).
The Long Lake portion of Snettisham, on which
ccmstruction was completed in the 1970's, includes such assets
a~; the improvements and property including: an underground
pmo~erhouse containing two complete turbine-generator sets with
rcltings of 23,580 kilowatts, each; auxiliary electrical and
mE!chanical systems; waterways and hydraulic structures;
rE!servoir and low concrete dam; switchyards, transformers,
138,000 kilovolt transmission line connecting the Snettisham
p1:>werplant and Juneau: the Juneau substation; project roads,
airstrip, boat basin, and barge dock; water, sewage, and waste
disposal facilities: maintenance facilities and vehicles; spare
parts and materials: supervisory control and communications
systems; and various buildings such as living quarters, garage,
and warehouses.
The crater Lake portion of Snettisham is now under
construction by the Corps of Engineers with power production
oxpected to begin in March 1989 and all construction expected to
be completed by September 1990, and includes such assets as the
improvements and property including: one complete
turbine-generator set with a rating of approximately 31,000
kilowatts; auxiliary electrical and mechanical systems.,.:
)
Snet.tisham Purchase Agreement F~bruary 10, 1989
Page 3
wat€~rways and hydraulic structures; a reservoir; a transformer
and certain switchyard modification; a new supervisory control
sys·l:em; and all spare parts and materials.
The above description of assets is intended to be
gen,aral and not precise or all inclusive. As part of the
transition activities, the parties will jointly prepare a
particularized listing of the assets to be sold or transferred.
Other assets acquired or otherwise provided by the
Corps of Engineers and APAd for Snettisham include: lands,
easements, and permits; studies, records, drawings, operating
data, and other technical information; and improvements and
replacements for original equipment; and warranties or other
intangible rights associat:ed with the assets to be transferred or
so1d.
Federal lands administered by the United States Forest
Se!~ice (USFS} and Bureau of Land Management {BL~) are used for
project purposes. With respect to these lands, the parties
int:end that approximately 2, 666 acres in the vicinity of Port
SnHttisham (generally identified in Exhibit A) be selected by the
State of Alaska under Statehood Act entitlements and that
riqhts-of-way be provided to APAu to operate and maintain the
Sn•:attisham transmission facilities between Port snettisham and
Juneau. Such rights-of-way are included in the assets to be sold
and transferred. Alaska will acquire the approximately 2, 666
acres under its Statehood Act entitlement; that land is not a
part of the assets to be sold by the APAd.
The parties intend that the sale of snettisham and
accompanying transfer of assets to APAu not result in additional
costs to APAu for licenses, permits, or other rights for
Snettisham, which costs would not have been encountered under
continued Federal ownership of Snettisham.
In full consideration of the payment by APAu of the
sales price to the federal government, APAd will convey title to
all snettisham assets, including but not limited to those assets
de!scribed above by bill of sale or other appropriate documents:
provided that for any Snettisham assets not yet available for
transfer at the Transaction Date, APAd will provide: 1)
satisfactory assurances that such rema1.n1ng assets will be
t::cansferred to APAu subsequently and in a timely fashion, and 2)
clear authority to APAu for use andjor beneficial occupancy of
) S'Lich remaining assets pending their conveyance to APAu.
All costs associated with preparing the Snettisham
assets under control of the Corps of Engineers and APAd for
conveyance to APAu, including the costs of com~l7t~ng
construction of the Crater Lake unit, shall be the responsl.bl.ll.ty
of the federal government. 1
)
)
Snettisham Purchase Agreement
5. Sales Price.
February 10, 1989
Page 4
The sales price will be calculated by APAd immediately
aft:;er APAu has notified APAd of the Final Interest Rate for the
APAu revenue bonds issued to finance the purchase of Snettisham
("Snettisham Bonds").
The sales price shall be the larger of:
1. The present value as of the Transaction Date of
the remaining interest and principal payments after the
Transaction Date according to the schedule shown in Exhibit
B ("Exhibit B Payments") discounted at a rate two (2)
percentage points above the final interest rate for the
Snettisham Bonds; or
2. Eighty-five (85) percent of the present value as
of the Transaction Date of the remaining Exhibit 3 payments
after the Transaction Date discounted at a rate eaual to the
average yield rate for the most current 30 year United
States Treasury Bonds during the 90 day period immediately
preceding the selling price determination, with such average
yield rate to be based upon Treasury bond yield rates as
published in "The Bond Buyer."
For purposes of the price determination, the Exhibit B
payments will be assumed to occur at the federal fiscal mid-year
(April 1). For the federal fiscal year in which the Transaction
D.ate occurs, the Exhibit B payments will be prorated to reflect
the portion of the year remaining after the Transaction Date.
APAu will make full payment of the sales price to the
United States Treasury by wire transfer on the Transaction Date.
The sales price described above is to be full
consideration for all Snettisham assets, including crater Lake,
described in section 4 (Assets to be Sold or Transferred).
6. Transfer.
APAu will pay the sales price to the United States
'l'reasury simultaneously with the transfer of available Snettisham
;:assets from the federal government or APAd to APAu on the
'rransaction Date. "Transaction Date" means the date on which
ownership of Snettisham is to be transferred to the APAu. The
date will initially be set in the transition plans described in
section 10. The parties recognize, however, that there may arise
circumstances that would warrant deferral of the Transaction
Date. Accordingly, each party has a one-time option to defer the
scheduled Transaction Date up to 90 days if a party notifies the
other in writing at any time prior to 45 days before the
•'
)
)
snettisham Purchase Agreement February 10, 1989
Page 5
sche:duled Transaction Date. By mutual agreement the parties may
defer the Transaction Date to any mutually agreeable date. If on
the Transaction Date the federal government or APAd is unable to
eith.er transfer all Snettisham assets (including Crater Lake) or
produce satisfactory assurances of reasonable future delivery and
interim use of such assets, then the parties agree to discuss and
implement appropriate remedies, including but not limited to
ten1ination of the agreement.
7. Liabilities and Resoonsibilities.
As of the Transaction Date, APAu will assume all
own·arship responsibilities and liabilities for Snettisham and
federal responsibilities and liabilities shall cease, except
that:
1. APAd will be solely responsible for all costs to
close out APAd responsibilities including but not limited to
federal employee entitlements and benefits for APAd
employees;
2. The parties recognize that there may be unfinished
work as of the Transaction Date which is the responsibility
of APAd and/or the Corps of Engineers to complete. such
unfinished work could include completion of construction on
the Crater Lake unit, incomplete transfer of some assets, or
specific APAd responsibilities arising out of the joint
determination of maintenance activities to be completed by
APAd. APAd will be solely responsible for such unfinished
work, including provisions of appropriate assurances that
unfinished work under control of the Corps of Engineers will
be completed at federal expense: and
3. APAu assumes no responsibility for any claims
filed or legal proceedings initiated by any other parties
concerning Snettisham and arising from actions or alleged
actions by APAd and the Corps of -Engineers while those
entities controlled Snettisham assets, regardless of the
date on which such claims may be asserted or proceedings may
be initiated.
B. Operation and Maintenance Expenses, Revenues.
All Snettisham operation and maintenance expenses
incurred up to the Transaction Date, including all obligations
incurred by the federal government for payments to be disbursed
after the Transaction Date, will be the responsibility of the
APAd. Operation and maintenance expenses for assets transferred
after the Transaction Date will be the responsibility of the
federal government until the date of transfer to the APAu or
)
Snet:tisham Purchase Agreement February 10, 1989
Page 6
until APAu gains use and/or beneficial occupancy of such assets.
Sub~;equent operation and maintenance expenses will be the )
responsibility of APAu. APAd fund balances from Congressional <E-
appcopriations as of the Transaction Date will remain with APAd.
All revenues for power delivered up to the Transaction
Date will be returned to the United States Treasury. APAu will
receive all revenues for power delivered after the Transaction
Date.
9. Non-Power Users.
The parties do not intend to adversely affect non-power
users as a result of transfer of ownership from federal control.
APAu, consistent with state and federal law, will
continue to make lands and water accessible and available to the
public.
The existing agreement between APAd and the Alaska
Department of Fish and Game ("ADF&G") will be continued. Any new
agreement will contain terms at least as favorable to ADF&G as
no·1,.. exist.
APAu will continue to honor the existing agreement
between the APAd and the USFS for use of surplus rock spoil
material stored at Snettisham.
APAu will work with the USFS and BLM in a cooperative
manner to ensure effective and proper management of lands
required for Snettisham.
10. Transition Plans.
Within six months after the state and federal
authorizations are obtained, APAu and APAd will adopt specific
transition plans setting forth the arrangements and a timetable
f<)r completing the sale and transfer. The parties intend that
the transition plans will foster an efficient, orderly, and
expeditious transfer of Snettisham and its operation to APAu,
help minimize transition costs, and help minimize adverse impacts
on employees. The transition plans shall be developed jointly by
APAu and APAd and, among other items, will include:
1. A "Transaction Date" on which ownership of
Snettisham would transfer to APAu;
2. A timetable for obtaining the financing and making
the price determination;
Snet:tisham Purchase Agreement February 10, 1989
Page 7
3. Arrangements and timetable for the transfer of
operations, maintenance, power marketing, and administration
of Snettisham;
4. A definition of activities and schedules for
completing the sale and assignment of responsibilities for
such activities;
5. A continuation of the consultations and access to
records and data, and arrangements and timetable for
transfer of data and other records to APAu;
6. Provisions for engineering and safety inspections
by APAu and APAd and a joint determination by APAu and APAd
of specific maintenance activities, including procurement,
to be completed by the APAd;
7. If necessary, provisions for completing asset
transfer actions that may not be completed as of the
Transaction Date, including transfer of the Crater Lake
addition;
8. Provisions for the completion of necessary
agreements, including a particularized listing of the assets
to be sold or transferred;
9. Transition staffing plans as necessary to assure
continuity of operations and minimizing adverse impacts on
APAd employees. In this regard, the parties intend that
APAd Snettisham personnel have first call on post-transfer
Snettisham jobs for which they are qualified, and APAu will
include such a requirement in any operations contract. The
staffing plans shall also consider transferring portions or
all of the operations and maintenance functions to its
operations contractor in advance of the Transaction Date, if
that course of action is found to be feasible and helpful in
minimizing adverse impacts to employees. APAu will request
assistance through state personnel and employment offices
and from its operations contractor in locating suitable
employment opportunities for displaced APAd employees; and
10. Other matters as may be considered necessary by
the parties.
11. Interim Activities.
J The parties to this agreement recognize that, in
c'lddition to the transition plan described above, a number of
actions still need to be taken by the parties and other entities.
'I'he asset transfer will involve several administrative
jurisdictions within the federal and state governments. The
. •'
)
I
/
snet·:.isham Purchase Agreement
parties intend to maintain full coord
jurisdictions and that legislation au·
appropriate authority to implement
part.ies agree to take all actions nece:
transfer including, but not limited to
a. APAd and the United States
will prepare federal legislation r
agreeement. The legislation, among c
provisions to accomplish the following
4) Authorize in accoJ
the sale and transfer of Snettisham to APAu;
~2) Direct and authorize other federal agencies,
including the United States Departments of Defense,
Agriculture, and Interior, to assist and cooperate in sale
implementation including transfer of Snettisham assets under
their jurisdiction;
1/'(3) Provide for the selection by the state and
conveyance to the state of lands needed for Snettisham,
including improved lands, under Alaska's Statehood Act
entitlements;
~) Exempt Snettisham and APAu or state
activities associated with snettisham, including b~ not
limited to exempting subsequent project modifications, from
jurisdiction of the Federal Energy Regulatory Commission
under the Federal Power Act (16 u.s.c. 791), unless such
modifications impact federal lands other than those
presently used for Snettisham; and
(5) Affirm tax-exempt status, subject to the
State of Alaska's private activity bond volume limit if
applicable, for the Snettisham bonds.
b. APAd will be responsible for the following actions:
(1) Apply for USFS and BLM rights-of-way
necessary for operation and maintenance of Snettisham
transmission facilities crossing federal lands, such
rights-of-way to be subsequently transferred to APAu;
(2) Arrange for expeditious transfer of all
Snettisham assets held by the Corps of Engineers or other
agencies of the federal government to APAd for subsequent
transfer to APAu; and
•'
\
)
)
/
Snettisham Purchase Agreement February 10, 1989
Page 9
(3) Arrange and be prepared to transfer to APAu
all other Snettisham assets including but not 1 imi ted to
those assets described in section 4 (Assets to be Sold or
Transferred·) .
c. APAu will be responsible for the following:
{1) Pursue state selection of the approximately
2,666 acres of Snettisham land identified in Exhibit B with
appropriate state agencies; and
(2) Arrange for the payment of the amounts set
out in section 5 {Sales Price) to be paid to the United
States Treasury.
d. APAu and APAd will conduct engineering and safety
inspections at Snettisham, APAu and APAd will jointly determine a
list of items or matters they consider necessary to be changed or
modified prior to transfer. APAd will make the changes prior to
the Transaction Date, or provide appropriate assurances that
those changes or modifications will be made. APAu and APAd will
also jointly determine the acceptability of Snettisham for
transfer to APAu. Failure to reach agreement on the joint
de:termination of either the list of necessary changes or
modifications or the acceptability of snettisham for transfer
will constitute grounds for either party to terminate this
aqreement.
The parties agree that the above-listed actions in
subsections (a) through (d) along with passage of the
l~~gislation described in (a) are crucial to the Snettisham
purchase and that failure to complete such actions by the
Transaction Date, or provide appropriate assurance of subsequent
c.::>mpletion, shall constitute grounds for either party to
terminate this agreement.
12. Post-sale Operation,
Arrangements.
Maintenance and Power Marketing
APAu intends to contract for operation and maintenance
c:·f Snettisham and for sale of project power with the power sales
c:ontract standing as the instrument backing APAu revenue bonds
issued to purchase the project.
To assist in implementation of these post-sale
arrangements, APAd will make available for inspection and use by
J~PAu all project records and data and will consult with APAu on
operating procedures, replacement schedules, staffing plans, and
~:raining on a continuing basis starting on the effective date of
·l:his agreement.
)
)
Snet·tisham Purchase Agreement February 10, 1989
Page 10
These provisions are intended to ensure that APAu has
full opportunity to become fully familiar with Snettisham and to
help identify further specific actions that will facilitate the
transfer of operation of Snettisham to state ownership.
13. Effective Date.
This agreement shall become effective as of the
cale::ndar date as of which signatures on behalf of the parties and
the approval of the APAu board of directors have been obtained.
14. Environmental Management.
The parties intend that the transfer of ownership be
acc~:::>rnplished in a manner that assures continued compliance with
environmental and public safety standards and laws. The parties
not~~ that, under applicable Department of Energy instructions,
APAd. is required to prepare a management plan for the Snettisham
Project covering environmental and safety regulations.
APAd agrees to develop and implement such management
plan prior to the Transaction Date and in full consultation with
APil.u.
APAu agrees to continue the implementation of such
management plan after the Transaction Date, and to update the
plan periodically as needed.
15. Severability.
If any provision of this agreement is held invalid, the
remaining provisions shall not be affected thereby.
16. Term.
This agreement shall remain in effect for such time as
is necessary both to complete the sale and transfer of Snettisham
tc' APAu and to complete payments for such sale to the United
States Treasury, provided that this agreement shall terminate two
years after the effective date if authorization by federal
le:gislation has not been obtained within those two years, and
provided further that this agreement shall terminate two years
after the date of the federal authorization if transfer of
Snettisham to APAu has not occurred by that time. The above
tHrmination dates may be extended by mutual agreement of the
parties.
The above termination provisions are intended
provide ample time to obtain state and federal authorizations
C<::lmplete the transaction. However, it is the intent of
parties to obtain those authorizations as quickly as possible
complete the sale as quickly thereafter as is practicable.
to
and
the
and
)
)
snettisham Purchase Agreement FebruarJ 10, 1989
Page 11
This agreement shall be terminated if, at any time
pric1r to the Transaction Date, APAu determines that it is not
ablE:! to meet the payment terms and so notifies APAd in writing.
17. Disoutes Resolution.
The parties agree to provide best efforts to resolve
any disputes arising out of interpretation of this agreement.
Either party may request mediation assistance in disputes, in
which case the parties will jointly select a mediator to provide
such assistance.
18. Amendment.
This agreement may be modified only by mutual agreement
between APAu and APAd. Any such modifications must be consistent
with applicable state and federal law.
19. Continuing Support and Assistance.
The parties agree to support and assist each other in
the, mutually satisfactory resolution of any unforeseen problems
associated with the transfer. APAd and APAu recognize that new
is~;ues involving the transfer process may arise prior to and
aft::er transfer, or that issues considered resolved may need
further clarification, implementation, or other resolution. APAd
and APAu agree that open lines of communication are desirable
aft:er the date of this agreement and after transfer to facilitate
th£! transfer process. To that end, APAd and APAu each agree to
ex(~rcise their good faith efforts to resolve any such disputes
expeditiously. APAd further agrees to use its best efforts to
ma:J<.e available an appropriate federal entity to implement this
se1::tion in the event that APAd as an identifiable federal entity
ceases to exist.
DATED this lOth day of _:.,F.:::eb~r:...:u::..::a:..:..r.._y ________ , 198 9 •
AlASKA POWER ADMINISTRATION
by: /s/
Robert J. cross
Administrator
ALASKA POWER AUTHORITY
by: /S/
Robert E. LeResche
Executive Director
l
/
Snettisham Purchase Agreement
Exhibit A
Lar1.ds, Easements and Rights-of-Ways
February 10, 1989
Page 1 of 2
Ex.hibit A consists of this narrative (pages 1 and 2 of 2) and the
map labeled "Exhibit A," signed by BI.M, USFS and APAd, and dated
February 3, 1989.
This exhibit describes and displays present land status for
Snettisham Hydroelectric Project and describes in general terms
thH conveyances of land and land rights contemplated in the
purchase agreement.
1. BLM. Refers to Federal lands managed by BLM used for the
Snettisham Project for which BLM is to provide APAd
rights-of-way sufficient for operation, maintenance, repair
and replacement of Snettisham facilities, such rights-of-way
to be assigned by APAd to the State of Alaska; and includes
Federal lands withdrawn for project purposes subject to
selection and conveyance to the State of Alaska.
Legend Symbols and Description.
Withdrawals. Refers to approximately 2,671 acres
of public lands withdrawn for Snettisham housing
such major facilities as the "Snettisham
Powerhouse, " "Intake Area, 11 "Power Tunnel, "
11 Crater and Long Lake Reservoirs" and "Thane
Substation. 11 The total acreage is comprised of
the following land:
a. Approximately 2,666 acres withdrawn for major
facilities including the "Snettisham
Powerhouse, 11 "Intake Area, 11 "Power TUnnel 11
and ••crater and Long Lake Reservoirs," such
lands subject to selection and conveyance to
the State of Alaska on or about the
Transaction Date.
b. Approximately 5 acres withdrawn for the
"Thane Substation" for which BLM is to
provide APAd rights-of-way, such rights-of-
-way to be assigned to the State of Alaska.
BLM Lands. Refers to rights-of-way across
state-selected lands covering a small portion of
the 138kV transmission line from the Tongass
Forest to approximately a mile from "Thane
Substation."
Snettisham Purchase Agreement
Exhibit A
February 10, 1989
Page 2 of 2
2. USFS. Refers to federal lands managed by the Forest Service
within the Tongasss National Forest.
3.
Legend Symbols and Description.
FS-R/W. Refers to rights-of-way and permits
across approximately 40 miles of federal lands
housing the majority of the 138kV transmission
line between Snettisham and the City of Juneau,
such rights-of-way to be provided to APAd for
assignment to the State of Alaska.
Acquired-Easements.
Map Symbol: M ... ~ Acquired-Easements
Refers to easements acquired by the Corps of Engineers for a
small portion of the 138kV transmission line near Thane
Substation during construction of Snettisham, such easements
to be provided to APAd for assignment to the state of
Alaska.
EXHIBIT B Page 1 of 2
Snettisham Purchase Agreement
Future Principal & Interest Payments
June 27, FY 1988 Power Repayment Study Data
{$1,000's)
FISCAL YEAR PRINCIPAL INTEREST TOTAL
1989 914 2,740 3,655
1990 942 4,563 5,505
1991 994 4,534 5,529
1992 1,090 4,503 5,593
1993 1,167 4,469 5,636
1994 1,253 4,433 5,686
1995 1,351 4,394 5,745
1996 1,441 4,352 5,793
1997 1,544 4,307 5,852
1998 1,658 4,260 5,918
1999 1,857 4,207 6,064
2000 1,748 4,152 5,901
2001 1,904 4,098 6,002
2002 1,984 4,040 6,024
2003 2,383 3,974 6,357
2004 2,563 3,900 6,463
2005 2,190 3,829 6,019
2006 2,935 3,752 6,687
2007 2,406 3,672 6,078
2008 2,675 3,596 6,271
2009 2,972 3,511 6,483
2010 2,190 3,434 5,624
) 2011 3,513 3,348 6,861
2012 3,619 3,241 6,860
2013 3,708 3,131 6,839
2014 3,840 3,018 6,858
2015 908 2,946 3,854
2016 935 2,919 3,854
2017 1,153 2,889 4, 043
2018 3,879 2,813 6,692
2019 4,142 2,692 6,835
2020 2,108 2,599 4,707
2021 4,338 2 ,.502 6,839
2022 4,467 2,370 6,837
2023 4,574 2,234 6,808
2024 4,748 2,094 6,843
2025 1,221 2,004 3,224
2026 2,053 1,955 4,008
2027 4,106 1,862 5,969
2028 4,230 1,737 5,967
2029 .4,397 1,609 6,006
2030 4,446 1,475 5,922
2031 5,450 1,328 6,778
2032 5,674 1,161 6,835
2033 5,867 988 6,856
2034 6,041 810 6,850
2035 4,776 648 5,424
2036 6,382 480 6,862 ) 2037 6,566 286 6,852
2038 6,197 93 6,290
TOTAL FY90-39 152,587 141,216 293,803
TOTAL FY90-39 151,645 136,653 288,298
TOTAL FY90-39 150,651 132,119 282,770
j
EXHIBIT B
Snettisham Purchase Agreement
Page 2 of 2
Sample Projected Floor Selling Price
($l,OOO's)
Transaction Date
Avg of US
30 Year
Treasury
Yields
During 90
Days Prior
Transaction
Present
Value of
Remaining
Payments
(assumed to
occur mid
Fiscal Year)
Floor Selling
Price Equal
Eighty-five
(85) Percent
of Present
Value
========================--===============================----==========
oct 1, 1989
(start of FY90)
Oct 1, 1990
(start of FY91)
Oct 1, 1991
(start of FY92)
Sample
Transaction Date
9%
9%
9%
Projected Formula
($1,000's)
Projected Final
Interest Rate for
the APAu Revenue
Bonds plus addi-
tional discount
$66,942 $56,900
$67,219 $57,136
$67,496 $57,372
Selling Price
Formula Selling
Price Equal to
Discounted Present
Value of Remaining
Payments
==:=-~~~-=========--=====================--===========----=
oc·':. 1, 1989
(start of FY90)
oct 1, 1990
{start of FY91)
oct 1, 1991
(start of FY92)
8.5% + 2%
8.5% + 2%
8.5% + 2%
Sales Price Determination
$57,987
$58,288
$58,597
The above are samples only. The actual US30 average yields and APAu
Final Interest Rate will be determined on the Transaction Date. The
Sc'1les price will be the larger of the floor or formula selling price.
It: the sales transaction occurs on October 1, 1990, and the average US
30 Treasury yield is 9%: and APAu' s cost of borrowing is 8. 5%: then
~1e Sales Price would be $58,288,000.
)
....,...
January 25, 1991
SNETTISHAM PURCr~SE AGREEMENT
Amendment No. 1
1. Puroose.
This J...mendtlent No. 1 reflects new infor:::J.ation with
respect to lands, and extends the terms of the February 10, 1989
SnE:~ttisham Purchase Agreement. It also recognizes that, subsequent
to the February 10, 1989 Agreement, the Alaska Power Authority
became the Alaska Energy Authority.
2. Alaska Enerav Authoritv {AEAl.
Wnerever used in the February 10, 1989 Agreement, "Alaska
Poy,rer Authori ty 11 or 11 APAu 11 means 11 Alaska Energy Authority" or AEA.
This reflects a name change only and does not change the intent of
or responsibilities under the February 10, 1989 Agreement.
3. Amendment to Section 4. Assets to be Sold or Transferred.
The sixth (6th) and seventh (7th} full paragraphs under
Sec:tion 4 of the February 10, 1989 Agreement are amended to read as
follows:
"Federal lands administered by the United states Forest
Service (USFS} and Bureau of Land Management (BLM} are
used for project purposes. With respect to these lands,
the parties intend that approximately 2,666 acres in the
vicinity of Port Snettisham and approximately 5 acres of
Thane Substation (generally identified in Exhibit A} be
selected by the state of Alaska under Statehood Act
entitlements and that rights-of-way be provided to APAu
to operate and maintain the Snettisham transmission
facilities between Port Snettisham and Juneau. such
rights-of-way are included in the assets to be sold and
transferred. Alaska will acquire the approximately 2,671
acres under its Statehood Act entitlement: that land is
not a part of the assets to be sold by the APAd."
"~he parties intend that, to the extent possible, the
sale of Snettisham and accompanying transfer of assets to
AEA not result in additional costs to AEA for licenses,
permits, or other rights for snettisham, which costs
would not have been encountered under continued Federal
ownership of Snettisham. The parties recognize that
existing law requires the Forest Service to.as7ess ~ees
for use of rights-of-way for project transm~ss~on l~nes
on Forest Service lands.11
)
/
Snettisham Purchase Agreement
Ame·ndment No. 1
6. Extended Te~.
(.......,.
January 25, 1991
Page 3
Under provisions of Section 16 of the Februart 10, 1989
Agt"eement, the ter:n of that agreement is hereby extended t•..to full
yea.rs until February 10, 1993.
7. Effective Date.
This ~endment No. 1 to the February 10, 1989 Agreement
sha.ll become effective as of the calendar date on which the parties
have executed this amendment.
* OJ.. TED this 25....-day of
AIJ.SKA POWER J..DM!NISTRATION
by:
Robert J. cr
Administrator ·' ....
ALASKA ENERGY AUTrlORITY
by: 7/:&A.~----..
Robert E. L~Resche
Executive Director
)
( .... ..,.
February 5, 1993
SNETTISF~ PURCF.ASE AGREEMENT
Amendment No. 2
1. Purpose.
This Amendment No. 2 further extends the te~ of the
February 101 1989 Snettisham Purchase Agreement and provides
clarification with respect to contract obliqations established in
Ala.ska Power Administration (APA) wholesale power contracts.
2. Extended Term.
Under provisions of Section 16 of the February 10 1 1989
AgJ~eement 1 the ten1 of that agreel!lent is hereby extended four full
years until February 10 1 1995.
3. .Wholesale Power Contracts.
APA Snettisham wholesale power contracts establish terms
of service and contain long-ter.Q (up to 20 years) commitments to
deliver specified amounts of power and energy. Alaska Energy
Authority (AEA) wholesale power contracts, which are to be in
effect starting on the Transaction Date will honor the established
' terms of service and, in both amount and duration, APA's
ccmtractural commitments to deliver power and energy. APA 1 s rights
arid responsil:lilities for delivery of power and energy under the
Snettisham wholesale power contracts are to be terminated as of the
Transaction Date.
APA will consult with AEA prior to entering new
Snettisham wholesale contracts with a view towards including
ccmtract provisions which will facilitate the change from Federal
t'::l State ownership of snettisham while protecting the interests of
"
,_
(._ . ..a::.
(
~ the purchaser, seller, and wholesale customers.
}
)
4. Effective Date.
This Amendment No. 2 to the February 10, 1989 Snettisham
Pur~:hase Agreement shall become effective as of the calendar date
on ',o~hich the parties have executed this amendment.
DATED this g day of Fe~J~ 9.:3
1 19~.
AIASKA POWER ADMINISTRATION
by:
ALASKA ENERGY AUTF.ORITY
Ronald A. Garz~~i
Executive Director
)
January 17, 1995
SNETTISHAM PURCHASE AGREEMENT
Amendment No.3
1. Purpose.
This Amendment No. 3 further extends the term of the February 10, 1989
Snettisham Purchase Agreement, as amended, and provides for the reassignment of
the Agreement from the Alaska Energy Authority to the Alaska Industrial Development
and Export Authority.
2. Alaska Industrial Develooment and Export Authority.
Wherever used in the February 10, 1989 Purchase Agreement, as amended,
"Alaska Energy Authority" or "AEA" shall mean "Alaska Industrial Development and
E>:port Authority" or "A IDEA". This change only reflects the reassignment of the
A(~reement from AEA to AIDEA and does not change the intent or substance of the
FHbruary 1 0, 1989 Agreement, as amended'.
3. Extended Term.
Under the provisions of Section 6 of the February 10, 1989 Agreement, the
te:rm of the Agreement _is hereby extended until June 30, 1997.
4. Effective Date.
NT
Executive Director
ajSllM Jawnsuo:) !SOd %02: ~
Jaded papil::>ai:J uo paJU!Jd '(11
PUBLIC LAW 104-58 [S. 395]; November 28,1995
ALASKA POWER ADMINISTRATION ASSET SALE AND
ADMINISTRATION-EXPORTS OF ALASKAN
NORTH SLOPE OIL
F0r Legislative HistO?"!f of Act, see p. 494.
An Act to authorize and direct the Secretary ot Energy to aell the Alaska Power
Admlnhltnltion, and to authorize the export of Alaaka North Slope crude oil. and tor
other purpoMS.
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
TITLE I-ALASKA POWER ADMINISTRA-
TION ASSET SALE AND TERMINATION
SEC. 101. SHORT TITLE.
This title may be cited as the "Alaska Power Administration
Asset Sale and Termination Act".
SEC. 102. DEFINITIONS.
For purposes of this title:
(1) The term "Eklutna" means the Eklutna Hydroelectric
Project and related assets as described in section 4 and Exhibit
A of the Eklutna Purchase Agreement.
(2) The term "Eklutna Purchase Agreement" means the
August 2, 1989, Eklutna Purchase Agreement between the
Alaska Power Administration of the Department of Energy
and the Eklutna Purchasers, together with any amendments
thereto adopted before the enactment of this section.
(3) The term "Eklutna Purchasers" means the Municipality
of Anchorage doing business as Municipal Light and Power,
the Chugach Electric Association, Inc. and the Matanuska Elec-
tric Association, Inc.
(4) The term "Snettisham" means the Snettisham Hydro-
electric Project and related assets as described in section 4
and Exhibit A of the Snettisham Purchase Agreement.
(5) The term "Snettisham Purchase Agreement" means the
February 10, 1989, Snettisham Purchase Agreement between
the Alaska Power Administration of the Department of Energy
and the Alaska Power Authority and its successors in interest,
together with any amendments thereto adopted before the
enactment of this section.
(6) The term "Snettisham Purchaser" means the Alaska
Industrial Development and Export Authority or a successor
State agency or authority.
109 STAT. 557
Alaska Power
Administration
Asset Sale and
Termination Act.
42USC7152
note.
P.L.l04-58
Sec.l03
LAWS OF 104th CONG.-Ist SESS. Nov. 28
SEC. 103. SALE OF EKLUTNA AND SNE'ITISBAM HYDROELECTRIC
PROJECTS.
(a) SALE OF EKLUTNA.-The Secretary of Energy is authorized
and directed to sell Eklutna to the Eklutna Purchasers in accord-
ance with the terms of this Act and the Eklutna Purchase Agree-
ment.
(b) SALE OF SNETI'ISHAM.-The Secretary of Energy is author-
ized and directed to sell Snettisham to the Snettisham Purchaser
in accordance with the terms of this Act and the Snettisham Pur-
chase Agreement.
(c) COOPERATION OF OTHER AGENCIES.-The heads of other
Federal departments, agencies, and instrumentalities of the United
States shall assist the Secretary of Energy in implementing the
sales and conveyances authorized and directed by this title.
(d) PRocEEDS.-Proceeds from the sales required by this title
shall be deposited in the Treasury of the United States to the
credit of miscellaneous receipts.
(e) AUTHORIZATION OF APPROPRIATIONS.-There are authorized
to be appropriated such sums as may be necessary to prepare,
survey, and acquire Eklutna and Snettisham for sale and convey-
ance. Such preparations and acquisitions shall provide sufficient
title to ensure the beneficial use, enjoyment, and occupancy by
the purchasers.
(f) CONTRIBUTED FUNDs.-Notwithstanding any other provision
of law, the Alaska Power Administration is authorized to receive,
administer, and expend such contributed funds as mdy be provided
by the Eklutna Purchasers or customers or the Snettisham Pur-
chaser or customers for the purposes of upgrading, improving,
maintaining, or administering Eklutna or Snettisham. Upon the
termination of the Alaska Power Administration under section
104(f), the Secretary of Energy shall administer and expend any
remaining balances of such contributed funds for the purposes
intended by the contributors.
SEC. 104. EXEMPTION AND OTHER PROVISIONS.
(a) FEDERAL POWER ACT.-(1) After the sales authorized by
this Act occur, Eklutna and Snettisham, including future modifica-
tions, shall continue to be exempt from the requirements of Part
I of the Federal Power Act (16 U.S.C. 79la et seq.), except as
provided in subsection (b).
(2) The exemption provided by paragraph (1) shall not affect
the Memorandum of Agreement entered into among the State of
Alaska, the Eklutna Purchasers, the Alaska Energy Authority, and
Federal fish and wildlife agencies regarding the protection, mitiga-
tion of, damages to, and enhancement of fish and wildlife, dated
August 7, 1991, which remains in full force and effect.
(3) Nothing in this title or the Federal Power Act preempts
the State of Alaska from carrying out the responsibilities and
authorities of the Memorandum of Agreement.
(b) SUBSEQUENT TRANSFERS.-Except for subsequent assign-
ment of interest in Eklutna by the Eklutna Purchasers to the
Alaska Electric Generation and Transmission Cooperative Inc.
pursuant to section 19 of the Eklutna Purchase Agreement, upon
any subsequent sale or transfer of any portion of Ek.lutna or
Snettisham from the Eklutna Purchasers or the Snettisham Pur-
chaser to any other person, the exemption set forth in paragraph
109 STAT. 558
Nov.28 ALASKA POWER ADl\UNISTRATION SALE
(1) of subsection (a) of this section shall cease to apply to such
portion.
P.L104-58
See.104
(c) REvlEW.-(1) The United States District Court for the Dis-Courts.
trict of Alaska shall have jurisdiction to review decisions made
under the Memorandum of Agreement and to enforce the provisions
of the Memorandum of Agreement, including the remedy of specific
performance.
(2) An action seeking review of a Fish and Wildlife Program
("Program") of the Governor of Alaska under the Memorandum
of Agreement or challenging actions of any of the parties to the
Memorandum of Agreement prior to the adoption of the Program
shall be brought not later than 90 days after the date on which
the Program is adopted by the Governor of Alaska, or be barred.
(3) An action seeking review of implementation of the Program
shall be brought not later than 90 days after the challenged act
implementing the Program, or be barred.
(d) EKLUTNA LANDs.-With respect to Eklutna lands described
in Exhibit A of the Eklutna Purchase Agreement:
(1) The Secretary of the Interior shall issue rights-of-way
to the Alaska Power Administration for subsequent reassign-
ment to the Eklutna Purchasers-
(A) at no cost to the Eklutna Purchasers;
(B) to remain effective for a period equal to the life
of Eklutna as extended by improvements, repairs, renewals,
or replacements; and
(C) sufficient for the operation of, maintenance of,
repair to, and replacement of, and access to, Eklutna facili-
ties located on military lands and lands managed by the
Bureau of Land Management, including lands selected by
the State of Alaska.
(2) Fee title to lands at Anchorage Substation shall be
transferred to Eklutna Purchasers at no additional cost if the
Secretary of the Interior determines that pending claims to,
and selections of, those lands are invalid or relinquished.
(3) With respect to the Eklutna lands identified in para-
graph 1 of Exhibit A of the Eklutna Purchase Agreement,
the State of Alaska may select, and the Secretary of the Interior
shall convey to the State, improved lands under the selection
entitlements in section 6 of the Act of July 7, 1958 (commonly
referred to as the Alaska Statehood Act, Public Law 85-508;
72 Stat. 339), and the North Anchorage Land Agreement dated
January 31, 1983. This conveyance shall be subject to the
rights-of-way provided to the Eklutna Purchasers under para-
graph (1).
(e) SNETTISHAM LANDs.-With respect to the Snettisham lands
identified in paragra~h 1 of Exhibit A of the Snettisham Purchase
Agreement and Pubhc Land Order No. 5108, the State of Alaska
may select, and the Secretary of the Interior shall convey to the
State of Alaska, improved lands under the selection entitlements
in section 6 of the Act of July 7, 1958 (commonly referred to
as the Alaska Statehood Act, Public Law 85-508; 72 Stat. 339).
(f) TERMINATION OF ALAsKA POWER ADMINISTRATION.-Not later
than one year after both of the sales authorized in section 103
have occurred, as measured by the Transaction Dates stipulated
in the Purchase Agreements, the Secretary of Energy shall-
( 1) compfete the business of, and close out, the Alaska
Power Administration;
109 STAT. 559
P~ .. 104-.58
Sec~ 104
Reports.
Effective dates.
48 usc 312, 312
note, 312a-312d.
42 usc 1962d-
12-1962d-14.
PrEsident.
LAWS OF 104th CONG.-lst SESS. Nov. 28
(2) submit to Congress a report documenting the sales;
and
(3) return unobligated balances of funds appropriated for
the Alaska Power Administration to the Treasury of the United
States. ·
(g) REPEAI..S.--(1) The Act of July 31, 1950 (64 Stat. 382)
is repealed effective on the date that Eklutna is conveyed to the
Eklutna Purchasers.
(2) Section 204 of the Flood Control Act of 1962 (76 Stat.
1193) is repealed effective on the date that Snettisham is conveyed
to the Snettisham Purchaser.
(3) The Act of August 9, 1955, concerning water resources
investigation in Alaska (69 Stat. 618), is repealed.
(h) DOE ORGANIZATION ACT.-As of the later of the two dates
determined in paragraphs (1) and (2) of subsection (g), section
302(a) of the Department of Energy Organization Act (42 U.S.C.
7152(a)) is amended-
(1) in paragraph (1)-
(A)bystrikingsubparagraph(C);and
(B) by redesignating subparagraphs (D), (E), and (F)
as subparagraphs (C), (D), and (E) respectively; and
(2) in p~aph (2) by striking out "and the Alaska Power
Administration' and by inserting .. and" after "Southwestern
Power Administration,".
(i) DISPOSAL.-The sales of Eklutna and Snettisham under this
title are not considered disposal of Federal surplus property under
the Federal Property and Administrative Services Act of l949 ( 40
U.S.C. 484) or the Act of October 3, 1944, popularly referred to
as the "Surplus Property Act of1944" (50 U.S.C. App. 1622).
SEC. 105. OTHER FEDERAL HYDROELECTRIC PROJECTS.
The provisions of this title regarding the sale of the Alaska
Power Administration's hydroelectric projects under section 103
and the exemption of these projects from Part I of the Federal
Power Act under section 104 do not apply to other Federal hydro-
electric projects.
TITLE II-EXPORTS OF ALASKAN
NORTH SLOPE on,
SEC. 201. EXPORTS OF ALASKAN NORTH SLOPE on..
Section 28 of the Mineral Leasing Act (30 U.S.C. 185) is amend-
ed by amending subsection (s) to read as follows:
"EXPORTS OF ALASKAN NORTH SLOPE OIL
"(s)(l) Subject to paragraphs (2) through (6) of this subsection
and notwithstanding any other provision of this Act or any other
provision of law (including any regulation) applicable to the export
of oil transported by pipeline over right-of-way granted pursuant
to section 203 of the Trans-Alaska Pipeline Authorization Act ( 43
U.S.C. 1652), such oil may be exported unless the President finds
that exportation of this oil is not in the national interest. The
President shall make his national interest determination within
five months of the date of enactment of this subsection. In evaluat-
109 STAT. 560
I
l
1996 SLA CH. 111
Chapter 111
ANACI'
1 Relating to the financing authority, programs. opezalioos. aod projects of the Alaska IDdustrial
2 Development and Export A.udtority; providing an e.xemption from the procurement code for
3 cenain projects of the authority; and providing for an effective date.
4
5 • Sectioa. 1. FINDINGS, POUCY, AND INTENT. 11 is the policy and intent of the
6 legislaluM that the fmancial integrity of the Alub. Industrial Development and Export
7 Auebority remain sccwe so the authority can eontiDue. co fulfill iiS vilal economic development
a mission for the scale. The legisla&IUe finds that this Al::t fu1fil1s this inteat.
9 • Sec:.l. AS 36.30.8SO(b) is amended by addina a new parasraph to read:
10
11
12
(34) conttKtS of the Alaska laduslrial Development and Export
Authority made with the developer of an inteparcd transportation and port facility
owned by the authority.
U • Sec:. 3. AS 44.88 is amended by adding a new section to uticle 3 to read:
-1-SCS CSHB S26(FIN) am S
36.30.850
(b )(34)
389
390
44.88.088
44.88.095
(g)
44.88.159
{a)
1996 SLA CH. 111
Clulpter Ill
I Sec. 44.88.088. PAYMENT OF DIVIDEND TO STATE. (a) The authority
l shall adopt a policy for payment of a dividend to the swc each fiscal year. The
3 unount of the dividend for a fiSCal year may not be less than 25 percent nor more than
4 SO percent of the net income of the authority for the base fiscal year. In no event.
5 however, shall the dividend for a fiSCal year exceed the total unrestricted net income
6 of the authority for the base fucal year. The dividend for a fJSCal year shall be made
7 available by the authority before the end of that fucal year. The authority shall notify
8 the commissioner of revenue wben the dividend for a fiSCal year is available for
9 appropriation.
10 (b) In this section,
11 (I) "base fiscal year" means the fiscal year ending two years before the
12 end of the fiscal year in which the payment is made;
13 (2) "net income" means the authority's net income as set out in the
14 audited financial swcments of the authority for the base fiscal year.
15 (3) "unrestric:ted net income" means the authority's unrestricted net
16 income as set out in the audited fmancial sratementS of the authority for the base fiSCal
17 year.
18 • Sec. 4. AS 44.88.095(8) is amended to read:
19
20
11
ll
l3
(J) Befqre Jgly 1. 19!8. the agtbprity may iPue bonds in 11 arnopnt
mattr than SIO.OOQM tp =jg in the llpwipr of a deyelopment grojec;t gpdcr
AS 44&171 • 44JI8.l'n onl! !rith lnjslatjye mnml. Begjoojng July I. 1991.
IIMI thtnaftcr. witbout [WITHOUT) prior legislative approval, the authority may not
issue bonds. excep1 refunding bonds.
24 • Sec. 5. AS 44.88.1S9(a) is amended to read:
(a) The inrerest n.te on a loan IN"'*i"tlon pqn:Jwcd [FINANCED] from
the proceeds of tax-exempt bonds or expected by the .uthority to be l'rrbe""
l7 [FINANCED) from the proceeds of tu-exempt bonds is equal to the cost of funds to
28 the authority. In Ibis subsecUon "cost of funds" means the aue inrerest cost expressed
l9 as a tate on tax-exempt bonds of the authority plus an additional percentage u
30 cletermined by the authority to represent the allocable expenses of operation. costs of
31 issuanCe, and loan servicing.
SCS CSHB S26(F'IN) am S
1
l
3
4
5
'
1996 SLA CH. 111
Chapter 111
• Sec. 6. AS 44.88.1S9(b) is amended to read:
(b) The interest rate on a loan partidpatjou purchased [FINANCED] from
the proceeds of taxable bonds or expected by the authority to be purchased
[FINANCED] from the proceeds of taxable bonds is equal to the cost of funds to the
authority. In this subsection "cost of funds" means the true interest cost expressed as
a rate on taxable bonds, plus an additional percentage as determined by the authority
?' to n:present the allocable expenses of operation. costs of issuance, and loan servicing
8 costs.
9 • Sec. 7. AS 44.88.JS9(e) is amended to read:
10
1J.
(e) The interest rate on a loan vartidDition pmhased [FINANCED] directly
from the assets of the authority shall be determined under the regulations adopted by
the authority under AS 44.88.08S(g)(2)(C). Howeyer. the jnterest rate on a loan
13 urtidJration !Uli'Sba1ed from assets of tbe authority may not be less than the rate
14 determined
l!i m Under fal of this section if the pmject is of a type tbat could be
Ui fondecl !rith tg-mmpt bond5: or
11 f2l under (b) c( this section if the pmjes;t js of a type tbat could not
18
19
20
11
be fgnded with tu=aenmt bonds·
• Sec. 8. AS 44.88.20S(b) is amended to read:
(b) To further ensure effective budgetary decision making by the legislature,
the authority shall
l.'Z (J) annually review the authority's assets to determine whether assets
%3 of the authority exceed an amount required to fulfill the purposes of the authority as
l4 defined in Ibis chapfer. in making its review, (lliE MEMBERS OF) the authority shall
lS determine whether, and to what extent. assets in excess of the amount required to
26 fulfill the purposes of the authority during at least the next fiscal year an: available
17 without
21 (A) breac~ing any agreement entered into by the authority;
29 (B) materially impairing the operations or financial integrity of
3Q the authority; or
3il (C) materially affecting the ability of the authority to fulfill the
·3· SCS CSHB S26(F'IN) am S
44.88.159
(b)
44.88.159
(e)
391
392
44.88.500
(a)
44.88.530
44.88.535
1996 SLA CH. 111
Cbapter 111
1 authority's purposes set out in AS 44.88.070; and
l (2) make ayajlable [PRESENT] to the legislature by January 10 of
3 each year a complete accounting of all assets of the authority and a repon of the
4 review and determination made under ( 1) of this subsection: the aa:ounting shall be
5 audited by the auditor who conducts the audit required by AS 44.88.200 and must
6 include a full description of all loan interest and principal payments and program
7 receipts. including
8 (A) loan commitment fees received by or aa:rued to the
9 authority during the preceding fiSCal Ye&ri [,] and
10 (B) all income earned on assets of the authority during that
11 period.
11
13
14
• Sec.'· AS 44.88.500(a) is amended to read:
(a) (THE BUSINESS ASSISTANCE FUND IS ESTABUSHED D'<l THE
At.TI'HORITY FROM MONEY D'<l THE AUIHORII"rS RESERVES DESIGNATED
15 BY ·THE At.TI'HORITY FOR THE PURPOSE.] Subject to the requirements of
16 AS 44.88..500 • 44.88.599. the authority may [USE MONEY IN THE PUNO)
17 (1) ffO] guanntee new bgsigcss psislapce loans; and
18 (2) rroJ guanntee ""' bgsina1 ..... loans made to refinance
19
20
11
existin& loans.
• Sec. 10. AS 44.88.530 is amended to read:
Sec. 44.88.530. APPUCABILITY OF PROVISIONS. AS 44.88.535 -
22 44.88.560 apply to
l3 [(1)] new loan guanntees and Rflpancipg narantces under
24 AS 44,88.500 [AS 44.88.SOO(a)(l); AND
l5 (2) DEBT REFJNANCJNG GUARANTEES UNDER
l6
rl
ll
29
30
AS 44.88.500(a)(2)).
• Sec. 11. AS 44.88.535 is amended to read:
Sec. 44.88.535. CONDmONS OF LOAN GU.ARAN'l'EE. (a) The authority
may guarantee a loan under AS 44.88..500 -44.88.599 if the
(I) loan
31 (A) is commercially reasonable;
SCS CSHB 526(f'IN) am S -4-
r
1996 SLA CH. 111
Claapter 111
1
2
(B) contains amortization provisions satisfactory to the
authority;
3 (C) is secuted by adequare collateral; however, the authority
4 may waive on a case-by-case basis the requirement of collatcra.l for a loan
5 guarantee of $100.000 [$7.5,000] or less for which the proposed loan
6 amonizalion period does not exceed five years, but the ability to waive the
1 requirement of this subparagraph or the grant of a waiver does not prevent the
8 financial institution that holds the loan pwanteed by the authority from
9 requiring reasonable collateral for the loan;
10 (2) net cash flow from the borrower provides adequate coverage for the
11 debt service on the loan;
12 (3) term of the Joan does not exceed 20 years;
13 (4) loan is originated with and serviced by a state chartered or federally
14 chaneted financial institution;
15 (S) portion of the loan not pwanteed by the authority is held by the
16 oriJinating financial institution or another [FINANCIAL) institution approved by the
17
18
authority;
(6) loan is made to a business with a majority interest held by state
19 residents; and
20 (7) Joan guarantee provides a benefit to the borrower.
21 (b) The authority may provide a guarantee (FROM TilE FUND
22 (1)] of Jll1.l! 80 percent of a loan [OF SSO,OOO OR LESS) that qualifies
23 under AS 44.88..500 • 44.88.S99....llll [;
l4 (2) FOR UP TO 80 PERCENT OF A LOAN OF MORE THAN
SSO,OOO THAT QUALIFIES UNDER AS 44.88..500 • 44.88.599; TilE] ratio of the
guarantee to the outstanding principal of the loan may not increase over the term of
the loan.
(c) The authority may [NOT) pwantee the payment of intereSt on the
29 guaranteed ponion of a loan ig the !!!111JH!t cst.abUsbed by the aytbority by
30 mulation and for a period of time not to gm.d 90 clan.
31 • Sec:. tl. AS 44.88.540 is amended to read:
SCS CSHB S26(FJN) am S
393
394
44.88,, 540
44.88.550
(a)
44.88.560
1996 SLA CH. 111
Cbapter 111
1
l
3
Sec. 44.88.540. LIMITATIONS OF GUARANTEES (FROM TilE FUND].
The authority may not issue a total of more tban [GUARANT:EE)
(I) [A TOTAL OF MORE THAN) $50,000,000 of loan mrantm
4 [LOANS];
S (2) [MORE THAN] $25,000,000 of loan IJIIfiPtCCS [LOANS) in
6 which the amount of the loan guarantee exceeds $500,000.
7 • Sec. 13. AS 44.88.5SO(a) is amended to read:
8
9
10
11
1l
13
(a) The maximum interest rate that may be maaed by a financial
iQStitution on a loan guaranteed by the authority is two and three-quarters percenmge
points above the prime rate.
• Sec. 14. AS 44.88.560 is amended to read:
Sec. 44.88.560. POWERS OF TilE AUTHORITY. The authority may
( I) adopt regulations to implement AS 44.88.500 -44.88.599:
14 (2) establish rcnns and conditions for loan guarantees and refinancins '
15 agn::ements subject to the requirements of AS 44.88.500 • 44.88.599;
16 (3) ma.k.e and execute conaa:ts and odler instruments to implement
17 AS 44.88.500 -44.88.599;
18 (4) charge
19 (A) one percent of the amount guaranteed for the service it
ZO provides under AS 44.88.500 -44.88.599; and
l1
ll regulation;
(B) any other reasonable fee that the authority may establish by
23 (5) acquire real or personal propeny by purchase. transfer. or
l4 foreclosure when the acquisition is necessary to protect the authority's [AN} interest
15 in a loan or a loan warantee [THE FUND];
l6 (6) exercise any OCher power necessary to implement AS 44.88.500 •
rJ 44.88.599; and
l8 (7) to the extent the authority considers it to be in its best interest to
l9 do so. use money [lN TilE BUSINESS ASSISTANCE FUND] to pay expenses
30 relating to the liquidation of collateral securing loans guaranteed by the apthority
31 [BUSINESS ASSISTANCE FUND}.
SCS CSHB S26(FIN) un S
r
1996 SLA CH. 111
Claapter 111
1 • Sec. 15. AS 44.88.599(2) is amended to read:
2
3
4
5
'
7
8
9
(2) "prime rare" means the lowest United States money center prime
rare of interest that is published in the Wall Street Journal.
• Sec. 16. AS 44.88.900(3) is amended to read:
(3) "development project" has the meaning given to "project" in (9XA)
and W> ·(F) [,(D), AND (E)] of this section;
• Sec. 17. AS 44.88.900(7) is repealed and reenacted to read:
(7) "loan participalion" means the purchase of a portion of a loan· from
a financial institution if the financial institution has obtained a commitment from the
10 authority to pun:hase the portion of that loan before the financial institution has
11 disbursed money as pan of the loan to the borrower;
12 • Sec. 18. AS 44.88.900(9) is amended to read:
13
14
15
16
17
18
19
20
:Zl
22
23
24·
2!i
26
%'l'
28
29
30
31L
(9) "project" means
(A) a plant or facility used or intended for use in connection
with making, processing, preparing, transporting, or producing in any manner,
goods, products, or substances of any kind or naaure or in c:onnection with
developing or utilizing a namral resource, or extracting, smelting. transporting.
converting, assembling, or producing in any manner, minerals. raw materials.
chemic:als, compounds, alloys. fibers, commodities and materials. products, or
substances of any kind or nature;
(B) a plant or facility used or intended for use in connection
with a business enterprise;
(C) commercial activity by a bpsigess [SMAlL] enterprise;
(D) a plant or facility demonstrating technological advances of
new methods and procedun:s and prototype c:ommen:iai appliQ&ions for the
exploration. development. production. transportation, conversion. and use of
energy resoun:es;
(E) infrastruchR for a new tourism destination facility or for
the expansion of a tourism destination facility;
(F) a plant or facility, other than a plant or facility described in
(D) of this paragraph. for the generation, transmission, development.
SCS CSHB 526(FIN) am S
44.88.599
(2)
44.88.900
(3)
44.88.900
(7)
44.88.900
(9)
395
396
Sections
21 and 22
Repealer
1996 SLA CH. 111
Claapter Ill
I
2
3
4
5
' 7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
ttansponation. conversion. or use of energy resources:
• Sec. 19. Section 2(a), cb. 27, SLA 1993, is amended to read:
Sec. 2. (a) The Alaska Industrial Development and Export Authority may
issue bonds to finance the acquisition. design, and constnsclion of a port facility and
related loading and conveyor equipment relar.ed to the development and operalion of
a bulk commodity loadipg and sbippjpr tmpjgaL 1be terminal may be loc;atcd
IDJWhm witbin Cook fplct. Tbc facility wDI be (DIRECT REDUCTION JR.ON
ORE PROCESSING FAClLlTY FOR USE BY 1liE MIDREX CORPORATION, TO
BE LOCATED AT POINT MACKENZIE AND] owned by the authorir.y. The
principal amount of the bonds may not exceed $.50.000,000.
• Sec. 20. Section 4. cb. 162. SLA 1988, as amcDded by sec. 4, cb. 2.5. SLA 1991, and
sec. 4, cb. 27. SLA 1993, is amended to read:
Sec. 4. AS 44.88 . .500-44.88..599 an: n:pealed July l,Jm [1996).
• Sec. 21. AS 44.88.542. 44.88 . .599(1). and 44.88.900(14) an: repealed.
• Sec. 22. Section I, cb. Z7. SLA 1993, is repealed.
• Sec. 23. TRANSmON. (a) On the effective dare of this Act. assets of the business
assistance fund (AS 44.88.500(a)) shall be transferred to die Alaska lndusaial Development
and Export Authority revolving fund (AS 44.88.060).
{b) The tint dividend payment to the scare UDdl:r AS 44.88.088, eDICted by sec. 3 or
Ibis Act. shall be made available during fiscal YfM 1997 bued upon net income and
unresuic:led net income of the Alaska Industrial Development and Export Authority for fiscal
year 199.5.
• Sec. 24. (a) The Alaska lndusaia.l Developmenr and Export Authorir.y (AIDEA) may
issue bonds to finance the expansion. impmvemem. and modifiC8bon of the existinc port
facilities owned by AIDEA with respect to the Del.ona Mouna tnmsponllioll systiiiD and
to fUU~nCC the COIISU'IICUon of new facilities to be OWMd by AIDEA relared to tbe Dei...ont
Mountain ttansportation system. or may finance 1hcsc projects by odlcr means available to
AIDEA. The principal amount of the bonds and odx:r finlnc:ing provided by AIDEA may not
exceed 5&5.000.000.
(b) Before bonds or notes authorized under (a) of tbis section may be issued. the
Alaska Indusaial Development and Export Authority shall comply widl AS 44.88.173 lftd
SCS CSHB S26(FJN) 1m S -8-
1996 SLA CH. 111
Cbapter111
1 shall iDcorporate inCo the final filumce plan and llp'eCJDellt for the project tbe followillg terms
2 and coadilioas:
3 (1) Commco. Ltd., is RICplimi to agRIC in writing tbat Cominco, Ltd., will pay
4 for all or a ponion of the operation and mainrenance of facilities COl'llti'UCfed. expanded.
5 improved. or modified u part of the project based on tbe use Cominco Alaska makes of tbe
6 f..:ilities compared to tbe use made by others;
'I (2) a toll schedule, which may include adj~~St~~a~S n:Wited to tbe price of zinc,
8 is e:stablisbed for use of facilities consa:ucted, expanded. improved. or modified as part of tbc
' project tbat
10 (A) eosun:s full tqlllymcDt of and a muoaable return on tbe Slate's
11 entim investmeat in tbe project;
12 (B) eosun:s an additional return on AIDEA's i:ovcstment made UDder
13 this section tbat is commensurate with tbe return earned on tbe original DeLong
14 Mountain traDipOI'Wion system project and tbc risks assumed by AIDEA;
15 (C) ~ equitable access to tbe facilities by all users and
16 potential usen. iDcludi:og access to privare property and access for aavel necessary aod
17 n=laled to resoun:e exploration and development for wbicb valid permits have been
11 obtained llld aavel in support of resource exploration llld development;
1J (3) reasonable access to the port and road is paranteed to all users and
20 pocential users.
21 (c) Subsection (a) of Ibis section constitutes tbe legislatjve approval required by
22 AS 44.88.095(J).
23 • Sec. 25. (a) Upoa approval of tbc Alaska IDdustrial Development and Export Authority
24 (.AIDEA), .AIDEA may ..:quire tbe Snettisham bydroelecttic project and related assets from
25 tbe Aluta Power Admi:oisttatioo
lti (b) AIDEA may issue bonds 10 filumce tbe acquisition of tbe Snettisbam hydroelectric
%7' project llld n:Wited asseas. or may tiDaDce tbe acquisition by other DaDS available 10 AIDBA.
28 The principal amount of 1be bonds and other financing provided by AIDBA to finance tbe
2!1 a.cquisition of tbe Sneu:isbam hydroelectric project may not exceed $100,000,000.
30 (c) To secure bonds issued UDder (b) of this section. AIDEA may establish a capital
3l reserve fund with respect 10 !bose bonds under AS 44.88.105. Jf AIDEA e:stablisbes a capital
-9-SCS CSHB S26(FIN) am S
397
398
Eff.
6/28/96
1996 SLA CH. 111
Claapter Ill
1
2
3
4
5
' 7
I
' 10
n:serw fund as provided in this subsection. the executive director of AIDEA shall annually,
no later than January 2. of each year. cenify in writing to rhc: governor and the Jcajslaaft the
amount. if any, required to restore the capital reserve fund to the capital reserve fund
requirement as defined in AS 44.88.10S(h). The lqis1arure may appropriate to AIDEA the
amount so certified by the executive director of AIDEA. AIDEA shall deposit the amounrs
appropriated under Ibis subsection durinc a fiscal year in lbe capital reserve fund. Nodlinc
in this section creates a debt or liability of the swe.
(d) Subsection (b) of this section panrs the lcgiSlalive approval required by
AS 44.88.095(1).
• Sec. 26. This Act takes effect immedialdy under AS OJ.J0.070(c).
SCS CSHB S26(f'IN) am S -10.
r
L
PUBUC LAW 104-188 [H.R. 3448]; August 20, 1996
SMALL BUSINESS JOB PROTECTION ACT OF 1996
For Legislative History ofAct, seep. 1474.
An Act to provide tax relief for small businesses, to protect jobs, to create opportunities,
to increase the take home pay of workers, to amend the Portal-to-Ponal Act of 1947
relating to the payment of wages to employees who use employer owned vehicles,
and to amend the Fair Labor Standards Act of 1938 to increase the minimum wage
rate ani:J to prevent job loss by providing flexibility to employers in complying with
minimum wage and overtime requirements under that Act
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.-This Acf may be cited as the "Small Business
Job Protection Act of 1996 ...
(b) TABLE OF CONTENTS.-
Sec. 1. Short title; table of contents.
TITLE I-SMALL BUSINESS AND OTHER TAX PROVISIONS
Sec. 1101. Amendment of 1986 Code.
Sec. 1102. Underpayments of estimated tax.
Subtitle A-Expensing; Etc.
Sec. 1111. Increase in expense treatment for small businesses.
Sec. 1112. Treatment of employee tips.
Sec. 1113. Treatment of storap of product samples.
Sec. 1114. Treatment of certain charitable risk pools.
Sec. 1115. Treatment of dues paid to agricultural or horticultural organizations.
Sec. 1116. Clarification of employment tax status of certain fishermen.
Sec. 1117. Modifications of .:.u.-exempt bond rules for first-time farmers.
Sec. 1118. Newspaper distributors treated as direct sellers.
Sec. 1119. ApJ?lication of involuntary conversion rules to presidentially declared
disasters.
Sec. 1120. Class life for gas station convenience stores and similar structures.
Sec. 1121. Treatment of abandonment of lessor improvements at termination of
lease.
Sec. 1122. Special rules relating to determination whether individuals are employ-
ees for purposes of employment taxes.
Sec. 1123. Treatment of housing provided to employees by academic health centers.
Subtitle B-Extension of Certain Expiring Provisions
Sec. 1201. Work opportunity t.u credit.
Sec. 1202. Employer-provided educational assistance programs.
Sec. 1203. FUTA exemption for alien agricultural workers.
Sec. 1204. Research credit.
Sec. 1205. Orphan drug tax credit.
Sec. 1206. Contributions of stock to private foundations.
Sec. 1207. Extension of binding contract date for biomass and coal facilities.
Sec. 1208. Moratorium for excise tax on diesel fuel sold for use or used in diesel-
powered motorboats.
Subtitle C-Provisions Relating to S Corporations
Sec. 1301. S corporations permitted to have 75 shareholders.
Sec. 1302. Electlng small business trusts.
110 STAT 1755
Small Business
Job Protection
Act of 1996.
26 USC 1 note.
P.L. 104-188
Sec.1
Sec. 1303.
Sec. 1304.
Sec. 1305.
Sec. 1306.
Sec. 1307.
Sec. 1308.
Sec. 1309.
Sec. 1310.
Sec. 1311.
Sec. 1312.
Sec. 1313.
Sec. 1314.
Sec. 1315.
Sec. 1316.
Sec. 1317.
Sec. 140L
Sec. 1402.
Sec. 1403.
Sec. 1404.
LAWS OF 104th CONG.-2nd SESS.
Expansion of J?OSt-death qualification for certain trusts.
Financial institutions permitted to hold safe harbor debt.
Rules relating to inadvertent terminations and invalid elections.
Agreement to terminate year.
Expansion of post-termination transition period.
S corporations permitted to hold subsidiaries.
Treatment of distributions during loss years.
Treatment of S corporations under subchapter C.
Elimination of certain earnings and profits.
Aug. 20
Carryover of disallowed losses and deductions under at-risk rules al-
lowed.
Adjustments to basis of inherited S stock to reflect certain ~terns of in-
come.
S corporations eligible for rules applicable to real property subdivided
for sale by noncorporate taxpayers.
Financial institutions.
Certain exempt organizations allowed to be shareholders.
Effective date.
Subtitle D-Pension Simplification
CHAPTER 1-SIMPLIFIED DISTRIBtrriON RULES
Repeal of 5-year income averaging for lump-sum distributions.
Repeal of $5,000 exclusion of employees' death benefits.
Simplified method for taxing annuity distributions under certain em-
ployer plans.
Required distributions.
CHAPTER 2-INCREASED ACCESS TO RETIREMENT PLANS
SUBCHAPTER A-SIMPLE SAVINGS PLANS
Sec. 1421. Establishment of savings incentive match plans for employees of small
employers.
Sec. 1422. Extension of simple plan to 401Ckl arrangements.
SUBCHAPTER B-OTHER PROVISIONS
Sec. 1426. Tax-exempt organizations eligible under section 401Ckl.
Sec. 1427. Homemakers eligible for full IRA deduction.
Sec. 1431.
Sec. 1432.
Sec. 1433.
Sec. 1434.
Sec. 1441.
Sec. 1442.
Sec. 1443.
Sec. 1444.
Sec. 1445.
Sec. 1446.
Sec. 1447.
Sec. 1448.
Sec. 1449.
Sec. 1450.
Sec. 1451.
Sec. 1452.
Sec. 1453.
Sec. 1454.
Sec·. 1455.
Sec. 1456.
Sec. 1457.
CHAPTER 3-NONDISCRIMINATION PROVISIONS
Defmition of highly compensated employees; repeal of family aggrega-
tion.
Modification ohdditional participation requirements.
Nondiscrimination rules for quahfied cash or deferred arrangements and
matching contributions.
Defmition of compensation for section 415 purposes.
CHAPTER 4-MISCELLANEOUS PROVISIONS
Plans covering self-employed individuals.
Elimination of special vesting rule for multiemployer plans.
Distributions under rural cooperative plans.
Treatment of governmental plans under section 415.
Uniform retirement age.
Contributions on behalf of disabled employees.
Treatment of deferred compensation plans of State and local govern-
ments and tax-exempt organizations.
Trust requirement for deferred compensation plans of State and local
governments.
Transition rule for computing maximum benefits under section 415 limi-
tations.
Modifications of section 403(b}.
Special rules relating to Joint and survivor annuity explanations.
RepeKl of limitation in case of defined benefit plan and defined contribu-
tion plan for same employee; excess distributions.
Tax on prohibited transactions.
Treatment of leased employees.
Uniform penalty provisions to apply to certain pension reporting require-
ments.
Retirement benefits of ministers not subject to tax on net earnings from
self-employment.
Sample language for spousal consent and qualified domestic relations
forms.
11 0 STAT. 1756
-Aug. 20
Sec. 1458.
Sec. 1459.
Sec. 1460.
Sec. 1461.
Sec. 1462.
Sec. 1463.
Sec. 1464.
Sec. 1465.
Sec. 1501.
Sec. 1601.
Sec. 1602.
Sec. 1603.
Sec. 1604.
Sec. 1605.
Sec. 1606.
Sec. 1607.
Sec. 1608.
Sec. 1609. sec. 1610.
Sec. 1611.
!Sec· 1612.
Sec. 1613.
:Sec. 1614.
Sec. 1615.
; . ! ...
Sec. .1616.
Sec. 1617.
SMALL BUSINESS JOB PROTECTION ACT
Treatment of length of service awards to volunteers performing fire
fighting or prevention services, emergency medical services, or ambu-
lance services.
Alternative nondiscrimination rules for certain plans that provide for
early participation.
Clarification of application of ERISA to insurance company general ac-
counts.
Special rules for chaplains and self-employed ministers.
Defmition of highly compensated employee for pre-ERISA rules for
church plans.
Rule relating to investment in contract not to apply to foreign mission-
aries.
Waiver of excise tax on failure to pay liquidity shortfall.
Date for adoption of plan amendments.
Subtitle E-Foreign Simplification
Repeal of inclusion of certain earnings invested in excess passive assets.
Subtitle F-Revenue Offsets
PART I-GENERAL PRoVISIONS
Modifications of Puerto Rico and possession tax credit.
Repeal of exclusion for interest on loans used to acquire employer securi-
ties.
Certain amounts derived from foreign corP9rations treated as unrelated
business taxable income.
Depreciation under income forecast method.
Repeal of exclusion for punitive damages and for damages not attrib-
utable to physical injuries or sickness.
Repeal of diesel fuel tax rebate to purchasers of diesel-powered auto-
mobiles and light trucks.
Extension and phasedown of luxury passenger automobile tax.
Termination of future tax-exempt bond financing for local furnishers of
electricity and gas.
Extension of Airport and Airway Trust Fund excise taxes.
Basis adjustment to property held by corporation where stock in corpora-
tion is replacement property under involuntary conversion rules.
Treatment of certain insurance contracts on retired lives.
Treatment of modified guaranteed contracts.
Treatment of contributions in aid of construction.
Election to cease status as qualified scholarship funding corporation.
Certain tax benefits denied to individuals failing to provide taxpayer
identification numbers.
Repeal of bad debt reserve method for thrift savings associations.
Exclusion for energy conservation subsidies limited to subsidies with re-
spect to dwelling units.
PART II-FINANCIAL AsSET SECURITIZATION INVESTMENTS
Sec. 1621. Financial Asset Securitization Investment Trusts.
sec. 1701.
Sec. 1702.
Sec. 1703.
Sec, 1704.
sec. 1801.
Sec. 1802.
Sec. 1803.
Sec. 1804.
Sec. 1805.
Sec. 1806.
Sec. 1807.
Sec. 1808.
Sec. 1809.
Subtitle G--Technical Corrections
Coordination with other subtitles.
Amendments related to Revenue Reconciliation Act of 1990.
Amendments related to Revenue Reconciliation Act of 1993.
Miscellaneous provisions.
Subtitle H-Other Provisions
Exemption from diesel fuel dyeing requirements with respect to certain
States.
Treatment of certain university accounts.
Modifications to excise tax on ozone-depleting chemicals.
Tax-exempt bonds for sale of Alaska Power Administration facility.
Nonrecognition treatment for certain transfers by common trust funds to
regulated investment companies.
Qualified State tuition programs.
Adoption assistance.
Removal of barriers to interethnic adoption.
6-month delay of electronic fund transfer requirement.
Subtitle l-Foreign Trust Tax Compliance
Sec. 1901. Improved information reporting on foreign trusts.
110 STAT. 1757
P.L 104-188
Sec. I
P.I-104-188
Se<~.l
26 usc 6054
note.
26 usc 179.
26 USC 179 note.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
Sec.
LAWS OF 104th CONG.-2nd SESS. Aug. 20
1902. Comparable penalties for failure to file return relating to transfers to
foreign entities.
1903. Modifications of rules relating to foreign trusts having one or more
UD.i.ted States beneficiaries.
1904. Foreign ~ns not to be treated as owners under grantor trust rules.
1905. Information reporting regarding foreign gifts.
1906. Modification of rules relating to foreign trusts which are not grantor
trusts.
1907. Residence oftrusts, etc.
Subtitle J-Generalized System of Preferences
1951. Short title.
1952. Generalized System of Preferences.
1953. Effective date.
1954. Confonning amendments.
TITLE U-PAYMEh"T OF WAGES
Sec. 2101. Short title.
Sec. 2102. Proper compensation for use of employer vehicles.
Sec. 2103. Effective date.
Sec. 2104. Minimum wage increase.
Sec. 2105. Fair Labor Standards Act Amendments.
TITLE I-SMALL BUSINESS AND OTHER
TAX PROVISIONS
SEC. 1101. AMENDMENT"'OF 1986 CODE.
Except as otherwise expressly provided, whenever in this title
an amendment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference shall
be considered to be made to a section or other provision of the
Internal Revenue Code of 1986.
SEC. 1102. UNDERPAYMENTS OF ESTIMATED TAX.
No addition to the tax shall be made under section 6654 or
6655 of the Internal Revenue Code of 1986 (relating to failure
to pay estimated tax) with respect to any underpayment of an
installment required to be paid before the date of the enactment
of this Act to the extent such underpayment was created or
increased by any provision of this title.
Subtitle A-Expensing; Etc.
SEC. llll. INCREASE IN EXPENSE TREATMENT FOR SMALL
BUSINESSES.
(a) GEl'I"ERAL RULE.-Paragraph (1) of section 179(b) (relating
to dollar limitation) is amended to read as follows:
"(1) DoLLAR LIMITATION.-The aggregate cost which may
be taken into account under subsection (a) for any taxable
year shall not exceed the following applicable amount:
.. If the taxable year The applicable
begins in: amount is:
1997 ....................................................................................... 18.000
1998 ....................................................................................... 18.500
1999 ....................................................................................... 19,000
2000 ....................................................................................... 20,000
2001 or 2002 ....................... .. ....... ..................... .... ................ 24,000
2003 or thereafter............................................ ............... 25,000."
(b) EFFECTIVE DATE.-The amendment made by subsection (a)
shall apply to taxable years beginning after December 31. 1996.
110 STAT 1758
Aug. 20 SMALL BUSINESS JOB PROTECTION ACT
(b) CHEMICALS USED AS PROPELLANTS lN METERED-DOSE
INHALERS TAX-EXEMPT.-Paragraph (4) of section 4682(g) (relating
to phase-in of tax on certain substances) is amended to read as
follows:
"(4) CHEMICALS USED AS PROPELLANTS IN METERED-DOSE
INHALERS.-
"(A} TAX-EXEMPT.-
"(i) IN GENERAL.-No tax shall be imposed by sec-
tion 4681 on-
"(!) any use of any substance as a propellant
in metered-dose inhalers, or
"(II) any qualified sale by the manufacturer,
producer, or importer of any substance.
"(ii) QUALIFIED SALE.-For purposes of clause (i),
the term 'qualified sale' means any sale by the manu-
facturer, producer, or importer of any substance-
"(!) for use by the purchaser as a propellant
in metered-dose inhalers, or
"(II) for resale by the purchaser to a 2d pur-
chaser for such use by the 2d purchaser.
The preceding sentence shall apply only if the manufac-
turer, producer, and importer, and the 1st and 2d
purchasers (if any) meet such registration require-
ments as may be prescribed by the Secretary.
"(B) OVERPAYMENTs.-If any substance on which tax
was paid under this subchapter is used by any person
as a propellant in metered-dose inhalers, credit or refund
without interest shall be allowed to such person in an
amount equal to the tax so paid. Amounts payable under
the preceding sentence with respect to uses during the
taxable year shall be treated as described in section 34(a)
for such year unless claim thereof has been timely filed
under this subparagraph.".
(c) EFFECTIVE DATES.-
(1) RECYCLED HALON.-
(A) IN GENERAL.-Except as provided in subparagraph
(B), the amendment made by subsection (a)(l) shall take
effect on January 1, 1997.
(B) H.ALoN-1211.-In the case of Halon-1211, the
amendment made by subsection (a}( 1) shall take effect
on January 1, 1998.
(2) METERED-DOSE INHALERS.-The amendment made by
subsection (b) shall take effect on the 7th day after the date
of the enactment of this Act.
SEC. 1804. TAX-EXEMPT BONDS FOR SALE OF ALASKA POWER
ADl\-IINISTRATION FACILITY.
Sections 142(f)(3) (as added by section 1608} and 147(d) of
the Internal Revenue Code of 1986 shall not apply in determining
whether any private activity bond issued after the date of the
enactment of this Act and used to finance the acquisition of the
Snettisham hydroelectric project from the Alaska Power Administra-
tion is a qualified bond for purposes of such Code.
110STAT 1893
P.L. 104-188
Sec. 1804
26 usc 4682
note.
,. usc ,., "'"· L
8
e1seM Jewnsuoo JSOd %0~ ~
Jaded pepklel::! uo peJU!Jd ~
December 18, 1997
Mr. William Cor bus
Alaska Electric Light & Power Company
Re: Estimated Debt Service Requirement of Snettisham Bonds
Dear Mr. Cor bus:
NUVEEN
John Nuveen & Co. Incorporated
Investment Bankers
333 West Wacker Drivt
Chicago, Illinois 6o6o6-1286
Telephont 312 917 7700
Please find attached two current "Snettisham Pricing/Sizing Report"
schedules.
If the bond for acquisition of the Snettisham Hydroelectric Project were sold
today, we estimate that annual debt service on the 30-year obligation would be
approximately $7.015 million, assuming that the acquisition included
:replacement of the underwater cable system at its present capacity.
Were the new cable system not required, debt service on the bonds would be
approximately $5.869 million in todats market.
JOHN NUVEEN & COMPANY, INC.
1£ZcL~a -~
REL:jlc
Attachments
cc: Mr. David Germer, AIDEA
Snettisham Pricing/Sizing Report
12/18/97
RED FLAGS:
Is the Floor Invoked? YES
$100 million authorization exceeded? YES
4.4:: 1l.iLa Long Bond ~Od avg}
5.65% 5.72% 6.24%
0.59% 0.52% Spreads v Long Bond
Long Bond
5.95%
0.47% 0.36% 5-yr Average Spread v Long Bond
Purchase Price
AA-
$74,202
0.07%
0.10%
Baa
$73,650
Moral Ob/Baa Spread
5-yr Average Moral Ob/Baa Spread
Floor
$74,438
Floor Increases Purchase Price by: $934,641
Floor Increases Annual Debt Svc. by: $65,855
Debt Service
With Moral Ob
$6,963,071
Sizing
Purchase Price
Cable Cost (net)
Debt Svc Reserve
R&RFund
Cost of Finance (2%)
Total
Without Moral Ob
$7,014,685
$74,438
$14,400
$7,015
$3,081
$2,019
$100,955
a
$51,614
(Floor Price)
Snettisham Pricing/Sizing Report
without new cable cost
12/18/97
RED FLAGS:
Is the Floor Invoked? YES
$100 million authorization exceeded? NO
AA-Baa Long BQnd (20d i!vg)
5.65% 5.72% 6.24%
0.59% 0.52% Spreads v l.Dng Bond
Long Bond
5.95%
0.47% 0.36% 5-yr Average Spread v l.Dng Bond
Purchase Price
AA-
$74,202
0.07%
0.10%
Baa
$73,650
Moral ObI Baa Spread
5-yr Average Moral ObI Baa Spread
Floor
$74,438
Floor Increases Purchase Price by: $934,641
Floor Increases Annual Debt Svc. by: $65,855
Debt Service
With Moral Ob
$5,825,558
Without Moral Ob
$5,868,755
Sizing
Purchase Price $74,438
Cable Cost (net) $0
Debt Svc Reserve $5,869
R & R Fund $2,496
Cost of Finance (2%) $1,690
Total $84,493 ========
a
$43,198
(Floor Price)
6
9!!!1!M Jewnsuoo !SOd %0<: ~
JedBd pepA091:1 uo P91U!ld W'
SNETTISHAM HYDROELECTRIC PROJECT
OPERATIONS AND MAINTENANCE AGREEMENT
between
ALASKA ELECTRIC LIGHT AND POWER COMPANY
("Operator")
and
ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY
A Public Corporation of the State of Alaska
("Authority")
TABLE OF CONTENTS
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
se,:tion 2 Responsibilities of Operator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(a) Preparation of Annual Operating Budget . . . . . . . . . . . . . . . . . 5
(b) Relationship of the Parties . . . . . . . . . . . . . . . . . . . . . . . . . 6
(c) Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(d) Manner of Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(e) Emergency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(f) Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(g) Subcontracting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(h) Provision of Power to Alaska Department of Fish and Game . . . . 8
Se(;tion 3 Payment of O&M Expenses and Project Work . . . . . . . . . . . . . . . . . . 8
(a) Payment of O&M Expenses . . . . . . . . . . . . . . . . . . . . . . . . 8
(b) Project Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Seetion 4 Inspections, Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . 10
(a) Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(b) Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(a) Evidence of Insurance ............................ 10
(b) Insurance Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(c) Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(d) Warranty and Other Recoveries . . . . . . . . . . . . . . . . . . . . . 11
(e) Insurance Consultant . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(f) Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(a) Liability for Environmental Contamination . . . . . . . . . . . . . . . 14
(b) Environmental Standards . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(c) Remediation .................................. 15
(d) Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(e) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(f) Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 7 Indemnity; Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . 16
(a) Indemnity/Hold Harmless . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(b) Notice of Claims/Tender . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(c) Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
275049.10
1
(d) Limitation of Liability ............................ 17
(e) General ..................................... 17
Section 8 Dispute Resolution .................................. 18
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(b) Independent Consultant . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(c) Judicial Review/Binding Arbitration . . . . . . . . . . . . . . . . . . . . 18
(d) Selection of Arbitrator(s) . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(e) Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(f) Hearing-Law -Appeal Limited ...................... 19
(g) Provisional Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(h) Attorneys' Fees and Costs ......................... 20
Sec:tion 9 Term; Termination of Agreement; Assignment ................. 20
(a) Term ...................................... 20
(b) Termination of Agreement ......................... 20
(c) Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Sec~tion 10 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(a) Power Sales Agreement ........................... 21
(b) Notices, Computation Of Time And Holidays .............. 21
(c) Applicable Law ................................ 21
(d) Availability Of Information . . . . . . . . . . . . . . . . . . . . . . . . . 21
(e) Severability .................................. 21
(f) Waiver Not Continuing . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(g) Construction of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 22
(h) Covenant to Act In Good Faith . . . . . . . . . . . . . . . . . . . . . . 22
(i) No Third-Party Beneficiary ......................... 22
G) Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(k) Multiple Copies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
EXHIBIT A FORM OF REQUISITION REQUEST
EXHIBIT B SERVICES TO BE PERFORMED
275049.10
2
OPERATIONS AND MAINTENANCE AGREEMENT
THIS OPERATIONS AND MAINTENANCE AGREEMENT (the "Agreement") is
executed this __ day of , 1997, by the ALASKA ELECTRIC LIGHT
AND POWER COMPANY, an Alaska corporation (the "Operator"), and the ALASKA
INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY, a public corporation of the
State of Alaska (the "Authority").
A. The Authority has purchased the Snettisham hydroelectric project (the "Project")
from the United States Department of Energy, Alaska Power Administration.
B. The Operator currently owns and operates an electric utility system within the
City and Borough of Juneau.
C. Pursuant to the Power Sales Agreement dated the date hereof (the "Power Sales
Agreement") between the Operator and the Authority, the Operator has agreed to purchase and
the Authority has agreed to sell electric power generated by the Project.
D. The Authority and the Operator have agreed that the Operator shall perform
operation and maintenance services for the Project as more fully described in this Agreement.
The parties intend and agree that (1) the Operator shall have responsibility for operating the
Project, except as otherwise provided herein; (2) the Authority's responsibilities under this
Agreement and the Power Sales Agreement shall be primarily those related to Project finance,
as distinct from Project operations; and, therefore (3) this Agreement and the Power Sales
Agreement shall be implemented and interpreted at all times in a manner that allows the
Operator the maximum Project-related operating flexibility consistent with the Authority's
responsibilities under this Agreement, the Power Sales Agreement and the Resolution (as defined
below).
NOW, THEREFORE, the parties agree as follows:
Section 1
apply:
Definitions. For the purposes of this Agreement, the following definitions
"Additional Bonds" means any bonds of the Authority (including any bonds issued to
refund the Bonds) issued pursuant to the Resolution on a parity of lien with the Bonds on the
Project and Project revenues.
"Administrative Procedures" has the meaning set forth in Exhibit B.
275049.10
1
"Agreement" means this Operations and Maintenance Agreement.
"Annual Operating Budget" has the meaning set forth in Section 2(a).
"APUC" means the Alaska Public Utilities Commission, and/or any successor thereto.
"Authority" means the Alaska Industrial Development and Export Authority and/or any
successor agency thereto.
"Bonds" means all bonds, notes, or other evidences of indebtedness issued by the
Authority pursuant to the Resolution, the proceeds of which are used to fmance or refinance the
acquisition of the Project and pay and/or reimburse related costs of acquisition of the Project and
Project Work.
"Dispute Resolution" means the process described in Section 8.
"Electric Power" or "Power" means electric energy or electric capacity or both. Where
the context of this Agreement requires a distinction, electric energy is specified and/ or expressed
in kilowatthours or megawatthours and electric capacity is specified and/or expressed in
kilowatts or megawatts.
"Enforcement or Remedial Action" means any action taken by any person or entity to
enforce compliance with, or to collect or impose penalties, fines, or other sanctions, including
any claim for damages, under any Environmental Law.
"Environmental Law" means any Federal, state or local laws, ordinances, codes,
regulations, rules, orders, or decrees, relating to, or imposing liability or standards of conduct
concerning any environmental matters, including, but not limited to, Pollution, air pollution,
water pollution, noise control, soil condition, industrial hygiene, Hazardous Substances
(including the treatment, storage, use or disposal of Hazardous Substances).
"Environmental Liabilities" means claims or liabilities for any damages, remediation
(including, without limitation, costs incurred in connection with any investigation of site
conditions or any clean up, remedial, removal action or restoration work), fines, penalties,
judgments, costs and expenses (including, without limitation, costs of defense, settlement, and
reasonable attorneys' fees), charges, forfeitures, or liens relating to Pollution or Hazardous
Substances.
"Fiscal Year" means that twelve-month period starting January 1 of a calendar year
through and including December 31 of the same calendar year. The initial Fiscal Year for
purposes of this Agreement is that portion of the twelve-month period starting on the "Effective
Date," as defined in the Power Sales Agreement, through and including the following December
31. If that portion of the calendar year is shorter than ninety (90) days the parties shall
275049.10
2
deu:rmine the initial Fiscal Year, which must end on a December 31 and may not be longer than
456 days. The last Fiscal Year for purposes of this Agreement shall be that portion of the
twelve-month period between the end of the last full (i.e., 12-month) Fiscal Year and the
expiration of this Agreement.
"Hazardous Substance" means any flammables, explosives, radioactive materials, crude
or refined petroleum, pollutants, contaminants, or any hazardous, toxic, or dangerous waste,
substance, or material, including asbestos, defmed as such in (or for purposes of) the
Comprehensive Environmental Response, Compensation, and Liability Action (42 U.S.C.A. Sec.
9601 et.seq.), any so-called "Superfund" or "Superlien" law, or any other Environmental Law,
including Alaska Statues Title 46, Chapters .03, .08 and .09, as now or at any time hereafter
in effect.
"Independent Consultant" means an independent individual or firm of engineers or any
other consultant that is nationally recognized and has expertise with respect to electric power
pr~jects comparable to the Project, selected by agreement of the Authority and the Operator and
me1~ting the requirements of the Resolution. For purposes hereof, "independent" means a person
who is in fact independent and does not have any substantial interest, direct or indirect, in the
Authority or the Operator.
"Insurance Consultant" means a nationally recognized insurance broker or consultant with
expertise in insuring projects comparable to the Project, selected by agreement of the Authority
and the Operator and meeting the requirements of the Resolution.
"Necessary Approvals" has the meaning specified in the Power Sales Agreement.
"O&M Costs" has the meaning set forth in Section 2(a)(i).
"Operator" means Alaska Electric Light and Power Company.
"Operating Procedures" has the meaning set forth in Exhibit B.
"Parity Obligations" means any bonds, notes or other evidences of indebtedness
(including any such indebtedness issued to refund outstanding Parity Obligations) issued by the
Operator, or by any issuer other than the Authority for the Operator, that are authenticated and
delivered by the Trustee and are to be secured by the Project and Project revenues on a parity
of lien with outstanding Bonds.
"Pollution" means the contamination or altering of waters, land, subsurface land or air
of the state in a manner which creates a nuisance or makes waters, land, subsurface land or air
unclean, or noxious, or impure, or unfit so that they are actually or potentially harmful or
detrimental or injurious to public health, safety or welfare, to domestic, commercial, industrial
or recreational use, or to livestock, wild animals, birds, fish or other aquatic life.
275049.10
3
"Power Sales Agreement" means the Power Sales Agreement dated the date hereof
between the Operator and the Authority, as the same may be amended, supplemented and
modified from time to time.
"Project" means the Snettisham hydroelectric project and all assets comprising the
project, including all transmission lines and cable.
"Project Expansions" means Project improvements, betterments, additions and expansions
(other than Project Repairs) that are consistent with Prudent Utility Practice.
"Project Repairs" means repairs, maintenance or replacements of existing parts, fixtures
or equipment with respect to the Project, which (i) are required by federal or state law or this
Agreement or are otherwise necessary to keep the Project in good and efficient operating
condition, consistent with Prudent Utility Practice, and (ii) are chargeable to the capital account
of the Project under the Code. Repairs, maintenance or replacements of existing parts, fixtures
or equipment which result in improvement of the Project are not excluded from this definition ..
"Project Work" means Project Repairs and/or Project Expansions.
"Prudent Utility Practice" shall mean at a particular time any of the practices, methods
and acts engaged in or approved by a significant portion of the electric utility industry at such
time, or which, in the exercise of reasonable judgment in light of facts known at such time,
could have been expected to accomplish the desired results at the lowest reasonable cost
consistent with good business practices, reliability, safety and reasonable expedition. Prudent
Utility Practice is not required to be the optimum practice, method or act to the exclusion of all
others, but rather to be a spectrum of possible practices, methods or acts which could have been
expected to accomplish the desired result at the lowest reasonable cost consistent with reliability,
safety and expedition. Prudent Utility Practice includes due regard for manufacturers'
warranties and the requirements of governmental agencies of competent jurisdiction and shall
apply not only to functional parts of the Project, but also to appropriate structures, landscaping,
painting, signs, lighting and other facilities. In evaluating whether any matter conforms to
Prudent Utility Practices, the parties shall take into account, among other things, (a) the nature
of the parties hereto under the laws of the State of Alaska and their statutory duties and
responsibilities and (b) the objectives of (i) complying with environmental and safety regulations
and management agreements, (ii) minimizing the financial risk of the parties hereto and
(iii) providing the Operator with flexibility in the conduct of its business affairs. For purposes
of this Agreement, "national standards for the industry" means Prudent Utility Practice.
"Reimbursable Administrative Costs" means those expenses of the Authority specific to
the operation, maintenance and administration of the Project limited to (a) direct out-of-pocket
expenses of a Project-specific nature, such as insurance, license fees, Project-specific travel
costs, and the like; (b) Project-specific legal and consulting fees, including but not limited to the
cost of inspections pursuant to Section 4 and the Independent Consultant and Insurance
275049.10
4
Consultant, if retained by the Authority; and (c) an appropriate pro rata portion of the salary and
salary-related expenses of any Authority employees for time worked directly by those employees
on Project matters. Reimbursable Administrative Costs of the Authority shall not include (a) any
share of the Authority's general overhead, or administrative and general costs, whether allocated
or not, or (b) any fees or costs of professional services retained by the Authority that are not
specific to the Project. This definition is intended to reflect that the Authority's responsibilities
under the Power Sales Agreement and this Agreement do not normally include operation of the
Project; that the Authority is not expected to possess, develop, or contract for significant Project-
related operational expertise or capabilities; and that the Authority's Project-related costs should
normally be limited to those reasonably necessary to allow the Authority to perform its other
responsibilities under the Power Sales Agreement, which are primarily related to fmancing.
"Reimbursable Extraordinary Administrative Costs" means those expenses of the
Authority specific to the operation, maintenance and administration of the Project limited to
those that (a) would properly have been Reimbursable Administrative Costs in the Annual
Operating Budget, had they been anticipated at the time the Annual Operating Budget was
prt~pared; and (b) arose unexpectedly and/or in an emergency; and (c) the Operator either agrees
should be reimbursed before such Costs are incurred, or circumstances have reasonably
prevented the Authority from seeking such advance agreement. Any disagreement regarding
Reimbursable Extraordinary Administrative Costs may be submitted to Dispute Resolution.
"Renewal and Replacement Fund" or "R & R Fund" means the Renewal and Replacement
Fund established by the Authority pursuant to the Resolution and Section 7 of the Power Sales
Agreement.
"Requisition Request" means a request in the form of Exhibit A hereto for a withdrawal
from the R & R Fund, as such form may be amended by agreement of the Authority and the
Operator.
"Resolution" means the Power Revenue Bond Resolution adopted by the Authority on
--------• 199_, as the same may be amended, modified or supplemented from
time to time pursuant to Supplemental Resolutions adopted in accordance with the provisions of
th1~ Resolution.
Section 2 Responsibilities of Operator
(a) Preparation of Annual Operating Budget. The Operator shall operate and
maintain the Project in accordance with an operating plan and budget that is prepared by the
Operator and accepted by the Authority for each Fiscal Year during which this Agreement is in
effect as provided below.
(i) Prior to each October 1, the Authority shall deliver to the
Operator an itemized description of the Authority's estimated Reimbursable
27:!049.10
5
Administrative Costs for the following Fiscal Year. No later than each
November 1, the Operator shall prepare and deliver to the Authority a proposed
Annual Operating Budget for the following Fiscal Year. Each Annual Operating
Budget shall set forth in reasonably specific detail all costs and expenses
reasonably expected to be incurred during such Fiscal Year for the operation and
maintenance of the Project, including the Authority's Reimbursable
Administrative Costs and all Project Repairs (collectively, the "O&M Costs")
consistent with Prudent Utility Practices. The Annual Operating Budget shall
indicate whether any O&M Cost included therein is to be borne by the Operator
or paid out of a withdrawal from the R & R Fund in accordance with the
provisions of Section 3(b).
(ii) If within forty-five (45) days of receipt by the Authority of
a proposed Annual Operating Budget from the Operator, the Authority does not
notify the Operator in writing of any questions, comments, objections or
suggested modifications which it may have with respect to the proposed Annual
Operating Budget, it shall be deemed to be accepted. If the Authority provides
such written notice, the parties shall cooperate with each other in attempting to
agree on a mutually acceptable Annual Operating Budget.
(iii) In the event the parties are unable to agree on any particular
line item of the proposed Annual Operating Budget, either party may submit the
matter for Dispute Resolution. Subject to the provisions of Section 3(b)(ii), and
pending resolution of any disputed line items submitted for Dispute Resolution,
the appropriate line items from the last Fiscal Year's Annual Operating Budget
shall be deemed to apply until a resolution is reached as to the disputed items.
(b) Relationship of the Parties. The Operator shall perform the services
hereunder as an independent contractor. Nothing in this Agreement shall be deemed to imply
that Operator is a partner, joint venturer, agent or representative of the Authority. Legal title
to all property purchased by the Operator under the terms of this Agreement for Project Work,
as opposed to Operator's inventory and equipment for operation and maintenance of Operator's
System, shall pass immediately to and vest in the Authority as a Project asset upon the passage
of title from the vendor or supplier thereof.
(c) Services. The Operator shall be responsible for the management,
operation, maintenance, and improvement of the Project, in recognition that the Operator has
a substantial long-term fmancial interest in, and service and planning responsibilities affected by,
the Project. The Operator shall perform all services for the operation and maintenance of the
Project, including the services set forth on Exhibit B.
(d) Manner of Performance. The Operator shall perform all services
hereunder in a good, workmanlike and commercially reasonable manner with the standard of
27:5049.10
6
diligence and care nonnally employed by duly qualified persons in the perfonnance of
comparable work. The Operator shall in all material respects perfonn all services hereunder in
accordance with (i) the Operating Procedures (including any operation and maintenance manuals
included therein), the Administrative Procedures and all warranties, (ii) all applicable laws,
regulations, codes, pennits, licenses and standards (including all Necessary Approvals), (iii) the
Power Sales Agreement, (iv) the Annual Operating Budgets, (v) Prudent Utility Practice and
(vi) this Agreement.
(e) Emergency. In the event of any emergency involving the Project or any
portion thereof endangering life or property, the Operator shall, subject to Section 3(b)(ii)
hereof, take such action as may be reasonable and necessary to prevent, avoid or mitigate,
injury, damage or loss and shall, as soon as practicable, report any such injury, damage or loss,
including the Operator's response thereto, to the Authority.
(f) Limitations. Notwithstanding any other provision in this Agreement or
the Power Sales Agreement to the contrary, the Operator may not, without the prior written
consent of the Authority:
(i) enter into any contracts that in any way bind the Authority
or subject the Authority to any liability;
(ii) pennit or suffer any liens or encumbrances on the Project;
(iii) take any action which is likely to have a material adverse
impact on the revenues necessary to pay debt service on the Bonds or any
Additional Bonds or Parity Obligations; or
(iv) take any action in respect of the Project other than in the
ordinary course of perfonning the services to be provided hereunder or as
contemplated by the Power Sales Agreement.
(g) Subcontracting. The Operator may subcontract work on the operation or
maintenance of the Project to the extent authorized in the then effective Annual Operating Budget
or with the written approval of the Authority, which shall not be unreasonably withheld. The
Operator shall, in any contract or agreement with subcontractors perfonning work with respect
to the operation or maintenance of the Project, require that all indemnities and waivers of
subrogation it obtains, if any, and that any stipulation to be named as an additional insured it
obtains, if any, also be extended to waive rights of subrogation against both the Authority and
the State of Alaska and to add them both as additional named indemnitees and as additional
insureds.
275049.10
7
(h) Provision of Power to Alaska Department of Fish and Game. The
0pf~rator shall comply with the terms of the Snettisham Hydroelectric Project Hatchery
Coordination Agreement with the Alaska Department of Fish and Game, including the obligation
to provide Power to the Department in accordance with the terms of such Agreement.
Section 3 Payment of O&M Expenses and Project Work
(a) Payment of O&M Expenses. All O&M Expenses shall be paid or
provided for as follows:
275049.10
(i) The Operator shall pay to the Authority all Reimbursable
Administrative Costs included in an Annual Operating Budget on the dates
provided in Section 6(c)(i)(B)(l) of the Power Sales Agreement.
(ii) In the event of any unforeseen event with respect to the
Project (including any unexpected or unplanned disruption of service, any Project
failure or any damage to any portion of the Project), the Operator shall pay to the
Authority all Reimbursable Extraordinary Administrative Costs as provided in
Section 6(c)(i)(B)(2) of the Power Sales Agreement; provided that, the Authority
shall give the Operator such advance notice of any Reimbursable Extraordinary
Administrative Costs as is reasonable under the circumstances and, if the
Operator objects to the nature or amount of any such Reimbursable Extraordinary
Administrative Costs, the Operator shall pay the Reimbursable Extraordinary
Administrative Costs and, thereafter, may submit the matter for Dispute
Resolution.
(iii) At such time as is necessary to perform any item of Project
Repairs that, as provided in the applicable Annual Operating Budget and
Section 3(b)(i), is to be paid out of withdrawals from the R & R Fund, the
Operator shall submit a Requisition Request for such item and shall apply the
amount disbursed from the R & R Fund to the payment thereof.
(iv) Except as provided in the foregoing clause (iii), the Operator
shall bear all O&M Costs and shall pay all such O&M Costs payable to third
parties to such parties when due, as set forth in the Annual Operating Budget.
(b) Project Work.
(i) All scheduled Project Repairs for any Fiscal Year shall be
included in the Annual Operating Budget for that Fiscal Year. Each Annual
Operating Budget shall indicate whether any item of scheduled Project Repairs
shall be paid out of withdrawals from the R & R Fund or shall be paid by the
Operator; provided, however, that in no event shall any item of scheduled Project
8
2'15049.10
Repairs less than $5,000 be paid for out of the R & R Fund. The Operator shall
undertake all Project Repairs in accordance with the applicable Annual Operating
Budget.
(ii) In the event of an emergency involving the Project or any
portion thereof endangering life or property, the Operator may immediately make
any Project Repairs or changes in Project operation the Operator reasonably
believes are necessary under the circumstances; provided that, the Operator shall
give the Authority notice thereof as soon as possible. As soon as the emergency
situation has been contained, the Operator shall notify the Authority of the nature
and estimated cost of any further Project Repairs or changes in Project operation
that the Operator believes are necessary to restore the Project. With the approval
of the Authority, the Operator may proceed with the further Project Repairs or
changes in Project operation and, if the parties agree, the cost thereof may be
withdrawn from the R & R Fund. If the parties disagree as to whether any such
further Project Repairs or changes in Project operation are necessary, either party
may submit the matter for Dispute Resolution. If, as a result of such process, it
is determined that such further Project Repairs or changes in Project operation are
necessary, the Operator shall undertake such Project Repairs.
(iii) In the event either party determines that Project Work (other
than Project Work described in Section 3(b)(i) or (ii)) should be performed and
paid in whole or in part out of withdrawals from the R & R fund and/or fmanced
through Additional Bonds or Parity Obligations, such party shall give the other
party notice of the nature and estimated cost thereof and the manner in which
such party proposes to pay for and/or fmance the proposed Project Work. If the
parties fail to agree regarding the manner of payment for the proposed Project
Work or, in the case of Project Work proposed by the Authority, regarding the
necessity for the Project Work, either party may submit the matter for Dispute
Resolution. The Operator may agree to perform Project Work proposed by the
Authority, but shall not be obligated to do so unless it is determined to be
necessary through the Dispute Resolution process and the cost thereof is financed
by the Authority (if such fmancing is requested by the Operator). If it is not
agreed by the parties or determined through Dispute Resolution that Project Work
proposed by the Operator shall be paid in whole or part out of the R & R Fund
and/or fmanced by Additional Bonds or Parity Obligations, the Operator may
nevertheless undertake such Project Work, provided, that it has been agreed by
the parties or determined in the Dispute Resolution process that performing such
Project Work would not interfere unreasonably with the Project or the Operator's
ability to perform its obligations under this Agreement or the Power Sales
Agreement.
9
(iv) If financing is required to pay the cost of any Project Work
contemplated by Section 3(b)(ii) or (iii), the Authority may, at its option, issue
Additional Bonds, subject to the conditions set forth in Section 5(b) of the Power
Sales Agreement, and apply the net proceeds thereof to the payment of such
Project Work. If the Authority declines to issue Additional Bonds for such
purpose, the Operator shall be entitled to finance the cost of the Project Work
with Parity Obligations, subject to the conditions set forth in the Resolution.
Section 4 Inspections, Books and Records
(a) Inspections. The Authority shall have full right of access to the Project,
and the Operator shall cooperate with inspections of the Project by the Authority. Such
inspections may occur at any time upon reasonable notice to the Operator.
(b) Books and Records. The Authority shall have the right to inspect the
Operator's books and records relating to the operation of the Project, and the Operator shall
retain all such information for a minimum of three (3) years or for such longer period as the
Authority may reasonably request.
SectionS Insurance
(a) Evidence of Insurance. Evidence of the insurance required under this
Agreement must be provided to the Authority upon the effective date of this Agreement. Such
evidence shall be in a form and substance reasonably satisfactory to the Authority, executed by
the carrier's representative and issued to the Authority, shall consist of a certificate of insurance
or the policy declaration page with required endorsements attached thereto, and must provide
a thirty (30) day prior notice of cancellation, nonrenewal or significant reduction in limit or
coverage form. Acceptance by the Authority of deficient evidence does not constitute a waiver
of Agreement requirements.
The requirements for insurance coverages of the kinds and with the limits stated
in this Section 5 shall not be construed as a representation that such insurance coverage is
adequate or limits the Operator's liability.
The obligation to obtain and maintain earthquake, flood and debt service coverage
under the All Risk Property Insurance (Section 5(f)(4)), debt service coverage under Section
5(f)(5), and pollution liability coverage under Section 6(e) shall be subject to the general
availability of such coverage at reasonable cost and under reasonable terms and conditions
prevailing at the time of original issuance and any renewals or replacements thereof. If, after
utilizing its reasonable best efforts, the Operator is unable to obtain adequate insurance under
su1;h terms and conditions, as reasonably determined by the Operator, the Operator may request
a wTitten waiver of the relevant insurance requirement. The request shall outline the steps taken
by the Operator to obtain such insurance and shall disclose the terms and conditions and
275049.10
10
prt:mium quotations received. Upon the written determination of the Authority in conjunction
with the State of Alaska Division of Risk Management that a reasonable basis exists to believe
either that a waiver of such insurance will not materially affect the Authority and State of
Alaska's risk with regard to the Project, or that the insurance coverage in question is not
available under reasonable terms and conditions prevailing at the time of such request, the
Authority will approve the requested waiver. Disputes regarding changes in insurance coverage
shall be referred to the Insurance Consultant pursuant to Section 5(e).
(b) Insurance Premiums. The Operator shall be responsible for obtaining and
paying the cost of insurance coverage for the Project. Notwithstanding the foregoing, if any
insurance coverage under this Agreement is obtained by the Authority, the premiums with
respect thereto shall be included in Reimbursable Administrative Costs reimbursable to the
Authority as provided in Section 3(a)(i). Project property insurance shall be acquired from the
source that is best able to provide such coverage at the lowest possible cost consistent with
Pmdent Utility Practice, which may include placement with the State of Alaska excess insurance
program, the Operator's acquisition in the private market, or a combination of both. The
Project, if otherwise eligible, may be included in any future Authority or State of Alaska
self-insurance program for hydroelectric facilities, provided that the allocable cost of such
program is included in Reimbursable Administrative Costs reimbursable to the Authority as
provided in Section 3(a)(i).
(c) Insurance Proceeds. The proceeds of any insurance coverage shall be used
to repair, replace or otherwise restore the Project to at least as good condition or state of repair
as it was in prior to the occurrence with respect to which such proceeds were payable, unless
the Authority and the Operator otherwise agree and such agreement does not conflict with the
provisions of the Resolution.
275049.10
(d) Warranty and Other Recoveries.
(i) The Authority shall tender to the Operator enforcement of
any warranty or other agreement relating to the operation and performance of the
Project. Any amounts recoverable under any warranty or other agreement shall
be applied to the repair and replacement of the affected portion of the Project.
Any remaining warranty payments shall be deposited in the R & R Fund.
(ii) If a judgment is obtained or other recovery is received from
any person or entity that performed any Project Work, the proceeds thereof
(A) shall be paid to the Operator, to the extent the Operator paid for such Project
Work, (B) shall be deposited into the R & R Fund, to the extent a withdrawal
therefrom was made to pay for all or part of such Project Work and (C) in any
other case, shall be applied to the repayment of all outstanding Bonds, Additional
Bonds or Parity Obligations at the earliest possible date any prepayment may be
made without premium.
11
(e) Insurance Consultant. Subject to the provisions of the Resolution, the
parties shall retain an Insurance .Consultant to review no less frequently than every five (5) years
the Project's insurance coverage and recommend changes that are necessary or appropriate with
respect to the Project; provided, that, to the extent any recommended changes would result in
an increase in premiums, the Insurance Consultant shall have determined that such changes are
commercially reasonable in light of the benefits to be obtained and Prudent Utility Practice. If
the parties disagree as to whether any changes recommended by the Insurance Consultant should
be implemented, either party may submit the matter for Dispute Resolution. The Operator may
expand the Project's insurance coverage at any time without the approval of the Authority or the
Insurance Consultant. The Operator may decrease or limit the coverages set forth below only
with the written approval of the Authority. Disputes regarding changes in insurance coverage
requested by the Operator shall be submitted for Dispute Resolution.
(f) Coverage. Without limiting the Operator's indemnity obligations under
this Agreement, in addition to any coverage agreed upon, and unless otherwise agreed, pursuant
to Section 5(e), the Operator shall provide and maintain the following policies of insurance, with
responsible insurance companies acceptable to the Authority and State of Alaska Division of Risk
Management:
275049.10
( 1) Commercial General Liability with a combined limit of not less
than $1 million primary and $4 million umbrella ($5 million total), which shall
include, but not be limited to:
• Premises and Operations
• Independent Contractors
• Owners and Contractors Protective
• Products/Completed Operations
• Broad Form Property Damage
• Blanket Contractual -Covering all oral
and written contracts (including but not
limited to Section 7(a) hereof)
• Explosion, Collapse, and Underground
• Personal Injury
• Incidental Malpractice
This insurance shall protect against claims which may arise out of, or result from,
operations relating to the Project on or away from the site. The policy shall
contain a "cross-liability" or "severability of interest" clause or endorsement.
The Authority and the State of Alaska shall be additional named insureds to the
extent of their interests.
12
(2) Automobile Liability with a combined single limit of not less
than $5 million, which shall include, but not be limited to:
• All Owned Vehicles
• All Hired Vehicles
• All Non-owned Vehicles all while used in
the operation and management of the
Project.
The policy shall contain a "cross-liability" or "severability of interest" clause or
endorsement. The Authority and the State of Alaska shall be additional named
insureds to the extent of their interests.
(3) Workers' Compensation and Employer's Liability Insurance
with a sublimit of not less than $1 million in compliance with the laws of the
State of Alaska, and where applicable, insurance in compliance with any other
statutory obligations, whether federal or state, pertaining to the compensation of
injured employees, and including Voluntary Compensation. The Workers'
Compensation Insurance shall contain a waiver of subrogation clause in favor of
the Authority and the State of Alaska.
(4) All Risk Property Insurance (including earthquake and flood)
on property of every kind and description forming part of the Project in an
amount, and with such deductibles, that is reasonable and consistent with industry
practice. The Authority and the State of Alaska shall be named as loss payee on
any property loss settlement. The Operator shall be obligated to pay all
applicable deductibles. The policy shall contain a waiver of subrogation clause
in favor of the Authority and the State of Alaska.
(5) Insurance Covering Payment of Debt Service, subject to the
limitations of Section 5(a).
The Operator's insurance coverage for Commercial General Liability under clause (1)
or Automobile Liability under clause (2) for action or inaction of the Operator shall be primary
insurance with respect to the Authority and the State of Alaska, its officers, agents, and
employees. Any insurance or self insurance maintained by the Authority or the State shall be
in excess of the Operator's insurance and shall not contribute with it.
275C49.10
13
Section 6 Environmental Matters
(a) Liability for Environmental Contamination.
(i) Pre-Transfer Owner Liabilities. In the Purchase Agreement and
Transition Plan (as such terms are defined in the Power Sales Agreement), the Authority
and USDOE have provided that the Authority is not obligated to assume, and does not
assume, responsibility for any claims filed or legal proceedings initiated by any other
parties concerning the Project and arising from actions or alleged actions of the US DOE
while USDOE controlled Project assets, regardless of the date on which such claims may
be asserted or proceedings may be initiated. To the extent the foregoing applies to
potential Environmental Liabilities of USDOE as the pre-transfer owner of the Project,
and except as limited by paragraph (11) below, the parties hereto acknowledge that
neither the Authority nor the Operator are obligated to assume, and do not assume, any
or all of such potential Environmental Liabilities.
(ii) Operator Liabilities. The Operator shall be responsible for any and
all potential Environmental Liabilities related to the Project to the extent such liabilities
arise during any period (including the pre-transfer period) in which the Operator served
or serves as Project operator. If at any time a different entity serves as Project operator,
then such entity shall be responsible for the potential Environmental Liabilities of the
Project operator that may arise during such time.
(iii) Post-Transfer Owner Liabilities. The potential Environmental
Liabilities for which the Operator shall be responsible as Project operator under
paragraph (a)(ii) above shall include, but not be limited to, any and all potential
Environmental Liabilities that (A) might otherwise be liabilities, in whole or in part, of
the Authority in its capacity as the post-transfer owner of the Project, and (B) arise
during any period in which the Operator served or serves as Project operator. This
inclusion reflects the division of Project responsibilities between the Operator and the
Authority set forth throughout this Agreement and the Power Sales Agreement, and
particularly in Recital "D" above.
(b) Environmental Standards. The Operator shall abide by, and shall cause
its employees, agents, and any subcontractors it employs to abide by all applicable rules and
regulations for the Project related to fire, safety, health, Pollution, and environmental protection.
The Operator shall provide any required or appropriate hazard information and training to all
of its employees or agents who will be performing work at the Project, including a description
of the Hazardous Substances present or likely to be present at the Project and instructions and
information regarding the potential health hazard of, and how to work safely with, such
Hazardous Substances.
275049.10
14
(c) Remediation. Subject to the Operator's liability in subparagraph (a) above
and Section 7, the Authority and the Operator shall, in consultation with any governmental
agency with authority to conduct, monitor or oversee any Enforcement or Remedial Action,
determine what action, if any, is required by applicable law to investigate, remove, or remediate
any condition of Pollution or in relation to Hazardous Substances.
(d) Permits. The Operator shall prepare and submit any reports and apply for
and procure all permits or authorizations required to operate the Project in full compliance with
any and all applicable or relevant federal, state, and local statues or ordinances, rules and
regulations, financial responsibility requirements, permit conditions, and orders related to safety
and working conditions, transportation or disposal of Hazardous Substances, and environmental
protection.
(i) The Operator shall provide the Authority with copies of any
and all applications for any permit or authorization, and copies of any and all
correspondence with any federal, state, or local government authority related to
any such permit or authorization, including, but not limited to, any application
for any such permit or authorization, any monitoring or other test reports, notices
of inspection, notices of violations, manifests, reports of any spill or release, and
any communication related to compliance with any such permit or authorization.
(ii) The Authority shall have reasonable access to all data, test
results, reports, or other documentation or information supplied to and/or
developed or generated by the Operator in connection with its use of the Project
relating to any Environmental Law, including without limitation, those related to
safety and working conditions, transportation or disposal of Hazardous
Substances. The Authority covenants and agrees to keep confidential all such
information, to the extent permitted under state law.
(e) Insurance. Notwithstanding any other obligation under this Agreement to
provide insurance coverage, and without limiting the Operator's indemnity obligations under this
Agreement, the Operator shall make a reasonable good faith effort to acquire, provide and
mailntain, insurance coverage for liability for Pollution, subject to the limitation of Section 5(a).
The named insureds on any such policy shall include the Authority, the Operator, all of their
contractors and subcontractors, and the State of Alaska. Such insurance shall be considered to
be primary of any other insurance carried by the Authority and the State of Alaska through self
insurance or otherwise. This insurance shall also contain a "cross liability" or "severability of
interest" clause or endorsement.
(f) Hazardous Substances. The Operator shall transport and dispose of any
Hazardous Substances in accordance with all applicable laws.
275049.10
15
Section 7 Indemnity; Limitation of Liability
(a) Indemnity/Hold Harmless. Notwithstanding any other rights, obligations
or limitations of liability under this Agreement, the Operator will at all times defend, indemnify
and hold harmless the Authority and the State of Alaska, their officials, officers, employees,
agents and representatives (collectively "Authority") from and against any and all claims, losses,
damages, costs, charges, expenses, judgments and liabilities, including Environmental Liabilities
described under Section 6(a)(ii) and (iii) of this Agreement, and including reasonable attorneys'
fet:s (including attorneys' fees in establishing indemnification of whatsoever nature), collectively
referred to herein as "losses," directly or indirectly resulting from, arising out of, or related to
one or more claims, as hereinafter defmed, which allegedly or actually arise or result, directly
or indirectly, from, or are in any way connected with: (i) the performance or nonperformance
of any provision or requirement of this Agreement by Operator, its officers, employees,
subcontractors, agents or servants; (ii) any of the acts or omissions of Operator, its officers,
employees, subcontractors, agents or servants at any of the Project facilities; or (iii) the failure
of Operator, its officers, employees, subcontractors, agents, or servants to comply in any respect
with the provisions and requirements of all applicable permits, licenses, laws, statutes,
regulations, ordinances, codes, orders and all other legal requirements of federal, state, regional,
county and local government authorities and agencies having jurisdiction over the Project
fadlities or relevant activities of the Operator.
275()49.10
(i) The obligations of the Operator hereunder shall apply to all losses
or claims, or both, that result from, arise out of, or are related to any event,
occurrence, condition or relationship, whether such losses or claims, or both, are
asserted.
(ii) The term "claims" as used in this Section shall mean all claims,
lawsuits, causes of action, damages, penalties, charges, judgments, losses,
liabilities of any character or kind and other legal actions and proceedings of
whatsoever nature, including but not limited to claims, lawsuits, causes of action,
damages, penalties, charges, judgments, losses, liabilities of any character or kind
and other legal actions and proceedings involving bodily or personal injury or
death of any person or damage to any property (including but not limited to
persons employed by the Authority, the Operator or any other person and all
property owned or claimed by the Authority, the Operator, any affiliate of the
Operator or any other person). The term "claims" or "losses" as used in this
Section shall not include claims or losses (as defmed above) initiated by the
Authority against its own officers, employees, subcontractors, agents or servants.
(iii) The Operator shall pay all royalties and license fees. The Operator
shall defend all suits or claims for any and all infringements of any patents which
may occur in the Operator's performance of this Agreement and shall save the
Authority harmless from loss on account thereof.
16
(iv) The Parties do not under this Article waive or surrender any
indemnity available under any federal, regional, state or local law.
(b) Notice of Claims/Tender. In case any action shall be brought against the
Authority in respect of which indemnity may be sought against the Operator, the Authority shall
promptly notify the Operator in writing and the Operator shall have the right to assume the
investigation and defense thereof, including the employment of counsel and the payment of all
expenses. The Authority may tender any such cause of action, lawsuit, claim or other
proceeding brought against the Authority to the Operator and such tender shall immediately be
accepted by the Operator. Reasonable attorney fees or costs incurred by the Authority prior to
such tender of defense shall be the complete and sole responsibility of the Operator. The
Authority shall have the right to employ separate counsel in any such action and participate in
the:: investigation and defense thereof, but the fees and expenses of such counsel following the
Authority's tender of defense shall be paid by the Authority unless the employment of such
counsel has been authorized by the Operator and the Operator shall control the defense of claims
against which it is providing indemnity hereunder.
(c) Release. The Authority and the State of Alaska shall not be liable to the
Operator for, and the Operator hereby releases the Authority from, all liability for any injuries,
damages or destruction to all or any part or parts of any property owned or claimed by the
Operator that directly or indirectly results from, arises out of or relates to the Project or any part
thereof, except where that liability arises from the Authority's sole negligence or intentionally
wrongful acts or omissions.
(d) Limitation of Liabilitv. Notwithstanding any other provision of this
Agreement, the Authority shall not be liable, and the Operator hereby releases the Authority
from liability, for consequential and indirect damages, such as loss of profit, loss of use, loss
of revenue, extra cost of producing profits or any other special or incidental damages of any
nature sustained in connection with or as a result of any issue or dispute that could be subject
to binding arbitration under Section 8(d) below, including any issue or dispute regarding the
Project Work the Operator performs under this Agreement, whether such consequential or
indirect damages are sought in contract, warranty, tort (including negligence, in whole or in
part, but excluding fraud, gross negligence and willful misconduct), strict liability or otherwise.
(e) General. Except to the extent prohibited by law, the limitations, releases
from liability and indemnity provisions in this Agreement shall extend to the Authority's
officers, employees and agents. The provisions of this Section 7 shall survive the expiration,
termination, cancellation or assignment of this Agreement, as to any events occurring during the
term of the Agreement which may give rise to claims or losses as defmed above.
27.'·049.10
17
Section 8 Dispute Resolution
(a) General. In the event that (i) the Authority and the Operator shall fail to
resolve a material issue or dispute or (ii) a dispute arises between the Authority and the Operator
regarding the application or interpretation of any provision of this Agreement, the provisions of
this Section 8 shall apply.
(b) Independent Consultant. In the event of a dispute or issue referred to in
Section 8(a) above (other than a dispute regarding the selection or removal of the Independent
Consultant, which dispute shall be subject to binding arbitration described in Sections 8(d)
through 8(h) below), upon written notice given by one party to the other and to the Independent
Consultant, the issue or dispute shall be submitted to the Independent Consultant for resolution.
Within ten (10) days after delivery of such notice, each party shall submit to the Independent
Consultant a written statement setting forth such party's position with respect to the issue in
question. Within twenty-five (25) days following delivery of such notice the Independent
Consultant shall deliver to the parties its written determination of the issue. Unless a party
elects to have the determination of the Independent Consultant reconsidered through judicial
review or binding arbitration, as provided in Sections 8(c) through (i) below, the Operator and
the Authority shall abide by the decision of the Independent Consultant. Any decision by the
Independent Consultant with respect to an issue or dispute submitted hereunder shall be
consistent with Prudent Utility Practice and shall, to the greatest extent reasonably possible under
the circumstances, have the effect of assuring the adequacy of revenues necessary to pay debt
service on all outstanding Bonds, Additional Bonds and Parity Obligations.
(c) Judicial Review/Binding Arbitration. If either party chooses to not abide
by the decision of the Independent Consultant or if the Independent Consultant declines to make
a determination, then the parties may mutually agree to submit the issue or dispute to binding
arbitration described in Sections 8(d) through 8(h) below; however, the parties may mutually
agree to modify any provision or procedure regarding binding arbitration. If the parties do not
mutually agree to resolve the issue or dispute through binding arbitration, then either party may
file suit in an Alaska State Court of competent jurisdiction to obtain a de novo review of the
issue or dispute. Either party may call the Independent Consultant as a witness or submit
affidavits of the Independent Consultant as part of its case.
(d) Selection of Arbitrator(s). If the expenditure or other amount in question
is less than $250,000, there shall be one neutral arbitrator; if the expenditure or other amount
in question is $250,000 or more, there shall be three neutral arbitrators. The arbitrator(s) shall
be selected and qualified as follows:
275049.10
(i) Promptly following the demand for arbitration, each party shall
submit to the other party a list of names of fmns or individuals who would
be acceptable to such party. If the parties cannot agree on the identity of
the arbitrator(s) within ten (10) days of the arbitration demand, the
18
arbitrator(s) shall be selected by the administrator of the American
Arbitration Association ("AAA") regional office for Anchorage.
(ii) Each of the arbitrators shall be an individual with demonstrated
experience in electric utility operations and fmance.
(e) Procedures. The arbitration shall be conducted in accordance with the
AAA Commercial Arbitration Rules with Expedited Procedures, in effect on the date hereof, as
modified by this Agreement. There shall be no dispositive motion practice. As may be shown
to be necessary to ensure a fair hearing, the arbitrator(s) may authorize limited discovery and
may enter pre-hearing orders regarding (without limitation) scheduling, document exchange,
witness disclosure and issues to be heard. The arbitrator(s) shall not be bound by the rules of
evidence or of civil procedure, but may consider such writings and oral presentations as
reasonable business people would use in the conduct of their day-to-day affairs, and may require
the parties to submit some or all of their case by written declaration or such other manner of
presentation as the arbitrator(s) may determine to be appropriate. The parties intend to limit live
testimony and cross-examination to the extent necessary to ensure a fair hearing on material
issues. Either party may call the Independent Consultant as a witness or submit affidavits of the
Independent Consultant as part of its case. All statutes of limitations which would otherwise be
applicable shall apply to any arbitration proceeding hereunder.
(f) Hearing-Law-Appeal Limited. The arbitrator(s) shall take such steps
as maybe necessary to hold a private hearing within ninety (90) days of the initial demand for
arbitration and to conclude the hearing within three (3) days; and the written decision of the
arbitrator(s) shall be made not later than fourteen (14) calendar days after the hearing. The
parties have included these time limits in order to expedite the proceeding, but they are not
jurisdictional, and the arbitrator(s) may for good cause afford or permit reasonable extensions
or delays, which shall not affect the validity of the award. The written decision shall contain
a brief statement of the claim(s) determined and the award made on each claim. In making the
dedsion and the award, the arbitrator(s) shall apply applicable substantive law. Absent fraud,
collusion or willful misconduct by an arbitrator, the award shall be final, and judgment may be
entered in any court having jurisdiction thereof. The arbitrator(s) may award injunctive relief
or any other remedy available from a judge (including the joinder of parties or consolidation of
this arbitration with any other arbitration arising under the Operations and Maintenance
Agreement or the Power Sales Agreement involving common issues of law or fact or which may
promote judicial economy), but shall not have the power to make any award payable by the
Authority (except an award for attorneys' fees and costs under Section 8(h), an award
determining that an amount is properly payable out of the R & R Fund, or an award of
reimbursement of amounts paid to the Authority as Reimbursable Extraordinary Administrative
Costs), and shall not have the power to award punitive or exemplary damages. The decision and
award of the arbitrators need not be unanimous; rather, the decision and award of two arbitrators
shaH be fmal. The parties confirm that by agreeing to binding arbitration, they intend to give
up their right to have such disputes decided in court by a judge or jury.
275049.10
19
(g) Provisional Remedies. Pending selection of the arbitrator(s), either party
may request the AAA to appoint unilaterally an arbitrator for the limited purpose of awarding
temporary or preliminary relief, however the arbitrator appointed for this purpose shall cease
to have any power to enter orders after the arbitrator(s) is selected pursuant to paragraph (d)
above. Any temporary or preliminary relief shall be limited to relief that the arbitrator(s) could
award. This award may be immediately entered in any federal or state court having jurisdiction
over the parties even though the decision on the underlying dispute may still be pending. Once
the arbitrator(s) is selected pursuant to paragraph (d) above, the arbitrator(s) may, upon request
of a party, issue a superseding order to modify or reverse such temporary or preliminary relief
or may confirm such relief pending a full hearing on the merits on the underlying dispute. Any
such initial or superseding order of temporary or preliminary relief may be immediately entered
in any federal or state court having jurisdiction over the parties even though the decision on the
underlying dispute may remain pending. Such relief may be granted by the arbitrator(s) only
after notice to and opportunity to be heard by the opposing party unless the party applying for
such relief demonstrates that its purpose would be rendered futile by giving notice.
(h) Attorneys' Fees and Costs. If the party submitting a matter for resolution
to the Independent Consultant, arbitration, or court does not prevail, such party shall pay all of
the costs and expenses of the Independent Consultant, the arbitration and the other party
(including such other party's reasonable attorney's fees). If the party submitting a matter for
resolution to the Independent Consultant, arbitration, or court prevails, such party shall pay one-
hallf of all of the costs and expenses of the Independent Consultant and arbitration, and the other
party shall pay the other one-half; and each party shall be responsible for its own costs and
expenses (including attorneys' fees). If the party submitting a matter for resolution to the
Independent Consultant prevails before the Independent Consultant but loses in arbitration or
judicial review requested by the other party, such party shall pay one-half of all of the costs and
expenses of the Independent Consultant and arbitration, and the other party shall pay the other
one-half; and each party shall be responsible for its own costs and expenses (including attorneys'
fees). If more than one issue or dispute are submitted for resolution, the award of attorneys'
fees and costs shall be separately made for each issue or dispute on a prorated basis. Unless
otherwise directed by this subsection (h), the Authority's attorney's fees shall not be chargeable
to the Operator as a Reimburseable Administrative Cost or as a Reimburseable Extraordinary
Administrative Cost.
Section 9 Term; Termination of Agreement; Assignment
(a) Term. Unless earlier terminated pursuant to Section 9(b) below, this
Ag:reement shall remain in effect until the termination of the Power Sales Agreement.
(b) Termination of Agreement. This Agreement shall be subject to
tennination by the Authority as provided in Section lO(b) of the Power Sales Agreement.
275049.10
20
(c) Assignment. Neither the Operator nor the Authority may assign their
rights or obligations under this Agreement, except to the assignee in connection with a permitted
assignment under Section 15 of the Power Sales Agreement.
Section 10 Miscellaneous
(a) Power Sales Agreement. This Agreement implements the terms of the
Power Sales Agreement, and is not intended to modify the terms thereof in any respect. In the
event of any conflict between this Agreement and the Power Sales Agreement, the terms of the
Power Sales Agreement shall control.
(b) Notices. Computation Of Time And Holidays. Any notice required by
th1s Agreement to be given to any party shall be effective when it is received by such party, and
in computing any period of time from such notice, such period shall commence at 12:01 p.m.
prevailing time at the place of receipt on the date of receipt of such notice. Whenever this
Agreement calls for notice to or notification by any party the same (unless otherwise specifically
provided) shall be in writing directed to the Authority's executive director or the Operator's
general manager. If the date for making any payment or performing any act is a day on which
banking institutions are closed in the place where payment is to be made or a legal holiday,
payment may be made or the act performed on the next succeeding day which is neither a legal
holiday nor a day when banking institutions are closed in such place.
(c) Applicable Law. The laws of the State of Alaska shall govern the
interpretation and application of this Agreement.
(d) Availability Of Information. The parties shall make available to each
other, for inspection and copying during business hours, all books, records, plans and other
information relating to any calculation or determination to be made pursuant to this Agreement.
275049.10
(e) Severability.
(i) Severability Generally. If any section, paragraph, clause or
provision of this Agreement or any agreement referred to in this Agreement shall
be fmally adjudicated by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of this Agreement shall be unaffected by such
adjudication and all the remaining provisions of this Agreement shall remain in
full force and effect as if such section, paragraph, clause or provision or any part
thereof so adjudicated to be invalid had not been included herein.
(ii) Correction and Substitution. If any section, paragraph,
clause or provision of this Agreement or any agreement referred to in this
Agreement shall be finally adjudicated by a court of competent jurisdiction to be
invalid or unenforceable, then and in such event the parties agree that they shall
21
exercise their reasonable best efforts to correct such invalidation and substitute
appropriate agreements and contractual arrangements to achieve the intent of this
Agreement.
(f) Waiver Not Continuing. Any waiver at any time by either party to this
Agreement of its rights with respect to any default of the other party hereto, or with respect to
any other matter arising in connection with this Agreement, shall not be considered a waiver
with respect to any subsequent default, right or matter.
(g) Construction of Agreement. Both the Authority and Operator have
participated in the drafting of this Agreement and have been advised by separate counsel.
Neither party shall be considered the drafter for purposes of applying rules of construction in
any disputes arising under this Agreement. This Agreement shall be construed in harmony with
the Resolution; however, where the terms cannot be harmonized, the terms of the Resolution
shall control.
(h) Covenant To Act In Good Faith. In order to permit this Agreement,
throughout its term, to be fully effective in accordance with the original intent of the parties,
each party agrees that it shall at all times act in good faith and with fair dealing in performing
its l)bligations and in exercising its rights under this Agreement.
(i} No Third-Party Beneficiary. Notwithstanding that the operation of this
Agreement may and is intended to confer benefits on third parties who are not signatories to this
Agreement, this Agreement shall be enforceable only in accordance with its provisions expressly
governing enforcement. In promising performance to one another under this Agreement, the
parties intend to create binding legal obligations to and rights of enforcement in (i) one another,
and (ii) such assignees or successors in interest of the parties as may enjoy a right to enforce this
Agreement by virtue of provisions of this Agreement that expressly create such a right in such
assignees or successors in interest. By entering into this Agreement, the parties expressly do
not intend to create any obligation or promise any performance to any other third party, nor have
the parties created for any other third party any right to enforce this Agreement.
G) Section Headings. The section headings in this Agreement are for
convenience only, and do not purport to, and shall not be deemed to, define, limit or extend the
scope or intent of the section to which they pertain.
275049.10
22
(k) Multiple Copies. This Agreement shall be executed in several
counterparts, each of which shall be an original, but all of which shall constitute one and the
same instrument
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed the
day and year first above written.
27:;Q49.10
ALASKA ELECTRIC LIGHT AND POWER
COMPANY
By: -----------=~~------------------!Print Name]
Its: ---------------------------------
ALASKA INDUSTRIAL DEVELOPMENT AND
EXPORT AUTHORITY
By: -----------===~-----------------!Print Name]
Its:
23
EXHIBIT A -FORM OF REQUISffiON REQUEST
ALASKA INDUSTRIAL
DEVELOPMENT AND EXPORT
AUTHORITY Date: Page 1 of
Snettisham Hydro Project
Replacement and Renewal R & R Order No: SN
Description of Work: Agency Approval Date:
Task Location: Estimated Start Date:
Maint. & Related Work Order: --Estimated COmpletion Date:
Improvements:
Replacements: Related Work Order:
Contained in R&R 3 I Cost Estimate in 3 year
year Schedule: R&R Schedule:
Item Description Direct or Benefits Materials Admin. Other Totals
Contract 0/H Costs
.
-.:-..,..,, f.:~ -~ ~..,.._ ....... ...,..._ i--~ . -:.·J' :·~ \ r.:: ---..
•. \."' ..
· ... ·,. " . •. i:;...;,•";'j"'l ·t'·~.
: '· ... l.:~ .. ::~i~ ~i ~
~.;..;,:, ~¥"' l1i -l'p.lil •• • . .,.; s
AEL&P Estimator Signature: Date: AEL&P Authorized Signature: Date:
AIDEA Deputy Director-Energy: Date: Signature of AEA Operations Manager: Date:
EXHIBIT B
SERVICES TO BE PERFORMED
The Operator shall perfonn the following services under this Agreement in accordance
with the Annual Operating Budget for the applicable Fiscal Year, federal and state law and the
requirements of licensing and regulatory agencies and Prudent Utility Practices:
1. Provide operation of the Project dispatch and control equipment on a
continuous 24-hour daily basis.
2. In accordance with the Annual Operating Budget, purchase or contract for
materials, equipment, services, and supplies for the Project.
3. Maintain business records, which shall in all material respects be (i) in
compliance with all applicable laws, regulations, pennits, licenses, and standards, (ii) consistent
with this Agreement and (iii) consistent with those requirements relating to accounting,
reporting, and other administrative matters set forth in the Power Sales Agreement.
4. Maintain Operating Procedures, which shall in all material respects be
(i) in compliance with all applicable laws, regulations, codes, pennits, licenses, and standards
(induding all safety, environmental, and security requirements), (ii) consistent with this
Agreement and all manuals and instructions relating to the Project and the equipment therein and
(iii) consistent with those requirements relating to the operation and maintenance of the Project
set forth in the Power Sales Agreement and in any operation and maintenance manuals relating
to the Project. The Operating Procedures shall provide for preventative and ordinary
maintenance of the Project, compliance with manufacturer's and dealer's operation, maintenance
and. warranty requirements for Project equipment and vehicles of any kind, inventory control and
tradting of equipment history. The Authority shall have the right to approve the Operating
Procedures delivered by the Operator, and, if the Authority does not approve such procedures,
the Authority and Operator shall mutually agree on a set of Operating Procedures. Subject to
the Authority's reasonable approval, the Operator shall prepare and deliver to the Authority from
time to time any amendment or modification to the Operating Procedures that the Operator may
deem necessary in its perfonnance of the services. If the parties .are unable to agree on the
Operating Procedures, either party may submit the matter for Dispute Resolution.
5. Conduct scheduled technical, operation and maintenance inspections of the
Project features and copy the Authority on all inspection reports.
275049.10
1
6. Read, maintain and operate all Project metering devices in accordance
with operating procedures and make all readings, records, relevant graphs, and/or magnetic tapes
available to the Authority.
7. Hire and maintain a work force and administrative personnel as necessary
for the smooth and efficient operation of the Project.
8. Provide regular training for its employees as follows:
(i) Regular Training. Establish a regular training program for its
personnel designed to keep such personnel informed of existing Operating
Procedures and any additions or modifications thereto and provide such training
for such personnel throughout the term of this Agreement.
(ii) New Personnel. Select and train all replacement and additional
personnel employed by the Operator at the Project in accordance with the
Operator's regular training procedures.
(iii) Employment of Licensed Personnel. Whenever required by
applicable laws, regulations, codes, or standards, employ only licensed personnel
to perform professional services.
9. Take all appropriate actions to preserve the Authority's rights under
equipment warranties and make all appropriate warranty claims in a timely manner.
10. Perform all accounting and related functions for the Authority relating to
the Project.
11. Prepare and file all reports to federal, state and local governmental
agencies relating to the Project.
12. Handle governmental relations, all permitting matters and regulatory
compliance, and assist the Authority in securing appropriate permits, approvals and licenses and
in renewing and maintaining all required permits, approvals, and licenses including, but not
limited to, filing all reports and notices and disbursing funds for all payments in connection
therewith.
13. Maintain full and accurate books, records, and accounts of the Project in
a<:cordance with generally accepted accounting principles and administer and be responsible for
all cost accounting, cash management, purchasing, personnel and payroll functions relating to
the performance of the services.
14. Remove and dispose of waste generated at the Project in accordance with
2')5049.10
2
the Operating Procedures.
15. Prepare status reports as follows:
(i) Quarterly. Within thirty (30) days after the end of each calendar
quarter following the date hereof, deliver to the Authority a report, in form and
substance reasonably satisfactory to the Authority, summarizing, in appropriate
detail, the results of operations of the Project during the preceding quarter.
(ii) Annually. Within sixty (60) days after the end of each Fiscal
Year, deliver to the Authority a report, in form and substance reasonably
satisfactory to the Authority, summarizing in appropriate detail the result of
operations of the Project during the preceding Fiscal Year.
(iii) Additional Information. Provide such additional information with
respect to the Operator's or its subcontractor's performance of services hereunder
the Authority Owner may reasonably request or as required by applicable laws,
regulations, or permits.
16. Obtain and maintain the insurance to be provided by the Operator under
Section 5 of this Agreement and perform such other obligations with respect to such insurance
as set forth in Section 5.
17. Pay all taxes, charges and assessments for the Project and all income
(other than taxes imposed on the income of the Authority), payroll, unemployment, sales, use,
excise, import duty, and gross receipts tax and corporate and professional business taxes and
fees incurred in or resulting from the performance of the services.
18. Initiate and maintain reasonable security precautions and programs to
protect against vandalism, theft, or other similar actions.
19. Initiate and maintain reasonable safety precautions and programs necessary
to comply with all applicable safety laws and other safety requirements to prevent injury to
persons or damage to property on, about, or adjacent to the Project.
20. Report to the Authority any protective relay or protective alarm actions
in the quarterly operations report. Upon the Authority's request, provide the Authority with
copies of all relay certification reports.
21. Oversee and supervise any subcontractors or agents retained by the
Operator in the performance of the services.
22. Maintain an inventory of spare parts.
275049.10
3
23. Perform all Project Work in a workmanlike and expeditious manner.
24. Operate and maintain the Project in accordance with Prudent Utility
Practices, all applicable federal, state and local laws, all relevant governmental permits and
lie<mses, the terms of this Agreement and the Power Sales Agreement and the operating and
maintenance manuals for the Project.
25. Perform all other services as may be necessary or appropriate in
cmmection with the full and proper operation and maintenance of the Project.
275049.10
4
0~
81SBM J8WnSUO:) ISOd %061.!!\
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ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY
POWER REVENUE BOND RESOLUTION
Adopted: ------• 1998
ARTICLE I.
1.1
1.2
1.3
1.4
1.5
ARTICLE II.
2.1
2.2
2.3
2.4
ARTICLE IlL
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
ARTICLE N.
4.1
4.2
4.3
4.4
4.5
4.6
ARTICLE V.
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
5.10
295637.6
TABLE OF CONTENTS
Definitions and Statutory Authority . . . . . . . . . . . . . . . . . . . . . . . . . I
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I
Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Authority for this Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Resolution to Constitute Contract . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Obligation of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Authorization and Issuance of Bonds . . . . . . . . . . . . . . . . . . . . . . . 13
Authorization of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
General Provisions for Issuance of Bonds . . . . . . . . . . . . . . . . . . . . 14
Additional Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Refunding Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 7
General Terms and Provisions of Bonds . . . . . . . . . . . . . . . . . . . . . 19
Medium of Payment; Form and Date; Letters and Numbers . . . . . . . . 19
Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Exchange of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Negotiability, Transfer and Registry; Bond Depository . . . . . . . . . . . 21
Regulations With Respect to Exchanges and Transfers . . . . . . . . . . . 23
Bonds Mutilated, Destroyed, Stolen or Lost . . . . . . . . . . . . . . . . . . . 23
Temporary Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Redemption of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Privilege of Redemption and Redemption Price . . . . . . . . . . . . . . . . 24
Redemption at the Election or Direction of the Authority . . . . . . . . . 24
Redemption Otherwise Than at the Authority's Election or
Direction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Selection of Bonds to be Redeemed; Allocation to Sinking Fund
Installments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Payment of Redeemed Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Establishment of Funds and Application Thereof . . . . . . . . . . . . . . . 26
Pledge of Revenues and Other Funds . . . . . . . . . . . . . . . . . . . . . . . 26
Establishment of Funds and Accounts . . . . . . . . . . . . . . . . . . . . . . . 27
Project Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Revenues and Revenue Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Payments Into Certain Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Debt Service Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Debt Service Reserve Fund .............................. 33
Renewal and Replacement Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Rebate Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Cancellation and Destruction of Bonds . . . . . . . . . . . . . . . . . . . . . . 36
-1-
ARTICLE VI.
6.1
6.2
6.3
6.4
ARTICLE VII.
7.1
7.2
7.3
7.4
7.5
7.6
7.7
7.8
7.9
7.10
7.11
7.12
7.13
7.14
7.15
7.16
7.17
7.18
7.19
7.20
7.21
7.22
ARTICLE VIII.
8.1
8.2
8.3
8.4
8.5
8.6
8.7
8.8
8.9
ARTICLE IX.
9.1
9.2
9.3
295637.6
Depositories of Moneys, Security for Deposits and Investment of
Funds ............................................. 36
Deposttones ......................................... 36
Deposits ........................................... 36
Investment of Certain Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 7
Valuation and Sale of Investments . . . . . . . . . . . . . . . . . . . . . . . . . 3 7
Particular Covenants of the Authority ....................... 38
Payment of Bonds .................................... 38
Extension of Payment of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 8
Offices for Servicing Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 8
Further Assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 9
Power to Issue Bonds and Pledge Revenues and Other Funds . . . . . . 39
Power to Collect Charges ............................... 39
Creation of Liens; Sale and Lease of Property ................. 39
Independent Consultant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Annual Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Limitations on Operating Expenses and Other Costs . . . . . . . . . . . . . 42
Acquisition of the Project and Its Operation and Maintenance . . . . . . 42
Charges and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Power Sales Agreement; Operations and Maintenance
Agreement; Project Sale Agreement . . . . . . . . . . . . . . . . . . . . . . . . 43
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Reconstruction; Application of Insurance Proceeds . . . . . . . . . . . . . . 45
Maintenance of Debt Service Reserve Fund . . . . . . . . . . . . . . . . . . . 46
Accounts and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Tax Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Payment of Taxes and Charges ........................... 51
Pledge of the State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Waiver of Laws ...................................... 51
General ............................................ 51
Remedies of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Account and Examination of Records After Default ............. 53
Application of Revenues and Other Moneys After Default ........ 53
Appointment of Receiver ................................ 55
Proceedings Brought by Trustee ........................... 55
Restriction on Action by Holders of Bonds and Parity
Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Remedies Not Exclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Effect of Waiver and Other Circumstances ................... 56
Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Concerning the Fiduciaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Trustee; Appointment and Acceptance of Duties . . . . . . . . . . . . . . . 57
Paying Agents; Appointment and Acceptance of Duties .......... 57
Responsibilities of Fiduciaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
-11-
9.4
9.5
9.6
9.7
9.8
9.9
9.10
9.11
9.12
9.13
ARTICLE X.
10.1
10.2
10.3
10.4
10.5
ARTICLE XI.
11.1
11.2
11.3
11.4
11.5
11.6
ARTICLE XII.
12.1
12.2
12.3
12.4
12.5
12.6
12.7
12.8
Evidence on Which Fiduciaries May Act . . . . . . . . . . . . . . . . . . . . . 58
Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Certain Permitted Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Resignation of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Removal of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Appointment of Successor Trustee; Financial Qualifications of
Trustee and Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Transfer of Rights and Property to Successor Trustee . . . . . . . . . . . . 60
Merger or Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Adoption of Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Resignation or Removal of Paying Agent and Appointment of
Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Supplemental Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Supplemental Resolutions Effective Upon Filing With the
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Supplemental Resolutions Effective Upon Consent of Trustee . . . . . . 62
Supplemental Resolutions Effective With Consent of Holders . . . . . . 63
General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Amendments Prior to Delivery of Bonds . . . . . . . . . . . . . . . . . . . . . 63
Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Mailing ............................................ 64
Powers of Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Modifications by Unanimous Consent . . . . . . . . . . . . . . . . . . . . . . . 66
Exclusion of Certain Bonds and Parity Obligations . . . . . . . . . . . . . . 66
Notation on Bonds and Parity Obligations . . . . . . . . . . . . . . . . . . . . 66
Miscellaneous . . . . . . . : . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Evidence of Signatures of Holders and Ownership of Bonds and
Parity Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Moneys Held for Particular Bonds or Parity Obligations . . . . . . . . . . 69
Preservation and Inspection of Documents . . . . . . . . . . . . . . . . . . . . 69
No Recourse on the Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Severability of Invalid Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE XIII. Bond Form and Effective Date ............................ 70
13.1 Form of Bonds and Trustee's Certificate of Authentication ........ 70
13.2 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
295637.6 -lll-
ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY
POWER REVENUE BOND RESOLUTION
[Appropriate Recitals to be Included]
BE IT RESOLVED by the Alaska Industrial Development and Export Authority, as
follows:
ARTICLE I.
Definitions and Statutory Authority
1.1 Definitions. The following terms shall, for all purposes of this Resolution, have
the following meanings:
nAccountant" shall mean a nationally recognized firm of certified public accountants
selected by the Authority.
"Accountant's Certificate" shall mean a certificate signed by a fmn of independent
certified public accountants of recognized national standing, selected by the Authority, which
may be the firm of accountants which regularly audits the books of the Authority.
"Act" shall mean Title 44, Chapter 88 of the Alaska Statutes (AS 44.88) as the same
may be amended or supplemented from time to time.
"Additional Bonds" shall mean Bonds authenticated and delivered pursuant to Section
2.3.
"Affiliate" shall mean Snettisham Electric Company, a corporation that is a wholly
owned subsidiary of Alaska Energy and Resources Company and is under common control
with the Purchaser.
"Aggregate Debt Service" for any period shall mean, as of any date of calculation, the
sum of the amounts of Debt Service for such period with respect to the Outstanding Bonds and
Parity Obligations of all Series.
"Annual Budget" shall mean the annual budget, as amended or supplemented, adopted
or in effect for a particular Fiscal Year as provided in Section 7.9.
"Authority" shall mean the Alaska Industrial Development and Export Authority
organized and existing under the Act.
295637.6 -1-
"Authorized Officer of the Authority" shall mean the Chairman, Vice Chairman,
Executive Director, Secretary or Treasurer of the Authority or any officer or employee of the
Authority authorized to perform specific acts or duties by resolution duly adopted by the
Authority. Whenever chief financial officer is used in this Resolution it shall mean a person
designated as such by the Executive Director.
"Average Aggregate Debt Service" shall mean, as of any date of calculation, the sum
of the remaining Aggregate Debt Service divided by the number of Bond Years such Bonds
and Parity Obligations are scheduled to remain Outstanding.
"Bond" or "Bonds" shall mean any bond or bonds, note or notes, or evidence of
indebtedness or evidences of indebtedness, as the case may be, issued by the Authority and
authenticated and delivered under and pursuant to, and entitled to the benefit and security of,
this Resolution.
"Bond Depository" shall mean a Holder acting as a central securities depository as
provided in Section 3.5.
"Bond Registrar" shall mean the Trustee or any other bank or trust company organized
under the laws of any state of the United States of America or any national banking association
appointed by the Authority to perform the duties of Bond Registrar enumerated in Section 7.3.
"Bond Year" shall mean each period of 12 calendar months ending on each 1.
"Capital Improvements" shall mean Project Repairs and/or Project Expansions.
"Code" shall mean the Internal Revenue Code of 1986, as amended, including applicable
Treasury regulations thereunder.
"Cost of Acquisition and Construction" shall mean all costs and expenses of acquiring
the Project and planning, designing, acquiring, constructing, installing and financing any
Capital Improvement, placing the Project or a Capital Improvement in operation, and obtaining
governmental approvals, certificates, permits and licenses with respect thereto. Such costs shall
include amounts required to be paid to any other party which are applied or are to be applied
under agreement to the payment of items of Cost of Acquisition and Construction. Such costs
also shall include, but shall not be limited to:
(a) Reimbursements to the Authority and the Purchaser for original
expenditures made for the Project or a Capital Improvement prior to the issue date of Bonds
to the extent those original expenditures are eligible for reimbursement from Bond proceeds
under the Code;
(b) Costs of preliminary investigation and development, the performance or
acquisition of feasibility and planning studies, the securing of regulatory approvals, as well as
costs for land and land rights, water and water rights, engineering, contractors' fees, labor,
materials, equipment, utility services and supplies, accounting, legal and financing fees and
expenses;
295637.6 -2-
(c) The purchase price of the Project payable under the Purchase Agreement;
(d) Interest accruing in whole or in part on Bonds prior to and during
construction and for such additional period as the Authority may reasonably determine to be
necessary for the placing of the Project or a Capital Improvement or any facility thereof in
operation in accordance with the provisions of this Resolution;
(e) Amounts required by this Resolution or a Supplemental Resolution to be
paid into any Funds or Accounts established pursuant to this Resolution from the proceeds of
Bonds issued to finance the Project or a Capital Improvement;
(f) The payment of principal, premium, if any, and interest when due
(whether at the maturity of principal or at the due date of interest or upon redemption) on any
bond anticipation note or other note or evidence of indebtedness issued in anticipation of Bonds
for the purpose of financing the Project or a Capital Improvement;
(g) Training and testing costs incurred by the Authority which are properly
allocable to acquisition and construction;
(h) All costs of insurance applicable to the period of construction;
(i) The cost of restoring and repairing in accordance with Prudent Utility
Practice all public or private property damaged or destroyed in the construction of a Capital
Improvement, or the amount required by law to be paid by the Authority as adequate
compensation for such damages, or amounts required by law or Prudent Utility Practice to be
paid with respect to the restoration, relocation, removal, reconstruction or duplication of
property made necessary or caused by the construction and installation of such Project or a
Capital Improvement to the extent such costs are not otherwise paid out of the proceeds of
msurance;
(j) Legally required or permitted federal, state and local taxes and payments
in lieu of taxes applicable to the period of construction;
(k) All other costs incurred by or on behalf of the Authority and properly
allocable to the acquisition of the Project or acquisition or construction of a Capital
Improvement; and
(1) Costs of Issuance.
"Costs of Issuance" shall mean any item of expense payable or reimbursable, directly
or indirectly, by the Authority and related to the authorization, offering, sale, issuance and
delivery of Bonds, including, but not limited to, printing costs, costs of preparation and
reproduction of documents, filing and recording fees, initial fees and charges of any Fiduciary,
legal fees and disbursements, fees and disbursements of the Independent Consultant, fees and
disbursements of other consultants and professionals, costs of credit ratings, fees and charges
for preparation, execution, transportation and safekeeping of Bonds, application fees and
premiums on municipal bond insurance, credit facility charges and costs and expenses relating
295637.6 -3-
to the refunding of Bonds or other obligations issued to finance or refinance the Project or a
Capital Improvement.
"Counsel's Opinion" or "Opinion of Counsel" shall mean an opinion of counsel of
nationwide recognized standing in the field of municipal bonds, selected by the Authority and
not objected to by the Trustee in writing within five (5) days after written notice of selection;
provided, however, that, in the case of any opinion required pursuant to clause (b) of
Subsection 5.3.5 or paragraph (d) of Subsection 5.3.8, "Counsel's Opinion" or "Opinion of
Counsel" shall include an opinion of the Office of the Attorney General of the State of Alaska.
"Debt Service" for any period shall mean, as of any date of calculation and with respect
to any Series, an amount equal to the sum of (i) interest accruing during such period on Bonds
or Parity Obligations of such Series, except to the extent that such interest is to be paid from
deposits in the Interest Account in the Debt Service Fund made from proceeds of Bonds or
Parity Obligations and (ii) that portion of each Principal Installment for such Series which
would accrue during such period if such Principal Installment were deemed to accrue daily in
equal amounts from the next preceding Principal Installment due date for such Series (or, if
there shall be no such preceding Principal Installment due date, from a date one year preceding
the due date of such Principal Installment or from the date of issuance of the Bonds or Parity
Obligations of such Series, whichever date is later). Such interest and Principal Installments
for such Series shall be calculated on the assumption that no Bonds or Parity Obligations of
such Series Outstanding at the date of calculation will cease to be Outstanding except by
reason of the payment of each Principal Installment on the due date thereof. For the purposes
of this definition (x) interest and Principal Installments with respect to interest accreting on
compound interest or zero coupon or like interest paying Bonds shall be deemed to accrue in
the twelve ( 12) months immediately prior to the final maturity of such Bonds; and (y) the
Authority may determine that interest will accrue on variable rate Bonds at a rate equal to the
actual rate during a prior period.
"Debt Service Fund" shall mean the Debt Service Fund established in Section 5.2.
"Debt Service Reserve Fund" shall mean the Debt Service Reserve Fund established in
Section 5.2.
"Debt Service Reserve Requirement" shall mean an amount equal to the least of
(i) Maximum Aggregate Debt Service, (ii) 125% of Average Aggregate Debt Service, or
(ii) 10% of proceeds of the Bonds and Parity Obligations.
"Depository" shall mean any bank or trust company organized under the laws of any
state of the United States of America or any national banking association selected by the
Authority and approved in writing by the Trustee as a depository of moneys and securities held
under the provisions of this Resolution, and may include the Trustee; provided that, if the
Trustee shall fail to so approve, it shall deliver to the Authority a statement of its reasons for
such failure.
"Event of Default" shall have the meaning given to such term in Section 8.1.
2956:17.6 -4-
"Federal Obligation" shall mean any direct obligation of, or any obligation the full and
timely payment of principal of and interest on which is guaranteed by, the United States of
America.
"Fiduciary" or "Fiduciaries" shall mean the Trustee, the Bond Registrar, the Paying
Agents, or any or all of them, as may be appropriate.
"Fiscal Year" shall mean the twelve month period commencing on January 1 of each
year and including December 31 of the succeeding calendar year.
"Fund" or "Funds" shall mean, as the case may be, each or all of the Funds established
in Section 5.2.
"Holder" or ••Holders" shall mean any person or persons who shall be the registered
owner of any Bonds or Parity Obligations.
"Independent Consultant" shall mean an independent individual or firm of engineers or
any other consultant that is nationally recognized and has expertise with respect to electric
power projects comparable to the Project at the time retained pursuant to Section 7.8 to carry
out the duties and responsibilities given to such Independent Consultant by this Resolution.
For purposes hereof, '1independene' means a person who is in fact independent and does not
have any substantial interest, direct or indirect, in the Authority or the Purchaser.
"Interest Account" shall mean the Interest Account in the Debt Service Fund established
in Section 5.2.
11 Investment Securities•• shall mean and include any of the following securities, if and
to the extent the same are at the time legal for investment of the Authority's funds:
295637.6
(i) Federal Obligations;
(ii) obligations of the Government National Mortgage Association, the
Federal National Mortgage Association to the extent that such obligations are
guaranteed by the Government National Mortgage Association, the Federal Financing
Bank, the Federal Intermediate Credit Banks, Federal Banks for Cooperatives, Federal
Land Banks, Federal Home Loan Banks, Farmers Home Administration and Federal
Home Loan Mortgage Association;
(iii) new housing authority bonds issued by public agencies or municipalities and
fully secured as to the payment of both principal and interest by a pledge of annual
contributions under an annual contributions contract or contracts with the United States
of America; or project notes issued by public agencies or municipalities and fully
secured as to the payment of both principal and interest by a requisition or payment
agreement with the United States of America;
(iv) direct and general obligations of any state of the United States of America,
to the payment of the principal of and interest on which the full faith and credit of such
state in pledged, provided that at the time of their purchase under this Resolution such
-5-
295637.6
obligations are rated not less than Aa or AA or their equivalents by Moody's Investors
Service, Inc. and Standard & Poor's Corporation, or their successors;
(v) certificates of deposit, whether negotiable or nonnegotiable, issued by any
bank or trust company organized under the laws of any state of the United States of
America or any national banking association (including any Fiduciary), provided that
such certificates of deposit shall be purchased directly from such a bank, trust company
or national banking association and shall be either ( 1) continuously and fully insured
by the Federal Deposit Insurance Corporation, or (2) continuously and fully secured by
Qualified Collateral, which shall have a market value (exclusive of accrued interest) at
all times at least equal to 100% of the principal amount of such certificates of deposit
and shall be lodged with the trust department of the Trustee or with a Federal Reserve
Bank or branch, as custodian, by the bank, trust company or national banking
association issuing each such certificate of deposit required to be so secured;
(vi) repurchase agreements with banks which are members of the Federal
Reserve System or with government bond dealers recognized as primary dealers by the
Federal Reserve Bank of New York that are secured by Federal Obligations or the
obligations referred to in paragraph (ii) (herein called "Other Obligations"), having a
current market value at least equal to 100% of the amount of the repurchase agreement,
marked to market weekly, and which Federal Obligations or Other Obligations shall
have been deposited in trust by such bank or dealer with the trust department of the
Trustee or with a Federal Reserve Bank or branch, or with another third party custodian
approved by the Trustee, by such bank or dealer and by the Authority, as collateral
security for such repurchase agreements;
(vii) "commercial paper" rated either A-1 or P-1, or corporate bonds or notes,
in each case issued by a United States corporation, rated in one of the two highest
rating categories by Standard & Poor's Corporation and Moody's Investors Service Inc.
(viii) investment agreements with any corporation, including banking or financial
institutions, the corporate debt of which is rated, at the time of investment, "Aa" or
better by Moody's Investors Service, Inc. and "AA" or better by Standard & Poor's
Corporation or secured in the same manner as repurchase agreements in paragraph (vi);
(ix) guaranteed investment contracts or similar funding agreements issued by
insurance companies, the corporate debt of which, at the time of investment, is rated
"Aa" or better by Moody's Investors Service, Inc, and "AA" or better by Standard &
Poor's Corporation, or Best's and the contract is pari passu with senior debt, or the
contract is rated in one of the two highest rating categories by Standard & Poor's
Corporation and Moody's Investors Service, Inc. or Best's; and
(x) units of a taxable government money market fund consisting of
obligations guaranteed by the full faith and credit of the United States of America and
repurchase agreements secured as provided in paragraph (vi).
-6-
"Maximum Aggregate Debt Service" shall mean, as of any date of calculation, the
greatest amount of Aggregate Debt Service payable in any unexpired Bond Year.
"Operating Expenses" shall mean (i) the operation, maintenance, administrative and
general expenses of the Project, and shall include, without limiting the generality of the
foregoing, costs of investigations, insurance, ordinary repairs of the Project which do not entail
the acquisition and installation of a unit of property (as generally prescribed by the Federal
Energy Regulatory Commission), fuel costs, rents, engineering expenses, legal and financial
advisory expenses, salaries and required employee costs, any taxes or payments in lieu of taxes
pursuant to the Act or otherwise pursuant to law and Reimbursable Administrative Costs and
Reimbursable Extraordinary Administrative Costs (as such terms are defined in the Power Sales
Agreement), (ii) any other current expenses or obligations required to be paid by the Authority
under the provisions of this Resolution or by law, all to the extent properly allocable to the
Project, or required to be incurred under or in connection with the performance of the Power
Sales Agreement or the Operations and Maintenance Agreement, and (iii) the fees and expenses
of the Fiduciaries. Operating Expenses shall not include any costs or expenses for new
construction or any allowance for depreciation.
"Operations and Maintenance Agreement'' shall mean the Operations and Maintenance
Agreement dated as of , 1998 between the Authority and the Purchaser as
the same may be amended.
"Option Agreement" shall mean that certain Snettisham Option Agreement dated as of
___ _.. 1998, between the Authority and the Affiliate as the same may be amended.
"Outstanding", when used with reference to Bonds or Parity Obligations, shall mean,
as of any date, Bonds or Parity Obligations theretofore or thereupon being authenticated and
delivered under this Resolution except:
29S637.6
(i) Bonds or Parity Obligations cancelled by the Trustee at or prior to such
date;
(ii) Bonds or Parity Obligations (or portions of Bonds or Parity Obligations)
for the payment or redemption of which moneys equal to the principal amount or
Redemption Price thereof, as the case may be, with interest to the date of maturity or
redemption date, shall be held in trust under this Resolution and set aside for such
payment or redemption (whether at or prior to the maturity or redemption date),
provided that if such Bonds or Parity Obligations (or portions of Bonds or Parity
Obligations) are to be redeemed, notice of such redemption shall have been given as
in Article IV provided or provision satisfactory to the Trustee shall have been made for
the giving of such notice;
(iii) Bonds or Parity Obligations in lieu of or in substitution for which other
Bonds or Parity Obligations, respectively, shall have been authenticated and delivered
pursuant to Article III or Section 4.6 or Section 11.6; and
-7-
(iv) Bonds or Parity Obligations deemed to have been paid as provided in
Subsection 12.1.2.
"Parity Obligations" shall mean any bonds, notes or other evidences of indebtedness
(including any such indebtedness issued to refund Outstanding Parity Obligations) issued by
the Purchaser, or by any issuer other than the Authority for the Purchaser, that are
authenticated and delivered by the Trustee and are to be secured by the Project and Revenues
on a parity of lien with Outstanding Bonds.
"Parity Obligation Instrument" shall mean any indenture, trust agreement, loan
agreement or other instrument authorizing the incurrence and issuance of a Parity Obligation
or a Series of Parity Obligations.
"Paying Agent" shall mean any bank or trust company organized under the laws of any
state of the United States of America or any national banking association designated as paying
agent for the Bonds or Parity Obligations of any Series, and its successor or successors
hereafter appointed in the manner provided in this Resolution and applicable Parity Obligation
Instrument.
"Power Sales Agreement" shall mean the Power Sales Agreement for the purchase and
sale of Project Capability dated as of 1998 between the Authority and the
Purchaser as the same may be amended.
"Principal Account" shall mean the Principal Account m the Debt Service Fund
established in Section 5.2.
"Principal Installment" shall mean, as of any date of calculation and with respect to any
Series, so long as any Bonds or Parity Obligations thereof are Outstanding, (i) the principal
amount of Bonds or Parity Obligations of such Series due on a certain future date for which
no Sinking Fund Installments have been established, or (ii) the unsatisfied balance of any
Sinking Fund Installments due on a certain future date for Bonds or Parity Obligations of such
Series, plus the amount of the sinking fund redemption premiums, if any, which would be
applicable upon redemption of such Bonds or Parity Obligations on such future date in a
principal amount equal to said unsatisfied balance of such Sinking Fund Installments, or (iii) if
such future dates coincide as to different Bonds or Parity Obligations of such Series, the sum
of such principal amount of Bonds or Parity Obligations and of such unsatisfied balance of
Sinking Fund Installments due on such future date plus such applicable redemption premiums,
if any.
"Project" shall mean the Snettisham Hydroelectric Project, as the same is described on
Exhibit A to the Power Sales Agreement.
"Project Capability" shall mean the entire capability of the Project to generate and
transmit electric energy at any and all times, including periods when the Project may not be
operating or may be inoperable or the operation thereof is curtailed, in each case in whole or
in part for any reason whatsoever.
295637.6 -8-
"Project Costs" shall have the meaning given it in the Power Sales Agreement or the
Project Sale Agreement, as applicable.
"Project Expansions" shall mean Project improvements, betterments, additions and
expansions (other than Project Repairs) that are consistent with Prudent Utility Practice.
"Project Fund" shall mean the Project Fund established in Section 5.2.
"Project Repairs" shall mean repairs, maintenance or replacements of existing parts,
fixtures or equipment with respect to the Project, which (i) are required by federal or state law
or the Power Sales Agreement or are otherwise necessary to keep the Project in good and
efficient operating condition, consistent with Prudent Utility Practice, and (ii) are chargeable
to the capital account of the Project under the Code.
"Project Sale Agreement" shall mean the agreement or several related agreements that
are entered into pursuant to the Option Agreement, meet the requirements of this Resolution
and the Option Agreement, provide for the sale by the Authority to the Affiliate or the
Purchaser of all or substantially all of the property, facilities and assets comprising the Project,
evidence the obligation to pay the Purchase Price (as defined in the Option Agreement) of the
Project and provide security for the payment and performance of all obligations of the
purchaser thereunder, which agreement or agreements may be in the form or forms of a sale
agreement, installment sale agreement, financing contract, loan agreement, bond, note,
guaranty, security agreement, mortgage, deed of trust or any similar form of agreement or
agreements, as thereafter amended.
"Prudent Utility Practice" shall mean at a particular time any of the practices, methods
and acts engaged in or approved by a significant portion of the electric utility industry at such
time, or which, in the exercise of reasonable judgment in light of facts known at such time,
could have been expected to accomplish the desired results at the lowest reasonable cost
consistent with good business practices, reliability, safety and reasonable expedition. Prudent
Utility Practice is not required to be the optimum practice, method or act to the exclusion of
all others, but rather to be a spectrum of possible practices, methods or acts which could have
been expected to accomplish the desired result at the lowest reasonable cost consistent with
reliability, safety and expedition. Prudent Utility Practice includes due regard for
manufacturers' warranties and the requirements of governmental agencies of competent
jurisdiction and shall apply not only to functional parts of the Project, but also to appropriate
structures, landscaping, painting, signs, lighting and other facilities. In evaluating whether any
matter conforms to Prudent Utility Practices, there shall be taken into account, among other
things, (a) the nature of the Authority and the Purchaser under the laws of the State of Alaska
and their statutory duties and responsibilities and (b) the objectives of (i) complying with
environmental and safety regulations and management agreements, (ii) minimizing the financial
risk of the Authority and the Purchaser and (iii) providing the Purchaser with flexibility in the
conduct of its business affairs. For purposes of this Resolution, "national standards for the
industry" shall mean Prudent Utility Practice.
295637.6 -9-
"Purchase Agreement" shall mean the agreement between the Authority and the U.S.
Department of Energy dated February 10, 1989 relating to the purchase of the Project by the
Authority, as amended.
"Purchaser" shall mean Alaska Electric Light and Power Company and its permitted
successors and assigns under the Power Sales Agreement.
"Qualified Collateral" shall mean:
(i) Obligations described under items (i), (ii) and (iii) of the definition of
Investment Securities;
(ii) direct and general obligations of any state of the United States of
America which are rated not less than AA or Aa or their equivalents by Standard &
Poor's Corporation and Moody's Investors Service, Inc., respectively, or their
successors.
"Rebate Amount" shall mean the rebate amount, if any, payable to the United States of
America in respect of any Series of Bonds or tax-exempt Parity Obligations pursuant to section
148(f) of the Code.
"Rebate Fund" shall mean the Rebate Fund established in Section 5.2.
"Redemption Price" shall mean, with respect to any Bond or Parity Obligation, the
principal amount thereof plus the applicable premium, if any, payable upon redemption thereof
pursuant to such Bond or Parity Obligation or this Resolution.
"Refunding Bonds" shall mean all Bonds, whether issued in one or more Series,
authenticated and delivered on original issuance pursuant to Section 2.4, and any Bonds
thereafter authenticated and delivered in lieu of or in substitution for such Bonds pursuant to
Article III or Section 4.6 or Section 11.6.
"Renewal and Replacement Fund" shall mean the Renewal and Replacement Fund
established in Section 5 .2.
"Renewal and Replacement Fund Contribution" shall mean (a) on the issue date of the
first Series of Bonds authorized pursuant to Section 2.3.1, [$1,900,000] deposited in the
Renewal and Replacement Fund from proceeds of that Series of Bonds, (b) for the first full
Fiscal Year following the adoption of this Resolution, [$624,000] deposited in the Renewal and
Replacement Fund from payments received from the Purchaser pursuant to the Power Sales
Agreement, and (c) for each subsequent Fiscal Year, the amount equal to 103% of the Renewal
and Replacement Fund Contribution for the immediately preceding Fiscal Year deposited in
the Renewal and Replacement Fund from payments received from the Purchaser pursuant to
the Power Sales Agreement, which amounts described in clauses (b) and (c) of this definition
sha.ll be subject to adjustment as provided in Section 7(c) of the Power Sales Agreement.
295637.6 -10-
"Reserve Fund Credit Facility" shall mean means any bond insurance, letter of credit,
guaranty, surety bond or similar credit enhancement device providing for or securing the
payment of all or part of the principal of and interest on the Outstanding Bonds or Parity
Obligations, issued by an institution which has been assigned a credit rating at the time of
issuance of such Outstanding Bonds or Parity Obligations to be secured by such Reserve Fund
Credit Facility that is equal to or better than the highest then-existing rating for any of the
Outstanding Bonds or Parity Obligations.
"Resolution" shall mean this Resolution as from time to time amended or supplemented
by Supplemental Resolutions in accordance with the terms hereof.
"Retained Revenues" shall mean (a) all Reimbursable Administrative Costs and
Reimbursable Extraordinary Administrative Costs payable or reimbursable to the Authority
pursuant to the Power Sales Agreement, (b) all payments pursuant to Section 6(c)(i)(A)(2) of
the Power Sales Agreement constituting (i) Margin on Additional Debt (as such terms are
defined in such Section) or (ii) principal of or interest on Additional Debt (as defined in such
Se<:tion) other than Additional Bonds and (c) all payments pursuant to the indemnification
provisions of Section 6 or 7 of the Operations and Maintenance Agreement.
"Revenue Fund" shall mean the Revenue Fund established in Section 5.2.
"Revenues" shall mean (i) all revenues, income, rents and receipts, derived or to be
derived by the Authority from, or attributable to the ownership, operation and/or sale of, the
Project, including all revenues attributable to the Project or to payment of the costs thereof
including, without limitation, all revenues received or to be received by the Authority under
the Power Sales Agreement or under any other contract for the sale of power, energy,
transmission or other service from the Project or any part thereof, any contractual arrangement
with respect to the use of the Project or any portion thereof or the services, output or capacity
thereof, or under any Project Sale Agreement, exclusive of Retained Revenues and (ii) interest
received or to be received on any moneys or securities (other than in the Project Fund or in
the Rebate Fund) held pursuant to this Resolution and required to be paid into the Revenue
Fund.
"Series" shall mean (i) all of the Bonds authenticated and delivered on original issuance
and identified pursuant to this Resolution or a Supplemental Resolution authorizing such Bonds
as a separate Series of Bonds, and any Bonds thereafter authenticated and delivered in lieu of
or in substitution for such Bonds pursuant to Article III or Section 4.6 or Section 11.6,
regardless of variations in maturity, interest rate, Sinking Fund Installments, or other
provisions; and (ii) all of the Parity Obligations authenticated and delivered by the Trustee on
original issuance that are identified by their authorizing documents as a separate series of Parity
Obligations.
"Sinking Fund Installment" means, as of any particular date of determination and with
respect to the Outstanding Bonds or Parity Obligations of any Series, the amount required by
a Supplemental Resolution or Parity Obligation Instrument to be paid in any event by the
Authority or the issuer of the Parity Obligations on a single future date for the retirement of
Bonds or Parity Obligations of such Series which mature after said future date, but does not
295637.6 -11-
include any amount payable by the Authority or the issuer of the Parity Obligations by reason
only of the maturity of a Bond or Parity Obligation.
"Supplemental Resolution" shall mean any resolution supplemental to or amendatory
of this Resolution, adopted by the Authority in accordance with Article X.
"Trustee" shall mean the trustee appointed pursuant to Article IX, and its successor or
successors and any other corporation or association which may at any time be substituted in
its place pursuant to this Resolution.
1.2 Interpretation. In this Resolution, unless the context otherwise requires:
1.2.1 The terms "hereby," "hereof," "hereto,'' "hereunder," "herein" and any
similar terms used herein refer to this Resolution, and the term "hereafter" shall mean after, and
the term "heretofore'' shall mean before, the date of adoption of this Resolution;
1.2.2 Words of the masculine gender shall mean and include correlative words
of the feminine and neuter genders and words importing the singular number shall mean and
include the plural number and vice versa;
1.2.3 Words importing persons shall include firms, associations, partnerships
(including limited partnerships), trusts, corporations and other legal entities, including public
bodies, as well as natural persons;
1.2.4 Words importing the redemption or redeeming of a Bond or Parity
Obligation or the calling of a Bond or Parity Obligation for redemption do not include or
connote the payment of such Bond or Parity Obligation at its stated maturity or the purchase
of such Bond or Parity Obligation;
1.2.5 Any percentage of Bonds and Parity Obligations, for purposes of this
Resolution, shall be computed on the basis of the unpaid principal amount of Bonds and Parity
Obligations Outstanding at the time the computation is made or is required to be made
hereunder;
1.2.6 Any headings preceding the text of the several Articles and Sections of
this Resolution, and any table of contents or marginal notes appended to copies hereof, shall
be solely for convenience of reference and shall not constitute a part of this Resolution, nor
shall they affect its meaning, construction or effect;
1.2. 7 Articles and Sections mentioned by number only are the respective
Articles and Sections of this Resolution so numbered; and
1.2.8 The term "principal" when used in connection with compound interest or
zero coupon or like paying Bonds or Parity Obligations shall mean the initial principal amount
of such Bonds or Parity Obligations as at their date of issuance plus interest accreted thereon
to the date of calculation.
29S6J7.6 -12-
1.3 Authoritv for this Resolution. This Resolution is adopted pursuant to the
provisions of the Act. The Authority has ascertained and hereby determines and declares that
adoption of this Resolution is necessary to carry out the powers and duties expressly provided
by the Act, that each and every act, matter, thing or course of conduct as to which provision
is made in this Resolution is necessary or convenient in order to carry out and effectuate the
purposes of the Authority in accordance with the Act and to carry out powers expressly given
in the Act, and that each and every covenant or agreement herein contained and made is
necessary, useful or convenient in order to better secure the Bonds and are contracts or
agreements necessary, useful and convenient to carry out and effectuate the corporate purposes
of the Authority under the Act.
1.4 Resolution to Constitute Contract. In consideration of the purchase and
acceptance of any and all of the Bonds and Parity Obligations authorized to be issued or
secured hereunder by those who shall hold the same from time to time, this Resolution shall
be deemed to be and shall constitute a contract between the Authority, the Trustee, and the
holders from time to time of the Bonds and Parity Obligations, a trust agreement under the Act
and a security agreement under the Alaska Uniform Commercial Code. The pledge and
assignment made in this Resolution and the covenants and agreements herein set forth to be
performed on behalf of the Authority shall be for the equal benefit, protection and security of
the holders of any and all of the Bonds and Parity Obligations, all of which, regardless of the
time or times of their authentication and delivery or maturity, shall be of equal rank without
preference, priority or distinction of any of the Bonds or Parity Obligations over any other
thereof except as expressly provided in or permitted by this Resolution.
1.5 Obligation of Bonds. The Bonds shall be special, limited obligations of the
Authority, and Debt Service thereon shall be payable from and secured solely by the Revenues
and other sources identified or described in Article V hereof. Notwithstanding anything to the
contrary in this Resolution or the Bonds, the Bonds do not and shall not represent or constitute
a general obligation debt or pledge of the faith and credit or the taxing power of the Authority
(it being understood that the Authority has no taxing power) or the State or of any political
subdivision, municipality or other local agency thereof. All Bonds and Parity Obligations shall
be entitled to the benefit of the continuing pledge and lien created by this Resolution to secure
the full and final payment of the principal and Redemption Price of and interest on all of the
Bonds and Parity Obligations.
ARTICLE II.
Authorization and Issuance of Bonds
2.1 Authorization of Bonds.
2.1.1 The Resolution provides for the authorization of Bonds of the Authority
to be designated as "Power Revenue Bonds" for the purpose of providing funds for the
financing or refinancing of the acquisition of the Project and construction of Capital
Improvements. The aggregate principal amount of the Bonds which may be executed,
2951137.6 -13-
authenticated and delivered under this Resolution is not limited except as may hereafter be
provided in this Resolution, or as may be limited by the Power Sales Agreement or by law.
2.1.2 The Bonds may, if and when authorized by the Authority pursuant to one
or more Supplemental Resolutions, be issued in one or more Series, and the designation
thereof, in addition to the name "Power Revenue Bonds", shall include such further appropriate
particular designation added to or incorporated in such title for the Bonds of any particular
Series as the Authority may determine. Each Bond shall bear upon its face the designation so
determined for the Series to which it belongs.
2.1.3 Nothing contained in this Resolution shall be deemed to preclude or
restrict the consolidation pursuant to a Supplemental Resolution of any Bonds of two or more
separate Series authorized pursuant to such Supplemental Resolution to be issued pursuant to
any of the provisions of Sections 2.3, 2.4 and 2.5 into a single Series of Bonds for purposes
of sale and issuance; provided that each of the tests, conditions and other requirements
contained in Sections 2.3, 2.4 and 2.5 as applicable to each such separate Series shall be met
and complied with. Except as otherwise provided in this subsection or in such Supplemental
Resolution, such a consolidated Series shall be treated as a single Series for all purposes of this
Resolution.
2.2 General Provisions for Issuance of Bonds.
2.2.1 All (but not less than all) the Bonds of each Series shall be executed by
the Authority for issuance under this Resolution and delivered to the Trustee and thereupon
shall be authenticated by the Trustee and by it delivered to the Authority or upon its order, but
only upon the receipt by the Trustee of:
295~37.6
(a) A Counsel's Opinion to the effect that:
(i) the Authority has the right and power under the Act as
amended to the date of such Opinion to adopt this Resolution, and this
Resolution has been duly and lawfully adopted by the Authority, is in full force
and effect and is valid and binding upon the Authority in accordance with its
terms, and no other authorization for this Resolution is required;
(ii) (A) Ifthe Authority is the owner of the Project, the Authority
has the right and power under the Act as so amended to enter into the Power
Sales Agreement and the Operations and Maintenance Agreement, and the
Power Sales Agreement and the Operations and Maintenance Agreement are
valid and binding upon the Authority in accordance with their respective terms,
and no other authorization for the Power Sales Agreement or the Operations and
Maintenance Agreement is required, or (B) if the Authority is not the owner of
the Project, the Authority has the right and power under the Act as so amended
to enter into the Project Sale Agreement, and the Project Sale Agreement is
valid and binding upon the Authority in accordance with its terms, and no other
authorization for the Project Sale Agreement is required;
-14-
295637.6
(iii) this Resolution creates the valid pledge and assignment which
it purports to create of the Revenues, moneys, securities and funds held or set
aside under this Resolution subject only to the provisions of this Resolution
permitting the application thereof for the purposes and on the terms and the
conditions set forth in this Resolution;
(iv) the Bonds of such Series are valid and binding special, limited
obligations of the Authority payable from and secured solely by the Revenues
and other sources pledged as provided in this Resolution, and entitled to the
benefits of this Resolution and of the Act as amended to the date of such
Opinion, and such Bonds have been duly and validly authorized and issued in
accordance with law, including the Act as amended to the date of such Opinion,
and in accordance with this Resolution; provided, that such Opinion may take
exception for limitations imposed by or resulting from bankruptcy, insolvency,
moratorium, reorganization or other laws affecting creditors' rights generally;
and
(v) Debt Service on the Bonds of such Series is includible as a
Project Cost.
(b) A written order as to authentication and delivery of such Bonds, signed
by an Authorized Officer of the Authority;
(c) A copy of the Supplemental Resolution authorizing such Bonds, certified
by an Authorized Officer of the Authority, which shall, to the extent necessary and not
already fixed by the Resolution, among other provisions, specify:
(i) the authorized principal amount, designation and Series of such
Bonds;
(ii) the purposes for which such Series of Bonds is being issued,
which shall be (A) the purpose specified in Section 2.3, (B) one of the purposes
specified in Section 2.4, or (C) the refunding of Bonds as provided in
Section 2.5;
(iii) the date, and the maturity date or dates, of the Bonds of such
Series;
(iv) the interest rate or rates or the maximum rate of interest of
the Bonds of such Series or the method of calculating the interest rate, which
interest rate may be determinable at one or more specified times or periodically
by reference to an index or other reference point, an interest accreting or
compound interest, zero coupon, or like method of interest rate or yield
calculation and the interest payment dates therefor, provided that the interest rate
shall be identical for all such Bonds of like maturity;
(v) the denominations of, and the manner of dating, numbering
and lettering, the Bonds of such Series;
(vi) the Paying Agent or Paying Agents and the place or places
of payment of the principal and Redemption Price, if any, of, and interest on,
the Bonds of such Series;
(vii) the Redemption Price or Prices, if any, and subject to Article
N, the redemption terms for the Bonds of such Series;
(viii) the amount and due date of each Sinking Fund Installment,
if any, for Bonds of like maturity of such Series;
(ix) if so determined by the Authority, provisions for the sale of
the Bonds of such Series;
(x) the amount, if any, to be deposited from the proceeds of such
Series of Bonds into the Debt Service Fund for the payment of all or a portion
of the interest on such Series of Bonds and the amount to be deposited from the
proceeds of such Series of Bonds into the Debt Service Reserve Fund to cause
the amount therein to equal the Debt Service Reserve Requirement;
(xi) whether the Series of Bonds is to be issued pursuant to
Subsections 3.5.3 through 3.5.8;
(xii) the amount to be deposited from the proceeds of such Series
of Bonds in the account in the Project Fund established for the Project or the
undertaking of Capital Improvements for which such Bonds are authorized to be
issued; and
(xiii) such other matters as shall be necessary or appropriate so as
to comply with the provisions of this Resolution or to provide for the issuance
and delivery of the Bonds;
(d) Except in the case of Refunding Bonds, a certificate of an Authorized
Officer of the Authority stating that the Authority is not in default in the performance
of any of the covenants, conditions, agreements or provisions contained in this
Resolution;
(e) A certificate from the Purchaser stating that the Purchaser has approved
the Supplemental Resolution authorizing such Bonds; and
(f) Such further documents as are required by the provisions of Section 2.3
or 2.4 or Article X or any Supplemental Resolution adopted pursuant to Article X.
295637.6 -16-
2.2.2 After the original issuance of Bonds of any Series, no Bonds of such
Series shall be issued except in lieu of or in substitution for other Bonds of such Series
pursuant to Article III or Section 4.6 or Section 11.6.
2.2.3 The Supplemental Resolution authorizing the initial Series of Bonds for
the Project shall establish Principal Installments for such Series.
2.3 Additional Bonds.
2.3.1 After the issuance of the first Series of Bonds to finance the acquisition
of the Project, one or more Series of Additional Bonds designated as ••Power Revenue Bonds"
may be authenticated and delivered pursuant to one or more Supplemental Resolutions
establishing the terms of the Series from time to time for the purpose of paying all or a portion
of the Cost of Acquisition and Construction of any Capital Improvements, upon compliance
with the terms and conditions set forth in Section 2.2, and upon receipt by the Trustee of a
written Opinion of the Independent Consultant that neither the issuance of the Additional
Bonds nor the payment of the Cost of Acquisition and Construction of the Capital
Improvements will impair the ability of the Authority to pay Debt Service through collection
of Revenues under the Power Sales Agreement.
2.3.2 The proceeds, including accrued interest, of the Additional Bonds of each
Series shall be applied simultaneously with the delivery of such Bonds, as provided in the
Supplemental Resolution authorizing such Series.
2.4 Refunding Bonds.
2.4.1 One or more Series of Refunding Bonds may be authenticated and
delivered upon original issuance to refund any Outstanding Bond or Bonds. Refunding Bonds
shall be issued in a principal amount sufficient, together with other moneys available therefor,
to accomplish such refunding and to make the deposits in the Funds and Accounts under this
Resolution required by the provisions of the Supplemental Resolution authorizing such Bonds.
2.4.2 Refunding Bonds of each Series shall be authenticated and delivered by
the Trustee only upon receipt by the Trustee (in addition to the documents required by
Section 2.2) of:
295637.6
(a) Irrevocable instructions to the Trustee, satisfactory to it, to give
due notice of redemption, on a redemption date or dates specified in such instructions,
of any of the refunded Bonds to be redeemed;
(b) Irrevocable instructions to the Trustee, satisfactory to it, to give
due notice provided for in Section 12.1 to the Holders ofthe Bonds being refunded; and
(c) Either (i) moneys (including moneys withdrawn and deposited
pursuant to Subsection 5.7.4) in an amount sufficient to effect payment at the applicable
Redemption Price of the refunded Bonds to be redeemed and of the principal amount
of the Refunded Bonds not to be redeemed, together with accrued interest on such
-17-
Bonds to the redemption date or maturity date, as the case may be, which moneys shall
be held by the Trustee in a separate account irrevocably in trust for and assigned to the
respective Holders of the Bonds to be refunded, or (ii) Federal Obligations in such
principal amounts, of such maturities, bearing such interest, and otherwise having such
terms and qualifications, and any moneys, as shall be necessary to comply with the
provisions of Subsection 12.1.2, which Federal Obligations and moneys shall be held
in trust by the Trustee and used only as provided in said Subsection 12.1.2.
2.4.3 The proceeds, including accrued interest, of the Refunding Bonds of each
Series shall be applied simultaneously with the delivery of such Bonds for the purposes of
making deposits in such Funds and Accounts under this Resolution as shall be provided by the
Supplemental Resolution authorizing such Series of Refunding Bonds and shall be applied to
the refunding purposes thereof in the manner provided in said Supplemental Resolution.
2.4.4 The Supplemental Resolution authorizing a Series of Refunding Bonds
may establish such funds and accounts in addition to the Funds and Accounts established
herein as are necessary to provide for such refunding.
2.5 Parity Obligations.
2.5.1 If the Authority declines to issue Additional Bonds to finance the Cost of
Acquisition and Construction of Capital Improvements on terms satisfactory to the Purchaser,
the Purchaser may cause one or more Series of Parity Obligations to be authenticated and
delivered by the Trustee pursuant to one or more Parity Obligation Instruments from time to
time: for the purpose of paying all or a portion of the Cost of Acquisition and Construction of
any Capital Improvements, upon compliance with the following terms and conditions:
2956.:>7.6
(a) There shall be delivered to the Authority and the Trustee a
certificate of an authorized representative of the Purchaser stating that no default then
exists under the Power Sales Agreement or the Project Sale Agreement, as applicable,
and all payments required to be made under the Power Sales Agreement or the Project
Sale Agreement, as applicable, are current;
(b) Prior to the issuance of any Series of Parity Obligations, the
Authority, the Trustee, the Purchaser and Affiliate shall supplement and amend the
Power Sales Agreement or the Project Sale Agreement, as applicable, and this
Resolution, to the extent necessary, to cause Debt Service on such Series of Parity
Obligations to be included in Project Costs;
(c) The Parity Obligation Instrument shall, to the extent reasonably
practicable, cause payment dates for the Parity Obligations to be the same as payment
dates for the Bonds, and shall appoint Trustee to act as trustee, paying agent and
registrar in respect to the Parity Obligations on behalf of the Holders thereof and, upon
the occurrence of any default with respect to the Parity Obligations, for the purposes
of enforcing any and all remedies against the Purchaser for such default upon
substantially the same terms as it so acts in respect of the Bonds;
-18-
(d) The principal amount of any Series of Parity Obligations shall not
exceed (i) the Independent Consultant's estimate of the reasonable cost of the Capital
Improvements to be fmanced with the proceeds of such Series, plus (ii) the cost of
issuance of such Series, plus (iii) capitalized interest if any, thereon, plus (iv) the
amount of funds required to be deposited into the Debt Service Reserve Fund to cause
the amount therein to equal the Debt Service Reserve Requirement;
(e) The Independent Consultant shall have delivered a certificate to
the Authority, the Trustee and the Purchaser to the effect that (i) the net proceeds of the
Series of Parity Obligations will be sufficient to acquire, construct and install the
Capital Improvements to be financed by such Series and (ii) after giving effect to the
additional Debt Service in respect of such Series payable by the Purchaser as Project
Costs, the Purchaser will have substantially the same or greater ability to produce
sufficient revenues to meet its obligations under the Power Sales Agreement or the
Project Sale Agreement, as applicable, to pay Project Costs as it had prior to the
issuance of such Series of Parity Obligations;
(f) The Parity Obligation Instruments pursuant to which the Parity
Obligations are incurred and issued shall include (i) a cross default provision with the
Power Sales Agreement or the Project Sale Agreement, as applicable, the Resolution
and any other Parity Obligation Instrument; (ii) provisions causing the rights and
obligations of the Holders of the Parity Obligations in respect of the Project and
Revenues to be substantially the same as the rights and obligations of the Holders of
Bonds; (iii) provisions causing the remedies upon an "event of default" (however
defined) thereunder to be substantially the same as the remedies provided for Events of
Default under the Resolution and the Power Sales Agreement or the Project Sale
Agreement, as applicable, and requiring the Holders of such Parity Obligations to
cooperate with the Trustee so that the interests of the Holders of all Bonds and Parity
Obligations shall be equally protected; and (iv) provisions requiring the Purchaser or
the Holders of the Parity Obligations to inform the Trustee immediately upon the
occurrence of an "event of default" (however defmed) thereunder.
ARTICLE III.
General Terms and Provisions of Bonds
3.1 Medium of Payment: Form and Date; Letters and Numbers.
3.1.1 The Bonds shall be payable, with respect to interest, principal and
Redemption Price, in any coin or currency of the United States of America which at the time
of payment is legal tender for the payment of public and private debts.
3.1.2 The Bonds of each Series shall be negotiable instruments issued in the
fonn of fully registered Bonds.
295637.6 -19-
3.1.3 Each Bond shall be lettered and numbered as provided in this Resolution
or the Supplemental Resolution authorizing the Series of which such Bond is a part and so as
to bc~ distinguished from every other Bond.
3.1.4 Bonds of each Series shall be dated as provided in the Supplemental
Resolution authorizing such Series.
3 .1.5 The principal and Redemption Price of the Bonds shall be payable upon
pres1:mtation and surrender at the principal corporate trust office of any Paying Agent or as may
be provided by Supplemental Resolution. Interest on Bonds shall be paid by the Trustee by
check or draft mailed by first class mail to the registered owners of record as of the 15th day
of the month preceding each interest payment date at the addresses of such owners appearing
on the registration books maintained by the Authority for such purpose at the principal
corporate trust office of the Bond Registrar or as may be provided by Supplemental Resolution.
3.2 Legends. The Bonds of each Series may contain or have endorsed thereon such
proviSions, specifications and descriptive words not inconsistent with the provisions of this
Resolution as may be necessary or desirable to comply with custom, the rules of any securities
exchange or commission or brokerage board, or otherwise, as may be determined by the
Authority prior to the authentication and delivery thereof.
3.3 Execution and Authentication.
3.3.1 The Bonds shall be executed in the name of the Authority by the manual
or facsimile signature of its Chairman or its Vice Chairman, and its corporate seal (or a
facsimile thereof) shall be impressed, imprinted, engraved or otherwise reproduced thereon and
attested by the manual or facsimile signature of the Secretary or an Assistant Secretary of the
Authority, or in such other manner as may be required or permitted by law. In case any one
or more of the officers who shall have signed or sealed any of the Bonds shall cease to be such
offi,~er before the Bonds so signed and sealed shall have been authenticated and delivered by
the Trustee, such Bonds may, nevertheless, be authenticated and delivered as herein provided,
and may be issued as if the persons who signed or sealed such Bonds bad not ceased to hold
such offices. Any Bond of a Series may be signed and sealed on behalf of the Authority by
such persons as at the time of the execution of such Bonds shall be duly authorized to hold the
proper office in the Authority, although at the date borne by the Bonds of such Series such
person may not have been so authorized or have held such office.
3.3.2 The Bonds of each Series shall bear thereon a certificate of authentication,
in the form set forth in Section 13.1 and any Supplemental Resolution authorizing such Bonds,
executed manually by the Trustee. Only such Bonds as shall bear thereon such certificate of
authentication shall be entitled to any right or benefit under this Resolution and no Bond shall
be valid or obligatory for any purpose until such certificate of authentication shall have been
duly executed by the Trustee. Such certificate of the Trustee upon any Bond executed on
behalf of the Authority shall be conclusive evidence that the Bond so authenticated has been
duly authenticated and delivered under this Resolution and that the Holder thereof in entitled
to the benefits of this Resolution.
29S637.6 -20-
3.4 Exchange of Bonds. Bonds, upon surrender thereof at the principal corporate
trust office of the Bond Registrar with a written instrument of transfer satisfactory to the Bond
Registrar, duly executed by the registered owner or his duly authorized attorney, may, at the
option of the registered owner thereof, and upon payment by such registered owner of any
charges which the Bond Registrar may make as provided in Section 3.6, be exchanged for an
equal aggregate principal amount of Bonds of the same Series and maturity of any other
authorized denominations.
3.5 Negotiability, Transfer and Registry; Bond Dcmository.
3.5.1 Bonds shall be transferable only upon the books of the Authority, which
shall be kept for such purposes at the principal corporate trust office of the Bond Registrar, by
the registered owner thereof in person or by his attorney duly authorized in writing, upon
surrender thereof together with a written instrument of transfer satisfactory to the Bond
Registrar duly executed by the registered owner or his duly authorized attorney. Upon transfer
of any such Bond, the Authority shall issue in the name of the transferee a new Bond or Bonds
of the same aggregate principal amount and Series and maturity as the surrendered Bond.
3.5.2 The Authority and each Fiduciary may deem and treat the person in
whose name any Bond shall be registered upon the books of the Authority as the absolute
owner of such Bond, whether such Bond shall be overdue or not, for the purpose of receiving
payment of, or on account of, the principal and Redemption Price, if any, of and interest on
such Bond and for all other purposes, and all such payments so made to any such registered
owner or upon his order shall be valid and effectual to satisfy and discharge the liability upon
such Bond to the extent of the sum or sums so paid, and neither the Authority nor any
Fiduciary shall be affected by any notice to the contrary. The Authority agrees to indemnify
and. save each Fiduciary harmless from and against any and all loss, cost, charge, expense,
judgment or liability incurred by it, acting in good faith and without negligence under this
Resolution, in so treating such registered owner.
3.5.3 A Supplemental Resolution may provide that (i) the Bonds may be
initially issued in the form of a separate single authenticated fully registered bond in the
amount of each separate stated maturity of the Bonds and (ii) upon initial issuance, the
ownership of such Bond may be registered in the registry books kept by the Trustee in the
name of the nominee of a Bond Depository or in the name of the Bond Depository. With
respect to Bonds registered in the registry books kept by the Trustee in the name of a nominee
of a Bond Depository or in the name of the Bond Depository, the Authority and the Trustee
shall have no responsibility or obligation with respect to (i) the accuracy of the records of the
Bond Depository, its nominee or any participant with respect to any ownership interest in the
Bonds, (ii) the delivery to any participant, any beneficial owner or any other person, other than
the nominee or Bond Depository, of any notice with respect to the Bonds, including any notice
of redemption, or (iii) the payment to any participant, any beneficial owner or any other
person, other than the nominee or Bond Depository, of any amounts with respect to the
principal of or premium, if any, or interest on the Bonds. The Authority and the Trustee may
treat as and deem the nominee or Bond Depository to be the absolute owner of each Bond for
the purpose of payment of the principal of or premium, if any, and interest on such Bond, for
the~ purpose of giving notices of redemption and other matters with respect to such Bond, for
295637.6 -21-
the purpose of registering transfers with respect to such Bond, and for all other purposes
whatsoever. The Trustee shall pay all principal of or premium, if any, and interest on the
Bonds only to or upon the order of the nominee or Bond Depository, and all such payments
shall be valid and effective to fully satisfy and discharge the Authority's obligation with respect
to the principal of and premium, if any, and interest on the Bonds to the extent of the sum or
sums so paid. No person other than the nominee or Bond Depository shall receive an
authenticated Bond evidencing the obligation of the Authority to make payments of principal
and premium, if any, and interest pursuant to this Resolution. Upon delivery by the nominee
or Bond Depository to the Trustee of written notice to the effect that the Bond Depository has
detf:rmined to substitute a new nominee in place of the existing nominee, the Trustee shall
issue a new registered bond to the new nominee in exchange for each bond surrendered which
was registered in the name of the old nominee to such new nominee of the Bond Depository.
3.5.4 Upon receipt by the Authority and the Trustee of written notice from the
Bond Depository to the effect that the Bond Depository is unable or unwilling to discharge its
responsibilities and no substitute depository willing to undertake the functions of the Bond
Depository hereunder can be found which is willing and able to undertake such functions upon
reasonable and customary terms, then the Bonds shall no longer be restricted to being
registered in the registry books of the Authority kept by the Trustee in the name of the
nominee of the Bond Depository, but may be registered in whatever name or names the
beneficial owners transferring or exchanging Bonds shall designate, in accordance with the
provisions of this Resolution.
3.5.5 In the event the Authority determines that it is in the best interests of the
beneficial owners that they be able to obtain Bond certificates, the Authority may notify the
Bond Depository and the Trustee, whereupon the nominee or Bond Depository will notify the
participants, of the availability through the nominee or Bond Depository of Bond certificates.
In such event, the Trustee shall issue, transfer and exchange Bond certificates as requested to
the Bond Depository and any other Holders in appropriate amounts, and whenever the Bond
Depository requests the Authority and the Trustee to do so, the Trustee and the Authority will
cooperate with the Bond Depository by taking appropriate action after reasonable written notice
(i) to make available one or more separate certificates evidencing the Bonds to any nominee
or participant having Bonds credited to its Bond Depository account or (ii) to arrange for
another securities depository to maintain custody of certificates evidencing the Bonds.
3.5.6 So long as any Bond in registered in the name of a nominee of the Bond
Depository, all payments with respect to the principal of and premium, if any, and interest on
such Bond and all notices with respect to such Bond shall be made and given, respectively, to
the nominee or Bond Depository.
3.5.7 In connection with any notice or other communication to be provided to
Holders pursuant to this Resolution by the Authority or the Trustee with respect to any consent
or other action to be taken by Holders, the Authority or the Trustee, as the case may be, shall
establish a record date for such consent or other action and give the nominee or Bond
Depository notice of such record date not less than 15 calendar days in advance of such record
date to the extent possible.
295<)37.6 -22-
3.5.8 As used in this section "participant" means any person or other entity for
whom the Bond Depository holds Bonds under this section.
3.6 Regulations With Respect to Exchanges and Transfers. In all cases in which the
privilege of exchanging or transferring Bonds is exercised, the Authority shall execute and the
Trustee shall authenticate and deliver Bonds in accordance with the provisions of this
Resolution. All Bonds surrendered in any such exchanges or transfer shall forthwith be
delivered to the Trustee and cancelled by the Trustee. For every such exchange or transfer of
Bonds, whether temporary or definitive, the Authority or the Bond Registrar may make a
charge sufficient to reimburse it for any tax, fee or other governmental charge required to be
paid with respect to such exchange or transfer. Neither the Authority nor the Bond Registrar
shall be required (a) to transfer or exchange Bonds of a Series which could be redeemed for
a period of 15 days next preceding any selection of such Bonds to be so redeemed or thereafter
until after the first mailing of any notice of redemption; or (b) to transfer or exchange any
Bonds called for redemption.
3.7 Bonds Mutilated, Destroyed, Stolen or Lost. If any Bond becomes mutilated or
is lost, stolen or destroyed, the Authority may execute and the Trustee shall authenticate and
deliver a new Bond of like date of issue, maturity date, principal amount and interest rate per
annum as the Bond so mutilated, lost, stolen or destroyed, provided that (i) in the case of such
mutilated Bond, such Bond is first surrendered to the Trustee, (ii) in the case of any such lost,
stolen or destroyed Bond there is first furnished evidence of such loss, theft or destruction
satisfactory to the Authority and Trustee together with indemnity satisfactory to the Authority
and Trustee, (iii) all other reasonable requirements of the Authority are complied with, and
(iv) expenses in connection with such transaction are paid by the Holder. Any Bonds
surrendered for exchange shall be cancelled. Any such new Bonds issued pursuant to this
Section in substitution for Bonds alleged to be destroyed, stolen or lost shall constitute original
additional contractual obligations on the part of the Authority, whether or not the Bonds so
alleged to be destroyed, stolen or lost be at any time enforceable by anyone, and shall be
equally secured by and entitled to equal and proportionate benefits with all other Bonds issued
under this Resolution in any moneys or securities held by the Authority or any Fiduciary for
the benefit of the Holders.
3.8 Temporary Bonds.
3.8.1 Until the definitive Bonds of any Series are prepared, the Authority may
execute, in the same manner as is provided in Section 3.3, and upon the request of the
Authority, the Trustee shall authenticate and deliver, in lieu of definitive Bonds, but subject
to the same provisions, limitations and conditions as the definitive Bonds except as to the
denomination thereof, one or more temporary Bonds substantially of the tenor of the definitive
Bonds in lieu of which such temporary Bond or Bonds are issued, in denominations authorized
by the Authority, and with such omissions, insertions and variations as may be appropriate to
temporary Bonds. The Authority at its own expense shall prepare and execute, and, upon
surrender of such temporary Bonds for exchange and the cancellation of such surrendered
temporary Bonds, the Trustee shall authenticate and without charge to the Holder thereof
deliver in exchange therefor, definitive Bonds, if any, of the same aggregate principal amount
and Series and maturity as the temporary Bonds surrendered. Until so exchanged, the
29~637.6 -23·
temporary Bonds shall in all respects be entitled to the same benefits and security as definitive
Bonds authenticated and issued pursuant to this Resolution.
3.8.2 If the Authority shall authorize the issuance of temporary Bonds in more
than one denomination, the Holder of any temporary Bond or Bonds may, at his option,
surrender the same to the Trustee in exchange for another temporary Bond or Bonds of like
aggregate principal amount and Series and maturity of any other authorized denomination or
denominations, and thereupon the Authority shall execute and the Trustee shall authenticate
and, in exchange for the temporary Bond or Bonds so surrendered and upon payment of the
taxes, fees and charges provided for in Section 3.6, shall deliver a temporary Bond or Bonds
of like aggregate principal amount, Series and maturity in such other authorized denomination
or denominations as shall be requested by such Holder.
3.8.3 All temporary Bonds surrendered in exchange either for another
temporary Bond or Bonds or for a definitive Bond or Bonds shall be forthwith cancelled by
the Trustee.
ARTICLE IV.
Redemption of Bonds
4.1 Privilege of Redemption and Redemption Price. Bonds subject to redemption
prior to maturity pursuant to this Resolution or a Supplemental Resolution shall be redeemable,
upon notice an provided in this Article IV, at such times, at such Redemption Prices and upon
such terms in addition to the terms contained in this Article IV as may be specified in this
Resolution or in the Supplemental Resolution authorizing such Series.
4.2 Redemption at the Election or Direction of the Authority. In the case of any
redemption of Bonds at the election or direction of the Authority, the Authority shall give
written notice to the Trustee of its election or direction so to redeem, of the redemption date,
of the Series, and of the principal amounts of the Bonds of each maturity of such Series to be
redeemed (which Series, maturities and principal amounts thereof to be redeemed shall be
determined by the Authority in its sole discretion, subject to any limitations with respect
thereto contained in this Resolution and the Supplemental Resolution with respect to such
Series). Such notice shall be given at least 45 days prior to the redemption date or such shorter
period as shall be acceptable to the Trustee. In the event notice of redemption shall have been
giv1:m as in Section 4.5 provided, there shall be paid prior to the redemption date to the
appropriate Paying Agents an amount in cash which in addition to other moneys, if any,
available therefor held by such Paying Agents, will be sufficient to redeem on the redemption
date at the Redemption Price thereof, plus interest accrued and unpaid to the redemption date,
all of the Bonds to be redeemed. The Authority shall promptly notify the Trustee in writing
of all such payments by it to a Paying Agent.
4.3 Redemption Otherwise Than at the Authority's Election or Direction. Whenever
by the terms of this Resolution the Trustee in required or authorized to redeem Bonds
otherwise than at the election or direction of the Authority, the Trustee shall select the Bonds
295637.6 -24-
to be redeemed, give the notice of redemption and pay out of moneys available therefor the
Redemption Price thereof, plus interest accrued and unpaid to the redemption date, to the
appropriate Paying Agents in accordance with the tenns of this Article IV and, to the extent
applicable, Section 5.7.
4.4 Selection of Bonds to be Redeemed; Allocation to Sinking Fund Installments.
If less than all of the Bonds of like maturity of any Series shall be called for prior redemption,
the particular Bonds or portions of Bonds to be redeemed shall be selected by lot by the
Trustee in such manner as the Trustee in its discretion may deem fair and appropriate. If the
Authority shall redeem Bonds subject to Sinking Fund Installments under the optional
redemption provisions above or purchase such Bonds in the open market, the par amount of
the Bonds so redeemed or purchased (irrespective of their actual redemption or purchase prices)
shall be credited against one or more Sinking Fund Installments for those Bonds (as allocated
by 1he Authority) (or, if the Authority fails to notify the Trustee of its selection, then pro rata
among the Sinking Fund Installments) beginning not earlier than 60 days after the date of the
optional redemption or purchase, and the Authority shall promptly notify the Trustee in writing
of tb.e manner in which the credit for the Bonds so redeemed or purchased has been allocated.
4.5 Notice of Redemption. When the Trustee shall receive notice from the Authority
of its election or direction to redeem Bonds pursuant to Section 4.2, and when redemption of
Bonds is authorized or required pursuant to Section 4.3, the Trustee shall give notice, in the
name of the Authority, of the redemption of such Bonds, which notice shall specify the Series
and maturities of the Bonds to be redeemed, the redemption date and the place or places where
am<>unts due upon such redemption will be payable and, if less than all of the Bonds of any
like Series and maturity are to be redeemed, the letters and numbers or other distinguishing
marks of such Bonds so to be redeemed and, in the case of Bonds to be redeemed in part only,
such notice shall also specify the respective portions of the principal amount thereof to be
redeemed. Such notice shall further state that on such date there shall become due and payable
upon each Bond to be redeemed the Redemption Price thereof, or the Redemption Price of the
specified portions of the principal thereof in the case of Bonds to be redeemed in part only,
together with interest accrued to the redemption date, and that from and after such date interest
thereon shall cease to accrue and be payable. Such notice shall be given by mailing such
notice, first class mail, postage prepaid, not less than 30 or more than 60 days before the
redemption date, to the registered owners of any Bonds or portions of Bonds which are to be
redeemed, at their last addresses, if any, appearing upon the registry books.
4.6 Payment of Redeemed Bonds. Notice having been given in the manner provided
in Section 4.5, the Bonds or portions thereof so called for redemption shall become due and
payable on the redemption date so designated at the Redemption Price, plus interest accrued
and unpaid to the redemption date, and, upon presentation and surrender thereof at the office
sp(~ified in such notice, such Bonds, or portions thereof, shall be paid at the Redemption Price,
plus interest accrued and unpaid to the redemption date. If there shall be selected for
redemption less than all of a Bond, the Authority shall execute and the Trustee shall
authenticate and the Paying Agent shall deliver, upon the surrender of such Bond, without
charge to the owner thereof, for the unredeemed balance of the principal amount of the Bond
so surrendered, at the option of the owner thereof, Bonds of like Series and maturity in any
295637.6 -25-
of 1he authorized denominations. If, on the redemption date, moneys for the redemption of all
the Bonds or portions thereof of any like Series and maturity to be redeemed, together with
interest to the redemption date, shall be held by the Paying Agents so as to be available
therefor on said date and if notice of redemption shall have been mailed as aforesaid (and
notwithstanding any defect therein or the lack of actual receipt thereof by any Holder), then,
from and after the redemption date interest on the Bonds or portions thereof of such Series and
maturity so called for redemption shall cease to accrue and become payable. If said moneys
shall not be so available on the redemption date, such Bonds or portions thereof shall continue
to bear interest until paid at the same rate an they would have borne had they not been called
for redemption.
ARTICLE V.
Establishment of Funds and Application Thereof
5.1 Pledge of Revenues and Other Funds.
5.1.1 A pledge of the Revenues, and of all moneys, securities and funds, except
the Rebate Fund, held or set aside or to be held or set aside by the Authority or any Fiduciary
under this Resolution, is hereby made, and the same are hereby pledged and assigned to secure
the payment of the principal and Redemption Price of and interest on the Bonds and Parity
Obligations and any Sinking Fund Installments for the retirement thereof, subject only to the
provisions of this Resolution permitting the payment, setting apart or appropriation thereof for
or to the purposes and on the terms, conditions, priorities and order set forth in or provided
under this Resolution. This pledge shall be valid and binding from the time when it is made;
tht:: Revenues so pledged and then or thereafter received by the Authority or any Fiduciary
under this Resolution shall immediately be subject to the lien of such pledge without any
physical delivery or further act; and the lien of such pledge and the obligation to perform the
contractual provisions hereby made shall be valid and binding as against all parties having
claims of any kind in tort, contract or otherwise against the Authority, irrespective of whether
such parties have notice thereof.
5.1.2 The Bonds shall be special, limited obligations of the Authority, and
Debt Service thereon shall be payable from and secured solely by the Revenues and other
sources identified or described in this Article V. Notwithstanding anything to the contrary in
this Resolution or the Bonds, the Bonds do not and shall not represent or constitute a general
obligation debt or pledge of the faith and credit or the taxing power of the Authority (it being
understood that the Authority has no taxing power) or the State or of any political subdivision,
municipality or other local agency thereof. Nothing contained in this Section shall be
construed to affect any obligation of the Purchaser under the Power Sales Agreement.
5.1.3 Nothing contained in this Resolution shall be construed to prevent the
Authority from acquiring, constructing or financing through the issuance of its bonds, notes or
other evidences of indebtedness any facilities which do not constitute a part of the Project for
the purposes of this Resolution or from securing such bonds, notes or other evidences of
indebtedness by a mortgage of the facilities so financed or by a pledge of, or other security
29.5637.6 -26-
interest in, the revenues therefrom or any lease or other agreement with respect thereto or any
revenues derived from such lease or other agreement; provided that such bonds, notes or other
evidences of indebtedness shall not be payable out of or secured by the Revenues or any Fund
held under this Resolution and neither the cost of such facilities nor any expenditure in
connection therewith or with the financing thereof shall be payable from the Revenues or from
any such Fund.
5.2 Establishment of Funds and Accounts. The following Funds and Accounts, each
to be held by the Trustee, are hereby established:
(a) Project Fund,
(b) Debt Service Fund, which shall consist of an Interest Account and a
Principal . Account,
(c) Debt Service Reserve Fund,
(d) Renewal and Replacement Fund,
(e) Rebate Fund, and
(f) Revenue Fund.
5.3 Project Fund.
5.3.1 There shall be paid into the Project Fund the amounts required to be so
paid by the provisions of this Resolution and any Supplemental Resolution, and there may be
paid into the Project Fund, at the option of the Authority, any moneys received for or in
connection with the Project by the Authority from any other source, unless required to be
otherwise applied as provided by this Resolution. Amounts in the Project Fund shall be
applied to the Cost of Acquisition and Construction in the manner provided in this Section 5.3,
and until so applied are pledged for the security of and the payment to Holders of the principal
or Redemption Price of and interest on the Bonds and Parity Obligations and shall at all times
be subject to the lien of such pledge.
5.3.2 There shall be established within the Project Fund separate accounts for
the acquisition of the Project and for each undertaking of Capital Improvements for which
Bonds or Parity Obligations are authorized to be issued.
5.3.3 The proceeds of insurance, including the proceeds of any self insurance
fund, maintained pursuant to this Resolution against physical loss of or damage to the Project
or Capital Improvements, or of contractor's performance bonds or other assurances of
completion with respect thereto, pertaining to the period of construction thereof, shall be paid
into the appropriate separate account in the Project Fund.
5.3.4 The Trustee shall make payments from the Project Fund in the amounts,
at the times, in the manner and on the other terms and conditions set forth in this paragraph
29S637.6 -27-
and in Subsection 5.3.5. Before any such payment shall be made, the Authority shall file with
the Trustee:
(a) its requisition therefor, stating in respect of each payment to be made (1)
the name of the person, firm or corporation to whom payment in due, (2) the amount
to be paid, and (3) in reasonable detail the purpose for which the obligation was
incurred;
(b) in the case of any requisition to pay the purchase price of the Project
pursuant to the Purchase Agreement, its certificate signed by the chief financial officer
of the Authority attached to the requisition certifying that all conditions precedent to the
purchase by the Authority of the Project pursuant to the Purchase Agreement (other
than the payment of the purchase price therefor) have been satisfied; and
(c) its certificate signed by the chief financial officer of the Authority
attached to the requisition certifying (1) that obligations in the stated amounts have been
properly incurred by the Authority in or for the construction or acquisition of the
Project or Capital Improvements, and that each item thereof is a proper charge against
the Project Fund and is a proper Cost of Construction and Acquisition of the Project or
Capital Improvements and has not been paid, (2) that there has not been filed with or
served upon the Authority notice of any lien, right to lien, or attachment upon, or claim
affecting the right to receive payment of, any of the moneys payable under such
requisition to any of the persons, firms or corporations named in such requisition, or
if any such lien, attachment or claim has been filed with or served upon the Authority,
that such lien, attachment or claim has been released or discharged in the amount in
which such lien, right to lien, attachment or claim is stated in said notice, or if no
amount is so stated the amount stated by the Independent Consultant as his opinion of
the amount thereof, and (3) that such requisition contains no item representing payment
on account of any retained percentages which the Authority is at the date of such
certificate entitled to retain.
Upon receipt of each such requisition and accompanying certificates, the Trustee shall pay each
such obligation or, if so requested by the Authority, shall transfer from the Project Fund to the
credit of a special account in the name of the Authority an amount equal to the total of the
amounts to be paid as set forth in such requisition but not more than the excess of such
amounts over the amount stated of any lien, right to lien, attachment or claim referred to above
in subparagraph (b), the amounts in such special account to be held and used solely for the
timely payment of the obligations set forth in such requisition. In making such transfer, the
Trustee may rely upon such requisition and accompanying certificates.
5.3.5 If any requisition filed with the Trustee in accordance with
Subsection 5.3.4 contains any item for the payment of the cost and expense of acquisition of
any lands, easements, or rights or interests in or relating to lands, there shall be attached to
such requisition, before any transfer or payment with respect to such item shall be made, in
addition to the certificates mentioned in Subsection 5.3.4: (a) a certificate of an Authorized
Officer to the effect that such lands, easements, rights or interests have been or are being
acquired and are necessary for the Project or Capital Improvements; and (b) a Counsel's
295637.6 -28-
Opinion stating, in the opinion of the signer, that the Authority has authority to acquire such
lands, easements, rights or interests, and that the Authority will have upon the payment of such
item title in fee simple to, or perpetual easements for the purposes of the Authority over and
through, such lands subject to no lien, charge or encumbrance thereon or affecting the title
thereto except such as will not under any circumstances cause the possession and use of the
property by the Authority for its purposes to be disturbed, or, if such payment be a payment
for an option to purchase or a quitclaim deed or a lease or a release or on a contract to
purchase or be a payment to the United States of America or the State of Alaska or any
political subdivision, or to a public utility, for the acquisition of a right or interest in lands less
than a fee simple or a perpetual easement, or if such payment be a part payment for any such
purpose, the written approval, by the signer of such Counsel's Opinion, of such payment as
proper, and of the acquisition of such lesser right or interest as sufficient, for the purposes of
the Authority. A requisition directing application of amounts in the Project Fund to purchase
or redeem bonds or notes issued to pay the Cost of Acquisition or Construction of the Project
or any Capital Improvement need only recite that fact and the principal amount of bonds or
notes to be purchased or redeemed.
5.3.6 In the case of any Capital Improvements, including those made in
connection with the acquisition of the Project, financed in whole or in part out of proceeds of
Bonds, as soon as practicable after the date as of which the Independent Consultant shall
determine that (i) the Capital Improvements conform to the plans and specifications thereof as
may be modified from time to time and is ready for normal continuous operation;
(ii) acquisition, construction and installation of the Capital Improvements have been completed
in every material respect; and (iii) costs (including contingencies}, as estimated by the
Independent Consultant, of all work remaining to be done in order to complete such
acquisition, construction and installation will not exceed 2% of the Cost of Acquisition and
Construction of the Capital Improvements, the Authority shall cause the Independent
Consultant to file a report to that effect with the Authority and the Trustee.
5.3.7 As soon as practicable after the date referred to in Subsection 5.3.6, the
Authority shall cause the Independent Consultant to file with the Authority and the Trustee a
report setting forth, as of such later date, the following in reasonable detail with respect to the
Capital Improvements: (a) the total Cost of Acquisition and Construction exclusive of claims
of contractors and others which are the subject of actual or prospective dispute or controversy
and exclusive of the cost (including contingencies), as estimated by the Independent Consultant,
of the remaining work; (b) the portion of the total Cost of Acquisition and Construction
specified pursuant to clause (a) of this Subsection 5.3.7 which has been paid in full; (c) the
portion of the total Cost of Construction and Acquisition specified pursuant to said clause
(a) which remains to be paid, including all amounts which are not the subject of a dispute or
controversy but are dependent upon the satisfaction of any agreements or conditions precedent
to such payment; (d) the aggregated amount of the claims of contractors and others which are
the subject of a dispute or controversy; (e) the cost (including contingencies), as estimated by
the Independent Consultant and as approved by the Authority, of the remaining work; and (f)
such amount, if any, as the Independent Consultant shall determine is necessary or desirable
to be set aside in the Project Fund for contingencies.
295637.6 -29-
5.3.8 The Trustee shall at any time or from time to time withdraw from the
Project Fund the balance in the Project Fund, or any part thereof, for deposit in other Funds
or Accounts as provided in this Section 5.3.8 in the amounts, at the times, in the manner and
on the other terms and conditions set forth in this Section. Before any such withdrawal shall
be made, the Authority shall file with the Trustee:
(a) its requisition therefor, stating the amount of such withdrawal;
(b) its certificate signed by the chief financial officer of the Authority
attached to the requisition certifying (1) that the purchase by the Authority of the
Project pursuant to the Purchase Agreement has been closed, and (2) that a sum, if any,
stated in the certificate is sufficient to pay, and is required to be reserved in the Project
Fund to pay, all items of Cost of Acquisition and Construction of the Project then
remaining unpaid, including the estimated amount of any such items the amount of
which is not finally determined and all claims (if any) against the Authority arising out
of the Project;
(c) its certificate signed by the chief financial officer of the Authority
attached to the requisition certifying (1) that the Capital Improvements financed in
whole or in part out of proceeds of Bonds have been completed, and (2) that a sum
(which shall not be less than the amount stated in the report of the Independent
Consultant filed with the Trustee pursuant to Subsection 5.3. 7) stated in the certificate
is sufficient to pay, and is required to be reserved in the Project Fund to pay, all items
of Cost of Acquisition and Construction of the Capital Improvements then remaining
unpaid, including the estimated amount of any such items the amount of which is not
finally determined and all claims against the Authority arising out of the Capital
Improvements; and
(d) a Counsel's Opinion stating, in the opinion of the signer, that the
Authority has acquired title to all property constituting a part of the Project or Capital
Improvements and all property incidental thereto sufficient for the purposes of the
Authority, free from all liens, charges, conditions or encumbrances except such as will
not under any circumstances cause the possession and use of the property by the
Authority for its purposes to be disturbed, and that, as to such parts of the Project or
Capital Improvements as constitute real property acquired, constructed or installed under
a right or interest less than a fee simple or perpetual easement, the right or interest is
sufficient for the purposes of the Authority, and that there are no uncanceled
mechanics', laborers', contractors' or materialmen's liens on any such property or any
funds of the Authority or on file in any public office where the same should be filed
in order to be valid liens against any fund of the Authority or any part of such property
or of the Project or Capital Improvements, and that, in the opinion of the signer of such
Counsel's Opinion, the time within which such liens can be filed has expired.
Upon filing of such certificates and Counsel's Opinion, the balance in the separate account in
the Project Fund established therefor in excess of the amount, if any, stated in such certificate
shall be deposited in the Debt Service Reserve Fund, if and to the extent necessary to make
the amount of such Fund equal to the Debt Service Reserve Requirement, and any balance shall
29.563'7.6 -30-
be deposited in the Revenue Fund and applied, if and to the extent a Counsel's Opinion states
that such application is necessary to preserve the tax exempt status of interest on the Bonds,
to the retirement of Bonds by purchase or redemption. If subsequent to the filing of such
certificate it shall be determined that any amounts specified in such certificate as being required
for the payment of any remaining part of the Cost of Acquisition and Construction are no
longer so required, such fact shall be evidenced by a certificate or certificates of an Authorized
Officer of the Authority which shall be filed with the Trustee stating such fact and any amount
shown therein as no longer being required shall be transferred to the Debt Service Reserve
Fund, if and to the extent necessary to make the amount of such Fund equal to the Debt
Service Reserve Requirement, and any balance shall be applied to the extent stated in such
Counsel's Opinion.
5.3.9 The Trustee shall during the construction of any Capital Improvements
financed in whole or in part out of proceeds of Bonds, pay from the appropriate separate
account in the Project Fund to the Authority, upon its requisitions therefor signed by an
Authorized Officer of the Authority, at one time or from time to time, a sum or sums not more
than $250,000, such sums to be used by the Authority as a revolving fund for the purpose of
paying such items of the Cost of Acquisition and Construction thereof as cannot conveniently
be paid as in this Section otherwise provided. So long as the amount in such revolving fund
shall at any time be less than $250,000, such revolving fund shall be reimbursed by the Trustee
from time to time for such expenses so paid, by payments from the Project Fund upon
requisitions and certificates signed by an Authorized Officer and filed with the Trustee
specifying the payee and the amount and particular purpose of such payment from such
revolving fund for which such reimbursement is required and certifying that each such amount
so paid was necessary for the payment of an item of the Cost of Acquisition and Construction
of the Capital Improvements and that such expense could not conveniently be paid except from
such revolving fund. In making such reimbursement the Trustee may rely upon such
requisitions and accompanying certificates.
5.3.10 Notwithstanding any of the other provisions of this Section, to the extent
that other moneys are not available therefor, amounts in the Project Fund shall be applied to
the payment of principal of and interest on Bonds when due.
5.4 Revenues and Revenue Fund. All Revenues and amounts, if any, required to be
transferred from the Project Fund pursuant to Section 5.3.8 shall be promptly deposited by the
Trustee upon receipt thereof to the credit of the Revenue Fund.
5.5 Payments Into Certain Funds.
As soon as practicable after the deposit of Revenues into the Revenue Fund, and
with at least the frequency stated below, the Trustee shall use and apply moneys in the
Revenue Fund to make deposits in the Funds set forth below in the priority and amounts as
follows:
(a) In the Debt Service Fund (i) monthly on the day of each
month, for credit to the Interest Account, unless the sum on deposit therein equals or exceeds
the interest due on all Bonds and Parity Obligations on the next succeeding interest payment
295637.6 -31-
date, an amount equal to one-sixth ( 116) of the interest due on such interest payment date less
the interest to be paid on such interest payment date from proceeds of Bonds or Parity
Obligations held in said Account for such purpose; provided, however, that for the purposes
of computing the amount on deposit in said Account, there shall be excluded the amount, if
any, set aside in said Account for the payment of interest due after the next succeeding interest
payment date; and (ii) monthly on the day of each month, for credit to the Principal
Account, unless the sum on deposit therein equals or exceeds all Principal Installments due on
the next succeeding 1, an amount equal to one-twelfth (1112) of such Principal
Installments.
(b) In the Debt Service Reserve Fund, the amount, if any, required so that
the balance in the Fund equals the Debt Service Reserve Requirement, and all amounts required
to be paid to the provider of any Reserve Fund Credit Facility under any agreement relating
to such Reserve Fund Credit Facility.
(c) Commencing on the __ day of the first full Fiscal Year, semiannually
on 1 and 1, for credit to the Renewal and Replacement Fund an
amount equal to one-half (1/2) of the applicable Renewal and Replacement Fund Contribution.
(d) Annually not later than 60 days after the end of each Bond Year or on
a date or dates to be determined by Supplemental Resolution, to the credit of the Rebate Fund
in such amount as is necessary to cause the amount on deposit in the Rebate Fund (after a
deposit therein, if any, from the Project Fund) to be equal to the Authority's estimate of Rebate
Amount for the Bond Year from amounts in the Revenue Fund, or from amounts transferred
from the Project Fund and/or the Debt Service Reserve Fund.
5.6 Debt Service Fund.
5.6.1 The Trustee shall pay out of the Debt Service Fund to the respective
Paying Agents (i) out of the Interest Account, on or before each interest payment date for any
of the Bonds or Parity Obligations the amount required for the interest payable on such date;
(ii) out of the Principal Account, on or before each Principal Installment due date, the amount
required for the Principal Installment payable on such due date; and (iii) out of the Interest
Account, on or before any redemption date for the Bonds or Parity Obligations, the amount
required for the payment of interest on the Bonds or Parity Obligations then to be redeemed.
Such amounts shall be applied by the Paying Agents on and after the due dates thereof. The
Trustee shall also pay out of the Interest Account the accrued interest included in the purchase
price of Bonds or Parity Obligations purchased for retirement.
5.6.2 Amounts accumulated in the Principal Account with respect to any
Sinking Fund Installment (together with amounts accumulated in the Interest Account with
respect to interest on the Bonds or Parity Obligations for which such Sinking Fund Installment
was established) may, and if so directed by the Authority with respect to such Bonds or by the
issuer of such Parity Obligations, shall, be applied by the Trustee, on or prior to the 60th day
preceding the due date of such Sinking Fund Installment, to (i) the purchase of the Bonds or
Parity Obligations of the Series and maturity for which such Sinking Fund Installment was
established, or (ii) the redemption at the applicable sinking fund Redemption Price of such
295637.6 -32-
Bonds or Parity Obligations. After the 60th day but on or prior to the 45th day preceding the
due date of such Sinking Fund Installment, any amounts then on deposit in the Principal
Account may, and if so directed by the Authority with respect to such Bonds or by the issuer
of such Parity Obligations, shall, be applied by the Trustee to the purchase of Bonds or Parity
Obligations of the Series and maturity for which such Sinking Fund Installment was established
in an amount not exceeding that necessary to complete the retirement of the unsatisfied balance
of such Sinking Fund Installment. All purchases of any Bonds or Parity Obligations pursuant
to this Subsection 5.6.2 shall be made at prices not exceeding the applicable sinking fund
Redemption Price of such Bonds or Parity Obligations plus accrued interest, and such
purchases shall be made by the Trustee as directed by the Authority with respect to such Bonds
or by the issuer of such Parity Obligations. The applicable sinking fund Redemption Price of
any Bonds or Parity Obligations so purchased or redeemed shall be deemed to constitute part
of the Principal Account, until such Sinking Fund Installment date, for the purpose of
calculating the amount of such Account. An soon as practicable after the 45th day preceding
the due date of any such Sinking Fund Installment, the Trustee shall proceed to call for
redemption, by giving notice as provided in Section 4.5, on such due date Bonds or Parity
Obligations of the Series and maturity for which such Sinking Fund Installment was established
in such amount as shall be necessary to complete the retirement of the unsatisfied balance of
such Sinking Fund Installment. The Trustee shall pay out of the Principal Account to the
appropriate Paying Agents, on or before such redemption date, the amount required for the
redemption of the Bonds or Parity Obligations so called for redemption, and such amount shall
be applied by such Paying Agents to such redemption. All expenses in connection with the
purchase or redemption of Bonds or Parity Obligations shall be paid from the Revenue Fund.
5.6.3 The amount, if any, deposited in the Interest Account from the proceeds
of each Series of Bonds or Parity Obligations shall be set aside in such Account and applied
to the payment of interest on such Bonds or Parity Obligations as provided in the Supplemental
Resolution or Parity Obligation Instrument relating to the issuance of such Series of Bonds.
5.6.4 In the event of the refunding of one or more Series of Bonds or Parity
Obligations, the Trustee shall, upon the direction of the Authority or the issuer of the Parity
Obligations, respectively, withdraw from the Debt Service Fund amounts accumulated therein
with respect to Debt Service on the Bonds or Parity Obligations being refunded and deposit
such amounts with itself as Trustee to be held for payment of the principal or Redemption
Price, if applicable, and interest on the Series of Bonds or Parity Obligations being refunded;
provided that such withdrawal shall not be made unless {a) immediately thereafter the Series
of Bonds or Parity Obligations being refunded shall be deemed to have been paid pursuant to
Subsection 12.1.2, and {b) the amount remaining in the Debt Service Fund after such
withdrawal shall not be less than the requirement of such Fund pursuant to Subsection 5.5{a).
5.7 Debt Service Reserve Fund.
5.7.1 If on any date on which a Principal Installment or interest is due the
amount in the Debt Service Fund shall be less than the amount required to be in such Fund to
pay said Principal Installment or interest, the Trustee shall apply amounts from the Debt
Service Reserve Fund to the extent necessary to make good the deficiency.
295637.6 -33-
5.7.2 Money and investments held in the Debt Service Reserve Fund shall be
valued fifteen (15) days following each interest payment date for the Bonds and Parity
Obligations. If the value of the moneys and investments on deposit in the Debt Service
Reserve Fund shall exceed the Debt Service Reserve Requirement, such excess shall, on the
request of the Authority, be transferred at least annually first to the Rebate Fund to the extent
of any Rebate Amount payable in respect of investments held in the Debt Service Reserve
Fund, and then to the Revenue Fund to be used for the payment of amounts required to be paid
therefrom. If the value of the moneys and investments on deposit in the Debt Service Reserve
Fund shall be less than the Debt Service Reserve Requirement, the Trustee shall give written
notice of the deficiency to the Authority and the Purchaser, and the Authority shall cause the
amount of money and investments therein to be restored to the Debt Service Reserve
Requirement pursuant to the Power Sales Agreement or the Project Sale Agreement, as
applicable, not later than 60 days prior to the next succeeding interest payment date for any
Outstanding Bonds or Parity Obligations.
5.7.3 Whenever the amount in the Debt Service Reserve Fund, together with
the amount in the Debt Service Fund, is sufficient to pay in full all Outstanding Bonds and
Parity Obligations in accordance with their terms (including principal or applicable sinking
fund Redemption Price and interest thereon), the funds on deposit in the Debt Service Reserve
Fund shall be transferred to the Debt Service Fund. Prior to said transfer, all investments held
in the Debt Service Fund shall be liquidated to the extent necessary in order to provide for the
timely payment of principal and interest (or Redemption Price) on Bonds and Parity
Obligations.
5.7.4 In the event of the refunding of one or more Series of Bonds or Parity
Obligations or one or more maturities within a Series of Bonds or Parity Obligations, the
Trustee shall, upon the direction of the Authority or the issuer of the Parity Obligations,
respectively, withdraw from the Debt Service Reserve Fund amounts accumulated therein with
respect to the Bonds or Parity Obligations being refunded and deposit such amounts with itself
an Trustee to be held for the payment of the principal or Redemption Price, if applicable, and
interest on the Series or maturities within a Series of Bonds or Parity Obligations being
refunded; provided that such withdrawal shall not be made unless (a) immediately thereafter
the Series or maturities within a Series of Bonds or Parity Obligations being refunded shall be
deemed to have been paid pursuant to Subsection 12.1.2 and (b) the amount remaining in the
Debt Service Reserve Fund after such withdrawal shall not be less than the Debt Service
Reserve Requirement with respect to all Outstanding Bonds and Parity Obligations.
5.7.5 All or any part of the Debt Service Reserve Requirement may be provided
through a Reserve Fund Credit Facility, and the amount available to be drawn upon under that
Reserve Fund Credit Facility shall be credited against the Debt Service Reserve Requirement,
subject to the following requirements. The Reserve Fund Credit Facility shall not be
cancelable on less than 3 years' notice. On receipt of a notice of cancellation of any Reserve
Fund Credit Facility or upon notice that the entity providing the Reserve Fund Credit Facility
no longer meets the requirements specified in the definition thereof herein, the Authority shall
either (1) provide a substitute Reserve Fund Credit Facility in the amount required to make up
the deficiency created in the Debt Service Reserve Fund, or (2) create a special fund with the
Trustee and deposit therein from Revenues, on or before the 25th day of each of the
295637.6 -34-
36 succeeding calendar months (commencing with the 25th day of the calendar month next
following the date of the notice) one l/36th of the amount sufficient, together with other
money and investments on deposit in the Debt Service Reserve Fund, to equal the Debt Service
Reserve Requirement in effect as of the date the cancellation or disqualification of the entity
becomes effective. Amounts on deposit in that special fund shall not be available to pay Debt
Service or for any other purpose, and shall be transferred to the Debt Service Reserve Fund
on the effective date of any cancellation of a Reserve Fund Credit Facility to make up all or
part of the deficiency caused thereby. Amounts in that special fund may be transferred back
to the Revenue Fund and used for any purpose of that fund if and when a qualifying Reserve
Fund Credit Facility is obtained. Amounts deposited in the Reserve Fund to make payments
to the provider of a Reserve Fund Credit Facility shall be paid to such provider as required by
any agreement relating to such Reserve Fund Credit Facility.
5.8 Renewal and R!.(placement Fund.
Amounts in the Renewal and Replacement Fund shall be applied, pursuant to a
requisition by the Purchaser approved by the Authority and filed with the Trustee, to the
payment of costs of Project Repairs, as provided in the Power Sales Agreement and the
Operations and Maintenance Agreement. No payments shall be made from the Renewal and
Replacement Fund if and to the extent that the proceeds of insurance, including the proceeds
of any self insurance fund, or other moneys recoverable as the result of damage, if any, are
available to pay the costs otherwise payable from such Fund.
5.9 Rebate Fund.
5.9.1 The Trustee shall establish within the Rebate Fund a separate account for
each Series of Bonds and tax-exempt Parity Obligations. Within 60 days after the end of each
Bond Year the Trustee shall cause the Rebate Amount to be determined with respect to each
Series of Bonds and tax-exempt Parity Obligations for such Bond Year, and the Trustee, at the
direction of the Authority, shall transfer from the Project Fund, the Debt Service Reserve Fund
and/or the Revenue Fund, as applicable, such amount as shall be necessary to cause the amount
he1d in such account to equal the Rebate Amount for such Series of Bonds and tax-exempt
Parity Obligations accrued as of the end of such Bond Year and not previously paid to the
United States of America.
5.9.2 Moneys in the Rebate Fund shall be applied by the Trustee to pay rebate
amounts due the United States, as provided in Section 148(f) of the Code. All moneys in the
Rebate Fund shall be held by the Trustee free and clear of the lien of this Resolution. If at any
time, the amount held in any account in the Rebate Fund exceeds the accrued and unpaid
Rebate Amount attributable to the Series of Bonds and tax-exempt Parity Obligations for which
such account is maintained; then the Trustee, at the direction of the Authority, shall transfer
such excess to the Revenue Fund.
5.9.3 If and to the extent necessary the Authority shall take all action required
to cause amounts equal to the Rebate Amount to be included as Operating Expenses and
therefore as Project Costs.
295637.6 -35-
5.10 Cancellation .and Destruction of Bonds. All Bonds paid or redeemed, either at
or before maturity, shall be delivered to the Trustee when such payment or redemption is made,
and such Bonds, together with all Bonds purchased by the Trustee, shall thereupon be promptly
cancelled and destroyed.
6.1 Dsmositories.
ARTICLE VI.
Depositories of Moneys, Security for
Dsmosits and Investment of Funds
6.1.1 All moneys held by the Trustee under the provisions of this Resolution
shall be deposited with the Trustee and the Trustee shall, if directed by the Authority, deposit
such moneys with one or more Depositories in trust for the Trustee. All moneys held by the
Authority under this Resolution shall be deposited in one or more Depositories in trust for the
Authority. All moneys deposited under the provisions of this Resolution with the Trustee or
any Depository shall be held in trust and applied only in accordance with the provisions of this
Resolution, and each of the Funds established by this Resolution shall be a trust fund for the
purposes thereo£
6.1.2 Each Depository shall be a bank or trust company organized under the laws
of any state of the United States of America or a national banking association and willing and
able to accept the office on reasonable and customary terms and authorized by law to act in
accordance with the provisions of this Resolution.
6.2 Dsmosits.
6.2.1 All Revenues and other moneys held by any Depository under this
Resolution may be placed on demand or time deposit, if and as directed by the Authority,
provided that such deposits shall permit the moneys held to be available for use at the time
when needed. The Authority shall not be liable for any loss or depreciation in value resulting
from any investment made pursuant to this Resolution. Any such deposit may be made in the
commercial banking department of any Fiduciary which may honor checks and drafts on such
deposit with the same force and effect as if it were not such Fiduciary. All moneys held by
any Fiduciary, as such, may be deposited by such Fiduciary in its banking department on
demand or, if and to the extent directed by the Authority and acceptable to such Fiduciary, on
time deposit, provided that such moneys on deposit be available for use at the time when
needed. Such Fiduciary shall allow and credit on such moneys such interest, if any, as it
customarily allows upon similar funds of similar size and under similar conditions or as
required by law.
6.2.2 All moneys held under this Resolution by the Trustee or any Depository
shall be (a) either (1) continuously and fully insured by the Federal Deposit Insurance
Corporation, or (2) continuously and fully secured by lodging with the Trustee, any Federal
Reserve Bank or branch, or another third party custodian approved by the Trustee and the
295637.6 -36-
Authority, Qualified Collateral having a market value (exclusive of accrued interest) not less
than 100% of the amount of such moneys, or (b) held in such other manner as may then be
required by applicable federal or State of Alaska laws and regulations and applicable state laws
and regulations of the state in which the Trustee or such Depository (as the case may be) is
located, regarding security for, or granting a preference in the case of, the deposit of trust
funds; provided, however, that it shall not be necessary for the Fiduciaries to give security
under this Subsection 6.2.2 for the deposit of any moneys with them held in trust and set aside
by them for the payment of the principal or Redemption Price of or interest on any Bonds or
Parity Obligations, or for the Trustee or any Depository to give security for any moneys which
shall be represented by obligations or certificates of deposit purchased as an investment of such
moneys.
6.2.3 All moneys deposited with the Trustee and each Depository shall be
credited to the particular Fund or Account to which such moneys belong.
6.2.4 The Trustee may, and upon the written request of the Authority shall,
commingle any of the funds or accounts established pursuant to this Resolution into a separate
fund or funds, provided, however, that all Funds or Accounts held by the Trustee hereunder
shall be accounted for and credited to the correct Fund or Account notwithstanding such
commingling.
6.3 Investment of Certain Funds. Moneys held in any Fund or Account shall be
invested and reinvented by the Trustee to the fullest extent practicable in Investment Securities
which mature not later than such times as shall be necessary to provide moneys when needed
for payments to be made from such Funds and Accounts in accordance with instructions
received from any Authorized Officer of the Authority.
Any amount in any Fund in excess of amounts required to be on deposit therein, shall
be paid to the Authority for deposit to the Revenue Fund. Interest earned on any moneys or
investments in a separate account in the Project Fund shall be held in such account for the
purposes thereof. Interest earned on amounts in the Interest Account shall be held in such
Account for the purposes thereof.
Nothing in this Resolution shall prevent any Investment Securities acquired as
investments of funds held under this Resolution from being issued or held in book-entry form
on the books of the Department of Treasury of the United States of America.
6.4 Valuation and Sale of Investments. Obligations purchased as an investment of
moneys in any Fund created under the provisions of this Resolution shall be deemed at all
times to be part of such Fund and any profit realized from the liquidation of such investment
shall be credited to such Fund and any loss resulting from the liquidation of such investment
shall be charged to the respective Fund.
In computing the amount in any Fund created under the provisions of this Resolution
for any purpose provided in this Resolution, obligations purchased as an investment of moneys
therein shall be valued fifteen (15) days after each interest payment date for the Bonds and
295637.6 -37-
Parity Obligations at the market value thereof exclusive of accrued interest, or otherwise as
may then be required by the Code.
Except as otherwise provided in this Resolution, the Trustee shall sell at the best price
obtainable, or present for redemption, any obligation so purchased as an investment whenever
it shall be requested in writing by an Authorized Officer of the Authority so to do or whenever
it shall be necessary in order to provide moneys to meet any payment or transfer from any
Fund held by it. The Trustee shall not be liable or responsible for making any such investment
in the manner provided above or for any loss resulting from any such investment.
ARTICLE VII.
Particular Covenants of the Authority
7.1 Payment of Bonds. The Authority shall duly and punctually pay or cause to be
paid, the principal or Redemption Price, if any, of every Bond and the interest thereon, at the
dates and places and in the manner mentioned in the Bonds according to the true intent and
meaning thereof.
7.2 Extension of Pavment of Bonds. The Authority shall not directly or indirectly
extend or assent to the extension of the maturity of any of the Bonds or the time of payment
of claims for interest, by the purchase or funding of such Bonds or claims for interest or by
any other arrangement, and in case the maturity of any of the Bonds or the time for payment
of any such claims for interest shall be extended, such Bonds or claims for interest shall not
be entitled, in case of any default under this Resolution, to the benefit of this Resolution or to
any payment out of Revenues or Funds established by this Resolution, including the
investments, if any, thereof, pledged under this Resolution or the moneys (except moneys held
in trust for the payment of particular Bonds or claims for interest pursuant to this Resolution)
held by the Fiduciaries, except subject to the prior payment of the principal of all Bonds
Outstanding the maturity of which has not been extended and of such portion of the accrued
interest on the Bonds as shall not be represented by such extended claims for interest. Nothing
herein shall be deemed to limit the right of the Authority to issue Refunding Bonds and such
issuance shall not be deemed to constitute an extension of maturity of Bonds.
7.3 Offices for Servicing Bonds. The Authority shall at all times maintain one or
more agencies as may be provided by Supplemental Resolution where Bonds may be presented
for payment and shall at all times maintain one or more agencies where Bonds may be
presented for registration, transfer for registration, transfer or exchange, and where notices,
demands and other documents may be served upon the Authority in respect of the Bonds or
of this Resolution. The Authority hereby appoints the Trustee as Bond Registrar to maintain
an agency for the registration, transfer or exchange of Bonds, and for the service upon the
Authority of such notices, demands and other documents and the Trustee shall continuously
maintain or make arrangements to provide such services. The Authority hereby appoints the
Paying Agent or Agents in such city as its respective agents to maintain such agencies for the
payment or redemption of Bonds.
295637.6 -38-
7.4 Further Assurance. At any and all times the Authority shall, as far as it may be
authorized by law, comply with any reasonable request of the Trustee to pass, make, do,
execute, acknowledge and deliver, all and every such further resolutions, acts, deeds,
conveyances, assignments, transfers and assurances as may be necessary or desirable for the
better assuring, conveying, granting, pleading, assigning and confirming all and singular the
rights, Revenues and other moneys, securities and funds hereby pledged or assigned, or
intended so to be, or which the Authority may become bound to pledge or assign.
7.5 Power to Issue Bonds and Pledge Revenues and Other Funds. The Authority
is duly authorized under the Act and all other applicable laws to create and issue the Bonds
and to adopt this Resolution and to pledge and assign the Revenues and other moneys,
securities and funds purported to be subject to the lien of this Resolution in the manner and
to the extent provided in this Resolution. Except to the extent otherwise provided in this
Resolution, the Revenues, and other moneys, securities and funds so pledged are and will be
free and clear of any pledge, lien, charge or encumbrance thereon or with respect thereto prior
to, or of equal rank with, the pledge and assignment created by this Resolution, and all
corporate or other action on the part of the Authority to that end has been and will be duly and
validly taken. The Bonds and the provisions of this Resolution are and will be valid and
legally enforceable obligations of the Authority in accordance with their terms and the terms
of the Act and this Resolution. The Authority shall at all times, to the extent permitted by law,
defend, preserve and protect the pledge and assignment of the Revenues and other moneys,
securities and funds pledged under this Resolution and all the rights of the Holders under this
Resolution against all claims and demands of all persons whomever.
7.6 Power to Collect Charges. The Authority has, and will have as long as any
Bonds are Outstanding, good right and lawful power to collect (i) charges with respect to the
use and sale of the Project Capability, subject to the terms of the Power Sales Agreement and
the Operations and Maintenance Agreement, and (ii) payments of the Purchase Price under and
as defined by the Project Sale Agreement.
7.7 Creation of Liens; Sale and Lease ofPropertv.
7. 7.1 The Authority shall not issue any bonds, notes or other evidences of
indebtedness, other than the Bonds, secured by a pledge of or other lien or charge on the
Revenues (including amounts which the Authority may thereafter be entitled to expend for
Operating Expenses) and shall not create or cause to be created any lien or charge on such
Revenues or on any amounts held by any Fiduciary under this Resolution; provided, however,
that neither this Section nor any other provision of this Resolution shall prevent the Authority
from issuing bonds or notes or other obligations for the purposes of the Authority payable out
of, or secured by a pledge of, Revenues to be derived on and after such date as the pledge of
the Revenues provided in this Resolution shall be discharged and satisfied as provided in
Seetion 12.1, or from issuing bonds or notes or other obligations for the purposes of the
Authority which are secured by a pledge of amounts which is and shall be in all respects
subordinate to the provisions of this Resolution and the lien and pledge created by this
Resolution and shall not be accelerated in the event of default.
295637.6 -39-
7. 7.2 The Authority shall not create or cause to be created any encumbrance,
lien or charge on the Project, and no part of the Project shall be sold, leased, mortgaged or
otherwise disposed of, except as follows:
295637.6
{a) The Authority may sell or exchange at any time and from time to
time any property or facilities constituting part of the Project provided (i) it shall
determine that such property or facilities are not useful in the operation of the Project,
or {ii) the proceeds of such sale are less than 2% of the prior Bond Year's Debt
Service, or it shall file with the Trustee an opinion of the Independent Consultant
stating that the fair market value of the property or facilities exchanged are less than
2% of the prior Bond Year's Debt Service or {iii) if such proceeds or fair market value
exceeds 2% of the prior Bond Year's Debt Service, it shall file with the Trustee an
opinion of the Independent Consultant stating that the sale or exchange of such property
or facilities will not impair the ability of the Authority to comply during the current or
any future Fiscal Year with the provisions of Section 7.12. The proceeds of any such
sale or exchange not used to acquire other property necessary or desirable for the safe
or efficient operation of the Project shall forthwith be deposited in the Renewal and
Replacement Fund;
{b) In addition to the Power Sales Agreement and the Operations and
Maintenance Agreement, the Authority may lease or make contracts or grant licenses
for the operation of, or make arrangements for the use of, or grant easements or other
rights with respect to, any part of the Project, provided that any such lease, contract,
license, arrangement, easement or right {i) does not impede the operation by the
Authority or the Purchaser or their respective agents of the Project and (ii) does not in
any manner impair or adversely affect the rights or security of the Holders under this
Resolution, and {iii) does not adversely affect the exemption from federal income
taxation of the interest on the Bonds; and provided, further, that if the depreciated cost
of the property to be covered by any such lease, contract, license, arrangement,
easement or other right is in excess of 2% of the prior Bond Year's Debt Service the
Authority shall first file with the Trustee an opinion of the Independent Consultant that
such action of the Authority with respect thereto does not impair the ability of the
Authority to comply during the current or any future Fiscal Year with the provisions
of Section 7 .12. Any payments received by the Authority under or in connection with
any such lease, contract, license, arrangement, easement or right in respect of the
Project or any part thereof shall constitute Revenues and shall be deposited in the
Revenue Fund; and
(c) The Authority may sell the Project to the Affiliate or the Purchaser {each
referred to in this Section 7.7.2(c) as the "purchaser") in the manner contemplated by
and subject to the terms and conditions of the Option Agreement, and subject to the
following additional terms and conditions to the effectiveness of such sale:
{i) The purchaser shall have delivered or caused to be delivered to
the Authority and the Trustee all instruments, certificates, legal opinions and other
evidence required to demonstrate to the satisfaction of the Authority that all conditions
-40-
applicable to a purchase of the Project by the purchaser pursuant to the Option
Agreement have been met; and
(ii) The purchaser shall have delivered or caused to be delivered to
the Authority and the Trustee either:
(A) (1) a written plan for defeasing all Outstanding Bonds and Parity
Obligations in accordance with the requirements of Article XII, and
(2) money and/or Federal Obligations sufficient to provide for the
defeasance of all Outstanding Bonds and Parity Obligations in accordance with
such defeasance plan and the requirements of Article XII; or
(B) (1) the Project Sale Agreement certified by the Authority and the
purchaser to have been duly authorized, executed and delivered by the Authority
and the purchaser and to be in full force and effect;
(2) an opinion of counsel to the purchaser addressed to the
Authority and the Trustee to the effect that the Project Sale Agreement is a
legal, valid and binding obligation of the purchaser enforceable against the
purchaser in accordance with its terms, except only as such enforcement may be
limited by bankruptcy, insolvency, moratorium and other laws affecting
creditors' rights generally;
(3) a Counsel's Opinion addressed to the Authority and the
Trustee to the effect that the Project Sale Agreement is a legal, valid and binding
obligation of the Authority enforceable against the Authority in accordance with
its terms, except only as such enforcement may be limited by bankruptcy,
insolvency, moratorium and other laws affecting creditors' rights generally;
(4) a written opinion of the Independent Consultant addressed to
the Authority and the Trustee that the sale of the Project pursuant to the Project
Sale Agreement does not impair the ability of the Authority to comply during
the current or any future Fiscal Year with the provisions of Section 7.12 and that
the Revenues to be derived by the Authority from payments under the Project
Sale Agreement are not less than the Revenues that otherwise would be derived
from payments under the Power Sales Agreement; and
( 5) a Counsel's Opinion addressed to the Authority and the
Trustee to the effect that entering into the Project Sale Agreement does not
adversely affect the exclusion of interest on the Bonds or any tax-exempt Parity
Obligations then Outstanding from gross income of the Holders thereof for
federal income tax purposes.
7.8 Indc:mendent Consultant. The Authority shall, for the purpose of performing and
carrying out the duties imposed on the Independent Consultant by this Resolution, cause to be
selected and employed as provided in the Power Sales Agreement or Project Sale Agreement
29562·7.6 -41-
/
an independent individual or frrm of engineers or any other consultants or corporation that
meets the requirements of the definition of Independent Consultant herein.
7.9 Annual Budget. The Authority shall cause to be prepared and adopted an
Annual Budget each Fiscal Year pursuant to Section 8(a) of the Power Sales Agreement and
shall cause such Annual Budget to be flied with the Trustee at least ten (1 0) days prior to such
Fiscal Year. Each Annual Budget shall set forth in reasonable detail the estimated Revenues
and Operating Expenses including Project Costs for the Fiscal Year, and including provision
for the estimated amount to be deposited during such Fiscal Year in each Fund and Account
established under this Resolution and the requirements, if any, for the amounts estimated to be
expended from each Fund and Account established under this Resolution.
7.10 Limitations on Operating Expenses and Other Costs. The Authority shall not
incur or permit to be incurred Operating Expenses or other costs payable from the Renewal and
Replacement Fund in any Fiscal Year in excess of the reasonable and necessary amount of
suc:h expenses or costs, respectively, and shall not expend or permit to be expended any
amount for Operating Expenses or from the Renewal and Replacement Fund for costs payable
therefrom for such Fiscal Year in excess of the respective amounts provided therefor in the
Annual Budget or amended Annual Budget as then in effect; provided, that the foregoing shall
not prohibit the Authority or the Purchaser from incurring or expending any Operating
Expenses or any costs for Project Repairs that, in accordance with Prudent Utility Practice, are
necessary or appropriate to be made in connection with or as a result of any emergency
involving the Project or any portion thereof endangering life or property. Nothing in this
Section contained shall limit the amount which the Authority or the Purchaser may expend for
Operating Expenses or other costs payable from the Renewal and Replacement Fund in any
Fiscal Year provided any amounts expended therefor in excess of such Annual Budget shall
be received by the Authority or the Purchaser from some source other than the Revenues,
which source shall not be reimbursable out of Revenues.
7.11 Acguisition of the Project and Its Operation and Maintenance.
7.11.1 The Authority shall acquire the Project in accordance with the terms of
the Purchase Agreement.
7 .11.2 The Authority shall at all times use its best efforts to cause the Project
to be operated properly and in an efficient and economical manner, consistent with the Power
Sales Agreement and the Operations and Maintenance Agreement (during their terms) and with
Prudent Utility Practice, and shall use its best efforts to cause the same to be so maintained,
preserved, reconstructed and kept, with the appurtenances and every part and parcel thereof,
in good repair, working order and good condition, and shall from time to time use its best
efforts to cause to be made all necessary and proper repairs, replacements and renewals so that
at all times the operation of the Project may be properly and advantageously conducted.
7 .11.3 The Authority shall take or cause to be taken all necessary steps to
comply with applicable federal and state laws and regulations relating to the licensing, use and
operation of the Project.
295637.6 -42-
7.12 Charges and Expenses.
7.12.1 The Authority shall at all times collect the Project Costs required to be
paid by the Purchaser pursuant to the Power Sales Agreement, the Operations and Maintenance
Agreement or the Project Sale Agreement. The Authority shall determine Project Costs in such
amounts as shall be required to provide Revenues at least sufficient in each Fiscal Year,
together with other available funds, for the payment of the sum of:
(a) An amount equal to the Aggregate Debt Service during such Fiscal
Year;
(b) The amount, if any, to be paid during such Fiscal Year into the
Debt Service Reserve Fund, which shall be the amount, if any, necessary to restore the
Debt Service Reserve Fund to the Debt Service Reserve Requirement or as required to
maintain a Reserve Fund Credit Facility.;
(c) The Renewal and Replacement Fund Contribution to be paid
during such Fiscal Year into the Renewal and Replacement Fund; and
(d) All other charges or liens whatsoever required to be paid out of
Revenues during such Fiscal Year, including without limitation any Rebate Amount.
7.12.2 The Authority will not furnish or supply, or cause to be furnished or
supplied, any use, output, capacity or service of the Project, free of charge to any person, firm
or corporation, public or private, and the Authority will enforce the payment of any and all
amounts owing to the Authority pursuant to the Power Sales Agreement and the Project Sale
Agreement in accordance with their respective terms.
7.13 Power Sales Agreement: Operations and Maintenance Agreement; Project Sale
Agreement. The Authority shall collect and forthwith deposit with the Trustee for credit to the
Revenue Fund all amounts payable to it pursuant to the Power Sales Agreement, the Operations
and Maintenance Agreement and the Project Sale Agreement, exclusive of Retained Revenues.
The Authority hereby pledges, assigns and transfers to the Trustee, acting on behalf of the
Holders, all of its rights under the Power Sales Agreement, the Operations and Maintenance
Agreement and the Project Sale Agreement, exclusive of its right to receive Retained Revenues
or any other contracts for the use of the capability of the Project or the sale of the output,
capacity or service of the Project or any part thereof and the Trustee shall enjoy and hold for
the benefit of the Holders the rights and privileges so assigned, including, without limiting the
foregoing, the rights of the Authority to receive payments thereunder, exclusive of its right to
receive Retained Revenues. The Authority shall enforce the provisions of the Power Sales
Agreement, the Operations and Maintenance Agreement and the Project Sale Agreement and
duly perform its covenants and agreements thereunder. The Authority will not consent or agree
to or permit any termination, rescission of or amendment to or otherwise take any action under
or in connection with the Power Sales Agreement, the Operations and Maintenance Agreement
or the Project Sale Agreement which will in any manner lessen, postpone or restrict payment
obligations thereunder or which otherwise will in any manner materially impair or materially
adversely affect the rights or security of the Holders under this Resolution. A copy of the
295637.6 -43-
Power Sales Agreement, the Operations and Maintenance Agreement and the Project Sale
Agreement certified by an Authorized Officer of the Authority shall be filed with the Trustee,
and a copy of any such amendment certified by an Authorized Officer of the Authority shall
be filed with the Trustee.
7.14 Insurance.
7.14.1 The Authority shall cause the Project to be at all times insured against
such risks and in such amounts, with such deductible provisions, or provide for a source of self
insurance, as is customary in connection with the operation of facilities of a type and size
comparable to the Project and as may reasonably and economically be obtained or secured.
The determination of what is "customaryn and what may be "reasonably and economically
obtained or secured" within the meaning of the prior sentence shall be made by an independent
insurance consultant selected and employed as provided in the Power Sales Agreement
Without limiting the foregoing, but only if required under the preceding sentences, the
Authority shall carry and maintain, or cause to be carried and maintained, and pay or cause to
be paid timely the premiums for, the following insurance with respect to the Project and the
Authority:
(a) insurance coverage for buildings, works, plants and facilities
comprising the Project for all risks of direct physical loss, at all times in an amount not
less than an amount necessary giving regard to coinsurance provisions to pay and retire
and redeem all the Outstanding Bonds;
(b) general public liability insurance (other than as set forth in subsection
(c) of this Section) in minimum amounts per occurrence, for annual aggregate claims,
and with a deductible amount, to the same extent that other entities comparable to the
Authority and owning or operating facilities of the size and type comparable to the
Project carry such insurance;
(c) comprehensive automobile liability insurance;
(d) workers' compensation insurance or self insurance as required by the
laws of the State of Alaska;
7.14.2 Each insurance policy required by this Section (i) shall be issued or
written by a financially responsible insurer (or insurers), or by an insurance fund established
by the United States of America or State of Alaska or an agency or instrumentality thereof,
(ii) shall be in such form and with such provisions (including, without limitation and where
applicable, loss payable clauses payable to the Trustee, waiver of subrogation clauses,
provisions relieving the insurer of liability to the extent of minor claims and the designation
of the named assureds) as are generally considered standard provisions for the type of
insurance involved, and (iii) shall prohibit cancellation or substantial modification by the
insurer without at least thirty days' prior written notice to the Trustee and the Authority.
Without limiting the generality of the foregoing, all insurance policies, and other arrangements
to the extent feasible, carried pursuant to this Section 7.14 shall name the Trustee, the
Authority and the Purchasers as parties insured thereunder as the respective interest of each of
295637.6 -44-
such parties may appear, and loss thereunder shall be made payable and shall be applied as
provided in this Resolution.
7.14.3 The Authority covenants to review each year the insurance carried by the
Authority with respect to the Authority and the Project and, to the extent feasible and
economically prudent, will carry insurance insuring against the risks and hazards specified in
this Section 7.14 to the same extent that other entities comparable to the Authority and owning
or operating facilities of the size and type comparable to the Project, and taking into account
any special circumstances of the Project, carry such insurance. In the event that the Authority
detennines that the insurance required by this Section in not available to the Authority at
reasonable cost, and, in any case, every [two] years, from and after the date of issuance of the
first Series of Bonds the Authority shall cause to be selected and employed as provided in the
Operations and Maintenance Agreement an independent insurance consultant or the State
division of risk management (the "consultant") for the purpose of reviewing the insurance
coverage of, and the insurance required for, the Authority and the Project and making
recommendations respecting the types, amounts and provisions of insurance that should be
carried with respect to the Authority and the Project and their operation, maintenance and
administration. A signed copy of the report of the consultant shall be filed with the Trustee
and copies thereof shall be sent to the Authority, and the insurance requirements specific
thereunder, including any and all of the dollar amounts set forth in this Section, shall be
deemed modified or superseded as necessary to conform with the recommendations contained
in said report.
7.14.4 The Authority may establish a fund to provide self insurance against the
risks and hazards relating to the properties of the Project and the interests of the Authority and
the Holders as described in this Section, and, in connection therewith, may specify and
determine the matters and things set forth in Subsection 7.14.3.
7 .14.5 Insurance maintained pursuant to this Section may be part of one or more
master policies maintained by the State of Alaska so long as the form of such policy and the
coverage is the same as if a separate policy was in effect.
7.14.6 The Authority shall on or before January 1 of each year submit to the
Trustee a certificate verifying that all minimum insurance coverages required by this Resolution
are in full force and effect as of the date of such Authority Certificate.
7.15 Reconstruction; Agplication of Insurance Proceeds.
7.15.1 If any useful portion of the Project shall be damaged or destroyed, the
Authority shall, as expeditiously as possible, continuously and diligently prosecute or cause to
be prosecuted the reconstruction or replacement thereof, unless a determination has been made
to end the Project pursuant to Section 15 of the Power Sales Agreement, or unless the
Independent Consultant in an opinion or report filed with the Trustee shall state that such
reconstruction and replacement is not consistent with Prudent Utility Practice or is not in the
best interests of the Purchaser and the Holders. The proceeds of any insurance, including the
proceeds of any self insurance fund, paid on account of such damage or destruction shall be
held by the Trustee in a special account in the Project Fund and made available for, and to the
295637.6 -45-
extent necessary be applied to, the cost of such reconstruction or replacement. Pending such
application, such proceeds may be invested at the direction of the Authority in Investment
Securities which mature not later than such time as shall be necessary to provide moneys when
needed to pay such costs of reconstruction or replacement. The proceeds of any insurance,
including the proceeds of any self insurance fund, not applied within 36 months after receipt
thereof by the Authority to repairing or replacing damaged or destroyed property, or in respect
to which notice in writing of intention to apply the same to the work of repairing or replacing
the property damaged or destroyed shall not have been given to the Trustee by the Authority
within such 36 months, or which the Authority shall at any time notify the Trustee are not to
be so applied, in excess of $5,000,000 shall be used to retire Bonds and Parity Obligations on
a pro rata basis in proportion to the Outstanding principal amount of each Series by purchase
or redemption to the extent provided by the Supplemental Resolution and Parity Obligation
Instmment authorizing the Bonds and Parity Obligations and the terms thereof.
Notwithstanding the foregoing, in the event that payments are made from the Renewal and
Replacement Fund for any such repairing of property damaged or destroyed prior to the
availability of insurance proceeds, including the proceeds of any self-insurance fund therefor,
such proceeds when received by the Authority shall be deposited in the Renewal and
Replacement Fund to the extent of such payments therefrom.
7.15 .2 If the proceeds of insurance, including the proceeds of any self insurance
fund, authorized by this Section to be applied to the reconstruction or replacement of any
portion of the Project are insufficient for such purpose, the deficiency may be supplied out of
moneys in the Renewal and Replacement Fund.
7.15.3 Alternate methods (if any) of carrying out and funding Project Repairs
may be determined as provided in the Power Sales Agreement.
7.16 Maintenance of Debt Service Reserve Fund.
The Authority shall at all times maintain the Debt Service Reserve Fund with
the Trustee created and established by Section 5.2 and do and perform or cause to be done and
performed each and every act and thing with respect to the Debt Service Reserve Fund
provided to be done or performed on behalf of the Authority or the Trustee under the terms
and provisions of Article V hereof.
7.17 Accounts and Reports.
7.17 .1 The Authority shall keep or cause to be kept proper books and records
made of its transactions relating to the Project and each Fund and Account established under
this Resolution and relating to its costs and charges under the Power Sales Agreement and
which, together with the Power Sales Agreement and all other books and papers of the
Authority, including insurance policies, relating to the Project, shall at all times be subject to
the inspection of the Trustee and the Holders of an aggregate of not less than 5% in principal
amount of the Bonds and Parity Obligations then Outstanding or their representatives duly
authorized in writing.
29S637.6 -46-
7.17.2 The Trustee shall advise the Authority promptly after the end of each
month in its regular statements of the respective transactions during such month relating to
each Fund and Account held by it under this Resolution. The Authority shall have the right
upon reasonable notice and during reasonable business hours to audit the books and records
of the Trustee with respect to the Funds and Accounts held by the Trustee under this
Resolution.
7.17.3 (a) The Authority shall annually, within 120 days after the close of each
Fiscal Year, file with the Trustee a copy of its audited financial statements for such Fiscal
Year, including the following, setting forth the reasonable detail:
(i) a balance sheet for the Authority showing assets, liabilities
and equity at the end of such Fiscal Year;
(ii) a statement of the Authority's revenues and expenses in
accordance with the categories of classifications established by the Authority for its
operating and program purposes; and
(iii} a statement of cash flows as of the end of such Fiscal Year.
The fmancial statements shall be accompanied by an opinion of an Accountant stating that the
financial statements audited present fairly the financial position of the Authority at the end of
the Fiscal Year, the results of its operations and its cash flows for the period examined, in
conformity with generally accepted accounting principles.
(b} Any such audited fmancial statement may be presented on a
consolidated or combined basis with other reports of the Authority, but only to the extent that
such basis of reporting shall be consistent with that required hereunder.
(c) A copy of such audited financial statement and any Accountant's
opinion relating thereto shall be mailed promptly thereafter by the Authority to each Holder
who shall have filed his name and address with the Authority for such purpose.
7.17.4 The Authority shall file with the Trustee (a} forthwith upon becoming
aware of any Event of Default or default in the performance by the Authority of any covenant,
agreement or condition contained in this Resolution, a certificate signed by an Authorized
Officer of the Authority and specifying such Event of Default or default and (b) within 120
days after the end of each Fiscal Year, commencing with the Fiscal Year ending December 31,
1998, a certificate signed by an Authorized Officer of the Authority stating that, to the best of
his knowledge and belief, the Authority has kept, observed, performed and fulfilled each and
every one of its covenants and obligations contained in this Resolution and there does not exist
at the date of such certificate any default by the Authority under this Resolution or any Event
of Default or other event which, with the lapse of time specified in Section 8.1, would become
an Event of Default, or, if any such default or Event of Default or other event shall so exist,
specifying the same and the nature and status thereof.
295637.6 -47-
7.17.5 With respect to each Capital Improvement for which a Independent
Consultant is retained pursuant to Subsection 5.3.7, the Authority shall cause such Independent
Consultant to (a) prepare and submit to the Authority such drawings, designs, plans,
specifications, surveys and reports as are necessary for the proper acquisition and construction
of the Capital Improvement, and approve and supervise any necessary modifications in the
designs, plans and specifications thereof; (b) prepare and submit to the Authority quarterly
reports of progress during the period of construction of the Capital Improvement, including
data as to the date of expected completion and the comparison of estimated construction time
and the Cost of Acquisition and Construction thereof with the estimates made prior to the
issuance and sale of any Bonds, and an estimate of the amounts that will be needed from time
to time to pay the Cost of Acquisition and Construction thereof and the estimated dates of such
payments; (c) continuously supervise and inspect the acquisition and construction of the Capital
Improvement in accordance with the usual accepted practices of such inspection and
supervision; and (d) upon completion and testing as required by the specifications of the
Capital Improvement, certify to the Authority to that effect and to the further effect that the
Project with such Capital Improvement is ready for normal continuous operation. The
Authority shall cause a copy of every report of the Independent Consultant referred to in this
Subsection to be filed with the Trustee.
7.17.6 The reports, requested statements and other documents required to be
furnished to the Trustee pursuant to any provisions of this Resolution shall be available for the
inspection of Holders at the office of the Trustee and shall be mailed to each Holder who shall
file a written request therefor with the Authority. The Authority shall request the Purchaser
to send a copy of its annual financial statement to the Authority and shall send a copy to each
Holder which has requested it. The Authority may charge each Holder requesting such reports,
statements and other documents a reasonable fee to cover reproduction, handling and postage.
7.17. 7 Compliance with Continuing Disclosure Requirements.
(a) Authority Undertaking to Provide Notice of Material Events. To meet the
conditions of paragraph ( d)(2) of United States Securities and Exchange Commission ("SEC")
Rule 15c2-12 (the "Rule"), as applicable to a participating underwriter for the Bonds, the
Authority undertakes (the "Undertaking") for the benefit of the Holders to provide or cause to
be provided, either directly or through a designated agent to each nationally recognized
municipal securities information repository designated by the SEC in accordance with the Rule
(each "NRMSIR") or the Municipal Securities Rulemaking Board ("MSRB"), and to the state
information depository, if any, established in the State of Alaska and recognized by the SEC
(the: "SID"), timely notice of the occurrence of any of the following events with respect to the
Bonds, if material: (i) principal and interest payment delinquencies; (ii) non-payment related
defaults; (iii) unscheduled draws on debt service reserves reflecting financial difficulties;
(iv) unscheduled draws on credit enhancements reflecting financial difficulties; (v) substitution
of <:redit or liquidity providers, or their failure to perform; (vi) adverse tax opinions or events
affecting the tax-exempt status of the Bonds; (vii) modifications to rights of holders of the
Bonds; (viii) Bond calls (other than scheduled mandatory redemptions of term Bonds, if any);
(ix) defeasances; (x) release, substitution, or sale of property securing repayment of the Bonds
and (xi) rating changes.
2956:17.6 -48-
(b) Amendment of Undertaking. The Undertaking is subject to amendment after the
primary offering of the Bonds without the consent of any Holder of any Bond, or of any
broker, dealer, municipal securities dealer, participating underwriter, rating agency, NRMSIR,
the SID or the MSRB, under the circumstances and in the manner permitted by the Rule. The
Authority will give notice to each NRMSIR or the MSRB, and the SID, if any, of the
substance (or provide a copy) of any amendment to the Undertaking and a brief statement of
the reasons for the amendment.
(c) Beneficiaries. The Undertaking evidenced by this Section 7.17. 7 shall inure to
the benefit of the Authority and any Holder of Bonds, and shall not inure to the benefit of or
create any rights in any other person.
(d) Termination ofUndertaking. The Authority's obligations under this Undertaking
shall terminate upon the legal defeasance, prior redemption or payment in full of all of the
Bonds. In addition, the Authority's obligations under this Undertaking shall terminate if those
provisions of the Rule which require the Authority to comply with this Undertaking become
legally inapplicable in respect of the Bonds for any reason, as confirmed by an opinion of
nationally recognized bond counsel or other counsel familiar with federal securities laws
delivered to the Authority, and the Authority provides timely notice of such termination to each
NRMSIR or the MSRB and the SID.
(e) Remedy for Failure to Comply with Undertaking. As soon as practicable after
the Authority learns of any failure to comply with the Undertaking, the Authority will proceed
with due diligence to cause such noncompliance to be corrected. No failure by the Authority
or other obligated person to comply with the Undertaking shall constitute a default in respect
of the Bonds. The sole remedy of any Holder shall be to take such actions as that holder
deems necessary and appropriate, including seeking a writ of mandate or order of specific
performance from an appropriate court, to compel the Authority or other obligated person to
comply with the Undertaking.
(f) Continuing Disclosure by Purchaser. Pursuant to Section 12(d) of the Power
Sales Agreement, the Purchaser has undertaken all responsibility for compliance with
continuing disclosure requirements relating to the Purchaser and the Project, and the Authority
shall have no liability to the Holders of the Bonds or any other person with respect to such
disc:losure matters. Notwithstanding any other provision of this Resolution, failure of the
Trustee to comply with any of its obligations under this Section 7.17. 7 or failure of the
Purchaser or any dissemination agent, to comply with the continuing disclosure provisions of
the Power Sales Agreement shall not be considered an Event of Default; however, the Trustee
shall, at the request of the Underwriter or the Holders of at least 25% aggregate principal
amount of Outstanding Bonds and upon receipt of indemnification against any cost, expense
or liability, including without limitation fees and costs of its attorneys, satisfactory to the
Trustee, or any Holder may, take such actions as may be necessary and appropriate, including
seeking specific performance by court order, to cause the Purchaser to comply with its
obligations under Section 12(d) of the Power Sales Agreement or to cause the Trustee to
comply with its obligations under this Section 7.17.7.
295637.6 -49-
(t) Trustee to Forward Information. The Trustee shall provide notice to the
Authority and the Purchaser of any ofthe events listed in Section 7.17.7(a) ofwhich the officer
of the Trustee responsible for administering this Resolution has actual notice (including notice
from the Authority) or knowledge and, upon a written determination by the Authority or the
Purchaser, as applicable, given to the Trustee that any such event is material, shall, in its
capacity as dissemination agent ("Dissemination Agent") provide notice of such event to each
NRMSIR or to the MSRB, and to the SID. In addition, the Trustee, in its capacity as
Dissemination Agent, shall forward to each NRMSIR, the MSRB and the SID, as applicable,
all information delivered to the Trustee by the Authority or the Purchaser, as applicable, with
instructions to forward that information to thos~ entities pursuant to this Section 7.17. 7 and
Section 7(e) of the Power Sales Agreement, it being understood that the Trustee has no
responsibility for the content, format or timeliness of such information. The failure of the
Trustee to provide notice to the Authority pursuant to this paragraph shall not relieve the
Authority of its responsibility to provide notice of material events pursuant to Section 7.17. 7( a).
Notwithstanding the foregoing, the Trustee shall have no duty or obligation hereunder to the
Authority, any Holder of Bonds or any other person (including without limitation any
underwriter of the Bonds) to monitor the Authority's compliance with the Undertaking.
7.18 Tax Covenants.
7 .18.1 The Authority shall at all times do and perform all acts and things
necessary or desirable including, but not limited to, compliance with provisions of a letter of
instructions from Bond Counsel, as the same may be revised from time to time, in order to
assure that interest paid on the Bonds shall, for the purposes of federal income taxation, be
excludable from the gross income of the recipients thereof and exempt from such taxation,
except in the event that such recipient is a "substantial user" or "related person" within the
meaning of Section 147(a) of the Code.
7 .18.2 The Authority shall not permit at any time or times any of the proceeds
of the Bonds, Revenues or any other funds of the Authority to be used directly or indirectly
to acquire any securities or obligations the acquisition of which would cause any Bond to be
an "arbitrage bond" as defined in Section 148(a) and (e) of the Code.
7.18.3 The Authority shall not permit at any time or times any proceeds of any
Bonds, Revenues or any other funds of the Authority or the Project to be used, directly or
indirectly, in a manner which would result in the exclusion of any Bond from the treatment
afforded by subsection (a) of Section 103 of the Code, including without limitation in a manner
that would cause the Project to fail to qualify as a facility for the local furnishing of electric
energy within the meaning of Section 142(a)(8) of the Code, except in the case of Bonds held
by a person who, within the meaning of Section 147(a) of the Code, is a "substantial user" or
"related person".
7 .18.4 This Section shall not apply to any Series of Bonds the interest on which
is determined by the Authority not to be exempt from taxation under Section 103 of the Code,
provided, that no such Series of Bonds shall be issued unless a Counsel's opinion is filed with
the Trustee stating that the issuance of such Series will not cause the interest on a tax exempt
Bond previously issued to be subject to taxation under Sections 103 and 141-150 of the Code.
295<537.6 -50-
7.18.5 Notwithstanding any other provision of this Resolution to the contrary,
upon the Authority's failure to observe, or refusal to comply with, the covenants in this
Section 7 .18, no person other than the Trustee or the Holders of Bonds of the specific Series
affected shall be entitled to exercise any right or remedy provided to the above Holders under
this Resolution on the basis of the Authority's failure to observe, or refusal to comply with,
the covenant.
7.19 Payment of Taxes and Charges. The Authority will from time to time duly pay
and discharge, or cause to be paid and discharged, all taxes, assessments and other
governmental charges, or required payments in lieu thereof, lawfully imposed upon the
properties of the Authority or upon the rights, Revenues, income, receipts and other moneys,
securities and funds of the Authority when the same shall become due (including all rights,
moneys and other property transferred, assigned or pledged under this Resolution), and all
lawful claims for labor and material and supplies, except those taxes, assessments, charges or
claims which the Authority shall in good faith contest by proper legal proceedings, if the
Authority shall in all such cases have set aside on its books reserves deemed adequate with
respect thereto.
7.20 Pledge of the State. The State of Alaska pledges to and agrees with the Holders
of the Bonds that the State will not limit or alter the rights and powers vested in the Authority
by the Act to fulfill the terms of the contracts made by the Authority under this Resolution
with the Holders of Bonds, or in any way impair the rights and remedies of the Holders of
Bonds until the Bonds, together with the interest on them with interest on unpaid installments
of interest, and all costs and expenses in connection with an action or proceeding by or on
behalf of the Holders of the Bonds, are fully met and discharged. This pledge is included in
this Resolution under the specific authority of 44.88.130 of the Act.
7.21 Waiver of Laws. The Authority shall not at any time insist upon or plead in any
manner whatsoever, or claim or take the benefit or advantage of, any stay or extension law
now or at any time hereafter in force which may affect the covenants and agreements contained
in this Resolution or in the Bonds, and all benefit or advantage of any such law is hereby
expressly waived by the Authority.
7.22 General.
7 .22.1 The Authority shall do and perform or cause to be done and performed
all acts and things required to be done or performed by or on behalf of the Authority under the
provisions of the Act and this Resolution.
7 .22.2 Upon the date of authentication and delivery of each Series of Bonds,
all conditions, acts and things required by law and this Resolution to exist, to have happened
and to have been performed precedent to and in the issuance of such Bonds shall exist, have
happened and have been performed and the issue of such Bonds, together with all other
indebtedness of the Authority, shall comply in all respects with the applicable laws of the State
of Alaska including the debt and other limitations prescribed by the Constitution and laws of
th€:: State of Alaska.
295{)37.6 -51-
7.22.3 The provisions of this Article are covenants and agreements by the
Authority with the Trustee and the Holders.
29~1637.6
ARTICLE VIII.
Remedies of Holders
Section 8.1 Events of Default. The following shall constitute Events of Default:
(i) if default shall be made in the due and punctual payment of
the principal of or Redemption Price, if any, when and as the same shall become due
on or with respect to any Bond or Parity Obligation, whether at maturity or upon call
for redemption or otherwise;
(ii) if default shall be made in the due and punctual payment of
any installment of interest on any Bond or Parity Obligation or the unsatisfied balance
of any Sinking Fund Installment therefor, when and as such interest installment or
Sinking Fund Installment shall become due and payable;
(iii) if default shall be made by the Authority in the performance
or observance of any other of the covenants, agreements or conditions on its part
contained in this Resolution, the Bonds, the Power Sales Agreement, the Operations and
Maintenance Agreement or the Project Sale Agreement, and such default shall continue
for a period of 60 days after written notice thereof to the Authority by the Trustee or
to the Authority and to the Trustee by the Holders of not less than 25% in principal
amount of the Bonds and Parity Obligations Outstanding;
(iv) if there shall occur the dissolution or liquidation of
the Authority or the filing by the Authority of a voluntary petition in bankruptcy, or the
commission by the Authority of any act of bankruptcy, or adjudication of the Authority
as a bankrupt, or assignment by the Authority for the benefit of its creditors, or the
entry by the Authority into an agreement of composition with its creditors, or the
approval by a court of competent jurisdiction of a petition applicable to the Authority
in any proceeding for its reorganization instituted under the provisions of the federal
bankruptcy act, as amended, or under any similar act in any jurisdiction which may now
be in effect or hereafter enacted;
(v) if default shall be made by the Purchaser or Affiliate in the
performance or observance of any of the covenants, agreements or conditions on its part
contained in the Power Sales Agreement, the Operations and Maintenance Agreement
or the Project Sale Agreement, and such default shall continue for a period of 60 days
after written notice thereof to the Authority by the Trustee or to the Authority and to
the Trustee by the Holders of not less than 25% in principal amount of the Bonds and
Parity Obligations Outstanding;
-52-
(vi) if there shall occur the dissolution or liquidation of the
Purchaser or Affiliate or the filing by or against the Purchaser or Affiliate of a petition
in bankruptcy, or the commission by the Purchaser or Affiliate of any act of
bankruptcy, or adjudication of the Purchaser or Affiliate as a bankrupt. or assignment
by the Purchaser or Affiliate for the benefit of its creditors, or the entry by the
Purchaser or Affiliate into an agreement of composition with its creditors, or the
approval by a court of competent jurisdiction of a petition applicable to the Purchaser
or Affiliate in any proceeding for its reorganization instituted under the provisions of
the federal bankruptcy act, as amended, or under any similar act in any jurisdiction
which may now be in effect or hereafter enacted;
(vii) if an order or decree shall be entered, with the consent or
acquiescence of the Authority or the Purchaser or Affiliate, appointing a receiver or
receivers of the Project, or any part thereof, or of the rents, fees, charges or other
Revenues therefrom, or if such order or decree, having been entered without the consent
or acquiescence of the Authority or the Purchaser or Affiliate, shall not be vacated or
discharged or stayed within 90 days after the entry thereof; and
(viii) if judgment for the payment of money shall be rendered
against the Authority or the Purchaser or Affiliate as the result of the construction,
improvement, ownership, control or operation of the Project, and any such judgment
shall not be discharged within 90 days after the entry thereof, or an appeal shall not be
taken therefrom or from the order, decree or process upon which or pursuant to which
such judgment shall have been granted or entered, in such manner as to set aside or stay
the execution of or levy under such judgment, or order, decree or process or the
enforcement thereof.
8.2 Account and Examination of Records After Default.
8.2.1 The Authority covenants that if an Event of Default shall have happened
and shall not have been remedied, the books of record and account of the Authority and all
other records of the Project at all times shall be subject to the inspection and use of the Trustee
and of its agents and attorneys.
8.2.2 The Authority covenants that if an Event of Default shall have happened
and shall not have been remedied, the Authority upon demand of the Trustee, will account, as
if it were the trustee of an express trust, for all Revenues and other moneys, securities and
funds pledged or held under this Resolution for such period as shall be stated in such demand.
8.3 Application of Revenues and Other Moneys After Default.
8.3.1 The Authority covenants that if an Event of Default shall happen and shall
not have been remedied, the Authority upon the demand of the Trustee, shall pay over or cause
to be paid over to the Trustee (i) forthwith, all moneys, securities and funds then held by the
Authority in any Fund or Account under this Resolution, and (ii) all Revenues as promptly as
practicable after receipt thereof.
29S637.6 -53-
8.3.2 During the continuance of an Event of Default, the Trustee shall apply all
moneys, securities, funds and Revenues received by the Trustee pursuant to any right given or
action taken under the provisions of this Article as follows and in the following order:
(i) Expenses of Fiduciaries-to the payment of the reasonable and
proper fees, charges, expenses including, but not limited to, fees and expenses of their
attorneys, and liabilities of the Fiduciaries;
(ii) Operating Expenses -to the payment of the amounts required
for reasonable and necessary Operating Expenses. For this purpose the books of record
and accounts of the Authority and the Purchaser relating to the Project shall at all times
be subject to the inspection of the Trustee and its representatives and agents during the
continuance of such Event of Default;
(iii) Principal or Redemption Price and Interest -to the payment
of the interest and principal or Redemption Price then due on the Bonds and Parity
Obligations, as follows:
First: Interest-To the payment to the persons entitled thereto of
all installments of interest then due in the order of the maturity of such
installments, together with accrued and unpaid interest on the Bonds and
Parity Obligations theretofore called for redemption, and, if the amount
available shall not be sufficient to pay in full any installment or
installments maturing on the same date, then to the payment thereof
ratably, according to the amounts due thereon, to the persons entitled
thereto, without any discrimination or preference; and
Second: Principal or Redemption Price -To the payment to
the persons entitled thereto of the unpaid principal or Redemption Price
of any Bonds and Parity Obligations which shall have become due,
whether at maturity or by call for redemption, in the order of their due
dates, and, if the amount available shall not be sufficient to pay in full
all the Bonds and Parity Obligations due on any date, then to the
payment thereof ratably, according to the amounts of principal or
Redemption Price due on such date, to the persons entitled thereto,
without any discrimination or preference.
8.3.3 If and whenever all overdue installments of interest on all Bonds and
Parity Obligations, together with the reasonable and proper fees, charges, expenses, including,
but not limited to, fees and expenses of its attorneys, and liabilities of the Trustee, and all other
sums payable by the Authority under this Resolution and by the Purchaser under the Parity
Obligations, including the principal and Redemption Price of and accrued unpaid interest on
all Bonds and Parity Obligations which shall then be payable by declaration or otherwise, shall
either be paid by or for the account of the Authority or the Purchaser, as applicable, or
provision satisfactory to the Trustee shall be made for such payment, and all defaults under this
Resolution or the Bonds and the Parity Obligations shall be made good or secured to the
satisfaction of the Trustee or provision deemed by the Trustee to be adequate shall be made
295637.6 -54-
therefor, and the Trustee shall pay over to the Authority or the Purchaser or Affiliate as their
respective interest may appear all moneys, securities and funds then remaining unexpended in
the hands of the Trustee (except moneys, securities and funds deposited or pledged, or required
by the terms of this Resolution and the Parity Obligations to be deposited or pledged, with the
Trustee), and thereupon the Authority, the Trustee and the Purchaser or Affiliate shall be
restored, respectively, to their former positions and rights under this Resolution. No such
payment over to the Authority or the Purchaser or Affiliate by the Trustee nor such restoration
of the Authority, the Purchaser or Affiliate and the Trustee to their former positions and rights
shall extend to or affect any subsequent default under this Resolution or impair any right
consequent thereon.
8.3.4 The Trustee shall not take any action which will unreasonably interfere
with the performance of the Power Sales Agreement, the Operations and Maintenance
Agreement or the Project Sale Agreement.
8.4 Appointment of Receiver. The Trustee shall have the right to apply m an
appropriate proceeding for the appointment of a receiver of the Project.
8.5 Proceedings Brought by Trustee.
8.5.1 If an Event of Default shall happen and shall not have been remedied, then
and in every such case, the Trustee, by its agents and attorneys, may proceed, and upon written
request of the Holders of not less than 25% in principal amount of the Bonds and Parity
Obligations Outstanding shall proceed, to protect and enforce its rights and the rights of the
Holders of the Bonds and Parity Obligations under this Resolution forthwith by a suit in equity
or at law, whether for the specific performance of any covenant herein contained, or in aid of
the execution of any power herein granted or any remedy granted under the Act, or for an
accounting against the Authority and the Purchaser or Affiliate as if the Authority and the
Purchaser or Affiliate were the trustee of an express trust, or in the enforcement of any other
legal or equitable right as the Trustee, being advised by counsel, shall deem most effectual to
enforce any of its rights or to perform any of its duties under this Resolution and the Parity
Obligations.
8.5.2 All rights of action under this Resolution may be enforced by the Trustee
without the possession of any of the Bonds or Parity Obligations or the production thereof on
the trial or other proceedings, and any such suit or proceedings instituted by the Trustee shall
be brought in its name.
8.5.3 The Holders of not less than a majority in principal amount of the Bonds
and Parity Obligations at the time Outstanding may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee, provided that the Trustee shall have the right to decline to
follow any such direction if the Trustee shall be advised by counsel that the action or
proceeding so directed may not lawfully be taken, or if the Trustee in good faith shall
determine that the action or proceeding so directed would involve the Trustee in personal
liability or be unjustly prejudicial to the Holders not parties to such direction.
295637.6 -55-
8.5.4 Upon commencing a suit in equity or upon other commencement of
judicial proceedings by the Trustee to enforce any right under this Resolution, the Trustee shall
be entitled to exercise any and all rights and powers conferred in this Resolution and provided
to be exercised by the Trustee upon the occurrence of any Event of Default.
8.6 Restriction on Action by Holders of Bonds and Parity Obligations.
8.6.1 No Holder of any Bond or Parity Obligation shall have any right to
institute any suit, action or proceeding at law or in equity for the enforcement of any provision
of this Resolution or the execution of any trust under this Resolution or for any remedy under
this Resolution, unless such Holder shall have previously given to the Trustee written notice
of the happening of an Event of Default, as provided in this Article, and the Holders of at least
25% in principal amount of the Bonds and Parity Obligations then Outstanding shall have filed
a written request with the Trustee, and shall have offered it reasonable opportunity either to
exercise the powers granted in this Resolution or by the Act or by the laws of the State of
Alaska or to institute such action, suit or proceeding in its own name, and unless such Holders
shall have offered to the Trustee adequate security and indemnity against the costs, expenses
and liabilities to be incurred therein or thereby, and the Trustee shall have refused to comply
with such request for a period of 60 days after receipt by it of such notice, request and offer
of indemnity, it being understood and intended that no one or more Holders of Bonds or Parity
Obligations shall have any right in any manner whatever by his or their action to affect, disturb
or prejudice the pledge created by this Resolution, or to ~nforce any right under this
Resolution, except in the manner therein provided; and that all proceedings at law or in equity
to enforce any provision of this Resolution shall be instituted, had and maintained in the
manner provided in this Resolution and for the equal benefit of all Holders of the Outstanding
Bonds and Parity Obligations, subject only to the provisions of Section 7.2.
8.6.2 Nothing contained in this Resolution or in the Bonds or Parity Obligations
shall affect or impair the obligation of the Authority from the sources provided herein or of
the Purchaser, respectively, which is absolute and unconditional, to pay at the respective dates
of maturity and places therein expressed the principal of (and premium, if any) and interest on
the Bonds and Parity Obligations to the respective Holders thereof, or affect or impair the right
of action, which is also absolute and unconditional, of any Holder to enforce such payment of
his Bond or Parity Obligation.
8. 7 Remedies Not Exclusive. No remedy by the terms of this Resolution conferred
upon or reserved to the Trustee or the Holders is intended to be exclusive of any other remedy,
but each and every such remedy shall be cumulative and shall be in addition to every other
remedy given under this Resolution or existing at law, including under the Act, or in equity
or by statute on or after the date of adoption of this Resolution.
8.8 Effect of Waiver and Other Circumstances. No delay or omission of the Trustee
or any Holder to exercise any right or power arising upon the happening of an Event of Default
shall impair any such right or power or shall be construed to be a waiver of any such Event
of Default or be an acquiescence therein; and every power and remedy given by this Article
to the Trustee or to the Holders of Bonds or Parity Obligations may be exercised from time
295637.6 -56-
to time and as often as may be deemed expedient by the Trustee or by the Holders of Bonds
or Parity Obligations.
8.9 Notice of Default. The Trustee shall promptly mail written notice of the
occurrence of any Event of Default of which it has actual knowledge to each registered owner
of Bonds and Parity Obligations then Outstanding at his address, if any, appearing upon the
registry books maintained by the Trustee for the Authority and the issuer of any Parity
Obligations, and to the Purchaser. The Trustee shall be deemed to have actual notice of any
default under Section 8.l(i) and (ii).
ARTICLE IX.
Concerning the Fiduciaries
9.1 Trustee; Appointment and Accc:mtance of Duties. The Trustee shall be appointed
by a Supplemental Resolution. The Trustee shall signify its acceptance of the duties and
obligations imposed upon it by this Resolution by executing and delivering to the Authority
a written acceptance thereof, and by executing such acceptance the Trustee shall be deemed
to have accepted such duties and obligations with respect to all the Bonds thereafter to be
issued, but only, however, upon the terms and conditions set forth in this Resolution.
9.2 Paying Agents; Appointment and Accc:mtance of Duties.
9.2.1 The Authority shall appoint one or more Paying Agents for the Bonds of
each Series, and may at any time or from time to time appoint one or more other Paying
Agents having the qualifications set forth in Section 9.13 for a successor Paying Agent. The
Trustee may be appointed a Paying Agent.
9 .2.2 Each Paying Agent shall signify its acceptance of the duties and
obligations imposed upon it by this Resolution by executing and delivering to the Authority
and to the Trustee a written acceptance thereof.
9 .2.3 Unless otherwise provided, the principal corporate trust offices of the
Paying Agents are designated as the respective offices or agencies of the Authority for the
payment of the interest on and principal or Redemption Price of the Bonds.
9.3 Responsibilities of Fiduciaries.
9.3.1 The recitals of fact herein and in the Bonds contained shall be taken as
the statements of the Authority and no Fiduciary assumes any responsibility for the correctness
of the same. No Fiduciary makes any representations as to the validity or sufficiency of this
Resolution or of any Bonds issued thereunder or as to the security afforded by this Resolution
or the Power Sales Agreement, and no Fiduciary shall incur any liability in respect thereof.
The Trustee shall, however, be responsible for its representation contained in its certificate of
authentication on the Bonds. No Fiduciary shall be under any responsibility or duty with
respect to the application of any moneys paid by such Fiduciary in accordance with the
295637.6 -57-
provisions of this Resolution to the Authority or to any other Fiduciary. No Fiduciary shall
be under any obligation or duty to perform any act which would involve it in expense or
liability or to institute or defend any suit in respect thereof, or to advance any of its own
moneys, unless properly indemnified. Subject to the provisions of Subsection 9.3.2, no
Fiduciary shall be liable in connection with the performance of its duties hereunder except for
its own negligence, misconduct or default.
9.3.2 The Trustee, prior to the occurrence of any Event of Default and after the
curing of all Events of Default which may have occurred, undertakes to perform such duties
and only such duties are specifically set forth in this Resolution. In case an Event of Default
has occurred (which has not been cured), the Trustee shall exercise such of the rights and
powers vested in it by this Resolution, and use the same degree of care and skill in their
exercise, as a prudent man would exercise or use under the circumstances in the conduct of his
own affairs. Any provision of this Resolution relating to action taken or to be taken by the
Trustee or to evidence matters upon which the Trustee may rely shall be subject to the
provisions of this Section 9.3.
9.4 Evidence on Which Fiduciaries May Act.
9.4.1 Each Fiduciary, upon receipt of any notice, resolution, request, consent,
order, certificate, report, opinion, bond or other paper or document furnished to it pursuant to
any provision of this Resolution, shall examine such instrument to determine whether it
conforms to the requirements of this Resolution and shall be protected in acting upon any such
instrument believed by it to be genuine and to have been signed or presented by the proper
party or parties. Each Fiduciary may consult with counsel, who may or may not be of counsel
to the Authority, and the opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken or suffered by it under this Resolution in good faith
and in accordance therewith.
9.4.2 Whenever any Fiduciary shall deem it necessary or desirable that a matter
be proved or established prior to taking or suffering any action under this Resolution, such
matter (unless other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate of an Authorized Officer of
the Authority and such certificate shall be full warrant for any action taken or suffered in good
faith under the provisions of this Resolution upon the faith thereof; but in its discretion the
Fiduciary may in lieu thereof accept other evidence of such fact or matter or may require such
further or additional evidence as to it may seem reasonable.
9.4.3 Except as otherwise expressly provided in this Resolution, any request,
order, notice or other direction required or permitted to be furnished pursuant to any provision
thereof by the Authority to any Fiduciary shall be sufficiently executed in the name of the
Authority by an Authorized Officer of the Authority.
9.5 Compensation. The Authority shall pay to each Fiduciary from time to time
reasonable compensation for all services rendered under this Resolution, and also all reasonable
expenses, charges, counsel fees and other disbursements, including those of its attorneys, agents
and employees, incurred in and about the performance of their powers and duties under this
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Resolution and each Fiduciary shall have a lien therefor on any and all funds at any time held
by it under this Resolution. Subject to the provisions of Section 9.3, the Authority further
agrees to indemnify and save each Fiduciary harmless against any loss, expense including
attorneys fees and expenses, and liabilities which it may incur in the exercise and performance
of its powers and duties hereunder, and which are not due to its negligence, misconduct or
default.
9.6 Certain Permitted Acts. Any Fiduciary may become the owner of any Bonds or
Parity Obligations with the same rights it would have if it were not a Fiduciary. To the extent
permitted by law, any Fiduciary may act as depository for, and permit any of its officers or
directors to act as a member of, or in any other capacity with respect to, any committee formed
to protect the rights of Holders of Bonds or Parity Obligations or to effect or aid in any
reorganization growing out of the enforcement of the Bonds or this Resolution, whether or not
any such committee shall represent the Holders of a majority in principal amount of the Bonds
and Parity Obligations then Outstanding.
9.7 Resignation of Trustee. The Trustee may at any time resign and be discharged
of the duties and obligations created by this Resolution by giving not less than 60 days' written
notice to the Authority, and mailing notice thereof to each Holder, specifying the date when
such resignation shall take effect, and such resignation shall take effect upon the day specified
in such notice, provided a successor shall have been appointed by the Authority or the Holders
as provided in Section 9.9, and has accepted the appointment.
9.8 Removal of Trustee. The Trustee may be removed at any time by an instrument
or concurrent instruments in writing, filed with the Trustee, and signed by the Holders of a
majority in principal amount of the Bonds and Parity Obligations then Outstanding or their
attorneys-in-fact duly authorized, excluding any Bonds and Parity Obligations held by or for
the account of the Authority. The Authority may remove the Trustee at any time except during
the existence of an Event of Default, for such cause as shall be determined in the sole
discretion of the Authority, by filing with the Trustee an instrument in writing signed by an
Authorized Officer of the Authority.
9.9 Appointment of Successor Trustee: Financial Qualifications of Trustee and
Successor Trustee.
9.9.1 In case at any time the Trustee shall resign or shall be removed or shall
become incapable of acting, or shall be adjudged a bankrupt or insolvent, or if a receiver,
liquidator or conservator of the Trustee, or of its property, shall be appointed, or if any public
officer shall take charge or control of the Trustee, or of its property or affairs, a successor may
be appointed by the Holders of a majority in principal amount of the Bonds and Parity
Obligations then Outstanding, excluding any Bonds and Parity Obligations held by or for the
account of the Authority, by an instrument or concurrent instruments in writing signed and
acknowledged by such Holders or by their attorneys-in-fact duly authorized and delivered to
such successor Trustee, notification thereof being given to the Authority and the predecessor
Trustee; provided, nevertheless, that unless a successor Trustee shall have been appointed by
the Holders as aforesaid, the Authority by a duly executed written instrument signed by an
Authorized Officer of the Authority shall forthwith appoint a Trustee to fill such vacancy until
295637.6 -59-
a successor Trustee shall be appointed by the Holders as authorized in this Section 9.9. The
Authority shall mail notice to each Holder of any such appointment made by it within 20 days
after such appointment. Any successor Trustee appointed by the Authority shall, immediately
and without further act, be superseded by a Trustee appointed by the Holders.
9.9.2 If in a proper case no appointment of a successor Trustee shall be made
pursuant to the foregoing provisions of this Section within 45 days after the Trustee shall have
given to the Authority written notice as provided in Section 9.7 or after a vacancy in the office
of the Trustee shall have occurred by reason of its inability to act, removal, or for any reason
whatsoever, the Trustee (in the case of its resignation under Section 9.7) or the Holder of any
Bond or Parity Obligation (in any case) may apply to any court of competent jurisdiction to
appoint a successor Trustee. Said court may thereupon, after such notice, if any, as such may
deem proper, appoint a successor Trustee.
9.9.3 The Trustee appointed under the provisions of this Article or any
successor to the Trustee shall be a bank or trust company or national banking association
having capital stock and surplus aggregating at least $200,000,000, if there be such a bank or
trust company or national banking association willing and able to accept the office on
reasonable and customary terms and authorized by law to perform all the duties imposed upon
it by this Resolution.
9 .I 0 Transfer of Rights and Property to Successor Trustee. Any successor Trustee
appointed under this Resolution shall execute, acknowledge and deliver to its predecessor
Trustee, and also to the Authority, an instrument accepting such appointment, and thereupon
such successor Trustee, without any further act, deed or conveyance, shall become fully vested
with all moneys, estates, properties, rights, powers, duties and obligations of such predecessor
Trustee, with like effect as if originally named as trustee; but the Trustee ceasing to act shall
nevertheless, on the written request of the Authority, or of the successor Trustee, execute,
acknowledge and deliver such instrument of conveyance and further assurance and do such
other things as may reasonably be required for more fully and certainly vesting and confirming
in such successor Trustee all the right, title and interest of the predecessor Trustee in and to
any property held by it under this Resolution, and shall pay over, assign and deliver to the
successor Trustee any money or other property subject to the trusts and conditions herein set
forth. Should any deed, conveyance or instrument in writing from the Authority be required
by such successor Trustee for more fully and certainly vesting in and confirming to such
successor Trustee any such estates, rights, powers and duties, any and all such deeds,
conveyances and instruments in writing shall, on request, and so far as may be authorized by
law, be executed, acknowledged and delivered by the Authority. Any such successor Trustee
shall promptly notify the Paying Agents of its appointment as Trustee.
9.11 Merger or Consolidation. Any company into which any Fiduciary may be
merged or converted or with which it may be consolidated or any company resulting from any
merger, conversion or consolidation to which it shall be a party or any company to which any
Fiduciary may sell or transfer all or substantially all of its corporate trust business, provided
such company shall be a bank or trust company organized under the laws of any state of the
United States of America or a national banking association and shall be authorized by law to
295637.6 -60-
perform all the duties imposed upon it by this Resolution, shall be the successor to such
Fiduciary without the execution or filing of any paper or the performance of any further act.
9.12 Adoption of Authentication. In any case any of the Bonds contemplated to be
issued under this Resolution shall have been authenticated but not delivered, any successor
Trustee may adopt the certification of authentication of any predecessor Trustee so
authenticating such Bonds and deliver such Bonds so authenticated; and in case any of the said
Bonds shall not have been authenticated, any successor Trustee may authenticate such Bonds
in the name of the predecessor Trustee, or in the name of the successor Trustee, and in all
cases such certificate shall have the full force which it is anywhere in said Bonds or in this
Resolution provided that the certificate of the Trustee shall have.
9.13 Resignation or Removal of Paying Agent and Appointment of Successor.
9.13.1 Any Paying Agent may at any time resign and be discharged of the
duties and obligations created by this Resolution by giving at least 60 day's written notice to
the Authority, the Trustee and the other Paying Agents. Any Paying Agent may be removed
at any time by an instrument filed with such Paying Agent and the Trustee and signed by an
Authorized Officer. Any successor Paying Agent shall be appointed by the Authority with the
approval of the Trustee, and shall be a bank or trust company organized under the laws of any
state of the United States of America or a national banking association, having capital stock
and surplus aggregating at least $25,000,000, and willing and able to accept the office on
reasonable and customary terms and authorized by law to perform all the duties imposed upon
it by this Resolution.
9.13.2 In the event of the resignation or removal of any Paying Agent, such
Paying Agent shall pay over, assign and deliver any moneys held by it as Paying Agent to its
successor, or if there be no successor, to the Trustee. In the event that for any reason there
shall be a vacancy in the office of any Paying Agent, the Trustee shall act as such Paying
Agent.
ARTICLE X.
Supplemental Resolutions
10.1 Supplemental Resolutions Effective Upon Filing With the Trustee. For any one
or more of the following purposes and at any time or from time to time, a Supplemental
Resolution of the Authority may be adopted, which, upon the filing with the Trustee of (i) a
copy thereof certified by an Authorized Officer of the Authority and (ii) a certificate of the
Purchaser stating that such Supplemental Resolution has been approved by the Purchaser shall
be fully effective in accordance with its terms:
(a) To close this Resolution against, or provide limitations and
restrictions in addition to the limitations and restrictions contained in this Resolution on,
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the authentication and delivery of Bonds or the 1ssuance of other evidences of
indebtedness;
(b) To add to the covenants and agreements of the Authority n
this Resolution, other covenants and agreements to be observed by the Authority which
are not contrary to or inconsistent with this Resolution as theretofore in effect;
(c) To add to the limitations and restrictions in this Resolution, other
limitations and restrictions to be observed by the Authority which are not contrary to
or inconsistent with this Resolution as theretofore in effect;
(d) To authorize Bonds of a Series and, in connection therewith,
specify and determine the matters and things referred to in Section 2.2, and also any
other matters and things relative to such Bonds which are not contrary to or inconsistent
with this Resolution as theretofore in effect, including without limitation the form of
coupon bonds as provided in Section 3.1, or to amend, modify or rescind any such
authorization, specification or determination at any time prior to the first authentication
and delivery of such Bonds;
(e) To confirm, as further assurance, any pledge or assignment under,
and the subjection to any lien, pledge or assignment created or to be created by, this
Resolution, of the Revenues or of any other moneys, securities or funds;
(f) To modify any of the provisions of this Resolution in any other
respect whatever, provided that (i) such modification shall be, and be expressed to be,
effective only after all Bonds of each Series Outstanding at the date of the adoption of
such Supplemental Resolution shall cease to be Outstanding, and (ii) such Supplemental
Resolution shall be specifically referred to in the next text of all Bonds of any Series
authenticated and delivered after the date of the adoption of such Supplemental
Resolution and of Bonds issued in exchange or in place thereof; and
(g) To appoint the Trustee.
10.2 Supplemental Resolutions Effective Upon Consent of Trustee. For any one or
more of the following purposes and at any time from time to time, a Supplemental Resolution
may be adopted, which, upon (i) the filing with the Trustee of a copy thereof certified by an
Authorized Officer of the Authority, (ii) a certificate of the Purchaser stating that such
Supplemental Resolution has been approved by the Purchaser, and (iii) the filing with the
Authority of an instrument in writing made by the Trustee consenting thereto, shall be fully
effective in accordance with its terms:
29S637.6
(a) To cure any ambiguity, supply any omission, or cure or correct
any defect or inconsistent provision in this Resolution; or
(b) To insert such provisions clarifying matters or questions arising
under this Resolution as are necessary or desirable and are not contrary to or
inconsistent with this Resolution as theretofore in effect.
-62-
(c) To make any changes which do not in the sole opinion of the
Trustee, materially and adversely affect the rights of the Holders.
10.3 Sugplemental Resolutions Effective With Consent of Holders. At any time or
from time to time, a Supplemental Resolution may be adopted subject to consent by Holders
in accordance with and subject to the provisions of Article XI, which Supplemental Resolution,
upon the filing with the Trustee of (i) a copy thereof certified by an Authorized Officer of the
Authority and (ii) a certificate of the Purchaser stating that such Supplemental Resolution has
been approved by the Purchaser, and upon compliance with the provisions of said Article XI,
shall become fully effective in accordance with its terms as provided in said Article XL
10.4 General Provisions.
I 0.4.1 The Resolution shall not be modified or amended in any respect except
as provided in and in accordance with and subject to the provisions of this Article X and
Article XI. Nothing in this Article X or Article XI contained shall affect or limit the right or
obligation of the Authority to adopt, make, do, execute, acknowledge or deliver any resolution,
act or other instrument pursuant to the provisions of Section 7.4 or the right or obligation of
the Authority to execute and deliver to any Fiduciary any instrument which elsewhere in this
Resolution it is provided shall be delivered to said Fiduciary.
1 0.4.2 Any Supplemental Resolution referred to and permitted or authorized by
Section 10.1 and 10.2 may be adopted by the Authority without the consent of any of the
Holders, but shall become effective only on the conditions, to the extent and at the time
provided in said Sections, respectively. The copy of every Supplemental Resolution when filed
with the Trustee shall be accompanied by an Opinion of Counsel stating that such
Supplemental Resolution has been duly and lawfully adopted in accordance with the provisions
of this Resolution, is authorized or permitted by this Resolution, and is valid and binding upon
the Authority and enforceable in accordance with its terms.
1 0.4.3 The Trustee is hereby authorized to accept the delivery of a certified
copy of any Supplemental Resolution referred to and permitted or authorized by Sections I 0.1,
10.2 or 10.3 and to make all further agreements and stipulations which may be therein
contained, and the Trustee, in taking such action, shall be fully protected in relying on an
Opinion of Counsel that such Supplemental Resolution is authorized or permitted by the
provisions of this Resolution.
1 0.4.4 No Supplemental Resolution shall change or modify any of the rights or
obligations of any Fiduciary without its written assent thereto.
10.5 Amendments Prior to Delivery of Bonds. Amendments to this Resolution and
of the [First Series Resolution], not substantial in nature but required in the Opinion of Counsel
to effectuate delivery of the Bonds in accordance with the Bond Purchase Agreement or the
Official Statement issued in connection with the Bonds, may be effected by certificate of the
Executive Director filed with the Trustee prior to the delivery of any Bonds. The certificate
shall state the amendment, whether the same is in the nature of a clerical correction or consists
of the completion of an omission, or otherwise, and from and after the delivery of the
295637.6 -63-
certificate this Resolution or the [First Series Resolution], as the case may be, shall be
considered as if originally adopted with such change.
ARTICLE XI.
Amendments
11.1 Mailing. Any provision in this Article for the mailing of a notice or other paper
to Holders shall be fully complied with if it in mailed postage prepaid only to each registered
owner of Bonds or Parity Obligations then Outstanding at his address, if any, appearing upon
the registry books of the Authority and each Fiduciary.
11.2 Powers of Amendment. Any modification or amendment of this Resolution and
of the rights and obligations of the Authority and of Holders of the Bonds and Parity
Obligations thereunder, in any particular, may be made by a Supplemental Resolution, and with
the written consent given as provided in Section 11.3 of the Holders of at least a majority in
principal amount of the Bonds and Parity Obligations Outstanding at the time such consent in
given, and (ii) in case less than all of the several Series of Bonds and Parity Obligations then
Outstanding are affected by the modification or amendment, of the Holders of at least a
majority in principal amount of the Bonds and Parity Obligations of each Series so affected
and Outstanding at the time such consent is given, and (iii) in case the modification or
amendment changes the terms of any Sinking Fund Installment, of the Holders of at least a
majority in principal amount of the Bonds and Parity Obligations of the particular Series and
maturity entitled to such Sinking Fund Installment and Outstanding at the time such consent
is given; provided, however, that if such modification or amendment will, by its terms, not take
effect so long as any Bonds or Parity Obligations of any specified like Series and maturity
remain Outstanding the consent of the Holders of such Bonds or Parity Obligations shall not
be required and such Bonds and Parity Obligations shall not be deemed to be Outstanding for
the purpose of any calculation of Outstanding Bonds under this Section. No such
modifications or amendment shall permit a change in the terms of redemption or maturity of
the principal of any Outstanding Bond or Parity Obligation or any installment of interest
thereon or a reduction in the principal amount or the Redemption Price thereof or in the rate
of interest thereon without the consent of the Holder of such Bond or Parity Obligation, or
shall reduce the percentages or otherwise affect the classes of Bonds and Parity Obligations
the consent of the Holders of which is required to effect any such modification or amendment,
or shall change or modify any of the rights or obligations of any Fiduciary without its written
assent thereto. For the purposes of this Section, a Series shall be deemed to be affected by a
modification or amendment of this Resolution if the same adversely affects or diminishes the
rights of the Holders of Bonds or Parity Obligations of such Series. The Trustee may in its
discretion determine whether or not in accordance with the foregoing powers of amendment
Bonds or Parity Obligations of any particular Series or maturity would be affected by any
modification or amendment of this Resolution and any such determination shall be binding and
conclusive on the Authority, the issuers of Parity Obligations and all Holders of Bonds and
Parity Obligations.
295637.6 -64-
11.3 Consent of Holders. The Authority may at any time adopt a Supplemental
Resolution making a modification or amendment permitted by the provisions of Section 11.2
to take effect when and as provided in this Section, provided that such modification or
amendment receives the written consent of the Purchaser. A copy of such Supplemental
Resolution (or brief summary thereof or reference thereto in form provided by the Authority
to by the Trustee), together with a request to Holders for their consent thereto in form
satisfactory to the Trustee, shall be mailed by the Authority to Holders (but failure to mail such
copy and request shall not affect the validity of the Supplemental Resolution when consented
to as in this Section provided). Such Supplemental Resolution shall not be effective until
(i) there shall have been filed with the Trustee (a) the written consents of Holders of the
percentages of Outstanding Bonds and Parity Obligations specified in Section 11.2 and (b) an
Opinion of Counsel stating that such Supplemental Resolution has been duly and lawfully
adopted and filed by the Authority in accordance with the provisions of this Resolution, is
authorized or permitted by this Resolution, and is valid and binding upon the Authority, the
Fiduciaries and the Holders of Bonds and Parity Obligations and enforceable in accordance
with its terms, and (ii) a notice shall have been mailed as hereinafter in this Section 11.3
provided. Each such consent shall be effective only if accompanied by proof of the holding,
at the date of such consent, of the Bonds and Parity Obligations with respect to which such
consent is given, which proof shall be such as is permitted by Section 12.2. A certificate or
certificates executed by the Trustee and filed with the Authority stating that it has examined
such proof and that such proof is sufficient in accordance with Section 12.2 shall be conclusive
that the consents have been given by the Holders of Bonds and Parity Obligations described
in such certificate or certificates of the Trustee. Any such consent shall be binding upon the
Holders of Bonds and Parity Obligations signing such consent and, anything in Section 12.2
to the contrary notwithstanding, upon any subsequent Holder of such Bonds and Parity
Obligations and of any Bonds and Parity Obligations issued in exchange (whether or not such
subsequent Holder has notice thereof) provided however that any consent may be revoked in
writing by any Holder of such Bonds by filing with the Trustee, prior to the time when the
written statement of the Trustee hereinafter in this Section 11.3 provided for is filed, such
revocation. The fact that a consent has not been revoked may likewise be proved by a
certificate of the Trustee filed with the Authority to the effect that no revocation thereof is on
file with the Trustee. At any time after the Holders of the required percentages of Bonds and
Parity Obligations shall have filed their consents to the Supplemental Resolution, the Trustee
shall make and file with the Authority a written statement that the Holders of such required
percentages of Bonds and Parity Obligations have filed such consents. Such written statements
shall be conclusive that such consents have been filed. At any time thereafter, notice stating
in substance that the Supplemental Resolution (which may be referred to as a Supplemental
Resolution adopted by the Authority on a stated date, a copy of which in on file with the
Trustee) has been consented to by the Holders of the required percentages of Bonds and Parity
Obligations, and will be effective as provided in this Section 11.3, may be given to Holders
by the Authority by mailing such notice to Holders (but failure to mail such notice shall not
prevent such Supplemental Resolution from becoming effective and binding as in this
Section 11.3 provided). The Authority shall file with the Trustee proof of the mailing of such
notice to Holders. A record, consisting of the certificates or statements required or permitted
by this Section 11.3 to be made by the Trustee, shall be proof of the matters therein stated.
Such Supplemental Resolution making such amendment or modification shall be deemed
conclusively binding upon the Authority, the Fiduciaries and the Holders of all Bonds and
295637.6 -65-
Parity Obligations at the expiration of 40 days after the filing with the Trustee of the proof of
the mailing of such last mentioned notice, except in the event of a final decree of a court of
competent jurisdiction setting aside such Supplemental Resolution in a legal action or equitable
proceeding for such purpose commenced within such 40 day period; provided, however, that
any Fiduciary and the Authority during such 40 day period and any such further period during
which any such action or proceeding may be pending shall be entitled in their absolute
discretion to take such action, or to refrain from taking such action, with respect to such
Supplemental Resolution an they may deem expedient.
11.4 Modifications by Unanimous Consent. The Resolution and the rights and
obligations of the Authority and of the Holders of Bonds and Parity Obligations thereunder
may be modified or amended with the written consent of the Purchaser in any respect by a
Supplemental Resolution effecting such modification or amendment and the consents of the
Holders of all the Bonds and Parity Obligations then Outstanding, each such consent to be
accompanied by proof of the holding at the date of such consent of the Bonds and Parity
Obligations with respect to which consent is given. Such Supplemental Resolution shall take
effect upon the filing (a) with the Trustee of (i) a copy thereof certified by an Authorized
Officer of the Authority, (ii) such consents and accompanying proofs and (iii) the Counsel's
opinion referred to in Section 11.3 and (b) with the Authority and the Trustee of the Trustee's
written statement that the consents of the Holders of all Outstanding Bonds and Parity
Obligations have been filed with it. No mailing of any Supplemental Resolution (or reference
thereto or summary thereof) or of any request or notice shall be required. No such
modification or amendment, however, shall change or modify any of the rights or obligations
of any Fiduciary without its written assent thereto.
11.5 Exclusion of Certain Bonds and Paritv Obligations. Bonds owned by or for the
account of the Authority and Parity Obligations owned by or for the account of the issuer of
such Parity Obligations shall not be deemed Outstanding for the purpose of consent or other
action or any calculation of Outstanding Bonds and Parity Obligations provided for in this
Article XI, and the Authority and the issuer of such Parity Obligations shall not be entitled
with respect to such Bonds or Parity Obligations to give any consent or take any other action
provided for in this Article. At the time of any consent or other action taken under this
Article, the Authority and the issuer of such Parity Obligations shall furnish the Trustee a
certificate of an Authorized Officer of the Authority upon which the Trustee may rely,
describing all Bonds and Parity Obligations so to be excluded.
11.6 Notation on Bonds and Parity Obligations. Bonds and Parity Obligations
authenticated and delivered after the effective date of any action taken as in Article X or
Article XI provided may, and if the Trustee so determines, shall, bear a notation by
endorsement or otherwise in fonn approved by the Authority or the issuer of such Parity
Obligations and the Trustee as to such action, and in that case upon demand of the Holder of
any Bond or Parity Obligation Outstanding at such effective date and presentatio·n of his Bond
or Parity Obligation for the purpose at the principal corporate trust office of the Trustee or
upon any transfer or exchange of any Bond or Parity Obligation Outstanding at such effective
date, suitable notation shall be made on such Bond or Parity Obligation or upon any Bond or
Parity Obligation issued upon any such transfer or exchange by the Trustee as to any such
action. If the Authority or issuer of such Parity Obligations or the Trustee shall so detennine,
295637.6 -66-
new Bonds or Parity Obligations so modified as in the opinion of the Trustee and the Authority
or the issuer of such Parity Obligations to conform to such action shall be prepared,
authenticated and delivered, and upon demand of the Holder any Bond or Parity Obligation
then Outstanding shall be exchanged, without cost to such Holder, for Bonds or Parity
Obligation of the same Series and maturity then Outstanding, upon surrender of such Bonds
or Parity Obligations.
ARTICLE XII.
Miscellaneous
12.1 Defeasance.
12.1.1 If the Authority and the issuers of Parity Obligations shall pay or cause
to be paid, or there shall otherwise be paid, to the Holders of all Bonds and Parity Obligations
the principal or Redemption Price, if applicable, and interest due or to become due thereon, at
the time and in the manner stipulated therein and in this Resolution and the Parity Obligation
Instruments, then the pledge and assignment of any Revenues and other moneys and securities
pledged under this Resolution and all covenants, agreements and other obligations of the
Authority and the issuers of Parity Obligations to the Holders, shall thereupon cease, terminate
and become void and be discharged and satisfied. In such event, the Trustee shall cause an
accounting for such period or periods as shall be requested by the Authority and the issuers
of Parity Obligations to be prepared and filed with the Authority and the issuers of Parity
Obligations and, upon the request of the Authority and the issuers of Parity Obligations shall
execute and deliver to the Authority and the issuers of Parity Obligations all such instruments
as may be desirable to evidence such discharge and satisfaction, and the Fiduciaries shall pay
over or deliver to the Authority and the issuers of Parity Obligations as their respective
interests may appear all moneys or securities held by them pursuant to this Resolution which
are not required for the payment of principal or Redemption Price, if applicable, and interest
on Bonds and Parity Obligations. If the Authority or an issuer of Parity Obligations shall pay
or cause to be paid or there shall otherwise be paid, to the Holders of all Outstanding Bonds
or Parity Obligations of a particular Series, or of a particular maturity within a Series, the
principal or Redemption Price, if applicable, and interest due or to become due thereon, at the
times and in the manner stipulated therein and in this Resolution or the Parity Obligation
Instrument, such Bonds or Parity Obligations shall cease to be entitled to any lien, benefit or
security under this Resolution, and all covenants, agreements and obligations of the Authority
or the issuer of such Parity Obligations to the Holders of such Bonds or Parity Obligations
shall thereupon cease, terminate and become void and be discharged and satisfied.
12.1.2 Bonds or Parity Obligations or interest installments for the payment or
redemption of which moneys shall have been set aside and shall be held in trust by the Paying
Agents (through deposit by the Authority or the issuer of such Parity Obligations of funds for
such payment or Redemption or otherwise) at the maturity or redemption date thereof shall be
deemed to have been paid within the meaning and with the effect expressed in
Subsection 12.1.1. Prior to the maturity or redemption date thereof, Bonds or Parity
Obligations shall be deemed to have been paid within the meaning and with the effect
295637.6 -67-
expressed in Subsection 12.1.1 if(a) in case any of such Bonds or Parity Obligations are to be
redeemed on any date prior to their maturity, the Authority or the issuer of such Parity
Obligations shall have given to the Trustee irrevocable instructions accepted in writing by the
Trustee to mail as provided in Article IV with respect to Bonds and as provided in the Parity
Obligation Instrument with respect to Parity Obligations notice of redemption of such Bonds
or Parity Obligations on such date, (b) there shall have been deposited with the Trustee either
moneys (including moneys withdrawn and deposited pursuant to Subsection 5.7.4) in an
amount which shall be sufficient, or Federal Obligations (including any Federal Obligations
issued or held in book-entry form on the books of the Department of the Treasury of the
United States of America) which shall not contain provisions permitting the redemption thereof
other than at the option of the holder the principal of and the interest on which when due will
provide moneys which, together with the moneys, if any, deposited with the Trustee at the
same time, shall be sufficient to pay when due the principal or Redemption Price, if applicable,
and interest due and to become due on such Bonds or Parity Obligations on or prior to the
redemption date or maturity date thereof, as the case may be, and (c) the Authority or the
issuer of such Parity Obligations shall have given the Trustee in form satisfactory to it
irrevocable instructions to mail, as soon as practicable, a notice to the Holders of such Bonds
or Parity Obligations that the deposit required by (b) above has been made with the Trustee
and that such Bonds or Parity Obligations are deemed to have been paid in accordance with
this Section 12.1 and stating such maturity or redemption date upon which moneys are to be
available for the payment of the principal or Redemption Price, if applicable, and interest on
such Bonds or Parity Obligations. Neither Federal Obligations nor moneys deposited with the
Trustee pursuant to this Section 12.1 nor principal or interest payments on any such Federal
Obligations shall be withdrawn or used for any purpose other than, and shall be held in trust
for, the payment of the principal or Redemption Price, if applicable, and interest on such Bonds
or Parity Obligations; provided that any cash received from such principal or interest payments
on such Federal Obligations deposited with the Trustee, (A) to the extent such cash will not
be required at any time for such purpose, after verification by a Certified Public Accountant
shall be paid over to the Authority or the issuer of such Parity Obligations as received by the
Trustee, free and clear of any trust, lien, pledge or assignment securing such Bonds or Parity
Obligations or otherwise existing under this Resolution, and (B) to the extent such cash will
be required for such purpose at a later date, shall, to the extent practicable, be reinvested in
Federal Obligations maturing at times and in amounts sufficient to pay when due the principal
or Redemption Price, if applicable, and interest to become due on such Bonds or Parity
Obligations, on or prior to such redemption date or maturity date thereof, as the case may be,
and interest earned from such reinvestment shall be paid over to the Authority or the issuer of
such Parity Obligations as received by the Trustee, free and clear of any trust, lien, pledge or
assignment securing such Bonds or Parity Obligations or otherwise existing under this
Resolution. For the purposes of this Section 12.1, Federal Obligations shall mean and include
only such Federal Obligations which shall not be subject to redemption prior to their maturity
other than at the option of the holder thereof.
12.1.3 Anything in this Resolution to the contrary notwithstanding, any moneys
held by a Fiduciary in trust for the payment and discharge of any of the Bonds or Parity
Obligations which remain unclaimed for six years after the date when such Bonds or Parity
Obligations have become due and payable, either at their stated maturity dates or by call for
earlier redemption, if such moneys were held by the Fiduciary at such date, or for six years
295637.6 -68-
after the date of deposit of such moneys if deposited with the Fiduciary after the said date
when such Bonds or Parity Obligations became due and payable, shall, at the written request
of the Authority or the issuer of such Bonds or Parity Obligations, be repaid by the Fiduciary
to the Authority for payment into the Revenue Fund or to the issuer of such Parity Obligations
for application in accordance with the Parity Obligation Instrument, and any such amount
repaid to the Authority shall be deemed "other available funds" within the meaning of
Section 7.12.1 to be used for the payment of amounts required to be paid therein, and the
Fiduciary shall thereupon be released and discharged with respect thereto and the Holders shall
look only to the Authority or the issuer of such Parity Obligations for the payment of such
Bonds or Parity Obligations.
12.2 Evidence of Signatures of Holders and Ownership of Bonds and Parity
Obligations.
12.2.1 Any request, consent, revocation of consent or other instrument which
this Resolution may require or permit to be signed and executed by the Holders may be in one
or more instruments of similar tenor, and shall be signed or executed by such Holders in
person or by their attorneys appointed in writing. Proof of the execution of any such
instrument, or of any instrument appointing any such attorney, shall be sufficient for any
purpose of this Resolution (except as otherwise therein expressly provided) if made in the
following manner, or in any other manner satisfactory to the Trustee, which may nevertheless
in its discretion require further and other proof in cases where it deems the same desirable:
The fact and date of the execution by any Holder or his attorney of such
instruments may be proved by a guarantee of the signature thereon by a bank or trust company
or by the certificate of any notary public or other officer authorized to take acknowledgements
of deeds, that the person signing such request or other instrument acknowledged to him the
execution thereof, or by an affidavit of a witness of such execution, duly sworn to before such
notary public or other officer. Where such execution is by an officer of a corporation or
partnership, such signature guarantee, certificate or affidavit shall also constitute sufficient
proof of his authority.
12.2.2 The ownership of Bonds and Parity Obligations and the amount, numbers
and other identification, and date of holding the same shall be proved by the registry books.
12.2.3 Any request or consent by the owner of any Bond or Parity Obligation
shall bind all future owners of such Bond or Parity Obligation in respect of anything done or
suffered to be done by the Authority or any Fiduciary in accordance therewith.
12.3 Moneys Held for Particular Bonds or Parity Obligations. The amounts held by
any Fiduciary for the payment of the interest, principal or Redemption Price due on any date
with respect to particular Bonds or Parity Obligations shall, on and after such date and pending
such payment, be set aside on its books and held in trust by it for the Holders of the Bonds
or Parity Obligations entitled thereto.
12.4 Preservation and Inspection of Documents. All documents received by a
Fiduciary under the provisions of this Resolution shall be retained in its possession and shall
295637.6 -69-
be subject at all reasonable times during regular hours with reasonable notice to the inspection
of the Authority, any other fiduciary, and any Holder and their agents and their representatives,
any of whom may make copies thereof.
12.5 No Recourse on the Bonds. No recourse shall be had for the payment of the
principal of or interest on the Bonds or for any claim based thereon or on this Resolution
against any member or officer of the Authority or any person executing the Bonds.
12.6 Severability of Invalid Provisions. If any one or more of the covenants provided
in this Resolution on the part of the Authority or any Fiduciary to be performed should be
contrary to law, then such covenant or covenants or agreement or agreements shall be deemed
severable from the remaining covenants and agreements, and shall in no way affect the validity
of the other provisions of this Resolution.
12.7 Holidays. If the date for making any payment or the last date for performance
of any act or the exercising of any right, as provided in this Resolution, shall be a legal holiday
or a day on which banking institutions in the city in which is located the principal office of the
Trustee are authorized by law to remain closed, such payment may be made or act performed
or right exercised on the next succeeding day not a legal holiday or a day on which such
banking institutions are not authorized by law to remain closed, with the same force and effect
as if done on the nominal date provided in this Resolution.
12.8 Notices. It shall be sufficient service of any notice, request, complaint, demand
or other paper on the Authority or the Trustee, as the case may be, if the same shall be duly
mailed by registered or certified mail and addressed to it at Alaska Industrial Development and
Export Authority, 480 West Tudor Road, Anchorage, Alaska 99503-6690, Attention: Executive
Director, or to such other address as the Authority may from time to time file with the Trustee
(in respect of the Authority) or at ----------------
------------' Attention: , or at such other
address as the Trustee may from time to time file with the Authority (in respect of the Trustee).
ARTICLE XIII.
Bond Form and Effective Date
13.1 Form of Bonds and Trustee's Certificate of Authentication. Subject to the
provisions of this Resolution, the form of the Bonds of each Series and the Trustee's
Certificate of Authentication, shall be substantially of the following tenor with such variations,
omissions and insertions with respect to capital appreciation bonds and otherwise as are
required or permitted by this Resolution and as fixed by or pursuant to Supplemental
Resolution.
295637.6 -70-
ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY
$ ____ _
Power Revenue Bond,
(
Series
)
____ % Due July 1, __
No. ___ _
ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY (herein
called the "Authority"), a public corporation of the State of Alaska organized and existing
under and by virtue of the laws of the State of Alaska. acknowledges itself indebted to, and
for value received hereby promises to pay to
or registered assigns, on the first day
of ___ • the principal sum of Dollars in any coin or
currency of the United States of America which at the time of payment is legal tender for the
payment of public and private debts, upon presentation and surrender of this bond at the
principal corporate trust office of or ---------
(such banks and any successors thereto being referred to herein as the "Paying Agentsn), at the
option of the registered owner hereof, and to pay to the registered owner the interest on such
principal sum in like coin or currency from the date hereof, at the rate per annum specified
above, payable on the first days of and in each year, until the Authority's
obligation with respect to the payment of such principal sum shall be discharged by check or
draft mailed to the registered owner of record hereof as of the 15th day of the calendar month
next preceding such interest payment date at the address of such owner appearing on the
registration books maintained by the Authority for such purpose at the principal corporate trust
office of , in the City of , as bond registrar.
This bond is one of a duly authorized issue of bonds of the Authority designated as its
"Power Revenue Bonds, Series " (herein called the " Series
___ Bonds"), in the aggregate principal amount of $ issued pursuant to the
(herein called the "Act"), and under and pursuant to a
resolution of the Authority, adopted , entitled "Power Revenue Bond
Resolution" and a supplemental resolution of the Authority authorizing the -------
Series Bonds (said being herein called the "Resolution").
As provided in the Resolution, the Bonds are [limited recourse] obligations of the
Authority, which are secured as to payment of the principal and redemption price thereof, and
interest thereon, in accordance with their terms and the provisions of the Resolution by (i) the
proceeds of the sale of the Bonds, (ii) the Revenues (as defmed in the Resolution, and (iii) all
funds established by the Resolution including the investments, if any, thereof, subject only to
the provisions of the Resolution permitting the application thereof for the purposes and on the
terms and conditions met forth in the Resolution. Copies of the Resolution are on file at the
office of the Authority and at the principal corporate trust office of----------'
as Trustee under the Resolution, or its successor as Trustee (herein called the "Trustee"), and
reference to the Resolution and any and all supplements thereto and modifications and
295637.6 -71-
amendments thereof and to the Act is made for a description of the pledge and assignment and
covenants securing the Bonds, the nature, extent and manner of enforcement of such pledge
and assignment, the rights and remedies of the registered owners of the bonds with respect
thereto, the limitations on such rights and remedies and the terms and conditions upon which
the Bonds are issued and may be issued thereunder.
As provided in the Resolution, Bonds of the Authority may be issued from time to time
pursuant to supplemental resolutions in one or more series, in various principal amounts, may
mature at different times, may bear interest at different rates and may otherwise vary as in the
Resolution provided. The aggregate principal amount of Bonds which may be issued under
the Resolution is not limited except as provided in the Resolution, and all Bonds issued and
to be issued under the Resolution are and will be equally secured by the pledge and assignment
and covenants made therein, except an otherwise expressly provided or permitted in the
Resolution.
To the extent and in the manner permitted by the terms of the Resolution, the provisions
of the Resolution, or any resolution amendatory thereof or supplemental thereto, may be
modified or amended by the Authority, with the written consent of the owners of at least a
majority in principal amount of the bonds then outstanding under the Resolution, and, in case
less than all of the Series of bonds would be affected thereby, with such consent of at least a
majority in principal amount of the bonds of each Series so affected then outstanding under
the Resolution, and, in case such modification or amendment would change the terms of any
sinking fund installment, with such consent of at least a majority in principal amount of the
bonds of the particular Series and maturity entitled to such sinking fund installment then
outstanding; provided, however, that, if such modification or amendment will, by its terms, not
take effect so long as any bonds of any specified like Series and maturity remain outstanding
under the Resolution, the consent of the owners of such bonds shall not be required and such
bonds shall not be deemed to be outstanding for the purpose of the calculation of outstanding
bonds. No such modification or amendment shall permit a change in the terms of redemption
or maturity of the principal of any outstanding bond or of any installment of interest thereon
or a reduction in the principal amount or redemption price thereof or in the rate of interest
thereon without the consent of the owner of such bond, or shall reduce the percentages or
otherwise affect the classes of bonds the consent of the owners of which in required to effect
any such modification or amendment, or shall change or modify any of the rights or obligations
of the Trustee or of any Paying Agent without its written assent thereto.
This Bond is transferable as provided in the Resolution, only upon the books of the
Authority kept for the purpose at the above-mentioned office of the Trustee, by the registered
owner hereof in person, or by his duly authorized attorney, upon surrender of this bond
together with a written instrument of transfer satisfactory to the Trustee duly executed by the
registered owner or his duly authorized attorney, and thereupon a new registered Bond or
Bonds, and in the same aggregate principal amounts, shall be issued to the transferee in
exchange therefor as provided in the Resolution, and upon payment of the charges therein
prescribed. The Authority, the Trustee and any Paying Agent may deem and treat the person
in whose name this bond is registered as the absolute owner hereof for the purpose of receiving
payment of, or on account of, the principal or redemption price hereof and interest due hereon
and for all other purposes.
295637.6 -72-
The Bonds of the issue of which this Bond in one are subject to redemption prior to
maturity, upon notice as hereinafter provided, (i) by operation of the Principal Account
established under the Resolution to satisfy sinking fund installments, on any interest payment
date on and after ·· at the principal amount thereof together with
accrued interest to the redemption date, and (ii) otherwise, as a whole, or in part in maturities,
at any time on or after at the respective redemption prices
(expressed as percentages of the principal amount of the bonds or portions thereof to be
redeemed) set forth below, in each case together with accrued interest to the redemption date:
Period During Which
(both dates inclusive)
Redemption
Prices
If less than all the bonds of like maturity are to be redeemed, the particular bonds to
be redeemed shall be selected by lot by the Trustee.
(Further Redemption provisions per the Resolution and Supplemental Resolution)
The Bonds of the issue of which this bond is one are payable upon redemption at the
above-mentioned offices of the Paying Agents. Notice of redemption, setting forth the place
of payment, shall be mailed by first class mail to each registered owner not less than 30 days
nor more than 60 days prior to the redemption date, all in the manner and upon the terms and
conditions set forth in the Resolution. If notice of redemption shall have been given as
aforesaid, the Bonds or portions thereof specified in said notice shall become due and payable
on the redemption date therein fixed, and if, on the redemption date, moneys for the
redemption of all the Bonds and portions thereof to be redeemed, together with interest to the
redemption date, shall be available for such payment on said date, then from and after the
redemption date interest on such Bonds or portions thereof so called for redemption shall cease
to accrue and be payable.
Neither the State of Alaska nor any political subdivision thereof, other than the
Authority but only to the extent of Revenues available therefor, nor any member of the
Authority nor the Purchaser (as defined in the Resolution) is obligated to pay the principal,
premium, if any, or interest on this bond and the issue of which it is one and neither the faith
and credit nor the taxing power of the State of Alaska or any political subdivision thereof is
pledged to the payment of the principal of, premium, if any, or interest on this bond or the
issue of which it is one.
It is hereby certified and recited that all conditions, acts and things required by law and
the Resolution to exist, to have happened and to have been performed precedent to and in the
issuance of this bond, exist, have happened and have been performed and that the issue of
bonds of which this is one, together with all other indebtedness of the Authority, complies in
all respects with the applicable laws of the State of Alaska, including, particularly, the Act and
is within every debt and other limit prescribed by said laws of the State of Alaska.
295637.6 -73-
This bond shall not be entitled to any benefit under the Resolution or be valid or
become obligatory for any purpose until this bond shall have been authenticated by the
execution by the Trustee of the Trustee's Certificate of Authentication hereon.
IN WITNESS WHEREOF, ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT
AUTHORITY has caused this bond to be signed in its name and on its behalf by the facsimile
signature of its Chairman or its Vice Chairman, and its corporate seal (or facsimile thereof) to
be hereunto affixed, imprinted, engraved or otherwise reproduced and attested by the facsimile
signature of its Secretary or its Assistant Secretary.
DATED: __________ _
ATTEST:
(Assistant) Secretary
295637.6 -74-
ALASKA INDUSTRIAL DEVELOPMENT
AND EXPORT AUTHORITY
By __________________________ _
(Vice) Chainnan
[FORM OF CERTIFICATE OF AUTHENTICATION ON ALL BONDS]
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This bond in one of the Series Bonds delivered pursuant to ----------------the within mentioned Resolution.
Trustee,
By __ ~----------------------Authorized Officer
13.2 Effective Date. This Power Revenue Bond Resolution shall take effect
immediately.
Power Revenue Bond Resolution approved and adopted by Alaska Industrial
Development and Export Authority on ------------
295<)37.6 -75-
ALASKA INDUSTRIAL DEVELOPMENT
AND EXPORT AUTHORITY
By ________________________ _
Chairman
ALASKA ELECTRIC LIGHT AND POWER COMPANY
Projected COPA for 1998 with Snettlsham owned by AIDEA
Sample Calculation Only
CALCULATION OF ANNUAL
COST OF POWER ADJUSTMENT
(1) Forecasted Cost of Fuel and Purchased Power for the Period
of January 1, 1998 through December 31, 1998:
Firm Purchased Power (kwh)
Projected Costs: ($ x 1 000)
Debt Service
AELP O&M Costs
AIDEA Admin Costs
Insurance
AELP Admin Costs
R&R Fund Contribution
Less: Debt Service lntere:
Less: Hatchery Sales
7,015
1,472
100
190
100
653
-401
-60
9,069
Snettisham
Estimated
Energy Use
253,733,094
Unit
Cost
$0.0357
Diesel Fuel Not included, as the purpose of this
Total
$9,069,000
(gallons)
(kwh) calculation is to show Snettisham impacts only
(2) Less: Costs included in base rates:
Total Firm Power Purchased & Produced
(3) Estimated changes to COPA Balancing Account
Will assume no existing balance.
Estimated ending balance, December 31, 1997
(4) Total of (1)-(2)-(3} above
253,733,094
(5) Estimated Kwh sales: January 1, 1998-December 31, 1998:
(6) Cost of Power Adjustment per kwh for
the 1998 Year (line 4/line 5)
$0.0347 (8,804,538)
0.00
264,462
298,640,400
$0.0009