HomeMy WebLinkAboutAEA Annual Report 2001et=Alaska Energy Authority
2001 Annual Report
Mission statement
"Assist in the development of safe,reliable,and efficient energy systems
throughout Alaska,which are financially viable and environmentally sound.”
Table of Contents
Powering Alaska 1.2.00...eee eee eee eee 1
Power Generation ..0.0.0...cece cee cee eee2-3
Major Projects.....cece eee cece eee ee eens 4-5
Rural Energy Group ............eee e eee eee eee6
PCE occ ccc ccc cece eee ee eee eee eee eas 7
Denali Commission ...........0.0000 e eee e eee 8-9
Kotlik ceceeeececeeeenes 10
Training Programs ......0...cece eee eee eee 11
Bulk Fuel Fund ....0.0...0c cece cece eee eee 12-13
Alternative Energy ............202.e eee eee 14-15
Alternatives at Work .........0...cece eee 16-17
Looking Forward .....-.0.cs eee e eee eee eee 18
Auditors'Report ....0...cece eee ee eee eee 19
Balance Sheets .........0...eee eee ee eee etree20
Statements of Revenues and Expenses.............21
Statements of Changes in Fund Equity ............22
Statements of Cash Flows ...........0eeeeeeeee23
Powering Alaska
A common thread exists
between the Alaska
Industrial Development
and Export Authority
(AIDEA)and the Alaska
Energy Authority (AEA)
that helps weave together
economic development
opportunities and
improve the living
standards of Alaskans
in both urban and rural
regions of the 49th state.
As an economic
development engine,
AIDEA helps diversify
Alaska's economy and
foster the growth of
business.AEA helps
provide safe,reliable and
efficient energy systems
throughout the state that
are financially viable and
environmentally sound.
Without access to efficient,
reasonably priced power,
economic development
cannot proceed,Alaska's
long-term economic
outlook is enhanced
by AIDEA and AEA
combining their talents to
develop and advance the
general prosperity and
economic welfare of the
people of Alaska.This
synergy is a key element in
Alaska's ongoing effort to
encourage new business and
projects -from large to
small -in rural and urban
communities.
AEA was created by the
Alaska State Legislature in
1976 to provide affordable
power to promote and
develop the economic
welfare of all Alaska
residents.Since it's inception,
AEA has made great strides
toward providing energy
to residents from Southeast
to Northwest Alaska,and
all points in between.
With the continued
development of reliable,
affordable power sources,
we've seen Alaska's
economy flourish as well.
Providing a dependable
energy infrastructure is
a critical element in the
growth of any economy.
Alaska has 120
independent utilities
serving a total population
of over 600,000 that covers
an immense geographic as
well as economic landscape.
It is the task of AEA to
operate and maintain
existing state-owned
power projects to achieve
the lowest reasonable
consumer power costs and
assist in the development
of safe,reliable and
effective energy systems
throughout Alaska that
are financially viable and
environmentally sound.
And through this,AEA
works to provide a better
and more comfortable way
of life to both urban and
rural Alaska.
AEA's Role in
Alaska's Economy
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Power Generation
Meeting Alaska's
Power Needs
The goals and services
provided by AEA developed
out of an emerging statewide
need,as Alaska's oil boom
of the late 70's and early
80's brought about the
need for industries to
support oil development.
The initial impetus came
from construction as the
TransAlaska Pipeline
was built and industrial
businesses and impacted
communities began to
expand.
Since that time,Alaska has
experienced strong economic
diversification as we moved
away from heavy reliance
on oil and gas development
to a network of industries
such as transportation,
communications,health
care and retail services.
Tribal entities and regional
nonprofit corporations have
played an ever increasing
role as they have created or
purchased business entities,
developed subsidiaries
and participated in joint
ventures and partnerships.
Over the last 25 years AEA
has developed new and
innovative ways to provide
energy to accommodate
Alaska's needs.A few of
these projects include the
Four Dam Pool,Bradley
Lake,and Larsen Bay
hydroelectric projects and
the Alaska Intertie -a 170
mile electric highway that
provides Interior Alaska
with less expensive energy
available from Southcentral
Alaska.The bottom line for
the Alaska consumer is they
are now accessing energy
at lower rates than in the
past from a variety of
energy sources distributed
throughout the railbelt and
southeast Alaska.
Of particular note is the
ongoing work AEA does in
rural Alaska,where power
costs are dramatically
higher than in urban
centers.While urban Alaska
utilizes natural gas,large
hydroelectric projects and
coal,rural Alaska is
dependent upon diesel
generator sets and small
hydro.Energy costs in
remote parts of the state are
dictated by the high cost of
fuel and transportation,the
cost of maintaining rural
power plants,and the
additional financial impacts
of moving parts and equip-
ment to remote communities.
Transportation is key in
most remote areas.There
are 190 communities in
Rural Alaska,and 150 of
those are not accessible by
road.Those communities
must rely on air or water
to provide the goods and
services required to
generate power.And,
with their water highways
frozen during our long
winters,they must plan
well in advance for bulk
fuel storage.
In this report,we hope
to educate and inform
Alaskans about the
important programs
AEA provides for all
residents of the state.We
will present information on
new undertakings such as
AEA's growing
relationship with the
Denali Commission,as
well as exciting alternative
energy projects.We will
also update you on the
status of public policy
initiatives that provide
long-term benefits in all
regions of the state.
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Bradley Lake
Hydroelectric Project
The Bradley Lake Project
began commercial operation
in 1991,providing improved
power delivery to the
Kenai Peninsula from
Homer,along the Railbelt to
Fairbanks and Delta Junction.
A 610-foot long,125-foot
high concrete-faced and
rock-filled gravity dam,
Bradley Lake has a 3.5-
mile power tunnel and
steel-lined penstock.
AEA has contracted
with Homer Electric
Association to operate
this major power facility.
Four Dam Pool
The Four Dam Pool
hydroelectric projects
include Solomon Gulch,
which serves Valdez and
Glennallen.Ketchikan and
the surrounding area derive
power from the Swan Lake
project,while Terror Lake
services Kodiak.Tyee Lake
provides power for
Petersburg,Wrangell and
associated transmission
facilities.Collectively,
these projects make up
the Four Dam Pool.
The project gained its
name from the fact that
operation,maintenance
and debt costs are pooled,
with the same rate charged
for electricity drawn from
any one of the four
projects.(See page 7 for
more information on the
Four Dam Pool).
Alaska Intertie
The Alaska Intertie is a
170-mile,345kV transmission
line that runs from Willow,
north of Anchorage,to
Healy,78 miles south of
Fairbanks.The Intertie
allows Golden Valley
Electric Association in
Fairbanks to purchase less
expensive electricity from
the Anchorage and Kenai
Peninsula utilities.It is
estimated that the Intertie
Bently Lake
iy iat,Gets Gropp tan cmt cate Ato lpdofthe}Kenai]Peninsula he;project,includes.610-foot,Tongs 125-rT g concrete-faced and rock-filled gravi dam and a3 5-mileathe:126-megawatt project transmits its power to,the state'sgmainpowergridviatwoparallel20-mile transmission linesyThe project,:
has saved residents of
Fairbanks $7 million a
year.An added benefit
has been a drastic
reduction in the number
of black/brownouts
throughout the system.
The Intertie enables
multiple projects to be
developed utilizing power
where most needed and
taking advantage of both
hydro and natural gas
electric generation sources.
Larsen Bay
Hydroelectric Project
The Larsen Bay Hydro-
electric Project was
established in 1991 to
augment the existing diesel
generators for this isolated
Kodiak Island community.
AEA worked with the
City of Larsen Bay this
year to repair and replace
equipment,ensuring more
reliable service.Like many
other AEA ventures,this
project provided additional
benefit to the City of
Larsen Bay by replacing
their old water supply
system.They now have
more reliable and cost
efficient power generation,
reduced maintenance and
improved water quality.
Projects Anchor Alaska's
Power System
fwhich cost approximate $328 million (inc uding reserve |und balances .
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Aural
Solution
Seekers
While AEA is responsible
for projects that have
provided better energy
solutions for consumers
all over the state,the Rural
Energy Group (REG),a
division of AEA,is dedicated
to finding the best and most
cost-efficient methods for
providing power to rural
Alaska.
Integration between urban
and rural Alaska has been
a key element in the
diversification of our
economy.Anchorage
exports one-third of its
goods and services and
over 60%of those exports
are destined for other
regions of the state.In
short,20%of Anchorage's
customers for the goods
and services it exports
are in rural Alaska.In
Fairbanks,16%of their
goods and services spending
comes from village-based
Alaska Native organizations.
To ensure that the economies
of these rural customers
remain strong,reliable,low-
cost power is a necessity.
cneray Projects
LC 'EL
For years,Alaskans have
debated the merits of the
Power Cost Equalization
program,a state subsidy
that helps equalize the cost
of power between rural
and urban Alaska.
Although the rationale
for the Power Cost
Equalization program has
been clearly demonstrated
over the years,there has
consistently been concern
in some quarters regarding
the subsidy program.
In May 2000,Governor
Tony Knowles signed into
law an innovative plan that
addressed the long-term
funding of the PCE program
and authorized the sale of
the Four Dam Pool to the
communities they serve,
with AIDEA financing the
sale.Using the proceeds
from the sale together
with $100 million from
the Constitutional Budget
Reserve,the plan created
an endowment to provide
long-term funding for PCE.
The governor and supporters
hailed the plan as it provided
more local control to the
Four Dam Pool communities
and helped guarantee the
future of the PCE program.
This forward thinking
public policy recognized
that Rural Alaska should
receive the same benefits
of affordable power that
Southeast Alaska and the
Railbelt received.
Governmental subsidies
were utilized in the
construction of the Four
Dam Pool,Bradley Lake,
the Intertie,Snettisham
and the now dormant
Healy Clean Coal facility.
PCE was established to
bring those same economies
to rural Alaska,where
energy costs are three
to five times higher than
those in urban areas.
PCE insures availability of
economical,reliable power to
77,625 rural Alaska residents
in 190 communities and
increases their standard
of living by providing for
communications,lighting
and water and sewer systems.
The average monthly
electric consumption
in urban Alaska is 710-
kilowatt hours (kWh),
which would result in a
bill of approximately $70
based on an average cost
of 9.9 cents per kWh.The
average rural bill would be
$283 without any subsidy.
PCE underwrites the first
500 kWhs-lowering the
monthly bill to $177.As
a result,residents in rural
Alaska are generally more
conservative with their
energy consumption than
their urban counterparts,
averaging only 412 kWh
per month as compared to
710 kWh in urban Alaska.
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Productive
New Partnership
The Denali Commission is a
relatively new and innovative
federal-state partnership
established in 1998 by
the U.S.Congress at the
insistence of Senator Ted
Stevens to provide needed
utilities,infrastructure,and
economic support in rural
Alaska.The primary focus
of the Denali Commission
is to improve the delivery
of energy,sewer,water,
health care,training,inter-
governmental coordination
and other infrastructure
that facilitates economic
development and improved
quality of life in rural Alaska.
The Rural Energy Group
works hand-in-hand with
the Denali Commission
specifically to improve
rural area power systems
and bulk fuel storage.
And they ensure that
all communities receiving
upgrades have a long-term
plan for sustainability
before new infrastructure
projects are funded.
An essential part of the
Denali Commission
strategy for economic
development is a sound
business plan.These
business plans cover
costs associated with the
Operations,maintenance and
Commission
long-term sustainability
of the facilities,and
projections of operating
costs.They also specify
how long-term renewal
and replacement funds
will be collected.
Construction funds are
not authorized for these
projects until the business
plan has been approved.
Rural Power
System Upgrades
Rural Power System
Upgrade (RPSV)projects
can include the rebuilding
or replacement of worn
out diesel generator units,
old and hazardous
distribution systems
and constructing new
power generation systems.
Tuntutuliak and Deering
powerhouse projects were
completed this year.The
Kotlik powerhouse is
nearing completion and
will be operational January
2002.Stevens Village and
Arctic Village RPSU projects
have been funded and site
preparation is ongoing.
Golovin,Kwigillingok,
Newtok,Kongiginak,
Atmautluak and Manokotak
upgrades are in design stage
with anticipated construction
in 2002.
Bulk Fuel Upgrades
Rural Alaska communities
require bulk fuel tank
farms with sufficient
storage capacity to meet
their needs for an entire
winter,and many of these
storage facilities are in poor
condition.By the close of
2001,new bulk fuel projects
were substantially complete
and operational in nine
communities:Kotlik,
Chignik Lagoon,Noorvik,
Port Graham,Manokotak,
Kiana,Allakaket,and
Napaskiak.An additional
21 bulk fuel projects are
planned for in the 2002
construction scason and 14
more are planned in 2003.
Energy Planning
Process
AEA embarked on a four-
part planning process that
involved:
¢working with private
sector businesses to assess
the condition of all rural
power systems in Alaska
*analyzing ways to reduce
the cost of power delivery in
rural Alaska including ways
to achieve diesel efficiencies,
heat recovery,conservation
and wind generation
¢developing an energy
cost reduction RFP (see
following)designed to
bring more promising
opportunities for cost
reduction into practice
quickly
¢and completing a rural
energy plan that will
include further cost
reduction efforts
Energy Cost
Reduction RFP
An Energy Cost Reduction
Request For Proposals
issued by AEA in May
attracted 42 proposals.
Grant awards and loans
totaling $7.6 million have
been recommended for 15
hydroelectric,heat recovery,
electrical line extension,and
diesel efficiency projects.
Selection criteria include
cost-effectiveness,economic
need,and readiness for
2002 construction.
KOtllk
This year,the Rural
Energy Group staff and
members of the Denali
Commission traveled to
the Village of Kotlik to
tour a Bulk Fuel Upgrade
Project and a Rural Power
System Upgrade Project
that the two agencies have
worked cooperatively to
develop.Kotlik is the perfect
example of how AEA's
programs work together to
provide a well-integrated
system of providing
improved energy resources
and training to the residents
of rural Alaska.
AEA
Kotlik is a Yupik Eskimo
2001 village of about 460 people,
Annual located 165 air miles
Report northwest of Bethel.A
recent Village Safe Water
project and a planned new
school under construction
pushed the existing power
system beyond its capability.
The bulk fuel storage tank
system was not code
compliant,resulting in
hazards to both the
environment and the
people of Kortlik.
AEA partnered with the
Barrow-based LCMF
Engineering,and STG,Inc.
construction management
to complete construction
of a state-of-the-art
340,000-gallon
consolidated bulk
fuel storage facility.
The design and construction
of this facility will service
the needs of the community
for decades to come.
This project is unique
because the construction
managers were able to weave
in a training component as
well.Welding instructors
from the King Career
Center and the University
of Alaska Anchorage
traveled to Kotlik and
trained local residents to
become welders to work
on the tank farm.Seven
Kotlik residents are now
certified to work as
welders on jobs statewide.
A new powerhouse in
Kotlik is also under
construction.It will have
four generators with fully
automated controls which
monitor the electrical load,
starting and stopping the
various generators to
optimize fuel efficiency.
It has a heat recovery
system that will send
normally wasted heat
to the new community
school,further reducing
village oil consumption.
The powerhouse has a
waste oil blending system
that burns the used oil
from the generators,
recovering the energy from
the waste oil and reducing
the disposal problems
associated with waste oil
accumulation in the
community.
The powerhouse
construction project will
be completed in 2002.
Training
Living in rural Alaska
comes with its own set of
challenges.Limited access
and transportation,higher
prices for power and delays
in travel can often be
obstacles for those living
in rural Alaska.And rural
residents often have to travel
to urban areas of Alaska to
receive training for the career
of their choice.Through
REG's Rural Training
Program,rural Alaskans
can train for a career and
work in rural Alaska.
This year,the AEA training
program for small rural
utilities received funding
for its sixth consecutive
year.This funding provides
training for rural utility
clerks,bulk fuel operators,
powerhouse operators and
an advanced powerhouse
operator program.
These programs are
administered by REG
and funded by the Denali
Commission through the
Department of Labor's
Denali Training Fund Open
Enrollment Grant.The
programs are designed to
train powerhouse operators,
bulk fuel operators and
utility clerks by educating
trainees on the industry's
latest technology.They are
taught to troubleshoot and
to understand the laws and
regulations associated with
small utilities.The Denali
Training Fund provides
training to rural residents for
job opportunities available
in their community.
The powerhouse operator
training program began
in 1995.Since that time,
113 rural residents from
villages throughout Alaska
have completed the training
and were certified to work
statewide in rural utility
operations.All participants
are guaranteed at least two
years of employment upon
successful completion of
the training program.
This year's grant will allow
-rograms
more than 100 applicants
to receive training through
the program.
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Bulk UC
Revolving
Loan Fund
In rural Alaska,communities
purchase their fuel in bulk
quantities for several reasons.
The first is economic -it costs
less to buy larger quantities of
fuel than to buy in smaller
increments.And while per
capita income in rural Alaska
is 75%less than the national
average,energy expenditures
are more than triple the
national average.
Electrical generation in rural
Alaska is produced primarily
by diesel fuel.The purchase
of bulk fuel allows Alaska
communities to reduce that
cost,as retail prices are from
30%to 250%higher than in
Alaska's largest city,Anchorage.
Second,the window for
transporting fuel is seasonal.
The 150 communities off the
road system have to purchase
their fuel to secure its delivery
in a single shipment,working
around Alaska's notorious
cold weather and freezing
conditions that drastically
limit transportation options.
Imagine if residents of urban
Alaska had to pay for their
entire winter's electricity,home
heating fuel and vehicle fuel in
one lump sum.The amount
would be staggering and not
many of us could afford the
pricetag.This is exactly what
rural Alaskan residents face
every year.The Bulk Fuel
Revolving Loan Fund provides
low-cost loans of up to $100,000
to rural communities to make
their bulk purchase in a cost-
effective manner.
Municipalities or unincorporated
villages with a population under
2,000 people are eligible for
loans from the fund.A private
individual,with a written
endorsement from the governing
body of the community for
which the fuel will be used,
may also be eligible for a loan.
Bulk fuel loans may be used
for municipal electrical power
generators,municipal heavy
equipment,heating fuel for
the municipality,residents,
and businesses.In addition,
fuel purchased with the aid of
an AEA Bulk Fuel Loan
can be used for municipal,
business and residential
motor vehicles or for
subsistence purposes.
The interest rate on a
community's first bulk fuel
loan is zero percent.The
interest rate charged on
subsequent loans is tied to
municipal bond yields and
is much lower than available
through other funding
sources.A community then
has up to nine months to
repay the loan.
This program is in high
demand in rural commu-
nities.With the increase
in the price of petroleum
products,larger bulk fuel
tank farm capacity and the
reluctance of fuel vendors
to finance the purchase of
their product,there has been
increasing pressure on the
limited funds available.
AEA will be able to provide
an even greater benefit to
rural communities in the
coming year due to the
awarding of a $5 million
grant to the Alaska Energy
Authority from the U.S.
Department of Agriculture,
Rural Utilities Service to
be used for bulk fuel loans.
The grant represents a four-
fold increase in the amount
of funds that can be
provided to help rural
Alaskans with the high
cost of purchasing their
winter fuel supplies.
Since 1994,applications
for loans have remained
steady,averaging 37 per
year.AEA has annually
distributed an average of
$1,756,000 in loans.
The Power
Project Fund
In 1978,the Alaska
Legislature established
the Power Project Fund
to provide financing for
small-scale power and
potable water projects.
Loans from the fund can be
used to finance all phases of
project development from
feasibility studies,licensing
and permit applications,
design and engineering to
construction and expansion.
Organizations that are
eligible for Power Project
Fund loans include electric
utilities,regional electric
authorities,municipalities,
cities,boroughs,regional
and village corporations,
village councils and non-
profits,and non-profit
marketing cooperatives.
2001
Annua
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are the largest part of the Eon program at $39.3 paiiltemn J;INANENSDenali,Commission have.set:a goal_o comp cuing 'work'on remainingbulkfuelinfrastructurein168communitiesbytheyear2010}
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Altemative
In addition to major energy
projects that benefit commu-
nities across Alaska,and
programs specifically designed
to meet the needs of rural
residents,AEA also looks at
alternative energy programs
to reduce the cost of power
generation and delivery
statewide.Some of these
projects include:
Biomass Fuels
The Alaska Bioenergy Program
provides financial and technical
assistance for the use of wood
and waste to produce power,
heat,and processed fuels.The
program is funded in part by
the U.S.Department of Energy.
Recent projects include waste
wood-to-ethanol production
in Southeast Alaska with
Sealaska Corporation,fish
oil/diesel substitution in
Dutch Harbor,wood-fired
district heating in rural
Interior Alaska,biomass
resource assessment,and
analysis of small waste-
to-energy feasibility.
"nergy
Conservation
AEA's energy conservation
program promotes energy
efficiency in schools and other
public facilities.The program
includes the Rural Alaskans
Conserve Energy (RACE)
initiative,which provides
energy audits and training in
rural communities,technical
support for energy saving
retrofits,and funding for
energy efficiency
demonstrations.The program
is supported in part by the
U.S.Department of Energy.
Fuel Cells and
Energy Storage
AEA provides funding and
technical support for fuel
cell and energy storage
development in Alaska.
Partners include Chugach
Electric Association,Copper
Valley Electric Association,
the University of Alaska
Energy Center,Sandia
National Laboratory,
and the U.S.Department
of Energy.
SHI is designed to shut off the diesel engines"ol sustained high winds
Hydroelectric and Partners in the wind
Tidal Energy program include Kotzebue
AEA provides funding for Electric Association,AlaskaiassessmentanddevelopmentScienceandTechnologyFoundation,National ;p dtidalpowerfacilities.Recent Renewable Energy Unique Tograms Reduce
efforts include state and Laboratory,and the U.S.Cost,Increase Efficiency
of small hydroelectric and
federal pass-through Department of Energy.
funding for hydro projects
in Atka,Cordova,Iliamna,
King Cove,Old Harbor,
and Unalaska,as well as
support for an assessment
of tidal power feasibility.
Wind
The Wind Energy Program
provides assistance for the
evaluation and development
of wind energy systems for
rural communities.Currently
AEA is participating in the
Kotzebue Wind Turbine
Test,the Wales High
Penetration Wind-Diesel
System project,and
installations are being
considered in Unalaska and
Nome.AEA coordinates
the state's Wind Resource
Assessment Program.
AEA
2001
Annual
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Danonsreniton Repos
'Alaska produces millions of gallonsof fish oil each'year'from seafood,processing.In Dutch Harbor,UniSea has begun utilizinga blend of diesel andfishoiltocreate_a cleaner,efficient fuel @The test project.was an under
(GIN,Gia,Re Mii Seer ath teins,Foundation,the U.S.Department of Energy and a diesel generator sub Stlersy
ists
Alternatives at Work
Looking for New
Sources of Energy
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Fish Oil Test Burn
AEA is working with UniSea,
Inc.in Dutch Harbor to
reduce air emissions from
their power plant by burning
various formulas of fish oil
blended with diesel fuel.
UniSea recently tested air
emissions and performance
of fish-based "biodiesel”fuel
and preliminary results are
very positive.
Currently around 3.5 million
gallons of fish oil per year
are produced from pollock
processing operations in
Unalaska.Additional
quantities are produced
in other locations on the
Aleutian Chain,Kodiak,and
the Southeast coast.Exporting
the oil to food markets in the
Pacific Rim and the lower 48
presents logistical problems
for the three large processors
in Unalaska and sometimes
a poor net return -25 cents/
gallon earlier this year.
UniSea is fueling a 2200 kW
diesel generator with a 50-50
blend of diesel and fish oil as
part of a one-year test.
Approximately 1700 gallons
of fish biodiesel are being
consumed per day,resulting
in substantial fuel cost savings.
Plans by the City of Unalaska
and UniSea to link their
electrical systems together
may help bring these cost
savings directly to the public.
Air emission tests confirm
another important benefit-
cleaner air.Substituting a
50-50 blend for all diesel,
particulate emissions (smoke)
decreased 21%to 43%
depending on power output
levels.Using 100%fish oil
caused carbon monoxide to
decrease 29%.
AEA,the Alaska Science and
Technology Foundation,the
U.S.Department of Energy,
and BF Goodrich diesel
generator subsidiary
Fairbanks-Morse are
providing cost-share and
technical assistance for
the year-long test.
i =
Lime Village Solar
Power System
AEA is coordinating an
innovative demonstration
project in Lime Village that
may provide an option for
small villages to significantly
reduce diesel fuel consum-
ption while improving the
reliability of the commu-
nity power system.
Lime Village has a population
of approximately 50 people
located on the Stony River
about 185 air miles west of
Anchorage.All fuel must
be flown in and the airport
has a very short airstrip,
allowing delivery of only
500-600 gallons of fuel oil
per trip.The village was
chosen because of its high
energy costs,low per capita
power consumption,
latitude,weather and an
existing,poorly performing
hybrid system.It was the
last village in Alaska to be
electrified in 1998 and power
costs have averaged about
85 cents per kilowatt-hour.
The project is an
experimental hybrid
diesel/solar energy
generation system.In
1999,BP Exploration
Alaska offered photo-
voltaic technology from
their sister company BP
Solar to determine if it could
help reduce the high cost of
energy in rural communities.
BP's donation of 106
photovoltaic (solar)
panels became a seed
that reinforced the
community's commitment
to invest in the hybrid
system and attracted
support from Sandia
National Labs.
The system stores excess
energy from renewable
energy sources,and allows
a small diesel generator to
operate at a near constant
optimal setting.Studies
show that Lime Village
can expect a fuel savings
of 30%or more.
AEA
v/
2001
Annual
Report
a neween nares Pit!arr00-ader Btr ee BE,se-Seeejodag .i
tay
AEA
2001
Annual
Report
LOOKING -orwaro
As we look to the future,
we will continue to seek
out exciting opportunities
to work cooperatively
with organizations like the
Denali Commission as well
as private sector businesses
such as BP in our quest to
bring safe,economical
power to Alaskans from
Kotzebue to Ketchikan,
from Wrangell to
Wainwright.
Our mission is about
energy,people and jobs.
Through our innovative
training programs,we can
help train Alaskans to build
and maintain state of the
art energy systems.Through
our bulk fuel loan programs
we can help provide financial
checks and balances for
communities that need the
assistance as they purchase
their fuel for the season.
We salute those who worked
with us in the past year
and look forward to
another successful year
partnering with Alaskans
and the decision-makers
that help guide our
programs.
Independent Auditors'Report
ALASKA ENERGY AUTHORITY
(a Component Unit of the State of Alaska)
c on -l
The Board of Directors
Alaska Energy Authority
(a Component Unit of the State of Alaska):
We have audited the accompanying balance sheets of the Alaska Energy Authority (a Component
Unit of the State of Alaska)as of June 30,2001 and 2000,and the related statements of revenues and
expenses,changes in fund equity,and cash flows for the years then ended.These financial statements
are the responsibility of Alaska Energy Authority's management.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.Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement.An audit includes
examining,on a test basis,evidence supporting the amounts and disclosures in the financial state-
ments.An audit also includes assessing the accounting principles used and significant estimates made
by management,as well as evaluating the overall financial statement presentation.We believe that
our audits provide a reasonable basis for our opinion.
In our opinion,the financial statements referred to above present fairly,in all material respects,the
financial position of Alaska Energy Authority (a Component Unit of the State of Alaska)as of
June 30,2001 and 2000,and the results of its operations and its cash flows for the years then ended
in conformity with accounting principles generally accepted in the United States of America.
KPMG LIP
Anchorage,Alaska
October 5,2001
Balance Sheets
ALASKA ENERGY AUTHORITY
(a Component Unit of the State of Alaska)
June 30,2001 and 2000
(Stated in Thousands)
ls os nes .2010 4e q M9 Oe'
-
ASSETS
Property,plant and equipment (notes 4 and 5}
,
$890,209 890,209
Less accumulated depreciation 331,447 310,214
Net property,plant and equipment ,;558,762 579,995
Other assets -cash and investments -restricted (note 3)..7 198,299 146,177
Current assets:
Due from State of Alaska
.
1,632 46,432
Operating revenue receivable 10,506 13,774
Accrued interest receivable 1,191 1,244
Total current assets
;-13,3829 61,450
Loans receivable,net of allowance (note 7);
:23,832 24,035
AEA Grants receivable
;
_5,465 10,004p20)|
}20|.$799,687 '821,6612001
Annual FUND EQUITY AND LIABILITIES
Report
Fund equity:
Contributed capital $963,518 963,518
Accumulated deficit (326,241)(316,713)
Total fund equity .
;637,277 646,805
Long-term debt,net of current portion (note 6):
Bonds payable 139,525 142,387
Arbitrage interest payable 226 149
Total long-term debt :=139,751 142,536
Current liabilities:.
Accounts payable 10,871 9,450
Grants payable 2,350 11,540
Current portion of bonds payable (note 6);4,635 4,180
Accrued interest .3,850 3,246
Other liabilities 953 3,904
Total current liabilities 7 22,659.32,320
s ..799,687 821,661
See accompanying notes to financial statements.
Statements of Revenues and Expenses
ALASKA ENERGY AUTHORITY
{a Component Unit of the State of Alaska}
Years ended June 30,2001 and 2000
(Stated in Thousands)
__
aon 200 ]
REVENUES
Revenue from operating plants $25,257 25,259
Operating transfer frorn State of Alaska 20,254 9,163
Federal grants 7,920 22,284
State of Alaska appropriations 3,079 7,020
Receipts from (refunds to)other agencies (77)1,239
Investment income (loss)(309 )5,667
Other revenue 83 69
Total revenues 56,207 70,701
EXPENSES
Depreciation 21,233 22,974
Power cost equalization grants 16,955 14,583
Grants and projects 9,707 26,849
Interest 9,538 10,017
Plant operating 5,440 6,567
General and administrative 1,971 1,911
Operating transfer to State of Alaska 425 -_
Bad debt expense 332 -
Provision for loan losses (note 7)134 :1,093
Impairment loss (note 5)-_-41,358
Total expenses 65,735 125,352 _
Deficiency of revenues over expenses $(9,528 )(54,651 )
See accompanying notes to financial statements.
AEA
2001
Annual
Report
Statements of Changes in Fund Equity
ALASKA ENERGY AUTHORITY
(a Component Unit of the State of Alaska)
Years ended June 30,2001 and 2000
(Stated in Thousands)
-)--1
Contributed Accumulated Total
Capital Deficit Fund Equity
Balance at June 30,1999 619,801 (262,062 )367,739
Residual equity transfers in (note 1}399,320 _-399,320
Residual equity transfers out (note 1)(55,603)-(55,603 }
Deficiency of revenues over expenses -_-_(64,651)(54,651 )
Balance at June 30,2000 963,518 -(816,713)646,805
'Deficiency of revenues over expenses -_-(9,528 )(9,528 )
Balance at June 30,2001 $963,518 _(326,241).-637,277
See accompanying notes to financial statements.
Statements of Cash Flows
ALASKA ENERGY AUTHORITY
(a Component Unit of the State of Alaska)
Years ended June 30,2001 and 2000
(Stated in Thousands)
-cee,A00C was |
Reconciliation of deficiency of revenues over expenses to net
cash provided by operating activities:
Deliciency of revenues over expense $(9,528 )(54,651 )
Adjustments to reconcile deficiency of revenues over
expenses to net cash provided by operating activities:
Depreciation 21,233 22,974
Provision for loan losses (note 7)134 1,093
Impairment loss (note 5)-_41,358
Bad debt expense 332 -_-
Bond interest expense 9,538 10,017
Investment (income)loss 309 (5,667}
Cnanges in assets and liabilities:
(Increase)decrease in due from State and other agencies 44,800 (1,244)
(Increase)decrease in grants receivable 4,539 (7,773)
(Increase)decrease in loans receivable 69 (2,428}
(Increase)decrease in operating revenue receivable 2,936 (3,882)
Increase (decrease)in grants payable (9,190 )11,341
Increase (decrease)in accounts payable 1,421 (413)
Decrease in other liabilities (2,951 )(3,336)
Net cash provided by operating activities 63,642 7,389
Cash flows from noncapital financing activities -
_Residual equity transfer -_-|86,908
Cash flows from capital and related financing activities:
Repayment of bonds (4,180 }(4,874)
interest paid on borrowings (7,161)(7,310}
Construction of capital projects -(56)
Net cash used in capital and related financing activities (11,341 )(12,240)|
Cash flows from investing activities:
Net increase in restricted cash and investments (62,230 )(87,479)
interest received from investments 9,929 5,422
Net cash provided by investing activities (52,301 )(82,057)
Cash and investments at beginning of year
Cash and investments at end of year
See accompanying notes to financial staternents.
Notes to Financial Statements
ALASKA ENERGY AUTHORITY
June 30,2001 and 2000
Ms
(1)Organization and Operations
The Alaska Energy Authority (AEA)was created by the Alaska State Legislature in 1976.AEA is a public corporation andacomponentunitoftheStateofAlaska(State).AEA's mission is to promote,develop,and advance the general prosperityandeconomicwelfareofAlaskansbyprovidingameanstooperateandmaintainexistingpowerprojectsthattapAlaska's
natural resources to achieve the lowest reasonable consumer power costs.
Throughout the 1980's,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.Today,AEA's six hydroelectric projects have an installed capacity of 164
megawatts,and the Alaska Intertie's 170 miles of transmission line link Interior Alaska with the cheaper energy available in
the Southcentral portion of the State.
Pursuant to statute,on August 12,1993,the Board of Directors of the Alaska Industrial Development and Export Authority(AIDEA),a public corporation and a political subdivision of the State,became the Board of Directors of AEA.Concurrently,the Executive Director of AIDEA was also appointed as Executive Director of AEA.The staff of AIDEA serves as the staff
of AEA.AIDEA and AEA continue to exist as separate legal entities.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 corporate structure of AEA was
retained but the ability to construct and acquire energy projects was eliminated.AEA retained its operating assets including
the Four Dam Pool (Solomon Gulch,Swan Lake,Terror Lake and Lake Tyee Hydroelectric Projects),the Bradley Lake
Hydroelectric Project,the Alaska Intertie and the Larsen Bay Hydroelectric Project.The intent of the legislation was that
ongoing operation of the operating assets be assumed by the electric utility companies that use or purchase power from the
assets with oversight responsibility retained by AEA;this has occurred to the extent possible.
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 reor-
ganization of state agencies.Five general energy programs comprising more than twenty smaller programs were moved to
AEA.Rural energy programs were originally part of AEA prior to the reorganization that occurred in 1993.The 1999
reorganization resulted in a residual equity transfer in of $399,320,000.During 2000,the Authority transferred $55,603,000
to the Railbelt Energy Fund and to the State General Fund;the transfers were recorded as residual equity transfers out.
The following is a description of AEA's existing projects:
(a)Bradley Lake Hydroelectric Project
The project has installed capability of 126 megawatts 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 Homer to Fairbanks as well as the Delta Junction area.
(b)Four Dam Pool Project
The Solomon Gulch,Swan Lake,Terror Lake and Lake Tyee Hydroelectric projects,collectively known as the Four
Dam Pool,came on line in the 1980's and serve,respectively,the communities of Valdez and Glennallen,Ketchikan,
Kodiak,and Petersburg and Wrangell.
The project gained its name from the fact that all costs are pooled,with the same kwh rate charged for electricity
drawn from any one of the four projects.The local utilities are responsible for day-to-day operation of the projects.
(See note 5)
(c)Alaska Intertie
The 170-mile,345-kilovolt transmission line interconnects the power distribution systems of Anchorage and
Fairbanks.The Alaska Intertie allows Golden Valley Electric Association in Fairbanks to purchase electricity
produced with lower cost energy,such as natural gas and hydroelectric,from the Anchorage and Kenai Peninsula
utilities.The Alaska Intertie reduces the number of black/brownouts throughout the system.Operations and main-
tenance duties are overseen by the Intertie Operating Committee.
(d)
(e)
(2)
(a)
(b)
(c)
Notes to Financial Statements
ALASKA ENERGY AUTHORITY
June 30,2001 and 2000
Larsen Bay Hydroelectric Project
The 475-kilowatt project went into commercial operation in mid-1991.In addition to producing electricity for this
isolated Kodiak Island community,the project replaced the City of Larsen Bay's old water supply system and provides
a better source of water with reduced maintenance and improved water quality.The City of Larsen Bay operates the
project.(See note 6)
Rural Energy Programs
The rural energy programs of the Authority include Bulk Fuel Storage Upgrades,Rural Power System Upgrades,
Power Cost Equalization,Alternative Energy,Utility Training and Technical Assistance,two active loan programs
funded from the Bulk Fuel Revolving Loan Fund and the Power Project Fund and one inactive loan program.
Summary of Significant Accounting Policies
Basis of Accounting -Enterprise Fund Accounting
The accounts of AEA are organized as an Enterprise Fund.Accordingly,the financial activities of AEA are recorded
using 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.
Statement No.20 of the Government Accounting Standards Board (GASB),Accounting and Financial Reporting for
Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting,provides two options for
reporting proprietary fund activities (including component units using proprietary fund accounting).AEA has elected
to apply all applicable GASB pronouncements and all FASB Statements and Interpretations,Accounting Principles
Board Opinions and Accounting Research Bulletins issued on or before November 30,1989,unless they conflict with
or contradict GASB pronouncements.
Property,Plant and Equipment
Property,plant and equipment 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
For hydroelectric plants financed through tax-exempt borrowings,interest costs on the borrowings,less any interest
earned on the related investments acquired with proceeds of the borrowings are capitalized from the date of the borrowing
until the assets are placed in service.Ordinary repairs and maintenance are expensed as incurred.
The Authority follows Statement of Financial Accounting Standards No.121 (SFAS No.121),Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.This statement requires recognition
of impairment losses for long-lived assets whenever events or changes in circumstances result in the carrying amount
of the assets exceeding the sum of the expected future cash flows associated with such assets.
Cash and Investments
All of AEA's cash and investments are restricted and are not considered to be cash equivalents for purposes of preparing
the statement of cash flows.
AEA's marketable securities are reported at fair value in the financial statements.Unrealized gains and losses are reported
as components of the deficiency of revenues over expenses.Fair values are obtained from independent sources.
ACA
20
Annue
Report
Notes to Financial Statement
ALASKA ENERGY AUTHORITY
June 30,2001 and 2000
(d)Allowance for Loan Losses
The allowance for loan losses represents management's judgment as to the amount required to absorb potential 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.
(e)Contributed Capital
Funds received from Federal,State or other sources for purposes of acquisition of property,plant and equipment are
accounted for as contributed capital.
(f)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 political subdivision of the State performing an essential governmental function
and is therefore exempt from State and federal income taxes.
(g)Grant Revenue Recognition
The Authority recognizes grant revenue under the provisions of Governmental Accounting Standards Board
Statement No.33,Accounting and Financial Reporting for Nonexchange Transactions,whereby revenue is recognized
when all applicable eligibility requirements,including time requirements,are met.
(h)ReclassificationsAEA
9 A Certain reclassifications have been made to the 2000 financial statements to conform to the 2001 presentation.
2001
Annual
Rept (3)Cash and Investments
Pursuant to various agreements relating to its operation,AEA has established funds to account for assets restricted to
construction,operation and financing activities.
The restricted cash and investments are held in trust accounts for the following activities as of June 30 (stated in thousands):
2001 2000
Bradley Lake Hydroelectric Project funds $29,416 28,859
Power Cost Equalization Endowment fund 95,677 -
Rural Energy Operations 23,537 3,265
Four Dam Pool Project funds (note 5)17,310 21,868
Rural Energy Loan funds 14,158 69,002
Southeast Energy fund 12,028 12,079
Power Cost Equalization and Rural Electric Capitalization fund 3,952 9,217
Power Development fund 1,633 1,169
Four Dam Pool sale fund 480 -_
Electric Service Extension fund 84 84
Alaska Intertie operations fund 24 597
Larsen Bay Hydroelectric Project funds =37
$198,299 146,177
Notes to Financial Statements
eeinmiel 5
.
-a
ALASKA ENERGY AUTHORITY
June 30,2001 and 2000
AEA's cash and investments are categorized below to give an indication of risk assumed by AEA at June 30,2001.Category
1 includes investments that are insured,registered or collateralized with securities held by AEA or its agents in AEA's name.
Category 2 includes uninsured and unregistered.investments or collateralized investments,with securities held by the pledging
financial institution's trust department in AEA's name.Category 3 includes 'uninsured and unregistered investments for
which the securities are held by the counter party,or by its trust department or agent but not in AEA's name.
(Stated in Thousands)
Fair value at
Category 1 Category 2 Category 3 June 30,2001
US.Treasury and Agency Securities $16,943 --16,943
Repurchase agreements _-_-39,356 39,356
Cash with State Treasury --114,092 114,092
Other investments -_27,371 537 27,908
$16,943 27,371 153,985 198,299
(4)Property,Plant and Equipment
A summary of property,plant and equipment and related accumulated depreciation is as follows at June 30,2001 and 2000
(stated in thousands):
2001 2000
Intangible $2,989 2,989
Production 581,685 581,685
Transmission 339,177 339,177
General 7,716 7,716
.
931,567 931,567
Less:Four Dam Pool impairment loss (note 5)(41,358)(41,358)
Less:Accumulated depreciation (331,447)(310,214)
Net property,plant and equipment $558,762 579,995
(5)Four Dam Pool Sale
Pursuant to ch.60 SLA 2000 (the Legislation),AEA has been authorized to sell the Four Dam Pool Projects to an entity
formed by the City of Ketchikan,the City of Wrangell,the City of Petersburg,Copper Valley Electric Association,Inc.and
Kodiak Electric Association,Inc.Pursuant to the Legislation,AEA may sell the Projects pursuant to the terms of a
Memorandum of Understanding (MOU)between AEA and the Purchasing Utilities dated April 11,2000,as amended in
accordance with the Legislation.Pursuant to the MOU there are various conditions that must be satisfied prior to consummation
of the sale.Assuming all conditions can be satisfied,the parties anticipate the sale of the Projects to be consummated on
December 31,2001.Pursuant to ch.75 SLA 2000,the proceeds of the sale along with certain other project funds have been
appropriated to the Power Cost Equalization Endowment Fund established under the Legislation.In accordance with
Statement of Financial Accounting Standard No.121,the Authority wrote down its investment in the Four Dam Pool Project
by $41,358,000 during the year ended June 30,2000.
AEA
200
Annui
Repo
Notes to Financial Statements
ALASKA ENERGY AUTHORITY
June 30,2001 and 2000
(6)Long-term Debt
Following is a summary of long-term debt at June 30 (stated in thousands):
(a)
(b)
2001 2000
Bradley Lake Power:
Revenue Bonds,First Series (a)$9,910 9,910
Revenue Bonds,Second Series (a)11,520 13,055
Revenue Refunding Bonds,Third Series (a)56,880 59,485
Revenue Refunding Bonds,Fourth Series (a)47,710 47,710
Revenue Refunding Bonds,Fifth Series (a)30,640 30,640
Larsen Bay Fixed Rate Revenue Bonds (b)585 625
Total scheduled maturities of long-term debt 157,245 161,425
Arbitrage interest payable (c)226 149
Less -bond discount and deferred interest (13,085 )(14,858 )
"144,386 "146,716,
Less -current portion of bonds payable (4,635 )(4,180 )
Total long-term debt $139,751 142,536
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 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 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 5%to 6.25%.
On April 4,2000,AEA issued $47,710,000 of Power Revenue Refunding Bonds,Fourth Series,for the purpose of
refunding $46,235,000 of the Second Series Bonds.The refunded Second Series Bonds were called on July 1,2000.The
refunding resulted in aggregate debt service payments over the next twenty-two years in a total amount approximately
$6,400,000 less than the debt service payment which would be due on the refunded bonds.There was an economic gain
of approximately $3,500,000.
Larsen Bay Fixed Rate Revenue Bonds were issued May 1991 for the long term financing of a portion of the construction
costs of the Larsen Bay Hydroelectric Project.All of the revenues derived by AEA from the operation of the project are
pledged and assigned to secure payment of the bonds.No other revenues of AEA are pledged as security for the paymentofthebonds.The bonds are further secured by a letter of credit.The bonds mature annually each April 1 through the
year 2011 with interest rates ranging from 7.4%to 7.75%.
An event of default exists under the terms of certain agreements entered into in conjunction with the issuance of the
Larsen Bay Bonds.The City of Larsen Bay has failed to pay certain costs relating to the Larsen Bay HydroelectricProject.As the bonds are supported bya letter of credit,no bondholder loss of principal or interest is anticipated.TheAlaskaLegislatureinch61,SLA 2001,appropriated $400,000 to AIDEA to be deposited with the Larsen Bay
Notes to Financial Statements
ALASKA ENERGY AUTHORITY
June 30,2001 and 2000
be Bt
Hydroelectric Project's bond indenture trustee for the purpose of retiring bonds.AEA is working with the City of
Larsen Bay and the issuer of the letter of credit in an effort to resolve the default.
(c)The arbitrage interest payable is due to the Internal Revenue Service for the excess of investment income on the proceeds
of AEA's tax exempt bonds over the related interest expense in accordance with Section 148 of the Internal Revenue
Code of 1986.The accumulated arbitrage interest payable amount is computed each year,and the amount is first due
after the end of the fifth bond year and every five years thereafter.AEA maintains a separate account with the trustee
and each year sets aside a sufficient amount to satisfy the liability.
Scheduled maturities of long-term debt as of June 30,2001 are as follows (stated in thousands):
Bradley Lake
Power Revenue Bonds Power Revenue Refunding Bonds Total Larsen Bay
First Second Third Fourth Fifth Bradley Revenue
Maturity date Series Series Series Series Series Lake Bonds Total
2002 $_--_2,740 1,855 -_-4,595 40 4,635
2003 --_-2,875 1,950 -_-4,825 45 4,870
2004 -_--_3,030 2,055 -5,085 45 5,130
2005 -__-3,200 2,170 -_5,370 50 5,420
2006 3,270 =105 2,290 -_-5,665 55 5,720 AEA
2007-2011 6,540 11,520 11,020 635 -29,715 350 30,065 yd)2012-2016 -_-_-22,775 13,835 560 37,170 -_-37,170
2017-2021 -75 -_-11,135 18,525 22,320 52,055 -52,055 00Thereafter25--4,395 7,760 12,180 -_12,180 Repo
$9,910 11,520 56,880 47,710 30,640 156,660 585 157,245
Interest expense on borrowings,totaled $9,537,811 and $10,016,987 for the years ended June 30,2001 and 2000,
respectively.
In addition,the Authority has participated in the following debt agreements:
°Other Debt -In 1982,AEA assumed $44,858,858 of 5%mortgage notes payable which require 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 30,2001,the unpaid principal
balance of the notes was $27,710,601 and the trust assets had a fair value of $27,257,679.
e 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.As of June 30,2001,the outstanding balance was
$49,905,000.,
AEA
50)
2001
annual
seport
Notes to Financial Statements
ane
ALASKA ENERGY AUTHORITY
June 30,2001 and 2000
(7)
The Sitka Bonds are special obligations of AEA secured under a trust indenture by and between AEA and U.S.BankTrustNationalAssociation,as trustee.The Sitka Bonds are payable solely from the sources provided under the trust
indenture.They are equally and ratably secured by a pledge and assignment of the municipal revenue bonds of Sitka
held by AEA under the trust indenture,the obligation of Sitka to make payments under its loan agreement with AEAandthemoneyandsecuritiesheldunderthetrustindenture,including a capital reserve fund.AEA has covenanted to
notify the State Legislature of any failure to maintain the capital reserve fund at its required level.The bonds are further
secured by bond insurance.
The Sitka Bonds do not constitute an indebtedness or other liability of the State and do not directly,indirectly or
contingently obligate the State or any political subdivision thereof to levy any form of taxation for the payment of the
bonds.Neither the full faith and credit nor the taxing power of the State or Sitka is pledged for the payment of the
Sitka Bonds.
Loans
The Authority administers the Power Project Loan Program,the Rural Electrification Revolving Loan Fund and the Bulk
Fuel Revolving Loan Fund.Loans outstanding at June 30 are classified as follows (stated in thousands):
2001 2000
Number Amount Number Amount
Power Project Loan Program 40 $22,279 33 $21,712
Rural Electrification Revolving Loan Fund 11 2,132 11 2,466
Bulk Fuel Revolving Loan Fund 38 868 43 1,170
89 25,279 87 25,348
Less:Allowance for loan losses (1,447)(1,313)
$23,832 $24,035
Loans which are more than 90 days past due on which the accrual of interest has been discontinued amounted to $1,582,386
and $1,543,524 at June 30,2001 and 2000,respectively.
An analysis of changes in the allowance for loan losses for the year ended June 30,2001 and 2000 follows (stated in thousands):
(8)
2001 2000
Balance at beginning of year $1,313 -
Residual equity transfer -220
Provision for loan losses 134 1,093
$1,447 1,313
Risk Management
AEA is exposed to various risks of loss.AEA obtains coverage for its risks through the purchase of commercial insurance,
participation in the State Risk Management Pool and the establishment of self-insurance plans.
(a)General Liability -Watercraft and Aviation
All risks are covered by the State insurance plan through an annual charge assessed by the State Division of Risk
Management and payroll markup.
Notes to Financial Statements
(b)
(c)
(d)
(9)
(a)
(b)
(c)
ALASKA ENERGY AUTHORITY
June 30,2001 and 2000
Property
1.Four Dam Pool Facilities:
The Four Dam Pool (FDP)property risks are covered by commercial insurance purchased through the State
Division of Risk Management for losses in excess of $10,000,000 up to $60,000,000.The risk of losses for the first
$10,000,000 is retained.However,AEA maintains an insurance fund to cover the self retained risks and other
noninsurable risks,as well as a $10,000,000 line of credit secured by the insurance fund for this purpose.(See note 10)
AEA's self-insurance for the FDP is currently funded through:(a)an annual insurance premium payment from
the FDP project management committee,(b)investment revenue from investment of the insurance fund and
(c)certain interruptible power sales revenues.
2.Alaska Intertie:
The utilities participating in the Alaska Intertie operating agreement retain the property risk associated with
the Alaska Intertie.
3.Bradley Lake and Larsen Bay Hydroelectric Projects:
The risks are covered by commercial insurance purchased through the State Division of Risk Management,and
the self-insured retentions are the responsibility of the respective projects from operating funds.
Boiler and Machinery
These risks are covered by commercial insurance purchased through the State Division of Risk Management anda private carrier.
Additionally,utilities benefiting from the use of the facilities owned by AEA participate in the responsibility for
deductibles and self insured retentions under the terms of the respective agreements.
Workers Compensation Insurance
AEA participates in the State Risk Management Pool.The risks are transferred to the pool and the premium is charged
to AEA based on payroll expenditures.
Related Parties
Alaska Industrial Development and Export Authority
Pursuant to understandings and agreements between AIDEA and AEA,AIDEA provides administrative,treasury,
personnel,legal,data processing,communications,and other services to AEA.
Four Dam Pool Project Management Committee
Effective October 28,1985,AEA entered into a long-term power sales agreement with entities purchasing electricpowerfromtheFDPProject.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 to the PMC,net of each purchaser's operating costs associated with the respective FDP facility,
for the power purchaser's share of total estimated annual costs,including a "debt service component,”at a set price
for kilowatt hours purchased each month,with an annual settlement to adjust the payments to actual cost.The PMC
makes monthly payments to AEA for a fixed annual administrative fee and to reimburse operating and maintenance
costs incurred by AEA.The PMC makes annual payments to AEA for the debt service component of the wholesale
power rate and for insurance.
Alaska Intertie Operating Committee
Effective May 1,1986,AEA entered into an agreement with utilities using the Alaska Intertie for wheeling of electrical
power.Pursuant to the agreement,the Intertie Operating Committee (IOC)was established to manage the system.
The IOC is comprised of a representative from AEA and each of the utilities.AEA is to be reimbursed for operation
and maintenance costs on a monthly basis with an annual settlement to adjust the payments to actual costs.The agreement
may be terminated by mutual agreement of the participants.
AEA
31
200
Annué
Repot
AFA
2001
Annual
Report
Notes to Financial Statements
ALASKA ENERGY AUTHORITY
June 30,2001 and 2000
(d)
(10)
(a)
(b)
(c)
Bradley Lake Project Management Committee
Effective December 7,1987,AEA entered into a power sales agreement with entities purchasing electric power produced
by the Bradley Lake Hydroelectric Project.Pursuant to the agreement,a 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,
including debt service,for each fiscal year with an annual settlement to adjust the payments to actual costs,which
includes a fixed annual administrative fee to AEA.
Commitments and Contingencies
Litigation
AEA,in the normal course of business,is involved in various claims and pending litigation.The State Department of
Law manages all pending litigation of AEA,and any liability arising from the settlement of pending claims is a liability
for which the Department of Law or AEA requests an appropriation from the Legislature to satisfy judgment in the
event that the judgment exceeds available funds or the proceeds from applicable insurance policies.In the opinion of
management,the disposition of current claims and pending litigation are not presently expected to have a material
adverse effect on AEA's financial statements.
Four Dam Pool Project Repairs and Improvements
Prior to July 1998,AEA received $19,353,419 from the FDP power purchasers to be expended for repairs and
improvements to the FDP projects,in lieu of "debt service component”payments under the long term power sales
agreement.These funds were deposited into the Four Dam Pool Self-Help Fund.AEA received an additional
$1,600,000 in August 1999 from the FDP power purchasers to be held in trust for repairs and improvements to the
FDP projects,in lieu of "debt service component”payments.AEA's commitments for future repairs to the FDP facilities,
which is expected to be paid from funds currently held by AEA,approximates $4,800,000.
Unused Line of Credit
At June 30,2001 AEA had an unused $10 million line of credit relating to the FDP self-insurance fund.(See note 8)
Alaska Industrial Development and Export Authority
AID Bee re Meee hans er ee ar a an Me ae lle ine a at ae eA so ll
Alaska Energy Authority
Alaska Industrial Development and Export Authority
AID
Alaska Energy Authority
AIDEA
Annual
Report
Notes to Financial Statements
fen
ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY
36,2001 and 2000June
(b)
(c)
(d)
(e)
Healy Clean Coal Project
A Power Sales Agreement between GVEA and the Authority for the Healy Project was originally entered into in
1991,In 1998,GVEA initiated litigation alleging that the Authority had breached the Healy Project Power Sales
Agreement,among other allegations.
On March 9,2000,GVEA and the Authority entered into a settlement agreement regarding the Healy Project litigation.
The settlement agreement provided for the interim shutdown of the Healy Project,which is now maintained in custodial
status by the Authority.The settlement agreement further provided terms of partial financial assistance under which
GVEA,if it elected to proceed,could either retrofit the plant to conventional combuster technology or operate the
Healy Project under existing systems.GVEA has elected to pursue authorization and financing to undertake a full
retrofit of the Healy Project.If the retrofit occurs,GVEA would operate the Healy Project and would purchase all
power produced by the Healy Project.
Dividend
Pursuant to Alaska statutes the Authority's Board is required to annually determine the amount of a dividend to be
made available for appropriation by the legislature.The dividend made available by the Board is to be not less than
25%and not more than 50%of the Authority's net income for the fiscal year two years before the fiscal year in which
the dividend is to be made.In no event,however,may the dividend exceed unrestricted net income.The Authority's
Board has authorized a $17.5 million dividend to be paid during the year ending June 30,2002.
Four Dam Pool Sale Financing
Pursuant to legislation enacted in May 2000,the Authority has been authorized to issue bonds or otherwise extend
financing to a joint action agency formed by the City of Ketchikan,the City of Wrangell,the City of Petersburg,
Copper Valley Electric Association,Inc.and Kodiak Electric Association,Inc.in connection with the sale of the Four
Dam Pool (Four Dam Pool)Hydroelectric Projects from the Alaska Energy Authority to the newly formed entity.
Pursuant to the authorization,the principal amount of bonds and other financing the Authority may provide may not
exceed $110,000,000.The Authority expects to fund the loan using internal assets.The anticipated closing date is
December 31,2001.
Other Commitments and Contingencies
The Authority from time to time may be a defendant in legal proceedings and contract disputes related to the conduct
of its business.In the normal course of business,it also has various commitments and contingent liabilities,such as
commitments for the extension of credit and guarantees,which are not reflected in the accompanying financial statements.
At June 30,2001,the Authority had extended loan commitments for loans of $18,032,205 and loan guarantees of
$1,905,622.In the opinion of management,the financial position of the Authority will not be affected materially by
the final outcome of any present legal proceedings or other contingent liabilities and commitments.
End of Financial Statements
Exemption from taxation
The Alaska Industrial Development and Export Authority is a political subdivision of the State of Alaska performing an essential
governmental function and as such is not subject to federal or state income taxation.In accordance with AS 44.88.140 (a),the
Authority submits the following information describing the nature and extent of the tax exemption of the Authority's property:
All furniture,fixtures and equipment utilized by Authority personnel and real property occupied by the Authority offices within
the Municipality of Anchorage are exempt from Municipality of Anchorage property taxes.All real and personal property associated
with or part of projects developed,originally owned or operated under the Economic Development account located within cities,
municipalities and/or boroughs are exempt from any respective real and personal property taxes.
Notes to Financial Statements
a |
(9)
ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY
June 30,2001 and 2000
Retirement Plan
Effective July 1,1997,the Authority adopted the provisions of Governmental Accounting Standards Board Statement No.27
(GASB 27),Accounting for Pensions by State and Local Governmental Employers.There was no impact on the financial
statements as a result of GASB 27.
(a)
(b)
(10)
(a)
Plan Description
The Authority contributes to the State of Alaska Public Employees'Retirement System (PERS),a defined benefit,
agent multiple-employer public employee retirement system which was established and is administered by the State
to provide pension,postemployment healthcare,death and disability benefits to eligible employees.All full-time
Authority employees are eligible to participate in PERS.Benefit and contribution provisions are established by State
law and may be amended only by the State Legislature.
Each fiscal year,PERS issues a publicly available financial report that includes financial statements and required
supplementary information.That report may be obtained by writing to the State of Alaska,Department of Administration,
Division of Retirement and Benefits,P.O.Box 110203,Juneau,Alaska,99811-0203 or by calling (907)465-4460,
Funding Policy and Annual Pension Cost
Employee contribution rates are 6.75%for employees,as required by State statute.The funding policy for PERS provides
for periodic employer contributions at actuarially determined rates that,expressed as a percentage of annual covered
payroll,are sufficient to accumulate sufficient assets to pay benefits when due.
The Authority's annual pension cost for the current year and the related information is as follows:
Contribution rates:
Employee 6.75%
Employer 8.09%
Annual pension cost $407,000
Contributions made $407,000
Actuarial valuation date June 30,1998
Actuarial cost method Projected Unit Credit
Amortization method Level dollar,open
Amortization period Rolling 25 years
Asset valuation method 5-year smoothed market
Actuarial assumptions:
Inflation rate 4.00%
Investment return 8.25%
Projected salary increase
Inflation 4.00%
Productivity and merit 1.50%
Health cost trend 5.50%
In the current year,the Authority determined,in accordance with provisions of GASB 27,that no pension liability
(asset)existed to PERS and there was no previously reported liability (asset)to PERS.
Commitments and Contingencies
Commitments
At June 30,2001,the Authority held approximately $114,000 of borrower and participating lender money which had not
yet been remitted or applied.Additionally,the Authority held approximately $122,082,000 of investments in trust for the
construction of two intertie projects.The Authority held approximately $17,666,000 of investments in trust for others
under various agreements.The moneys and related liability are not reflected in the accompanying financial statements.
ADEA
2001
Annua
Reoon
Notes to Financial Statements
A 5
ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY
June 30,2001 and 2000
The minimum payments related to all Revolving Fund Bonds for the years subsequent to June 30,2001 are as follows (stated in thousands)
Principal Interest Total
2002 $11,325 15,780 27,105
2003 12,350 15,140 27,490
2004 13,205 14,435 27,640
2005 14,290 13,662 27,952
2006 11,985 12,808 24,793
2007-2011 62,370 52,672 115,042
2012-2016 63,800 34,296 98,096
2017-2021 45,380 17,761 63,141
2022-2026 31,565 6,223 37,788
2027 4,795 293 5,088
$271,065 183,070 454,135
Revolving Fund Bond resolution covenants effective June 30,2001 preclude the Authority from incurring any general obligation
indebtedness unless future estimated net income (as defined in the Revolving Fund Bond Resolution)equals not less than
150%of the general obligation annual debt service requirement in each year or from taking any action to cause its unrestricted
surplus (as defined in the Revolving Fund Bond Resolution)to be less than the lesser of $200,000,000 or the amount of general
AIDEA obligation indebtedness outstanding,and in no event less than $100,000,000.At June 30,2001,the Authority has estimated
36 that projected future coverage for each future year exceeds 150%,giving effect only to existing projects at that date,including
the projected effect of completion of all current projects,and excluding the effect of proposed projects.At June 30,2001,
2001 unrestricted surplus was approximately $825,000,000.The Authority is also required by Revolving Fund Bond covenants to
Annual maintain 25%of the unrestricted surplus requirement described above in cash and U.S.Treasury securities maturing within
Report one year.At June 30,2001,the liquidity requirement was $50,000,000.
The Authority also issued $100,000,000 of Power Revenue Bonds to finance the purchase of Snettisham.The bonds bear
interest at rates ranging from 4.75%to 6.0%,mature at varying dates through 2034 and are payable solely from project revenues,
currently received from AEL&P pursuant to a power sales agreement,and from other project funds.Certain of the bonds
are insured by Ambac Assurance Corporation.In December 1999,the Authority defeased $6,865,000 of the bonds using
funds on hand.The minimum payments related to the Power Revenue Bonds for the years subsequent to June 30,2001 are
as follows (stated in thousands):
Principal Interest Total
2002 $1,065 4,857 5,922
2003 1,115 4,806 5,921
2004 1,170 4,753 5,923
2005 1,230 4,692 5,922
2006 1,295 4,627 5,922
2007-2011 7,980 22,035 29,615
2012-2016 9,960 19,642 29,602
2017-2021 13,105 16,493 29,598
2022-2026 16,915 12,688 29,603
2027-2031 21,695 7,907 29,602
2032-2034 16,010 1,751 17,761
$91,140 104,251 195,391
Notes to Financial Statements
"|
(c)Restricted Direct Financing Lease
ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHOR!
June 30,2001 and 2000
TY
°During 1999,the Authority purchased the Snettisham Hydroelectric Project from the federal government.
Under the terms of various agreements,the project is operated by and all power from the project is sold to
AEL&P.The project provides the majority of the Juneau-Douglas area electrical energy.
(8)Bonds Payable
The composition of bonds outstanding issued under the Authority's Revolving Fund Bond Resolution (Revolving Fund Bonds)
at June 30 follows (interest rate and maturity date information is as of June 30,2001.Dollar amounts are stated in thousands):
2001 2000
Revolving Fund Bonds:
Series 1990A -7.8%and 7.95%,issued December 13,1990,
maturing through 2010 $14,285 15,460
Series 1992A -6.1%to 6,5%,issued September 30,1992,
maturing through 2014 21,665 22,725
Series 1995A -5.75%to 6.0%,issued May 17,1995,
maturing through 2005 3,165 3,635
Series 1997A -5.5%to 6.125%,issued March 27,1997,
.
maturing through 2027 136,115 139,870
Refunding Revolving Fund Bonds:
Series 1993A -5.5%to 6.2%,issued June 3,1993,
maturing through 2010 7,605 8,560
Series 1994A -5.5%to 5.9%,issued March 30,1994,
maturing through 2006 3,330 4,795
Series 1995B -5.6%to 5.85%,issued May 17,1995,
maturing through 2005 5,325 6,260
Series 1998A -4.5%to 5.25%,issued May 14,1998,
maturing through 2023 .79,575 81,535
$271,065 282,840
At June 30,2001,all Revolving Fund Bonds are secured by the general assets and future revenues of the Authority.Various
bonds are further secured by loan proceeds and capital reserve funds established pursuant to terms of the bond resolutions
(note 4).Various bonds are further secured by bond insurance.
DEA
2001
\nnual
Report
Notes to Financial Statements
9 zy Peace uaa-a_en |J
ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY
June 30,2001 and 2000
(b)
At June 30,2001,future minimum lease payments receivable for each of the five succeeding fiscal years are (stated in thousands):
Year ending
June 30:Amount
2002 $20,649
2003 23,889
2004 25,299
2005 25,089
2006 24,729
The components of the Authority's net investment in direct financing leases by project at June 30 are (stated in thousands):
2001 2000
Alaska Seafood Center $48,000 48,000
Federal Express Project 25,682 26,726
*Red Dog Project 258,688 254,045
$332,370 328,771
Development Projects
In August 1995,the Authority entered into an agreement with a Canadian mining company (Anvil)to
use 75%of the Skagway Terminal for seven years for an annual minimum user fee of $2,582,500 per year.
In early 1998,Anvil shut down operations due to low ore prices and other economic considerations.
There are several other mineral deposits in the area and the Authority has had discussions with other
parties regarding use of the facility.The Authority believes that additional users will be found for the
Skagway Terminal.,
In accordance with SFAS 121,the Authority determined that its investment in the Skagway Terminal was
impaired and reduced the carrying value by $10,419,000 during the year ended June 30,2001.
See note 10 for information relating to the Healy Project.
The Authority receives user fees in consideration of its interest in the Seward Coal Load-Out facility.The lessee
continues to operate the facility at its sole expense.
The Authority entered into an operations and maintenance agreement for the Shipyard with Alaska
Ship and Drydock (ASD).Under that agreement,the Authority is paid a minimum $1,500 per month
for certain uses of the facility and is also paid a percentage of net profits resulting from ASD's activities
at the Shipyard.
The components of the Authority's net investment in development projects at June 30 are (stated in thousands):
2001 2000
Healy Project $126,227 125,242
Ketchikan Shipyard 15,750 15,076
Skagway Terminal 2,202 13,595
Seward Coal Load-Out Facility 6,145 6,328
$150,324 160,241
Notes to Financial Statements
ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY
June 30,2001 and 2000
Loans which are more than 90 days past due,excluding restructured loans,on which the accrual of interest has been discontinued
amounted to $203,605 and $984,914 at June 30,2001 and 2000,respectively.Gross interest income which would have been
received on these loans amounted to $16,059 and $97,867 for the years ended June 30,2001 and 2000,respectively.The
amount of interest income collected and included in net income was $6,875 and $39,322 for the years ended June 30,2001
and 2000,respectively.
Loans on which the terms have been restructured amounted to $8,391,624 and $11,061,662 at June 30,2001 and 2000,respectively.
Gross interest income which would have been received on these loans amounted to $794,603 and $1,033,782 for the years
ended June 30,2001 and 2000,respectively.The amount of interest income collected and included in net income was $591,114
and $965,428 for the years ended June 30,2001 and 2000,respectively.
(6)Allowance for Loan Losses
An analysis of changes in the allowance for loan losses for the years ended June 30 follows (stated in thousands):
(7)
2001 2000
Balance at beginning of year $12,273 12,222
Recoveries of loans charged off 57 57
Loans charged off (133)(6)
$12,197 12,273
Net Investment in Direct Financing Leases and Development Projects
(a)_Direct Financing Leases
The Authority leases the Federal Express Project under an agreement which is recorded as a direct financing
lease,expiring twenty years after the facility was placed in service in March 1995,Minimum lease payments
under the agreement will return the cost of the Federal Express Project plus 7.55%interest and are expected
to be sufficient to pay the debt service on the $28,000,000 Revolving Fund Bonds issued September 30,1992.
Minimum annual toll fees for usage of the DeLong Mountain Transportation System return the cost of the
initial Red Dog Project,which went into service in 1990,to the Authority over 50 years at an interest rate
of 6.5%.Toll fees for the expansion to the Red Dog Project return the cost of the expansion from the in-service
date through the end of the term of the agreement at a rate based on bonds issued to finance the expansion.
The Authority leases the Alaska Seafood International project under an agreement which is recorded as a
direct financing lease with an initial term of 30 years.Monthly minimum lease payments range from $360,000
to $370,000 with several larger payments scheduled during the lease term.During an initial operating term,
lease payments may be deferred if certain performance benchmarks are not satisfied.
The components of the Authority's net investment in direct financing leases at June 30 are (stated in thousands):
2001 2000
Minimum lease payments receivable $852,368 856,764
Less Unearned income (519,998 )(527,993)
Net investment in direct financing leases $332,370 328,771
Notes to Financial Statements
ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY
June 30,2001 and 2000
All investments and collateral for the repurchase agreements are registered in the Authority's name and are held by the
Authority or its custodian.This arrangement results in Category 1 safekeeping risk,the lowest safekeeping risk classification
as defined by Governmental Accounting Standards Board Statement No.3 and Technical Bulletin No.87-1.
Certain investment securities,repurchase agreements and cash are restricted by the terms of the Authority's bond resolutions
or other agreements.A summary of restricted amounts at June 30 follows (stated in thousands):
Allowable Usage 2001 2000
Capital Reserve Funds Secure debt service
payments -bonds $3,339 3,510
Debt Service and Loan Funds held for future debt
Prepayment Accounts service -bonds 2,437 2,755
Healy Project Replacement Bond repayment and certain
and Contingency Fund project costs -4,076
Red Dog Project
Sustaining Capital Fund Project costs 13,101 13,023
Snettisham Hydroelectric Various costs relating
Project Funds to the project 9,160 9,216
$28,037 32,580
(5)Loans
NDEA The Authority participates with regulated financial institutions in secured commercial real estate and other loans to businesses
throughout the State.Although the Authority has a diversified loan portfolio,the Authority's ability to collect on loans is
5001 generally contingent upon economic conditions in the State.
Annual Loans outstanding at June 30 are classified as follows (dollar amounts stated in thousands):
Report
2001 2000
Number Amount Number Amount
Appropriated 360 $11,275 442.$14,609
Loan participation
Bonds outstanding 39 14,010 46 18,273
Bonds retired 59 22,803 68 27,430
Internally funded 131 151,432 129 159,304
OREO sale financing 40 15,426 45 17,176
Other 23 699 31 946
652 $215,645 761 $237,738
The aging of loans at June 30 follows (dollar amounts stated in thousands):
2001 2000
Percent Amount Percent Amount
Current 98.39%$212,163 97.3%$231,497
Past due:
31-60 days 0.81%1,750 2.10%4,999
61-90 days 0.06%127 0.10%223
Over 90 days 0.74%1,605 0.43%1,019
100.00%$215,645 100.00% $237,738
Notes to Financial Statements
eel
ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY
June 39,2001 and 2000
(3)Additional Information Regarding Cash Flows and Noncash Activities
Cash and cash equivalents consist of the following at June 30 (stated in thousands):
Unrestricted
Restricted
2001 2000
$28.611 27,444
11,769 10,826
$40,380 38,270
Additional information regarding cash flows and noncash activities for the years ended June 30 follows (stated in thousands):
Cash flows:
Interest collected on loans and investments
Interest paid
Noncash activity:
Sales of real estate owned
(4)Investment Securities
2001 2000
$43,087 42,550
16,414 17,413
350 _-
Major components of investment securities,the maturity distribution and carrying value at June 30 follows (stated in thousands):
USS.Treasury securities maturity:
Within one year
After one but within five years
After five but within ten years
Thereafter
U.S.Government agencies maturity:
Within one year
After one but within five years
After five but within ten years
Thereafter
Corporate securities maturity:
Within one year
After one but within five years
After five but within ten years
Thereafter
2001 2000
$66,107 59,889
40,780 50,798
7,844 -
31,744 20,882
146,475 131,569
115,442 74,047
33,501 57,866
37,825 42,883
1,420 10,541
188,188 185,337
2,701 -
36,675 21,417
26,541 26,145
15,990 10,238
81,907 57,800
$416,570 374,706
ADE
200
Annué
Repo
DEA
7001
Annual
3eport
Notes to Financial Statements
_
.
™=
. ticteneatnenanenanadl,a
tare a
ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY
June 30,2001 and 2000
(e)
(f)
(g)
(h)
(i)
(j)
(k)
()
(m)
Net Investment in Direct Financing Leases
The Authority leases various projects pursuant to certain agreements (as more fully described in note 7)which are recorded in
the accompanying financial statements as direct financing leases.Interest income related to direct financing leases is recognized
using the effective interest method which produces a constant periodic rate of return on the outstanding investment in the lease.
Development Projects
The Authority's development projects are carried at cost,adjusted for permanent impairments of value.The Authority
follows Statement of Financial Accounting Standards No.121 (SFAS No.121),Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.This statement requires recognition of impairment
losses for long-lived assets whenever events or changes in circumstances result in the carrying amount of the assets
exceeding the sum of the expected future cash flows associated with such assets.
Allowance for Loan Losses
The allowance for loan losses represents management's judgment as to the amount required to absorb potential 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.
Allowance for Lease Receivables
The allowance for lease receivables represents management's judgment as to the amount required to absorb potential
unrealizable direct financing lease receivables.The factors used by management to determine the allowance required
include individual lease delinquencies,property values,economic conditions and other factors.Management's opinion
is that no allowance for lease receivables is required at June 30,2001.
Other Real Estate Owned
Other real estate owned represents property acquired through foreclosure on loans,received by deed in lieu of foreclosure
or transferred from lease receivable when the properties become available for sale.Other real estate owned is record-
ed at the lower of the loan or lease balance or the estimated fair market value of the property at the time of receipt or
transfer of the property,with any excess of loan or lease balance over fair market value charged to the respective
allowance for loan or lease losses.Upon final disposition or a decline in the value of the property,gains or losses are
charged or credited to operations in the current period.
Environmental Issues
The Authority's policy relating to environmental issues is to record a liability when the likelihood of Authority
responsibility for clean-up is probable and the costs are reasonably estimable.At June 30,2001,there were no
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.
Appropriations and Grants
The Authority recognizes grant revenue under the provisions of Governmental Accounting Standards Board Statement
No.33,Accounting and Finanaal Reporting for Nonexchange Transactions,whereby,revenue is recognized when all
applicable eligibility requirements,including time requirements are met.Depreciation of capital assets acquired from
appropriations and grants restricted for capital acquisition is transferred to the contributed capital account.
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.The Authority is a political subdivision of the State performing an essential
governmental function and is therefore exempt from Federal and State income taxes.
Depreciation
Depreciation is charged to operations by use of the straight-line method over the estimated useful lives of depreciable assets.
|wane seietaieaietes
(f)
(2)
(a)
(b)
(c)
(4)
Notes to Financial Statements
ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY
June 30,2007 and 2000
Unaudited
(in thousands)
Assets:
Cash $6
Interest receivable 1
Loans receivable,net 388
$395
Liabilities and Equity:
Unrestricted contributed capital $390
Retained earnings:
Unreserved 5
$395
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
balance sheet and revenue and expenses for the period.Actual results could differ from those estimates.The more significant
accounting estimates applied in the preparation of the accompanying financial statements are described in note 2.
Summary of Significant Accounting Policies
Basis of Accounting -Enterprise Fund Accounting
The accounts of the Authority are organized as an Enterprise Fund.Accordingly,the financial activities of the
Authority are recorded using 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.
Statement No.20 of the Government Accounting Standards Board (GASB),Accounting and Financial Reporting for
Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting,provides two options for
reporting proprietary fund activities (including component units using proprietary fund accounting).The Authority
has elected to apply all applicable GASB pronouncements and all FASB Statements and Interpretations,Accounting
Principles Board Opinions and Accounting Research Bulletins issued on or before November 30,1989,unless they
conflict with or contradict GASB pronouncements.
Cash and Cash Equivalents
For purposes of the statement of cash flows,cash and cash equivalents consist of cash,short term commercial paper
and repurchase agreements,whether unrestricted or restricted as to their use.
Investments
The Authority's marketable securities are reported at fair value in the financial statements.Unrealized gains and losses
are reported as components of net income.Fair values are obtained from independent sources for marketable securities.
Loans and Interest Income
Loans are primarily secured by first deeds of trust on real estate located in Alaska and 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.
AIDE
200
Annue
Repat
Notes to Financial Statements
ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY
June 30,2001 and 2000
(c)
(d)
(e)
Other
The Authority has a stand-alone revenue bond program under which the Authority acts as a conduit to facilitate a
financing transaction for facilities owned by third parties.Stand-alone revenue bonds issued by the Authority are
not general obligations of the Authority.They are payable only out of revenues derived from the financing of projects
or the private businesses for which the projects are financed.The Authority is specifically authorized to issue revenue
bonds to finance the construction of power transmission interties to be owned by electric utilities in a collective
amount not to exceed $185,000,000;as of June 30,2001,no bonds under this authorization have been issued.As of
June 30,2001,the Authority had issued revenue bonds for 299 projects (not including bonds issued to refund other
bonds).The principal amount payable for revenue bonds issued after July 1,1995 was $107,683,878.The aggregate
amount outstanding for the remaining revenue bonds,which were issued prior to July 1,1995,could not be determined;
however,their original issue amounts totaled $616,000,000 (not including bonds issued to refund other bonds).
Small Business Economic Development Loan Program
The Authority's Small Business Economic Development Loan Program provides financing to eligible applicants under
the United States Economic Development Administration Long-Term Economic Deterioration program and the
Sudden and Severe Economic Dislocation program.The Small Business Economic Development Revolving Loan
Fund (Loan Fund)was created to receive loan fund grants from the United States Economic Development
Administration.The State of Alaska,Department of Community and Economic Development,Division of
Investments administers the Small Business Economic Development Loan Program on behalf of the Authority.As the
Loan Fund is nota part of the Authority's Revolving Fund,this fund is not included in the Authority's financial statements.
The Loan Fund's balance sheet as of June 30,2001 follows:
Unaudited
(in thousands)
Assets:
'Cash $1,219
Interest receivable 71
Loans receivable,net 2,603
$3,893
Liabilities and Equity:
Unrestricted contributed capital $2,982
Retained earnings:
Reserved 25
Unreserved -undesignated 886
$3,893
Rural Development Initiative Fund Loan Program
The Authority's Rural Development Initiative Fund (RDIF)Loan Program is designed for businesses that may not
have access to conventional commercial financing,and provides financing for working capital,equipment,construction
or other commercial purposes by a business located in a community with a population of 5,000 or less.The State of
Alaska,Department of Community and Economic Development,Division of Investments administers the RDIF
Loan Program on behalf of the Authority.As the Loan Fund is not a part of the Authority's Revolving Fund,this
fund is not included in the Authority's financial statements.The RDIF Loan Program's balance sheet as of June 30,
2001 follows:
Notes to Financial Statements
I -NER EA A satinbtzinasamiiomatns all
ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY
June 30,2001 and 2000
Department of Energy,Clean Coal Technology III Demonstration Grant Program to assist in financing the
Healy Project.In May 1998,$85,000,000 of bonds were issued to refund $85,000,000 of Variable Rate
Revolving Fund Bonds originally issued in July 1996,the proceeds of which were used to finance a portion of
the Healy Project.
Seward Coal Load-Out Facility.In May 1995,the Authority purchased a 49%interest in a coal load-out facility
in Seward,Alaska for approximately $6,900,000.The purchase was subject to specific conditions and the execution
of a demand note and repurchase agreement,and corporate guarantees by project participants.
Ketchikan Shipyard.Ownership of the Ketchikan Shipyard,located in Ketchikan,Alaska,was transferred to
the Authority in July 1997,under an agreement between the Authority and the State Department of
Transportation and Public Facilities.In connection with the transfer,the City of Ketchikan and the Ketchikan
Gateway Borough agreed to provide relief from real property taxes and favorable electric rates for the facility.
The Borough agreed to provide ongoing funds for maintenance and repairs for the Ketchikan Shipyard.The
Authority also agreed to provide funds for maintenance and repairs in an amount equal to the amount contributed
by the Borough.
Snettisham Hydroelectric Project (Snettisham).This project was acquired in August 1998 when the Authority
issued $100,000,000 of revenue bonds to purchase the project,located in southeast Alaska near Juneau,from
the Alaska Power Administration,a federal agency,and to provide funds for the purchase and installation of a
submarine cable system.The Authority has agreements with Alaska Electric Light and Power (AEL&P),the
sole Juneau electric utility.These agreements provide for the sale of the project's entire electrical capability to
AEL&P,require AEL&P to provide the project's operations and maintenance,and provide an option for the
purchase of the project at any time after five years from the issue date.Installation of the submarine cable system
has been completed.
Alaska Seafood International.The Authority initially loaned money for the construction of the Alaska Seafood
Center (ASC),which performs secondary processing for various types of seafood.An equity interest was purchased
in November 1998.The project was completed in September 1999 and the Authority purchased the facility for $48
million.In addition,the Authority acquired additional equity interests under a December 2000 restructuring.
Proposed own-and-operate projects for which the Legislature has authorized the issuance of bonds are:
The Authority has $55,000,000 of remaining authorization (from an original $85,000,000 authorization)to
issue bonds to finance the acquisition,design and construction of aircraft maintenance/air cargo/air transport
support facilities located at Ted Stevens Anchorage International Airport.
The Authority has bonding authorization of $50,000,000 for a bulk commodity loading and shipping terminal
to be located within Cook Inlet to be owned by the Authority.
The Authority has bonding authorization of $50,000,000 for a facility to be constructed in Anchorage for the
offloading,processing,storage and transloading of seafoods.The Authority purchased the ASC in September
1999 and no issuance of bonds is anticipated.
The Authority has bonding authorization of $20,000,000 to finance the acquisition,design and construction of
the Kodiak rocket launch complex and tracking station and the Fairbanks satellite ground station space park.
The Authority does not currently anticipate that it will participate in financing the projects.
The Authority has bonding authorization of $80,000,000 to finance the expansion,improvement and modification
of the existing Red Dog Project port facilities and to finance the construction of new related facilities to be
owned by the Authority.The project is currently being reviewed by the U.S.Corps of Engineers for potential
federal funding of a portion of the improvements.
The Authority has bonding authorization of $30,000,000 to finance the improvement and expansion of the -
Nome port facilities to be owned by the Authority.The Authority does not currently anticipate that it will
participate in financing the project.
The Authority has bonding authorization of $28,000,000 to finance development of a railroad right-of-way
within a railroad and utility corridor from near Healy to the eastern boundary of Denali National Park.
The Authority has bonding authorization of $15,000,000 to finance the construction and improvement of
phase 1 of the proposed Hatcher Pass Ski Resort,located in the Matanuska-Susitna Borough.
\DEA
2001
Annual
Report
Notes to Financial Statements
ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY
June 30,2001 and 2000
(1)Organization and Operations
The activities of the Alaska Industrial Development and Export Authority (Authority)Revolving Fund are authorized pursuant
to legislation which established within the Revolving Fund the Enterprise Development Account and the Economic
Development Account for separate and distinct purposes.The Authority is a component unit of the State of Alaska (State),
constituting a political subdivision within the Department of Community and Economic Development (formerly the
Department of Commerce and Economic Development)but with separate and independent legal existence.The Authority's
mission is to promote,develop and advance the general prosperity of the people of Alaska,to relieve problems of unemployment
and to create additional employment by providing various means of financing and facilitating the financing of industrial,
manufacturing,export and business enterprises and other facilities within the State.
Pursuant to legislation enacted in 1993,the members of the Board of Directors of the Authority also serve as the Board of
Directors of the Alaska Energy Authority (AEA).The staff of the Authority serves as the staff of AEA.The Authority and
AEA continue to exist as separate legal entities.Pursuant to legislation effective July 1,1999,certain programs previously
administered by the former Department of Community and Regional Affairs,Division of Energy,were transferred to AEA
for administration.There is no commingling of funds,assets or liabilities between the Authority and AEA and there is no
responsibility of one for the debts or the obligations of the other.Consequently,the accounts of AEA are not included in the
accompanying financial statements.
(a)Enterprise Development Account
A summary of programs available under the Enterprise Development Account follows:
°The loan participation program,under which the Authority purchases participations in loans made by financial
institutions to their customers.The Authority's participation is limited to the lesser of 80%or $10,000,000 of
the permanent financing for qualifying facilities.The Authority currently has tax-exempt bonds outstanding
under this program,which are general obligations of the Authority.
°The business and export assistance program,under which the Authority provides up to an 80%guarantee of
the principal balance and a guarantee of interest to the financial institution making a qualifying loan.The maximum
guarantee amount of any loan is $1,000,000.
(b)|Economic Development Account
Through the Economic Development Account,the Authority has the ability to own and operate facilities which will
help to accomplish its mission.Current own-and-operate projects undertaken through the Economic Development
Account are:
°DeLong Mountain Transportation System (Red Dog Project).This project consists of a road and port to serve
regional needs and permit transportation of lead and zinc concentrates and other minerals from the Red Dog
deposit,the largest zinc deposit in the world,located in the DeLong Mountains in northwestern Alaska.The
Red Dog Project was financed with Authority funds and bond financings,including $150,000,000 of general
obligation bonds issued in May 1997,which refunded outstanding revenue bonds and provided construction
funds.
°Skagway Ore Terminal (Skagway Terminal).This project is a public-use ore terminal port facility in Skagway,
Alaska.The Skagway Terminal was financed by a $25,000,000 bond issue completed in December 1990.The
purchase of a petroleum products tank farm and vehicle fueling facility was financed using Authority funds
(see note 7).
°City of Unalaska Marine Center (Unalaska Project).This project is a public port facility located in the Aleutian
Islands.The Unalaska Project was financed by a $7,000,000 bond issue completed in December 1991.In May
2000,the City of Unalaska paid all financial obligations related to the project and,in accordance with the terms
of the agreement,the project was transferred to the City.
°Federal Express Project.This project consists of an aircraft hangar and maintenance facilities at the Anchorage
International Airport.The Federal Express Project was partially financed by a $28,000,000 bond issue completed
in September 1992.
°Healy Clean Coal Project (Healy Project).This project is a coal-fired power plant located near Healy,Alaska.
The Authority received a $25,000,000 state legislative appropriation and $117,327,000 of funding from the U.S.
Statements of Cash Flows
ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY
(a Component Unit of the State of Alaska)
Years ended June 30,2001 and 2000
(Stated in Thousands)
-_-
Cash flows from operating activities:
Net income $40,299 35,597
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 1,244 1,244
Net depreciation (appreciation)of investment securities (13,022 )2,221
Write-downs and net loss on sale of other real estate owned :1,224 226
Write-down of development project 10,419 -_
Write-down of other investments 907 750
Amortization of uneamed income on direct financing leases (17,885)(18,796)
Increase in accrued interest receivable and other assets (2,471)(2,076)
Increase (decrease)in accrued interest and accounts payable 1,780 (1,080)
Net cash provided by operating activities 22,495 ..+18,086
Cash flows from capital and related financing activities:
Investment in direct financing leases (652 )(20,754)
Direct financing lease receipts 16,230 29,289
Payments on bonds (8,970)(19,420)
Net cash provided (used)by
Capital and related financing activities oo -6,608 .{10,885)
Cash flows from noncapital and related financing activities:
Dividend paid to the State of Alaska (18,500)(26,000)
Payments on bonds (3,825 }(4,740)
Net cash used by noncapital ;
and related financing activities :(22,325 )(30,740)
Cash flows from investing activities:
Cash advanced to Alaska Seafood Intemational 2,500 (2,500}
Proceeds from maturities of securities 155,684 216,248
Proceeds from sales of securities 151,476 36,519
Purchases of investment securities (336,002 )(229,337)
Principal collected on loans 32,194 30,423
Loans originated (9,878 )(83,022}
Investment in development projects,net 1,687 (12,587)
Net proceeds from sales of other real estate owned 171 462
Purchase of other investments (2,500 )}_
Net cash provided (used)by investing activities -(4,668)6,206
Net increase (decrease)in cash and cash equivalents 2,110 (17,333)
Cash and cash equivalents at beginning of year .38,270 55,603
Cash and cash equivalents at end of year $40,380 38,270
See accompanying notes to financial statements.
ADEA
200°
Annue
Repor
ADEA
2001
Annual
Report
Statements of Changes in Equity
ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY
(a Component Unit of the State of Alaska)
Years ended June 30,2007 and 2000
(Stated in Thousands)
--owen cn
Contributed Retained Total
capital eamings equity
Balance at June 30,1999 $294,338 582,239 846,577
Net income -35,597 35,597
Dividend (note 10}-(26,000 )(26,000)
Depreciation of contributed assets (270)270 -
Balance at June 30,2000 ;294,068 562,106 856,174
Net income -40,299 40,299
Dividend (note 10)-(18,500 )(18,500)
Depreciation of contributed assets (270)2/0 -
Balance at June 30,2001 -$293,798 584,175 877,973
See accompanying notes to financial statements.
Statements of Income
ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY
(a Component Unit of the State of Alaska)
Years ended June 30,2001 and 2000
'(Stated in Thousands)
|oo nen °
"200 baer2000eee
REVENUES:
Interest income:
Loans (note 5)$19,151 19,990
Investments 24,887 22,272
Direct financing leases 17,903 17,843
Restricted direct financing lease (note 7)4,880 5,288
Total interest income 66,821 65,393
Other project income 703 1,457
Other income 3,030 1,566
Net increase (decrease)in fair value of investments 13,022 (2,221)
Total revenues _83,576 66,195
EXPENSES:
Interest 16,738 17,679
interest on liabilities payable from restricted assets (note 8)4,880 5,288
General and administrative 7,436 5,207
Depreciation 1,244 1,244
Other project expenses 1,131 640
Write-downs associated with development projects (note 7)10,419 -
Write-downs and net expenses :
associated with other real estate owned 1,429 540
Total expenses se 43,277 30,598
Net income ,$-40,299 35,597
See accompanying notes to financial statements.
Balance Sheets
ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY
(a Component Unit of the State of Alaska)
June 30,2001 and 2000
(Stated in Thousands)
c a .
oer OOF t efne8ee
ASSETS
Cash and cash equivalents (notes 3 and 4)28,611.27,444
Investment securities (note 4)400,302 352,952
Loans (note 5)215,645 237,738
Less allowance for loan losses (note 6)(12,197 )(12,273)
Net loans 203,448 _225,465
Net investment in direct financing leases (note 7)332,370 328,771
Accrued interest receivable 7,585 6,634
Development projects (note 7)150,324 160,241
Other real estate owned 3,747 5,442
Due from Alaska Seafood Intemational -2,497
Other investments 3,394 1,801
Other assets 9,784 41,862
Restricted assets:
;
Cash and cash equivalents (notes 3 and 4)11,769 10,826
Investment securities (note 4)16,268 21,754
Net investment in direct financing leases -Snettisnam (note 7)90,499 91,598
1,258,101 1,247,287
LIABILMIES AND EQUITY
Liabilities:
Revolving Fund Bonds payable (note 8)271,065 282,840
Accrued interest payable 3,945 4,106
Accounts payable 5,459 3,353
Liabilities payable from restricted assets -Snettisham (note 8)
Power Revenue Bonds payable 91,140 92,160
Other 8,519 8,654
Total liabilities 380,128 391,113
Equity:
Contributed capital 293,798 294,068
Retained earings 584,175 562,106
Total equity 877,973 856,174
Commitments,contingencies and subsequent events (notes 5,9 and 10)
1,258,101 1,247,287
See accompanying notes to financial statements.
Independent Auditors'Report
ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY
(a Component Unit of the State of Alaska}
The Board of Directors
Alaska Industrial Development and Export Authority
(a Component Unit of the State of Alaska):
We have audited the accompanying balance sheets of the Alaska Industrial Development and Export
Authority Revolving Fund (a Component Unit of the State of Alaska)as of June 30,2001 and 2000,
and the related statements of income,changes in equity,and cash flows for the years then ended.
These financial statements are the responsibility of the Alaska Industrial Development and Export
Authority's management.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.Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement.An audit includes
examining,on a test basis,evidence supporting the amounts and disclosures in the financial state-
ments.An audit also includes assessing the accounting principles used and significant estimates made
by management,as well as evaluating the overall financial statement presentation.We believe that
our audits provide a reasonable basis for our opinion.
In our opinion,the financial statements referred to above present fairly,in all material respects,the
financial position of the Alaska Industrial Development and Export Authority Revolving Fund (a
Component Unit of the State of Alaska)as of June 30,2001 and 2000,and the results of its operations
and its cash flows for the years then ended in conformity with accounting principles generally
accepted in the United States of America.
KPIs LEP
Anchorage,Alaska
September 7,2001
ADEA
200°
Annueé
Repor
ADEA
2001
Annual
Report
-Aand A
AIDEA is committed to
providing economic
growth and diversification
for Alaskans and their
businesses.AIDEA also
provides financing
assistance programs in
order to help serve
businesses statewide and
provide jobs for Alaskans.
The Alaska Energy
Authority places emphasis
on lowering the costs and
increasing the safety and
reliability of rural power
systems.Emergency
responses to utility
systems and fuel storage
failures are provided,as
necessary,to protect the
life,health,and safety of
rural Alaskans.
Board of Directors
Wilson Hughes,Chairman
Joe Perkins,Vice Chairman
Deborah Sedwick,Member
Helvi Sandvik,Member
Larry Persily,Member
AIDEA and AEA
813 West Northern Lights
Boulevard
Anchorage,Alaska
99503
Phone:(907)269-3000
Fax:(907)269-3044
www.aidea.org
www.aidea.org/aea.htm
S0ards
New Indusines
AIDEA has also assisted in
bringing new industries to
Alaska to provide greater
economic diversification.
Teck Cominco.AIDEA is
the owner of the Delong
Mountain Transportation
System,the port complex
The Red Dog Mine located and 52-mile road to the _.near Kotzebue is one such Red Dog Mine.NANA,the Mining Advances
example of AIDEA part-Native regional corporation B ring Job S,Trainingneringwithindustryleaders
to provide new industry
and economic growth.
The Red Dog Mine brought
opportunity for economic
growth to a cash poor
region of Alaska.The mine
is located 90 miles north of
Kotzebue within the North-
west Arctic Borough.
for Northwestern Alaska,
owns the land where both
Red Dog and AIDEA's
port reside.Teck Cominco
is the operator of the mine.
Teck Cominco has adopted
a progressive training
program that includes
management training
and a job shadow program.
Currently more than 60 AIDEA
Currently,Red Dog is the _percent of the employees
world's largest zinc mine at the mine are NANA 001
and provides 485 perma-shareholders,with wages Annual
Reportnent,full-time jobs.Teck
Cominco is currently the
only taxpayer in the NW
Arctic Borough,providing
approximately $4.5 million
annually to the borough's
$7 million budget.
The partners in Red Dog
are NANA,AIDEA and
of $15 million paid to these
employees annually.
Re Das Mitre
INTIS fit development ws Czp dip Opies Ware
[lransportationSystem (DMTS),the road and port serving the Red Dog'Mine,and the|argest zinc mine in the,worldgThe project 1s a partnership,between AID Ay ”Teck Comincg MS the mine Operator,and }ANA
2001
Annual
Report
Value Added
Heading in the
Right Direction
Sometimes it isn't instant
success in business.But
Alaskans are known for their
tenacity and willingness to
keep trying until they get
it right.Alaska Seafood
International (ASI)
represents the possibility
for Alaskans to make a
permanent mark in the
value-added seafood
market.Due to several
factors,the first attempts at
making the seafood center
profitable were not successful.
By restructuring the deal,
increasing participation by
certain partners in the ASI
deal and by bringing in a
significant new partner,
AIDEA was able to help
make an additional $25.0
million in financing
available to ASI.
It's no secret that one of
Alaska's greatest assets is the
world's finest seafood.Alaska
has a new opportunity for
innovation in the seafood
industry with ASI.ASI
provides the opportunity
for shift-based manufac-
turing jobs as well as the
ability to deliver real
innovation to our
seafood industry.
Since new financing and
management have become
available to ASI,they have
redirected their efforts to
the basics of a startup
business with a focus on
sales and marketing.As a
result,in 2001 ASI signed
contracts to provide value
added Alaska seafood
products to a number
of new customers.
While ASI is not out of the
"financial woods”yet,they
are quickly heading in the
right direction.
litamertercd
who know the growing
season inside and out.They
have been in business for
nearly 10 years with Holm
Town Nursery,a retail
nursery and landscaping
business,and were looking
to make upgrades.AIDEA
stepped in and provided
assistance through a loan
guarantee to Mt.McKinley
Bank under the Business
and Export Assistance
Program,which services
the needs of pre-existing
businesses to enhance or
expand their current
operations.
Andy Alsup runs a small
business in Anchorage.His
company,Noah Marine,
provides boat repairs,sale
of parts and accessories
and storage for up to 30
vessels.He's been in
business for more than
10 years and has a loyal
following of customers
and a solid business track
record.A one-person
operation,Andy Alsup
received assistance from
AIDEA through a loan
participation with First
National Bank Alaska to
help buy the building
where his business
operates.The acquisition
of his building significantly
improves the profitability
of his business and allows
for expansion.
An innovative food and
refreshment business that
benefited from the Loan
Participation Program is
the Bear Tooth Theatre Pub.
Fresh Ale Pubs LLC was
formed in 1996 to operate
the immensely popular and
successful Moose's Tooth
Pub &Pizzeria.Their
success continued in June
of 2000 with the opening
of the Bear Tooth Theatre
Pub in the former Denali
Theatre in mid-town
Anchorage.It was an
instant success.So much
so,in fact,that the lack of
parking became a problem.
AIDEA participated with
First National Bank Alaska
to purchase an adjacent
office building that not
only provided the additional
parking needed,but also
now houses their
administrative offices.
AIDE
200°
Annué
Repor
2001
Annual
Aeport
etal
All of Alaska Benefits
from Retail Growth
The trade industry in
Alaska has expanded with
the demand for support
services in Alaska.Back in
the mid-80's it was far
more common for
Alaskans to travel to the
Lower 48 for large retail
purchases.Today,the retail
industry has grown to
supply the increasing
demands of a growing and
considerably more stable
economy and population.
The proportion of retail
jobs in Alaska are about
the same as they were in
1986,but revenues per
employee and the associated
efficiencies have increased
dramatically.
Retail has also grown
due to the rural and urban
interdependency that exists
in Alaska.Rural residents
travel to urban areas to
shop and in turn,urban
areas are able to offer more
retail services because their
business is supplemented by
in-state,rural consumers.
In fact,one third of the
output of goods and
services from Anchorage
are destined for other
regions of Alaska and 20
percent are destined for
rural Alaska.
In cooperation with Wells
Fargo Bank Alaska and
UIC Corporation,AIDEA
contributed $5.16 million
in a $6.45 million loan
Participation to construct
the Alaska Commercial
Store and retail mall in
Barrow.Without these
types of facilities in key
rural Alaska communities,
the interdependence
between urban and rural
Alaska in the sale of goods
and services would not be
as possible.
In Fairbanks,the summer
days are long,hot and have
an almost never-ending
supply of sunshine,making
for a very productive
growing season.James
and Marcia Holmes are
INDIN Loan Participation Program.IAIDEA provideddhelpedbringnewproductsandservicestothisremotecommunity,
weeded capital and
transportation
A major indicator of the
economic maturity of
Alaska can be gauged by
the transportation industry.
Alaska's transportation
network has evolved from
a fueling stop on routes
between Europe and Asia,
to a base of operation for
many companies.As
numbers have increased
for the transportation of
passengers and cargo to
and through Alaska,the
feasibility to have cargo
handling,cargo sorting,
customs clearance and
aircraft maintenance facilities
located within the state has
also increased.And,with
this transportation infra-
structure,Alaska can expect
continued growth in trans-
portation-related businesses.
Transportation is also the
key factor in the interde-
pendency of rural and
urban Alaska.In many
cases,rural communities
have no roads -air and
water transportation are
the chief way goods are
transported from urban
Alaska distribution centers
to rural Alaska.And most
of these transportation
companies serving rural
Alaska are either head-
quartered in urban Alaska,
or have economic ties there.
One of the most important
economic transitions for the
transportation industry in
Alaska was the FedEx
international package sorting
facility at the Ted Stevens
Anchorage International
Airport.Federal Express
management chose to place
a maintenance operation in
Anchorage to service their
fleet,and approached
AIDEA to finance the
facility.The facility created
approximately 20 permanent
pilot positions whose incomes
provide direct stimulus to
the Alaska economy.
In 1997,Williams-Lynxs
management recognized the
need for leaseable warehouse
and enclosed air cargo
transfer space at the
Ted Stevens Anchorage
International Airport.This
facility strengthens South-
central Alaska's economy by
providing as many as 200
permanent high paying jobs.
The Williams-Lynxs
Alaska CargoPort was
financed through tax-
exempt conduit revenue
bonds sold by AIDEA,an
AIDEA financing
approach that is gaining in
popularity.The bonds are
supported by the project's
revenues and a debt service
reserve fund.Williams-
Lynxs has strengthened
Alaska's
role as an international air
crossroads by improving
basic services for air carriers
serving Alaska and beyond.
Williams-Lynxs has also
become one of Alaska's
leading exporters due to the
sale of jet fuel to foreign
carriers transiting Anchorage
through this facility.
Gedteall Bye i
ADE
200
Annu:
Repo
IDE:
Healthcare
Healthcare is the leader for
growth in Alaska's services
sector.While general
employment grew by 19
percent in the 90's,healthcare
grew by 59 percent.And,the
trend is expected to continue
well into the 2000's.By
2008,it is forecasted that
10 of the 15 fastest-growing
occupations in Alaska will
be in the healthcare field.
This growth is partially due
to the Alaskan consumer
choosing to obtain their
health care services in Alaska.
AIDEA has worked in
partnership with many
organizations to further the
North Star plans to expand
their current facilities to
provide a greater percentage
of in-state residential treat-
ment needs.Currently there
are a limited number of
residential treatment
facilities in Alaska for
young mental-health
patients and hundreds of
residents must leave the state
each year to receive treatment
in the Lower 48 states.
Local healthcare has also
become available for the
rural residents of Glenallen.
Mountain View Eye Care
was the recipient of backing
from AIDEA through a loan
villages of the North Slope.
This clinic provides the
only eye care service in the
entire Copper River basin.
The Ketchikan Health
Clinic is a project also
realized with the financial
backing of AIDEA through
a loan participation with
First Bank.The clinic is
located adjacent to Ketchikan
General Hospital and focuses
on providing acute and
chronic medical and dental
care for the residents of
Ketchikan.The clinic is
owned by Ketchikan Indian
Corporation,the governing
body for Alaska Natives001availabilityofqualityhealth-guarantee to KeyBank under and American Indians
anual care in Alaska.In 2001,the Business and Export residing in the Ketchikan
report AIDEA participated in a
loan from Northrim Bank
to DeBarr Road Properties
and Bragaw Street Properties
LLCs to bring ownership
of two of Alaska's top
healthcare facilities under
Alaskan ownership -North
Star Hospital and Residential
Treatment Center.
Assistance Program to
provide eye care to the
residents of the Copper
River Basin.The clinic's
principal,Dr.Grant
Humphreys,was the eye
clinic director for the North
Slope Borough for seven
years,providing services
in Barrow and all remote
Gateway Borough.The
clinic employs 40 professional,
technical and clerical staff
and provides preferential
hire for Alaska Natives.
NaginGz;Rasta
In'2001¥AIDEA worked 'with DeBarr Road|Properties and.Braga,StreetProperties]LCs to secure Alaskan ownership oResidentialfIveatment{CementNorihtsearl LUGS planstttterpand|therfacilitiestoprovideagreaterpercentageofinstateresidentialtreatmentneeds}}
a newly-formed entity
comprised of the Seldovia
Native Association and
Dimond Center,LLC.
This will be the first hotel
in South Anchorage,an
area studies have shown
to be one of the prime
locations for a hotel in
the state.There are
expected to be 100
temporary construction
jobs and 30 permanent
jobs generated by this
project upon completion.
AIDEA also watches for
opportunities to breathe
new life into existing projects
like the Kuskokwim Inn in
Bethel.Today Bethel has
grown to almost 6,000 and
is the hub community for
the Yukon/Kuskokwim
Delta.But travelers wishing
to stay overnight in Bethel
have only limited bed and
breakfast offerings to
choose from.
The Kuskokwim Inn,
originally built in 1976
and closed in 1997,has
recently been acquired,is
currently under renovation,
and will be re-opened by
the Bethel Boys,LLC next
year.The project will give
a new face to the historic
Kuskokwim Inn and will
provide business and
leisure travelers to Bethel
with a badly needed lodging
option.AIDEA is making
$1.2 million available in a
loan participation with
Wells Fargo Bank Alaska
to complete this important
project for the YK Region
of Alaska.
Tourism companies like
these comprise just one
arm of Alaska's diverse
economy and AIDEA
appreciates the opportunity
to participate in projects
that add muscle to Alaska's
visitor industry.
Alaska's Most
Renewable Resource
IDEA
001
nual
feport
tournsm
Alaska's most renewable
resource,tourism,is
responsible for nearly $1
billion in annual revenue in
Alaska.Visitors come from
all over the world to see
the majesty and grandeur
that make up the 49th
state.Each year,visitors
and tourism businesses
inject about $124 million
directly into state and local
treasuries.And 78 percent
of the visitor industry's
work force are Alaskans.
In 1996,AIDEA participated
in a loan with KeyBank on
a joint venture between the
Mt.Roberts Development
Corporation and Goldbelt,
Inc.,a Southeast Alaska
Native corporation,to
build the Mt.Roberts
Tramway.The tram,
located in Juneau,takes
visitors from the cruise
ship docks to the 1,800-
foot level of Mt.Roberts
where a mountain complex
hosts a variety of activities
for visitors.
Goldbelt was one of the
first Native corporations
to enter into visitor industry
endeavors.This venture
has added significantly to
Southeast Alaska's tourism
offerings and increased
employment opportunities
in Juneau.
Small businesses comprise
90 percent of the Alaska
visitor industry and most
of these businesses are
Alaskan owned.One such
Alaskan that has made his
mark in the visitor industry
is Steve Mahay.
In 1975,Steve Mahay
founded Mahay's Riverboat
Service in Talkeetna and
since then he has been
hosting countless Alaska
visitors on riverboat tours
throughout the Talkeetna,
Susitna and Chulitna rivers.
In 1997,he was looking to
expand his fleet of jet
riverboats.AIDEA was
involved in the financing
of the addition to Mahay's
fleet through the Business
and Export Assistance
Program with a guarantee
to KeyBank on their loan
to Mahay's.
While many visitors travel
to Alaska to see its great
beauty,many others travel
to Anchorage and elsewhere
in Alaska for business,
conventions,and to visit
family and friends.And,a
great number of Alaskans
travel from rural areas of
Alaska to the state's largest
commerce hub,Anchorage,
for shopping,medical care
and to visit family.These are
some of the reasons hotel
room numbers in Anchorage
have increased dramatically
in the last few years.
On the horizon for
AIDEA is the Dimond
Center Hotel,a new 109
room,three-story hotel
located at one of Anchorage's
major retail hubs.AIDEA
will participate in the loan
from Wells Fargo Bank to
|oe:NationalT Dee '
Helping the
In the 2001 Alaska Business
Monthly "The Top 49ers”,
ten Regional Native
Corporations and three
Village Corporations were
among the top companies
in Alaska.In fact,this group,
at $2.4 billion in revenues,
represented 49.7 percent of
the revenues and,with
14,588 employees,
represented 54.6 percent
of the employees in the
top 49 Alaskan companies.
In 1986,Native corporations
represented 25 percent
of the revenue of the
top 49 companies.
To say Native corporations
are important to the
diversification of the
Alaskan economy would
be an understatement.And
since all of these companies
are headquartered in Alaska,
the earnings,the support
jobs and the economic
multiplier effect from these
companies'activities generally
accrue to Alaska.
AIDEA has been proud to
work with many of these
companies including
NANA,our partner in
the Red Dog Operations,
Goldbelt Inc.on the tram
in Juneau,and Ukpeagvik
Inupiat Corporation (UIC)
on the Alaska Commercial
Company store and retail
complex in Barrow.Other
Native organizations that
have benefited through
working with AIDEA
include the Seldovia
Native Association on
the Dimond Center Hotel
project,the Tanana Chiefs
Conference on their office
building in Fairbanks,the
Aurora Hotel in Nome
owned by the Bering
Straits Native Corporation,
the dock facility in Haines
owned by Klukwan,Inc.,
and a Tesoro station,NAPA
and convenience store
with Sitnasuak Native
Corporation in Nome.
-conom
The Importance of
Native Corporations
ADE
20C
Annu
Repc
\DEA
001
annual
report
Aetum on Investment
$120
100
AIDEA is a unique entity
financially since it pays for
its Own operating expenses
while continuing to expand
our ability to fuel economic
development,grow AIDEA
loan funds,and pay a
dividend back to the
state of Alaska.
AIDEA has directly
contributed a dividend
back to the State of Alaska's
general fund each year since
1997,based on income from
several previous years.
Under law,the dividend
ranges from 25 to 50
percent of net income for
the two fiscal years prior to
payment of the dividend.
Each year,the AIDEA
Board of Directors
approves the amount
of the dividend based on
several factors,including
1997 1998
projected income in future
years,project and loan
cash-flow projections,its
effect on bond covenants,
unanticipated needs and
rating agency concerns.
Since the dividend program
was signed into law in 1996,
the AIDEA Board has
authorized $128 million
in dividends.
1999 2000 2001
for Alaska,be supported
by their local governments
and be financially feasible.
These projects must also
be able to pay a return to
AIDEA.
Business and
Export Assistance
Program
This is a loan guarantee
program providing financial
institutions with a guarantee
of up to 80 percent,not to
exceed $1 million on the
principal of the loan.
Guarantees issued for export
transactions guarantee both
commercial and political
risk.These transactions are
primarily intended to assist
manufacturing enterprises
to export.
Conduit Revenue
Bond Program
Increasingly,AIDEA has
been involved in helping
credit-worthy Alaska
projects gain access to
the bond market.Conduit
revenue bond financing is
available for both taxable
and tax-exempt projects
that qualify under the
Internal Revenue Service
Code of 1986.This type
of financing requires that
AIDEA act solely as a
conduit for the transaction.
Under the Conduit
Revenue Bond Program,
neither the assets nor credit
of AIDEA is at risk.Rather,
the bond market decides to
finance the project based
solely on the economic
viability of the project.
Rural Development
Initiative Fund (RDIF)
The RDIF is a loan
program designed to create
job opportunities in rural
Alaska by providing small
Alaska businesses with
needed capital that may
not be available in
conventional markets.
RDIF provides loans for
working capital,equipment,
construction or other
commercial purposes.
Businesses eligible for
assistance under this
program must be Alaskan-
owned and be located in a
community of 5,000 or less.
The RDIF is administered
for AIDEA by the
Department of Community
and Economic Development,
Division of Investments.
AIDEA
'8|
2001
Annual
Report
Throughout the evolution
of Alaska's economy,
AIDEA has been there
every step of the way.
AIDEA's programs led to
the success of many
Alaskan business
enterprises that may not
have otherwise had the
chance to succeed.As all
Alaskans know,Alaska is
different from other states
in the United States.Much
of the infrastructure taken
for granted in the Lower
48 states is not present in
Alaska.Additionally,
although assets in our local
banking industry continue
to grow,many financial
institutions are limited in
their ability to make larger
or longer term loans.
AIDEA's programs are
specifically designed to
help the Alaskan economy
overcome two challenges:
assist financial institutions
to finance credit-worthy
business ventures in Alaska
and help provide key
economic infrastructure
required to enable the
Alaskan economy to
further develop,expanding
the number of jobs
available to Alaskans.
AIDEA's programs are
designed to assist in
business development for
Alaska.These programs
provide a wide variety
of services to fit each
individual business.
Loan Participation
Program
The Loan Participation
Program provides long-
term financing to Alaska
businesses for new or
existing projects,or for
the refinancing of existing
loans.This program has
helped diversify the Alaska
economy by providing
financing for a large variety
of commercial facilities
ranging from office
buildings,warehouses
and retail establishments to
hotels,fishing vessels and
manufacturing facilities.
Under the Loan Participation
program,AIDEA's customer
is actually the financial
institution seeking to make
a business loan to their
customer.AIDEA can
participate with a qualified
financial institution(s)up
to 80 percent but not more
than $10 million of a loan,
and with repayment terms
as long as 25 years.And,
the financial institution
may fully amortize their
portion of the loan over
a shorter term.
-conomic !ooloox
By far,this is the most
active program offered by
AIDEA.It allows financial
institutions to service their
customers,leverage their
lending ability,and to
structure loans to help
make their customer's
business ventures
financially feasible.Of
course,Alaska benefits
from the increased
economic activity.While
during the economic
downturn of the late 80's,
AIDEA's loan delinquency
rate under this program
exceeded 25 percent,today
this rate is 1.7 percent.
Development
Finance Program
The Development Finance
Program is designed to
finance the infrastructure
necessary to support larger
economic development
projects in Alaska.In all
cases,AIDEA actually
owns the project and is
repaid for use of the asset
througha user fee structure.
The user fee works similarly
to a lease since once the
term of the use agreement
is completed,AIDEA
retains ownership of the
asset for future economic
use.These projects must
have an economic benefit
declined in Alaska by 25
percent.
While the Alaskan economy
has begun to successfully
diversify,other parts of the
country have experienced
much stronger rates of
growth,and this has lured
many of Alaska's next
generation to take
employment outside of
Alaska.And while AIDEA
has played a significant role
in helping diversify the
Alaskan economy,our
challenge will be to seek
ways to help Alaska offer
an economic future to
coming generations that
will allow them to stay in
Alaska,raise their families
here,and contribute to
Alaska's stable,sustainable
diversified economy.
As Alaska's
Economy Grows,
So Grows Our Need
for Low Cost Power
In the early 1990's,AIDEA
merged management
efforts with the Alaska
Energy Authority (AEA)
which created a strong
synergy that helps business
ventures succeed in Alaska,
and also ensures safe,
reliable,and low cost
electric power is available
to all Alaskans.
Economists everywhere
recognize that the availability
of low cost power is critical
to the development of any
modern economy.Alaskan
leaders have long
recognized this.
AEA is responsible for many
of the most important electric
generation and distribution
assets in Alaska including
the Four Dam Pool
hydroelectric projects
(soon to be transferred
to the communities they
serve),the Bradley Lake
Hydroelectric facility,and
the Alaska Intertie that
transports Railbelt
electricity from Willow to
Healy.In 1999,rural energy
programs were transferred
to AEA to complete the
picture.Today,AEA's
Rural Energy Group
(REG),in partnership with
the Denali Commission,is
involved in the construction
of bulk fuel facilities and
electric power systems in
rural Alaska,further
recognizing the importance
of reliable,low cost power
to the economy in rural
Alaska.And,REG
administers the Power
Cost Equalization (PCE)
program.Today,over 20
percent of the goods and
services sold by Anchorage
businesses are sold to
customers in the 190
communities across
Alaska served by the PCE
program.(To learn more
about the work of AEA,
please turn this annual
report over.)
ADEA
2001
Annua
Reporl
ADEA
{|
2001
Annual
Report
-Conomic Climate
The Evolution
of Alaska's
Economic Climate
Great strides have been
made in Alaska's economic
diversification and AIDEA
is proud to have played a
part in that growth.Over
the next several pages we
will present examples of the
types of financing AIDEA
has participated in to
illustrate the role we have
and will continue to play
in helping Alaskan
businesses further diversify
our economy.These results
are an important qualitative
return on Alaska's investment
in AIDEA,but AIDEA
also provides Alaska a
financial dividend.
AIDEA is a public corpo-
ration of the State of Alaska.
It operates as an enterprise
fund and meets all of its
financial requirements,
including cost of operations
and generation of additional
financial assets,through its
own activities.As explained
in the financial statement
section of this annual
report,AIDEA currently
has assets totaling $1.258
billion and net income in
2001 of $40.3 million.
AIDEA is a profit-oriented
organization.AIDEA does
not make grants of any
kind.All AIDEA income
is a result of receipts from
loan participations,
development projects,
other investments,and
services provided by AIDEA.
Alaska has seen a more
stable and efficient
economy through
innovations in the
transportation industry and
stronger communications
technology.It has seen
improvements in healthcare
available within the state.
And tourism has grown
into a viable renewable
resource.In line with the
growth of the state,the
construction and retail
industries have advanced
and adjusted to service the
needs of Alaskans.
Over the past ten years,
Alaska's population has
grown 12 percent,
mirroring the number of
births in the state.This is a
result of people moving to
The Last Frontier in the
late 70's and early 80's and
choosing to stay and raise
their families.Much of the
economic diversification
Alaska has experienced is
in response to this larger,
more stable population.
Unfortunately,Alaska's
latest population data does
not tell an entirely positive
story.Over the same ten-
year period,the number of
residents between 20 and
34 years of age has
of industries and business,
both large and small,each
contributing to the stability
of Alaska's economy.As a
result of this diversification,
Alaskans are able to secure
the goods and services in-
state they would have gone
to the Lower 48 states for
in the mid-80s.And,the
increased stability of Alaska's
economy has made long
term investment capital
considerably more available
to businesses wishing to
expand Alaska's economy.
This annual report for
AIDEA and AEA attempts
to illustrate the role that
both organizations have
played and continue to
play in the diversification |
and stabilization of the
Alaskan economy.It
further serves to
underscore the critical
interdependence between
both urban and rural
Alaska,and the inseparable
link between energy
development and capital
development in the
Alaskan economy.
AIDEA and AEA are proud
to have played an important ;role in helping our economy The Changing Face of
achieve its current success Alaska's Economyandwelookforwardto
helping Alaska realize its
economic future.
Sincerely,
tite
Robert Poe,Jr.
Executive Director
ADEA
2001
Annual
Report
ADEA
al
2001
Annual
Report
EXECUTIVE
Alaska's economy has
weathered substantial
change over the past 15
years,evolving from a
series of boom bust cycles
to a considerably more
complex and diversified
economic system resulting
in stable,long-term growth
for Alaska.Today there is a
strong interdependency
between urban and rural
economies,intertwining
the oil and gas industry,
Native and non-Native
corporations,tourism,
service sectors,telecom-
munications,health care,
financial services,trans-
portation,petroleum refining,
construction,and government,
to name just a few.
This growing economic
diversification in Alaska
means employment is no
longer driven by the
actions of a handful of
employers in Alaska.And
the array of other economic
interdependencies in Alaska
are no longer indexed to the
movement in the price of a
single commodity -oil.
The consumer profile in
Alaska has also changed.
In the past,many Alaskan
consumers traveled to the
Lower 48 states to purchase
durable and non-durable
consumer goods and to
seek healthcare and other
services.Today,all of these
goods and services can be
easily obtained at competitive
prices in Alaska's urban
distribution centers.
A major factor in shaping
today's Alaskan economy
occurred in the summer of
1986-a time when Alaska
was heavily reliant on oil
and gas development and
government infrastructure
construction.That summer
Alaskans woke up to the
news that the price of a
barrel of oil had fallen to
$10.This devastating news
was felt in every sector of
the state's economy.As
jobs contracted in almost
Jectors Letter
every segment,financial
institutions found their
borrowers highly leveraged in
real estate,filing bankruptcy
at an alarming rate.Real estate
prices spiraled downward,
and Alaskan banks began
to fail.AIDEA found itself
with over a 25 percent
delinquency rate between
1987 and 1989 as compared
with a 1.7 percent rate today.
Looking at the economy of
Alaska today,we see a very
different picture.Since the
economic fall of 1986,oil
has dropped to $10 per
barrel twice,in 1994 and
again in 1999.But the
ramifications to the
Alaskan economy have
been substantially less.
So what has changed?
Alaska has grown up as a
state and as an economy.
The base of the state's
economic platform has
shifted from oil,government
and construction dependence
to an interrelated network
AIDEA in',August,000,tbringing)tO.ea]position expertise:in,|business devel opment,financial,'Planning publicpolicyandsystemspperations, e 1983;Bob]as served in many Positions o£tp Gandaif ba aii Gime i Sora lite
Each project we complete
has a separate story and a
unique group of Alaskans
it affects.
The staff of AIDEA and
AEA are proud to report
on the accomplishments of
our organizations,and to
illustrate the key role we
play in both rural and
urban Alaska.
Through this report we
hope you learn more about
AIDEA and AEA's missions
and of our recent successes
in meeting these objectives.
ADE
Sincerely,
200°(\))LW Annueé
Repor
Wilson Hughes
Chairman of the Board
AIDEA
2001
Annual
Reccrt
Chaimans Message
Link Between
Urban &Rural Alaska
Each year at AIDEA and
AEA we reflect on our past
efforts and look to the
future to determine how
to best serve the people
of Alaska.In 2001,infra-
structure development and
economic diversification
were at the forefront of
our efforts at AIDEA,
while at AEA we sought
new ways to provide
affordable and efficient
energy throughout Alaska.
Energy and economic
development are interde-
pendent.In Alaska,we try
to keep all of this in mind
as we consider each new
undertaking.
Our annual report this
year focuses on a very
important part of both
AIDEA and AEA's
missions -the link
between rural and urban
Alaska.We hope to
demonstrate in this report
just how critical this link
is,and that in order for
one region of the state to
perform well economically,
others must do so,too.
What we've found over the
years is that our rural and
urban economies are tied
together closely.Urban
communities provide
services and goods that
rural residents rely on.
Likewise,rural customers
are critical to those urban
businesses and service
providers.
And underlying the entire
fabric of the economy is
the need for infrastructure
throughout the state -
particularly the ability to
access reasonably priced
energy and investment
capital.All communities
throughout Alaska require
access to energy and
investment capital in order
to develop existing -as
well as new -industries.
At AIDEA and AEA
we help provide this
investment capital and
the energy to help fuel
Alaska's economic future.
Governors Message
With this annual report,
which encompasses the
year in review for both
the Alaska Industrial
Development and Export
Authority and the Alaska
Energy Authority,we
formally recognize the
integration of these two
critical agencies that energize
our economy through the
development and funding
of key projects.
AIDEA and AEA both
play an important part
in strengthening and
diversifying Alaska's
economy.AIDEA
continues its mission of
growing and broadening
the state's economy and
the economic well-being
of Alaska residents through
the programs it operates.
Creative partnerships with
the private sector have helped
contribute to AIDEA's
continued success.
AEA seeks to provide
reasonably priced power
to all regions of the state.
The agency also offers
training for Alaskans to
assist in ongoing mainte-
nance and operation of
energy systems across the
state.Safe,low-cost power
and reliable generation and
distribution systems allow
economic development to
flourish.
Throughout this report,
you'll see many examples
of unique links established
by AIDEA and AEA,
which ultimately benefit all
Alaskans.AEA,in partner-
ship with the Denali
Commission,continues
to work with communities
that need power system
upgrades,bringing unique
solutions to areas that need
assistance to establish long-
term,affordable power.
AIDEA,through its
finance programs and
relationships with lending
institutions,continues to
work with qualified
Alaskan businesses,
both large and small,
to help them get
started,expand,
and make
improvements
to existing
facilities.
AIDEA and AEA are
two integral cornerstones
in the foundation of
Alaska's economic future.
I'm pleased to see these
agencies continue to realize
their tremendous potential.
fy flowTonyKnowles
Governor
ADEA
1]
2001
Annua
Report
Mission statement
"To encourage economic growth and diversification in Alaska.”
AIDEA is about financing businesses,helping to diversi-
fy the economy of Alaska and creating jobs for
Alaskans.AIDEA accomplishes its mission by providing
various means of financing and by facilitating the financ-
ing of businesses in Alaska.AIDEA also has the ability
to own and operate facilities that advance this goal.
Table of Contents
Governor's Message ....0...cee cece eee eee eee 1
Chairman's Message .......---..00sseeseeeeee2-3
Executive Director's Letter...0.0...cee eee eee 4-5
Economic Climate 1.0...0.00 ccc een ee eens 6-7
Economic Toolbox 1.0...0.00 c ce cece cece ee eas 8-9
Return on Investment ............00.e eee eee 10
Helping the Economy ............00 cess ee eee 11
Tourism oo e ceeeeeeeteenies 12-13
Healthcare 2.0...ccc ccc cee nee 14
Transportation 6...cece eee eee eee eee es 15
Retail 0...ccc ce cece ee ence eens 16-17
Value Added...cc.ccc ccc cece tee e eee eee 18
New Industries ........00 cc cece ete eee nen e eens 19
AIDEA Board 1.0.0.0...00 ccc cece ce eee ee 20
Auditors'Report ..........00ceceeeeeeeeee 21
Balance Sheets ..0...00.c cece cece eevee ee eunes 22
Statements of Income ..........00 cee cece ee eee23
Statements of Changes in Equity ...............-.24
Statements of Cash Flows .............0ceeeae 25
Notes to Financial Statements .............200-26-38
lasrial DevelopmNeseIndust
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