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HomeMy WebLinkAboutBradley Lake PMC-Teleconference Mtg. Wednesday, December 9, 1998 1Bradley Lake PROJECT MANAGEMENT COMMITTEE MEETING Jae 7 Fal we, (Date) ALDPEA -Telcurkrene. (Location) PLEASE SIGN IN No. NAME REPRESENTING 1 eal a Le Co “4 A E. A 2 < & hie. Geary Le | Pe siecle AeA LALALLE 9 10 ll 12 t— 13) 14 15 16 18 Ae OAC 19 20 21 | 22 92Q2\IT9884 ALASKA INDUSTRIAL DEVELOPMENT =, > ¢ AND EXPORT AUTHORITY /= ALASKA i =ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 269-3000 FAX 907 / 269-3044 BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING AGENDA Wednesday, December 9, 1998 — 9:00 a.m. TELECONFERENCE Or, By Electronic Media at AIDEA — 480 W. Tudor Road A CALL TO ORDER Bjornstad 2. ROLL CALL (for Committee members) 3. PUBLIC ROLL CALL (for all others present) 4. PUBLIC COMMENT 5. AGENDA COMMENTS 6. APPROVAL OF MEETING MINUTES — Not Available 7. NEW BUSINESS A. Bradley Lake Bond Refunding Griffith 8. COMMITTEE COMMENTS A. Next Meeting Date Bjornstad 9! ADJOURNMENT BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING MINUTES Alaska Industrial Development and Export Authority 480 West Tudor Road Anchorage, Alaska Regular Meeting — VIA TELECONFERENCE Wednesday, December 9, 1998 — 9:00 a.m. 1. CALL TO ORDER Chairman Eugene Bjornstad called the meeting of the Bradley Lake Hydroelectric Project Management Committee to order at 9:00 a.m. on Wednesday, December 9, 1998, in the Board Room of the Alaska Industrial Development and Export Authority, Anchorage, Alaska, to conduct the business of the Committee per the agenda and public notice. 23 ROLL CALL Roll was called by Shauna Dean. The following members were present, and a quorum was established: Eugene Bjornstad, Chairman Chugach Electric Association Mike Kelly (teleconference) Golden Valley Electric Association Norm Story (teleconference) Homer Electric Association Dennis McCrohan Alaska Energy Authority Dan Helmick (teleconference) Anchorage Municipal Light & Power 3. PUBLIC ROLL CALL Others Present: Valorie Walker, Alaska Energy Authority Shauna Dean, Alaska Energy Authority Joe Griffith, Chugach Electric Association Ken Vassar, Wohlforth, Argetsinger, Johnson & Brecht Jim Seagraves, Seagraves & Hein, LLC (teleconference) John Moore, Prudential Securities (teleconference) Jim Patras, Homer Electric Association (teleconference) Rick Eckert, Homer Electric Association (teleconference) Rick Baldwin, Baldwin & Butler (teleconference) Robert Hanson, Golden Valley Electric Association (teleconference) Ron Saxton, Ater Wynne Hewitt Dodson & Skerritt (teleconference) Bradley Lake PMC Meeting Minutes Wednesday, December 9, 1998 Page 2 of 5 4. PUBLIC COMMENT There were no public comments. 5. AGENDA COMMENTS Chair Bjornstad stated that MEA indicated that they do not intend to participate in this conference call because they have not had enough time to review the documents. 6. APPROVAL OF MEETING MINUTES — Tuesday, November 3, 1998 Chair Bjornstad noted that the meeting minutes were not available for this meeting. le NEW BUSINESS 7A.) Bradley Lake Bond Refunding Mr. Saxton reviewed the Consenting and Approving Resolution for the PMC stating that the resolution is a preliminary step to indicate that the PMC will move forward with this transaction once the Bond Refunding documents are in substantially final form. He said the Approving Resolution is anticipated to be presented to the PMC in January 1999 when the Bradley Lake Bond Refunding documents are in final form. Mr. Saxton said the Alaska Energy Authority is having a board meeting on December 16, 1998, and the Board is going to be asked to approve going forward with this transaction. The Board would like an indication from the utilities that it is the utilities’ intention to go forward with this transaction once the AEA Board has taken their action. Mr. Saxton stated that even though MEA is absent at this meeting the Consenting and Approving Resolution can be passed with a majority vote. However, there must ultimately be a unanimous vote for the transaction to close because the transaction will require all of the utilities to sign the certificates, have their attorney’s cooperate with the reliance letters, etc. Mr. Kelly stated that MEA indicated at previous meetings that they support this transaction. Mr. Saxton said that over the past month his office has had conversations with most of the utilities. There were meetings held in Seattle last week and Steve Ellis attended for Matanuska, Rick Baldwin for Homer, ML&P, Chugach, etc. had people there, so | believe each of you is individually working with me and my office in addition to this collective work. Mr. Bjornstad said the City of Seward did not respond to Roll Call so it is assumed they are not on line for this conference call. Mr. Saxton said Seward is in a different position than the rest of the utilities because of their small percentage. Because of their 1% share, they are generally excluded from the Bradley Lake PMC Meeting Minutes Wednesday, December 9, 1998 Page 3 of 5 requirements that the rest of the utilities have about delivering some of these key documents. Mr. Jim Seagraves stated Prudential has been running numbers and the current numbers show a present value savings on the transaction of approximately $3.3 million for 11% of the amount of bonds outstanding that will be refunded. He said this is considered an excellent savings level. Mr. Saxton said the savings are not a lump sum up front but will show up in the future through reduced annual debt service payments. Mr. Seagraves affirmed Mr. Saxton’s statement saying the current structure shows approximately $300,000 in annual actual dollar savings for approximately the next 16 years. This is the real reduction in the debt service payments every year. In response to PMC members, Mr. Seagraves stated the bonds that are issued typically have an optional redemption. The bonds can be called out of the market and replaced. Having the option to redeem bonds in the future has its advantages. Discussions ensued as to the advantages of optional redemption. Mr. Seagraves said the decision to have optional redemption for the bonds will not be needed until right at pricing so there is time for discussion on the subject. Mr. Seagraves said that for this transaction Prudential has a proposed underwriter’s discount of $8.50 a bond. He said, in his opinion that’s a little higher than the market would dictate today. There are provisions in the Forward Purchase Agreement that are still being sorted out. We want to make sure that it is a balanced and fair Agreement for both sides. One of the provisions is that Prudential has requested they be paid at closing whether this transaction occurs or not. A lot of things could happen outside of anybody’s control that could cause this transaction to fail. There could be a collapse of the stock market, banking moratoriums, things that are not likely to occur especially with a short forward period like this. We believe Prudential’s request to be paid at closing is reasonable — they will have to sell the bonds anyway. On the other hand, we have asked that if they fail to perform for some reason; either the market goes bad or interest rates go way up, they have to pay us the savings that we would have gotten otherwise. We are still negotiating these aspects of the deal. John Moore and Prudential have been very cooperative on all of these issues and | don’t think that we are going to have any problem negotiating the final details of this transaction as it moves along. Mr. Griffith said the bond insurance premium is yet to be finalized, there is an estimate that is certainly in the ballpark. He said the other decision to make is a percent of the issue to hold out to preserve the funds. He asked if the 10% discussed earlier is satisfactory. Mr. Vassar affirmed that the 10% will be satisfactory. Mr. Griffith said the option is whether we do a three-month forward or wait for the call date. Bradley Lake PMC Meeting Minutes Wednesday, December 9, 1998 Page 4 of 5 Mr. Seagraves said that if you do a forward transaction you would pay a small interest rate penalty for that benefit. Roughly five to seven basis points higher than you would have paid if you would have done a current issue on that date. We believe it is more prudent to get a good market in January and pay a small penalty, than to wait a few months and do it as a current refunding without the penalty. The prevailing view is that if the market is really good and attractive and the savings are where we want to be in early January, the prudent thing to do would be to complete the transaction. Mr. Saxton said the bonds could not be settled until April because of the provisions of the existing bonds. We are scheduling a meeting of the attorneys in Seattle on December 21“. Then on January 13" we would have a pricing and a PMC meeting later in the day to approve the transaction. The paper closing would be around February 1“ and would not be settled until April. However, if we get to January and the advice we receive is that we might not want to close, we can put the transaction on hold for as long as we wanted. The goal is to be ready to take the opportunity if interest rates are good in January or have the ability to hold and close later if the advice was to the contrary. One question, on the previous bond re-issuances where we have had forward delivery, those most recent two issues, how did the underwriters get paid, they didn’t get their money up front did they? Mr. Seagraves said in the previous bond re-issuances, it is my understanding from conversations that the provisions in the agreements were the same as the ones that we are currently negotiating. Prudential would like to be paid at the settlement date, whether it settles or not, which is a current standard in the industry. We don’t feel this is unreasonable, however we also believe it is reasonable for the utilities to ask for a quid pro quo should they back out of the transaction the utilities should get paid as well. Ms. Walker clarified that Goldman has received no compensation to date and will not receive compensation until the two series close and there will be compensation in April of 1999 and April of 2000, when the bonds actually settle. But, to date on that transaction, the only entities that have been paid have been our contractors — the utilities’ and the Authority’s contractors. Mr. Seagraves stated that is the same way the document is written for this transaction. Mr. Saxton said we are looking for approval of the Consenting and Approving Resolution. MOTION: Mr. Kelly moved to approve the Consenting and Approving Resolution. Seconded by Mr. Story. There being no further discussion, the question was called. A roll call vote was taken, and the motion passed unanimously. Mr. Seagraves indicated they would like to have a teleconference on January 5, 1999, with the underwriters to discuss the conditions of the market and whether the conditions are good enough to proceed with the forward transaction before the Preliminary Official Statement is sent out. He said we can do that independently, but it seemed prudent to include the PMC in that process. Bradley Lake PMC Meeting Minutes Wednesday, December 9, 1998 Page 5 of 5 8. COMMITTEE COMMENTS Chair Bjornstad said the committee needs to consider voting on new officers for the PMC at the next meeting. A. Next Meeting Date It was the consensus of the Committee that the next meetings of the Bradley Lake Hydroelectric Project Management Committee be set for January 5" at 9:00 a.m. and also on January 13" at 9:00 a.m. 9. ADJOURNMENT MOTION: Mr. Kelly moved to adjourn. Seconded by Mr. Story. There being no objection and no further business of the Committee, the meeting was adjourned at 9:35 a.m. BY: L 2 Eugene Bjornstad, Chair attest. G7 Lu uy V Me bobo. Alaska Energy Authority, Secretary BEAL Why /afifeh ¢ Fh a oe /2ecorfe rence 5 St A Ln a= Aa endo Crt ile — er A; Not enol ive ty yeview 9 OL Mintes ee Whe Aris Mecre—tr_ Helmick 7A) Reludiig - goes kL ade, be Mose Redon LOIN te m Yoearis » HEA Abeal Fivatization bods Howen— (ICA Chek Elon HEA Cpserton, A ppg. 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