HomeMy WebLinkAboutMahoney Lake Hydro Correspondance 20002 ALASKA INDUSTRIAL DEVELOPMENT
AND EXPORT AUTHORITY / = ALASKA
iE =SENERGY AUTHORITY
480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 269-3000 FAX 907 / 269-3044
August 22, 2000
Mr. John Dunker
Water Resource Officer
Department of Natural Resources 400 Willoughby Avenue, 4" Floor
Juneau, Alaska 99801-1796
Subject: Mahoney Lake Hydro Economic Information
Dear Mr. Dunker:
In response to your request, | am enclosing copies of the Southeast Intertie Review, dated April
12, 1999, and the Indemnification Agreement between Ketchikan Electric Company and the
Alaska Energy Authority, dated June 22, 1998.
If | can be of further assistance or provide additional information, please do not hesitate to
contact me.
Sincerely,
Acting Executive Director
SENT BY: WOHLFORIH 7- 1-97 > 7:35AM ; WOHL TH? : # 2/3
WOHLFORTH, ARGETSINGER, JOHNSON & BRECHT:
suena. eREGHT A PROPESSPOWAL CORPORATION Q TELEPHONE CHERYL RAWLS BROOKING - CYNTHIA L. CARTLEDOE (90T) 278-409
BeGuana 4. Sueree ATTORNEYS ATLAW
RADLEY E. seven” 900 WEST 6TH AVENUE, SUITE 400
ERI¢ £. WOKLFORTH ANCHORAGE, ALASKA 09501-2048 ccineaieeEaveas
PETER AROETUINGER
July 1, 1997
Jim McMillan
Deputy Director-Credit
Alaska Industrial Development and Export Authority
480 West Tudor Road
Anchorage, Alaska 99503
RE: Preliminary Eligibility Application of Cape Fox Corporation for Tax Exempt Financing of Electrical Energy
Our File No. 3730.0006
Dear Jim:
We have reviewed the preliminary eligibility application of Cape Fox Corporation
(the "Corporation") for purposes of determining preliminarily whether financing of a
hydroelectric facility (the "Project”) may be accomplished with the issuance of tax exempt
bonds. The Corporation represents that the proposed Project consists of a lake tap of
upper Mahoney Lake, a powerhouse and hydroturbine generator and functionally related
and subordinate property. The Project will be operated by the Corporation and the City of
Saxman with all power to be sold to Ketchikan Public Utilities ("KPU"). The proposed
Project will intertie with KPU through the existing Swan Lake transmission line. Our preliminary opinion is that the Project will not qualify for tax exempt financing.
The Internal Revenue Code of 1986, as amended (the “Code") permits tax exempt financing for the local furnishing of electrical energy, subject to certain conditions found
therein. Section 142(f) of the Code. In order that the Project qualify as a facility for the
local furnishing of electric power, the following five preliminary requirements must be satisfied:
1; The property must be either depreciable property or land;
25 The property must be used to produce, collect, generate, transmit, store,
distribute or convey electricity;
3. The property must be used in the trade or business of furnishing electricity;
SENT BY :WOHLFORTH 7- 1-97 + 7:36AM 3 WOH! ‘The IS
Jim McMillan
July 1, 1997
Page 2
4. The property must be part of a system which provides service to the general populace of no more than two contiguous counties or their political equivalent, regardless of whether the facility itself is in the service area; and
5. The facility for the local furnishing of electric power must (a) be used by a person who is engaged in the local furnishing of that energy source on January 1, 1997,
and be used to provide service within the area served by such person on January 1, 1997 (or within a county or city any portion of which is within such area), or (b) the facility will
be used by a successor in interest to such person for the same use and within the same
service area as described in (a) above.
Treas. Regs., Section 1.103-8(f}(2)(iii), and; Section 147(f)(3) of the Code.
Based on the information provided by the Corporation, it appears that only three, possibly four, of the five preliminary requirements will be satisfied. The fourth requirement
relating to the two-county rule, is satisfied only if the electrical energy provided by the
Project, and sold by KPU, is confined to the Ketchikan Gateway Borough. If the service
area exceeds the Ketchikan Gateway Borough and extends into an “unorganized borough"
this requirement will not be satisfied. In any event, the fifth requirement is not satisfied
under the terms of the proposed financing.
Section 147(f)(3) requires that proceeds be used by an entity that is engaged in the
local furnishing of power on January 1, 1997 and be used to provide service within the
service area on January 1, 1997. The Corporation is a start-up corporation and has not
been in operation since January 1, 1997 and thus this requirement is not satisfied.
Further, the Corporation is not a successor in interest to KPU (an alternative which would
have permitted the Corporation to bypass the January 1, 1997 deadline).
Based on the foregoing, we are of the opinion that the Project does not qualify for
tax exempt financing.
Sincerely,
WOHLFORTH, ARGETSINGER,
JOHNSON OL
Cynthia L. Cartledge
co F, James McConnell
F. James McConnell & Associates
AFFO5S21/3730,0008
SENT BY : WOHLFORTH 7- 1-97 3 7:35AM 5 WOH = TH i# 173
WOHLFORTH, ARGETSINGER, JOHNSON & BRECHT
A Professional Corporation Attorneys at Law
900 West 5th Avenue, Suite 600
Anchorage, Alaska 99501
FACSIMILE COVER PAGE
FILE NO.: 3730.0006 DATE: July 1, 1997
PLEASE DELIVER THE FOLLOWING PAGES TO:
NAME: SUE M. WEIMER / Loan Servicing Officer
FIRM: Alaska Industrial Development and Export Authority
CITY: Anchorage
TELEPHONE NUMBER: (907) 269-3000 FAX NUMBER: (907) 269-3044
FROM: Cindy Cartledge
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TONY KNOWLES, GOVERNOR
e nl
« 400 Willoughby Avenue, 4th Floor
Juneau, Alaska 99801-1796
Phone: (907) 465-3400
FAX: (907) 586-2954
DEPARTMENT OF NATURAL RESOURCES
DIVISION OF MINING, LAND AND WATER
26 July 2000
Keith Laufer, Executive Director
Alaska Energy Authority
Alaska Industrial Development & Export Authority
480 West Tudor
Anchorage, AK 99503
Re: | Mahoney Lake Hydro economic information
ADNR file # LAS 14359
Dear Mr. Laufer:
| am preparing to adjudicate Cape Fox Corporation’s application for a water right for the Mahoney
Lake Hydro Project. Under the Alaska Water Use Act, we must make a finding of the public interest,
and in so doing must consider the effects of the proposed appropriation on benefits to the project
developer and on general economic activity. Since we lack in-house economic analysis resources,
we must rely on a review of available economic information and analysis by others.
| respectfully request your advice and assistance in referring me to such economic information as
may be available regarding the Mahoney Lake Hydro Project, particularly any data or analysis
developed by AEA, AIDEA, or other agency. (I already have the FERC license applicant's “Costs &
Financing” report included as Exhibit D in the FERC license application; the FERC applicant's
“Economic & Financial Feasibility Assessment of the Swan/Tyee Lakes Intertie Project”, included as
Appendix H of the FERC license application; FERC’s Developmental Analysis contained in the Final
Environmental Assessment; and the FERC applicant's and KPU’s comment letters in Appendix D of
the Final EA.)
Also, | note in the 22-23 July Ketchikan Daily News that KEC has requested AEA’s opinion on KEC’s
interpretation of the Four Dam Pool power sales agreement. | would appreciate receiving a copy of
AEA’s response, and of any other analyses of this issue that AEA might produce.
Thank you for any assistance you may be able to provide.
eZ of. ce La 4
John Dunker
Water Resource Officer
Ce: Percy Frisby, Rural Energy Manager, AEA
Gary Prokosch, Chief, Water Resource Section, ADNR
“Develop, Conserve and Enhance Natural Resources for Present and Future Alaskans”
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