HomeMy WebLinkAboutAEA Basic Financial Statement-FY16 2016-A
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Basic Financial Statements and Schedules
June 30, 2016
(With Independent Auditors’ Report Thereon)
(Continued)
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Table of Contents
Page(s)
Management’s Discussion and Analysis (Unaudited) 1–11
Independent Auditor’s Report 12-13
Basic Financial Statements
Government-Wide Financial Statements:
Statement of Net Position 14
Statement of Activities 15
Fund Financial Statements:
Governmental Fund:
Balance Sheet/Statement of Net Position - Governmental Activities 16
Statement of Revenues, Expenditures, and
Changes in Fund Balance/Statement of Activities – Governmental Activities 17
Enterprise Fund:
Statement of Net Position 18
Statement of Revenues, Expenses, and Changes
in Net Position 19
Statement of Cash Flows 20
Notes to Basic Financial Statements 21-41
(Continued)
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Table of Contents
Page(s)
Schedules
1 Bradley Lake Hydroelectric Project Trust Account Activities 42
2 Projects and Programs – Special Revenue Fund – Balance Sheet 43
3 Projects and Programs – Special Revenue Fund – Revenues,
Expenses, and Changes in Fund Balance 44
4 Projects and Programs – Business-Type Activities – Statement of Net Position 45
5 Projects and Programs – Business-Type Activities – Revenues,
Expenses, and Changes in Net Position 46
Supplementary Information (Unaudited)
6 Schedule of Capital Assets Presented under Federal Energy Regulatory Commission 47
7 Bradley Lake Historical Annual Project Cost 48
8 PCE Endowment Fund Historical Analysis 49
9 Supplementary Organization and Project Information 50-52
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2016
1
Overview of the Financial Statements
The Alaska Energy Authority (AEA or Authority) is a public corporation of the State of Alaska (State) in the
Department of Commerce, Community, and Economic Development (DCCED), but with a separate and
independent legal existence with a separate and self-balancing set of financial statements independently audited.
AEA’s operations consist of governmental fund activities – special revenue fund and business-type activities –
enterprise fund. 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, 2016. 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 can be found on pages 14-15 of this
report.
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 Grant program.
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 Bradley Lake Hydroelectric Project, Larsen Bay Hydroelectric Project, Alaska Intertie, Susitna-
Watana Hydroelectric Project, Power Project Fund, and the Rural Electrification Revolving Loan Fund.
The Statement of Net Position presents information on all of AEA’s assets and deferred outflows less liabilities
and deferred inflows, which results in net position. This statement is designed to display the financial position of
AEA. Over time, increases and decreases in net position may serve as a useful indicator of whether the financial
position of the Authority is improving or deteriorating.
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 accrual basis of accounting, which is similar to the accounting used
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2016
2
by private-sector businesses. All of the revenues and expenses are reported regardless of the timing of when cash
is received or paid.
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. All of 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
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 and Governmental Fund
Statement of Revenues, Expenditures, and Changes in Fund Balance. The governmental fund financial statements
are presented on pages 16-17.
Proprietary Funds
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 Authority uses enterprise fund to account for activities
relating to Bradley Lake Hydroelectric Project, Larsen Bay Hydroelectric Project, Alaska Intertie, Susitna-Watana
Hydroelectric Project, Power Project Fund, and the Rural Electrification Revolving Loan Fund.
The Statement of Net Position reports the Authority’s assets, liabilities, deferred outflows of resources, 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
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. The proprietary fund financial statements can be found
on pages 18-20 of this report.
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. The notes to the financial statements can be found on pages 21-
41 of this report.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2016
3
Other Information
In addition to the basic financial statements and accompanying notes, this report also presents certain
supplementary information, such as a schedule of Bradley Lake Trust Accounts, detail Statement of Net Position,
detail Revenues, Expenses, and Changes in Net Position, Capital Assets reported under Federal Energy Regulatory
Commission (FERC), Bradley Lake Annual Project Cost, Endowment Fund Historical Analysis, and more detailed
project information. The supplementary information can be found on pages 42-52 of this report.
Required Components of the Financial Report
Management's Discussion and
Analysis
(unaudited)
Basic Financial
Statements
(audited)
Required and Optional
Supplementary
Information*
Government-wide Financial
Statements
(audited)
Fund Financial
Statements
(audited)
Notes to the Financial
Statements
(audited)
Summary Detail
*Required and Optional Supplementary Information:
Schedule 1: Bradley Lake Hydroelectric Project Trust Accounts Activities (audited);
Schedule 2: Governmental Fund Schedule of Projects and Programs – Balance Sheet (audited);
Schedule 3: Governmental Fund Schedule of Projects and Programs – Revenue, Expenses and Changes in
Fund Balance (audited);
Schedule 4: Business-Type Schedule of Projects and Programs – Statement of Net Position (audited);
Schedule 5: Business-Type Schedule of Projects and Programs – Revenue, Expenses and Changes in Net
Position (audited);
Schedules 6: Capital Assets reported under FERC (unaudited);
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2016
4
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 $1,395
million at June 30, 2016 and $1,427 million at June 30, 2015. Of the total net position at June 30, 2016,
$307 million was invested in capital assets net of related debt, $1,088 million was restricted. Of the total net
position at June 30, 2015, $297 million was invested in capital assets net of related debt, and $1,130 million was
restricted.
Table 1
Net Position
(shown in thousands)
Governmental Activities Business-type Activities
2016 2015 2016 2015
Current and other assets $ 1,035,415 1,100,820 96,670 90,395
Capital assets - - 370,154 368,159
Total current assets 1,035,415 1,100,820 466,824 458,554
Deferred outflows of resources - - 53 91
Total assets and deferred outflows 1,035,415 1,100,820 466,877 458,645
Long-term liabilities - - 55,302 64,586
Other liabilities 22,498 46,227 29,315 21,881
Total liabilities 22,498 46,227 84,617 86,467
Total net position 1,012,917 1,054,593 382,260 372,178
Net position:
Net investment in capital assets - - 307,569 297,005
Restricted 1,012,917 1,054,629 74,691 75,173
Total net position $ 1,012,917 1,054,629 382,260 372,178
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2016
5
Governmental Activities
Current and other assets are $65 million less in the current fiscal year. Of the $65 million decrease, $21 million
is comprised of investment balance reductions in the Power Cost Equalization Endowment Fund, the Renewable
Energy Fund, and the Emerging Energy Technology Fund. $17 million was reduced in the Authority’s cash and
cash equivalents. Cash held by AEA are advances from state appropriations and are drawn based on project need;
therefore, these balance will fluctuate annually.
Other liabilities, in total, decreased in the current year by $23 million. The Authority’s total amount due to the
State decreased by $17 million. Accounts payable decreased in the current year by $6 million.
Net position, during the current fiscal year, reduced, overall, by $42 million. This decrease is mainly a result of
reduced funding from state and federal sources.
Business-Type Activities
Current and other assets are $6 million higher in the current fiscal year. The $6 million is an increase in due to
other funds.
Capital assets, net of accumulated depreciation, also increased by $2 million relating to the Bradley Lake and
Susitna-Watana projects.
Deferred outflows of resources decreased in the current year by $38 thousand, due to amortized costs relating to
long-term debt.
Long-term liabilities reduced in the current year by $9 million. The reduction of long-term liabilities is due to the
scheduled Bradley Lake debt service payment.
Other liabilities increased in the current year by a total of $7 million. Accrued invoices at year end for Bradley
Lake projects were applied to payables; therefore, showing an increase in other liabilities.
Net position, during the current fiscal year, for business-type activities increased, overall, by $10 million. The
increase is shown in the activities for Bradley Lake Hydroelectric project and the Susitna-Watana Hydro project.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2016
6
Table 2
Changes in Net Position
(shown in thousands)
Governmental Activities Business‐type Activities
2016 2015 2016 2015
Revenues:
Program revenues:
Charges for services $ 2 146 18,972 17,143
Operating grants 22,300 67,673 ‐ (66)
and contributions
Capital grants
and contributions ‐ ‐ 9,167 36,601
General revenues:
Investment Income 9,313 33,477 1,735 1,618
Total revenues 32,615 101,296 29,874 55,296
Expenses:
Grants and projects 37,918 75,056 ‐ ‐
Power cost equalization grants 31,198 36,663 ‐ ‐
General and administrative 5,211 4,812 1,379 1,303
Interest expense ‐ ‐ 3,177 3,668
Plant operations ‐ ‐ 4,709 3,984
Depreciation ‐ ‐ 10,529 10,487
Provision for loan loss ‐ ‐ (2) 6
Total expenses 74,327 116,531 19,792 19,448
Change in net position (41,712) (15,235) 10,082 35,848
Net position, beginning 1,054,629 1,069,864 372,178 336,330
Net position, ending $ 1,012,917 1,054,629 382,260 372,178
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2016
7
Governmental Activities
Revenues decreased by $69 million, based on the following:
Charges for services are $144 thousand less in the current fiscal year, due to the reduced interagency
receipts;
Operating grants and contributions reduced by $45 million from reduced state and federal funding;
Investment income received $24 million less from reduced interest earnings of $10 million and reduced
gains of $14 million.
Expenses for governmental activities decreased overall by $42 million from the prior year, based on the following:
Grants and project expenses decreased by $37 million, which is seen in a $19 million reduction of
funding for Renewable Energy projects and an $18 million reduction of costs for the Emerging Energy
Technology projects (EETF). EETF projects are beginning to prepare final reports and, therefore, costs are
reduced;
PCE grants were reduced by $5 million due to a decrease in energy costs in communities; and
General and administrative expenses increased by $399 thousand in the current year primarily within
the rural energy operating and capital project expenses related to payroll.
Business-Type Activities
Revenues for business-type activities decreased, overall, by $25 million in the current year. The following details
the $25 million reduction:
Charges for services were increased by $1.8 million. This increase is due to upgrades to the Bradley Lake
Hydroelectric project;
Operating grants and contributions reduced in the current fiscal year by $66 thousand due to the
recording of the cash balance owed to the State at year end;
Capital grants and contributions from the State were less in the current year by $25 million for Susitna-
Watana and $2 million for the Alaska Intertie, compared to the prior year; and
Investment income increased slightly by $117 thousand due to higher cash balances at year end, when
compared to prior year end balances.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2016
8
Expenses remained flat, based on the following:
General and administrative expenses increased by $76 thousand in the current year. This increase is
related to the Bradley Lake Hydroelectric project and the Alaska Intertie project;
Interest expense reduced by $491 thousand as a result of scheduled debt service interest payments;
Plant operations for Bradley Lake Hydroelectric project, Alaska Intertie project, and Power Project Fund
were increased in the current fiscal year by $725 thousand.
Depreciation expense increased slightly in the current fiscal year by $42 thousand as a result of
construction work in progress capitalizations; and
Provision for loan loss decreased by $8 thousand from the prior year. In the current fiscal year, the
remaining balance in the Larsen Bay project was reviewed to determine if the entire balance was
retrievable. At year end, management concluded that a portion of the remaining fund was to be written off
as uncollectible. Therefore, the fund only retains the portion that is receivable from the vendor.
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 $1,013
million, which is a decrease of $42 million in comparison with the prior 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.
Governmental activities track costs related to the Power Cost Equalization Fund, Renewable Energy Fund,
Emerging Energy Technology Fund, Trans-Alaska Pipeline Liability Fund, and Rural Energy Grant programs. At
the end of the current fiscal year, total fund balances were as follows (shown in thousands of dollars):
Power Cost Equalization Fund $ 949,537
Renewable Energy Fund 53,976
Trans-Alaska Pipeline Liability Fund 5,273
Emerging Energy Technology Fund 2,137
Rural Energy Projects 1,994
Total Fund Balance $ 1,012,917
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2016
9
Proprietary Funds
AEA’s proprietary fund financial statements consist of enterprise funds, which only provide the same type of
information found in the business-type activities section of the government-wide financial statements, but in more
detail.
Restricted net position of the Bradley Lake Hydroelectric project at the end of the current fiscal year amounted to
$126 million, Larsen Bay Hydroelectric project was a negative $11 thousand, the Alaska Intertie project was $32
million, Susitna-Watana project was $175 million, Power Project Fund was $49 million, and the Rural
Electrification Revolving Loan Fund was $7 thousand. The total increase in net position of the proprietary fund
was $10 million, primarily consisting of the following:
1. An increase of $5 million for the Bradley Lake Hydroelectric project, which resulted from revenues for
the turbine nozzle repair and expedited payments for the static VAR compensators;
2. A decrease of $3 million in the Alaska Intertie project, which resulted from depreciation costs of $3
million, offset by capital additions;
3. An increase of $9 million relating to the Susitna-Watana Hydroelectric project, which included capital
assets funded by the State;
4. A decrease of $504 thousand spread across the Power Project Fund and Revolving Rural Electrification
Loan Fund, resulting from revenues totaling less than expenditures; and
5. A $200 thousand decrease in the Power Development Fund offset by a $200 thousand increase in the
Larsen Bay Hydroelectric project, which relates to the allowance for doubtful account balance between the
two funds.
Information for each of these funds is presented in more detail on pages 46 of this report.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2016
10
Capital Assets and Debt Administration
Capital Assets
AEA’s investment in capital assets for its business-type activities as of June 30, 2016 amounts to $370.1 million
(net of accumulated depreciation), which is an increase of $2 million from the prior year. The investment in capital
assets only occurs in the enterprise funds and includes land and right of ways, infrastructure, equipment, and
construction in progress. Additional information on AEA’s capital assets can be found in Note 5 to the financial
statements on page 35 and in the supplementary information section on page 47.
Capital Assets
(net of depreciation, in thousands of dollars)
Business-Type Activities
2016 2015
Land and Right of Ways $ 11,212 $ 11,212
Infrastructure 168,782 177,552
Equipment 175 178
Construction in Progress 189,985 179,218
Total $ 370,154 $ 368,160
Major additions to capital assets during the current fiscal year include improvements to the Bradley Lake
Hydroelectric Project consisting primarily of turbine nozzle repair and replacement of a static VAR compensator,
along with other capital repairs. Susitna-Watana studies and costs associated with obtaining a Federal Electric
Regulatory Commission license. The Alaska Intertie capital costs were improvements to the static VAR
compensator and Douglas substation upgrades.
Capital Asset Additions
(in thousands of dollars)
SVC Replacement-Daves Crk/Soldotna $ 1,571
Bradley Turbine Nozzle Repair 1,320
Fishwater screen debris removal 290
Bradley Fish Water Valve Actuators 26
Bradley Battle Creek Diversion 190
AK Intertie-SVC Project 87
AK Intertie - Douglas Substation Upgrade 16
Susitna-Watana 9,023
Total Capital Additions $ 12,523
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2016
11
Long-Term Debt
At the end of the current fiscal year, AEA had total long-term debt outstanding of $62.6 million. AEA’s total long-
term debt decreased by $8.6 million (12%) during the current fiscal year as a result of scheduled debt service
payments. Additional information relating to AEA’s long-term debt can be found in Note 7 to the financial
statements on page 36.
Outstanding Debt
(in thousands of dollars)
Business-Type Activities
2016 2015
Bradley Lake Power
Revenue Bonds $ 62,585 $ 71,155
Total $ 62,585 $ 71,155
Ongoing operations and maintenance of the owned hydroelectric and intertie projects are approved by the utilities
using the assets and pursuant to bond resolutions and other agreements. Susitna-Watana Hydroelectric project
expenditures are funded by State capital appropriations and legislation. Continued operations of the rural energy
programs and energy development programs and projects are based on State legislation, annual appropriations, and
federal grant awards.
12
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Tel: 907-278-8878
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3601 C Street, Suite 600
Anchorage, AK 99503
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, 2016 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
audits 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, 2016, 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.
Emphasis of Matter
As discussed in note 2 to the financial statements, the Authority changed its reporting structure from a
proprietary fund to reporting a governmental fund and a proprietary fund.
13
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 1–11 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 and Other 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 28, 2016
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 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 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 28, 2016
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Statement of Net Position
June 30, 2016
(stated in thousands)
Governmental Business-Type
Assets and Deferred Outflows of Resources Activities Activities Total
Current assets:
Restricted cash and cash equivalents (note 3) $ 49,306 60,856 110,162
Operating receivable 940 809 1,749
Grants receivable 964 — 964
Loans receivable (note 8) — 689 689
Due from State of Alaska 3,785 — 3,785
Accrued interest receivable — 1,223 1,223
Internal balances (5,864) 5,864 —
Total current assets 49,131 69,441 118,572
Noncurrent assets:
Restricted investments (note 3) 986,284 21,606 1,007,890
Loans receivable, net of allowance (note 8) — 5,623 5,623
Capital assets, net of accumulated depreciation (note 5) — 370,154 370,154
Total noncurrent assets 986,284 397,383 1,383,667
Deferred outflows of resources:
Deferred charge on bond refundings — 53 53
Total assets and deferred outflows of resources $ 1,035,415 466,877 1,502,292
Liabilities and Net Position
Current liabilities:
Due to State of Alaska $ 9,585 8,588 18,173
Accounts payable 12,913 9,683 22,596
Bonds payable – current portion (note 7) — 9,090 9,090
Other bond liabilities – current portion (note 7) — 252 252
Accrued interest payable — 1,702 1,702
Total current liabilities 22,498 29,315 51,813
Noncurrent liabilities:
Bonds payable – noncurrent portion, net (note 7) — 53,495 53,495
Other bond liabilities – noncurrent portion (note 7) — 1,214 1,214
Other liabilities — 593 593
Total noncurrent liabilities — 55,302 55,302
Total liabilities 22,498 84,617 107,115
Net Position:
Net investment in capital assets — 307,569 307,569
Restricted for debt service — 22,183 22,183
Restricted by agreements with external parties 5,273 3,210 8,483
Restricted by legislation 1,007,644 49,298 1,056,942
Total net position 1,012,917 382,260 1,395,177
Total liabilities and net position $ 1,035,415 466,877 1,502,292
Commitments and contingencies (note 13)
See accompanying notes to basic financial statements.
14
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Statement of Activities
Year ended June 30, 2016
(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 Fund $ 31,938 — — — $ (31,938) — (31,938)
Renewable Energy Fund 18,333 — 624 — (17,709) — (17,709)
Emerging Energy Technology Fund 1,335 — 364 — (971) — (971)
Trans Alaska Pipeline Liability Fund 407 — — — (407) — (407)
Rural Energy Projects 22,314 2 22,312 — — — —
Total governmental
activities 74,327 2 23,300 — (51,025) — (51,025)
Business-type:
Bradley Lake Hydroelectric Project 14,554 17,709 — 41 — 3,196 3,196
Alaska Intertie Project 4,348 919 — 103 — (3,326) (3,326)
Susitna-Watana Hydroelectric Project — — — 9,023 — 9,023 9,023
Larsen Bay Hydroelectric Project (178) 12 — — — 190 190
Power Project Fund 587 327 — — — (260) (260)
Rural Electrification Revolving Loan Fund 303 5 — — — (298) (298)
Power Development and Railbelt Energy Funds 178 — — — — (178) (178)
Total business-type
activities 19,792 18,972 — 9,167 — 8,347 8,347
Total activities 94,119 18,974 23,300 9,167 (51,025) 8,347 (42,678)
General Revenues
Interest and Investment Income 9,313 1,735 11,048
Total general revenues 9,313 1,735 11,048
Change in net position (41,712) 10,082 (31,630)
Net Position, beginning as restated (note 2)1,054,629 372,178 1,426,807
Net Position, ending $ 1,012,917 382,260 1,395,177
See accompanying notes to basic financial statements.
Net (Expense) Revenue and
Program Revenues Changes in Net Position
15
Major
Special Statement of
Revenue Net Position
Fund Total
Current assets:
Restricted cash and cash equivalents (note 3) $ 49,306 $ 49,306
Operating receivable 940 940
Grants receivable 964 964
Due from State of Alaska 3,785 3,785
Total current assets 54,995 54,995
Noncurrent assets:
Restricted investments (note 3) 986,284 986,284
Total assets $ 1,041,279 $ 1,041,279
Current liabilities:
Due to State of Alaska $ 9,585 $ 9,585
Accounts payable 12,913 12,913
Due to other funds/Internal balances 5,864 5,864
Total liabilities 28,362 28,362
Fund balance:
Restricted by agreements with external parties 5,273
Restricted by legislation 1,007,644
Total fund balance 1,012,917
Total liabilities and fund balance $ 1,041,279
Net Position:
Restricted by agreements with external parties 5,273
Restricted by legislation 1,007,644
Total net position 1,012,917
Total liabilities and net position $ 1,041,279
Commitments and contingencies (note 13)
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, 2016
16
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, 2016
(stated in thousands)
Major
Special
Revenue Statement of
Revenues:Fund Activities
State of Alaska appropriations $ 18,943 $ 18,943
Federal grants 4,357 4,357
Investment income, net 9,313 9,313
Other revenues 2 2
Total revenues 32,615 32,615
Expenditures/Expenses:
Grants and projects 37,918 37,918
Power cost equalization grants 31,198 31,198
General and administrative 5,211 5,211
Total expenditures/expenses 74,327 74,327
Net change in fund balance (41,712)
Change in net position (41,712)
Fund balance/Net position – beginning as restated (note 2)1,054,629 1,054,629
Fund balance/Net position – ending $ 1,012,917 $ 1,012,917
See accompanying notes to basic financial statements.
17
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Enterprise Fund - Major Fund
Statement of Net Position
June 30, 2016
(stated in thousands)
Assets and Deferred Outflows of Resources
Current assets:
Restricted cash and cash equivalents (note 3) $ 60,856
Operating receivable 809
Loans receivable (note 8)689
Accrued interest receivable 1,223
Due from other funds 5,864
Total current assets 69,441
Noncurrent assets:
Restricted investments (note 3)21,606
Loans receivable, net of allowance (note 8) 5,623
Capital assets, net of accumulated depreciation (note 5) 370,154
Total noncurrent assets 397,383
Deferred outflows of resources:
Deferred charge on bond refundings 53
Total assets and deferred outflows of resources $ 466,877
Liabilities and Net Position
Current liabilities:
Due to State of Alaska $ 8,588
Accounts payable 9,683
Bonds payable – current portion (note 7) 9,090
Other bond liabilities – current portion (note 7) 252
Accrued interest payable 1,702
Total current liabilities 29,315
Noncurrent liabilities:
Bonds payable – noncurrent portion, net (note 7) 53,495
Other bond liabilities – noncurrent portion (note 7) 1,214
Other liabilities 593
Total noncurrent liabilities 55,302
Total liabilities 84,617
Net position:
Net investment in capital assets 307,569
Restricted for debt service 22,183
Restricted by agreements with external parties 3,210
Restricted by legislation 49,298
Total net position 382,260
Total liabilities and net position $ 466,877
Commitments and contingencies (note 13)
See accompanying notes to basic financial statements.
18
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, 2016
(stated in thousands)
Operating revenues:
Revenue from operating plants $ 18,640
Interest on loans 291
Other revenues 41
Total operating revenues 18,972
Operating expenses:
Depreciation 10,529
General and administrative 1,379
Interest expense 3,177
Plant operations 4,709
Provision for loan loss (note 8) (2)
Total operating expenses 19,792
Operating loss (820)
Nonoperating activities:
Investment income, net 1,735
State of Alaska appropriations 9,167
Total nonoperating activities 10,902
Increase in net position 10,082
Net position – beginning as restated (note 2)372,178
Net position – ending $ 382,260
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 Cash Flows
Year ended June 30, 2016
(stated in thousands)
Cash flows from operating activities:
Receipts from customers and users $ 18,797
Payments to suppliers (3,108)
Payments to State of Alaska (66)
Net cash provided by operating activities 15,623
Cash flows from noncapital and related financing activities:
Net unremitted interest returned on State appropriation advances (5)
Net decrease in short-term borrowings from AIDEA for working capital (897)
Net cash used by noncapital and related financing activities (902)
Cash flows from capital and related financing activities:
Principal paid on bonds (8,570)
Interest paid on bonds (3,428)
State of Alaska appropriation for capital assets 9,172
Investment in capital assets (12,523)
Net cash used for capital and related financing activities (15,349)
Cash flows from investing activities:
Purchase of investments (12,537)
Proceeds from sales and maturities of investments 10,809
Interest received from investments 1,735
Principal collected on loans 37
Interest collected on loans 116
Net cash provided by investing activities 160
Net decrease in cash and cash equivalents (468)
Cash and cash equivalents at beginning of year 61,324
Cash and cash equivalents at end of year $ 60,856
Reconciliation of operating loss to net cash used for operating activities:
Operating loss $ (820)
Adjustments to reconcile operating loss to net cash provided by operating activities:
Depreciation 10,529
Amortization of bond deferred charges 38
Provision for loan loss and bad debt expense (2)
Bond interest expense 3,177
Interest on loans (291)
Changes in assets and liabilities that provided (used) cash:
Decrease in due to State of Alaska (692)
Decrease in other long-term assets 2
Decrease in operating receivables 116
Decrease in due to from other funds 441
Decrease in other liabilities (35)
Decrease in other bond liabilities (383)
Increase in operating accounts payable 3,543
Net cash provided by operating activities $ 15,623
Noncash capital and related financing and investing activities:
Ending balance of capital assets accounts payable $ (3,629)
Net decrease in contingent liability on sold loans 35
See accompanying notes to basic financial statements.
20
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2016
21
(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 also 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 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 the Bradley Lake
project. The diversion will increase the Bradley Lake projects annual energy by approximately 37,000
megawatt hours (mWh). Construction may begin in 2017 and be completed in the fall of 2019.
(b) Alaska Intertie Project
The Alaska Intertie is a 170–mile transmission line designed for 345 kilovolts and is operating at 138
kilovolts. It runs between Willow and Healy and interconnects the power systems in the Anchorage
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 Golden Valley Electric Association (GVEA) in Fairbanks to purchase lower cost
electricity produced by Chugach Electric Association (CEA) and the Municipality of Anchorage, d/b/a
Municipal Light and Power (ML&P). It also allows Southcentral Alaska utilities to purchase power
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2016
22
from Fairbanks during power shortages. AEA contracts with the above Participating Utilities for
operations and maintenance. These duties are overseen by the Intertie Management Committee (IMC)
and AEA under the Alaska Intertie Agreement.
(c) Susitna-Watana Hydroelectric Project
The Alaska Legislature appropriated $193 million in funding to AEA for the development of a large
hydroelectric project to be built in the Railbelt Region. AEA is currently in the process of obtaining a
FERC license for this project. Pursuant to Administrative Order 271, AEA is using existing
appropriations to incrementally advance the licensing process through the updated FERC Study Plan
Determination.
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 electrical demand.
(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.
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.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2016
23
(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 accounts 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. Taxes and other items not properly included
among program revenues are reported instead as general revenues. Investment earnings are program
revenues due to the restriction to their function by legislation.
Separate financial statements are provided for the special revenue fund and enterprise fund.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2016
24
(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 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.
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 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 and actual is not presented in the financial statements.
Major proprietary fund:
The Enterprise Fund accounts for all financial activities primarily related to fees and charges to external
parties.
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) 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. In
addition, general revenues include federal and State of Alaska entitlement 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.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2016
25
(e) 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.
(f) Cash and Investments
All of AEA’s cash and investments 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.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2016
26
AEA’s 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.
(g) 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.
(h) 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 historical loss experience, individual loan delinquencies, collateral values, economic
conditions, and other factors. Management’s opinion is that the allowance is currently adequate to
absorb known losses and inherent risks in the portfolio.
(i) 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.
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.
Committed fund balance – if applicable, these amounts can only be used for specific purposes pursuant
to constraints imposed by formal resolutions or ordinances of the Authority’s board—the
government’s highest level of decision making authority. Those committed amounts cannot be used
for any other purpose unless the Authority’s board removes the specified use by taking the same type
of action imposing the commitment. This classification also includes contractual obligations to the
extent that existing resources in the fund have been specifically committed for use in satisfying those
contractual requirements.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2016
27
Assigned fund balance – if applicable, this classification reflects the amounts constrained by the
Authority’s “intent” to be used for specific purposes, but are neither restricted nor committed. The
Authority’s board and management have the authority to assign amounts to be used for specific
purposes.
Unassigned fund balance – if applicable, this classification is the residual classification for the
governmental fund. It is also used to report negative fund balances if applicable for governmental
funds.
All of the Authority’s fund balance is restricted.
(j) Net Position
Equity 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, 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.
(k) 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. At June 30, 2016, there were no 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.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2016
28
(l) 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.
(m) Appropriations and Grants
The Authority recognizes appropriations and grant revenue when all applicable eligibility
requirements, including time requirements, are met.
(n) 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.
(o) Deferred Outflows/Inflows of Resources
In addition to assets, the statements of net position will sometimes report 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 statements 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.
In addition to liabilities, the statements of financial position will sometimes report a separate section
for deferred inflows of resources. This separate financial statement element, deferred inflows of
resources, represents an acquisition of net position that applies to a future period(s) and so will not be
recognized as an inflow of resources (revenue) until that time. AEA has no activity that qualifies for
reporting in this category.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2016
29
(p) Recently Issued Accounting Pronouncements
GASB Statement No. 76 – The Hierarchy of Generally Accepted Accounting Principles for State and
Local Governments (Statement 76) was issued by the GASB in June 2015. The objective of Statement
76 is to identify the hierarchy of generally accepted accounting principles (GAAP). Statement 76
reduces the GAAP hierarchy to two categories of authoritative GAAP and addresses the use of
authoritative and non-authoritative literature in the event that the accounting treatment for a transaction
or other event is not specified within a source of authoritative GAAP. Statement 76 is required to be
implemented for the fiscal year ending June 30, 2017. We have not implemented Statement 76 and
are currently evaluating the impact on future financial statements.
GASB Statement No. 79 – Certain External Investment Pools and Pool Participants – Effective for
year-end June 30, 2017 – This statement establishes criteria for an external investment pool to qualify
for making the election to measure all of its investments at amortized cost for financial reporting
purposes. We have not implemented Statement 79 and are currently evaluating the impact on future
financial statements.
(q) Restatement of Net Position/Fund Balance
To better reflect the Authority’s financial position, the presentation of the financial statements has
been changed for fiscal year 2016. In previous years, the Authority presented the financial statement
as an Enterprise Fund. In the current fiscal year, the accounts of the Authority are organized as a
Governmental Fund and a Proprietary Fund.
As a result of the change, the Authority has recorded an opening balance adjustment to reflect opening
net position as follows:
Opening net
position, as
originally
presented
Restatement
of Net
Position
Opening
net position,
as restated
Governmental Activities $ - $ 1,054,629 $ 1,054,629
Business-type Activities $ 1,426,807 $ (1,054,629) $ 372,178
The Authority has also recorded an opening balance adjustment to reflect opening fund balance in
governmental funds of $1,054,629.
(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 footnote, “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.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2016
30
At June 30, 2016, the Authority’s carrying amount of cash and cash equivalents (all of which were restricted
or designated for specific purposes) was $110,162,000. The total of all bank balances on the same dates was
$110,224,000.
The restricted cash and cash equivalents and investments were held in trust and restricted accounts for the
following activities as of June 30, 2016:
Restricted Cash and Cash Equivalents
(in thousands of dollars)
Governmental Business-Type
Activities Activities Totals
Power Cost Equalization Endowment Fund $ 4,032 $ - $ 4,032
Renewable Energy Grant Fund 17,146 - 17,146
Emerging Energy Technology Fund 2,147 - 2,147
Trans-Alaska Pipeline Liability Fund 5,329 - 5,329
Rural Energy and Energy Development Programs 513 - 513
Funds advanced from state and federal agencies 20,139 2,458 22,597
Bradley Lake Hydroelectric Project - 10,808 10,808
Alaska Intertie Project - 2,197 2,197
Rural Energy Loan Funds - 43,444 43,444
Power Development Fund - 1,949 1,949
Total restricted cash and cash equivalents $ 49,306 $ 60,856 $ 110,162
Restricted Investments
(in thousands of dollars)
Governmental Business-Type
Activities Activities Totals
Power Cost Equalization Endowment Fund $ 946,939 $ - $ 946,939
Renewable Energy Grant Fund 39,345 - 39,345
Bradley Lake Hydroelectric Project - 21,606 21,606
Total restricted investments $ 986,284 $ 21,606 $ 1,007,890
Investment Holdings
Power Cost Equalization Endowment Fund, Renewable Energy Grant Fund, and Emerging Energy
Technology Fund – The Power Cost Equalization Endowment Fund (PCE Fund), created under Alaska
Statute (AS) 42.45.070, the Renewable Energy 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).
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2016
31
Other AEA Cash and Investments – Bradley Lake Hydroelectric Project investments are substantially
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.
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. The bulk of the Bradley Lake investments are
subject to rebate computation.
All other AEA assets are managed by internal staff for liquidity and minimal risk. There is no AEA Board
approved investment policy, but 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); and
Money market funds collateralized by U.S. Treasury and agency securities.
At June 30, 2016, the fair values of AEA’s cash and investments in its other funds were (stated in thousands):
Fair Value of Cash and Investments
(in thousands of dollars)
Governmental Business-Type
Activities Activities Totals
Deposits $ 1,005 $ - $ 1,005
Money market funds 48,301 60,856 109,157
Investment agreements - 21,606 21,606
Investments managed by
Department of Revenue 986,284 - 986,284
Total invested assets $ 1,035,590 $ 82,462 $ 1,118,052
AEA Internally Managed Investments – There is no written policy for interest rate risk for AEA’s internally
managed investments, but AIDEA’s policy is followed. The duration for investments is 2 years or less. The
maximum maturity of any issue is 3 years from the date of purchase.
There is no written policy with regard to credit risk for investments managed by AEA. 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 are substantially invested in guaranteed investment
contracts collateralized by federal obligations, which minimize credit risk.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2016
32
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,
2016, AEA’s deposits managed by Treasury were uncollateralized and uninsured.
With respect to AEA managed investments, amounts totaling approximately $109,157,000 at June 30, 2016
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 $21,606,000 are held with
the custodian institution and are collateralized.
Renewable Energy Fund and Emerging Energy Technology Fund Investment Holdings
The Department of Revenue, Treasury Division (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 Special Revenue 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 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 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.
June 30, 2016
GeFONSI
(in thousands of dollars)
Renewable Emerging Energy
Energy Fund Technology Fund
IRIS Fund 1210 IRIS Fund 1219
$ 39,345 $ -
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, 2016
33
Power Cost Equalization Endowment Fund Investment Holdings
The Department of Revenue, Treasury Division (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
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 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, 2016, the Fund’s share of pool investments was as follows (stated in thousands):
Power Cost Equalization Fund
Investment Pools
AY13
Cash and cash equivalents
Short-term fixed income pool $ 1,831
Domestic fixed income
Broad market fixed income pool 277,177
Equity
SSgA Russell 3000 446,199
SSgA MSCI EA FE index pool 139,118
Lazard International Equities 82,614
Total $ 946,939
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, 2016
34
(4) Fair Value Measurements
Various inputs are used in valuing the investments held by the Authority. Generally Accepted Accounting
Principles (GAAP) establishes a hierarchy of inputs used to value investments emphasizing observable
inputs and minimizing unobservable inputs. These inputs are summarized as follows:
Level 1 – Quoted prices for identical assets in an active market;
Level 2 – Inputs, other than quoted prices, that are observable for the asset, either directly or indirectly; and
Level 3 – Unobservable inputs. Unobservable inputs should only be used to the extent that observable inputs
are not available for a particular asset.
The Authority categorizes fair value measurements within the fair value hierarchy established by GAAP. At
June 30, 2016, the Authority has the following recurring fair value measurements (stated in thousands):
Business-type activities -
investments by fair value
level Total Level 1 Level 2 Level 3
Guaranteed investment
contracts $ 21,606 - 21,606 -
Debt securities classified as level 2 are valued using Net Asset Valuation. Values are obtained from the
custodian entity.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2016
35
(5) Capital Assets
Capital asset activity for the year ended June 30, 2016 was as follows (stated in thousands):
Balance at Balance at
Business-Type Activities July 1, 2015 Additions Deletions
June 30,
2016
Capital assets not being
depreciated:
Land and Rights of Way $ 11,212 - - 11,212
Construction in progress:
Intangibles 170,074 9,213 - 179,287
Other 9,144 3,283 (1,729) 10,698
Total capital assets not
being depreciated 190,430 12,496 (1,729) 201,197
Depreciable capital assets:
Infrastructure 437,034 1,729 - 438,763
Equipment 5,549 27 - 5,576
Total depreciable capital
assets 442,583 1,756 - 444,339
Less accumulated depreciation:
Infrastructure (259,482) (10,499) - (269,981)
Equipment (5,371) (30) - (5,401)
Total accumulated
depreciation (264,853) (10,529) - (275,382)
Capital assets, net $ 368,160 3,723 (1,729) 370,154
Depreciation expense was charged to the functions as follows for the year ended June 30, 2016 (stated in
thousands):
Business-Type Activities
Bradley Lake Hydroelectric Project $ 7,102
Alaska Intertie Project 3,427
Total depreciation expense – business type activities $ 10,529
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2016
36
(6) 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, 2016
follows:
Due from other funds
Due from Special Revenue Fund to Enterprise Fund $ 5,864
(7) Long-Term Debt
Long-term debt activity for the year ended June 30, 2016 was as follows (stated in thousands):
Balance at Balance at
Due
within
Business-Type Activities
July 1,
2015 Additions Deletions
June 30,
2016 one year
Bradley Lake Power
Revenue Bonds:
First Series (a) $ 100 - - 100 -
Refunding, Third Series (a) 16,235 - (5,100) 11,135 5,405
Refunding, Fourth Series (a) 26,020 - (3,100) 22,920 3,285
Refunding, Sixth Series (a)(b) 28,800 - (370) 28,430 400
Total bonds payable 71,155 - (8,570) 62,585 9,090
Arbitrage interest payable (c) 776 359 (475) 660 -
Bond original issue premium 1,073 - (267) 806 252
Total other bond liabilities 1,849 359 (742) 1,466 252
Total long-term debt $ 73,004 359 (9,312) 64,051 9,342
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2016
37
(a) AEA issued the Power Revenue Bonds, First and Second Series (Bradley Lake 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. 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. 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 bonds, except for the Sixth Series, are 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 2.5% 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 refunding
resulted in aggregate debt service payments over the next eleven years of approximately $3,316,000
less than the debt service payments which would have been due on the refunded bonds. There was
an economic gain of approximately $2,350,000 which is calculated as the net difference between the
present value of the old debt service requirements and the present value of the new debt service
requirements, discounted at the effective interest rate and adjusted for additional cash paid. The
refunded bonds were called on August 2, 2010.
(c) 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 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, 2016
38
The minimum payments related to all bonds for the years subsequent to June 30, 2016 are as follows (stated
in thousands):
Business-Type Activities
Principal Interest Total
Year Ending June 30:
2017 $ 9,090 3,138 12,228
2018 9,555 2,590 12,145
2019 10,470 2,031 12,501
2020 11,025 1,479 12,504
2021 11,575 893 12,468
2022 10,870 291 11,161
Total $ 62,585 10,422 73,007
In addition, the Authority has participated in the following debt agreements:
Other Debt – In 1982, AEA assumed $44,859,000 of 5% mortgage notes payable, which requires
quarterly principal and interest payments to the Rural Utilities Service (RUS) in connection with the
Solomon Gulch Hydroelectric Project. Concurrent with the assumption, AEA deposited with a trustee
Treasury notes sufficient to satisfy and provide for timely repayment of all principal and interest due
on the assumed RUS loans. Accordingly, the loans and related trust assets are not included in the
financial statements of AEA. At June 30, 2016, there was no unpaid principal balance on the note and
the trust assets had a fair value of $38,000.
(8) Loans Receivable
The Authority administers the Power Project Fund Loan Program and the Rural Electrification Revolving
Loan Program. Loans outstanding at June 30, 2016 are classified as follows (dollar amounts stated in
thousands):
Business-Type Activities
No. of
Loans Amount
Power Project Fund Loan Programs 11 $ 6,255
Rural Electrification Revolving Loan Program 2 251
13
Less: Allowance for Loan Loss (194)
Balance at end of year $ 6,312
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2016
39
Loans more than 90 days past due are not included in the accrual of interest. At June 30, 2016, 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, 2016 follows (stated in
thousands):
Balance at beginning of year $ 196
Provision for loan loss (2)
Balance at end of year $ 194
On September 30, 2010, the Authority sold to AIDEA its Power Project Fund loans. Under the agreement,
upon AIDEA’s request, AEA is required to repurchase any loan upon a payment default. On June 30, 2016,
the outstanding principal balance of the loans sold was $16,307,000, for which AEA has recognized an
estimated liability for potential repurchase of $489,200.
(9) Fund Balance
Fund balances reported in the aggregate on the governmental fund balance sheet are subject to the following
constraints:
Restricted by
External Parties
Restricted by
Legislation
Power Cost Equalization Fund $ - 949,537
Renewable Energy Fund - 53,976
Emerging Energy Technology Fund - 2,137
Trans-Alaska Pipeline Liability Fund 5,273 -
Rural Energy Projects - 1,994
Total fund balance $ 5,273 1,007,644
(10) Net Position
The Authority reports net position totaling $1,395,177, of which total restricted net assets at June 30, 2016
totaled $1,087,608. Total net investment in capital assets totals $307,569.
(11) Risk Management
AEA is exposed to various risks of loss and obtains coverage for its risks through the purchase of commercial
insurance and participation in the State Risk Management Pool.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2016
40
(12) Related Parties
(a) Alaska Industrial Development and Export Authority
Pursuant to understandings and agreements between AIDEA and AEA, AIDEA provides
administrative, treasury, personnel, data processing, communications, and other services to AEA.
During 2016, AEA incurred the following for services (stated in thousands):
Expensed services – governmental activities $ 6,238
Capitalized services – business-type activities 1,019
Total services $ 7,257
AEA has a Board approved borrowing agreement with AIDEA to provide short-term working capital
funds up to a maximum of $7,500,000. At June 30, 2016, AEA had $3,300,000 payable to AIDEA for
services and borrowings.
As a result of implementing Governmental Accounting Standards Board No. 68 Accounting and
Financial Reporting for Pensions, AIDEA recorded a net pension liability. AEA’s annual payments
to AIDEA for personnel services supporting AEA activities includes a Public Employees Retirement
System contribution component. Payments to AIDEA for AEA personnel services comprise
approximately two-thirds 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 $53,800 during fiscal year 2016 for administrative
services.
(c) Bradley Lake Project Management Committee
Effective December 7, 1987, AEA entered into a power sales agreement with entities purchasing
electric powers produced by the Bradley Lake Hydroelectric Project. Pursuant to the agreement, a
Project Management Committee (PMC) was formed. The PMC is comprised of a representative from
AEA and each of the power purchasers. The participating power purchasers 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.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2016
41
(13) 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, 2016, AEA had open Power Project Fund loan commitments of
$22,307,000.
At June 30, 2016, AEA had cumulative prior year commitments from grant awards that are funded by State
appropriations and federal awards; the amounts committed were $76,847,000.
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, 2016(stated in thousands)ExcessCapital Renewal and Investment OperatingDebt Service Reserve Contingency Earnings Revenue Operating ReserveFund Fund Reserve Fund Fund Fund Fund Account TotalBalance at July 1, 2015 $ 10,523 12,779 3,213 476 432 1,852 1,126 30,401 Interest received 226 961 287 32 220 152 83 1,961 Bond principal paid (8,570) — — — — — — (8,570) Bond interest paid (3,655) — — — — — — (3,655) Arbitrage paid — — — (475) — — — (475) Operating budget surplus paid — — (20) — — (1,394) — (1,414) Construction expenditures — — (1,288) — (74) — — (1,362) Operating revenue received — — — — 19,954 — — 19,954 Operating expenses paid — — — — — (4,426) — (4,426) Transfers between funds 12,268 (961) 3,432 281 (20,147) 5,220 (93) — Balance at June 30, 2016 $ 10,792 12,779 5,624 314 385 1,404 1,116 32,414 See accompanying independent auditors’ report.42
Schedule 2ALASKA ENERGY AUTHORITY(A Component Unit of the State of Alaska)Schedule of Projects and Programs – Balance SheetJune 30, 2016(stated in thousands)Emerging Trans AlaskaPower Cost Renewable Energy Pipeline RuralEqualization Energy Technology Liability EnergyFund Fund Fund Fund Projects Eliminations TotalsCurrent assets:Restricted cash and cash equivalents $ 4,032 17,146 2,147 5,329 20,652 — 49,306 Operating receivable — 650 21 — 269 — 940 Grants receivable— — 5 — 959 — 964 Due from State of Alaska 3,594 — — — 191 — 3,785 Due from other funds 33 — — — 1,238 (1,271) — Total current assets7,659 17,796 2,173 5,329 23,309 (1,271) 54,995 Noncurrent assets:Restricted investments 946,939 39,345 — — — — 986,284 Total assets$ 954,598 57,141 2,173 5,329 23,309 (1,271) 1,041,279 Liabilities and Fund BalanceCurrent liabilities:Due to State of Alaska $ 21 — — — 9,564 — 9,585 Accounts payable 5,040 2,807 36 — 5,030 — 12,913 Due to other funds— 358 — 56 6,721 (1,271) 5,864 Total current liabilities5,061 3,165 36 56 21,315 (1,271) 28,362 Total liabilities5,061 3,165 36 56 21,315 (1,271) 28,362 Fund Balance:Restricted by agreements with external parties— — — 5,273 — — 5,273 Restricted by legislation 949,537 53,976 2,137 — 1,994 — 1,007,644 Total fund balance949,537 53,976 2,137 5,273 1,994 — 1,012,917 Total liabilities and fund balance$ 954,598 57,141 2,173 5,329 23,309 (1,271) 1,041,279 Commitments and contingenciesSee accompanying independent auditors’ report.Special Revenue FundAssets43
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, 2016(stated in thousands)Emerging Trans AlaskaPower Cost Renewable EnergyPipeline RuralEqualizationEnergyTechnologyLiabilityEnergyFundFundFundFundProjects TotalsOperating revenues:State of Alaska appropriations $ — 624 — — 18,319 18,943 Federal grants — — 364 — 3,993 4,357 Investment income, net8,926 380 — 7 — 9,313 Other revenues — — — — 2 2 Total operating revenues8,926 1,004 364 7 22,314 32,615 Operating expenditures:Grants and projects — 16,256 1,335 389 19,938 37,918 Power cost equalization grants 31,198 — — — — 31,198 General and administrative 740 2,077 — 18 2,376 5,211 Total operating expenditures31,938 18,333 1,335 407 22,314 74,327 Increase (decrease) in fund balance(23,012) (17,329) (971) (400) — (41,712) Fund balance – beginning as restated (note 2)972,549 71,305 3,108 5,673 1,994 1,054,629 Fund balance – ending$ 949,537 53,976 2,137 5,273 1,994 1,012,917 See accompanying independent auditors’ report.44
Schedule 4ALASKA ENERGY AUTHORITY(A Component Unit of the State of Alaska)Schedule of Projects and Programs – Statement of Net PositionJune 30, 2016(stated in thousands)Rural Power DevelopmentBradley Lake Alaska Susitna-Watana Larsen Bay Power Electrification andHydroelectric Intertie Hydroelectric Hydroelectric Project Revolving Loan Railbelt EnergyAssets and Deferred Outflows of Resources Project Project Project Project Fund Fund Projects Eliminations TotalsCurrent assets:Restricted cash and cash equivalents $ 10,808 2,197 — — 43,378 66 4,407 — 60,856 Operating receivable 85 724 — — — — — — 809 Loans receivable— — — — 628 61 — — 689 Accrued interest receivable 1,103 — — — 118 2 — — 1,223 Due from other funds— 1 33 — 216 — 5,868 (254) 5,864 Total current assets11,996 2,922 33 — 44,340 129 10,275 (254) 69,441 Noncurrent assets:Restricted investments 21,606 — — — — — — — 21,606 Loans receivable, net of allowance— — — — 5,440 183 — — 5,623 Capital assets, net of accumulated depreciation 163,531 31,929 174,694 — — — — — 370,154 Total noncurrent assets185,137 31,929 174,694 — 5,440 183 — — 397,383 Deferred outflows of resources:Deferred charge on bond refundings 53 — — — — — — — 53 Total assets and deferred outflows of resources$ 197,186 34,851 174,727 — 49,780 312 10,275 (254) 466,877 Liabilities and Net PositionCurrent liabilities:Due to State of Alaska $ 7 (1) (1,552) — — 66 10,068 — 8,588 Accounts payable 4,953 2,906 1,585 — — 239 — — 9,683 Bonds payable – current portion 9,090 — — — — — — — 9,090 Other bond liabilities – current portion 252 — — — — — — — 252 Accrued interest payable 1,702 — — — — — — — 1,702 Due to other funds 36 — — 11 — — 207 (254) — Total current liabilities 16,040 2,905 33 11 — 305 10,275 (254) 29,315 Noncurrent liabilities:Bonds payable – noncurrent portion, net 53,495 — — — — — — — 53,495 Other bond liabilities – noncurrent portion 1,214 — — — — — — — 1,214 Other liabilities 104 — — — 489 — — — 593 Total noncurrent liabilities 54,813 — — — 489 — — — 55,302 Total liabilities 70,853 2,905 33 11 489 305 10,275 (254) 84,617 Net position:Net investment in capital assets 100,946 31,929 174,694 — — — — — 307,569 Restricted for debt service 22,183 — — — — — — — 22,183 Restricted by agreements with external parties 3,204 17 — (11) — — — — 3,210 Restricted by legislation— — — — 49,291 7 — — 49,298 Total net position 126,333 31,946 174,694 (11) 49,291 7 — — 382,260 Total liabilities and net position $ 197,186 34,851 174,727 — 49,780 312 10,275 (254) 466,877 Commitments and contingenciesSee accompanying independent auditors’ report.Business-Type Activities - Enterprise Fund45
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, 2016(stated in thousands)Rural PowerBradley Lake Alaska Susitna-Watana Larsen BayPower Electrification Development andHydroelectric Intertie Hydroelectric Hydroelectric Project Revolving Loan Railbelt EnergyProject Project Project Project Fund Fund Projects TotalsOperating revenues:Revenue from operating plants $ 17,709 919 — 12 — — — 18,640 Interest on loans— — — — 286 5 — 291 Other revenues— — — — 41 — — 41 Total operating revenues17,709 919 — 12 327 5 — 18,972 Operating expenses:Depreciation 7,102 3,427 — — — — — 10,529 General and administrative 399 88 — — 587 305 — 1,379 Interest expense 3,177 — — — — — — 3,177 Plant operating 3,876 833 — — — — — 4,709 Provision for loan loss— — — (178) — (2) 178 (2) Total operating expenses14,554 4,348 — (178) 587 303 178 19,792 Operating income (loss)3,155 (3,429) — 190 (260) (298) (178) (820) Nonoperating activities:Investment income, net1,679 2 — — 54 — — 1,735 State of Alaska appropriations 41 103 9,023 — — — — 9,167 Increase (decrease) in net position4,875 (3,324) 9,023 190 (206) (298) (178) 10,082 Net position – beginning as restated (note 2)121,458 35,270 165,671 (201) 49,497 305 178 372,178 Net position – ending$ 126,333 31,946 174,694 (11) 49,291 7 — 382,260 See accompanying independent auditors’ report.46
Schedule 6
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Schedule of Capital Assets Presented under Federal Energy Regulatory Commission
June 30, 2016
(stated in thousands)
Balance at Balance at
July 1, 2015 Additions Deletions June 30, 2016
Capital assets:
Intangible $ 165,685 9,023 — 174,708
Production 264,121 1,828 — 265,949
Transmission 188,690 1,571 — 190,261
General 14,517 101 — 14,618
Total capital assets 633,013 12,523 — 645,536
Less accumulated depreciation:
Intangible (6) — — (6)
Production (122,081) (5,477) — (127,558)
Transmission (137,396) (5,025) — (142,421)
General (5,370) (27) — (5,397)
Total accumulated
depreciation (264,853) (10,529) — (275,382)
Capital assets, net $ 368,160 1,994 — 370,154
Unaudited - See accompanying independent auditors’ report.
47
Schedule 7
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Bradley Lake Historical Annual Project Cost
Year ended June 30, 2016
(stated in thousands)
Operating Data 2016
Project costs:
Operations and maintenance $ 3,057
General and administrative 686
Insurance 531
Capital purchases 26
Contributions to renewal and contingency fund and operating reserve account 3,739
Subtotal 8,039
Debt service 12,495
Less investment income (1,649)
Total cost of power $ 18,885
Energy delivered (mWh) 429,882
Total unit cost of power (cents per kWh) 4.39
This schedule is provided as part of the Bradley Bond continuing disclosure requirement.
Unaudited - See accompanying independent auditors’ report.
48
Schedule 8ALASKA ENERGY AUTHORITY(A Component Unit of the State of Alaska)PCE Endowment Fund Historical AnalysisJune 30, 2016(stated in thousands)FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016Beginning investment fund balance $ 303,354 320,714 364,529 751,780 840,215 977,867 969,389 Inflows:Annual investment earnings 38,387 67,651 10,948 111,488 171,112 33,192 8,912 Capital fund transfers in — — 400,000 — — — — Total inflows 38,387 67,651 410,948 111,488 171,112 33,192 8,912 Outflows:Transfers to AEA for PCE payments (1) (20,725) (23,458) (23,154) (22,527) (32,773) (41,002) (30,622) Program administration - AEA (160) (174) (211) (198) (241) (248) (255) Administrative fee - Regulatory Commission — (78) (129) (90) (110) (107) (100) Management fee - Department of Revenue (142) (126) (203) (238) (336) (313) (385) Total outflows (21,027) (23,836) (23,697) (23,053) (33,460) (41,670) (31,362) Ending investment fund balance $ 320,714 364,529 751,780 840,215 977,867 969,389 946,939 (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.49
Schedule 9
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Supplementary Organization and Project Information
June 30, 2016
Unaudited – See accompanying independent auditors’ report 50
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 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, at cost, for 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.
Pursuant to legislation effective July 1, 1999, 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.
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 is working 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. The project is now operated by Homer Electric Association 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 project. The diversion will increase the Bradley Lake Hydroelectric Project annual
energy by approximately 37,000 megawatt hours (mWh). The Battle Creek project addition includes construction
of three miles of road, a concrete diversion dam, a pipe and canal to convey the water to Bradley Lake. The
estimated cost of construction provided in June 2016 was approximately $44 million. Construction could begin in
2017 and be completed in the fall of 2019.
Schedule 9 (Continued)
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Supplementary Organization and Project Information
June 30, 2016
Unaudited – See accompanying independent auditors’ report 51
Alaska Intertie Project
The Alaska Intertie is a 170–mile transmission line, designed for 345 kilovolts and is operating at 138 kilovolts. It
runs between Willow and Healy and interconnects the power systems in the Anchorage 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 Golden Valley Electric Association
(GVEA) in Fairbanks to purchase lower cost electricity produced by Chugach Electric Association (CEA), Homer
Electric Association (HEA), and Municipal Light and Power (ML&P). It also allows Southcentral Alaska utilities
to purchase power from Fairbanks during power shortages. AEA contracts with certain Participating Utilities for
operations and maintenance. The Intertie Management Committee (IMC) and AEA oversee the Alaska Intertie
under an amended and restated Intertie Agreement (Agreement) executed on November 18, 2011. 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 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 compensator (SVC) is substantially complete as of June 30, 2016, with minor
punch list items being completed and a service warranty being negotiated. 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
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 Alaska Legislature empowered AEA to acquire a
Susitna River power project under AS 44.83.080 (18).
Schedule 9 (Continued)
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Supplementary Organization and Project Information
June 30, 2016
Unaudited – See accompanying independent auditors’ report 52
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 all 58 environmental study plans in early 2013. In implementing
the study plans, AEA is working 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 $193,400,000 for AEA to plan, design, and obtain a FERC
permit for the project. On December 26, 2014, the Governor of Alaska 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.