HomeMy WebLinkAboutFY14 AEA Basic Financial Statement 2014-A
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Basic Financial Statements and Schedules
June 30, 2014 and 2013
(With Independent Auditors’ Report Thereon)
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Table of Contents
Page(s)
Management’s Discussion and Analysis 1–5
Independent Auditors’ Report 6-8
Statements of Net Position 9
Statements of Revenues, Expenses, and Changes in Net Position 10
Statements of Cash Flows 11
Notes to Basic Financial Statements 12–33
Schedules
1 Schedule of Bradley Lake Hydroelectric Project Trust Account Activities 34
2 Schedule of Projects and Programs – Statement of Net Position 35
3 Schedule of Projects and Programs – Revenues, Expenses, and Changes in Net Position 36
Supplementary Information (Unaudited)
4 Schedule of Capital Assets presented under Federal Energy Regulatory Commission 37
5 Bradley Lake Historical Annual Project Cost 38
6 Supplementary Organization and Project Information 39–41
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2014 and 2013
1 (Continued)
Overview of the Financial Statements
The Alaska Energy Authority (AEA or Authority) manages the following programs – owned hydroelectric and
intertie projects, rural energy programs, and energy development programs. AEA’s programs are funded
primarily by the State, federal grants, and utility companies for use of AEA owned assets. AEA has no for-profit
operating business activities. Further information on AEA’s programs can be found in note 1 to the financial
statements.
This financial report consists of three sections: management ’s discussion and analysis, basic financial statements,
and supplementary schedules. AEA’s operations are business type activities and are accounted for as an
enterprise fund. The Authority is a component unit of the State of Alaska (State) and is discretely presented in the
State’s financial statements. The Authority’s basic financial statements are the Statements of Net Position; the
Statements of Revenues, Expenses, and Changes in Net Position; the Statements of Cash Flows; and the Notes to
Basic Financial Statements.
Basic Financial Statements
The Statements of Net Position report the Authority’s assets, liabilities, deferred outflows and inflows, and
resulting net position. The net position is reported as invested in capital assets, net of related debt; restricted; and
unrestricted. Restricted net position is subject to external limits such as bond resolutions, legal agreements, or
statutes.
The Statements of Revenues, Expenses, and Changes in Net Position report the Authority’s income, 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 Statements of Cash Flows report the Authority’s sources and uses of cash and change in cash balance
resulting from the Authority’s activities during the periods reported.
The Notes to Basic Financial Statements provide additional information required to fully understand the amounts
reported in the basic financial statements.
Management’s Discussion and Analysis
This section presents management’s discussion and analysis of the financial position and results of operations at
and for the years ended June 30, 2014 and 2013. 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.
Financial Highlights
AEA’s assets exceeded its liabilities by $1.4 billion and $1.2 billion at June 30, 2014 and 2013, respectively. Of
the total net position at June 30, 2014, $262.1 million was invested in capital assets net of related debt,
$29.5 million was restricted, and $1.1 billion was unrestricted. Of the total net position at June 30, 2013,
$182.9 million was invested in capital assets net of related debt, $31.3 million was restricted, and $966.6 million
was unrestricted.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2014 and 2013
2 (Continued)
Financial Analysis
Total assets, total liabilities, deferred inflows and outflows and total net position at June 30, 2014, 2013, and
2012 follow (stated in thousands):
2014 2013 2012
Current assets $147,941 149,998 137,815
Capital assets, net 341,002 270,563 229,310
Other noncurrent and restricted assets 1,072,371 931,599 861,624
Deferred outflows 131 178 235
Total assets and deferred outflows $1,561,445 1,352,338 1,228,984
Current liabilities $81,626 89,717 68,966
Noncurrent liabilities 72,272 80,061 87,726
Deferred inflows 1,354 1,647 1,955
Total liabilities and deferred inflows 155,252 171,425 158,647
Total net position 1,406,193 1,180,913 1,070,337
Total liabilities, deferred inflows and
outflows and net position $1,561,445 1,352,338 1,228,984
Current assets were $2.1 million lower at June 30, 2014 compared to June 30, 2013 due to a $12 million
decrease in cash, offset by a $7.8 million increase in receivables for hydroelectric and other energy development
projects and a $2.1 million increase in receivables from subrecipient grantees for grant advances. Current assets
were $12.2 million higher at June 30, 2013 compared to June 30, 2012 primarily due to an $18.1 million increase
of cash offset by a $3.1 million decrease of loans receivable because of transfer of loans to the State Department
of Commerce, Community and Economic Development (DCCED) and a $2.8 million reduction of federal grants
receivable.
Capital assets, net increased $70.4 million and $41.2 million during the years ended June 30, 2014 and June 30,
2013, respectively. The increases in both periods were substantially due to development of the Susitna -Watana
Hydroelectric Project and other capital improvements offset by depreciation of capital assets.
A summary of major activity during the years ended June 30, 2014 and 2013, relating to capital assets, follows
(stated in thousands):
2014 2013
Susitna-Watana Hydroelectric Project development $75,347 46,097
Bradley Lake Hydroelectric Project improvements 2,127 3,979
Alaska Intertie Project improvements 3,429 2,963
Depreciation (10,464) (11,786)
Change in capital assets, net $70,439 41,253
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2014 and 2013
3 (Continued)
Other noncurrent and restricted assets were $140.8 million higher at June 30, 2014 compared to June 30,
2013 and $70 million higher at June 30, 2013 compared to the prior year due to increase market value of PCE
Endowment Fund investments.
Deferred outflows decreased by $47,000 and $57,000 at June 30, 2014 and June 30 2013, respectively, due to
the amortization of charges on bond refundings.
Current liabilities were $8.1 million lower at June 30, 2014 compared to June 30, 2013 and $20.8 million
higher at June 30, 2013 compared to June 30, 2012. The changes related primarily to amounts due to the State
relating to Susitna-Watana accrued expenses.
Noncurrent liabilities decreased by $7.8 million at June 30, 2014 and June 30, 2013. The bonds payable
decreases were due to scheduled debt service payments.
Deferred inflows decreased by $293,000 and $308,000 at June 30, 2014 and June 30, 2013, respectively, due to
the amortization of the premium of bond refundings.
Total net position was $225.3 million higher at June 30, 2014 compared to June 30, 2013 and $110.6 million
higher at June 30, 2013 compared to June 30, 2012 due to operating and nonoperating activities.
Components of the Authority’s operating revenues, operating expenses, operating loss, and nonoperating activity
for the years ended June 30 were as follows (stated in thousands):
2014 2013 2012
Operating revenues $92,783 102,443 98,660
Operating expenses 156,499 165,921 160,513
Operating loss (63,716) (63,478) (61,853)
Nonoperating:
Investment income, net 173,093 113,415 14,050
State of Alaska contributions for capital assets 78,875 50,605 13,481
State of Alaska contributions to AEA Funds 37,000 25,871 29,020
Decrease in contingent liability from loan sale 28 36 84
Transfer of Bulk Fuel Loans to State of Alaska — (15,873) —
Increase (decrease) in net position $225,280 110,576 (5,218)
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2014 and 2013
4 (Continued)
Operating revenues decreased $9.6 million during the year ended June 30, 2014 compared to June 30, 2013 and
increased $3.8 million during the year ended June 30, 2013 compared to June 30, 2012. Components of changes
were as follows (stated in thousands):
FY 2014-2013 FY 2013-2012
Net change Net change
Increased (decreased) Federal grant revenue $1,377 (8,794)
Increased in revenue from operating plants 605 580
(Decreased) increased revenue from State for PCE grant program (9,948) 1,784
(Decreased) increased revenue from State energy projects for
Alaska Railbelt utilities (17,208) 6,915
Decreased revenue from State for Eva Creek wind farm — (10,000)
Increased revenue from other State general fund
operating and capital appropriations 20,325 15,279
(Decreased) revenue from other State agencies (4,811) (1,707)
(Decreased) revenue from loan interest and other miscellaneous
revenues — (274)
$(9,660) 3,783
Operating expenses decreased $9.4 million during the year ended June 30, 2014 compared to June 30, 2013 and
increased $5.4 million during the year ended June 30, 2013 compared to June 30, 2012. Components of the
changes were as follows (stated in thousands):
FY 2014-2013 FY 2013-2012
Net change Net change
Increased (decreased) federally funded grant and project expenses
in active rural energy construction projects $836 (8,677)
(Decreased) increased State funded grant and project expenses (5,955) 14,709
(Decreased) State agency and component unit funded
expenses for interagency contracts (3,083) (3,445)
Increased PCE grant expenditures 205 1,201
(Decreased) increased other expenses (1,425) 1,614
$(9,422) 5,402
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2014 and 2013
5
Net operating losses were caused by the following activity during the years ended June 30, 2014 and 2013
(stated in thousands):
2014 2013
PCE grants funded by prior period nonoperating investment earnings
from the PCE Endowment Fund $(33,091) (22,876)
Depreciation (11,500) (11,800)
Renewable Energy grant expenses funded by nonoperating
State fund capitalizations received in prior periods (22,500) (30,944)
Other operating income received to fund capital purchases 3,375 2,142
Operating losses $(63,716) (63,478)
The Authority has no for-profit operating business activities and has operating losses because many of its
operating activities are funded by nonoperating revenues (fund capitalizations and investment earnings). In
addition, when the State capitalizes funds or authorizes interest earnings to fund program expense, this can result
in nonoperating revenue recognition in one year and related expenses recorded in a different year. Other
operating losses are a result of depreciation expenses of capital assets.
Nonoperating activities increased $114.9 million in fiscal year 2014 compared to fiscal year 2013 and
$117.4 million in fiscal year 2013 compared to fiscal year 2012.
The components of the increases are as follows:
FY 2014-2013 FY 2013-2012
Net change Net change
Investment income $59,678 99,365
Non operating State contributions 39,391 33,927
One time transfer of Bulk Fuel Loan program to DCCED 15,873 (15,873)
$114,942 117,419
Investment income increased in fiscal year 2014 and 2013 due to market conditions relating to the PCE
Endowment Fund.
Nonoperating State contributions increased in both fiscal years due to major energy development initiatives in
the State legislature.
Outlook
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.
Independent Auditors’ Report
The Board of Directors
Alaska Energy Authority:
Report on the Financial Statements
We have audited the accompanying financial statements of the Alaska Energy Authority (a Component
Unit of the State of Alaska) (Authority), as of and for the years ended June 30, 2014 and 2013 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 U.S. generally accepted accounting principles; 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 an opinion on these financial statements based on our audits. 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 auditors’ 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 opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of the Authority as of June 30, 2014 and 2013, and the changes in its financial position
and its cash flows for the years then ended in accordance with U.S. generally accepted accounting
principles.
KPMG LLP
Suite 600
701 West Eighth Avenue
Anchorage, AK 99501
KPMG LLP is a Delaware limited liability partnership,
the U.S. member firm of KPMG International Cooperative
(“KPMG International”), a Swiss entity.
7
Emphasis of Matter
As discussed in note 2 to the financial statements, the Authority adopted the provisions of Governmental
Accounting Standards Board Statement No. 65, Items Previously Reported as Assets and Liabilities,
retroactive to July 1, 2012. Our opinion is not modified with respect to this matter.
Other Matters
Required Supplementary Information
U.S. generally accepted accounting principles require that the management ’s discussion and analysis on
pages 1–5 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
6 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 and 3 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 4, 5 and 6 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.
8
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated October 24,
2014 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.
October 24, 2014
9
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Statements of Net Position
June 30, 2014 and 2013
(Stated in thousands)
Assets and Deferred Outflows of Resources 2014 2013
Current assets:
Cash and cash equivalents designated for specific purposes (note 3)$105,563 116,552
Restricted cash and cash equivalents (note 3)16,662 17,717
Grants receivable 2,587 2,465
Loans receivable (note 6)167 92
Operating revenue receivable 3,712 1,673
Due from State of Alaska 18,209 10,455
Accrued interest receivable 1,041 1,044
Total current assets 147,941 149,998
Noncurrent assets:
Restricted investments (note 3)19,532 20,624
Investments designated for specific purposes (note 3)1,046,857 905,814
Loans receivable, net of allowance (note 6)5,977 5,153
Capital assets, net of accumulated depreciation (note 4)341,002 270,563
Other long term assets 5 8
Total noncurrent assets 1,413,373 1,202,162
Deferred outflows of resources:
Deferred charge on bond refundings 131 178
Total assets and deferred outflows of resources $1,561,445 1,352,338
Liabilities, Deferred Inflows of Resources and Net Position
Current liabilities:
Due to State of Alaska $18,925 37,823
Accounts payable 52,430 41,533
Bonds payable – current portion (note 5)7,735 7,300
Arbitrage interest payable – current portion (note 5)351 657
Accrued interest payable 2,185 2,404
Total current liabilities 81,626 89,717
Noncurrent liabilities:
Bonds payable – noncurrent portion, net (note 5)71,155 78,890
Arbitrage interest payable – noncurrent portion (note 5)459 484
Other liabilities 658 687
Total noncurrent liabilities 72,272 80,061
Deferred inflows of resources:
Original issue premium on bond refundings 1,354 1,647
Total liabilities and deferred inflows of resources 155,252 171,425
Net position:
Invested in capital assets, net of related debt 262,112 182,912
Restricted for debt service 21,007 20,908
Restricted by agreements with external parties 8,526 10,463
Unrestricted 1,114,548 966,630
Total net position 1,406,193 1,180,913
Total liabilities, deferred inflows of resources and net position $1,561,445 1,352,338
Commitments and contingencies (notes 7 and 9)
See accompanying notes to basic financial statements.
10
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Statements of Revenues, Expenses, and Changes in Net Position
Years ended June 30, 2014 and 2013
(Stated in thousands)
2013
2014 (as adjusted)
Operating revenues:
State of Alaska appropriations $67,429 74,260
Revenue from operating plants 17,542 16,937
Federal grants 7,454 6,077
Revenue from state agencies and component units 81 4,892
Interest on loans 277 277
Total operating revenues 92,783 102,443
Operating expenses:
Grants and projects 91,431 99,634
Power cost equalization grants 40,305 40,100
Depreciation 10,464 11,786
General and administrative 5,424 5,291
Interest expense 4,127 4,561
Plant operating 4,720 4,363
Provision for loan loss (note 6)28 186
Total operating expenses 156,499 165,921
Operating loss (63,716) (63,478)
Nonoperating activities:
Investment income, net 173,093 113,415
State of Alaska appropriations for capital assets 78,875 50,605
State of Alaska contribution to the Renewable Energy Fund 25,000 25,871
State of Alaska contribution to the Power Project Loan Fund 10,000 —
State of Alaska appropriation to the Emerging Energy Technology
Fund 2,000 —
Decrease in contingent liability on sold loans 28 36
Transfer of Bulk Fuel Loan Fund to State DCCED — (15,873)
Total nonoperating activities 288,996 174,054
Increase in net position 225,280 110,576
Net position – beginning (as adjusted)1,180,913 1,070,337
Net position – ending $1,406,193 1,180,913
See accompanying notes to basic financial statements.
11
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Statements of Cash Flows
Years ended June 30, 2014 and 2013
(Stated in thousands)
2014 2013
Cash flows from operating activities:
Receipts from federal grants $7,331 6,864
Receipts from customers and users 17,811 17,164
Receipts from State of Alaska appropriations 70,208 59,186
Receipts from state agencies and component units 340 6,048
Payments to suppliers (16,747) (18,266)
Payments to grantees (111,561) (130,976)
Net cash used for operating activities (32,618) (59,980)
Cash flows from noncapital and related financing activities:
Net unremitted interest returned on State appropriation advances 11 —
Net State appropriations to communities managed by AEA for the communities 576 —
Emerging Energy Technology contribution from State — 2,000
Renewable Energy Fund contribution from State 25,000 25,871
Power Project Fund contribution from State 10,000 —
Bulk Fuel Loan Fund transfer to State DCCED — (9,158)
Net (increase) decrease in subrecipient grant advances (2,541) 7,034
Net decrease in short term borrowings from AIDEA for working capital (157) (2,668)
Net cash provided by noncapital and related financing activities 32,889 23,079
Cash flows from capital and related financing activities:
Principal paid on bonds (7,300) (6,880)
Interest paid on bonds (4,589) (5,014)
State of Alaska appropriation for capital assets 50,488 72,215
Purchase of capital assets (83,080) (45,544)
Net cash (used for) provided by capital and related financing activities (44,481) 14,777
Cash flows from investing activities:
Purchase of investments (143,768) (234,092)
Proceeds from sales and maturities of investments 160,361 270,951
Interest received from investments 16,243 9,266
Principal collected on loans 490 6,408
Interest collected on loans 256 237
Loans originated (1,416) (12,621)
Net cash provided by investing activities 32,166 40,149
Net (decrease) increase in cash and cash equivalents (12,044) 18,025
Cash and cash equivalents at beginning of year 134,269 116,244
Cash and cash equivalents at end of year $122,225 134,269
Reconciliation of operating loss to net cash used for operating activities:
Operating loss $(63,716) (63,478)
Adjustments to reconcile operating loss to net cash used for operating activities:
Depreciation 10,464 11,786
Provision for loan loss and bad debt expense 28 186
Bond interest expense 4,127 4,561
Interest on loans (277) (277)
Changes in assets and liabilities that provided (used) cash:
Increase (decrease) in due to State of Alaska 1,045 (7,360)
Decrease (increase) in due from the State of Alaska 2,051 (7,294)
(Increase) decrease in grants receivable (122) 787
Decrease in operating revenue receivable 492 797
Increase in operating accounts payable 13,290 312
Net cash used for operating activities $(32,618) (59,980)
Noncash capital and related financing and investing activities:
Net (decrease) increase in capital asset accounts payable $(2,178) 7,496
Net decrease in contingent liability on sold loans 28 36
Transfer of Bulk Fuel Loan Fund loan and interest receivable, net of allowance to State DCCED — (6,715)
Net increase in fair value of investments 124,172 107,317
See accompanying notes to basic financial statements.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2014 and 2013
12 (Continued)
(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 and a component unit of the State. AEA’s mission is to reduce the cost of
energy in Alaska through various energy infrastructure projects and energy programs funded by State,
federal grants and utility companies for use of AEA owned assets. AEA has no for-profit operating
business activities.
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.
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 from the Kenai
Peninsula to Fairbanks as well as the Delta Junction area.
The Authority is in the process of amending the Federal Energy Regulatory Commission (FERC)
license for a diversion of Battle Creek into the Bradley Lake proje ct to provide increased energy of
approximately 37,000 megawatt hours (mWh) annually. The license amendment is anticipated to be
received in 2015 with construction completed the fall of 2017.
(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 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.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2014 and 2013
13 (Continued)
(c) Susitna-Watana Hydroelectric Project
The Alaska Legislature appropriated $190 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. AEA expects to file for the FERC license in 2016.
As currently envisioned, 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,
Power Cost Equalization (PCE) Grant Program, Utility Training, Technical Assistance, one active
loan program (the Power Project Fund), and one inactive loan program (Rural Electric Revolvi ng
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.
Pursuant to legislation, effective January 1, 2013, the Bulk Fuel program (all outstanding Bulk Fuel
loans, and the Bulk Fuel Revolving Loan Fund that provided the program’s funding) was transferred
from AEA to the State’s Department of Commerce, Community and Economic Development
(DCCED). The Bulk Fuel program had a carrying amount of $15,873,000 at the time of the transfer.
(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 alte rnative
energy resources specific to Alaska. The purpose of the EETF grant program is to promote and
provide financial assistance to applicants to test, conserve, and improve emerging energy
technologies.
(2) Summary of Significant Accounting Policies
(a) Basis of Accounting – Enterprise Fund 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, the Authority is subject to the accounting
requirements as set forth by the Governmental Accounting Standards Board (GASB).
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2014 and 2013
14 (Continued)
The accounts of the Authority are organized as an Enterprise Fund. Accordingly, the financial
activities of the Authority are reported using the economic resources measurement focus and the
accrual basis of accounting, whereby revenues are recorded when earned and expenses are recorded
when goods or services are received or the related liability is incurred.
Operating Revenue and Expense
The Authority considers all 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. State appropriations to fund operating
grants and projects are included in operating revenue.
(b) 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.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2014 and 2013
15 (Continued)
(c) Cash and Investments
All of AEA’s cash and investments are restricted or designated as to use. For the purposes of the
statement of cash flows, cash and cash equivalents consist of cash, short term commercial paper, and
money market funds.
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.
(d) 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.
(e) 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.
(f) 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, 2014 and June 30, 2013, 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.
(g) Income Taxes
The Internal Revenue Code provides that gross income for tax purposes does not include inco me
accruing to a state or territory or any political subdivision thereof which is derived from the exercise
of any essential governmental function or from any public utility. AEA is a public corporation of the
State performing an essential governmental function and is therefore exempt from State and federal
income taxes.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2014 and 2013
16 (Continued)
(h) Appropriations and Grants
The Authority recognizes appropriations and grant revenue when all applicable eligibility
requirements, including time requirements, are met.
(i) 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.
(j) Deferred Outflows/Inflows of Resources
In addition to assets, the statements of financial 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 statement of
net position. A deferred charge on debt refunding results from the difference in the carrying va lue 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 statement 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 only has one item that
qualifies for reporting in this category. It is the premium on debt refunding reported in the statement
of net position. A premium on debt refunding results from the difference in the carrying value of
refunded debt and its reacquisition price. This amount is deferred and recognized over the shorter of
the life of the refunded or refunding debt.
(k) Change in Accounting Principle
In March 2012, the GASB issued GASB Statement No. 65, Items Previously Reported as Assets and
Liabilities (Statement 65). Statement 65 established accounting and financial reporting standards that
reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that were
previously reported as assets and liabilities and recognizes, as outflows of resources or inflows of
resources, certain items that were previously reported as assets and liabilities. The Authority adopted
the provisions of Statement 65 during 2014, retroactive to July 1, 2011. The adoption of Statement
65 resulted in the write-off of certain debt issuance costs. It also resulted in the reclassification of the
liability related to bond refundings. Original issuance premium was reclassified as a deferred inflow,
and losses from bond refundings were reclassified as deferred outflows.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2014 and 2013
17 (Continued)
The effects of adopting Statement 65 in the Authority’s financial statements for the year ended
June 30, 2013 were as follows:
Year ended June 30, 2013
Effect of
adoption of
As previously Statement
reported No. 65 As adjusted
(In thousands)
Statement of net position:
Total assets $1,352,152 8 1,352,160
Deferred outflows — 178 178
Total assets and
deferred outflows 1,352,152 186 1,352,338
Total liabilities (171,005) 1,227 (169,778)
Deferred inflows — (1,647) (1,647)
Total liabilities and
deferred inflows (171,005) (420) (171,425)
Total net position $1,181,147 (234) 1,180,913
Statement of revenues, expenses
and changes in net position:
Operating revenues $102,443 — 102,443
Operating expenses (165,978) 57 (165,921)
Nonoperating revenues 174,054 — 174,054
Changes in net position 110,519 57 110,576
Net position, beginning of year 1,070,628 (291) 1,070,337
Net position, end of year $1,181,147 (234) 1,180,913
(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 U.S. generally accepted accounting
principles.
At June 30, 2014 and 2013, the Authority’s carrying amount of cash and cash equivalents (all of which
were restricted or designated for specific purposes) was $122,225,000 and $134,269,000, respectively. The
total of all bank balances on the same dates was $123,542,000 and $139,755,000, respectively.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2014 and 2013
18 (Continued)
The restricted cash and cash equivalents and investments were held in trust accounts for the following
activities as of June 30, 2014 and 2013 (stated in thousands):
2014 2013
Bradley Lake Hydroelectric Project $9,920 9,704
Trans-Alaska Pipeline (TAPL) Appropriation 5,913 6,855
Alaska Intertie Project 829 1,158
Total restricted cash and cash equivalents $16,662 17,717
Bradley Lake Hydroelectric Project $19,532 20,624
Total restricted investments $19,532 20,624
The designated cash and cash equivalents and investments were held in trust accounts for the following
activities as of June 30, 2014 and 2013 (stated in thousands):
2014 2013
Renewable Energy Grant Program $21,832 29,733
Funds advanced from State and federal agencies 34,437 57,401
Rural Energy and Energy Development Programs 158 73
Emerging Energy Technology Fund 2,467 782
Rural Energy Loan Funds 44,778 26,911
Power Development Fund 1,866 1,650
Power Cost Equalization Endowment Fund 25 2
Total designated cash and cash equivalents $105,563 116,552
Emerging Energy Technology Fund $2,953 4,800
Renewable Energy Grant Fund 66,061 50,795
Rural Energy Loan Funds — 10,006
Power Cost Equalization Endowment Fund 977,843 840,213
Total designated investments $1,046,857 905,814
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).
Treasury has created a pooled environment by which it manages the investments. Actual investing is
performed by investment officers in Treasury or by contracted external investment managers. PCE Fund
assets are held in the State’s internally managed Short-term Fixed Income Pool, the Broad Market Fixed
Income Pool, as well as the State’s externally managed Domestic Equity and International Equity Pools.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2014 and 2013
19 (Continued)
RE and EET Fund assets are held in the State’s internally managed General Fund and Other
Non-Segregated Investments Pool (GeFONSI). The GeFONSI consists of investments in the State ’s
internally managed Short-term Fixed Income Pool, Short Term Liquidity Fixed Income Pool and the
Intermediate-term Fixed Income Pool. The complete financial activity of the funds is shown in the
Comprehensive Annual Financial Report available from the Division of Finance in the State Department of
Administration.
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.
Fixed income and equity securities are valued each business day using prices obtained from a pricing
service. Securities expressed in terms of foreign currencies ar e translated into U.S. dollars at the prevailing
exchange rates.
The accrual basis of accounting is used for 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, Intermediate-term Fixed Income, and Broad Market Fixed
Income pools is allocated to pool participants daily on a pro rata basis.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2014 and 2013
20 (Continued)
At June 30, 2014, AEA had the following cash and investments in the PCE, RE, and EET Funds (stated in
thousands):
Cash Investments at fair value
RE and EET
PCE Fund Funds PCE Fund
Short and Broad market
intermediate-and U.S.
Short-term terms and Treasuries
fixed liquidity fixed fixed
Investment type income pool income pools income pools Other Total
U.S. Treasury bonds $— — 4,494 — 4,494
U.S. Treasury bills 6,789 29,925 — — —
U.S. Treasury notes 1,527 23,362 54,312 — 54,312
U.S. Treasury strip — 51 3,551 — 3,551
U.S. government agency — 32 3,445 — 3,445
Mortgage-backed 55 812 52,612 — 52,612
Other asset-backed 3,879 11,600 8,218 — 8,218
Overnight sweep account 1,260 3,536 — — —
Repurchase agreement 787 2,209 — — —
Municipal bonds — — 474 — 474
Corporate bonds 804 3,681 33,595 — 33,595
Yankee:
Government — 108 2,006 — 2,006
Corporate 182 840 6,116 — 6,116
Domestic equity — — — 512,002 512,002
International equity — — — 284,660 284,660
Total invested
assets 15,283 76,156 168,823 796,662 965,485
Pool related net assets (liabilities)(3,213) (7,142) 179 134 313
Other pool ownership (12,045) — 12,045 — 12,045
Net invested assets $25 69,014 181,047 796,796 977,843
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2014 and 2013
21 (Continued)
At June 30, 2013, AEA had the following cash and investments in the PCE, RE, and EET Funds (stated in
thousands):
Cash Investments at fair value
RE and EET
PCE Fund Funds PCE Fund
Short and Broad market
intermediate-and U.S.
Short-term terms and Treasuries
fixed liquidity fixed fixed
Investment type income pool income pools income pools Equity Total
Commercial paper $386 1,132 — — —
U.S. Treasury bonds — — 4,283 — 4,283
U.S. Treasury bills 3,894 18,590 — — —
U.S. Treasury notes — 17,990 60,130 — 60,130
U.S. Treasury strip — 148 895 — 895
U.S. government discount notes 1 2 — — —
U.S. government agency — 804 5,982 — 5,982
Mortgage-backed 20 594 66,426 — 66,426
Deposit 198 580 (2) — (2)
Other asset-backed 3,946 12,255 6,921 — 6,921
Municipal bonds 5 19 — — —
Corporate bonds 472 3,420 41,507 — 41,507
Yankee:
Government — 97 1,987 — 1,987
Corporate 124 726 8,930 — 8,930
Domestic equity — — — 428,020 428,020
International equity — — — 211,837 211,837
Total invested
assets 9,046 56,357 197,059 639,857 836,916
Pool related net liabilities (159) (762) (5,796) 208 (5,588)
Other pool ownership (8,885) — 8,885 — 8,885
Net invested assets $2 55,595 200,148 640,065 840,213
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.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2014 and 2013
22 (Continued)
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, 2014 and 2013, the fair values of AEA’s cash and investments in its other funds (stated in
thousands) were:
Investment type 2014 2013
Deposits $71 116
Money market funds 122,129 134,151
U.S. Treasury notes — 10,006
Investment agreements 19,532 20,624
Total invested assets $141,732 164,897
Interest Rate Risk
Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an
investment. Duration is a measure of interest rate risk. It measures a security’s sensitivity to a 100–basis
point change in interest rates. Treasury uses industry-standard analytical software developed by The Yield
Book Inc. to calculate effective duration. The software takes into account various possible future interest
rates, historical and estimated prepayment rates, call options and other variable cash flows for purposes of
the effective duration calculation.
Short-Term Fixed Income Pool – As a means of limiting its exposure to fair value losses arising from
increasing interest rates, Treasury’s investment policy limits individual fixed rate securities to fourteen
months to maturity or fourteen months expected average life upon purchase. Floating rate securities are
limited to three years to maturity or three years expected average life upon purchase. These constraints
apply to trade date, except for securities bought at new issue, for which settlement date applies. At June 30,
2014, the expected average life of individual fixed rate securities ranged from one day to 2.2 years and the
expected average life of floating rate securities ranged from 8 days to 3.2 years. At June 30, 2013, the
expected average life of individual fixed rate securities ranged from three days to 34 years and the
expected average life of floating rate securities ranged from 14 days to 22 years.
Short-Term Liquidity Fixed Income Pool – Treasury’s investment policy limits individual fixed rate
securities to six months to maturity. These constraints apply to trade date, except for securities bought at
new issue, for which settlement date applies. At June 30, 2014, the expected average life of fixed rate
securities ranged from 31 to 179 days.
Intermediate-Term Fixed Income Pool – Through its investment policy, Treasury manages its exposure to
fair value losses arising from increasing interest rates by limiting effective duration of the
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2014 and 2013
23 (Continued)
Intermediate-term Fixed Income Pool to ± 20% of the Barclays 1-3 year Government Bond Index. The
effective duration for the Barclays 1-3 year Government Bond Index was 1.94 years at June 30, 2014 and
1.87 years at June 30, 2013.
Broad Market Fixed Income Pools – Through its investment policy, Treasury manages its exposure to fair
value losses arising from increasing interest rates by limiting the effective duration of its other fixed
income pool portfolios to the following:
Broad Market Fixed Income Pool: ± 20% of the Barclay’s Capital U.S. Aggregate Bond Index. The
effective duration of the Index at June 30, 2014 was 5.52 years. The effective duration of the Index at
June 30, 2013 was 5.49 years.
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.
Treasury has no policy with regard to interest rate risk for the money market balance held in the
International Equity Pool.
At June 30, 2014 and 2013, the effective duration by investment type (not including the investment
agreements) was as follows:
Intermediate-Broad
term market
fixed income fixed income
Managed by Treasury pool pool
2014
U.S. Treasury notes 2.14 4.71
U.S. Treasury strip 3.27 3.44
U.S. Treasury bills 0.42 —
U.S. Treasury bonds — 19.07
U.S. government agency 1.71 8.00
Mortgage-backed 0.99 4.24
Other asset-backed 0.70 0.69
Municipal bonds — 15.09
Corporate bonds 1.40 8.11
Yankees:
Government 0.78 8.21
Corporate 0.62 5.89
Portfolio effective duration 1.72 5.21
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2014 and 2013
24 (Continued)
Intermediate-Broad
term market
fixed income fixed income
Managed by Treasury pool pool
2013
U.S. Treasury notes 2.04 5.10
U.S. Treasury strip 4.43 4.89
U.S. Treasury bills 0.11 —
U.S. Treasury bonds — 19.69
U.S. government agency 1.70 8.23
Mortgage-backed 1.45 4.13
Other asset-backed 0.59 1.37
Municipal bonds 4.41 —
Corporate bonds 2.42 7.31
Yankees:
Government 2.06 5.17
Corporate 1.85 3.99
Portfolio effective duration 1.77 5.23
Managed by AEA
2014 2013
Money market 0.09 0.11
U.S. Treasury notes —1.41
Portfolio effective duration 0.09 0.20
Credit Risk
Credit risk is the financial risk that an issuer or other counter party to an investment will not fulfill its
obligations. Treasury’s investment policy has the following limitations with regard to credit risk:
Short-Term Fixed Income Pool – Short-term Fixed Income Pool investments are limited to instruments
with a long-term credit rating of at least A3 or equivalent and instruments with a short -term credit rating of
at least P-1 or equivalent. Commercial paper must be rated at least P-1 by Moody’s and A-1 by Standards
and Poor’s. Asset-backed and Nonagency mortgage securities must be rated A3 or equivalent. The A3
rating is defined as the median rating of the following three rating agencies: Standard & Poor ’s
Corporation, Moody’s and Fitch. Asset-backed and Nonagency mortgage securities may be purchased if
only rated by one of these agencies if they are rated AAA.
Short-Term Liquidity Pool – Short-term Liquidity Pool investments are limited to U.S. Treasury
obligations or other U.S. Government securities issued in full faith or guaranteed by agencies and
instrumentalities of the U.S. Government, obligations of foreign governments, sovereign states,
supranational entities, and their instrumentalities denominated in U.S. dollars, and the State’s internally
managed Short-Term Fixed Income Pool.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2014 and 2013
25 (Continued)
Intermediate-Term and Broad Market Fixed Income Pools – Intermediate-term and Broad Market Fixed
Income Pool investments are limited to securities with a long-term credit rating of at least Baa3 or
equivalent and securities with a short-term credit rating of at least P-1 or equivalent. Asset-backed and
Nonagency mortgage securities must be rated investment grade. The investment grade rating is defined as
the median rating of the following three rating agencies: Standard & Poor’s Corporation, Moody’s and
Fitch. Asset-backed and Nonagency mortgage securities may be purchased if only rated by one of these
agencies if they are rated AAA.
AEA Internally Managed Investments - 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 interest
accounts collateralized by federal obligations, which minimize credit risk.
At June 30, 2014, the Pools managed by Treasury and the investments managed by AEA consisted of
investments with credit quality ratings issued by nationally recognized statistical rating organizations as
follows (using Standard & Poor’s Corporation rating scale).
Short-term Short-term Intermediate-Broad market
fixed liquidity fixed term fixed fixed AEA
Investment type Rating income pool income pool income pool income pool managed
Money market AAA —%—%—%—%86%
U.S. Treasury notes AA 13 3 68 30 —
U.S. Treasury bills AA 56 97 5 — —
U.S. Treasury strips AA — — — 2 —
U.S. Treasury bond AA — — — 2 —
U.S. government agency AA — — — 2 —
Mortgage-backed AAA — — 1 3 —
Mortgage-backed AA — — 1 25 —
Mortgage-backed Not Rated — — — 1 —
Other asset-backed AAA 23 — 2 3 —
Other asset-backed AA — — — 1 —
Other asset-backed A 1 — — — —
Other asset-backed Not Rated 8 — 1 1 —
Overnight sweep account Not Rated 10 — — — —
Other pool ownership Not Rated — — 9 7 —
Repurchase agreement AA 7 — — — —
Corporate bonds AA 3 — 1 3 —
Corporate bonds A 4 — 3 10 —
Corporate bonds BBB — — 1 6 —
Yankees – government AA — — — 1 —
Yankees – corporate AA 1 — 1 1 —
Yankees – corporate A 1 — — 1 —
Yankees – corporate BBB — — — 1 —
No credit exposure (27) — 7 — 14
100%100%100%100%100%
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2014 and 2013
26 (Continued)
At June 30, 2013, the Pools managed by Treasury and the investments managed by AEA consisted of
investments with credit quality ratings issued by nationally recognized statistical rating organizations as
follows (using Standard & Poor’s Corporation rating scale).
Short-term Short-term Intermediate-Broad market
fixed liquidity fixed term fixed fixed AEA
Investment type Rating income pool income pool income pool income pool managed
Money market AAA —%—%—%—%81%
Commercial paper Not Rated 4 — — — —
U.S. Treasury notes AA — — 70 30 6
U.S. Treasury bills AA 44 100 7 — —
U.S. Treasury strips AA — — 1 1 —
U.S. Treasury bond AA — — — 2 —
U.S. government agency AA — — 3 1 —
U.S. government agency not rated — — — 2 —
Mortgage-backed AAA — — 1 3 —
Mortgage-backed AA — — 1 28 —
Mortgage-backed Not Rated — — — 2 —
Other asset-backed AAA 40 — 2 2 —
Other asset-backed AA 1 — — 1 —
Other asset-backed Not Rated 4 — 1 1 —
Other pool ownership Not Rated — — 6 4 —
Corporate bonds AAA — — — 1 —
Corporate bonds AA 2 — 2 3 —
Corporate bonds A 3 — 5 12 —
Corporate bonds BBB — — 1 5 —
Yankees – government AA — — — 1 —
Yankees – corporate AAA — — — 1 —
Yankees – corporate AA 1 — 1 1 —
Yankees – corporate A 1 — — 1 —
Yankees – corporate BBB — — — 1 —
No credit exposure (2) — (1) (3) —
Investment agreements Not Rated — — — — 13
Deposits 2 — — — —
100%100%100%100%100%
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, 2014, AEA’s deposits managed by Treasury were uncollateralized and uninsured.
With respect to AEA managed investments, amounts totaling approximately $112,209,000 at June 30,
2014 and $124,447,000 at June 30, 2013, are held in money market funds not registered in AEA’s name.
The investment agreements are collateralized. All other investment securities are registered in AEA’s name
and are held by its custodian, the trust department of a commercial bank; therefore, no custodial risk exists
for these securities.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2014 and 2013
27 (Continued)
Foreign Currency Risk
The Commissioner of Revenue (Commissioner) formally adopts asset allocation policies for AEA’s PCE
Fund at the beginning of each fiscal year, which places policy limitations on the amount of international
securities the PCE Fund is allowed to hold. The following policy was in place during fiscal years 2014 and
2013, and invested assets included the following holdings at June 30, 2014 and 2013, for the PCE Fund’s
investment in the International Equity Pool:
Policy Actual
FY14 28%±5%29.12%
FY13 26%±5%25.24%
At June 30, 2014 and 2013, AEA’s PCE Fund had exposure to foreign currency risk as follows (stated in
thousands):
Currency 2014 2013
Deposits:
Japanese Yen $22 42
Pound Sterling 188 —
210 42
Investment – international equity:
Australian Dollar 1,514 1,580
Canadian Dollar 2,197 2,344
Danish Krone 799 649
Euro Currency 22,582 18,291
Japanese Yen 16,380 12,996
New Zealand Dollar — 447
Norwegian Krone 504 733
Pound Sterling 22,437 16,426
Swedish Krona 2,793 3,708
Swiss Franc 5,259 4,082
74,465 61,256
Total $74,675 61,298
Foreign Exchange, Foreign Exchange Contracts, Off-Balance Sheet Risk, and Derivative Exposure
Treasury’s policy is exposed to credit risk on investment derivative instruments that are in asset positions.
The Commissioner has no policy of requiring collateral or other security to support derivative instruments
subject to credit risk. Additionally, the Commissioner has no policy regarding entering into netting
arrangements when it enters into derivative instrument transactions with a counterparty, nor does the
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2014 and 2013
28 (Continued)
Commissioner have a policy for contingencies. The Fund’s share of the International Equity Pool’s
investment includes the following income from derivative investments at June 30, 2014:
Changes in fair value Fair value at June 30, 2014
Classification Amount Classification Amount Notional
FX Forwards Investment Revenue $11,569 Long Term Instruments $— —
Concentration of Credit Risk
Treasury’s policy with regard to concentration of credit risk is to prohibit the purchase of more than five
percent of a pool’s holdings in corporate bonds backed by any one company or affiliated group.
At June 30, 2014 and 2013, AEA did not have more than five percent of its investments in any one
company or affiliated group.
(4) Capital Assets
Capital asset activity for the years ended June 30, 2014 and 2013 was as follows (stated in thousands):
Balance at Balance at
July 1, 2013 Additions Deletions June 30, 2014
Capital assets not being depreciated:
Land and Right of Ways $11,212 — — 11,212
Construction in progress:
Intangibles 60,112 75,652 — 135,764
Other 3,980 5,192 (1,788) 7,384
Total capital assets not
being depreciated 75,304 80,844 (1,788) 154,360
Depreciable capital assets:
Infrastructure 433,766 1,758 — 435,524
Equipment 5,395 89 — 5,484
Total depreciable capital
assets 439,161 1,847 — 441,008
Less accumulated depreciation:
Infrastructure (238,596) (10,425) — (249,021)
Equipment (5,306) (39) — (5,345)
Total accumulated
depreciation (243,902) (10,464) — (254,366)
Capital assets, net $270,563 72,227 (1,788) 341,002
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2014 and 2013
29 (Continued)
Balance at Balance at
July 1, 2012 Additions Deletions June 30, 2013
Capital assets not being depreciated:
Land and Right of Ways $11,212 — — 11,212
Construction in progress:
Intangibles 11,532 48,580 — 60,112
Other 2,195 3,518 (1,733) 3,980
Total capital assets not
being depreciated 24,939 52,098 (1,733) 75,304
Depreciable capital assets:
Infrastructure 431,116 2,650 — 433,766
Equipment 5,371 24 — 5,395
Total depreciable capital
assets 436,487 2,674 — 439,161
Less accumulated depreciation:
Infrastructure (226,874) (11,722) — (238,596)
Equipment (5,242) (64) — (5,306)
Total accumulated
depreciation (232,116) (11,786) — (243,902)
Capital assets, net $229,310 42,986 (1,733) 270,563
(5) Long-Term Debt
Long-term debt activity for the years ended June 30, 2014 and 2013 was as follows (stated in thousands):
Balance Balance
at July 1,at June 30,Due within
2013 Additions Deletions 2014 one year
Bradley Lake Power
Revenue Bonds:
`First Series (a)$100 — — 100 —
Refunding, Third Series (a)25,590 — (4,540) 21,050 4,815
Refunding, Fourth Series (a)31,700 — (2,760) 28,940 2,920
Refunding, Sixth —
Series (a) (b)28,800 — — 28,800 —
Total bonds
payable 86,190 — (7,300) 78,890 7,735
Arbitrage interest payable (c)1,141 326 (657) 810 351
$87,331 326 (7,957) 79,700 8,086
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2014 and 2013
30 (Continued)
Balance Balance
at July 1,at June 30,Due within
2012 Additions Deletions 2013 one year
Bradley Lake Power
Revenue Bonds:
`First Series (a)$100 — — 100 —
Refunding, Third Series (a)29,870 — (4,280) 25,590 4,540
Refunding, Fourth Series (a)34,300 — (2,600) 31,700 2,760
Refunding, Sixth
Series (a) (b)28,800 — — 28,800 —
Total bonds
payable 93,070 — (6,880) 86,190 7,300
Arbitrage interest payable (c)813 328 — 1,141 657
$93,883 328 (6,880) 87,331 7,957
(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 pled ged 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 ne t 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.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2014 and 2013
31 (Continued)
(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.
The minimum payments related to all bonds for the years subsequent to June 30, 2014 are as follows
(stated in thousands):
Principal Interest Total
Year ending June 30:
2015 $7,735 4,138 11,873
2016 8,570 3,655 12,225
2017 9,090 3,138 12,228
2018 9,555 2,590 12,145
2019 10,470 2,031 12,501
2020–2021 33,470 2,664 36,134
$78,890 18,216 97,106
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, 2014, the unpaid principal balance of the
notes was $2,378,000 and the trust assets had a fair value of $2,525,000.
Conduit Financing – City and Borough of Sitka – Utility Revenue Refunding Bonds, Series 1997 and
Utility Revenue Bonds, Series 1992 – In May 1992, AEA issued $56,890,000 of tax-exempt bonds
that allowed the City and Borough of Sitka (Sitka) to refinance its 1979 municipa l bonds, resulting
in significant debt service savings to Sitka. In November 1997, AEA issued $22,080,000 of
tax-exempt bonds to advance refund and defease $20,145,000 of the Series 1992 bonds (collectively
with the Series 1992 bonds, the Sitka Bonds). The Sitka Bonds are not included in these financial
statements.
In December 2010, the Alaska Municipal Bond Bank issued bonds, the proceeds of which were used
to refund and defease the Sitka Bonds. The Series 1992 bonds were defeased and $5,600,000 of the
defeased bonds remain outstanding at June 30, 2014. The Series 1997 bonds were called and
redeemed in January 2011.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2014 and 2013
32 (Continued)
(6) Loans Receivable
The Authority administers the Power Project Loan Program and the Rural Electrification Revolving Loan
Program. The Bulk Fuel Revolving Loan Program was transferred to the State DCCED in FY2013. Loans
outstanding at June 30, 2014 and 2013 are classified as follows (dollar amounts stated in thousands):
2014 2013
No. of loans Amount No. of loans Amount
Power Project Loan Program 6 $5,964 6 $4,980
Rural Electrification Revolving
Loan Program 2 370 2 427
8 6,334 8 5,407
Less allowance for loan losses (190) (162)
$6,144 $5,245
Loans more than 90 days past due are not included in the accrual of interest. At June 30, 2014, and 2013,
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, 2014 and 2013 follows
(stated in thousands):
2014 2013
Balance at beginning of year $162 181
Loan transfer – Bulk Fuel Loans — (205)
Provision for loan loss 28 186
Balance at end of year $190 162
On September 30, 2010, the Authority sold to AIDEA 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, 2014,
the outstanding principal balance of the loans sold was $18,501,000, for which AEA has recognized an
estimated liability for potential repurchase of $555,000.
(7) 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, 2014 and 2013
33
(8) 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 2014 and 2013, AEA paid the following for services (stated in thousands):
2014 2013
Expensed services $5,979 6,295
Capitalized services 2,428 1,498
$8,407 7,793
AEA has a board approved borrowing agreement with AIDEA to provide short-term working capital
funds. At June 30, 2014 and 2013, AEA had $5,900,000 and $3,538,000, respectively, payable to
AIDEA for services and borrowings.
(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 $33,000 and $37,000 for fiscal year
2014 and 2013, respectively, for administrative services.
(c) Bradley Lake Project Management Committee
Effective December 7, 1987, AEA entered into a power sales agreement with entities purchasing
electric power 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.
(9) 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, 2014 and 2013, AEA had open loan commitments of
$8,968,000 and $1,374,000, respectively. At June 30, 2014 and 2013, AEA had committed to grant awards
to be funded by State appropriations and federal awards; the amounts committed were $93,991,000 and
$135,964,000, respectively.
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.
34
Schedule 1
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Schedule of Bradley Lake Hydroelectric Project Trust Account Activities
Year ended June 30, 2014
(Stated in thousands)
Excess
Capital Renewal and investment Operating
Debt service reserve contingency earnings Revenue Operating reserve
fund fund reserve fund fund fund fund account Total
Balance at July 1, 2013 $9,704 12,779 4,628 829 156 1,310 922 30,328
Interest received 351 816 313 29 205 101 94 1,909
Bond principal paid (7,300) — — — — — — (7,300)
Bond interest paid (4,589) — — — — — — (4,589)
Arbitrage paid — — — (659) — — — (659)
Operating budget surplus paid — — (767) — — (264) — (1,031)
Construction expenditures — — (2,486) — (120) — — (2,606)
Operating revenue received — — — — 17,675 — — 17,675
Operating expenses paid — — — — — (4,275) — (4,275)
Transfers between funds 11,754 (816) 1,328 294 (17,238) 4,728 (50) —
Balance at June 30, 2014 $9,920 12,779 3,016 493 678 1,600 966 29,452
See accompanying independent auditors’ report.
35
Schedule 2
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Schedule of Projects and Programs – Statement of Net Position
June 30, 2014
(Stated in thousands)
Administration Rural Energy
Bradley Lake Alaska Susitna-Watana Rural and Power and Energy
Hydroelectric Intertie Hydroelectric Energy Development Development Combined
Assets and Deferred Outflows of Resources Project Project Project Projects Fund Programs balance
Current assets:
Cash and cash equivalents designated for specific purposes $— — — — 36,271 69,292 105,563
Restricted cash and cash equivalents 9,920 829 — — — 5,913 16,662
Grants receivable — — — — — 2,587 2,587
Loans receivable — — — — — 167 167
Operating revenue receivable 26 135 8 — — 3,543 3,712
Due from State of Alaska — 153 10,394 — (5,733) 13,395 18,209
Accrued interest receivable 993 — — — — 48 1,041
Total current assets 10,939 1,117 10,402 — 30,538 94,945 147,941
Noncurrent assets:
Restricted investments 19,532 — — — — — 19,532
Investments designated for specific purposes — — — — — 1,046,857 1,046,857
Loans receivable, net of allowance — — — — — 5,977 5,977
Capital assets, net of accumulated depreciation 173,058 36,345 131,599 — — — 341,002
Other long term assets 5 — — — — — 5
Total noncurrent assets 192,595 36,345 131,599 — — 1,052,834 1,413,373
Deferred outflows of resources:
Deferred charge on bond refundings 131 — — — — — 131
Total assets and deferred outflows of resources $203,665 37,462 142,001 — 30,538 1,147,779 1,561,445
Liabilities, Deferred Inflows of Resources and Net Position
Current liabilities:
Due to State of Alaska $(7) — 750 — 28,757 (10,575) 18,925
Accounts payable 2,489 1,100 9,652 213 (391) 39,367 52,430
Bonds payable – current portion 7,735 — — — — — 7,735
Arbitrage interest payable – current portion 351 — — — — — 351
Accrued interest payable 2,185 — — — — — 2,185
Total current liabilities 12,753 1,100 10,402 213 28,366 28,792 81,626
Noncurrent liabilities:
Bonds payable – noncurrent portion, net 71,155 — — — — — 71,155
Arbitrage interest payable – noncurrent portion 459 — — — — — 459
Other liabilities 103 — — — — 555 658
Total noncurrent liabilities 71,717 — — — — 555 72,272
Deferred inflows of resources:
Original issue premium on bond refundings 1,354 — — — — — 1,354
Total liabilities and deferred outflows of resources 85,824 1,100 10,402 213 28,366 29,347 155,252
Net position:
Invested in capital assets, net of related debt 94,168 36,345 131,599 — — — 262,112
Restricted for debt service 21,007 — — — — — 21,007
Restricted by agreements with external parties 2,666 17 — — — 5,843 8,526
Unrestricted — — — (213) 2,172 1,112,589 1,114,548
Total net position 117,841 36,362 131,599 (213) 2,172 1,118,432 1,406,193
Total liabilities, deferred outflows of resources and net position $203,665 37,462 142,001 — 30,538 1,147,779 1,561,445
Commitments and contingencies
See accompanying independent auditors’ report.
36
Schedule 3
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Schedule of Projects and Programs – Revenues, Expenses, and Changes in Net Position
Year ended June 30, 2014
(Stated in thousands)
Administration Rural Energy
Bradley Lake Alaska Susitna-Watana Rural and Power and Energy
Hydroelectric Intertie Hydroelectric Energy Development Development Combined
Project Project Project Projects Fund Programs balance
Operating revenues:
State of Alaska appropriations $— — — — — 67,429 67,429
Revenue from operating plants 16,540 990 — 12 — — 17,542
Federal grants — — — — — 7,454 7,454
Revenue from state agencies — — — — — 81 81
Interest on loans — — — — — 277 277
Total operating revenues 16,540 990 — 12 — 75,241 92,783
Operating expenses:
Grants and projects — 13 — — — 91,418 91,431
Power cost equalization grants — — — — — 40,305 40,305
Depreciation 7,037 3,427 — — — — 10,464
General and administrative 298 100 — — — 5,026 5,424
Interest expense 4,127 — — — — — 4,127
Plant operating 3,845 875 — — — — 4,720
Provision for loan loss — — — — — 28 28
Total operating expenses 15,307 4,415 — — — 136,777 156,499
Operating income (loss)1,233 (3,425) — 12 — (61,536) (63,716)
Nonoperating:
Investment income, net 1,561 — — — — 171,532 173,093
State of Alaska contributions/appropriations, net of transfers out 99 3,429 75,347 — — 37,000 115,875
Decrease in contingent liability on sold loans — — — — — 28 28
Increase in net position 2,893 4 75,347 12 — 147,024 225,280
Net position – beginning 114,948 36,358 56,252 (225) 2,172 971,408 1,180,913
Net position – ending $117,841 36,362 131,599 (213) 2,172 1,118,432 1,406,193
See accompanying independent auditors’ report.
37
Schedule 4
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Schedule of Capital Assets Presented under Federal Energy Regulatory Commission
June 30, 2014 and 2013
(Stated in thousands)
Balance at Balance at
July 1, 2013 Additions Deletions June 30, 2014
Capital assets:
Intangible $14 — — 14
Production 317,094 77,453 — 394,547
Transmission 188,690 — — 188,690
General 8,667 3,450 — 12,117
Total capital assets 514,465 80,903 — 595,368
Less accumulated depreciation:
Intangible (5) (1) — (6)
Production (111,244) (5,402) — (116,646)
Transmission (127,344) (5,026) — (132,370)
General (5,309) (35) — (5,344)
Total accumulated
depreciation (243,902) (10,464) — (254,366)
Capital assets, net $270,563 70,439 — 341,002
Balance at Balance at
July 1, 2012 Additions Deletions June 30, 2013
Capital assets:
Intangible $14 — — 14
Production 267,040 50,054 — 317,094
Transmission 188,570 120 — 188,690
General 5,802 2,865 — 8,667
Total capital assets 461,426 53,039 — 514,465
Less accumulated depreciation:
Intangible (5) — — (5)
Production (105,312) (5,932) — (111,244)
Transmission (121,556) (5,788) — (127,344)
General (5,243) (66) — (5,309)
Total accumulated
depreciation (232,116) (11,786) — (243,902)
Capital assets, net $229,310 41,253 — 270,563
Unaudited - See accompanying independent auditors’ report.
38
Schedule 5
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Bradley Lake Historical Annual Project Cost
Year ended June 30, 2014
(Stated in thousands)
Operating Data 2014
Project costs:
Operations and maintenance $2,939
General and administrative 685
Insurance 519
Capital purchases 194
Contributions to renewal and contingency fund and operating reserve account 1,686
Total project costs 6,023
Cost of power:
Debt service 12,105
Less investment income (1,587)
Total cost of power $16,541
Energy delivered (mWh)376,842
Total unit cost of power (kWh)$4.39
This schedule is provided as part of the Bradley Bond continuing disclosure requirement.
Unaudited - See accompanying independent auditors’ report.
Schedule 6
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Supplementary Organization and Project Information
June 30, 2014 and 2013
39 (Continued)
Organization and Operations
Throughout the 1980’s, Alaska Energy Authority (AEA) 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 together with the Alaska Intertie help provide Interior Alaska with cheaper energy
available in 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, design,
and 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.
The Authority is in the process of amending the Federal Energy Regulatory Commission (FERC) license by
adding a new Battle Creek diversion project. This project will divert the West Fork Upper Battle Creek into
Bradley Lake. The annual energy increase to Bradley Lake Hydroelectric Project would be about 37,000
megawatt hours (mWh). The Battle Creek project addition includes construction of four miles of road, a concrete
diversion dam, and a canal to convey the water to Bradley Lake. The engineering costs provided in
Schedule 6
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Supplementary Organization and Project Information
June 30, 2014 and 2013
40 (Continued)
December 2013 were approximately $61 million. The license amendment is anticipated to be received in 2015.
Construction is expected to be completed in the fall of 2017.
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 Municipal Light and Power (ML&P). It also allows Southcentral Alaska utilities to purchase power
from Fairbanks during power shortages. AEA contracts with the above Participating Utilities for operations and
maintenance. The Intertie Management Committee (IMC) and AEA oversee an amended and restated Intertie
Agreement (Agreement) executed on November 18, 2011. The Agreement improves the reliability of the
interconnected electrical systems, outlines how transfer 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 of the Intertie. 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:
Appropriation description Year Amount
Upgrade and extension of intertie (net of FY08 and FY12
reappropriations)FY02 $9,300,000
Repair of static VAR compensators (SVC) and a tower foundation
repair FY08 10,000,000
Substation upgrades and tower repairs FY12 5,000,000
Railbelt transmission plan FY12 1,000,000
ML&P was contracted to perform the repairs and upgrades. The tower repairs are now complete. Design and
construction of the new SVC is estimated to be completed by December 31, 2014. AEA will continue to work
with the Railbelt utilities on the logical extension destination of the intertie.
Susitna-Watana Hydroelectric Project
The Alaska Legislature appropriated $10 million to AEA effective July 1, 2010 for the 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.
Schedule 6
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Supplementary Organization and Project Information
June 30, 2014 and 2013
Unaudited – See accompanying independent auditors’ report 41
The Alaska Legislature unanimously passed and the Governor signed Senate Bill 42 effective July 14, 2011,
which authorized the Authority to acquire a Susitna River power project. Senate Bill 46 appropriated
$65.7 million, effective July 1, 2011, to plan, design, and obtain permit of the project. With Senate Bill 18,
effective April 14, 2013, an additional $95.2 million was appropriated to the project. An additional $20 million
was appropriated for the project effective April 2014. In December 2011, AEA filed Notice of Intent and
Pre-Application Document with the FERC to begin the licensing process for the project. AEA is actively
engaged in this FERC process and expect to file for licensing in 2016. The FERC approved all 58 environmental
study plans in early 2013. Since then, AEA has been 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 7000 page ISR presents information
collected from the first year of field studies.
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.
As currently envisioned, the project would include a single Roller Compacted Concrete dam with a height
providing nominal crest elevation at 2,075 feet mean sea level with a 23,546 acre, 42.5-mile long reservoir with
an average width of one to two miles. The final height of the dam construction is being evaluated as part of 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.