HomeMy WebLinkAboutAEA FY15 Financial Report 2015-A
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Basic Financial Statements and Schedules
June 30, 2015 and 2014
(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 1–6
Independent Auditors’ Report 7-8
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 12–35
Schedules
1 Schedule of Bradley Lake Hydroelectric Project Trust Account Activities 36
2 Schedule of Projects and Programs – Statement of Net Position 37
3 Schedule of Projects and Programs – Revenues, Expenses, and Changes in Net Position 38
Supplementary Information (Unaudited)
4 Schedule of Capital Assets Presented under Federal Energy Regulatory Commission 39
5 Bradley Lake Historical Annual Project Cost 40
6 Supplementary Organization and Project Information 41–43
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2015 and 2014
1 (Continued)
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 are business type activities and are accounted for as an 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.
The 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.
This financial report consists of three sections: management ’s discussion and analysis, basic financial statements,
and supplementary schedules. 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 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 Statements of Revenues, Expenses, and Changes in Net Position report 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 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, 2015 and 2014. 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.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2015 and 2014
2 (Continued)
Financial Highlights
AEA’s assets exceeded its liabilities by $1.4 billion at both June 30, 2015 and 2014. Of the total net position at
June 30, 2015, $297 million was invested in capital assets net of related debt, $1,129.8 million was restricted. Of
the total net position at June 30, 2014, $262.1 million was invested in capital assets net of related debt, and
$1,144.1 million was restricted.
Financial Analysis
Total assets, total liabilities, deferred outflows of resources and total net position at June 30, 2015, 2014, and 2013
follow (stated in thousands):
2015 2014 2013
Current assets $144,132 147,941 149,998
Capital assets, net 368,160 341,002 270,563
Other noncurrent and restricted assets 1,045,811 1,072,371 931,599
Deferred outflows of resources 91 131 178
Total assets and deferred outflows
of resources $1,558,194 1,561,445 1,352,338
Current liabilities $66,800 81,626 89,717
Noncurrent liabilities 64,587 73,626 81,708
Total liabilities 131,387 155,252 171,425
Total net position 1,426,807 1,406,193 1,180,913
Total liabilities and net position $1,558,194 1,561,445 1,352,338
Current assets were $3.8 million lower at June 30, 2015 compared to June 30, 2014 due primarily to an increase
in cash of $5.8 million offset by a reduction in federal and state receivables of $9.8 million. 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 sub-recipient grantees for grant advances.
Capital assets, net increased $27.2 million and $70.4 million during fiscal years (FY) ended June 30, 2015 and
June 30, 2014, 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.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2015 and 2014
3
A summary of major activity during the years ended June 30, 2015 and 2014, relating to capital assets, follows
(stated in thousands):
FY2015 -
FY2014 Net
change
FY2014 -
FY2013 Net
change
Susitna-Watana Hydroelectric Project development $34,072 75,347
Bradley Lake Hydroelectric Project improvements 1,238 2,127
Alaska Intertie Project improvements 2,335 3,429
Depreciation (10,487) (10,464)
Change in capital assets, net $27,158 70,439
Other noncurrent and restricted assets were $26.6 million lower due to decreases in market value of investments
at June 30, 2015 compared to June 30, 2014 and $140.8 million higher at June 30, 2014 compared to the prior year
due to increases in the Power Cost Equalization (PCE) Fund’s market value of investments.
Deferred outflows of resources decreased by $40,000 and $47,000 at June 30, 2015 and June 30 2014,
respectively, due to the amortization of charges on bond refundings.
Current liabilities were $14.8 million lower at June 30, 3015 compared to June 30, 2014 and $8.1 million lower
at June 30, 2014 compared to June 30, 2013. The changes are primarily related to amounts due to the State relating
to Susitna-Watana and other program accrued expense.
Noncurrent liabilities decreased by $9 million at June 30, 2015 and June 30, 2014. The bonds payable decreases
were due to scheduled debt service payments.
Total net position was $20.6 million higher at June 30, 2015 compared to June 30, 2014 and $225.3 million higher
at June 30, 2014 compared to June 30, 2013 due to operating and nonoperating activities.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2015 and 2014
4
Components of the Authority’s operating revenues, operating expenses, nonoperating activity for the years ended
June 30 were as follows (stated in thousands):
2015 2014
Operating revenues $55,978 92,783
Operating expenses 135,978 156,499
Operating loss (80,000) (63,716)
Nonoperating activities:
Investment income, net 35,095 173,093
State of Alaska appropriation for capital assets 36,601 78,875
State of Alaska appropriation to AEA Funds 28,888 37,000
Decrease in contingent liability from loan sale 30 28
Nonoperating activities 100,614 288,996
Increase in net position $20,614 225,280
Operating revenues decreased $36.8 million during the year ended June 30, 2015 compared to June 30, 2014 and
decreased $9.6 million during the year ended June 30, 2014 compared to June 30, 2013. Components of changes
were as follows (stated in thousands):
FY 2015-2014 FY 2014-2013
Net change Net change
Increased (decreased) Federal grant revenue $(2,720) 1,377
Increased (decreased) revenue from operating plants (714) 605
Decreased revenue from State for PCE grant program (8,679) (9,948)
Decreased revenue from State energy projects for
Alaska Railbelt utilities (6,868) (17,208)
Increased (decreased) revenue from other State general fund
operating appropriations (17,897) 20,325
Decreased revenue from other State agencies — (4,811)
Increased revenue from loan interest and other miscellaneous
revenues 73 —
$(36,805) (9,660)
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2015 and 2014
5
Operating expenses decreased $20.5 million during the year ended June 30, 2015 compared to June 30, 2014 and
decreased $9.4 million during the year ended June 30, 2014 compared to June 30, 2013. Components of the changes
were as follows (stated in thousands):
FY 2015-2014 FY 2014-2013
Net change Net change
(Decreased) increased federally funded grant and project expenses
in active rural energy construction projects $(2,597) 836
Decreased State funded grant and project expenses (14,227) (5,955)
Increased (decreased) State agency and component unit funded
expenses for interagency contracts 448 (3,083)
(Decreased) increased PCE grant expenditures (3,642) 205
Decreased other expenses (503) (1,425)
$(20,521) (9,422)
Net operating losses were caused by the following activity during the years ended June 30, 2015 and 2014 (stated
in thousands):
2015 2014
PCE grants funded by prior period nonoperating investment earnings
from the PCE Endowment Fund $(38,445) (33,091)
Depreciation (10,487) (11,500)
Renewable Energy grant expenses funded by nonoperating
State fund capitalizations received in prior periods (37,614) (22,500)
Plant operations 8,886 8,282
Other income received from programs and projects (2,340) (4,907)
Operating loss $(80,000) (63,716)
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 decreased $188.4 million in fiscal year 2015 compared to 2014 and increased $114.9
million in fiscal year 2014 compared to fiscal year 2013.
The components of the changes are as follows:
FY 2015-2014 FY 2014-2013
Net change Net change
Investment income $(137,998) 59,678
Nonoperating State contributions (50,384) 39,391
One time transfer of Bulk Fuel Loan program to DCCED — 15,873
$(188,382) 114,942
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2015 and 2014
6
Investment income decreased in fiscal year 2015 and increased in 2014 due to market conditions relating to the
PCE Endowment Fund.
Nonoperating State contributions decreased in fiscal year 2015 from a reduction in Susitna-Watana and the
Power Project Loan Fund contributions. Fiscal year 2014 nonoperating State contributions increased 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, 2015 and 2014 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, 2015 and 2014, 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.
8
Other Matters
Required Supplementary Information
U.S. generally accepted accounting principles require that the management’s discussion and analysis on
pages 1–6 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.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated October 26, 2015
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 26, 2015
9
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Statements of Net Position
June 30, 2015 and 2014
(Stated in thousands)
Assets and Deferred Outflows of Resources 2015 2014
Current assets:
Restricted cash and cash equivalents (note 3)$128,037 122,225
Grants receivable 1,384 2,587
Loans receivable (note 6)454 167
Due from State of Alaska 10,616 18,209
Accrued interest receivable 1,048 1,041
Operating receivable 2,593 3,712
Total current assets 144,132 147,941
Noncurrent assets:
Restricted investments (note 3)1,039,916 1,066,389
Loans receivable, net of allowance (note 6)5,893 5,977
Capital assets, net of accumulated depreciation (note 4)368,160 341,002
Other long term assets 2 5
Total noncurrent assets 1,413,971 1,413,373
Deferred outflows of resources:
Deferred charge on bond refundings 91 131
Total assets and deferred outflows of resources $1,558,194 1,561,445
Liabilities and Net Position
Current liabilities:
Due to State of Alaska $29,199 18,925
Accounts payable 26,603 52,430
Bonds payable – current portion (note 5)8,570 7,735
Other bond liabilities – current portion (note 5)475 351
Accrued interest payable 1,953 2,185
Total current liabilities 66,800 81,626
Noncurrent liabilities:
Bonds payable – noncurrent portion, net (note 5)62,585 71,155
Other bond liabilities – noncurrent portion (note 5)1,374 1,813
Other liabilities 628 658
Total noncurrent liabilities 64,587 73,626
Total liabilities 131,387 155,252
Net position:
Net investment in capital assets 297,005 262,112
Restricted for debt service 21,825 21,007
Restricted by agreements with external parties 9,041 8,313
Restricted by legislation 1,098,936 1,114,761
Total net position 1,426,807 1,406,193
Total liabilities and net position $1,558,194 1,561,445
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, 2015 and 2014
(Stated in thousands)
2015 2014
Operating revenues:
State of Alaska appropriations $33,985 67,429
Revenue from operating plants 16,828 17,542
Revenue from state agencies and component units 131 81
Interest on loans 282 277
Federal grants 4,734 7,454
Other revenues 18 —
Total operating revenues 55,978 92,783
Operating expenses:
Grants and projects 75,056 91,431
Power cost equalization grants 36,663 40,305
Depreciation 10,487 10,464
General and administrative 6,113 5,424
Interest expense 3,668 4,127
Plant operations 3,985 4,720
Provision for loan loss (note 6)6 28
Total operating expenses 135,978 156,499
Operating loss (80,000) (63,716)
Nonoperating activities:
Investment income, net 35,095 173,093
State of Alaska appropriation for capital assets 36,601 78,875
State of Alaska appropriation to the Renewable Energy Fund 28,888 25,000
State of Alaska appropriation 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 30 28
Total nonoperating activities 100,614 288,996
Increase in net position 20,614 225,280
Net position – beginning 1,406,193 1,180,913
Net position – ending $1,426,807 1,406,193
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, 2015 and 2014
(Stated in thousands)
2015 2014
Cash flows from operating activities:
Receipts from federal grants $5,937 7,331
Receipts from customers and users 16,159 17,811
Receipts from State of Alaska appropriations 30,530 70,208
Payments to suppliers (16,530) (16,747)
Payments to grantees (123,178) (111,561)
Receipts from state agencies and component units 150 340
Net cash used for operating activities (86,932) (32,618)
Cash flows from noncapital and related financing activities:
Net unremitted interest returned on State appropriation advances (10) 11
Net State appropriations to communities managed by AEA for the communities (382) 576
Renewable Energy Fund contribution from State 28,888 25,000
Power Project Fund contribution from State — 10,000
Net (increase) decrease in subrecipient grant advances 1,848 (2,541)
Net decrease in short term borrowings from AIDEA for working capital (997) (157)
Net cash provided by noncapital and related financing activities 29,347 32,889
Cash flows from capital and related financing activities:
Principal paid on bonds (7,735) (7,300)
Interest paid on bonds (4,138) (4,589)
State of Alaska appropriation for capital assets 60,150 50,488
Investment in capital assets (46,480) (83,080)
Net cash used for capital and related financing activities 1,797 (44,481)
Cash flows from investing activities:
Purchase of investments (305,263) (143,768)
Proceeds from sales and maturities of investments 354,412 160,361
Interest received from investments 12,351 16,243
Principal collected on loans 284 490
Interest collected on loans 309 256
Loans originated (493) (1,416)
Net cash provided by investing activities 61,600 32,166
Net (decrease) increase in cash and cash equivalents 5,812 (12,044)
Cash and cash equivalents at beginning of year 122,225 134,269
Cash and cash equivalents at end of year $128,037 122,225
Reconciliation of operating loss to net cash used for operating activities:
Operating loss $(80,000) (63,716)
Adjustments to reconcile operating loss to net cash used for operating activities:
Depreciation 10,487 10,464
Provision for loan loss and bad debt expense 6 28
Bond interest expense 3,668 4,127
Interest on loans (282) (277)
Changes in assets and liabilities that provided (used) cash:
Due to State of Alaska (1,175) 1,045
Due from the State of Alaska (2,211) 2,051
Grants receivable 1,203 (122)
Operating receivable (720) 492
Operating accounts payable (17,908) 13,290
Net cash used for operating activities $(86,932) (32,618)
Noncash capital and related financing and investing activities:
Ending balance of capital assets accounts payable $(1,489) (8,523)
Net decrease in contingent liability on sold loans 30 28
Net (decrease) increase in unrealized gain/loss of investments (589,063) 124,172
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, 2015 and 2014
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 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.
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 project to provide increased energy of
approximately 37,000 megawatt hours (mWh) annually. The license amendment is anticipated to be
received in 2016 with construction expected to be completed in the fall of 2018.
(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, 2015 and 2014
13 (Continued)
(c) Susitna-Watana Hydroelectric Project
The Alaska Legislature appropriated $192.1 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.
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, 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 Electric 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.
(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 (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 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. 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.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2015 and 2014
14 (Continued)
Operating Revenue and Expense
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. Pass through 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.
(c) 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 its 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, 2015 and 2014
15 (Continued)
AEA’s marketable securities are reported at fair value in the financial statements. Unrealized gai ns
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) 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.
(g) 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, 2015 and June 30, 2014, 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, 2015 and 2014
16 (Continued)
(h) 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.
(i) Appropriations and Grants
The Authority recognizes appropriations and grant revenue when all applicable eligibility
requirements, including time requirements, are met.
(j) 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.
(k) 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 statement s 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.
(l) Prior Period Information
Certain reclassifications were made to prior year information to conform to current year presentation.
(m) Recently Issued Accounting Pronouncements
GASB Statement No. 72, Fair Value Measurement and Application (Statement 72) was issued by the
GASB in February 2015. Statement 72 addresses accounting and financial reporting related to fair
value measurements. Statement 72 generally requires investments to be measured at fair value.
Investments are defined as a security or other asset that (a) a government holds primarily for the
purpose of income or profit and (b) has a present service capacity based solely on its ability to generate
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2015 and 2014
17 (Continued)
cash or to be sold to generate cash. Fair value is described as an exit price. The Statement provides
guidance and techniques appropriate to determine fair value. Statement 72 is required to be
implemented for financial reporting periods beginning after June 15, 2015. AEA has not implemented
Statement 72 and is currently evaluating the impact on future financial statements.
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, 2016. AEA has not implemented Statement 76 and is
currently evaluating the impact on future financial statements.
(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.
At June 30, 2015 and 2014, the Authority’s carrying amount of cash and cash equivalents (all of which were
restricted or designated for specific purposes) was $128,037,000 and $122,225,000, respectively. The total
of all bank balances on the same dates was $128,206,000 and $123,542,000, respectively.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2015 and 2014
18 (Continued)
The restricted cash and cash equivalents and investments were held in trust and restricted accounts for the
following activities as of June 30, 2015 and 2014 (stated in thousands):
2015 2014
Bradley Lake Hydroelectric Project $10,523 9,920
Trans-Alaska Pipeline (TAPL) Appropriation 5,707 5,913
Alaska Intertie Project 1,467 829
Renewable Energy Grant Program 16,765 21,832
Funds advanced from State and federal agencies 34,772 34,437
Rural Energy and Energy Development Programs 97 158
Emerging Energy Technology Fund 1,826 2,467
Rural Energy Loan Funds 43,892 44,778
Power Development Fund 2,019 1,866
Power Cost Equalization Endowment Fund 10,969 25
Total restricted cash and cash equivalents $128,037 122,225
Bradley Lake Hydroelectric Project $19,878 19,532
Emerging Energy Technology Fund 1,500 2,953
Renewable Energy Grant Fund 49,148 66,061
Power Cost Equalization Endowment Fund 969,390 977,843
Total restricted investments $1,039,916 1,066,389
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 internally managed Domestic Equity and International Equity Pools. 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. Fixed income and equity securities are valued each business day using prices obtained from a pricing
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2015 and 2014
19 (Continued)
service. 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 and GeFONSI investment income is
distributed to pool participants monthly if prescribed by statute or if appropriated by the State legislature.
Income in the Short-term, Short-term Liquidity, Intermediate-term Fixed Income, and Broad Market Fixed
Income pools is allocated to pool participants daily on a pro rata basis.
At June 30, 2015, AEA’s financials had the following investments to report in the PCE, RE, and EET Funds
(stated in thousands):
RE, EET, and RE and EET
PCE Funds Funds PCE Fund
Short and Broad market Total PCE
intermediate-and U.S.Broad market
Short-term terms and Treasuries and US
fixed liquidity fixed fixed Treasury
Investment type income pool income pools income pools Other Investments
U.S. Treasury bonds, bills, notes and TIPS $7,525 21,114 133,363 — 133,363
U.S. government agency — 10 6,328 — 6,328
Mortgage-backed 840 543 92,916 — 92,916
Other asset-backed 24,400 821 6,716 — 6,716
Repurchase agreement 3,895 — — — —
Municipal bonds 31 — 1,452 — 1,452
Corporate bonds 995 1,345 58,558 — 58,558
Deposits 25 — — — —
Certificate of Deposits 61 40 — — —
Yankee:
Government — 65 4,493 — 4,493
Corporate 443 348 9,374 — 9,374
Domestic equity — — — 426,862 426,862
International equity — — — 219,755 219,755
Total invested
assets 38,215 24,286 313,200 646,617 959,817
Pool related net assets (liabilities)(1,633) 138 (1,158) 372 (786)
Other pool ownership (10,274) — 10,274 — 10,274
Net invested assets $26,308 24,424 322,316 646,989 969,305
Investments at fair value
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2015 and 2014
20 (Continued)
At June 30, 2014, AEA’s financials had the following cash and investments to report in the PCE, RE, and
EET Funds (stated in thousands):
Cash
RE and EET
PCE Fund Funds PCE Fund
Short and Broad market Total PCE
intermediate-and U.S.Broad market
Short-term terms and Treasuries and US
fixed liquidity fixed fixed Treasury
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
Investments at fair value
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, 2015 and 2014
21 (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, 2015 and 2014, the fair values of AEA’s cash and investments in its other funds (stated in
thousands) were:
Investment type 2015 2014
Deposits $119 71
Money market funds 127,918 122,129
Investment agreements 19,878 19,532
Total invested assets $147,915 141,732
State of Alaska, Department of Revenue Treasury has provided the following footnotes for the funds
managed for AEA:
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. The duration is the average fair value weighted duration of each security taking into account
all related cash flows. 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 f or 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 fourt een
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, 2015,
the expected average life of individual fixed rate securities ranged from ten days to 3.3 years and the expected
average life of floating rate securities ranged from ten days to 14.5 years. 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 eight days to 3.2 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, 2015, the days to maturity of fixed rate securities ranged
from 65 to 170 days.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2015 and 2014
22 (Continued)
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 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 1.8 years at June 30, 2015 and 1.94 years at June 30,
2014.
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, 2015 was 5.48 years. The effective duration of the Index at
June 30, 2014 was 5.52 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, 2015 and 2014, 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
2015:
U.S. Treasury notes, bills, bonds and TIPS 1.96 5.02
U.S. government agency 3.96 8.96
Mortgage-backed 1.03 3.91
Other asset-backed 0.61 0.95
Municipal bonds — 14.68
Corporate bonds 1.63 8.53
Certificate of deposit 0.14 —
Yankees:
Government 1.08 7.61
Corporate 0.94 6.04
Portfolio effective duration 1.81 5.45
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2015 and 2014
23 (Continued)
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
Managed by AEA
2015 2014
Money market 0.11 0.09
Portfolio effective duration 0.11 0.09
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 non-agency 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 non-agency 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, 2015 and 2014
24 (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 non-agency
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 non-agency 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.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2015 and 2014
25 (Continued)
At June 30, 2015, 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, bills, bonds and TIPS AA 21 100 77 42 —
Mortgage-backed AAA 1 —1 1 —
Mortgage-backed AA 1 —1 ——
Mortgage backed A ——1 ——
Mortgage backed BBB —————
Mortgage-backed BB —————
Mortgage-backed Not Rated ——1 27 —
Other pool ownership Not Rated ——3 3 —
Certificate of deposit Not Rated —————
Deposits Not Rated —————
Other asset backed AAA 47 —3 1 —
Other asset backed AA 1 ————
Other asset backed A-1 2 ————
Other asset backed Not Rated 17 —2 1 —
Repurchase agreement AAA 8 ————
Repurchase agreement Not Rated 3 ————
U.S. Government agency AA ———2 —
Yankee corporate AAA —————
Yankee corporate AA 1 —1 1 —
Yankee corporate A 1 —1 1 —
Yankee corporate BBB ———1 —
Yankee government AAA —————
Yankee government AA —————
Yankee government A —————
Yankee government BBB ———1 —
Yankee government Not Rated ———1 —
Municipal bonds AA —————
Municipal bonds A —————
Corporate bonds AAA —————
Corporate bonds AA 1 —1 3 —
Corporate bonds A 1 —5 9 —
Corporate bonds BBB ——2 6 —
Corporate bonds BB —————
Corporate bonds Not Rated —————
No credit exposure (5)—1 —14
100%100%100%100%100%
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2015 and 2014
26 (Continued)
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%
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,
2015, AEA’s deposits managed by Treasury were uncollateralized and uninsured.
With respect to AEA managed investments, amounts totaling approximately $117,395,000 at June 30, 2015
and $112,209,000 at June 30, 2014, 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, 2015 and 2014
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 2015 and
2014, and invested assets included the following holdings at June 30, 2015 and 2014, for the PCE Fund’s
investment in the International Equity Pool:
Policy Actual
FY15 23%±5%22.71%
FY14 28%±5%29.12%
At June 30, 2015 and 2014, AEA’s PCE Fund had exposure to foreign currency risk as follows (stated in
thousands):
Currency 2015 2014
Deposits:
Japanese Yen $— 22
Pound Sterling — 188
Canadian Dollar 7 —
7 210
Investment – international equity:
Australian Dollar 2,787 1,514
Canadian Dollar 1,734 2,197
Danish Krone 888 799
Euro Currency 19,982 22,582
Japanese Yen 17,237 16,380
Norwegian Krone 1,167 504
Pound Sterling 21,502 22,437
Swedish Krona 3,087 2,793
Swiss Franc 4,910 5,259
73,294 74,465
Total $73,301 74,675
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, 2015 and 2014
28 (Continued)
Commissioner have a policy for contingencies. The PCE Fund’s share of the International Equity Pool’s
investment includes the following income from derivative investments at June 30, 2015:
Changes in fair value Fair value at June 30, 2015
Classification Amount Classification Amount Notional
FX Forwards Investment Revenue $(42,227) 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, 2015 and 2014, 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, 2015 and 2014 was as follows (stated in thousands):
Balance at Balance at
July 1, 2014 Additions Deletions June 30, 2015
Capital assets not being depreciated:
Land and Right of Ways $11,212 — — 11,212
Construction in progress:
Intangibles 135,764 34,310 — 170,074
Other 7,384 3,081 (1,321) 9,144
Total capital assets not
being depreciated 154,360 37,391 (1,321) 190,430
Depreciable capital assets:
Infrastructure 435,524 1,510 — 437,034
Equipment 5,484 65 — 5,549
Total depreciable capital
assets 441,008 1,575 — 442,583
Less accumulated depreciation:
Infrastructure (249,021) (10,461) — (259,482)
Equipment (5,345) (26) — (5,371)
Total accumulated
depreciation (254,366) (10,487) — (264,853)
Capital assets, net $341,002 28,479 (1,321) 368,160
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2015 and 2014
29 (Continued)
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, 2015 and 2014
30 (Continued)
(5) Long-Term Debt
Long-term debt activity for the years ended June 30, 2015 and 2014 was as follows (stated in thousands):
Balance Balance
at July 1,at June 30,Due within
2014 Additions Deletions 2015 one year
Bradley Lake Power
Revenue Bonds:
`First Series (a)$100 — — 100 —
Refunding, Third Series (a)21,050 — (4,815) 16,235 5,100
Refunding, Fourth Series (a)28,940 — (2,920) 26,020 3,100
Refunding, Sixth
Series (a) (b)28,800 — — 28,800 370
Total bonds
payable 78,890 — (7,735) 71,155 8,570
Arbitrage interest payable (c)810 317 (351) 776 475
Bond original issue premium 1,354 — (281) 1,073 —
Total other bond
liabilities 2,164 317 (632) 1,849 475
$81,054 317 (8,367) 73,004 9,045
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
Bond original issue premium 1,647 — (293) 1,354 —
Total other bond
liabilities 2,788 326 (950) 2,164 351
$88,978 326 (8,250) 81,054 8,086
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2015 and 2014
31 (Continued)
(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, 2015 and 2014
32 (Continued)
The minimum payments related to all bonds for the years subsequent to June 30, 2015 are as follows (stated
in thousands):
Principal Interest Total
Year ending June 30:
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 11,025 1,479 12,504
2021-2022 22,445 1,185 23,630
$71,155 14,078 85,233
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, 2015, the unpaid principal balance of the notes was $857,000
and the trust assets had a fair value of $914,000.
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 municipal 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 $2,900,000 of the
defeased bonds remain outstanding at June 30, 2015. 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, 2015 and 2014
33 (Continued)
(6) Loans Receivable
The Authority administers the Power Project Fund Loan Program and the Rural Electrification Revolving
Loan Program. Loans outstanding at June 30, 2015 and 2014 are classified as follows (dollar amounts stated
in thousands):
2015 2014
No. of loans Amount No. of loans Amount
Power Project Fund Loan Program 9 $6,232 6 $5,964
Rural Electrification Revolving
Loan Program 2 311 2 370
11 6,543 8 6,334
Less allowance for loan losses (196) (190)
Balance at end of year $6,347 $6,144
Loans more than 90 days past due are not included in the accrual of interest. At June 30, 2015 and 2014,
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, 2015 and 2014 follows
(stated in thousands):
2015 2014
Balance at beginning of year $190 162
Provision for loan loss 6 28
Balance at end of year $196 190
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, 2015,
the outstanding principal balance of the loans sold was $17,487,000, for which AEA has recognized an
estimated liability for potential repurchase of $524,600.
(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, 2015 and 2014
34 (Continued)
(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 2015 and 2014, AEA incurred the following for services (stated in thousands):
2015 2014
Expensed services $6,716 6,179
Capitalized services 2,130 2,428
$8,846 8,607
AEA has a Board approved borrowing agreement with AIDEA to provide short-term working capital
funds up to a maximum of $7.5 million. At June 30, 2015 and 2014, AEA had $2,400,000 and
$5,900,000, respectively, payable to AIDEA for services and borrowings.
As a result of implementing GASB 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 $25,000 and $33,000 during fiscal year 2015 and
2014, 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 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, 2015 and 2014
35 (Continued)
(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, 2015 and 2014, AEA had open Power Project Fund loan
commitments of $20,262,000 and $8,968,000, respectively.
At June 30, 2015 and 2014, AEA had cumulative prior year commitments for grants awarded to communities
that are funded by State appropriations and federal awards; the amounts committed were $73,521,000 and
$93,991,000, 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.
36
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, 2015
(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, 2014 $9,920 12,779 3,016 493 678 1,600 966 29,452
Interest received 208 958 245 36 232 137 76 1,892
Bond principal paid (7,735) — — — — — — (7,735)
Bond interest paid (4,138) — — — — — — (4,138)
Arbitrage paid — — — (351) — — — (351)
Operating budget surplus paid — — (180) — — (1,134) — (1,314)
Construction expenditures — — (944) — (223) — — (1,167)
Operating revenue received — — — — 18,006 — — 18,006
Operating expenses paid — — — — — (4,244) — (4,244)
Transfers between funds 12,268 (958) 1,076 298 (18,261) 5,493 84 —
Balance at June 30, 2015 $10,523 12,779 3,213 476 432 1,852 1,126 30,401
See accompanying independent auditors’ report.
37
Schedule 2ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Schedule of Projects and Programs – Statement of Net Position
June 30, 2015
(Stated in thousands)
Administration Rural Energy
Bradley Lake Alaska Susitna-Watana Rural and Power and EnergyHydroelectricIntertieHydroelectricEnergyDevelopmentDevelopment Combined
Assets and Deferred Outflows of Resources Project Project Project Projects Fund Programs balance
Current assets:
Restricted cash and cash equivalents 10,523 1,467 — — 36,773 79,274 128,037
Grants receivable — — — — — 1,384 1,384
Loans receivable — — — — — 454 454
Due from State of Alaska — — — — (850) 11,466 10,616
Accrued interest receivable 1,026 — — — — 22 1,048
Operating receivable 566 358 — — — 1,669 2,593
Total current assets 12,115 1,825 — — 35,923 94,269 144,132
Noncurrent assets:
Restricted investments 19,878 — — — — 1,020,038 1,039,916
Loans receivable, net of allowance — — — — — 5,893 5,893
Capital assets, net of accumulated depreciation 167,235 35,254 165,671 — — — 368,160
Other long term assets 2 — — — — — 2
Total noncurrent assets 187,115 35,254 165,671 — — 1,025,931 1,413,971
Deferred outflows of resources:
Deferred charge on bond refundings 91 — — — — — 91
Total assets and deferred outflows of resources $199,321 37,079 165,671 — 35,923 1,120,200 1,558,194
Liabilities and Net Position
Current liabilities:
Due to State of Alaska $(7) (799) (1,781) — 33,978 (2,192) 29,199
Accounts payable 2,810 2,608 1,781 201 (227) 19,430 26,603
Bonds payable – current portion 8,570 — — — — — 8,570
Other bond liabilities – current portion 475 — — — — — 475
Accrued interest payable 1,953 — — — — — 1,953
Total current liabilities 13,801 1,809 — 201 33,751 17,238 66,800
Noncurrent liabilities:
Net investment in capital assets 62,585 — — — — — 62,585
Other bond liabilities – noncurrent portion 1,374 — — — — — 1,374
Other liabilities 103 — — — — 525 628
Total noncurrent liabilities 64,062 — — — — 525 64,587
Total liabilities 77,863 1,809 — 201 33,751 17,763 131,387
Net position:
Net investment in capital assets 96,080 35,254 165,671 — — — 297,005
Restricted for debt service 21,825 — — — — — 21,825
Restricted by agreements with external parties 3,553 16 — — — 5,472 9,041
Restricted by legislation — — — — 2,172 1,096,764 1,098,936
Unrestricted — — — (201) — 201 —
Total net position 121,458 35,270 165,671 (201) 2,172 1,102,437 1,426,807
Total liabilities and net position $199,321 37,079 165,671 — 35,923 1,120,200 1,558,194
Commitments and contingencies
See accompanying independent auditors’ report.
38
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, 2015
(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 $— — — — — 33,985 33,985
Revenue from operating plants 16,520 296 — 12 — — 16,828
Federal grants — — — — — 4,734 4,734
Revenue from state agencies and component units — — — — — 131 131
Interest on loans — — — — — 282 282
Other revenues — — — — — 18 18
Total operating revenues 16,520 296 — 12 — 39,150 55,978
Operating expenses:
Grants and projects — — — — 75,056 75,056
Power cost equalization grants — — — — — 36,663 36,663
Depreciation 7,060 3,427 — — — — 10,487
General and administrative 253 36 — — — 5,824 6,113
Interest expense 3,668 — — — — — 3,668
Plant operations 3,725 260 — — — — 3,985
Provision for loan loss — — — — — 6 6
Total operating expenses 14,706 3,723 — — — 117,549 135,978
Operating income (loss)1,814 (3,427) — 12 — (78,399) (80,000)
Nonoperating activities:
Investment income, net 1,609 — — — — 33,486 35,095
State of Alaska appropriations 194 2,335 34,072 — — 28,888 65,489
Decrease in contingent liability on sold loans — — — — — 30 30
Increase (decrease) in net position 3,617 (1,092) 34,072 12 — (15,995) 20,614
Net position – beginning 117,841 36,362 131,599 (213) 2,172 1,118,432 1,406,193
Net position – ending $121,458 35,270 165,671 (201) 2,172 1,102,437 1,426,807
See accompanying independent auditors’ report.
39
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, 2015 and 2014
(Stated in thousands)
Balance at Balance at
July 1, 2014 Additions Deletions June 30, 2015
Capital assets:
Intangible $14 — — 14
Transmission 188,690 — — 188,690
General 12,117 2,400 — 14,517
Production 394,547 35,245 — 429,792
Total capital assets 595,368 37,645 — 633,013
Less accumulated depreciation:
Intangible (6) — — (6)
Production (116,646) (5,435) — (122,081)
Transmission (132,370) (5,026) — (137,396)
General (5,344) (26) — (5,370)
Total accumulated
depreciation (254,366) (10,487) — (264,853)
Capital assets, net $341,002 27,158 — 368,160
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
Unaudited - See accompanying independent auditors’ report.
40
Schedule 5
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Bradley Lake Historical Annual Project Cost
Year ended June 30, 2015
(Dollars stated in thousands)
Operating Data 2015
Project costs:
Operations and maintenance $2,875
General and administrative 509
Capital purchases 254
Contributions to renewal and contingency fund and operating reserve account 1,551
Insurance 593
Subtotal 5,782
Debt service 12,476
Less investment income (1,558)
Total cost of power $16,700
Energy delivered (mWh)448,090
Total unit cost of power (cents per kWh) 3.73 ₵
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, 2015 and 2014
Unaudited – See accompanying independent auditors’ report 41
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 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 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.
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 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 November 2014
Schedule 6
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Supplementary Organization and Project Information
June 30, 2015 and 2014
Unaudited – See accompanying independent auditors’ report 42
was approximately $54 million. The license amendment is anticipated to be received in 2016. Construction is
expected to be completed in the fall of 2018.
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 Valle y 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 of 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 SVC is substantially complete as of June 15, 2015, with minor punch list items being
completed and 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 empower ed AEA to acquire a
Susitna River power project under AS 44.83.080(18).
Schedule 6
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Supplementary Organization and Project Information
June 30, 2015 and 2014
Unaudited – See accompanying independent auditors’ report 43
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 2,050 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 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 $192.1 million for AEA to plan, design, and obtain permit of
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.