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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 AEA 2001 Annual Report 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. AEA B. 200 Annué Repor qJOl Energy Building Blocks AEA 4] 2001 \nnuel report -rolects 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 . AEA 2001 \nnual Report 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. AEA [7, 200 Annu: Repo AEA 2001 \nnual 3eport Jenall 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. 2001 Annua Report AEA 2001 Annual Report 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 Report 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} AEA 14 2001 Annual Report 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 Report 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 AEA 16 2001 Annuel Report 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 areyyatme