HomeMy WebLinkAboutRes 2020-07-Resolution-Signed-SealedALASKA ENERGY AUTHORITY
RESOLUTION NO. 2020-07
RESOLUTION OF THE ALASKA ENERGY AUTHORITY AUTHORIZING THE PURCHASE OF STERLING QUARTZ
CREEK TRANSMISSION LINE; APPROVING FINANCING TERMS; AND RELATED MATTERS
WHEREAS, the Alaska Energy Authority (the "Authority") and Homer Electric Association ("HEA")
entered into a Letter of Intent dated May 22, 2020, and approved by the Bradley Lake participating
utilities, whereby HEA will sell, and AEA will purchase and assume all rights and obligations in the
approximately 39.3 mile 115 kV transmission line between the Sterling Substation and the Quartz Creek
Substation and all associated rights -of -way and permits ("SSQ Line"), and acquire all of HEA's rights and
obligations in the 69 kV line located east of the Sterling Substation and transmission capacity on HEA's
line between Soldotna Substation and Sterling Substation (collectively, the "Proposed Transaction");
and
WHEREAS, the Authority intends to finance costs of Proposed Transaction, including financing costs and
necessary reserve deposits, through the issuance of power revenue bonds ("Bonds") issued under the
terms of the Bradley Lake Power Revenue Bond Resolution ("Bond Resolution") and secured, in part, by
payments received under and pursuant to the Power Sales Agreement ("PSA"); and
WHEREAS, the Bonds will be purchased by the Alaska Industrial Development and Export Authority
pursuant to conditions set forth in a financing term sheet ("Term Sheet"), which shall be in substantially
the form present to and made part of the records of this meeting; and
WHEREAS, the Proposed Transaction is intended to resolve: 1) the issues concerning the transmission of
energy from the Bradley Lake Hydroelectric Project (Project) off the Kenai Peninsula; and 2) the current
litigation between HEA and the other participating utilities (Golden Valley Electric Association,
Matanuska Electric Association, Chugach Electric Association, Municipal Light and Power and the City of
Seward)'; and
WHEREAS, benefits derived from the Proposed Transaction include:
• Cost Sharing of Purchase -The participating utilities, through the Bradley Lake Power Management
Committee ("BPMC"), will divide and share the cost of the Proposed Transaction (debt service on
the financing), operation and maintenance of the line in accordance with their respective shared
interest pursuant to the terms of the PSA.
• Greater Access to Resources - Allow for timely response, with shared utility resources, in the event
of immediate needs to the Project; and.
Better Ongoing Cost Alignment - Align the allocation of resources with traditional utility
methodology, i.e. cost causer/cost payer. From a financial perspective, there would be greater
The Proposed Transaction includes the dismissal of all regulatory proceedings, litigation, and appeals associated
with Case No. 3AN-14-06125 CI and the Complaint pending before the BPMC. There was an additional legal action,
3AN-14-08890 CI, on the same subject matter that AEA was a party to. AEA had intervened in this action to protect
certain financial issues related to the Project. It concluded in 2019.
(01024317)
resources available for use on this transmission segment, and the ongoing costs will be spread more
equitably to a wider group of ratepayers benefiting from Project power.
Increased Reliability - Reduction in risk of extended outages and related costs for power for
ratepayers throughout the Railbelt.
The Proposed Transaction results in the SSQ Line becoming part of the Project under the oversight
of the BPMC. Upgrades to the SSQ Line are needed to address significant issues with line losses and
when corrected will provide additional energy flows for the participating utilities in the North. The
transmission capacity allocations for the lines delivering energy from the Project have now been
established which should assist the utilities in scheduling delivery of their Project energy deliveries;
and
WHEREAS, the Department of Law Memorandum Opinion dated May 20, 2020 finding that the
definition of "Required Work" set forth in the PSA could include the Proposed Transaction, subject to
the approval of all parties to the PSA and determination that the work is necessary to keep the Project in
good and efficient operating condition, consistent with national industry standards and sound
economics (Attached DOL Memorandum on Required Project Work, May 20, 2020); and
WHEREAS, at the request of the Authority and the BPMC, the Bradley 0 & D subcommittee commenced
review and analysis of the Proposed Transaction to determine whether the Proposed Transaction is
necessary to keep the Project in good and efficient operating condition consistent with sound economics
and national standards. On July 17, 2020, the Bradley 0 & D committee finalized and issued its report
on the Proposed Transaction which is attached hereto and made part of the BPMC's Resolution No 20-
02 (Bradley 0 & D Report) attached. The BPMC is aware and understands the Authority will have the
findings and conclusions of the Bradley 0 & D committee reviewed and certified by an independent
consulting engineer; and
WHEREAS, the members of the BPMC support the Proposed Transaction, subject to any required final
approval of the governing bodies of the individual members (attached BPMC Resolution 20-03); and
WHEREAS, the Proposed Transaction is contingent upon:
• A determination that all costs associated with the Proposed Transaction are deemed Required
Project Work under the PSA and Bond Resolution;
• The receipt of working permits (including acceptable buffer zones) for authorization to use and
occupy certain lands in the Kenai National Wildlife Refuge for the SSQ Line and the right of way
of the 69 kV Line with terms acceptable to the BPMC;
• Execution by all the utilities of definitive agreements delineating terms and conditions of the
Proposed Transaction;
• Amendment to the various Project Agreements by the participating utilities reflecting the terms
of the Proposed Transaction;
• Approval of a Financing and Term Sheet by the Authority's Board, BPMC and the participating
utilities' Boards of Directors; and
• Issuance of the Bonds to finance qualified acquisition costs of the Proposed Transaction, funding
necessary reserves and payment of costs of issuance; and
WHEREAS, the cost of the Proposed Transaction is not to exceed $16 million plus costs of the Bond
issuance and funding of necessary reserves; and
(01034317)
WHEREAS, carrying out the Proposed Transaction is in furtherance of the Authority's statutory powers
and consistent with the Authorities mission to 'reduce the cost of energy in Alaska' and advances the
public interest.
NOW, THEREFORE BE IT RESOLVED BY THE ALASKA ENERGY AUTHORITY AS FOLLOWS:
Section 1. The Executive Director of the Authority is hereby authorized, directed and empowered
to continue efforts in conjunction with the Proposed Transaction, including preliminary efforts necessary
and desirable to enable the Authority to issue bonds under the Bond Resolution, supported by the moral
obligation of the State of Alaska.
Section 2: That the form and content of the Term Sheet, in substantially the form and content
presented and made part of this Resolution, is hereby approved.
Section 3. The Executive Director of the Authority is hereby authorized and empowered to
perform such acts for and on behalf of the Authority necessary or appropriate in order to implement
and carry out the intent and purpose of this Resolution.
Section 4. The Resolution shall become effective immediately upon its passage and approval.
DAT'af moorage, Alaska this 5t" day of August 2020.
upRPp �.sO
Chair
SEAL
1Q7$
AIL
Secretary
{01034317}