Loading...
HomeMy WebLinkAboutBPMC Meeting - October 19, 1989 2-~4 Alaska Power Authority MEMORANDUM pho? 1, Mind 0/72, v9 TO: Bradley Lake ail Project Mana ent Committee FROM: Brent N. Petrie Alternate Secretary, PMC DATE: August 28, 1989 SUBJECT: October 19, 1989 Meeting Enclosed for your review are copies of the draft August 21, 1989 Project Management Committee (PMC) meeting minutes. The minutes will be considered at the October 19, 1989 meeting. Also enclosed is an updated (August 25, 1989) list of PMC Representatives and Alternates for your use. Enclosures: as stated BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE August 21, 1989 1. CALL TO ORDER Chairman Kelly called the Bradley Lake Project Management Committee to order at 9:15 a.m. in the Training Room of Chugach Electric Association in Anchorage, Alaska to conduct the business of the Committee per the agenda and the public notice. 2. ROLL CALL The roll call was taken and a quorum was established. In attendance were the following: Designated Representatives Designated Alternates Representing Brent N. Petrie Alaska Energy Authority Ken Ritchey Myles Yerkes Matanuska Electric Association Dave Highers Tom Lovas Chugach Electric Association Michael Kelly Golden Valley Electric Association Thomas Stahr Municipal Light and Power Sam Mathews Homer Electric Association Fred Arvidson* City of Seward Representatives Absent aan Alternates Absent Representing Robert E. LeResche Alaska Energy Authority Robert Hansen Golden Valley Electric Association E. Paul Diener City of Seward John Cooley Municipal Light and Power Kent Wick Homer Electric Association Others Present Representing Marcey Rawitscher Alaska Energy Authority Dave Eberle Alaska Energy Authority Joe Griffith** Chugach Electric Association Dave Hutchens Alaska Rural Electric Coop. Assoc. Carol Johnson Chugach Electric Association Ron Saxton PMC Utilities Eric Wohlforth Bond Counsel Julie Becker Alaska Energy Authority * Mr. Arvidson said that he was the City of Seward’s voting representative for this PMC meeting. (reference August 21, 1989 letter from Darryl Schaefermeyer documenting the appointment of Mr. Arvidson as Seward’s Alternate to the PMC). ** Mr. Highers introduced Mr. Griffith as the new Executive Manager of Finance and Planning for Chugach Electric Association. BRADLEY PMC (BRADAU21.CHP) Page 2 of 6 MEETING MINUTES 3. PUBLIC COMMENT There being no members of the public present, Chairman Kelly proceeded to agenda item 4. 4. MODIFICATION OF AGENDA No modifications to the agenda were made. 5. APPROVAL OF MINUTES July 28, 1989 The mi € the July 28, 1989 PMC meeti i by acclamati REPRESENTATIVE TO FOUR DAM POOL TECHNICAL STANDARDS COM- MITTEE Mr. Yerkes suggested that a Bradley representative from the Operating & Dispatch Agreement Subcommittee be appointed to review the 300 plus pages of draft technical standards developed for the Four Dam Pool hydro operation. It was noted that this would be an informal participation and that care must be exercised not to affect the Four Dam Pool deadlines relative to the technical standards. Mr. Saxton said that this would be a process of mutual edification. Mr. Petrie said that many of the standards pertaining to the Terror Lake Project might also apply to the Bradley Project, as both projects have rockfill, concrete faced dams, long tunnels and Pelton units. Mr. Yerkes suggested that the Bradley individual appointed to review the technical standards subsequently take the lead in developing the Bradley Lake technical standards, with review by several of the utilities. (Reference previous PMC action whereby Technical Coordinating Subcommittee was asked to select a representative to review the FDP draft technical standards and provide any written comments to Mr. Zidalis-page 6 of July 28, 1989 meeting minutes.) It was agreed that this issue would be addressed through the Operating & Dispatch Agreement Subcommittee. 6. NEW BUSINESS a. DESCRIPTION OF BRADLEY FINANCING EVENTS Ms. Rawitscher reported that the Bond Resolution has been reviewed by a Finance Team conference call and that all of the financing documents will be in final form shortly. The Official Statement will be reviewed on August 23-24, 1989 in Chicago, Illinois. Copies of the final draft of the Official Statement, Consulting Engineer’s (R.W. Beck) report and Bond Resolution will be distributed to all of the members. Ms. Rawitscher said that the interest rates in the last two weeks had been heading up and were beginning to head down again. A sense of the market call will transpire on August 31, 1989 and all miembers of the PMC were invited to participate; Messrs. Kelly, Highers and Saxton asked to be included along with Mr. Wick. The pricing call is scheduled for September 6, 1989 and it was noted that Messrs. Kelly, Highers, Wick, and Saxton wanted to be included. It was noted that this was the last PMC meeting prior to the bond pricing. Mr. Wohlforth asked that the members reserve the possibility in their schedules for another meeting; although, no major changes in the documents were contemplated which might necessitate a subsequent PMC meeting. BRADLEY PMC (BRADAU21.CHP) Page 3 of 6 MEETING MINUTES Mr. Lovas asked that a copy of the page in the latest draft Official Statement dealing with project utilization and incorporating the Consulting Engineer’s changes be telecopied to him. b. APPROVAL OF BRADLEY DOCUMENTS i. Ratification of Previous Actions of the Committee ii. Consideration of Resolution Regarding PSA Section 31: Utility Costs to be Capitalized Copies of Mr. Saxton’s August 17, 1989 memorandum to the Bradley PMC regarding recommendations on Bradley related costs were distributed. The memorandum identifies three (i.e., the A, B and C lists) categories of costs and recommenda- tions regarding items to be included under each of the three lists. Mr. Saxton said that the "A list," or items to be treated as "Project" Costs (i.e., eligible for 50% grant funds), includes items necessary for the project and identifiably related to getting the project up and going. Items on the A list included: 1) All travel associated costs for members of the Finance Team for all trips and meetings associated with the first and second financings. 2) All fees and costs for Mr. Saxton’s work on finance activities. 3) All legal fees and costs associated with each utility’s 1989 opinion of counsel. 4) All costs associated with the PTI study. 5) Costs associated with meetings of the Technical Coordinating Subcommittee. 6) Insurance studies recommended by Insurance Subcommittee relating to determination of project insurance require- ments. 7) SCI stability study. 8) Participation Allocation Study. Mr. Saxton said that the B list was developed based upon items for the benefit of the purchasers (i.e., the general operation of the PMC or the purchasers taking over the operation). The B list, or Section 31 costs (possibly paid from bond proceeds, but not eligible for 50% grant contribution), included: 1) _ All costs, including legal, associated with the individual utilities negotiating, amending or obtaining approval of the Power Sales Agreement, Chugach Services Agreement and Homer Transmission Agreement. 2) Bradley PMC costs, including legal, for organizing the Committee and conducting Committee meetings and general business. BRADLEY PMC (BRADAU21.CHP) Page 4 of 6 MEETING MINUTES Items on the C list or items requiring categorization, included: 1) Managers’ salary costs for BPMC and Finance Team activities. 2) Smith Barney retention costs. It was noted that the Energy Authority was unwilling to treat any manager or Smith Barney costs as project costs. Mr. Saxton noted that the utilities have the option of treating these as Section 31 costs upon an 80% vote of the utilities, or handling them as individual utility costs not subject to bond financing. Copies of Mr. Wohlforth’s August 18, 1989 memorandum to Ms. Rawitscher regarding payment of certain costs in connection with Bradley Lake refunding, were distributed. Mr. Wohlforth noted that since the refunding bonds are private activity bonds, costs of issuance financed with refunding bond proceeds may not exceed 2% of the proceeds of the issue. The only permissible uses of refunding bonds are; refunding of existing debt, establishment of reserve funds for refunding bonds, capitalized interest on refunding bonds, and bona fide costs of issuance of the refunding issue. Mr. Wohlforth identified the following issuance costs: underwriters’ spread, counsel fees, financial advisor fees, rating agency fees, trustee fees, paying agent and certifying and authenticating agent fees, accountant fees, printing costs, cost incurred in connection with the required public approval process, and costs of engineering and feasibility studies necessary to the issuance of the bonds. Mr. Wohlforth provided the following opinion relative to how the categories of costs (i.e., A, B and C lists) should be treated under the criteria for cost of issuance: Items Comment A.1, 2 and 3. Costs of issuance; however, 2% cap may be a factor, A.4 and 6. May be paid out of existing construction fund; may be paid out of the 85 VRDB proceeds. AS. Excluded as a cost of construction. A.7 and 8. Could be costs of issuance if deemed feasibility studies required for financing. B.1 and 2. Not costs of issuance, C1, Not a cost of issuance or construction cost. May be paid when the bonds are paid off or through a taxable tail bond issuance. cz. Could be considered cost of issuance. (Note: Mr. Wohiforth la d that A.5.7 & 8 could be treated as project costs). iy 4 iF, ic W ore It was notedthat Section31 costs are not costs of issuance and cannot be paid out of the original issuance or the 2nd issuance; however, they may be funded after the completion issue is done and money is released from the 1985 indenture (i.e., unexpended funds under the first issuance) or capitalized and paid on a taxable bond basis. It was noted that the vast majority of the construction costs to date have been paid for out of the grant funds in order for the project to get the benefit of investment earnings on the’85 VRDB’s. If some of the closing costs for the first series bonds canbe paid for from the ’85 VRDB’s, additional utility costs of issuance can be covered within the 2% tax limit. The question was raised whether or not money could be shifted to pay for some of the items on Ms. Rawitscher’s list (i.e., if the 89 investor tour could be paid for out of 85 construction funds or grant funds in trust, thus freeing up some money in this issuance). Mr. Wolhforth will research this question and provide a response to Ms. Rawitscher. Mr. Wohlforth was also asked to research alternatives for payment of B list items (i.e., mechanism when bonds are retired). BRADLEY PMC (BRADAU21.CHP) Page 5 of 6 MEETING MINUTES Copies of Ms. Rawitscher’s estimate of closing costs for the first series of Bradley Lake bonds were distributed, which included R.W. Beck, the trustee, printing of the Official Statement, bond counsel’s fee, rating agency fees, financial advisor fee, underwriter’s discount, and Authority and utility costs. The costs on the handout totaled $1,960,000; however, it was noted that the fee for First Southwest, Financial Advisor had been renegotiated to $135,000 plus expenses, estimated to be $160,000 total. It was also noted that the investor tour expense was not included and that the estimate for Authority and utility costs of $80,000 was probably low. Mr. Saxton said that based upon these numbers, there is an anticipated shortage of $200,000 in the costs of issuance. The question was raised whether or not additional money may be available from the second bond issuance to pay for some of these costs. Ms. Rawitscher responded that only 2% of $60,000,000 may be available; moreover, the situation will worsen as there will be less room in the second issuance and many of the costs will remain the same for the second issuance (i.e., Official Statement, ratings). It was noted that there will be approximately $20 million in investment earnings; however, the original intent was to use these funds to pay off the bonds and lower the size of the issuance. Mr. Saxton said that the PMCHasto identify Section 31 costs prior to this bond issuance. — hehe Rely Sake, Mathews, Highers and arrktoa sctng os Mr. Kelly stated that none of the members sivocated reimbursement of manager and staff salary costs at this time. The consensus was that Messrs. Wohlforth and Saxton and Ms. Rawitscher would continue to work on this issue. iv. Consideration of Bond Resolution SURGE TANK Mr. Stahr reported that Placer County Water Agency (PCWA) in California has two powerplants with Pelton turbines which utilize surge tanks; and that the surge tanks were at least partially installed in order to increase the response times of the turbine/generator. Mr. Stahr referenced a letter from PCWA, which included diagrams of these projects and test data. Mr. Stahr asked that the Energy Authority review the use of surge tanks on the Bradley Project in terms of response times. Mr. Yerkes said that Stone and Webster Engineering Corporation (SWEC), design engineer, is developing a scoping level estimate of possible surge tanks including a pressurized vessel; however, a full scale analysis would cost several hundred thousand dollars. Mr. Yerkes clarified that Stone & Webster Engineering Corporation is aware of the use of surge tanks with Pelton units and has designed such projects. He also noted that SWEC had looked at a surge tank in conjunction with a Francis unit for Bradley Lake. Mr. Eberle said that the cost of a surge tank would probably be in the range of $10-$15 million. Mr. Eberle asked for clarification regarding what the PMC is trying to achieve in the analysis, as the issue does not appear to be limited to system stability concerns. Mr. Stahr responded that in addition to stability, his desire is for the Bradley Project to operate as an isolated unit with spinning reserve capability. Mr. Lovas added that the utilities expect a fully operational project under a range of conditions, which includes the islanded condition. Mr. Eberle noted that there may be other ways to improve the isolated operating condition and spinning reserve; and that a surge tank is only one possibility. He added that if the PM C is attempting to identify ways to improve system performance, then the objective is much clearer than simply reviewing the need for a surge tank. BRADLEY PMC (BRADAU21.CHP) Page 6 of 6 MEETING MINUTES : It was determined that the Energy Authority will study this issue through the Technical Coordinating Subcommittee (TCS)and Mr. Stahr was invited to attend the presentations of the TCS. The TCS will report back to the PMC with a discussion on a desirable stability situation, spinning reserve, how the project could operate isolated, etc. iii. Discussion of Statement of Warranty for Bond Purchase Agreement Mr. Saxton said that copies of the Statement of Warranty for the Bond Purchase Agreement were being distributed to the utility managers (reference Certificate), which certify that the information contained in the Official Statement is not misstated. These certificates are to be individually signed by the General Managers and returned to Mr. Wohlforth. Mr. Stahr asked for affirmation that execution of the Certificate would not result in giving up any rights regarding the surge tank issue; Mr. Petrie responded that it would not. Mr. Saxton said that if any of the utilities will not be able to sign this Certificate, he must be informed by August 23, 1989. The Certificates will be executed at the bond closing. 7. COMMUNICATIONS Mr. Kelly reported that HEA chose not to join IBEW in a lawsuit. Mr. Wick has accepted a one year contract offered by the HEA Board of Directors to continue as General Manager. Mr. Petrie reported that Mr. Zidalis, previous Electrical Superintendent of Ketchikan Public Utilities, has been hired by the Energy Authority as the General Foreman on-site for initial operation of the Bradley Project. Mr. Saxton said that he had a copy of the conflict of interest letter stating that he represents the utility group as opposed to the individual utilities. This letter was executed by the individual utilities during the meeting. 6. — c. Schedule Next Meeting The next meeting of the PMC was scheduled for October 19, 1989 at 9:00 a.m. in the Training Room of Chugach Electric Association. 8. ADJOURNMENT There being no further business before the Committee, the Committee adjourned at 11:50 a.m. Chairman Kelly ATTEST: Alaska Energy Authority, Secretary Approved at PMC meeting held , 1989. (c:edit/brad/bpmcrep) DESIGNATED REPRESENTATIVE PRO. 3 [11 REPR Bradley Lake Project Management Committee (August 25, 1989) DESIGNATED ALTERNATE REPRESENTING Everett Paul Diener Robert E. LeResche Ken Ritchey David L. Highers B. Kent Wick Michael P. Kelty Thomas R. Stahr Fred Arvidson Brent N. Petrie Myles C. Yerkes Tom Lovas S.C. Mathews Bob Hansen John Cooley City of Seward P. O. Bax 167 Seward, AK 99664 224-3331 224-3248 (Fax) Alaska Power Authority P.O. Box 190869 Anchorage, AK 99519-0869 561-7877 (Anchorage) 465-3575 (Juneau) 561-8584 (Fax) Matanuska Electric Assoc., Inc. 163 Industrial Way P.O. Box 2929 Palmer, AK 99645-2929 748-3231 745-9328 (Fax) Chugach Electric Assoc., Inc. 5601 Minnesota Drive P.O. Bax 196300 Anchorage, AK 99519-6300 563-7494 562-0027 (Fax) Homer Electric Assoc., Inc. P.O. Box 429 3977 Lake Street Homer, AK 99603 235-8167 235-8496 (Fax) Golden Valley Electric Assoc., Inc. P.O. Box 1249 Fairbanks, AK 99707 4$2-1151 452-1151 EXT. 533 (Fax) Municipal Light and Power Municipality of Anchorage 1200 East 1st Avenue Anchorage, AK 99501-1685 279-7671 276-2961 (Fax) Alaska Power Authority MEMORANDUM V TO: Bradley Lake Project Mana prea ane Sheu Yat FROM: rent N. ea Alternate Secretary, PMC DATE: August 23, 1989 SUBJECT: October 19, 1989 Meeting The next meeting of the Bradley Lake Project Management Committee (PMC) has been scheduled to begin at 9:00 a.m. on October 19, 1989 in the Training Room of Chugach Electric Association. Enclosed is a draft agenda for this meeting. Please provide any additions to Mr. Kelly. Copies of the executed May 4, 1989, June 8, 1989, and wuly 26, 1989 meeting minutes are enclosed for your record. Enclosures: as stated BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE October 19, 1989 AGENDA Chugach Electric Association Anchorage, Alaska 1, CALLTO ORDER 9:00 a.m. 2. ROLL CALL 3. PUBLIC COMMENT 4. MODIFICATION OF AGENDA 5. APPROVAL OF MINUTES August 21, 1989 6. BOND FINANCE TEAM REPORT 7. TECHNICAL COORDINATING SUBCOMMITTEE REPORT a. Report on Four Dam Pool Technical Standards b. Report on Stability/Islanded Condition 8. INSURANCE SUBCOMMITTEE REPORT a. Report on Collective Business Interruption Insurance b. Report on Pooled Insurance Coverage c. Report on Risk Assessment 9. BUDGET AND FINANCE SUBCOMMITTEE REPORT Status Report on Uniform Accounting Procedures 10. OPERATING AND DISPATCH AGREEMENT SUBCOMMITTEE REPORT 11. REVIEW OF PROJECT STATUS 12. OLD BUSINESS 13. NEW BUSINESS a. Report by Power Technologies, Inc. b. Schedule Next Meeting i. Date ii. Location iii. Time 14. COMMUNICATIONS 15, ADJOURNMENT Kelly Petrie Yerkes Saxton Saxton Shira Eberle Alaska Power Authority MEMORANDUM TO: Bradley Lake Project Mana ent Committee he ee er FROM: Brent N. Petrie Alternate Secretary, PMC DATE: August 28, 1989 SUBJECT: October 19, 1989 Meeting Enclosed for your review are copies of the draft August 21, 1989 Project Management Committee (PMC) meeting minutes. The minutes will be considered at the October 19, 1989 meeting. Also enclosed is an updated (August 25, 1989) list of PMC Representatives and Alternates for your use. Enclosures: as stated BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE 1. CALL TO ORDER August 21, 1989 Chairman Kelly called the Bradley Lake Project Management Committee to order at 9:15 a.m. in the Training Room of Chugach Electric Association in Anchorage, Alaska to conduct the business of the Committee per the agenda and the public notice. 2. ROLL CALL The roll call was taken and a quorum was established. In attendance were the following: Designated Representatives Designated Alternates Representing Brent N. Petrie Alaska Energy Authority Ken Ritchey Myles Yerkes Matanuska Electric Association Dave Highers Tom Lovas Chugach Electric Association Michael Kelly Golden Valley Electric Association Thomas Stahr Municipal Light and Power Sam Mathews Homer Electric Association Fred Arvidson* City of Seward Representatives Absent Alternates Absent Representing Robert E. LeResche Alaska Energy Authority Robert Hansen Golden Valley Electric Association E. Paul Diener City of Seward John Cooley Municipal Light and Power Kent Wick Homer Electric Association Others Present Representing Marcey Rawitscher Alaska Energy Authority Dave Eberle Alaska Energy Authority Joe Griffith** Chugach Electric Association Dave Hutchens Alaska Rural Electric Coop. Assoc. Carol Johnson Chugach Electric Association Ron Saxton PMC Utilities Eric Wohlforth Bond Counsel Julie Becker Alaska Energy Authority * Mr. Arvidson said that he was the City of Seward’s voting representative for this PMC meeting. (reference August 21, 1989 letter from Darryl Schaefermeyer documenting the appointment of Mr. Arvidson as Seward’s Alternate to the PMC). ** Mr. Highers introduced Mr. Griffith as the new Executive Manager of Finance and Planning for Chugach Electric Association. BRADLEY PMC (BRADAU21.CHP) Page 2 of 6 MEETING MINUTES 3. PUBLIC COMMENT There being no members of the public present, Chairman Kelly proceeded to agenda item 4. 4. MODIFICATION OF AGENDA No modifications to the agenda were made. 5. APPROVAL OF MINUTES July 28, 1989 cua — eee REPRESENTATIVE TO FOUR DAM POOL TECHNICAL STANDARDS COM- MITTEE Mr. Yerkes suggested that a Bradley representative from the Operating & Dispatch Agreement Subcommittee be appointed to review the 300 plus pages of draft technical standards developed for the Four Dam Pool hydro operation. It was noted that this would be an informal participation and that care must be exercised not to affect the Four Dam Pool deadlines relative to the technical standards. Mr. Saxton said that this would be a process of mutual edification. Mr. Petrie said that many of the standards pertaining to the Terror Lake Project might also apply to the Bradley Project, as both projects have rockfill, concrete faced dams, long tunnels and Pelton units. Mr. Yerkes suggested that the Bradley individual appointed to review the technical standards subsequently take the lead in developing the Bradley Lake technical standards, with review by several of the utilities. (Reference previous PMC action whereby Technical Coordinating Subcommittee was asked to select a representative to review the FDP draft technical standards and provide any written comments to Mr. Zidalis-page 6 of July 28, 1989 meeting minutes.) It was agreed that this issue would be addressed through the Operating & Dispatch Agreement Subcommittee. 6. NEW BUSINESS a. DESCRIPTION OF BRADLEY FINANCING EVENTS Ms. Rawitscher reported that the Bond Resolution has been reviewed by a Finance Team conference call and that all of the financing documents will be in final form shortly. The Official Statement will be reviewed on August 23-24, 1989 in Chicago, Illinois. Copies of the final draft of the Official Statement, Consulting Engineer’s (R.W. Beck) report and Bond Resolution will be distributed to all of the members. Ms. Rawitscher said that the interest rates in the last two weeks had been heading up and were beginning to head down again. A sense of the market call will transpire on August 31, 1989 and all members of the PMC were invited to participate; Messrs. Kelly, Highers and Saxton asked to be included along with Mr. Wick. The pricing call is scheduled for September _6, 1989 and it was noted that Messrs. Kelly, Highers, Wick, and Saxton wanted to be included. It was noted that this was the last PMC meeting prior to the bond pricing. Mr. Wohlforth asked that the members reserve the possibility in their schedules for another meeting; although, no major changes in the documents were contemplated which might necessitate a subsequent PMC meeting. BRADLEY PMC (BRADAU21.CHP) Page 3 of 6 MEETING MINUTES Mr. Lovas asked that a copy of the page in the latest draft Official Statement dealing with project utilization and incorporating the Consulting Engineer’s changes be telecopied to him. b. APPROVAL OF BRADLEY DOCUMENTS i. Ratification of Previous Actions of the Committee ii. Consideration of Resolution Regarding PSA Section 31: Utility Costs to be Capitalized Copies of Mr. Saxton’s August 17, 1989 memorandum to the Bradley PMC regarding recommendations on Bradley related costs were distributed. The memorandum identifies three (i.e., the A, B and C lists) categories of costs and recommenda- tions regarding items to be included under each of the three lists. Mr. Saxton said that the "A list,” or items to be treated as "Project" Costs (i.e., eligible for 50% grant funds), includes items necessary for the project and identifiably related to getting the project up and going. Items on the A list included: 1) All travel associated costs for members of the Finance Team for all trips and meetings associated with the first and second financings. 2) Ail fees and costs for Mr. Saxton’s work on finance activities. 3) All legal fees and costs associated with each utility's 1989 opinion of counsel. 4) All costs associated with the PTI study. 5) Costs associated with meetings of the Technical Coordinating Subcommittee. 6) Insurance studies recommended by Insurance Subcommittee relating to determination of project insurance require- ments. 7) SCI stability study. 8) Participation Allocation Study. Mr. Saxton said that the B list was developed based upon items for the benefit of the purchasers (i.e., the general operation of the PMC or the purchasers taking over the operation). The B list, or Section 31 costs (possibly paid from bond proceeds, but not eligible for 50% grant contribution), included: 1) All costs, including legal, associated with the individual utilities negotiating, amending or obtaining approval of the Power Sales Agreement, Chugach Services Agreement and Homer Transmission Agreement. 2) Bradley PMC costs, including legal, for organizing the Committee and conducting Committee meetings and general business. BRADLEY PMC (BRADAU21.CHP) Page 4 of 6 MEETING MINUTES Items on the C list or items requiring categorization, included: 1) Managers’ salary costs for BPMC and Finance Team activities. 2) Smith Barney retention costs. It was noted that the Energy Authority was unwilling to treat any manager or Smith Barney costs as project costs. Mr. Saxton noted that the utilities have the option of treating these as Section 31 costs upon an 80% vote of the utilities, or handling them as individual utility costs not subject to bond financing. Copies of Mr. Wohlforth’s August 18, 1989 memorandum to Ms. Rawitscher regarding payment of certain costs in connection with Bradley Lake refunding, were distributed. Mr. Wohlforth noted that since the refunding bonds are private activity bonds, costs of issuance financed with refunding bond proceeds may not exceed 2% of the proceeds of the issue. The only permissible uses of refunding bonds are; refunding of existing debt, establishment of reserve funds for refunding bonds, capitalized interest on refunding bonds, and bona fide costs of issuance of the refunding issue. Mr. Wohlforth identified the following issuance costs: underwriters’ spread, counsel fees, financial advisor fees, rating agency fees, trustee fees, paying agent and certifying and authenticating agent fees, accountant fees, printing costs, cost incurred in connection with the required public approval process, and costs of engineering and feasibility studies necessary to the issuance of the bonds. Mr. Wohlforth provided the following opinion relative to how the categories of costs (i.e., A, B and C lists) should be treated under the criteria for cost of issuance: Items Comment A.1, 2 and 3. Costs of issuance; however, 2% cap may be a factor, A.4 and 6. May be paid out of existing construction fund; may be paid out of the 85 VRDB proceeds. AS. Excluded as a cost of construction. A.7 and 8. Could be costs of issuance if deemed feasibility studies required for financing. B.1 and 2. ] Not costs of issuance, C.1. Not a cost of issuance or construction cost. May be paid when the bonds are paid off or through a taxable tail bond issuance. C2. Could be considered cost of issuance. (Note: Mr. Wohlforth later agreed that A.5.7 & 8 could be treated as project costs). It was noted that Section 31 costs are not costs of issuance and cannot be paid out of the original issuance or the 2nd issuance; however, they may be funded after the completion issue is done and money is released from the 1985 indenture (i.c., unexpended funds under the first issuance) or capitalized and paid on a taxable bond basis. It was noted that the vast majority of the construction costs to date have been paid for out of the grant funds in order for the project to get the benefit of investment earnings on the ’85 VRDB’s. If some of the closing costs for the first series bonds can be paid for from the ’85 VRDB’s, additional utility costs of issuance can be covered within the 2% tax limit. The question was raised whether or not money could be shifted to pay for some of the items on Ms. Rawitscher’s list (i.c., if the 89 investor tour could be paid for out of 85 construction funds or grant funds in trust, thus freeing up some money in this issuance). Mr. Wolhforth will research this question and provide a response to Ms. Rawitscher. Mr. Wohlforth was also asked to research alternatives for payment of B list items (i.e., mechanism when bonds are retired). BRADLEY PMC (BRADAU21.CHP) Page S of 6 MEETING MINUTES Copies of Ms. Rawitscher’s estimate of closing costs for the first series of Bradley Lake bonds were distributed, which included R.W. Beck, the trustee, printing of the Official Statement, bond counsel’s fee, rating agency fees, financial advisor fee, underwriter’s discount, and Authority and utility costs. The costs on the handout totaled $1,960,000; however, it was noted that the fee for First Southwest, Financial Advisor had been renegotiated to $135,000 plus expenses, estimated to be $160,000 total. It was also noted that the investor tour expense was not included and that the estimate for Authority and utility costs of $80,000 was probably low. Mr. Saxton said that based upon these numbers, there is an anticipated shortage of $200,000 in the costs of issuance. The question was raised whether or not additional money may be available from the second bond issuance to pay for some of these costs. Ms. Rawitscher responded that only 2% of $60,000,000 may be available; moreover, the situation will worsen as there will be less room in the second issuance and many of the costs will remain the same for the second issuance (i.e., Official Statement, ratings). It was noted that there will be approximately $20 million in investment earnings; however, the original intent was to use these funds to pay off the bonds and lower the size of the issuance. Mr. Saxton said that the PMC has to identify Section 31 costs prior to this bond issuance. Sishay Rails Stabe Statens Highs. se Arcchca stag son Mr. Kelly sed ato none of the members sustoatct reimbursement of manager and staff salary costs at this time. The consensus was that Messrs. Wohlforth and Saxton and Ms. Rawitscher would continue to work on this issue. iv. Consideration of Bond Resolution SURGE TANK Mr. Stahr reported that Placer County Water Agency (PCWA) in California has two powerplants with Pelton turbines which utilize surge tanks; and that the surge tanks were at least partially installed in order to increase the response times of the turbine/generator. Mr. Stahr referenced a letter from PCWA, which included diagrams of these projects and test data. Mr. Stahr asked that the Energy Authority review the use of surge tanks on the Bradley Project in terms of response times. Mr. Yerkes said that Stone and Webster Engineering Corporation (SWEC), design engineer, is developing a scoping level estimate of possible surge tanks including a pressurized vessel; however, a full scale analysis would cost several hundred thousand dollars. Mr. Yerkes clarified that Stone & Webster Engineering Corporation is aware of the use of surge tanks with Pelton units and has designed such projects. He also noted that SWEC had looked at a surge tank in conjunction with a Francis unit for Bradley Lake. Mr. Eberle said that the cost of a surge tank would probably be in the range of $10-$15 million. Mr. Eberle asked for clarification regarding what the PMC is trying to achieve in the analysis, as the issue does not appear to be limited to system stability concerns. Mr. Stahr responded that in addition to stability, his desire is for the Bradley Project to operate as an isolated unit with spinning reserve capability. Mr. Lovas added that the utilities expect a fully operational project under a range of conditions, which includes the islanded condition. Mr. Eberle noted that there may be other ways to improve the isolated operating condition and spinning reserve; and that a surge tank is only one possibility. He added that if the PM C is attempting to identify ways to improve system performance, then the objective is much clearer than simply reviewing the need for a surge tank. BRADLEY PMC (BRADAU21.CHP) Page 6 of 6 MEETING MINUTES It was determined that the Energy Authority will study this issue through the Technical Coordinating Subcommittee (TCS)and Mr. Stahr was invited to attend the presentations of the TCS. The TCS will report back to the PMC with a discussion on a desirable stability situation, spinning reserve, how the project could operate isolated, etc. iii. Discussion of Statement of Warranty for Bond Purchase Agreement Mr. Saxton said that copies of the Statement of Warranty for the Bond Purchase Agreement were being distributed to the utility managers (reference Certificate), which certify that the information contained in the Official Statement is not misstated. These certificates are to be individually signed by the General Managers and returned to Mr. Wohlforth. Mr. Stahr asked for affirmation that execution of the Certificate would not result in giving up any rights regarding the surge tank issue; Mr. Petrie responded that it would not. Mr. Saxton said that if any of the utilities will not be able to sign this Certificate, he must be informed by August 23, 1989. The Certificates will be executed at the bond closing. 7. COMMUNICATIONS Mr. Kelly reported that HEA chose not to join IBEW in a lawsuit. Mr. Wick has accepted a one year contract offered by the HEA Board of Directors to continue as General Manager. Mr. Petrie reported that Mr. Zidalis, previous Electrical Superintendent of Ketchikan Public Utilities, has been hired by the Energy Authority as the General Foreman on-site for initial operation of the Bradley Project. Mr. Saxton said that he had a copy of the conflict of interest letter stating that he represents the utility group as opposed to the individual utilities. This letter was executed by the individual utilities during the meeting. 6. ce. Schedule Next Meeting The next meeting of the PMC was scheduled for October 19, 1989 at 9:00 a.m. in the Training Room of Chugach Electric Association. 8. ADJOURNMENT There being no further business before the Committee, the Committee adjourned at 11:50 a.m. Chairman Kelly ATTEST: Alaska Energy Authority, Secretary Approved at PMC meeting held , 1989. (c:edit/brad/bpmcrep) Bradley Lake Project Management Committee (August 25, 1989) DESIGNATED REPRESENTATIVE Everett Paul Diener Robert E. LeResche Ken Ritchey David L. Highers B. Kent Wick Michael P. Kelly Thomas R. Stahr DESIGNATED ALTERNATE Fred Arvidson Brent N. Petrie Myles C. Yerkes Tom Lovas S.C. Mathews Bob Hansen John Cooley REPRESENTING City of Seward P. O. Box 167 Seward, AK 99664 224-3331 224-3248 (Fax) Alaska Power Authority P.O. Box 190869 Anchorage, AK 99519-0869 561-7877 (Anchorage) 465-3575 (Juneau) 561-8584 (Fax) Matanuska Electric Assoc., Inc. 163 Industrial Way P.O. Box 2929 Palmer, AK 99645-2929 748-3231 748-9328 (Fax) Chugach Electric Assoc., Inc. 5601 Minnesota Drive P.O. Box 196300 Anchorage, AK 99519-6300 563-7494 562-0027 (Fax) Homer Electric Assoc., Inc. P.O. Box 429 3977 Lake Street Homer, AK 99603 235-8167 235-8496 (Fax) Golden Valley Electric Assoc., Inc. P.O. Box 1249 Fairbanks, AK 99707 452-1151 452-1151 EXT. 533 (Fax) Municipal Light and Power Municipality of Anchorage 1200 East 1st Avenue Anchorage, AK 99501-1685 279-7671 276-2961 (Fax)