HomeMy WebLinkAboutAEA Annual Financial Statement 2018-A
The report accompanying these financial statements was issued by
BDO USA, LLP, a Delaware limited liability partnership and the U.S. member
of BDO International Limited, a UK company limited by guarantee.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Basic Financial Statements and Schedules
June 30, 2018
(With Independent Auditors’ Report Thereon)
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Basic Financial Statements and Schedules
June 30, 2018
(With Independent Auditors’ Report Thereon)
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Table of Contents
Page(s)
Independent Auditor’s Report 1-2
Management’s Discussion and Analysis (Unaudited) 3-15
Basic Financial Statements
Government-Wide Financial Statements:
Statement of Net Position 16
Statement of Activities 17
Fund Financial Statements:
Governmental Fund:
Balance Sheet/Statement of Net Position - Governmental Activities 18
Statement of Revenues, Expenditures, and
Changes in Fund Balance/Statement of Activities – Governmental Activities 19
Enterprise Fund:
Statement of Net Position 20
Statement of Revenues, Expenses, and Changes
in Net Position 21
Statement of Cash Flows 22
Notes to Basic Financial Statements 23-47
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Table of Contents
Page(s)
Supplementary Information
Schedules
1 Bradley Lake Hydroelectric Project Trust Account Activities 48
2 Special Revenue Fund – Projects and Programs – Balance Sheet 49
3 Special Revenue Fund – Projects and Programs – Revenues,
Expenses, and Changes in Fund Balance 50
4 Business-Type Activities – Enterprise Fund – Projects and Programs – Statement of Net
Position 51
5 Business-Type Activities – Enterprise Fund – Projects and Programs – Revenues,
Expenses, and Changes in Net Position 52
Supplementary Information (Unaudited)
6 Schedule of Capital Assets Presented under
Federal Energy Regulatory Commission Requirements 53
7 Bradley Lake Historical Annual Project Cost 54
8 PCE Endowment Fund Historical Analysis 55
9 Supplementary Organization and Project Information 56-58
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1
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Independent Auditor’s Report
The Board of Directors
Alaska Energy Authority
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business-type activities and
each major fund of Alaska Energy Authority (a Component Unit of the State of Alaska) (Authority), as of and for the
year ended June 30, 2018 and the related notes to the financial statements, which collectively comprise the Authority’s
basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with
accounting principles generally accepted in the United States of America; this includes the design, implementation, and
maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from
material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in
accordance with auditing standards generally accepted in the United States of America and the standards applicable to
financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates
made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinions.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial
position of the governmental activities, the business-type activities, and each major fund of the Authority as of June 30,
2018, and the respective changes in its financial position and, where applicable, cash flows thereof for the year then
ended in accordance with accounting principles generally accepted in the United States of America.
2
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and
analysis on pages 3-15 be presented to supplement the basic financial statements. Such information, although not a part
of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be
an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic,
or historical context. We have applied certain limited procedures to the required supplementary information in
accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of
management about the methods of preparing the information and comparing the information for consistency with
management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our
audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because
the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Supplementary Information
Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise
the Authority’s basic financial statements. The supplementary information in schedules 1 through 9 is presented for
purposes of additional analysis and is not a required part of the basic financial statements.
The supplementary information in schedules 1, 2, 3, 4 and 5 is the responsibility of management and was derived from
and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such
information has been subjected to the auditing procedures applied in the audit of the basic financial statements and
certain additional procedures, including comparing and reconciling such information directly to the underlying
accounting and other records used to prepare the basic financial statements or to the basic financial statements
themselves, and other additional procedures in accordance with auditing standards generally accepted in the United
States of America. In our opinion, the supplementary information is fairly stated in all material respects in relation to
the basic financial statements as a whole.
The supplementary information in schedules 6, 7, 8 and 9 has not been subjected to the auditing procedures applied in
the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on
it.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated October 29, 2018 on our
consideration of the Authority’s internal control over financial reporting and on our tests of its compliance with certain
provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely
to describe the scope of our testing of internal control over financial reporting and compliance and the results of that
testing, and not to provide an opinion on the effectiveness of the Authority’s internal control over financial reporting or
on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards
in considering the Authority’s internal control over financial reporting and compliance.
Anchorage, Alaska
October 29, 2018
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2018
3
Overview of the Financial Statements
The Alaska Energy Authority (AEA or Authority) is a public corporation of the State of Alaska
(State) within the Department of Commerce, Community, and Economic Development (DCCED),
but with a separate and independent legal existence and a separate and self-balancing set of
independently audited financial statements. AEA’s operations consist of governmental fund
activities reported as special revenue funds and business-type activities reported as enterprise funds.
The financial information in this report is later reported as a component unit of the State and is
discretely presented in the State’s financial statements.
AEA manages the following projects and programs: owned hydroelectric and intertie projects; rural
energy programs; and energy development programs. AEA’s programs are funded primarily by the
State, federal grants, investment income, and utility companies—for use of AEA owned assets.
Further information on AEA’s programs can be found in note 1 to the financial statements.
Management’s Discussion and Analysis
This section presents management’s discussion and analysis of the financial position and results of
operations for the year ended June 30, 2018. This information is presented to help the reader focus
on significant financial matters and provide additional information regarding the activities of the
Authority. This information should be read in conjunction with the Independent Auditors’ Report,
the audited financial statements, and the accompanying notes.
Government-Wide Financial Statements
The government-wide financial statements report information about the overall finances of the
Authority similar to a business enterprise. These statements combine and consolidate short-term,
spendable resources with capital assets and long-term obligations.
The government-wide financial statements are divided into the following categories:
Governmental activities – These are functions of the Authority that are financed primarily
by intergovernmental revenues. AEA’s governmental activities include Power Cost
Equalization Fund (PCE), Renewable Energy Fund, Emerging Energy Technology Fund,
Trans-Alaska Pipeline Liability Fund, and Rural Energy Projects.
Business-type activities – These are functions of the Authority in which customer user fees
and charges are used to help cover all or most of the cost of services they provide. AEA’s
business-type activities include the Bradley Lake Hydroelectric Project, the Alaska Intertie,
the Susitna-Watana Hydroelectric Project, the Power Project Fund, the Rural Electrification
Revolving Loan Fund, and the Power Development and Railbelt Projects.
The Statement of Net Position presents information on all of AEA’s assets and deferred outflows of
resources less liabilities and deferred inflows of resources, which results in net position. This
statement is designed to display the financial position of AEA.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2018
4
The Statement of Activities provides information, which shows how the Authority’s net position
changed as a result of the year’s activities. The statement uses the full accrual basis of accounting
and the economic resources measurement focus, which is similar to the accounting used by private-
sector businesses. Revenues are recognized when earned and expenses are recognized when a
liability is incurred.
Fund Financial Statements
A fund is a grouping of related accounts used to maintain control over resources that have been
segregated for specific activities or objectives. The funds of the Authority are divided into two
categories: governmental fund and proprietary fund, both of which are further described below, and
which provides more detail than the government-wide statements. AEA uses fund accounting to
ensure and demonstrate compliance with finance related legal requirements.
Governmental Funds – Special Revenue Funds
Governmental funds are used to account for essentially the same functions reported as governmental
activities in the government-wide financial statements. However, unlike the government-wide
financial statements, governmental fund financial statements focus on the short-term view of AEA’s
operations. Because the focus of governmental funds is narrower than that of the government-wide,
it is useful to compare the information presented for the governmental funds with similar information
presented for governmental activities in the government-wide financial statements. These funds are
combined on the Governmental Fund Balance Sheet/Statement of Net Position – Governmental
Activities and Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund
Balance/Statement of Activities – Governmental Activities.
Proprietary Funds – Enterprise Fund
The Authority reports one enterprise fund. The enterprise fund is used to account for activities for
which a fee is charged to external users for goods and services.
The Statement of Net Position reports the Authority’s assets, deferred outflows of resources,
liabilities, deferred inflows of resources, and resulting net position. The net position is reported as
net investment in capital assets, restricted, and unrestricted. Restricted net position is subject to
external limits such as bond resolutions, legal agreements, or statutes. The Statement of Revenues,
Expenses, and Changes in Net Position reports the Authority’s revenues, expenses, and resulting
change in net position during the periods reported. Both statements report on the full accrual basis of
accounting and economic resources measurement focus.
The Statement of Cash Flows reports the Authority’s sources and uses of cash and change in cash
balance resulting from the Authority’s activities during the periods reported.
Notes to Basic Financial Statements
The notes provide additional information that is essential to fully understand the amounts reported in
the government-wide and fund financial statements.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2018
5
Other Information
In addition to the basic financial statements and accompanying notes, this report also presents certain
supplementary information, which provides additional information about AEA’s projects and
programs.
Required Components of the Financial Report
Basic Financial
Statements
(audited)
Required and
Optional*
Supplementary
Information
Government‐wide
Financial Statements
(audited)
Fund Financial
Statements
(audited)
Notes to the
Financial
Statements
(audited)
Management's
Discussion and
Analysis
(unaudited)
Summary
Detail
*Optional Supplementary Information:
Schedule 1: Schedule of Bradley Lake Hydroelectric Project Trust Account Activities
(audited);
Schedule 2: Special Revenue Fund Schedule of Projects and Programs – Balance Sheet
(audited);
Schedule 3: Special Revenue Fund Schedule of Projects and Programs – Revenues, Expenses
and Changes in Fund Balance (audited);
Schedule 4: Business-Type Activities – Enterprise Fund – Schedule of Projects and Programs
– Statement of Net Position (audited);
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2018
6
Schedule 5: Business-Type Activities – Enterprise Fund – Schedule of Projects and Programs
– Revenues, Expenses, and Changes in Net Position (audited);
Schedules 6: Schedule of Capital Assets Presented under Federal Energy Regulatory
Commission (FERC) Requirements (unaudited);
Schedule 7: Bradley Lake Historical Annual Project Cost (unaudited)
Schedule 8: PCE Endowment Fund Historical Analysis (unaudited); and
Schedule 9: Supplementary Organization and Project Information (unaudited).
Government-Wide Financial Analysis
As noted earlier, net position may serve over time as a useful indicator of a government’s financial
position. In the case with AEA as a whole, assets and deferred outflows exceeded its liabilities and
deferred inflows by $1,488.9 million at June 30, 2018 and $1,461.2 million at June 30, 2017. Of the
total net position at June 30, 2018, $318.2 million was invested in capital assets, net of related debt,
and $1,170.7 million was restricted. Of the total net position at June 30, 2017, $321.5 million was
invested in capital assets, net of related debt and $1,139.7 million was restricted.
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ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2018
7
Financial Analysis
The following tables are provided to show AEA’s total assets, deferred outflows of resources,
liabilities, deferred inflows of resources, and net position at June 30, 2018 and 2017:
Table 1
(in thousands of dollars)
Governmental Activities Business-Type Activities
2018 2017 Variance 2018 2017 Variance
Assets: Current and other
noncurrent assets $ 1,118,780 1,088,666 30,114 117,158 87,444 29,714
Capital assets - - - 369,188 374,937 (5,749)
Total assets 1,118,780 1,088,666 30,114 486,346 462,381 23,965
Deferred outflows of
resources - - - 10 20 (10)
Total assets and
deferred outflows $ 1,118,780 1,088,666 30,114 486,356 462,401 23,955
Liabilities:
Current liabilities 17,726 20,672 (2,946) 22,143 23,877 (1,734)
Noncurrent liabilities 2 - 2 76,338 45,308 31,030
Total liabilities 17,728 20,672 (2,944) 98,481 69,185 29,296
Net Position:
Net investment in
capital assets - - - 318,239 321,462 (3,223)
Restricted 1,101,052 1,067,994 33,058 69,636 71,754 (2,118)
Total net position 1,101,052 1,067,994 33,058 387,875 393,216 (5,341)
Total liabilities and
net position $ 1,118,780 1,088,666 30,114 486,356 462,401 23,955
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2018
8
Governmental Activities:
Current and other noncurrent assets are $30.1 million higher in the current fiscal year. The Power Cost
Equalization Endowment Fund had a net increase in restricted investments of $49.8 million. Decreases in
restricted cash and cash equivalents and other assets in the remaining funds partially offset this increase.
Cash and cash equivalents held by AEA are advances from state appropriations and are drawn based on
project need; therefore, these balance will fluctuate annually.
Total liabilities decreased in the current fiscal year by $2.9 million. The Authority’s liabilities include
amounts due to the State and accounts payable and will fluctuate annually.
Net position, during the current fiscal year increased by $33.0 million. This increase is a result of FY18
operations. Net position increased $95.0 million from revenues earned in FY18 and decreased $60.0 million
from expenses incurred in FY18. Net position was further reduced by $2.0 million reflecting a transfer of net
assets within the Rural Energy Projects. The net asset transfer decreased governmental activities and
increased business-type activities.
Business-Type Activities:
Current and other noncurrent assets increased by $29.7 million in the current fiscal year. The increase in
current and noncurrent assets is primarily due to an increase in restricted cash and cash equivalents. These
balances comprise the total cash on hand for the Enterprise Fund projects and fluctuates relative to the
operational needs of the projects. In FY18 the cash increase was substantially due to the issuance of $41.2
million in bonds to finance the construction of the West Fork Upper Battle Creek Diversion Project.
Capital assets, net of accumulated depreciation decreased by $5.7 million due to an increase in depreciation
expense and decreased spending on the Susitna-Watana Hydroelectric project. Depreciation expense
increased from prior year due to an adjustment to the useful life of two static VAR compensators; the
adjustment was made to more accurately reflect the actual useful life of the assets, this caused an additional
amount of depreciation to be recognized in FY18. In the current year, Susitna-Watana Hydroelectric project
spent $7.6 million less on the FERC license capital asset compared to the prior fiscal year.
Deferred outflows of resources decreased in the current fiscal year by $10 thousand, due to amortized costs
relating to long-term debt.
Total liabilities increased in the current fiscal year by $29.3 million. $31.7 million of the total increase was
due to the net effect of the issuance of $41.2 million in debt for the construction of the West Fork Upper
Battle Creek Diversion projects and debt service payments on the Bradley Lake Hydroelectric Project bonds
of $9.5 million. The issuance of new debt increased total liabilities while payments on debt decreased this
balance. Advances to AEA from the State of Alaska decreased by $1.2 million in the current fiscal year.
Advances from the State are drawn based on project need; therefore, these amounts will fluctuate annually.
Net position decreased in the current fiscal year by $5.3 million. The decrease in net position was due to
the net effect of $25.8 million of revenues, $25.9 million of expenses, $2.8 million capital contributions and
$10.1 million in reappropriations of funds returned to the State of Alaska in FY18. Net position was further
increased by $2.0 million reflecting a transfer of net assets within the Power Development and Railbelt
Energy Projects. The net asset transfer increased business-type activities and decreased governmental
activities.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2018
9
The following tables are provided to show AEA’s revenues, expenses, and changes in net position at June
30, 2018 and 2017:
Financial Analysis, continued
Table 2
(in thousands of dollars)
Governmental Activities Business-Type Activities
2018 2017 Variance 2018 2017 Variance
Revenues:
Program revenues: Fees, Fines, and Charges
for services $ - - - 21,848 19,179 2,669
Operating grants and
contributions 17,986 22,096 (4,110) 995 - 995
Capital grants and
contributions - - - 661 9,148 (8,487)
General revenues:
Investment Income 77,046 112,618 (35,572) 2,299 1,825 474
Total revenues 95,032 134,714 (39,682) 25,803 30,152 (4,349)
Expenses:
Grants and projects 30,496 36,776 (6,280) - - -
Power cost equalization
grants 26,196 25,853 343 - - -
General and administrative 3,288 3,452 (164) 1,166 1,252 (86)
Interest expense - - - 2,371 2,652 (281)
Plant operations - - - 6,772 4,330 2,442
Depreciation - - - 15,594 10,808 4,786
Loss on disposal of asset - - - 15 - 15
Provision for loan loss - - - (51) 154 (205)
Total expenses 59,980 66,081 (6,101) 25,867 19,196 6,671
State of Alaska reappropriation
of funds - (13,556) 13,556 (10,067) - (10,067)
Capital contributions - - - 2,796 - 2,796
Transfers in (out) (1,994) - (1,994) 1,994 - 1,994
Change in net position 33,058 55,077 (22,019) (5,341) 10,956 (16,297)
Net position, beginning 1,067,994 1,012,917 55,077 393,216 382,260 10,956
Net position, ending $ 1,101,052 1,067,994 33,058 387,875 393,216 (5,341)
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2018
10
Governmental Activities:
Revenues for governmental activities decreased by $39.7 million, based on the following:
Operating grants and contributions decreased by $4.1 million in the current fiscal year as a result
of reduced state and federal contributions for Rural Power System Upgrade (RPSU) and Bulk Fuel
Upgrade (BFU) projects; and
Investment income was $35.6 million lower in the current fiscal year, due to appropriations taken
out of the PCE Endowment Fund and market fluctuations substantially contributed to decreased
earnings in FY18 compared to FY17.
Expenses for governmental activities decreased overall by $6.1 million from the prior fiscal year, based on
the following:
Grants and project expenses decreased by $6.3 million. The reduction is from reduced state and
federal funding for projects and will fluctuate annually;
PCE grants increased by $343 thousand;
General and administrative expenses decreased by $164 thousand in the current fiscal year,
primarily due to decreases in administrative costs shared between AIDEA and AEA for
administrative support; and
State of Alaska reappropriation and transfers for governmental activities decreased by
approximately $13.6 million in FY18 compared to FY17. In FY17 $13.6 million was reappropriated
from the PCE fund and there was no reappropriation in FY18.
Business-Type Activities:
Revenues for business-type activities decreased, overall, by $4.3 million in the current fiscal year, due to the
following:
Charges for services were increased by $2.7 million. Charges for services include the amounts
received from the utilities for services performed by AEA on behalf of the utilities. These services
are agreed to and the amounts are based on project expenditures, operating cash requirements, and
will fluctuate annually. The current year increase is a reflection of additional services required to be
performed related to the construction of the West Fork Upper Battle Creek Diversion Project and
maintenance projects performed on the Intertie;
Operating grants and contributions increased by $995 thousand due to maintenance projects
performed on the Alaska Intertie Project funded by the State of Alaska appropriations;
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2018
11
Capital grants and contributions from the State were less in the current fiscal year by $8.5 million.
The decrease is primarily due to the reduction of state funding for capital projects, such as the
Susitna-Watana Hydroelectric project. In the current fiscal year, AEA completed its efforts to get
the project to the point where the State’s investment, to date, is preserved and the project has been
left in abeyance; and
Investment income increased by $474 thousand due to higher cash and cash equivalent balances
throughout the year ended June 30, 2018, when compared to prior year. These balances will fluctuate
annually, based on operating cash needs of the projects. In FY18 cash balances increased
substantially due to the receipt of $41.2 million in debt proceeds for the construction of the Battle
Creek Diversion Project. Changes in portfolio management of the Power Project Fund also
contributed to higher investment income.
Expenses for business-type activities increased by $6.7 million in the current fiscal year, based on the
following:
General and administrative expenses decreased by $86 thousand. General and administrative
expenses will fluctuate annually. The current year decrease is minimal and a normal fluctuation;
Interest expense represents the cost of interest on AEA’s Power Revenue Bonds for the Bradley
Lake Hydroelectric Project. Interest expense decreased in the current fiscal year by $281 thousand.
Outstanding bond balances of the Bradley Lake bonds relating to the original project and not subject
to federal interest subsidy decreased; therefore, interest accrued on those balances also decreased.
The FY18 issuance of debt for the construction of the Battle Creek Diversion project offset this
decrease slightly. Interest expense on the Battle Creek Diversion bonds is offset by federal
subsidies causing interest expense to be minimal. The Battle Creek Diversion bonds qualified for
two federal interest subsidy programs;
Plant operations for the Bradley Lake Hydroelectric project and the Alaska Intertie project
increased in the current fiscal year by $2.4 million. Plant operations consist of various activities
required to maintain operations of each project. These activities are provided as needed; therefore,
these amounts will fluctuate annually. In the current year the Alaska Intertie project had multiple
large maintenance projects performed;
Depreciation expense increased in the current fiscal year by $4.8 million, as a result of an adjustment
to the useful life used to depreciate two static VAR compensators; the adjustment was made to more
accurately reflect the actual useful life of the assets, this caused an additional amount of depreciation
to be recognized in FY18;
Loss on disposal of asset in FY18 is related to a Michigan loader that was sold for $15 thousand
less than its book value for the Bradley Lake Hydroelectric project; and
Provision for loan recovery decreased by $205 thousand from the prior fiscal year. The decrease is
due to a reevaluation by management of the loss exposure relating to the Power Project Fund loan
portfolio.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2018
12
Fund Balances
Governmental Funds:
The focus of AEA’s governmental funds is to provide information on near-term inflows, outflows, and
balances of spendable resources. Such information is useful in assessing AEA’s financing requirements.
At the end of the current fiscal year, AEA’s governmental funds reported combined ending fund balances of
$1,101.1 million, which is an increase of $33.1 million in comparison with the prior fiscal year.
The combined ending fund balance is categorized as restricted to indicate that there is an externally
enforceable limitation to its use. Specifically, the fund balance is entirely restricted by agreements with
external parties or by legislation.
At the end of the current fiscal year, total fund balances for AEA’s governmental funds were as follows:
Table 3
Governmental Fund – Fund Balances
(in thousands of dollars)
Power Cost Equalization Fund $ 1,071,193
Renewable Energy Grant Fund 27,541
Trans-Alaska Pipeline Liability Fund 1,174
Emerging Energy Technology Fund 1,143
Rural Energy Projects 1
Total Fund Balance $ 1,101,052
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ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2018
13
Proprietary Funds:
AEA’s proprietary fund financial statements consist of enterprise funds, which provide detailed information
of the same type found in the business-type activities section of the government-wide financial statements.
At the end of the current fiscal year, total net position for AEA’s proprietary funds were as follows:
Table 4
Proprietary Funds – Net Position
(in thousands of dollars)
Bradley Lake Hydroelectric Project $ 137,572
Alaska Intertie Project 25,335
Susitna-Watana Hydroelectric Project 183,682
Power Project Fund 39,165
Rural Electrification Revolving Loan Fund 127
Power Development and Railbelt Energy Projects 1,994
Total Net Position $ 387,875
At the end of the current fiscal year, AEA’s proprietary funds reported combined ending net position of
$387.9 million, which is a decrease of $5.3 million in comparison with the prior fiscal year.
The combined ending net position is categorized as the following:
invested in capital assets, net of related debt ($318.2 million);
restricted for capital projects ($164 thousand);
restricted for debt service ($25.6 million);
restricted by agreements with external parties ($2.6 million); and
restricted by legislation ($41.3 million).
Capital Assets and Debt Administration
Capital Assets:
AEA’s investment in capital assets for its business-type activities as of June 30, 2018 amounts to $369.2
million (net of accumulated depreciation), which is a decrease of $5.7 million from the prior fiscal year. The
investment in capital assets only occurs in the enterprise funds and includes land and rights of way,
infrastructure, equipment, and construction in progress.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2018
14
Table 5
Capital Assets
(net of depreciation, in thousands of dollars)
Business-Type Activities
2018 2017 Variance
Land and Rights of Way $ 11,212 11,212 -
Infrastructure 160,530 167,600 (7,070)
Equipment 998 152 846
Construction in Progress 196,448 195,973 475
Total $ 369,188 374,937 (5,749)
Major additions to capital assets during the current fiscal year include improvements to the Bradley Lake
Hydroelectric Project consisting primarily of the static VAR compensator replacement for Soldotna/Daves
Creek and continued work on the West Fork Upper Battle Creek project. The Susitna-Watana Hydroelectric
project continued its efforts to complete studies and get the project to the point where the State’s investment,
to date, is preserved and the project can be left in abeyance.
Table 6
Capital Asset Additions
(in thousands of dollars)
Bradley Battle Creek Diversion $ 6,923
SVC Replacement-Soldotna/Daves Creek 1,341
Bradley Fish Water Valve Actuators 361
Bradley Lake power plant equipment (Mobile Crane and 950M Loader) 352
Bradley Lake transportation equipment (five vehicles) 168
Bradley Lake Equipment Storage Shed 68
Susitna-Watana Hydroelectric 661
Total Capital Asset Additions $ 9,874
Major deletions to capital assets during the current fiscal year includes the original static VAR compensators
that were replaced at Soldotna/Daves Creek, transportation equipment that was replaced and power plant
equipment that was replaced.
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ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2018
15
Table 7
Capital Asset Deletions
(in thousands of dollars)
SVC at Soldotna/Daves Creek $ 15,271
Bradley Lake power plant equipment (Loader) 136
Bradley Lake transportation equipment (two vehicles) 50
Total Capital Asset Additions $ 15,457
Long-Term Debt:
At the end of the current fiscal year, AEA had total long-term debt outstanding of $85.2 million. AEA’s
total long-term debt increased by $31.7 million during the current fiscal year as a result of scheduled debt
service payments of $9.5 million and the issuance of debt for the construction of the West Fork Upper Battle
Creek Diversion Project in the amount of $41.2 million.
Table 8
Outstanding Debt
(in thousands of dollars)
Business-Type Activities
2018 2017 Variance
Bradley Lake Power Revenue and refunding Bonds $ 85,179 53,495 31,684
Total $ 85,179 53,495 31,684
Outlook
Operations and maintenance of our hydroelectric and interties projects will continue as approved by the
utilities. The construction on the West Fork Upper Battle Creek Diversion Project is anticipated to continue
through FY21. Various RPSU and BFU projects are anticipated to continue through FY19 with the continued
federal and state funding. The Renewable Energy Grant Fund is expected to start projects for Round IX in
FY19. AEA and the Denali Commission are leveraging the use of available funding by shifting project focus
to more maintenance and improvement projects. AEA will continue Bulk Fuel and Power Plant Operator
training, Circuit Rider, Technical Assistance, and Electrical Emergency efforts across Alaska.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Statement of Net Position
June 30, 2018
(stated in thousands)
Governmental Business-Type
Assets and Deferred Outflows of Resources Activities Activities Total
Current assets:
Restricted cash and cash equivalents (note 3) $ 27,070 70,109 97,179
Operating receivable 1,090 346 1,436
Prepaid expense — 731 731
Grants receivable 1,530 — 1,530
Loans receivable (note 7) — 567 567
Due from State of Alaska 831 30 861
Accrued interest receivable — 1,198 1,198
Due (to) from other funds/internal balances 640 (640) —
Total Current Assets 31,161 72,341 103,502
Noncurrent assets:
Restricted investments (note 3) 1,087,619 27,416 1,115,035
Loans receivable, net of allowance (note 7) — 17,401 17,401
Capital assets, net of accumulated depreciation (note 4) — 369,188 369,188
Total Noncurrent Assets 1,087,619 414,005 1,501,624
Deferred outflows of resources:
Deferred charge on bond refundings — 10 10
Total Assets and Deferred Outflows of Resources $ 1,118,780 486,356 1,605,136
Liabilities and Net Position
Current liabilities:
Advances from the State of Alaska $ 5,869 2,212 8,081
Accounts payable 11,849 7,255 19,104
Bonds payable – current portion (note 6) — 10,470 10,470
Other bond liabilities – current portion (note 6) — 156 156
Accrued interest payable — 2,050 2,050
Other liabilities 8 — 8
Total Current Liabilities 17,726 22,143 39,869
Noncurrent liabilities:
Bonds payable – noncurrent portion, net (note 6) — 74,709 74,709
Other bond liabilities – noncurrent portion (note 6) — 1,100 1,100
Other liabilities 2 529 531
Total Noncurrent Liabilities 2 76,338 76,340
Total Liabilities 17,728 98,481 116,209
Net Position:
Net investment in capital assets — 318,239 318,239
Restricted for capital projects — 164 164
Restricted for debt service — 25,595 25,595
Restricted by agreements with external parties 1,174 2,591 3,765
Restricted by legislation 1,099,878 41,286 1,141,164
Total Net Position 1,101,052 387,875 1,488,927
Total Liabilities and Net Position $ 1,118,780 486,356 1,605,136
Commitments and contingencies (note 11)
See accompanying notes to basic financial statements.
16
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Statement of Activities
Year ended June 30, 2018
(stated in thousands)
Fees,
Fines, Operating Capital
and Grants Grants
Charges and and Govern- Business-
for Contri- Contri- mental Type
Activities Expenses Services butions butions Activities Activities
Total
Governmental:
Power Cost Equalization Endowment Fund $ 26,605 — — — $(26,605) — (26,605)
Renewable Energy Grant Fund 11,360 — — — (11,360) — (11,360)
Emerging Energy Technology Fund 163 — 76 — (87) — (87)
Trans Alaska Pipeline Liability Fund 3,252 — — — (3,252) — (3,252)
Rural Energy Projects 18,600 — 17,910 — (690) — (690)
Total Governmental Activities 59,980 — 17,986 — (41,994) — (41,994)
Business-type:
Bradley Lake Hydroelectric Project 18,606 19,207 — — — 601 601
Alaska Intertie Project 6,969 2,277 995 — — (3,697) (3,697)
Susitna-Watana Hydroelectric Project — — — 661 — 661 661
Power Project Fund 534 361 — — — (173) (173)
Rural Electrification Revolving Loan Fund (242) 3 — — — 245 245
Total Business-Type Activities 25,867 21,848 995 661 — (2,363) (2,363)
Total Activities 85,847 21,848 18,981 661 (41,994) (2,363) (44,357)
General Revenues
Interest and investment income 77,046 2,299 79,345
State of Alaska reappropriations and transfers — (10,067) (10,067)
Capital contributions — 2,796 2,796
Transfers in (out) (1,994) 1,994 —
Total General Revenues, Contributions,
and Transfers 75,052 (2,978) 72,074
Change in Net Position 33,058 (5,341) 27,717
Net Position - Beginning 1,067,994 393,216 1,461,210
Net Position - Ending $ 1,101,052 387,875 1,488,927
See accompanying notes to basic financial statements.
Net (Expense) Revenue and
Program Revenues Changes in Net Position
17
Major
Special Statement of
Revenue Net Position
Fund Total
Current assets:
Restricted cash and cash equivalents (note 3) $ 27,070 $ 27,070
Operating receivable 1,090 1,090
Grants receivable 1,530 1,530
Due from State of Alaska 831 831
Due (to) from other funds/internal balances 640 640
Total current assets 31,161 31,161
Noncurrent assets:
Restricted investments (note 3) 1,087,619 1,087,619
Total assets $ 1,118,780 $ 1,118,780
Current liabilities:
Advances from the State of Alaska $ 5,869 $ 5,869
Accounts payable 11,849 11,849
Other current liabilities 8 8
Total current liabilities 17,726 17,726
Noncurrent liabilities:
Other noncurrent liabilities 2 2
Total noncurrent liabilities 2 2
Total liabilities 17,728 17,728
Fund balance:
Restricted by agreements with external parties 1,174
Restricted by legislation 1,099,878
Total fund balance 1,101,052
Total liabilities and fund balance $ 1,118,780
Net Position:
Restricted by agreements with external parties 1,174
Restricted by legislation 1,099,878
Total net position 1,101,052
Total liabilities and net position $ 1,118,780
Commitments and contingencies (note 11)
See accompanying notes to basic financial statements.
Liabilities and Fund Balance
Assets
(stated in thousands)
(A Component Unit of the State of Alaska)
ALASKA ENERGY AUTHORITY
Governmental Fund
Balance Sheet/Statement of Net Position - Governmental Activities
June 30, 2018
18
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Governmental Fund
Statement of Revenues, Expenditures, and Changes in
Fund Balance/Statement of Activities - Governmental Activities
Year ended June 30, 2018
(stated in thousands)
Major
Special
Revenue Statement of
Fund Activities
Revenues:
State of Alaska appropriations $ 14,407 $ 14,407
Federal grants 3,505 3,505
Other revenues 74 74
Total revenues 17,986 17,986
Expenditures/Expenses:
Grants and projects 30,496 30,496
Power cost equalization grants 26,196 26,196
General and administrative 3,288 3,288
Total expenditures/expenses 59,980 59,980
Nonoperating activities:
Investment income, net 77,046 77,046
Transfers out (1,994) (1,994)
Total nonoperating activities and transfers out 75,052 75,052
Net change in fund balance 33,058
Change in net position 33,058
Fund balance/Net position – beginning 1,067,994 1,067,994
Fund balance/Net position – ending $ 1,101,052 $ 1,101,052
See accompanying notes to basic financial statements.
19
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Enterprise Fund - Major Fund
Statement of Net Position
June 30, 2018
(stated in thousands)
Assets and Deferred Outflows of Resources
Current assets:
Restricted cash and cash equivalents (note 3) $ 70,109
Operating receivable 346
Prepaid expense 731
Loans receivable (note 7)567
Accrued interest receivable 1,198
Due from the State of Alaska 30
Due (to) from other funds/internal balances (640)
Total Current Assets 72,341
Noncurrent assets:
Restricted investments (note 3) 27,416
Loans receivable, net of allowance (note 7) 17,401
Capital assets, net of accumulated depreciation (note 4) 369,188
Total Noncurrent Assets 414,005
Deferred outflows of resources:
Deferred charge on bond refundings 10
Total Assets and Deferred Outflows of Resources $ 486,356
Liabilities and Net Position
Current liabilities:
Advances from the State of Alaska $ 2,212
Accounts payable 7,255
Bonds payable – current portion (note 6) 10,470
Other bond liabilities – current portion (note 6) 156
Accrued interest payable 2,050
Total Current Liabilities 22,143
Noncurrent liabilities:
Bonds payable – noncurrent portion, net (note 6) 74,709
Other bond liabilities – noncurrent portion (note 6) 1,100
Other liabilities 529
Total Noncurrent Liabilities 76,338
Total Liabilities 98,481
Net position:
Net investment in capital assets 318,239
Restricted for capital projects 164
Restricted for debt service 25,595
Restricted by agreements with external parties 2,591
Restricted by legislation 41,286
Total Net Position 387,875
Total Liabilities and Net Position $ 486,356
Commitments and contingencies (note 11)
See accompanying notes to basic financial statements.
20
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Enterprise Fund - Major Fund
Statement of Revenues, Expenses, and Changes in Net Position
Year ended June 30, 2018
(stated in thousands)
Operating revenues:
State of Alaska appropriations $ 995
Revenue from operating plants 21,482
Interest on loans 296
Other revenues 70
Total Operating Revenues 22,843
Operating expenses:
Depreciation 15,594
General and administrative 1,166
Interest expense 2,371
Plant operations 6,772
Loss on disposal of asset 15
Provision for loan recovery (note 7) (51)
Total Operating Expenses 25,867
Operating Loss (3,024)
Nonoperating activities:
Investment income, net 2,299
State of Alaska reappropriations and transfers (10,067)
Capital contribution 2,796
State of Alaska appropriations 661
Transfers in 1,994
Total Nonoperating Activities and
Reappropriations, Capital Contributions, and Transfers (2,317)
Increase (Decrease) in Net Position (5,341)
Net Position – Beginning 393,216
Net Position – Ending $ 387,875
See accompanying notes to basic financial statements.
21
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Enterprise Fund - Major Fund
Statement of Cash Flows
Year ended June 30, 2018
(stated in thousands)
Cash flows from operating activities:
Receipts from customers and users $ 21,699
Payments from State of Alaska 995
Payments to suppliers (10,542)
Net cash provided by operating activities 12,152
Cash flows from noncapital and related financing activities:
Net unremitted interest returned on State appropriation advances (145)
Net decrease in short-term borrowings from AIDEA for working capital (457)
Net cash used for noncapital and related financing activities (602)
Cash flows from capital and related financing activities:
Principal paid on bonds (9,555)
Proceeds from issuance of bonds 41,239
Interest paid on bonds (2,018)
State of Alaska reappropriations and transfers (10,067)
Investment in capital assets (8,663)
Capital contributions 2,796
Transfers in 1,994
Net cash provided by capital and related financing activities 15,726
Cash flows from investing activities:
Purchase of investments (17,813)
Proceeds from sales and maturities of investments 10,990
Interest received from investments 2,299
Principal collected on loans 348
Loans originated (6,981)
Net cash used for investing activities (11,157)
Net increase in cash and cash equivalents 16,119
Cash and cash equivalents at beginning of year 53,990
Cash and cash equivalents at end of year $ 70,109
Reconciliation of operating loss to net cash provided by operating activities:
Operating loss $ (3,024)
Adjustments to reconcile operating loss to net cash provided by operating activities:
Depreciation 15,594
Loss on disposal of assets 15
Amortization of bond deferred charges 10
Provision for loan recovery (51)
Bond interest expense 2,371
Changes in assets and liabilities that provided (used) cash:
Increase in operating receivables (30)
Increase in due to from other funds (72)
Increase in accrued interest receivable (119)
Decrease in prepaid assets 164
Decrease in advances from State of Alaska (1,274)
Decrease in operating accounts payable (1,432)
Net cash provided by operating activities $ 12,152
Noncash capital and related financing and investing activities:
Ending balance of capital assets accounts payable $ (928)
Net increase in contingent liability on sold loans 36
See accompanying notes to basic financial statements.
22
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2018
23
(1) Organization and Operations
The Alaska Energy Authority (AEA or Authority) was created by the Alaska State Legislature in 1976. AEA
is a public corporation of the State of Alaska (State) within the Department of Commerce, Community, and
Economic Development with separate and independent legal existence. AEA has its own self-balancing set
of financial statements independently audited separate from the State. For financial reporting, AEA is a
component unit of the State. AEA finances various energy infrastructure projects and energy programs to
reduce the cost of energy throughout the State. AEA receives funding from the State, federal grants, and
utility companies for use of AEA owned assets.
Pursuant to legislation enacted in 1993, the Members of the Board of the Alaska Industrial Development and
Export Authority (AIDEA) also serve as the Board of Directors of AEA. AIDEA provides personnel services
for AEA (per statute, AEA has no employees) and has a Board approved borrowing agreement to provide
short-term working capital funds to AEA. AIDEA and AEA have separate executive directors, both are
employees of AIDEA. There is no commingling of funds, assets, or liabilities between AIDEA and AEA
and there is no responsibility of one for the debts or the obligations of the other. Neither AIDEA’s accounts
nor activities are included in the accompanying financial statements.
The following is a description of AEA’s existing owned projects and programs:
(a) Bradley Lake Hydroelectric Project
The project has 120 megawatts of installed capacity and transmits its power to the State’s main power
grid via two parallel 20–mile transmission lines. The project, which cost in excess of $300 million,
went into commercial operation in 1991. The Bradley Lake Project Management Committee oversees
the activities of the Bradley Lake Hydroelectric Project. The project is now operated by Homer Electric
Association under contract with AEA. Bradley Lake serves Alaska’s Railbelt (the power-sharing area
between Interior Alaska and South Central Alaska, connected by roads, generating facilities, and
transmission lines) from the Kenai Peninsula to Fairbanks, as well as the Delta Junction area.
In September 2016 the Authority received an amendment to the Federal Energy Regulatory
Commission (FERC) license for a diversion of West Fork Upper Battle Creek into Bradley Lake. The
diversion will increase the Bradley Lake projects annual energy by approximately 37,000 megawatt
hours (MWh). Construction began in 2018 and is anticipated to be complete in the fall of 2020.
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ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2018
24
(b) Alaska Intertie Project
The Alaska Intertie is a 170–mile transmission line designed for 345 kilovolts and operating at 138
kilovolts. It runs between Willow and Healy and interconnects the power systems in the Southcentral
and Fairbanks areas. The Alaska Intertie Agreement appointed the Intertie Management Committee
(IMC) and AEA to oversee the activities of the Alaska Intertie project. AEA contracts with the
following Participating Utilities for operations and maintenance: Golden Valley Electric Association
(GVEA) in Fairbanks, and Southcentral Alaska utilities, Chugach Electric Association (CEA),
Matanuska Electric Association (MEA), and the Municipality of Anchorage, d/b/a Municipal Light
and Power (ML&P). The Intertie reduces the number of black/brownouts throughout the system by
enabling power to move either north or south when major system disturbances occur. The Intertie
enables GVEA to obtain lower cost power from Southcentral utilities and allows Southcentral Alaska
utilities to purchase power from Fairbanks during power shortages. It also enables GVEA to receive
power generated by the Bradley Lake Project, which is some of the lowest priced power in the Railbelt
region.
(c) Susitna-Watana Hydroelectric Project
The Alaska Legislature appropriated $192 million in funding to AEA towards the development of a
large hydroelectric project to be built in the Railbelt Region. The proposed project would be located
approximately half-way between Anchorage and Fairbanks on the upper Susitna River and would
include a single dam that would produce 2,800,000 MWh annually, equivalent to approximately 50%
of the Railbelt’s annual electrical use.
AEA pursued a FERC license. Pursuant to Administrative Order 271, AEA advanced the licensing
process through FERC’s issuance of an updated Study Plan Determination on the environmental
studies completed between 2013 and 2015. The engineering feasibility study and economic analysis
have been completed; FERC’s updated Determination on the environmental work completed thus far
was favorable to the State. The licensing effort is currently in abeyance.
(d) Rural Energy Programs
The rural energy programs include Bulk Fuel Storage Upgrades, Rural Power System Upgrades, the
Power Cost Equalization (PCE) Grant Program, Utility Training, Technical Assistance, one active loan
program (the Power Project Fund), and one inactive loan program (Rural Electrification Revolving
Loan Fund). The PCE Endowment Fund provides the PCE program a long-term stable financing
source in order to reduce electricity costs for residential and community facility customers in otherwise
high-cost service areas.
(e) Energy Development Programs
The energy development programs include the Renewable Energy Grant Fund and Recommendation
Program, Alternative Energy and Energy Efficiency (AEEE) programs, and the Emerging Energy
Technology Fund (EETF) grant program.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2018
25
The purpose of the Renewable Energy Grant Fund and Recommendation program is to finance
renewable energy projects in Alaska. The AEEE programs support the development of alternative
energy resources specific to Alaska. The purpose of the EETF grant program is to promote and provide
financial assistance to applicants to test, conserve, and improve emerging energy technologies.
(2) Summary of Significant Accounting Policies
(a) Basis of Accounting
As a component unit of the State, and for the purpose of preparing financial statements in accordance
with U.S. Generally Accepted Accounting Principles (GAAP), the Authority, as a public corporation
of the State with separate and independent legal existence, is subject to the accounting requirements
as set forth by the Governmental Accounting Standards Board (GASB).
The funds of the Authority are organized as Governmental Fund and Proprietary Fund. The financial
activities of the Authority are recorded in various funds as necessitated by sound fiscal management.
The funds are combined for financial statement purposes.
(b) Government-Wide and Fund Financial Statements
The government-wide financial statements (i.e., the statement of net position and the statement of
activities) report information on all of the activities of the Authority. In general, the effect of inter-
fund activity has been removed from these statements to minimize the double-counting of internal
activities. Governmental activities, which normally are supported by intergovernmental revenues, are
reported separately from business-type activities, which rely primarily on fees and charges to external
parties.
The statement of activities demonstrates the degree to which the direct expenses of a given function
or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with
a specific function or segment. Program revenues include 1) fees, fines and charges to customers or
applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a
given function or segment and 2) grants and contributions that are restricted to meeting the operational
or capital requirements of a particular function or segment. Other items not properly included among
program revenues are reported instead as general revenues. Investment earnings are general revenues.
Separate financial statements are provided for the special revenue fund and enterprise fund.
(c) Measurement Focus, Basis of Accounting, and Financial Statement Presentation
The government-wide and proprietary fund financial statements are reported using the economic
resources measurement focus and the full accrual basis of accounting. Revenues are recorded when
earned and expenses are recorded when a liability is incurred, regardless of the timing of the related
cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements
imposed by the provider have been met.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2018
26
Governmental fund financial statements are reported using the current financial resources
measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as
they are both measurable and available. Revenues are considered to be available when they are
collectible within the current period or soon enough thereafter to pay liabilities of the current period.
For this purpose, the Authority considers all revenues, except reimbursement grants, to be available if
they are collected within 60 days after year end. Reimbursement grants are considered available if they
are collected within one year of the end of the current fiscal period. Expenditures generally are
recorded when a liability is incurred, as under full accrual accounting. However, debt service
expenditures are recorded only to the extent they have matured.
(d) The Authority reports the following major funds:
Major governmental funds:
AEA uses a special revenue fund to account for its governmental activities. This fund does not have
a legally adopted budget, and hence the budget to actual is not presented in the financial statements.
Major proprietary funds:
The enterprise fund accounts for all financial activities primarily related to fees and charges to external
parties.
(e) Revenue Recognition
AEA does not have a General Fund since all funds are legally restricted with specific purposes by external
agreements, legislation or statute. As a general rule, the effect of inter-fund activity has been eliminated
from the government-wide financial statements.
Amounts reported as program revenues include 1) fees, fines, and charges to customers or applicants for
goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and
contributions. Internally dedicated resources are reported as general revenues rather than as program
revenues.
For purposes of proprietary fund presentation, the Authority considers its revenues and expenses, except
investment income, the sale of program loans, fund transfers with the State, and conveyance of capital
assets, to be part of its principal ongoing operations and, therefore, classifies these revenues and expenses
as operating in the statement of revenues, expenses, and changes in net position.
(f) Fair Value Measurement and Application
Securities or other assets are reported and measured at fair value if (a) we hold it primarily for the
purpose of income or profit and (b) it has a present service capacity based solely on its ability to
generate cash or be sold to generate cash.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2018
27
(g) Cash and Cash Equivalents
All of AEA’s cash and cash equivalents are restricted or designated as to use. AEA has trust accounts
defined by bond resolutions, agreements with external parties, and state legislation restricting the use
of cash and investments.
For the purposes of the statement of cash flows, cash and cash equivalents consist of cash, short-term
commercial paper, and money market funds.
(h) Investments
Marketable securities are reported at fair value in the financial statements. Unrealized gains and losses
are reported as components of the change in net position. Fair values are obtained from independent
sources. Investments are segregated between current and noncurrent based on stated maturity and
intended use. Investments maturing within a year are classified as current if they are considered to be
potentially needed for current operations. This classification recognizes that a portion of our
investment portfolio may be needed for current operations. A noncurrent investment may be sold for
operational cash flow needs, if needed, and is beneficial under current market conditions.
(i) Loans and Related Interest Income
Loans are generally carried at amounts advanced less principal payments collected. Interest income is
accrued as earned. Accrual of interest is discontinued whenever the payment of interest or principal is
more than ninety days past due or when the loan terms are restructured. The Authority considers
lending activities to be part of its principal operations and classifies it as operating in the statement of
revenues, expenses, and changes in net position. For purposes of the statement of cash flows, the loan
program activities are treated as investing activities.
(j) Allowance for Loan Losses
The allowance for loan losses represents management’s judgment as to the amount required to absorb
probable losses in the loan portfolio. The factors used by management to determine the allowance
required include payment history, individual loan size, collateral values, and other factors.
Management’s opinion is that the allowance is currently adequate to absorb known losses and inherent
risks in the portfolio.
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ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2018
28
(k) Capital Assets
Capital assets are stated at cost and depreciation is charged to operations by use of the straight-line
method over their estimated useful lives.
The estimated economic lives of the assets are as follows:
Utility plant Life in years
Intangible 30–50
Production 30–50
Transmission 20–40
General 5–30
AEA recognizes intangible assets per the guidance of GASB Statement No. 51, Accounting and
Financial Reporting for Intangible Assets. Intangible assets are assets which are nonfinancial in
nature, lack physical substance, are identifiable and have a useful life extending beyond a single
reporting period. Costs associated with the generation of internally generated intangible assets are
capitalized when incurred after the following milestones have been met:
Determination of the specific objective of the project and the nature of the service capacity that is
expected to be provided by the intangible asset upon the completion of the project
Demonstration of the technical or technological feasibility for completing the project so that the
intangible asset will provide its expected service capacity
Demonstration of the current intention, ability, and presence of effort to complete or, in the case
of a multiyear project, continue development of the intangible asset
The Authority recognizes impairment losses for long-lived assets whenever there is a significant
unexpected decline in service utility.
Interest on short-term and long-term borrowing for construction projects are capitalized during the
construction phase of the projects.
(l) Fund Balance
In the fund financial statements, the Special Revenue Fund reports aggregate amounts for five
classifications of fund balances based on the constraints imposed on the use of these resources. The
nonspendable fund balance classification includes amounts that cannot be spent because they are either
(a) not in spendable form—prepaid items or inventories; or (b) legally or contractually required to be
maintained intact. The spendable portion of the fund balance comprises the remaining four
classifications: restricted, committed, assigned, and unassigned.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2018
29
Restricted fund balance – this classification reflects the constraints imposed on resources either (a)
externally by creditors, grantors, contributors, laws, or regulations of other governments; or (b)
imposed by law through constitutional provisions or enabling legislation.
All of the Authority’s fund balance is restricted.
(m) Net Position
Net position is displayed in three components, as follows:
Net investment in capital assets – This consists of capital assets, net of accumulated depreciation, less
the outstanding balances of any bonds, mortgages, notes, and accounts payable or other borrowings
that are attributable to the acquisition, construction, or improvement of those assets.
Restricted – this consists of net assets that are legally restricted by outside parties. Those restrictions
come in the form of legislation or State statute that cannot be modified by AEA’s board of directors.
Unrestricted – This consists of net assets that do not meet the definition of “restricted” or “net
investment in capital assets.”
The Authority’s spending policy is to evaluate, on a case by case basis, whether restricted or
unrestricted net position should be spent. This evaluation is performed by management as part of the
overall spending plan.
(n) Environmental Issues
The Authority’s policy relating to environmental issues, including pollution and contamination
remediation obligations to address the current or potential detrimental effects of existing pollution by
participating in pollution remediation activities such as site assessments and cleanups, is to record a
liability when the likelihood of Authority responsibility for clean-up is probable and the costs are
reasonably estimable. In July 2017, the Authority identified soil surface stains at the Authority’s
warehouse property. In FY18, the Authority retained the services of an independent contractor and
worked with the State of Alaska Department of Environmental Conservation (DEC) to conduct a
survey and soil tests of the area. Soil remediation efforts proceeded and a letter from DEC on March
28, 2018 deemed that no further action was required at the site. At June 30, 2018, there were no other
outstanding environmental issues which met both of these criteria and, accordingly, no provision has
been made in the accompanying financial statements for any potential liability which may result.
(o) Income Taxes
The Internal Revenue Code provides that gross income for tax purposes does not include income
accruing to a state or territory or any political subdivision thereof which is derived from the exercise
of any essential governmental function or from any public utility. AEA is a public corporation of the
State performing an essential governmental function and is therefore exempt from State and federal
income taxes.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2018
30
(p) Appropriations and Grants
The Authority recognizes appropriations and grant revenue when all applicable eligibility
requirements, including time requirements, are met.
(q) Estimates
In preparing the financial statements, management of the Authority is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent
assets and liabilities as of the date of the Statements of Net Position. These estimates impact revenue
and expenses for the period. Actual results could differ from those estimates.
(r) Deferred Outflows of Resources
In addition to assets, the statements of net position reports a separate section for deferred outflows of
resources. This separate financial statement element, deferred outflows of resources, represents a
consumption of net position that applies to a future period(s) and so will not be recognized as an
outflow of resources (expense) until then. AEA only has one item that qualifies for reporting in this
category. It is the deferred charge on debt refunding reported in the Statement of Net Position. A
deferred charge on debt refunding results from the difference in the carrying value of refunded debt
and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the
refunded or refunding debt.
(s) Recently Issued Accounting Pronouncements
GASB Statement No. 83 – Certain Asset Retirement Obligations (Statement 83) was issued by the
GASB in November 2016. Statement 83 addresses accounting and financial reporting for certain assets
retirement obligations. Statement 83 generally requires a government that has legal obligations to
perform future assets retirement activities related to its tangible capital assets to recognize a liability
based on the guidance in this Statement. Asset retirement obligation is defined as a legally enforceable
liability associated with the retirement of a tangible capital asset. The Statement establishes criteria for
determining the time and pattern of recognition of a liability and a corresponding deferred outflow of
resources for asset retirement obligations. The Statement requires that recognition occurs when the
liability is both incurred and reasonably estimable. Statement 83 is required to be implemented for
financial reporting periods beginning after June 15, 2018. The Authority has not implemented
Statement 83 and will evaluate the impact on future financial statements.
GASB Statement No. 84, Fiduciary activities (Statement 84) was issued by the GASB in January 2017.
The objective of Statement 84 is to improve guidance regarding the identification of fiduciary activities
for accounting and financial reporting purposes and how those activities should be recorded. This
Statement establishes criteria for identifying fiduciary activities of all state and local governments. The
focus of the criteria generally is on (1) whether a government is controlling the assets of the fiduciary
activity and (2) the beneficiaries with whom a fiduciary relationship exists. Separate criteria are
included to identify fiduciary component units and postemployment benefit arrangements that are
fiduciary activities. The provisions of this Statement are required to be implemented for the reporting
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2018
31
periods beginning after December 15, 2018. The Authority has not implemented Statement 84 and will
evaluate the impact on future financial statements.
GASB Statement No. 85, Omnibus 2017 (Statement 85) was issued by the GASB in March 2017. The
objective of Statement 85 is to address practice issues that have been identified during implementation
and application of certain GASB Statements. This Statement addresses a variety of topics including
issues related to blending component units, goodwill, fair value measurement and application, and
postemployment benefits (pensions and other postemployment benefits [OPEB]). Specifically, this
Statement addresses the following topics:
Blending a component unit in circumstances in which the primary government is a
business-type activity that reports in a single column for financial statement presentation
Reporting amounts previously reported as goodwill and “negative” goodwill
Classifying real estate held by insurance entities
Measuring certain money market investments and participating interest-earning investment
contracts at amortized cost
Timing of the measurement of pension or OPEB liabilities and expenditures recognized in
financial statements prepared using the current financial resources measurement focus
Recognizing on-behalf payments for pensions or OPEB in employer financial statements
Presenting payroll-related measures in required supplementary information for purposes of
reporting by OPEB plans and employers that provide OPEB
Classifying employer-paid member contributions for OPEB
Simplifying certain aspects of the alternative measurement method for OPEB
Accounting and financial reporting for OPEB provided through certain multiple-employer
defined benefit OPEB plans.
The provisions of this Statement are required to be implemented for the periods beginning after June
15, 2017. The Authority has determined that there is no financial statement impact from implementing
GASB Statement No. 85.
GASB Statement No. 86, Certain Debt Extinguishing Issues (Statement 86) was issued by the GASB
in May 2017. The objective of Statement 86 is to improve consistency in accounting and financial
reporting for in-substance defeasance of debt by providing guidance for transactions in which cash and
other monetary assets acquired with only existing resources—resources other than the proceeds of
refunding debt—are placed in an irrevocable trust for the sole purpose of extinguishing debt. This
Statement also improves accounting and financial reporting for prepaid insurance on debt that is
extinguished and notes to financial statements for debt that is defeased in substance. The provisions of
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2018
32
this Statement are required to be implemented for the reporting periods beginning after June 15, 2017.
The Authority has determined that there is no financial statement impact from implementing GASB
Statement No. 86.
GASB Statement No. 87, Leases (Statement 87) was issued by the GASB in June 2017. The objective
of Statement 87 is to better meet the information needs of financial statement users by improving
accounting and financial reporting for leases by governments. This Statement increases the usefulness
of governments’ financial statements by requiring recognition of certain lease assets and liabilities for
leases that previously were classified as operating leases and recognized as inflows of resources or
outflows of resources based on the payment provisions of the contract. It establishes a single model
for lease accounting based on the foundational principle that leases are financings of the right to use
an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an
intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred
inflow of resources, thereby enhancing the relevance and consistency of information about
governments’ leasing activities. The provisions of this Statement are required to be implemented for
the reporting periods beginning after December 15, 2019. The Authority has not implemented
Statement 87 and will evaluate the impact on future financial statements.
GASB Statement No. 88, Certain Disclosure Related to Debt, including Direct Barrowings and Direct
Placements (Statement 88) was released in March of 2018. The primary objective of this Statement
is to improve the information that is disclosed in notes to government financial statements related to
debt, including direct borrowings and direct placements. It also clarifies which liabilities governments
should include when disclosing information related to debt. This Statement defines debt for purposes
of disclosure in notes to financial statements as a liability that arises from a contractual obligation to
pay cash (or other assets that may be used in lieu of cash) in one or more payments to settle an amount
that is fixed at the date the contractual obligation is established. This Statement requires that additional
essential information related to debt be disclosed in notes to financial statements, including unused
lines of credit; assets pledged as collateral for the debt; and terms specified in debt agreements related
to significant events of default with finance-related consequences, significant termination events with
finance-related consequences, and significant subjective acceleration clauses. For notes to financial
statements related to debt, this Statement also requires that existing and additional information be
provided for direct borrowings and direct placements of debt separately from other debt. The
requirements of this Statement are effective for reporting periods beginning after June 15, 2018. The
Authority has not implemented Statement 88 and will evaluate the impact on future financial
statements.
GASB Statement No. 89, Accounting for Interest Cost Incurred before the End of a Construction
Period (Statement 89) was released in June of 2018. The objectives of this Statement are (1) to
enhance the relevance and comparability of information about capital assets and the cost of borrowing
for a reporting period and (2) to simplify accounting for interest cost incurred before the end of a
construction period. This Statement establishes accounting requirements for interest cost incurred
before the end of a construction period. Such interest cost includes all interest that previously was
accounted for in accordance with the requirements of paragraphs 5-22 of Statement No. 62,
Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989
FASB and AICPA Pronouncements which are superseded by this Statement. This Statement requires
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2018
33
that interest cost incurred before the end of a construction period be recognized as an expense in the
period in which the cost is incurred for financial statements prepared using the economic resources
measurement focus. As a result, interest cost incurred before the end of a construction period will not
be included in the historical cost of a capital asset reported in a business-type activity or enterprise
fund. This Statement also reiterates in the financial statements prepared using the current financial
resources measurement focus that interest cost incurred before the end of a construction period should
be recognized as an expenditure on a basis consistent with governmental fund accounting principles.
The requirements of this Statement are effective for reporting periods beginning after December 15,
2019. The Authority has not implemented Statement 89 and will evaluate the impact on future
financial statements.
GASB Statement No. 90, Majority Equity Interests (Statement 90) was issued August 2018. The
primary objectives of this Statement are to improve the consistency and comparability of reporting a
government’s majority equity interest in a legally separate organization and to improve the relevance
of financial statement information for certain component units. It defines a majority equity interest and
specifies that a majority equity interest in a legally separate organization should be reported as an
investment if a government’s holding of the equity interest meets the definition of an investment. A
majority equity interest that meets the definition of an investment should be measured using the equity
method, unless it is held by a special-purpose government engaged only in fiduciary activities, a
fiduciary fund, or an endowment (including permanent and term endowments) or permanent fund.
Those governments and funds should measure the majority equity interest at fair value. For all other
holdings of a majority equity interest in a legally separate organization, a government should report
the legally separate organization as a component unit, and the government or fund that holds the equity
interest should report an asset related to the majority equity interest using the equity method. This
Statement establishes that ownership of a majority equity interest in a legally separate organization
results in the government being financially accountable for the legally separate organization and,
therefore, the government should report that organization as a component unit. This Statement also
requires that a component unit in which a government has a 100 percent equity interest account for its
assets, deferred outflows of resources, liabilities, and deferred inflows of resources at acquisition value
at the date the government acquired a 100 percent equity interest in the component unit. Transactions
presented in statements of the component unit in that circumstance should include only transactions
that occurred subsequent to the acquisition. The requirements of this Statement are effective for
reporting periods beginning after December 15, 2018. The requirements should be applied
retroactively, except for the provisions related to (1) reporting a majority equity interest in a component
unit and (2) reporting a component unit if the government acquires a 100 percent equity interest. Those
provisions should be applied on a prospective basis. The Authority has not implemented Statement 90
and will evaluate the impact on future financial statements.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2018
34
(3) Cash and Investments
Pursuant to various agreements, appropriations, and statutory requirements relating to its operations, AEA
has established accounts for assets restricted to construction, operation, and financing activities. As used
throughout this note, “Fund” means a separate account established by the State legislature and does not refer
to a separate group of self-balancing accounts as contemplated by GAAP.
At June 30, 2018, the Authority’s carrying amount of cash and cash equivalents (all of which were restricted
or designated for specific purposes) was $97,179,000. The total of all bank balances on the same dates
amounted to $97,179,000.
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ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2018
35
The restricted cash and cash equivalents and investments were held in trust and restricted accounts for the
following activities as of June 30, 2018:
Restricted Cash and Cash Equivalents
(in thousands of dollars)
Governmental
Business-
Type
Activities Activities Totals
Bradley Lake Hydroelectric Project $ - 54,052 54,052
Alaska Intertie Project - 360 360
Rural Energy Loan Funds - 12,282 12,282
Power Development Fund - 1,931 1,931
Funds Advanced from State and Federal
Agencies
6,169 1,484 7,653
Power Cost Equalization Endowment
Fund
3,910 - 3,910
Renewable Energy Grant Fund 14,342 - 14,342
Emerging Energy Technology Fund 1,152 - 1,152
Trans-Alaska Pipeline Liability Fund 1,285 - 1,285
Rural Energy and Energy Development
Programs
212 - 212
Total restricted cash and cash equivalents $ 27,070 70,109 97,179
Restricted Investments
(in thousands of dollars)
Governmental
Business-
Type
Activities Activities Totals
Bradley Lake Hydroelectric Project $ - 17,429 17,429
Rural Energy Loan Funds - 9,987 9,987
Power Cost Equalization Endowment
Fund
1,073,333 - 1,073,333
Renewable Energy Grant Fund 14,286 - 14,286
Total restricted investments $ 1,087,619 27,416 1,115,035
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2018
36
Investment Holdings
The Power Cost Equalization Endowment Fund (PCE Fund), created under Alaska Statute (AS) 42.45.070,
the Renewable Energy Grant Fund (RE Fund), created under AS 42.45.045, and the Emerging Energy
Technology Fund (EET Fund), created under AS 42.45.375, are under the fiduciary authority of the State
Department of Revenue, Treasury Division (Treasury).
Other AEA Cash and Investments – a portion of Bradley Lake Hydroelectric Project investments are invested
pursuant to investment agreements with JP Morgan Chase Bank that guarantees annual interest earnings of
7.38% or 7.41% per annum that end the earlier of July 1, 2021 or the date of repayment of the Bradley Lake
Power Revenue Bonds, First Series. These investments are in nonparticipating contracts and are measured
at cost in accordance with GASB 31. Additional funds are held by a trustee bank and invested in accordance
with the requirements of the trust agreement.
Under the Internal Revenue Code of 1986, as amended, certain earnings in excess of arbitrage yield on the
Bradley Lake bonds must be rebated to the U.S. Treasury. Bradley Lake investments, associated with the
Power Revenue Bonds and Refunding Bonds, are subject to rebate computation.
Internal staff manage AEA’s internally managed portfolio for liquidity and safety. There is no AEA Board
approved investment policy; however, staff follows AIDEA’s Board approved investment policy for
internally managed investments. The AEA managed portfolio consists of the following eligible securities:
Debt instruments issued or guaranteed by the U.S. government, its agencies and instrumentalities, and
Government Sponsored Enterprises (GSEs);
Money market funds collateralized by U.S. Treasury, agency securities, and repurchase agreements;
Units in the investment pool or any series of investment pool of the Alaska Municipal League
Investment Pool, Inc., or any successor to that entity, or any other investment pool for public entities
of the State of Alaska that is established under the Alaska Investment Pool Act (AS
37.23.010-37.23.900); and
Other investments specifically approved by the board.
Fair Value Measurement
AEA categorizes fair value measurements within the fair value hierarchy established by generally accepted
accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of an
asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant
other observable inputs; and Level 3 inputs are significant unobservable inputs. Following is a summary of
the AEA’s cash and investments at the recurring fair value measurement at June 30, 2018 (in thousands):
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2018
37
Fair Value of Cash and Investments
(in thousands of dollars)
Governmental Business-Type
Activities Activities Totals
Deposits $ 2 - 2
Money market funds 27,068 70,109 97,177
Investment agreements - 17,429 17,429
Investments managed by
Treasury
1,087,619 - 1,087,619
U.S. Government agency
Discount notes
- 9,987 9,987
Total invested assets $ 1,114,689 97,525 1,212,214
Cash and cash equivalents, including investment agreements, are reported at amortized cost, investments
managed by Treasury are invested in a pooled environment and the remaining investments have a fair value
level of 2.
Interest Rate Risk
Interest rate risk is the risk that changes in interest rates will negatively affect the fair value of an investment.
The Resolution addresses interest rate risk. Duration is an indicator of a portfolio’s market sensitivity to
changes in interest rates. In general, major factors affecting duration are (in order of importance):
1) Maturity
2) Prepayment frequency
3) Level of market interest rates
4) Size of coupon
5) Coupon payments
Rising interest rates generally translate into the fair market value of fixed income investments declining,
while falling interest rates are generally associated with increasing market values. Effective duration attempts
to account for the price sensitivity of a bond to changes in prevailing interest rates, including the effect of
embedded options. For example, for a bond portfolio with a duration of 5.0, a one percentage point parallel
decline in interest rates would result in an approximate price increase on that bond portfolio of 5.0%.
AEA Internally Managed Investments – AEA has no written policy for interest rate risk for internally
managed investments; however, staff follows and believes to be in compliance with AIDEA’s written policy
for interest rate risk. The duration for investments is 2 years or less. The maximum maturity of any issue is
3 years from the date of purchase.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2018
38
Credit Risk
AEA has no written policy with regard to credit risk; however, staff follows and believe to be in compliance
with AIDEA’s written policy for credit risk. Since AEA only invests in highly rated money markets and
U.S. government and agency securities and GSEs, credit risk is minimal.
The Bradley Lake Hydroelectric Project investments contain a portion that are invested in guaranteed
investment contracts collateralized by federal obligations, which minimize credit risk.
Custodial Credit Risk
Custodial credit risk is the risk that deposits may not be returned in the event of a bank failure. Treasury’s
policy with regard to custodial credit risk is to collateralize State deposits to the extent possible. At June 30,
2018, AEA’s deposits managed by Treasury were uncollateralized and uninsured.
With respect to AEA managed investments, amounts totaling approximately $97,177,000 at June 30, 2018
are held in money market funds with the custodian, the trust department of a commercial bank; therefore, no
custodial risk exists for these securities. Investment agreements in the amount of $17,429,000 are held with
the custodian institution and are collateralized.
Renewable Energy Grant Fund
The State Department of Revenue – Treasury Division has created a pooled environment by which it
manages the investments for which its Commissioner has fiduciary responsibility. Actual investing is
performed by investment officers within Treasury or by contracted external investment managers. The Fund
invests in the State’s internally managed General Fund and Other Non-Segregated Investments Pool
(GeFONSI). The GeFONSI consists of investments in the State’s internally managed Short-term Fixed
Income Pool, Short-term Liquidity Fixed Income Pool and the Intermediate-term Fixed Income Pool. The
complete financial activity of the Fund is shown in the Comprehensive Annual Financial Report (CAFR)
available from the Department of Administration, Division of Finance.
Assets in the pools are reported at fair value. Investment purchases and sales are recorded on a trade-date
basis. Securities are valued each business day using prices obtained from a pricing service.
The full accrual basis of accounting is used for the investment income and GeFONSI investment income is
distributed to pool participants monthly if prescribed by statute or if appropriated by the State legislature.
Income in the Short-term, Short-term Liquidity, and Intermediate-term Fixed Income Pools is allocated to
the pool participants daily on a pro-rata basis.
At June 30, 2018, the GeFONSI total for the Renewable Energy Grant Fund was $14,286,000. For additional
information on interest rate risk, credit risk, foreign exchange, derivatives, fair value, and counterparty credit
risk see the separately issued report on the Invested Assets of the Commissioner of Revenue at:
http://treasury.dor.alaska.gov/Investments/Annual-Investment-Reports.aspx.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2018
39
Power Cost Equalization Endowment Fund Investment Holdings
Treasury has created a pooled environment by which it manages the investments the Commissioner has
fiduciary responsibility for. Actual investing is performed by investment officers in Treasury or by
contracted external investment managers. The Fund invests in the State’s internally managed Short-term
Fixed Income Pool, the Broad Market Fixed Income Pool, as well as the State’s internally managed Domestic
Equity and International Equity Pools. The complete financial activity of the Fund is shown in the
Comprehensive Annual Financial Report (CAFR) available from the State - Department of Administration,
Division of Finance.
Assets in the pools are reported at fair value. Investment purchases and sales are recorded on a trade-date
basis. Fixed income and equity securities are valued each business day. Securities expressed in terms of
foreign currencies are translated into U.S dollars at the prevailing exchange rates.
The full accrual basis of accounting is used for investment income. Income in the Short-term and Broad
Market Fixed Income Pools is allocated to pool participants daily on a pro-rata basis.
At June 30, 2018, the Fund’s share of pool investments was as follows:
Power Cost Equalization Endowment Fund
Investment Pools
(in thousands of dollars)
FY18
Cash and cash equivalents
Short-term fixed income pool $ 45
Domestic fixed income
Broad market pool 300,857
High yield pool 44,739
Equity
Domestic equity pool 420,801
International equity pools 248,729
Real estate investment trust pool 58,207
Net Invested Assets $ 1,073,378
For additional information on interest rate risk, credit risk, foreign exchange, derivatives, fair value, and
counterparty credit risk see the separately issued report on the Invested Assets of the Commissioner of
Revenue at: http://treasury.dor.alaska.gov/Investments/Annual-Investment-Reports.aspx.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2018
40
(4) Capital Assets
Capital asset activity for the year ended June 30, 2018 was as follows (stated in thousands):
Balance at Balance at
Business-Type Activities
July 1,
2017 Additions Deletions
June 30,
2018
Capital assets not being depreciated:
Land and Rights of Way $ 11,212 - - 11,212
Construction in progress:
Intangibles 188,490 661 - 189,151
Other 7,483 8,332 (8,518) 7,297
Total capital assets not
being depreciated 207,185 8,993 (8,518) 207,660
Depreciable capital assets:
Infrastructure 448,367 8,518 (15,407) 441,478
Equipment 5,576 881 (50) 6,407
Total depreciable capital assets 453,943 9,399 (15,457) 447,885
Less accumulated depreciation:
Infrastructure (280,767) (15,559) 15,378 (280,948)
Equipment (5,424) (35) 50 (5,409)
Total accumulated depreciation (286,191) (15,594) 15,428 (286,357)
Capital assets, net $ 374,937 2,798 (8,547) 369,188
For the year ended June 30, 2018 total interest costs on long term borrows for construction projects was
$895,824, of that amount $32,004 was capitalized as a part of construction in progress-other.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2018
41
Depreciation expense was charged to the functions as follows for the year ended June 30, 2018 (stated in
thousands):
Business-Type Activities
Bradley Lake Hydroelectric Project $11,903
Alaska Intertie Project 3,691
Total depreciation expense – business type activities $ 15,594
In FY18, AEA made a change to the estimated useful service life of two of its infrastructure assets. The
change is a change in accounting estimate and is reported in the current year. AEA adjusted the estimated
useful life of the original SVCs for the Bradley Lake Hydroelectric project at Daves Creek and Soldotna
Substations from a 36.36 year useful life to a useful life of 20 years. The impact of the change on the FY18
financial statements is an increase in depreciation expense of $4,772,000 that would have been recognized
in previous years had the asset been depreciated over is actual useful life.
(5) Interfund Receivables, Payables, and Transfers
Interfund balances typically result from short-term operating or capital advances. Transfers typically result
from operating activities. A schedule of interfund balances as of and for the year ended June 30, 2018 follows
(stated in thousands):
Due from other funds
Due to Special Revenue Fund from Enterprise Fund $ 640
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ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2018
42
(6) Long-Term Debt
Long-term debt activity for the year ended June 30, 2018 was as follows (stated in thousands):
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
Balance at Balance at Due
Business-Type Activities
July 1,
2017 Additions Deletions
June 30,
2018
within
one year
Power Revenue Bonds
Bradley Lake:
First Series (a) $ 100 - - 100 25
Refunding, Third Series (a) 5,730 - (5,730) - -
Refunding, Fourth Series (a) 19,635 - (3,485) 16,150 3,695
Refunding, Sixth Series (a)(b) 28,030 - (340) 27,690 6,750
Bradley Lake – Battle Creek
Seventh Series(a)(c) - 40,000 - 40,000 -
Eighth Series (a)(c) - 1,239 - 1,239 -
Total bonds payable 53,495 41,239 (9,555) 85,179 10,470
Arbitrage interest payable (c) 979 466 (504) 941 -
Bond original issue premium 554 - (239) 315 156
Total other bond liabilities 1,533 466 (743) 1,256 156
Total long-term debt $ 55,028 41,705 (10,298) 86,435 10,626
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2018
43
(a) AEA issued the Power Revenue Bonds, First and Second Series (Bradley Lake Hydroelectric Project
Bonds), in September 1989 and August 1990, respectively, for the long-term financing of the
construction costs of the Bradley Lake Hydroelectric Project and refunded AEA’s Variable Rate
Demand Bonds which were issued in November 1985 to provide interim financing of the project.
AEA issued the Power Revenue Refunding Bonds, Third and Fifth Series in April 1999 to refund a
portion of the First Series Bonds and to provide costs of issuance. The First Series refunded bonds
were called on July 1, 1999. AEA issued the Power Revenue Refunding Bonds, Fourth Series in
April 2000 to refund a portion of the Second Series Bonds and to provide costs of issuance. The
Second Series refunded bonds were called on July 1, 2000. All of the revenues derived by AEA
from the operation of the project and all moneys, securities and funds (except the excess investment
earnings fund), including a capital reserve fund, held or set aside are pledged and assigned to secure
the payment of principal, redemption premium, if any, and interest on the bonds. No other revenues
of AEA are pledged as security for the payment of the bonds. AEA has covenanted to notify the
State Legislature of any failure to maintain the capital reserve fund at its required level. The Fourth
Series Bondshare further secured by bond insurance. AEA collects from each power purchaser a
percentage share of annual project costs. The outstanding Bradley Lake bonds mature annually each
July 1 through the year 2021 with interest rates ranging from 4.0% to 6.25%.
(b) In July 2010, the Authority issued $28,800,000 of Power Revenue Refunding Bonds, Sixth Series,
to refund and defease $30,640,000 aggregate outstanding principal amount of the Authority’s Power
Revenue Refunding Bonds, Fifth Series, and to pay costs of issuing the bonds. The refunded bonds
were called on August 2, 2010.
(c) In December 2017, the Authority issued, as a private placement, $47,000,000 of Power Revenue
Bonds for the long-term financing of the construction costs of the Battle Creek Diversion Project,
an improvement to the Bradley Lake Hydroelectric Project. The Power Revenue Bonds consist of
$40,000,000 Seventh Series New Clean Renewable Energy Bonds; $1,239,000 Eighth Series
Qualified Energy Conservation Bonds; and $5,761,000 Ninth Series Taxable Draw-Down Bonds.
Only the Seventh and Eighth Series have amounts outstanding as of June 30, 2018. During the
period of construction, interest only payments are due on the outstanding bonds at a fixed interest
rate of 4.24%. The outstanding bonds mature annually each July 1 starting in 2021 through the year
2050. The draw period for the Ninth Series ends in December 2020. There were no draws made as
of June 30, 2018. The Seventh and Eighth Series Bonds qualify for federal tax credits under the New
Clean Renewable Energy Bond and Qualified Energy Conservation Bond Programs, respectively.
These programs provide for a partial federal subsidy of interest due on the bonds, subject to federal
funding availability.
(d) The arbitrage interest payable is due to the U.S. Treasury for the excess of investment income on the
proceeds of each series of AEA’s tax exempt and tax advantaged Bradley Lake bonds over the
related interest expense computed in accordance with Section 148 of the Internal Revenue Code of
1986, as amended. The accumulated arbitrage interest payable amount is computed each year, and
the amount for each series is first due after the end of the fifth bond year and every five years
thereafter. AEA maintains a separate account for each series with the trustee and each year sets aside
a sufficient amount to satisfy the liability.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2018
44
The minimum payments related to all bonds, for the years subsequent to June 30, 2018, are as follows:
Business-Type Activities
(in thousands of dollars)
Principal Interest Total
Fiscal Year Ending June 30:
2019 $ 10,470 3,808 14,278
2020 11,025 3,227 14,252
2021 11,575 2,647 14,222
2022 12,245 2,011 14,256
2023 1,375 1,661 3,036
2024-2028 6,873 7,431 14,304
2029-2033 6,873 5,974 12,847
2034-2038 6,873 4,517 11,390
2039-2043 6,873 3,060 9,933
2044-2048 6,873 1,603 8,476
2049-2051 4,124 262 4,386
Total $ 85,179 36,201 121,380
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2018
45
(7) Loans Receivable
The Authority administers the Power Project Fund Loan Program and the Rural Electrification Revolving
Loan Program. Loans outstanding at June 30, 2018 are classified as follows (stated in thousands):
Business-Type Activities
(in thousands of dollars)
No. of
Loans Amount
Power Project Fund Loan Programs 15 $ 18,137
Rural Electrification Revolving Loan Program 2 128
17
Less: Allowance for Loan Loss (297)
Balance, at end of year $ 17,968
Loans more than 90 days past due are not included in the accrual of interest. At June 30, 2018, there were
no loans more than 90 days past due.
An analysis of changes in the allowance for loan losses for the years ended June 30, 2018 follows (stated in
thousands):
Balance at beginning of year $ 348
Provision for loan recovery (51)
Balance at end of year $ 297
On September 30, 2010, the Authority sold a portion of its Power Project Fund loan portfolio to AIDEA.
Under the agreement, upon AIDEA’s request, AEA is required to repurchase any loan upon a payment
default. On June 30, 2018, the outstanding principal balance of the loans sold was $14,184,283 for which
AEA has recognized an estimated liability for potential repurchase of $425,528.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2018
46
(8) Fund Balance
Fund balances reported in the aggregate on the governmental fund balance sheet are subject to the following
constraints (stated in thousands):
Restricted by
External Parties Restricted by Legislation
Power Cost Equalization Fund $ - 1,071,193
Renewable Energy Fund - 27,541
Emerging Energy Technology Fund - 1,143
Trans-Alaska Pipeline Liability Fund 1,174 -
Rural Energy Projects - 1
Total fund balance $ 1,174 1,099,878
(9) Risk Management
AEA is exposed to various risks of loss related to torts, theft of, damage to and destruction of assets; errors
and omissions; and natural disasters. AEA covers that risk through the purchase of commercial insurance
and participation in the State’s Risk Management Pool. The Risk Management Pool administers a self-
insurance program for each State agency, which covers all sudden and accidental property and casualty
claims. Annual assessments allocated by Risk Management are the maximum each agency is called upon to
pay, forestalling the need for supplemental appropriation or disruption of vital state services after a major
property loss, adverse civil jury award, or significant workers compensation claim.
(10) Related Parties
(a) Alaska Industrial Development and Export Authority
Pursuant to understandings and agreements between AIDEA and AEA, AIDEA provides
administrative, personnel, data processing, communications, and other services to AEA. AEA has a
Board approved borrowing agreement with AIDEA to provide short-term working capital funds up to
a maximum of $7.5 million.
At June 30, 2018, AEA recognized expenses for services from AIDEA in the amount of $5.05 million.
AEA also paid AIDEA $200,000 for administration of the Bradley Lake Hydroelectric Project and
$22,000 for administration of the Battle Creek Project. In addition, AEA had $4.28 million payable to
AIDEA for services and borrowings, which are included in accounts payable.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2018
47
As a result of implementing GASB Statement No. 68 Accounting and Financial Reporting for
Pensions, AIDEA recorded a net pension liability. Additionally, as a result of implementing GASB
Statement No. 75, Accounting and Financial Reporting for Postemployment Benefit Plans Other than
Pensions, AIDEA recorded a net liability for other Postemployment Benefits. AEA’s annual payments
to AIDEA for personnel services supporting AEA activities includes a Public Employees Retirement
System contribution component. Payments to AIDEA for personnel services supporting AEA
activities comprise over half of AIDEA’s personnel costs.
(b) Alaska Intertie Management Committee
AEA is party to agreement with utilities (GVEA, MEA, CEA, and ML&P) using the Alaska Intertie
for wheeling of electrical power. Pursuant to the Intertie Agreement, the IMC was established to
manage the system. The IMC is comprised of a representative from AEA and each of the utilities.
AEA is reimbursed for operation and maintenance costs on a monthly basis with an annual settlement
to adjust the payments to actual costs. AEA received $99,383 during fiscal year 2018 for administrative
services.
(c) Bradley Lake Project Management Committee
On December 7, 1987, AEA entered into a Power Sales Agreement (PSA) with utilities (GVEA, MEA,
CEA, ML&P, HEA, and City of Seward) purchasing electric power produced by the Bradley Lake
Hydroelectric Project. In 1988, legislation was passed which made the PSA effective. Pursuant to the
PSA, a Project Management Committee (PMC) was formed to manage the project. The PMC is
comprised of a representative from AEA and each of the utilities. The participating utilities make
monthly payments directly to the bond trustee based on their respective percentage share of the
estimated annual project costs. AEA has an agreement with the PMC to provide administrative
services to the Bradley Lake Project and received $222,000 for these services.
(11) Commitments and Contingencies
In the normal course of business, AEA also has various commitments, such as commitments for the extension
of credit and award of grants. At June 30, 2018, AEA had Power Project Fund loan commitments of
$9,787,000.
At June 30, 2018, AEA had cumulative prior year commitments from grant awards that are funded by State
appropriations and federal awards; the amounts committed were $30,017,000.
In management’s opinion, the final outcome of any present legal proceedings or other contingent liabilities
and commitments will not materially affect our financial position.
Schedule 1ALASKA ENERGY AUTHORITY(A Component Unit of the State of Alaska)Schedule of Bradley Lake Hydroelectric Project Trust Account ActivitiesYear ended June 30, 2018(stated in thousands)ExcessCapital Renewal and InvestmentOperatingConstruction Debt Service Reserve Contingency Earnings Revenue Operating ReserveFund Fund Fund Reserve Fund Fund Fund Fund Account TotalBalance at July 1, 2017 $ — 10,990 12,779 3,220 682 1,339 2,431 1,031 32,472 Interest received 164 239 963 227 45 451 125 72 2,286 Bond principal paid — (9,555) — — — — — — (9,555) Bond interest paid — (2,590) — — — — — — (2,590) Arbitrage paid — — — — (504) — — — (504) Construction proceeds received41,239 — — — — — — — 41,239 IRS interest subsidy received— — — — — 572 — — 572 Capital reserve contribution — — 2,796 — — — — — 2,796 Operating budget surplus paid — — — (1,148) — — (1,223) — (2,371) Capital expenditures (3,856) — — (4,079) — (450) — — (8,385) Operating revenue received — — — — — 20,463 — — 20,463 Operating expenses paid — — — — — — (4,987) — (4,987) Transfers between funds — 13,436 (963) 2,793 268 (19,870) 4,512 (176) — Balance at June 30, 2018 $ 37,547 12,520 15,575 1,013 491 2,505 858 927 71,436 See accompanying independent auditors’ report.48
Schedule 2ALASKA ENERGY AUTHORITY(A Component Unit of the State of Alaska)Schedule of Projects and Programs – Balance SheetJune 30, 2018(stated in thousands)Power Cost Renewable Emerging Trans AlaskaEqualization Energy Energy Pipeline RuralEndowmentGrant Technology Liability EnergyFund Fund Fund Fund Projects Eliminations TotalsCurrent assets:Restricted cash and cash equivalents $ 3,910 14,342 1,152 1,285 6,381 — 27,070 Operating receivable — 994 — — 96 — 1,090 Grants receivable — — 13 — 1,517 — 1,530 Due from State of Alaska— — — — 831 — 831 Due (to) from other funds/internal balances — — — — 3,022 (2,382) 640 Total Current Assets3,910 15,336 1,165 1,285 11,847 (2,382) 31,161 Noncurrent assets:Restricted investments 1,073,333 14,286 — — — — 1,087,619 Total Assets$ 1,077,243 29,622 1,165 1,285 11,847 (2,382) 1,118,780 Liabilities and Fund BalanceCurrent liabilities:Advances from the State of Alaska$ 37 — — — 5,832 — 5,869 Accounts payable 5,300 1,329 22 — 5,198 — 11,849 Other current liabilities — — — — 8 — 8 Due to (from) other funds/internal balances 713 752 — 111 806 (2,382) — Total Current Liabilities6,050 2,081 22 111 11,844 (2,382) 17,726 Other liabilities-noncurrent— — — — 2 — 2 Total Noncurrent Liabilities— — — — 2 — 2 Total Liabilities6,050 2,081 22 111 11,846 (2,382) 17,728 Fund Balance:Restricted by agreements with external parties— — — 1,174 — — 1,174 Restricted by legislation1,071,193 27,541 1,143 — 1 — 1,099,878 Total Fund Balance1,071,193 27,541 1,143 1,174 1 — 1,101,052 Total Liabilities and Fund Balance$ 1,077,243 29,622 1,165 1,285 11,847 (2,382) 1,118,780 See accompanying independent auditors’ report.Special Revenue FundAssets49
Schedule 3ALASKA ENERGY AUTHORITY(A Component Unit of the State of Alaska)Special Revenue FundSchedule of Projects and Programs – Revenues, Expenses, and Changes in Fund BalanceYear ended June 30, 2018(stated in thousands)Power Cost Renewable Emerging Trans AlaskaEqualization Energy Energy Pipeline RuralEndowment Grant Technology Liability EnergyFund Fund Fund Fund Projects TotalsOperating revenues:State of Alaska appropriations $ — — — — 14,407 14,407 Federal grants — — 76 — 3,429 3,505 Other revenues — — — — 74 74 Total Operating Revenues— — 76 — 17,910 17,986 Operating expenditures:Grants and projects — 10,474 163 3,160 16,699 30,496 Power cost equalization grants 26,196 — — — — 26,196 General and administrative 409 886 — 92 1,901 3,288 Total Operating Expenditures26,605 11,360 163 3,252 18,600 59,980 Nonoperating activities:Investment income, net 76,663 355 — 28 — 77,046 Total Nonoperating Income76,663 355 — 28 — 77,046 Capital grants and contributions (465) (224) — — 689 — Transfers out — — — — (1,994) (1,994) Total Capital Contributions and Transfers(465) (224) — — (1,305) (1,994) Increase (Decrease) in Fund Balance49,593 (11,229) (87) (3,224) (1,995) 33,058 Fund Balance – Beginning1,021,600 38,770 1,230 4,398 1,996 1,067,994 Fund Balance – Ending$ 1,071,193 27,541 1,143 1,174 1 1,101,052 See accompanying independent auditors’ report.50
Schedule 4ALASKA ENERGY AUTHORITY(A Component Unit of the State of Alaska)Schedule of Projects and Programs – Statement of Net PositionJune 30, 2018(stated in thousands)Susitna- Rural Power Develop-Bradley Lake Alaska Watana Power Electrification ment andHydroelectric Intertie Hydroelectric Project Revolving Railbelt EnergyAssets and Deferred Outflows of Resources Project Project Project Fund Loan Fund Projects Eliminations TotalsCurrent assets:Restricted cash and cash equivalents $ 54,052 360 — 12,215 67 3,415 — 70,109 Operating receivable 15 297 — 32 — 2 — 346 Prepaid expense 51 680 — — — — — 731 Loans receivable — — — 504 63 — — 567 Accrued interest receivable 1,178 — — 19 1 — — 1,198 Due from State of Alaska — 25 — — — 5 — 30 Due (to) from other funds/internal balances — — — — — 85 (725) (640) Total Current Assets55,296 1,362 — 12,770 131 3,507 (725) 72,341 Noncurrent assets:Restricted investments17,429 — — 9,987 — — — 27,416 Loans receivable, net of allowance — — — 17,338 63 — — 17,401 Capital assets, net of accumulated depreciation 160,188 25,318 183,682 — — — — 369,188 Total Noncurrent Assets177,617 25,318 183,682 27,325 63 — — 414,005 Deferred outflows of resources:Deferred charge on bond refundings10 — — — — — — 10 Total Assets and Deferred Outflows of Resources$ 232,923 26,680 183,682 40,095 194 3,507 (725) 486,356 Current liabilities:Advances from (to) the State of Alaska $ 8 680 (56) — 67 1,513 — 2,212 Accounts payable 6,645 609 1 — — — — 7,255 Bonds payable – current portion 10,470 — — — — — — 10,470 Other bond liabilities – current portion 156 — — — — — — 156 Accrued interest payable 2,050 — — — — — — 2,050 Due to (from) other funds/internal balances 110 56 55 504 — — (725) — Total Current Liabilities19,439 1,345 — 504 67 1,513 (725) 22,143 Noncurrent liabilities:Bonds payable – noncurrent portion, net74,709 — — — — — — 74,709 Other bond liabilities – noncurrent portion 1,100 — — — — — — 1,100 Other liabilities 103 — — 426 — — — 529 Total Noncurrent Liabilities75,912 — — 426 — — — 76,338 Total Liabilities95,351 1,345 — 930 67 1,513 (725) 98,481 Net position:Net investment in capital assets 109,239 25,318 183,682 — — — — 318,239 Restricted for capital projects 164 — — — — — — 164 Restricted for debt service 25,595 — — — — — — 25,595 Restricted by agreements with external parties 2,574 17 — — — — — 2,591 Restricted by legislation — — — 39,165 127 1,994 — 41,286 Total Net Position137,572 25,335 183,682 39,165 127 1,994 — 387,875 Total Liabilities and Net Position$ 232,923 26,680 183,682 40,095 194 3,507 (725) 486,356 See accompanying independent auditors’ report.Business-Type Activities - Enterprise FundLiabilities and Net Position51
Schedule 5ALASKA ENERGY AUTHORITY(A Component Unit of the State of Alaska)Business-Type Activities - Enterprise FundSchedule of Projects and Programs – Revenues, Expenses, and Changes in Net PositionYear ended June 30, 2018(stated in thousands)Rural Power Develop-Bradley Lake AlaskaSusitna-Watana Power Electrification ment andHydroelectric Intertie Hydroelectric Project RevolvingRailbelt EnergyProject Project Project Fund Loan Fund Projects TotalsOperating revenues:State of Alaska appropriations $ — 995 — — — — 995 Revenue from operating plants 19,205 2,277 — — — — 21,482 Interest on loans — — — 293 3 — 296 Other revenues 2 — — 68 — — 70 Total Operating Revenues19,207 3,272 — 361 3 — 22,843 Operating expenses:Depreciation 11,903 3,691 — — — — 15,594 General and administrative 667 156 — 582 (239) — 1,166 Interest expense 2,371 — — — — — 2,371 Plant operating 3,650 3,122 — — — — 6,772 Loss on disposal of asset 15 — — — — — 15 Provision for loan recovery — — — (48) (3) — (51) Total Operating Expenses18,606 6,969 — 534 (242) — 25,867 Operating Income (Loss)601 (3,697) — (173) 245 — (3,024) Nonoperating activities:Investment income, net 1,960 6 — 332 1 — 2,299 Total nonoperating income1,960 6 — 332 1 — 2,299 State of Alaska reappropriations and transfers — — — (10,000) (67) — (10,067) Capital contribution 2,796 — — — — — 2,796 State of Alaska appropriations — 661 — — — 661 Transfers in — — — — — 1,994 1,994 2,796 — 661 (10,000) (67) 1,994 (4,616) Increase (Decrease) in Net Position5,357 (3,691) 661 (9,841) 179 1,994 (5,341) Net Position – Beginning132,215 29,026 183,021 49,006 (52) — 393,216 Net Position – Ending$ 137,572 25,335 183,682 39,165 127 1,994 387,875 See accompanying independent auditors’ report.Total reappropriations, capitalcontributions, and transfers52
Schedule 6
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Schedule of Capital Assets Presented under Federal Energy Regulatory Commission Requirements
June 30, 2018
(stated in thousands)
Balance at Balance at
July 1, 2017 Additions Deletions June 30, 2018
Capital assets:
Intangible $ 183,035 661 — 183,696
Production 266,837 7,796 (136) 274,497
Transmission 205,459 1,417 (15,271) 191,605
General 5,797 — (50) 5,747
Total capital assets 661,128 9,874 (15,457) 655,545
Less accumulated depreciation:
Intangible (6) — — (6)
Production (133,056) (5,505) 107 (138,454)
Transmission (147,712) (10,068) 15,271 (142,509)
General (5,417) (21) 50 (5,388)
Total accumulated
depreciation (286,191) (15,594) 15,428 (286,357)
Capital assets, net $ 374,937 (5,720) (29) 369,188
Unaudited - See accompanying independent auditors’ report.
53
Schedule 7
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Bradley Lake Historical Annual Project Cost
Year ended June 30, 2018
(stated in thousands)
Operating Data 2018
Project costs:
Operations and maintenance $ 2,748
Repairs 361
General and administrative 798
Insurance 625
Capital purchases 1,721
Contributions to capital reserve fund 2,796
Contributions to renewal and contingency fund and operating reserve account 2,917
Subtotal 11,966
Debt service 13,675
Less Federal interest subsidy (572)
Less investment income (1,810)
Total cost of power $ 23,259
Energy delivered (MWh) 417,522
Total unit cost of power (cents per kWh) 5.57
Unaudited - See accompanying independent auditors’ report.
This schedule is provided as part of the municipal secondary market disclosure requirements relating to the
Bradley Lake Hydroelectric Power Revenue and Refunding Bonds.
54
Schedule 8ALASKA ENERGY AUTHORITY(A Component Unit of the State of Alaska)PCE Endowment Fund Historical AnalysisJune 30, 2018(stated in thousands) FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018Beginning investment fund balance $ 303,354 320,714 364,529 751,780 840,215 977,867 969,389 946,939 1,023,566 Inflows:Annual investment earnings 38,387 67,651 10,948 111,488 171,112 33,192 8,912 112,331 76,602 Capital fund transfers in — — 400,000 — — — — — — Total inflows 38,387 67,651 410,948 111,488 171,112 33,192 8,912 112,331 76,602 Outflows:Transfers to AEA for PCE payments (1) (20,725) (23,458) (23,154) (22,527) (32,773) (41,002) (30,622) (34,956) (25,595) Program administration - AEA (160) (174) (211) (198) (241) (248) (255) (243) (624) Administrative fee - Regulatory Commission — (78) (129) (90) (110) (107) (100) (112) (113) Management fee - Department of Revenue (142) (126) (203) (238) (336) (313) (385) (393) (458) Total outflows (21,027) (23,836) (23,697) (23,053) (33,460) (41,670) (31,362) (35,704) (26,790) Ending investment fund balance $ 320,714 364,529 751,780 840,215 977,867 969,389 946,939 1,023,566 1,073,378 (1) Final PCE program expenditures reported may vary depending on outstanding PCE payables at June 30, not included in this presentation. Unaudited - See accompanying independent auditors’ report.55
Schedule 9
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Supplementary Organization and Project Information
June 30, 2018
Unaudited - See accompanying independent auditors’ report. 56
Organization and Operations
Throughout the 1980’s, Alaska Energy Authority (AEA or Authority) worked to develop the State’s energy
resources as a key element in diversifying Alaska’s economy. A number of large-scale projects were constructed;
four of those projects were sold in 2002 and one was transferred to the City of Larsen Bay in the fall of 2010. The
Bradley Lake Hydroelectric project provides some of the least expensive electric energy to the Railbelt. The Alaska
Intertie provides for connection and movement of power north or south to increase reliability and allow Interior
Alaska to obtain less expensive electric energy available from the Southcentral portion of the state.
Pursuant to statute, on August 12, 1993, the Board of the Alaska Industrial Development and Export Authority
(AIDEA), a public corporation and a political subdivision of the State, became the Board of Directors of AEA.
AEA continues to exist as a separate legal entity. The corporate structure and operating assets of AEA were
retained, but the ability to have employees and construct or acquire energy projects was eliminated. Among other
things, AIDEA provides personnel services to AEA. The AEA executive director is an employee of AIDEA, but
is separate and independent and is not subject to supervision by AIDEA’s executive director. There is no
commingling of funds, assets, or liabilities between AIDEA and AEA, and there is no responsibility of one for the
debts or the obligations of the other. Consequently, the accounts of AIDEA are not included in the accompanying
financial statements. The Legislature, in 1993, required AEA, to the maximum extent feasible, to enter into
contracts with public utilities and other entities to carry out AEA duties with respect to the ongoing operation and
maintenance of the AEA owned operating assets; this has occurred with oversight responsibility retained by AEA.
Rural energy programs previously administered by the former Department of Community and Regional Affairs,
Division of Energy, were transferred to AEA for administration, as part of a larger reorganization of State agencies.
These rural energy programs were originally part of AEA prior to the 1993 reorganization. During fiscal year 2009,
legislation added energy development programs to AEA.
The Alaska Legislature empowered AEA to acquire a Susitna River power project under AS 44.83.080 (18),
effective July 1, 1999. Effective July 14, 2011, the legislature empowered AEA to acquire, construct, own, and
operate a hydroelectric project located on the Susitna River. Under this legislative authorization, AEA worked on
planning, designing, and Federal Energy Regulatory Commission (FERC) licensing of the Susitna-Watana
Hydroelectric Project.
Bradley Lake Hydroelectric Project
The project has 120 Megawatts (MW) of installed capacity and transmits its power to the State’s main power grid
via two parallel 20–mile transmission lines. The project, which cost in excess of $300 million, went into
commercial operation in 1991. Homer Electric Association now operates the project under contract with AEA.
Bradley Lake serves Alaska’s Railbelt from the Kenai Peninsula to Fairbanks, as well as the Delta Junction area.
In September 2016, the Authority received an amendment to the FERC license for a diversion of West Fork Upper
Battle Creek into Bradley Lake. The diversion will increase the Bradley Lake Hydroelectric Project annual energy
output by approximately 37,000 Megawatt hours (MWh). The Battle Creek project addition includes construction
of three miles of road, a concrete diversion dam, and a pipe and canal to convey the water to Bradley Lake. The
estimated cost of construction is approximately $47.2 million. Construction began in 2018 and is anticipated to be
complete in the fall of 2020.
Schedule 9 (Continued)
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Supplementary Organization and Project Information
June 30, 2018
Unaudited - See accompanying independent auditors’ report. 57
Alaska Intertie Project
The Alaska Intertie is a 170–mile transmission line designed for 345 kilovolts and operating at 138 kilovolts. It
runs between Willow and Healy and interconnects the power systems in the Southcentral and Fairbanks areas. The
Intertie reduces the number of black/brownouts throughout the system by enabling power to move either north or
south when major system disturbances occur. The Alaska Intertie allows Railbelt utilities to implement informal
power to lower the costs to rate paying consumers. It also allows Southcentral Alaska utilities to purchase power
from Fairbanks during power shortages. AEA contracts with the following Participating Utilities for operations
and maintenance: Golden Valley Electric Association (GVEA) in Fairbanks, and Southcentral Alaska utilities,
Chugach Electric Association (CEA), Matanuska Electric Association (MEA), and the Municipality of Anchorage,
d/b/a Municipal Light and Power (ML&P). The Alaska Intertie also enables GVEA to receive power generated by
the Bradley Lake Project, which is some of the lowest priced power in the Railbelt region. It also allows
Southcentral Alaska utilities to purchase power from Fairbanks during power shortages.
The Alaska Intertie Agreement appointed the Intertie Management Committee (IMC) and AEA to oversee the
activities of the Alaska Intertie project. AEA contracts with certain Participating Utilities for operations and
maintenance. The IMC and AEA oversee the Alaska Intertie under the second amended and restated Intertie
Agreement (Agreement) executed on March 11, 2014. The Agreement improves the reliability of the
interconnected electrical systems, outlines how the transfer over the Intertie of electrical capacity and energy
among the participants will occur, and establishes the IMC. The IMC’s primary responsibility is to provide
governance, control, operation, maintenance, repair, and improvement to the Intertie, subject to AEA’s oversight.
The IMC is comprised of a representative from AEA and each of the Participating Utilities.
Summarized below are the State’s appropriations to upgrade and extend a portion of the Alaska Intertie (in
thousands):
Appropriation Description Year Amount
Upgrade and extension of the Intertie
(net of FY08 and FY12 reappropriations) FY02 $ 9,300
Repair of Static VAR compensators (SVC)
and a tower foundation repair FY08 10,000
Substation upgrades and tower repairs FY12 5,000
Railbelt transmission plan FY12 1,000
ML&P was contracted to perform the repairs and upgrades. The tower repairs are now complete. Design and
construction of the new static VAR compensators (SVC’s) is complete. AEA will continue to work with the
Railbelt utilities to extend the intertie to Lake Lorraine.
Susitna-Watana Hydroelectric Project
Starting in 2010, AEA conducted preliminary planning and conceptual design for a large hydroelectric project to
be built in the Railbelt Region. A number of hydroelectric generation alternatives were studied and AEA issued a
Schedule 9 (Continued)
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Supplementary Organization and Project Information
June 30, 2018
Unaudited - See accompanying independent auditors’ report. 58
Preliminary Decision Document selecting what is now known as the Susitna-Watana Hydroelectric Project as the
primary large hydroelectric project for the State to pursue.
The proposed Susitna-Watana Hydroelectric Project would be located approximately half-way between Anchorage
and Fairbanks on the upper Susitna River. The Susitna-Watana dam would be located within a steep-sided valley
of the Susitna River below Watana Creek at River Mile 184, above the mouth approximately 22 miles upstream of
the Devil's Canyon rapids.
The project would include a single roller compacted concrete dam with a height providing nominal crest elevation
at 2,050 feet mean sea level with a 23,546 acre, 42.5-mile long reservoir with an average width of one to two miles.
The height of the dam was determined to be 705 feet tall during the engineering feasibility studies. The powerhouse,
dam, and related facilities would be linked by transmission lines connecting the project to the Alaska Intertie. The
project would produce about 50% of the Railbelt's electrical demand or an annual average of 2,800,000 MWh.
AEA filed a Notice of Intent and Pre-Application Document with the FERC to begin the licensing process for the
project in December 2011. The FERC approved 58 environmental study plans in early 2013. In implementing the
study plans, AEA worked closely with the Alaska Department of Fish and Game in conducting the fishery and
wildlife studies. On June 3, 2014, AEA filed the Initial Study Report (ISR) for the project. The approximately
7,000 page ISR presents information collected from the first year of field studies.
The Alaska Legislature has appropriated a total of $192,072,930 for AEA to plan, design, and obtain a FERC
permit for the project. On December 26, 2014, the Governor of Alaska (Governor) issued Administrative Order
271 suspending discretionary spending on the project. On January 8, 2015, the FERC granted AEA’s request to
hold the licensing process in abeyance. On July 6, 2015, the Governor’s office authorized AEA to proceed with
the Integrated Licensing Process (ILP) using previously appropriated funds. AEA, in August 2015, requested the
FERC’s permission to resume the licensing efforts. On August 4, 2016, the Governor issued a letter to FERC
requesting to proceed with the ILP to the point of issuing an updated Study Plan Determination (SPD) to preserve
the State of Alaska’s investment in the project. On August 26, 2016, FERC responded to the Governor’s letter
stating that FERC will proceed with the ILP to complete the SPD. After issuing the SPD, the project will be put
into abeyance as requested by the Governor.
On June 22, 2017, FERC issued its Determination on the ISR for Susitna. Overall, it was very favorable to the
State. However, since it was issued more than 100 days beyond the ILP schedule of March 10, 2017, there was
insufficient time within FY17 to complete previously authorized scopes of work to complete a comprehensive
analysis of the Determination and revise study reports as needed. AEA requested that a portion of the Susitna
appropriation be extended for 90 days to complete this work and preserve the value of the State’s investment to
the maximum extent possible.
On July 18, 2017, the OMB issued a memo to AEA authorizing the continued spending on the project 90 days
from June 30, 2017. AEA was granted concurrence and authorization to spend necessary funds in order to proceed
to the point where the State’s investment, to date, is preserved and the project was put in abeyance. The work was
completed and all remaining contracts were terminated September 30, 2017. The remaining funds, approximately
$1,893,000, were returned to the State in FY19.