HomeMy WebLinkAboutRes 2017-03-Battle Creek
ALASKA ENERGY AUTHORITY
RESOLUTION NO. 2017-03
RESOLUTION OF THE ALASKA ENERGY AUTHORITY AUTHORIZING
STAFF TO PURSUE DEVELOPMENT AND FINANCING FOR THE
BATTLE CREEK DIVERSION PROJECT ASSOCIATED WITH THE
BRADLEY LAKE HYDROELECTRIC PROJECT
WHEREAS, the Alaska Energy Authority (the “Authority”), in conjunction with the Bradley
Project Management Committee (the “BPMC”), has undertaken efforts to develop and finance the
Battle Creek Diversion Project (the “Battle Creek Project”) associated with the Bradley Lake
Hydroelectric Project (the “Bradley Lake Project”);
WHEREAS, the Battle Creek Project includes the construction of a concrete diversion
dam, three miles of road, and a five-foot diameter pipe under the road;
WHEREAS, construction of the Battle Creek Project will divert into Bradley Lake sufficient
water from the West Fork of Upper Battle Creek to increase by 37,300 MWh the average annual
production of power from the Bradley Lake Project, roughly equivalent to a ten percent (10%)
increase in Bradley Lake power production;
WHEREAS, development activities undertaken or funded to date include an application to
the Federal Energy Regulatory Commission (“FERC”) to amend the Bradley Lake FERC license
to add the Battle Creek Project, final engineering, estimation of construction costs, financial
analysis of the Battle Creek Project’s economics, analysis of financing options available to the
Authority and the BPMC, and environmental and hydrological studies and field investigations;
WHEREAS, in September 2016, FERC approved an amendment to the Bradley Lake
FERC license to incorporate the Battle Creek Project into the Bradley Lake Project;
WHEREAS, the February 24, 2017 Opinion of Probable Construction Cost by Engineering
Solutions, LLC, (Exhibit F) which excludes the 112 page cost estimate detail report, estimates a
total construction cost (without interest during construction) of $46.4 million, consisting of $41.9
million of capital costs (bid plus contingency), and $4.5 million of indirect costs (the Authority’s
labor, engineering during construction, environmental survey), and subsequent development
work identified an additional $0.2 million of construction costs for stream gaging, resulting in a
total estimated construction cost (without interest during construction) of $46.6 million;
WHEREAS, the Authority’s financial advisor, PFM Financial Advisors LLC, has analyzed
and advised that the most cost effective plan available to finance the Battle Creek Project is for
the Authority to successfully apply for an allocation of volume cap for New Clean Renewable
Energy Bonds (NCREBs) from the Internal Revenue Service, and to issue NCREBs as additional
Battle Creek Project
Resolution No. 2017-03 Page 2
bonds under the existing Bradley Lake Power Revenue Bond Resolution secured, in part, by the
state’s moral obligation;
WHEREAS, NCREBs are a type of qualified tax credit bonds which, at the option of the
issuer, may be sold as direct pay bonds for which the federal government provides an interest
rate subsidy as set forth in IRC § 6431(f); the Authority’s financial advisor estimates that NCREBs
sold on or about the date hereof would have an estimated effective interest rate of 1.49% over 30
years;
WHEREAS, PFM Financial Advisors LLC, prepared the “Battle Creek Diversion Project
Financing Options” dated August 10, 2017, copy attached (“PFM Financing Options”), which
provides the estimated wholesale cost of power from the Battle Creek Project over 30, 50, and
100 years, under various financing options (e.g., see PFM Financing Options at pages 4 and 5);
WHEREAS, the BPMC utilities have expressed support for continuing the development
and financing of the Battle Creek Project as follows:
1. June 28, 2017 BPMC Resolution 2017-01, (Exhibit A) – authorizes and supports the
efforts of BPMC utilities desiring to participate in the Battle Creek Project to work with
the Authority to finance and bid the Project in 2017;
2. August 3, 2017 BPMC letter of support, (Exhibit B), which describes how the Battle
Creek Project will fit into the future energy needs of the Railbelt.
3. July 28, 2017 BPMC motion, (Exhibit C) - provides funding and directs the Authority to
proceed with the immediate tasks the Authority identified to continue progress on the
Battle Creek Project;
4. July 26, 2017 Chugach Electric Association, Inc. Resolution, (Exhibit D) - Board of
Directors authorizes its utility to participate in the Battle Creek Project at 100% if other
BPMC utilities choose not to participate;
5. August 8, 2017 Homer Electric Association Resolution, (Exhibit E) – Board of Directors
authorizes its utility to participate in the Battle Creek Project.
WHEREAS, both the BPMC utilities and the state have provided for funding activities
necessary to develop the Battle Creek Project as follows:
1. BPMC Utility Funding Sources:
a. $1.17 million from the Renewal and Contingency Fund (a Bradley Bond fund which
requires BPMC utilities to replenish amounts used within four years);
b. $800,000 payable by BPMC utilities participating in the Battle Creek Project,
pursuant to October 19, 2016 BPMC motion;
c. $400,000 payable by BPMC utilities participating in the Battle Creek Project
(Chugach Electric Association, Inc.; Homer Electric Association, Inc.; Matanuska