HomeMy WebLinkAboutBradley Lake PMC Meeting December 17, 2008 3Audited Financial Statements
and
Other Financial Information
BRADLEY LAKE
PROJECT MANAGEMENT COMMITTEE
OPERATING AND REVENUE FUNDS
Years ended June 30, 2008 and 2007
SWALLING & ASSOCIATES
Certified Public Accountants & Business Advisers
BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE
OPERATING AND REVENUE FUNDS
Financial Statements and Other Financial Information
Years ended June 30, 2008 and 2007
Contents
Page
Report of Independent Auditor 1
Balance Sheets 2
Statements of Revenues and Expenses 3
Statements of Cash Flows 4
Notes to Financial Statements 5-9
Report of Independent Auditor on Additional Information 10
Statements of Expenses 11
SWALLING & ASSOCIATES Pc
Certified Public Accountants & Business Advisers
REPORT OF INDEPENDENT AUDITOR
Bradley Lake Project Management Committee
Anchorage, Alaska
We have audited the accompanying special-purpose balance sheet of the Bradley Lake Project
Management Committee (a project management committee) Operating and Revenue Funds as of
June 30, 2008, and the related special-purpose statements of revenues and expenses, and of cash
flows for the year then ended. These financial statements are the responsibility of the Bradley
Lake Project Management Committee. Our responsibility is to express an opinion on these
financial statements based on our audit. The special-purpose financial statements of the Bradley
Lake Project Management Committee Operating and Revenue Funds as of June 30, 2007 and for
the year then ended were audited by other auditors who have ceased operations. Those auditors
expressed an unqualified opinion on those special-purpose financial statements in their report
dated November 2, 2007.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
The accompanying special-purpose financial statements were prepared for the purpose of
complying with, and in conformity with the accounting requirements specified in Note A, and are
not intended to be a presentation in conformity with generally accepted accounting principles.
In our opinion, the special-purpose financial statements referred to above present fairly, in all
material respects, the assets, liabilities and surplus of the Bradley Lake Project Management
Committee Operating and Revenue Funds as of June 30, 2008, and its revenue and expenses and
its cash flows for the year then ended, on the basis of accounting described in Note A.
This report is intended solely for the information and use of the Bradley Lake Project
Management Committee and is not intended to be and should not be used by anyone other than
this specified party.
Salling E Gacocute 7 FAC.
December 12, 2008
3201 C Street, Suite 405 : Anchorage. Alaska 99503 Q Independent member of DFK International -a worldwide association _ . . of independent accounting firms and business advisers Ph 907.563.7977 + Fax 907.561.7683 + www.swallingepas.com
BRADLEY LA... PROJECT MANAGEMENT VUMMITTEE
OPERATING AND REVENUE FUNDS
BALANCE SHEETS
June 30, 2008 and 2007
2008 2007
ASSETS
Current assets:
Investments (Note B) $ 2,299,171 $ 2,353,241
Other receivable 15,074 -
Prepaid expense 5 9,132 17,929
Total assets 23323377 2.371170
LIABILITIES AND SURPLUS
Current liabilities:
Due to other funds (Note D) $ 4,645 $ -
Accounts payable 256,108 643,508
Payable to utilities (Note E) 740,267 280,290
R & C repayment (Note A) 13322397, 1,447,372
Total liabilities Br 2323 377. $2,371,170
See accompanying notes to the financial statements.
2
BRADLEY LA... PROJECT MANAGEMENT WUMMITTEE
OPERATING AND REVENUE FUNDS
STATEMENTS OF REVENUES AND EXPENSES
Years ended June 30, 2008 and 2007
2008
Variance
Favorable 2007
Budget Actual (Unfavorable) Actual
Revenues:
Utility contributions,
net of surplus refund $ 16,389,588 $15,649,321 $ (740,267) $15,567,526
Interest receipts 1,304,527 1,776,915 472,388 1,875,539
Other miscellaneous - - - 5.656
Total revenue 17,694,115 17,426,236 (267,879) 17,448,721
Expenses, fixed asset
replacements, transfers
and debt service:
Operations and maintenance 4,995,710 4,716,639 279,071 4,891,214
Debt service 12,269,850 12,269,850 - 12,273,950
Arbitrage transfer 258,555 274,959 (16,404) 258,555
Fixed asset replacements 122,000 116,788 5,212 -
Interfund transfer 48.000 48.000 - 25,002
Total expenses, fixed
asset replacements,
transfers and debt
service 17,694,115 17,426,236 267,879 17,448,721
Excess of revenues over
expenses, fixed asset
replacements, transfers
and debt service $ - § - §$ - § -
See accompanying notes to the financial statements.
3
BRADLEY LA.uw PROJECT MANAGEMENT VCUMMITTEE
OPERATING AND REVENUE FUNDS
STATEMENTS OF CASH FLOWS
Years ended June 30, 2008 and 2007
2008 2007
Cash flows from operating activities:
Excess of revenues over expenses,
fixed asset replacements, transfers
and debt service $ - $ -
Adjustments to reconcile excess of revenues
over expenses, fixed asset replacements,
transfers and debt service to net cash provided
by (used in) operating activities:
Increase in accounts receivable (15,074) -
Decrease in utility contributions receivable - 70,648
Decrease in prepaid expense 8,797 2,596
Decrease in accounts payable (387,400) (22,618)
Increase (decrease) in amounts due
to other funds 4,645 (4,714)
Increase in payable to utilities 459,977 280,290
(Decrease) increase in R & C repayment (125,015) 1,034,953
Net cash provided by (used in)
operating activities (54,070) 1,361,155
Available cash and cash equivalents, beginning of year 2.353.241 992.086
Available cash and cash equivalents, end of year $2,299,171 $ 2,353,241
Supplemental disclosure of cash flows information:
Interest paid $_ 6,456,900 $6,470,138
See accompanying notes to the financial statements.
4
BRADLEY LAI... PROJECT MANAGEMENT CUMMITTEE
OPERATING AND REVENUE FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 2008 and 2007
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Description of Business: The Bradley Lake Project Management Committee (the Committee)
was established pursuant to Section 13 of the Agreement for the Sale and Purchase of Electric
Power (Power Sales Agreement) dated December 8, 1987. The purpose of the Committee is to
arrange for the operation and maintenance of the Bradley Lake Hydroelectric Project (the
Project), which became operational in September 1991, and the scheduling, production and
dispatch of power. The members of the Committee include the Alaska Energy Authority (AEA)
and the five purchasers under the Power Sales Agreement - Chugach Electric Association, Inc.;
Golden Valley Electric Association, Inc.; the Municipality of Anchorage (Municipal Light &
Power); the City of Seward (Seward Electric System); and the Alaska Electric Generation &
Transmission Cooperative, Inc. (AEG&T). AEG&T assigned its rights pertaining to Homer
Electric Association, Inc. (HEA) under the Power Sales Agreement to Alaska Electric and
Energy Cooperative, Inc. (AE&EC) in 2003. HEA and the Matanuska Electric Association, Inc.
(MEA) are additional parties to the Power Sales Agreement but are included as power purchasers
for purposes of representation while AEG&T and AE&EC have no direct vote as a consequence
of the individual representation of HEA and MEA.
Section 13 of the Power Sales Agreement delineates other Committee responsibilities, including:
establishing procedures for each party's water allocation, budgeting for annual Project costs and
calculating each party's required contribution to fund annual Project costs. Committee approval
of operations and maintenance arrangements for the Project, sufficiency of the annual budgets
and wholesale power rates and the undertaking of optional Project work requires a majority
affirmative vote and the affirmative vote of AEA.
The Power Sales Agreement extends until the later of: 1) 50 years after commencement of
commercial operation or 2) the complete retirement of bonds outstanding under the AEA Power
Revenue Bond Resolution along with the satisfaction of all other payment obligations under the
Power Sales Agreement. Renewal options for additional terms exist.
Establishment of Trust Funds: Article V, Section 502 of the Alaska Energy Authority's Power
Revenue Bond Resolution established a Revenue Fund and an Operating Fund, including an
Operating Reserve account, to be held by AEA. In actuality these funds, along with the Debt
Service, Excess Investment Earnings (arbitrage), and various construction funds related to the
Bradley Lake Hydroelectric Project are all held by the Corporate Trust Department of US Bank
in Seattle, Washington.
BRADLEY LAnw PROJECT MANAGEMENT WUMMITTEE
OPERATING AND REVENUE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
June 30, 2008 and 2007
NOTE A: SIGNIFICANT ACCOUNTING POLICIES (Continued)
All deposits, including utility contributions and interest transferred from other funds, are made
into the Revenue Fund, which transfers amounts approximately equal to one-twelfth of the
annual operating and maintenance budget into the Operating Fund on a monthly basis.
Additional transfers are made from the Revenue Fund to the Debt Service Fund in order to
satisfy semiannual interest payments and annual principal payments on the Project's outstanding
bonds payable.
Interest earnings available for operations and maintenance are derived from the following funds:
Debt Service Fund; Operating Reserve Fund; Operating Fund; Revenue Fund; Capital Reserve
Fund; and the Renewal & Contingency Fund when the fund balance is $5,000,000 or greater.
Revenue and Expense Recognition: Utility contributions are recognized as revenue when due to
be received under the terms of the Power Sales Agreement. Transfers from other funds are
recognized when the transfer is made and interest earnings are recognized when received.
Operating and maintenance expenses are recognized when incurred, while transfers to Debt
Service Fund and Excess Earnings Funds are recognized when the transfer is made. Purchases of
fixed asset replacements are expensed when purchased. The Operating Fund reimburses the
Renewal and Contingency Reserve Fund (R & C Fund) for capital costs over a four year period.
Transfers to the R & C Fund for repayment of funds withdrawn for capital costs are equal to the
cumulative total of one-fourth of the amount of expenditure incurred each year. The balance due
to the R & C Fund at June 30, 2008 is $3,918,194.
Estimates: The preparation of the special-purpose financial statements of the Operating and
Revenue Funds requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Income Taxes: The Bradley Lake Project Management Committee is exempt from income
taxation under Section 501 (a) of the Internal Revenue Code.
NOTE B: INVESTMENTS
Substantially all of the balances in the following funds are invested in collateralized investment
agreements through the trust department of US Bank. The specified interest rate for monies from
the Operating and Revenue Funds invested in the agreements is 7.38% per annum. Balances at
June 30, 2008 and 2007 are as follows:
BRADLEY LAnusw PROJECT MANAGEMENT CUMMITTEE
OPERATING AND REVENUE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
June 30, 2008 and 2007
NOTE B: INVESTMENTS (Continued)
2008 2007
Operating Fund $ 447,323 $ 821,997
Revenue Fund 1,851,848 1,531,244
Total investments $2,229,171 $2,353,241
Investments are sold as needed to cover operating requisitions submitted to the trustee and are
therefore considered to be short-term and available for sale. Investments are presented at
aggregate cost, which approximates market value.
For purposes of the cash flow statements, management considers the full amount of the
investment balance to be cash available for operations.
NOTE C: MAJOR CONTRACTS AND AGREEMENTS
During May 1994, the Alaska Energy Authority entered into the Master Maintenance and
Operating agreement with the Committee. The purpose of the agreement is to establish contract
administration and budgeting procedures for maintenance and operation contracts of the Bradley
Lake Hydroelectric Project and to provide for the lease or other use of facilities and equipment in
a manner consistent with the requirements of the Power Sales Agreement. The term of the
Master Agreement is indefinite, remaining in effect until termination of the Power Sales
Agreement or until AEA no longer legally exists. This agreement authorizes AEA to enter into
any contracts necessary to perform operating or maintenance-type services to the Project, subject
to the approval of the Committee.
On behalf of the Committee, the AEA entered into an agreement with Chugach Electric
Association, Inc. (CEA) in August, 1996, for the provision of all services necessary to dispatch
the Bradley Project's electric power output. The dispatch agreement runs concurrently with the
wheeling and related services contract entered into by and among the parties to the Power Sales
Agreement in December 1987 and remains in effect for the term of the wheeling agreement
unless CEA ceases to be the output dispatcher.
In August 1996, the Alaska Energy Authority entered into an agreement with CEA on behalf of
the Committee for the provision of maintenance services for the Daves Creek and Soldotna SVC
Substations.
BRADLEY LA.x PROJECT MANAGEMENT CUMMITTEE
OPERATING AND REVENUE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
June 30, 2008 and 2007
NOTE C: MAJOR CONTRACTS AND AGREEMENTS (Continued)
An operation and maintenance agreement dated February 11, 1994, was executed between
Homer Electric Association, Inc. and the Alaska Energy Authority. This agreement provides for
the operation and maintenance of the Bradley Lake Hydroelectric Project by Homer Electric
Association, Inc. The agreement, as amended effective July 1; 2008, is through June 30, 2013
and automatically continues in successive five year terms thereafter unless terminated by either
party as set forth in the amended agreement. Generally, to avoid an automatic, successive five
year term extension, notice of termination by either party must be given two years in advance of
the termination date. HEA is to be reimbursed for costs associated with the operation,
maintenance and repair of the Project as determined in advance through the submission of an
annual budget based upon prudent estimates and anticipated operation and maintenance costs.
In August, 1996, the agreement was amended to separate the maintenance of the transmission
facilities from the hydroelectric project. The transmission agreement continues from year to
year, except upon written notice to terminate by either party. Notice of termination must be given
six months in advance of termination dates. In June, 1999 the transmission agreement was again
amended to require HEA to provide communication services in addition to the other services.
NOTE D: RELATED PARTY TRANSACTIONS
During the years ended June 30, 2008 and 2007, costs incurred under the various contracts with
related parties described in Note C were as follows:
2008 2007
Homer Electric Association, Inc. — operation,
maintenance and communications $ 1,860,241 $ 1,397,214
Chugach Electric Association, Inc. — substation
service maintenance $ 74,517 $ 85,118
Alaska Energy Authority — administrative fees $ 200,000 $ 200,000
For the years ended June 30, 2008 and 2007, Chugach Electric Association, Inc. provided
dispatch services to the Committee at the agreed upon amount which is zero.
BRADLEY LA... PROJECT MANAGEMENT CUGMMITTEE
OPERATING AND REVENUE FUNDS
NOTES TO FINANCIAL STATEMENTS (Continued)
June 30, 2008 and 2007
NOTE D: RELATED PARTY TRANSACTIONS (Continued)
Amounts payable to related parties at June 30, 2008 and 2007 were as follows:
2008 007
Included in accounts payable:
Homer Electric Association, Inc. $ 137,106 $ 181,139
Chugach Electric Association, Inc. $ 4,361 $ 25,496
Due to other funds:
Alaska Energy Authority — short-term
borrowings for vendor payments $ 4,645 $ -
NOTE E: SURPLUS REFUND AND UTILITY CONTRIBUTIONS RECEIVABLE
The $280,290 surplus at June 30, 2007 was refunded to the member utilities in fiscal year 2008
pursuant to the Power Sales Agreement and direction of the Committee.
The $740,267 surplus at June 30, 2008 will be refunded to member utilities in fiscal year 2009
pursuant to the Power Sales Agreement and direction of the Committee.
SWALLING & ASSOCIATES PC
Certified Public Accountants & Business Advisers
REPORT OF INDEPENDENT AUDITOR ON ADDITIONAL INFORMATION
Bradley Lake Project Management Committee
Anchorage, Alaska
Our report on our audit of the special-purpose financial statements of the Bradley Lake Project
Management Committee Operating and Revenue Funds for the year ended June 30, 2008 appears
on the page preceding the balance sheets. That audit was conducted for the purpose of forming
an opinion on the special-purpose financial statements taken as a whole. The supplemental
special-purpose Statements of Expenses are presented for purposes of additional analysis and are
not a required part of the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the special-purpose financial statements and, in our
opinion, is fairly stated in all material respects in relation to the special-purpose financial
statements taken as a whole. The special-purpose financial statements of the Bradley Lake
Project Management Committee Operating and Revenue Funds for the year ended June 30, 2007
were audited by other auditors who have ceased operations. Those auditors expressed an
unqualified opinion on the supplemental special-purpose statement of expenses in their report
dated November 2, 2007.
Oe ea rece eel a 4
December 12, 2008
3201 C Street, Suite 405 ' Anchorage, Alaska 99503 Q Independent member of DFK international -a worldwide association i Id of independent accounting firms and business advisers Ph 907.563.7977 + Fax 907.561.7683 + www.swallingcpas.com
BRADLEY LAKE) JECT MANAGEMENT COMMITTEW
OPERATING AND REVENUE FUNDS
STATEMENTS OF EXPENSES
Years ended June 30, 2008 and 2007
Expenses:
Generation expense:
Operation supervision
and engineering
Hydraulic operation
Electric plant operation
Hydraulic power
generation operation
FERC land use fees
Structure maintenance
Reservoir, dam, and
waterway maintenance
Electric plant maintenance
Hydraulic plant maintenance
System control and load dispatching
Substation operation
and maintenance
Overhead line maintenance
Unallocated contingency funding
Total generation expense
Administrative, general and
regulatory expense:
Insurance
AEA administrative fee
PMC costs
Regulatory commission:
FERC administrative fees
FERC licensing
FERC study
Total administrative, general
and regulatory expense
Total operations and
maintenance expenses,
before capital project
reimbursement
R & C Fund repayment
Total operations and
maintenance expenses
2008
Variance
Favorable 2007
Budget Actual (Unfavorable) Actual
$ 140,357 $ 196,966 $ (56,609) $ 154,485
54,037 73,827 (19,790) 71,711
235,672 184,265 51,407 178,085
512,525 458,692 53,833 393,631
65,000 62,623 2,377 62,623
156,551 158,625 (2,074) 139,750
14,452 6,773 7,679 4,907
247,020 349,854 (102,834) 214,055
265,996 104,343 161,653 118,858
291,896 304,038 (12,142) 267,836
103,356 74,517 28,839 85,117
302,734 241,177 61,557 231,123
99.750 - 99.750 -
2.489.346 2,215,700 273.646 1,922,181
648,481 545,266 103,215 622,670
200,000 200,000 - 200,000
74,500 55,299 19,201 45,350
200,000 208,732 (8,732) 196,747
140,000 35,269 104,731 88,858
: - : 40,849
1,262,981 1,044,566 218.415 1,194,474
3,752,327 3,260,266 492,061 3,116,655
1,243,383 1,456,373 (212,990) 1,774,559
$4,995,710 $ 4,716,639 $ 279,071 $ 4,891,214
11