Loading...
HomeMy WebLinkAboutBradley Lake PMC Meeting Agenda 7A 09-26-2012BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING September 26, 2012 Agenda Item: 7A MOTION: Move that the Bradley Lake Project Management Committee, as recommended by the Finance Committee, approve the Alaska Energy Authority to proceed with final design, construction costs, exhibits for final amendment application, project bid documents and continuation of USGS water gauging for the Battle Creek Diversion project up to $670,000 to be paid from the FY2013 R&C budget. Move: Second: Bradley Lake Project Battle Creek R&C Allocation based on $670,000 estimated project costs Annual repayment S 167,500.00 Participant Participant % Participant's Repayment CEA 30.4% 50,920.00 $ MLP 25.9% $ 43,382.50 HEA 12.0% $ 20,100.00 MEA 13.8% $ 23,115.00 GVEA 16.9% $ 28,307.50 Seward 1.0% $ 1,675.00 S 167,500.00 LAW OFFICE OF Kenneth E. Vassar, LLC ¢ 2 711 M STREET SUITE 102 ANCHORAGE, ALASKA 99501 * TELEPHONE 907.272.2741 kyassar@keviaw org September 19, 2012 Alaska Energy Authority 813 West Northern Lights Boulevard Anchorage, Alaska 99503 Project Management Committee c/o Alaska Energy Authority 813 West Northern Lights Boulevard Anchorage, Alaska 99503 Dear Sir or Madam: 1 am bond counsel to the Alaska Energy Authority (the “Authority”) and have been asked to provide an opinion regarding the proposal to apply money on deposit in the Renewal and Contingency Reserve Fund (the “Fund”) established in Section 502 of the Authority’s Power Revenue Bond Resolution originally adopted on September 7, 1989, and subsequently amended and supplemented (as so amended and supplemented, the “Bond Resolution”) to the Battle Creek Diversion Project described herein. The Authority adopted the Bond Resolution for the purpose of issuing bonds (collectively, the “Bradley Lake Bonds”) to finance the construction of the Bradley Lake Hydroelectric Project (the “Bradley Lake Project”). To provide revenue to pay the bonds and for other purposes, the Authority entered into an Agreement for the Sale and Purchase of Electric Power (the “Power Sales Agreement”) dated as of December 8, 1987. The Authority (which was then known as the Alaska Power Authority) entered into the Power Sales Agreement with: (1) Chugach Electric Association, Inc.; Golden Valley Electric Association, Inc.; the Municipality of Anchorage doing business as Municipal Light and Power; the City of Seward doing business as Seward Electric System; and Alaska Electric Generation & Transmission Cooperative, Inc. (all of the foregoing as “purchasers” under the Power Sales Agreement); and (2) Homer Electric Association, Inc.; and Matanuska Electric Association, Inc. (as “additional parties” under the Power Sales Agreement). Section 13 of the Power Sales Agreement provides for the establishment of a Project Management Committee (the “Committee”). The Authority and the Committee are considering a project that would divert water to the Bradley Lake Project from the west fork of Upper Battle Creek on the Kenai Peninsula (the “Battle Creek Diversion Project”). The Battle Creek Diversion Project would include a diversion dam, one or more canals, one or more roads, and other facilities as may be required to complete LAW OFFICE OF KENNETH E. VASSAR, LLC September 19, 2012 Page 2 the intended diversion of water. The intended effect of the Battle Creek Diversion Project is to increase the power generation of the Bradley Lake Project. The Authority and the Committee have requested this opinion to address the question of whether money on deposit in the Fund may be used to finance costs of the Battle Creek Diversion Project. In my opinion, subject to the assumptions set forth herein, at least a portion of the money in the Fund (referred to herein as Other Amounts) may be so used. A more detailed discussion follows. Section 502 of the Bond Resolution establishes a number of funds. Included among those funds is the Fund. Section 509 of the Bond Resolution describes the uses to which the Fund may be put. Clause | of Section 509 permits money in the Fund to be applied to the costs of Capital Improvements. The definition of “Capital Improvements” in Section 101 of the Bond Resolution includes “additions or expansions” to the Bradley Lake Project that are approved by the Committee as Optional Project Work pursuant to the Power Sales Agreement. The proposed Battle Creek Diversion Project would constitute an addition or expansion of the Bradley Lake Project within the meaning of the definition of “Capital Improvements” contained in Section 101 of the Bond Resolution. I note that the Fund was originally funded with some of the proceeds of the Bradley Lake Bonds (the “Bond Proceeds”). To determine the amount of Bond Proceeds that remain on deposit in the Fund and the amount of other contributions remaining in the Fund that are not Bond Proceeds (the “Other Amounts”), | have reviewed the tax and arbitrage certificates signed by the Authority as part of the issuance of each series of Bradley Lake Bonds and a history provided to me by the Authority of amounts contributed to and spent from the Fund. For this purpose, | have assumed that Bond Proceeds in the Fund have been spent only after all Other Amounts have been spent. Using this approach, I have determined that, as of the most recent schedule | have received, which is for the fiscal year ending June 30, 2011, there remained on deposit in the Fund $1,436,000 of Bond Proceeds and $2,436,000 of Other Amounts. The numbers for Bond Proceeds and Other Amounts in the Fund at any point in time will change. In my opinion, the Other Amounts may be expended to pay for the Battle Creek Diversion Project without any adverse impact on the tax status of the Bradley Lake Bonds. As long as the amount withdrawn from the Fund for the Battle Creek Diversion Project does not exceed the Other Amounts. no special action (such as designating the expenditure as being made from Other Amounts) is necessary. It may be that the Bond Proceeds remaining in the Fund could also be spent for the Battle Creek Diversion Project without adversely impacting the tax status of the Bradley Lake Bonds, but determining that would require further research. My understanding is that the Other Amounts will be sufficient and that expenditure of the Bond Proceeds will not be required at this time, and, so, I have not addressed in this opinion the effect of spending Bond Proceeds from the LAW OFFICE OF KENNETH E. VASSAR, LLC September 19, 2012 Page 3 Fund; however. any expenditure from the Fund for the Battle Creek Diversion Project in excess of the Other Amounts (as that amount may be determined at the time of any such proposed expenditure) should be made only after the additional research has been done. The opinions expressed in this letter are based on certain assumptions, which are described in the following paragraphs. Clause 2 of Section 509 prohibits the application of money in the Fund to any otherwise permitted payments if there are proceeds from insurance or self-insurance available to make those payments. For purposes of this opinion, | have assumed that there are no such insurance or self-insurance proceeds. Clause 3 of Section 509 of the Bond Resolution provides that money in the Fund in excess of the amount required by the Bond Resolution to be in the Fund must be deposited in the Revenue Fund established in the Bond Resolution at least annually. For purposes of this opinion, I have assumed that such deposits have been made when and as required by the Bond Resolution. For purposes of this opinion, | have been directed to assume that the Committee approves the use of money in the Renewal and Contingency Reserve Fund for the Battle Creek Diversion Project, and, so, for purposes of this opinion, | have made that assumption and, moreover, have also assumed that the Committee’s approval is for the Battle Creek Diversion Project as Optional Project Work pursuant to the Power Sales Agreement. This opinion is addressed only to the addressees set forth above. It may not be copied or distributed without my express permission. It may not be relied upon by any person other than the addressees set forth above without my express permission. I disclaim any obligation to update this opinion. Sincerely, LAW OFFICE OF KENNETH E. VASSAR, LLC May Clark From: Bjorkquist, Brian D (LAW) <brian.bjorkquist@alaska.gov> Sent: Tuesday, September 18, 2012 5:04 PM To: Ambrose, Harvey; Carrie Buckley; Corey Borgeson; Cunningham, Mike; Dale, Henri; Dawn Baham; Day, Bob; Divina Portades, CEA; Don Zoerb; Evans, Brad; Foutz, John; Gamble, Teresa; Gary Kuhn (gary.kuhn@mea.coop); Janorschke, Brad; Jean Schroeder, HEA Secretary; Jeff Estes, City of Seward; Jeff Warner; Joe Griffith, MEA; Kirk Gibson, McDowell Rackner & Gibson PC; Larry Jorgensen; Owens, Connie; Posey, Jim; Rick Miller, AML&P; Susan Redlin, Exec. Secretary, GVEA; Wick, Burke; Agi, Lou E. (AgiLE@ci.anchorage.ak.us) Ce: Kelli L. Veech; May Clark; Bryan Carey; Brenda Applegate; Kimberly Lomen; Sara Fisher- Goad; Kenneth Vassar; Gene Therriault Subject: Battle Creek Financing - Renewal and Contingency Reserve Fund Attachments: 9-18-12 RC Battle Crk cost allocation.xlsx; 9-18-12 Vassar's Battle Creek Opinion.docx Greetings: Attached please find (1) a draft opinion from bond counsel which concludes the Renewal and Contingency Reserve Fund can be used for funding the Battle Creek diversion project, assuming the BPMC approves that use, and (2) an accounting of the amount the utilities collectively and individually would be obligated to pay to replenish the R&CR Fund over 4 years (i.e., assuming $730,000 is expended, a total of $182,500 would be annually paid for 4 years, with amounts by utility listed). Ken is still reviewing a few items related to the opinion, but believes they will not modify his opinion. Please forward any comments to Ken and myself. Unless there are any comments which would require amending the opinion, Ken will finalize this opinion by the end of the week Thanks. Brian Bjorkquist Senior Assistant Attorney General -S Labor and State Affairs s§ | b (907) 269-5150 - direct \ : (907) 258-4978 - fax ; Bradley Lake Project Battle Creek R&C Allocation based on $730,000 estimated project costs Annual repayment $ 182,500.00 Participant's Participant Participant % Repayment CEA 30.4% 55,480.00 MLP 25.9% 47,267.50 HEA 12.0% 21,900.00 GVEA 16.9% 30,842.50 Seward 1.0% 1,825.00 $ $ $ MEA 13.8% $ 25,185.00 $ $ $ 182,500.00 Battle Creek Diversion Opinion - DRAFT September 18, 2012 September 18, 2012 Alaska Energy Authority 813 West Northern Lights Boulevard Anchorage, Alaska 99503 Project Management Committee c/o Alaska Energy Authority 813 West Northern Lights Boulevard Anchorage, Alaska 99503 Dear Sir or Madam: I am bond counsel to the Alaska Energy Authority (the “Authority) and have been asked to provide an opinion regarding the proposal to apply money on deposit in the Renewal and Contingency Reserve Fund (the “Fund”) established in Section 502 of the Authority’s Power Revenue Bond Resolution originally adopted on September 7, 1989, and subsequently amended and supplemented (as so amended and supplemented, the “Bond Resolution”) to the Battle Creek Diversion Project described herein. The Authority adopted the Bond Resolution for the purpose of issuing bonds (collectively, the “Bradley Lake Bonds”) to finance the construction of the Bradley Lake Hydroelectric Project (the “Bradley Lake Project”). To provide revenue to pay the bonds and for other purposes, the Authority entered into an Agreement for the Sale and Purchase of Electric Power (the “Power Sales Agreement”) dated as of December 8, 1987. The Authority (which was then known as the Alaska Power Authority) entered into the Power Sales Agreement with: (1) Chugach Electric Association, Inc.; Golden Valley Electric Association, Inc. the Municipality of Anchorage doing business as Municipal Light and Power; the City of Seward doing business as Seward Electric System; and Alaska Electric Generation & Transmission Cooperative, Inc. (all of the foregoing as “purchasers” under the Power Sales Agreement); and (2) Homer Electric Association, Inc.; and Matanuska Electric Association, Inc. (as “additional parties” under the Power Sales Agreement). Section 13 of the Power Sales Agreement provides for the establishment of a Project Management Committee (the “Committee”). The Authority and the Committee are considering a project that would divert water to the Bradley Lake Project from the west fork of Upper Battle Creek on the Kenai Peninsula to provide additional water to Bradley Lake (the “Battle Creek Diversion Project”). The Battle Creek Diversion Project would include a diversion dam, one or more canals, one or more roads, and such other facilities as may be required to complete the intended diversion of water. The intended effect of the Battle Creek Diversion Opinion - DRAFT September 18, 2012 Battle Creek Diversion Project is to increase the power generation of the Bradley Lake Project. The Authority and the Committee have requested this opinion to address the question of whether money on deposit in the Fund may be used to finance costs of the Battle Creek Diversion Project. In my opinion, subject to the assumptions set forth herein, the money in the Fund may be so used. A more detailed discussion follows. Section 502 of the Bond Resolution establishes a number of funds. Included among those funds is the Fund. Section 509 of the Bond Resolution describes the uses to which the Fund may be put. Clause 1 of Section 509 permits money in the Fund to be applied to the costs of Capital Improvements. The definition of “Capital Improvements” in Section 101 of the Bond Resolution includes “additions or expansions” to the Bradley Lake Project that are approved by the Committee as Optional Project Work pursuant to the Power Sales Agreement. The proposed Battle Creek Diversion Project would constitute an addition or expansion of the Bradley Lake Project within the meaning of the definition of “Capital Improvements” contained in Section 101 of the Bond Resolution. I note that the Fund was originally funded with proceeds of the Bradley Lake Bonds. I have reviewed the tax and arbitrage certificates signed by the Authority as part of the issuance of each series of Bradley Lake Bonds. I have also reviewed a history provided to me by the Authority of amounts spent from the Fund. Based on these reviews, it is my opinion that amounts currently remaining on deposit in the Fund no longer include proceeds of the Bradley Lake Bonds in any significant amount and, therefore, are not restricted to being expended on the Bradley Lake Project as defined in either the federal legislation exempting the Bradley Lake Project from the two-county rule contained in Section 142(f) of the Internal Revenue Code of 1986, as amended, or in any TEFRA notices published in connection with the issuance of any of the Bradley Lake Bonds. In my opinion, the use of the money in the Fund to pay for the Battle Creek Diversion Project will not adversely affect the tax-exempt status of interest on any of the Bradley Lake Bonds. The opinions expressed in this letter are based on certain assumptions, which are described in the following paragraphs. Clause 2 of Section 509 prohibits the application of money in the Fund to any otherwise permitted payments if there are proceeds from insurance or self- insurance available to make those payments. For purposes of this opinion, | have assumed that there are no such insurance or self-insurance proceeds. Battle Creek Diversion Opinion - DRAFT September 18, 2012 Clause 3 of Section 509 of the Bond Resolution provides that money in the Fund in excess of the amount required by the Bond Resolution to be in the Fund must be deposited in the Revenue Fund established in the Bond Resolution at least annually. For purposes of this opinion, I have assumed that such deposits have been made when and as required by the Bond Resolution. For purposes of this opinion, I have been directed to assume that the Committee approves the use of money in the Renewal and Contingency Reserve Fund for the Battle Creek Diversion Project, and, so, for purposes of this opinion, I have made that assumption and, moreover, have also assumed that the Committee’s approval is for the Battle Creek Diversion Project as Optional Project Work pursuant to the Power Sales Agreement. This opinion is addressed only to the addressees set forth above. It may not be copied or distributed without my express permission. It may not be relied upon by any person other than the addressees set forth above without my express permission. I disclaim any obligation to update this opinion. Sincerely, Kenneth E. Vassar