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HomeMy WebLinkAboutAEA Annual Report 1996laska nergyuthori nnual Report spit HLIHOHIAYAQUINIURSUTS AEA'S Role As a result of legislation passed in 1993,the Alaska Energy Authority's primary role is to own its existing six hydroelectric projects and the Anchorage-Fairbanks Intertie. RePOTt tO ALBSHAMS as ceesssssscsessesessenseue Q Alaska Energy Authority Projects...5 Independent Auditors'Report.4 Financial Statements.wd Board of Directors Executive Vice President and General Manager,GCI Chairman Joe Perkins Commissioner,Department of Transportation and Public Facilities Vice Chairman Wilson (Wil)Condon Commissioner,Department of Revenue Willie Hensley Commissioner,Department of Commerce and Economic Development Robert W.Loescher Executive Vice President of Natural Resources,Sealaska Corporation Report to Alaskans In 1993 the Alaska Legislature restructured the Alaska Energy Authority (AEA)and turned oversight responsibilities for AEA-owned projects over to the Alaska Industrial Development and Export Authority (AIDEA).The Legislature's intent in 1993 was for AEA to get out of the energy business by transferring ownership of its projects to the local utilities,to the maximum extent feasible. Under the direction of AIDEA,progress has been made on the transfers.The procedures,however,are highly complicated requiring the resolution of federal license transfers,assignment of permit obligations and compliance with statutory and constitutional requirements,and may take years to complete. AEA will continue to make progress towards turning its projects over to the local utilities wherever possible.This report is a summary of our activities and the financial position of AEA. Respectfully submitted, Wd Kae Wm PSU Wilson Hughes William R.Snell Chairman of the Board Executive Director Alaska Enerqu Authority Projects The Alaska Energy Authority was created by the Alaska Legislature in 1976 and charged with the following mission:"To promote,develop and advance the general prosperity and economic welfare of the people of Alaska by providing a means of constructing,acquiring,financing and operating power projects and facilities that tap Alaska's natural resources to produce electricity and heat.” Throughout the 1980s,the Alaska Energy Authority (AEA)worked to develop the State's energy resources as a key element in diversifying Alaska's economy.A number of large-scale projects were constructed. Today,AEA's six hydroelectric projects have an installed capacity of 164 megawatts,and the Anchorage- Fairbanks Intertie's 170 miles of transmission line link Interior Alaska with the cheaper energy available in the Southcentral portion of the State. As a result of legislation passed in 1993,AEA's primary role is to own these existing hydroelectric projects and the Intertie project.(The many AEA programs addressing the energy needs of rural communities were transferred to the newly created Division of Energy within the Department of Community and Regional Affairs).Oversight of AEA now rests with the Alaska Industrial Development and Export Authority (AIDEA),whose board of directors and executive director serve in the same capacity for AEA.AIDEA also provides staff for AEA. The following is a look at AEA's existing projects. Bradley Lake Hydroelectric Project The 126-megawatt project continues to generate above expectations 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. Four Dam Poo!ProjectTheSolomonGulch,Swan Lake,Terror Lake and Lake Tyee Hydroelectric projects,which are collectively known as the Four Dam Pool,came on line in the 1980s and serve,respectively,the communities of Valdez and Glennallen,Ketchikan,Kodiak,and Petersburg and Wrangell.The project gained its name from the fact that operations,maintenance and debt costs are pooled,with the same 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. AEA and the participating utilities are investigating divestiture of the projects by AEA.Much needed repairs to the Terror Lake and Lake Tyee Hydroelectric Projects commenced in 1995.The repairs are scheduled to be completed in 1997. Anchorage-Fairbanks IntertieThe170-mile,345-kv transmission line runs between Willow and Healy.The 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.Fairbanks consumers save an estimated $7 million a year,and the Intertie reduces the number of black/brownouts throughout the system. Operations and maintenance duties are overseen by the Intertie Operating Committee. Larsen Bay Hydroelectric Project The 475-kilowatt project went into commercial operation in mid-1991 with construction costs of approximately $1.6 million.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. Independent Auditors Report The Board of Directors Alaska Energy Authority [a Component Unit of the State of Alaska We have audited the accompanying combined balance sheets of Alaska Energy Authority (a Component Unit of the State of Alaska)as of June 30,1996 and 1995,and the related combined statements of revenues and expenses,changes in fund equity,and cash flows for the years then ended.These combined financial statements are the responsibility of Alaska Energy Authority's management.Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards.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 statements.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 out audits provide a reasonable basis for our opinion. In our opinion,the combined 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 30,1996 and 1995,and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. KG Fase Mar wite LLP August 23,1996 Anchorage,Alaska Combined Balance Sheets fllaska Energy Authority (A Component Unit of the State of Alaska] June 30,1996 and 1995 Assets 1996 1995 Property,plant and equipment (note 4)§930,451,762 932,696,435 Less accumulated depreciation 218,067,103 195,021,172 Net property,plant and equipment 712,384,659 737,675,263 Other assets -cash and investments -restricted (note 3)52,129,010 47,181,334 Current assets: Operating revenue receivable 824,636 7,242,036 Accrued interest receivable 1,190,421 1,138,567 Total current assets 2,015,057 8,380,603 $766,528,726 793,237,200 Liabilities and Fund Equity Fund equity: Contributed capital 619,800,808 619,800,808 Deficit (203,680,550)(182,814,700) Total fund equity 416,120,258 436,986,108 Long-term debt,net of current portion (note 5): Bonds payable 152,648,793 154,878,493 Four Dam Pool Transfer Fund loan payable 184,571,726 184,571,726 Arbitrage interest payable 275,453 221,452 Total long-term debt 337,495,972 339,671,671 Current liabilities: Accounts payable 952,837 1,132,724 Retainage payable 103,432 103,432 Current portion of bonds payable (note 5)3,000,000 2,820,000 Current portion of arbitrage interest payable (note 5)-308,690 Due to State of Alaska: Four Dam Pool Transfer Fund loan accrued interest -6,368,525 Other 65,149 71,996 Other accrued interest 5,221,993 5,312,891 Other liabilities 3,569,085 461,163 Total current liabilities 12,912,496 16,579,421 $766,528,726 793,237,200 See accompanying notes to financial statements. Combined Statements of Revenues and ExpensesAlaskaEnergyAuthority(A Component Unit of the State of Alaska) Years ended June 30,1996 and 1995 1996 1995 Revenues: Revenue from operating plants $16,609,643 23,847,208 Interest and investment income 2,890,451 2,898,590 Total revenues 19,500,094 26,745,798 Expenses: General and administrative 1,185,665 844,941 Plant operating 4,855,582 4,258,721 Depreciation 23,045,931 23,066,221 Interest 11,278,766 17,783,270 Total expenses 40,365,944 45,953,153 Deficiency of revenues over expenses $(20,865,850)(19,207,355) See accompanying notes to financial statements. Combined Statements of Changes in Fund EquityAlaskaEnergyAuthority(A Component Unit of the State of Alaska) Years ended June 30,1996 and 1935 Accumulated Contributed Total Deficit Capital Fund Equity Balance at June 30,1994 $=(163,607,345)619,800,808 456,193,463 Deficiency of revenues over expenses (19,207,355)-(19,207,355) Balance at June 30,1995 (182,814,700)-619,800,808 436,986,108 Deficiency of revenues over expenses (20,865,850)-(20,865,850) Balance at June 30,1996 $(203,680,550)619,800,808 416,120,258 See accompanying notes to financial statements. Combined Statements of Cash FlowsAlaskaEnergyAuthority(A Component Unit of the State of Alaska] Years Ended June 30,1996 and 1995 1996 1995 Reconciliation of deficiency of revenues over expenses to net cash provided by operating activities: Deficiency of revenues over expenses $(20,865,850)(19,207,355) Adjustments to reconcile deficiency of revenues over expenses to net cash provided by operating activities: Depreciation 23,045,931 23,066,221 Amortization of deferred interest and bond discount 729,812 679,172 Amortization of bond issuance costs 40,488 43,640 Bond interest expense 11,278,766 10,656,525 Four Dam Pool Transfer Fund loan interest -6,368,525 Investment income (2,890,451)(2,898,590) Changes in assets and liabilities: Decrease in other due to State of Alaska (6,847)(635,569) Decrease in operating revenue receivable 6,417,400 4,156,207 Increase (decrease)in accounts payable (179,887)31,090 Decrease in other current assets -42,722 Increase in other liabilities 3,107,922 235,845 Net cash provided by operating activities 20,677,284 22,538,433 Cash flows from capital financing activities: Interest paid on borrowings (11,369,664)(10,740,418) Payment of arbitrage interest (308,689)(1,333,192) Repayment of bonds (2,820,000)(2,650,000) Four Dam Pool Transfer Fund loan interest paid (6,368,525)(10,734,405) Return of proceeds from escrow restructuring 2,300,867 - Construction of capital projects (56,194)(1,978,657 Refund to State of Alaska for Bradley Lake Hydroelectric Project construction cost savings -(582,500) Net cash used in capital financing activities (18,622,205)(28,019,172) Cash flows from investing activities: Interest received from Bradley Lake Hydroelectric Project investments 2,170,296 2,289,484 Interest received from other investments 722,301 738,759 Net cash provided by investing activities 2,892,597 3,028,243 Net increase (decrease)in cash and investments 4,947,676 (2,452,496) Cash and investments at beginning of year 47,181,334 49,633,830 Cash and investments at end of year $52,129,010 47,181,334 See accompanying notes to financial statements. Notes to Combined Financial Statements Alaska Energy Authority (A Component Unit of the State of Alaska] June 30,1996 and 1995 {1}Organization and Operations The Alaska Energy Authority (Energy Authority)was created in 1976 by an act of the State of Alaska Legislature (Legislature), Alaska Statute 44.83.020.The Energy Authority is a public corporation and a component unit of the State of Alaska (State)estab- lished to promote the general welfare of the people in the State by reducing consumer power costs and encouraging long-term eco- nomic growth of the State by promoting,financing,developing and operating power production facilities in the State.Such facilities may operate on fossil fuels,waste energy and renewable energy resources,including hydroelectric power,wind,biomass,geothermal, tidal and solar. Two major bills affecting the Energy Authority became effective August 11,1993 (Chapters 18 and 19,SLA 1993).Major elements of the legislation were: State energy loan programs,the Power Cost Equalization Program,technical assistance programs and technology development functions were transferred from the Energy Authority to the Department of Community and Regional Affairs (DCRA). On August 12,1993,the board of directors of the Alaska Industrial Development and Export Authority (AIDEA),a publiccorporationandapoliticalsubdivisionoftheState,assumed responsibility as the Board of Directors of the EnergyAuthority.Concurrently,the Executive Director of AIDEA was also appointed as Executive Director of the Energy Authority. The corporate structure of the Energy Authority was retained but the ability to construct and acquire energy projects was eliminated. The Energy Authority retained its operating assets including the Four Dam Pool (Solomon Gulch,Swan Lake,Terror Lake and Tyee Lake Hydroelectric Projects),the Bradley Lake Hydroelectric Project,the Anchorage-Fairbanks Intertie and the Larsen BayHydroelectricProject.It was the intent of the legislation that ongoing operation of the operating assets be assumed by the electric utility companies that use or purchase power from them with oversight responsibility retained by the Energy Authority;this has occurred to the extent possible. (2)Summary of Significant Accounting Policies Basis of Accounting-Enterprise Fund Accounting:The accounts of the Energy Authority are organized as an Enterprise Fund. Accordingly,the financial activities of the Energy Authority are recorded using the full accrual basis of accounting,whereby revenues are recorded when earned and expenses are recorded when goods or services are received or the related liability is incurred.The Energy Authority does not apply pronouncements of the Financial Accounting Standards Board issued on or after November 30, 1989. Property,Plant and Equipment:Property,plant and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives. For hydroelectric plants financed through tax-exempt borrowings,interest costs on the borrowings,less any interest earned on the telated investments acquired with proceeds of the borrowings,are capitalized from the date of the borrowing until the assets are placed in service.Amortization of bond discounts during construction is also capitalized.Ordinary repairs and maintenance are expensed as incurred. Depreciation on property,plant and equipment is reflected as an expense in the combined statement of revenues and expenses. Depreciation expense on property,plant and equipment acquired through capital contributions is also presented as an operating expense.The estimated economic lives of the assets are as follows: Utility plant Life in yearsIntangible30-50 Production 30-50 Transmission 20-40 General 5-30 Nonutility plant purchases of furniture and equipment are expensed as such items are the property of the State. Investments:Investments are recorded at amortized cost. Contributed Capital:Property,plant and equipment acquired with funds from federal,state or other sources are accounted for as con- tributed capital. Income Taxes:The Internal Revenue Code provides that gross income for tax purposes does not include income accruing to a state orterritoryoranypoliticalsubdivisionthereofwhichisderivedfromtheexerciseofanygovernmentalfunctionorfromanypublicutili-ty.The Energy Authority is a political subdivision of the State and is therefore exempt from State and federal income taxes. Cash and Investments:Investments for the purpose of presenting the statement of cash flows are comprised of short-term,highly liq-uid investments.All of the Energy Authority's cash and investments are restricted. Notes to Combined Financial Statements Alaska Energy Authority (A Component Unit of the State of Alaska) June 30,1996 and 1995 (3)Cash and Investments Pursuant to various agreements relating to its operation,the Energy Authority 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: 1996 1995 Bradley Lake Hydroelectric Project: Capital reserve fund $13,392,890 13,392,890 Debt service fund 8,182,864 8,093,145 Unallocated construction fund 2,999,273 3,208,453 Renewal and contingency fund 5,000,009 5,000,009 Excess earnings fund 261,635 562,407 Revenue fund 900,605 481,307 Operating reserve fund 535,000 535,000 Operating fund 660,152 2,004,613 Subtotal 31,932,428 33,277,824 Four Dam Pool self-insurance fund 13,400,300 12,781,601 Four Dam Pool construction fund 358,090 342,819 Four Dam Pool operations fund 265,024 394,606 Four Dam Pool renewal and replacement revolving loan fund 179,835 244,284 Four Dam Pool self-help fund 3,343,057 - Power Development Fund 2,495,291 - Anchorage-Fairbanks Intertie operations fund 679 492 Larsen Bay Hydroelectric Project funds 154,173 139,413 Alaska Energy Authority administration fund 133 295 Total cash and investments $52,129,010 47,181,334 The Energy Authority's cash and investments are categorized below to give an indication of risk assumed by the Energy Authority at year-end.Category |includes investments that are insured,registered or collateralized with securities held by the Energy Authority or its agents in the Energy Authority's name.Category 2 includes uninsured and unregistered investments or collateralized investments,with securities held by the pledging financial institution's trust department in the Energy Authority's name.Category 3 includes uninsured and unregistered investments for which the securities are held by the counterparty,or by its trust department or agent but not in the Energy Authority's name.The carrying value approximates market value at June 30,1996: Carrying amount at Category |Category 2 Category 3 June 30,1996 USS.Treasury and Agency Securities $16,581,461 -149,696 16,731,157 Repurchase agreements -6,313,540 6,313,540 Other investments 28,930,140 154,173 29,084,313 $16,581,461 28,930,140 6,617,409 52,129,010 [4]Property,Plant and Equipment A summary of property,plant and equipment and related accumulated depreciation is as follows at June 30: 1996 1995 Utility plant:Intangible $2,988,936 2,996,169 Production 580,838,438 583,078,514 Transmission 339,021,585 339,021,585General7,602,803 7,600,167 930,451,762 932,696,435 Accumulated depreciation 218,067,103 195,021,172 Net property,plant and equipment $712,384,659 737,675,263 Notes to Combined Financial Statements Alaska Energy Authority {A Component Unit of the State of Alaska) Jone 30,1996 and 1995 (5)Long-term Debt Following is a summary of long-term debt at June 30: 1996 1995 Bradley Lake Power Revenue Bonds,First Series (a)$97,667,555 98,960,214 Bradley Lake Power Revenue Bonds,Second Series (a)57,263,119 57,999,249 Larsen Bay Fixed Rate Revenue Bonds (b)718,119 739,030 Arhitrage interest payable (c)275,453 530,142 Note payable to State of Alaska Four Dam Pool Transfer Fund (d)184,571,726 184,571,726 340,495,972 342,800,361 Less: Current portion of bonds payable 3,000,000 2,820,000 Current portion of arbitrage interest payable =308,690 Total long-term debt $337,495,972 339,671,671 (a)The Energy Authority issued the Power Revenue Bonds,First and Second Series,in September 1989 and August 1990,respec-tively,for the long term financing of the construction costs of the Bradley Lake Hydroelectric Project and refunded the EnergyAuthority's Variable Rate Demand Bonds which were issued in November 1985 to provide interim financing of the project.All of the revenues derived by the Energy Authority from the operation of the project and all moneys,securities and funds held or set aside are pledged and assigned to secure the payment of the principal of,redemption premium,if any,and interest on the bonds.No other revenues of the Energy Authority are pledged as security for the payment of the bonds.The Energy Authority collects from each power purchaser a percentage share of annual project costs.The Power Revenue Bonds,First and Second Series,mature annuallyeachJuly|through the year 2021 with interest rates ranging from 6.25%to 7.6%a year. (b)Larsen Bay Fixed Rate Revenue Bonds were issued May 1991 for the long term financing of a portion of the construction costs oftheLarsenBayHydroelectricProject.All of the revenues derived by the Energy Authority from the operation of the project are pledged and assigned to secure payment of the bonds.The bonds mature annually each April 1 through the year 2010 with interest rates ranging from 6.9%to 7.75%. (c)The arbitrage interest payable is due to the Internal Revenue Service for the excess of investment income on the proceeds of the Energy Authority'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.The Energy Authority maintains a separate account with the trustee and each year sets aside a sufficient amount to satisfy the liability. (d}The note payable to the State of Alaska Four Dam Pool Transfer Fund (formerly the Power Development Revolving Loan Fund) at June 30,1996 and 1995 is subject to the terms and conditions of a loan agreement effective October 28,1985,as amended.The note is due October 28,2030 and provides for accrual of interest and repayments thereof for the first fifteen years in an amount not less than the debt service component of the proceeds from the sale of power generated from the Solomon Gulch,Terror Lake,Swan Lake and Lake Tyee hydroelectric facilities (Four Dam Pool Project).However,principal repayment may occur under specific cir- cumstances.The principal balance as of October 28,2000 will be amortized in equal annual installments at an interest rate of 8%, but subject to the reopener of the debt service component of the wholesale power rate in the fifteenth and thirtieth anniversaries of the Power Sales Agreement hetween the Energy Authority and the Four Dam Pool Project power purchasers. Notes to Combined Financial Statements Alaska Energy Authority {A Component Unit of the State of flaska] June 39,1936 and 1935 Scheduled maturities of long-term debt as of June 30,1996 are as follows: Bradley Lake Larsen Four Dam Power Revenue Bonds Total Bay Pool First Second Bradley Revenue Transfer Maturity date Series Series Lake Bond Fund Loan Total 1997 $1,790,000 1,185,000 2,975,000 25,000 -3,000,000 1998 1,905,000 1,265,000 3,170,000 30,000 -3,200,000 1999 2,035,000 1,345,000 3,380,000 35,000 -3,415,000 2000 2,175,000 1,435,000 3,610,000 35,000 -3,645,000 2001 2,325,000 1,535,000 3,860,000 40,000 1,629,295 5,529,295 2002-2006 14,330,000 9,415,000 23,745,000 235,000 10,323,094 34,303,094 2007-2011 17,080,000 11,520,000 28,600,000 355,000 15,168,014 44,123,014 2012-2016 23,320,000 13,305,000 36,625,000 -22,286,788 58,911,788 2017-2021 32,950,000 18,880,000 51,830,000 -32,746,604 84,576,604 2022-2026 7,925,000 4,635,000 12,560,000 -48,115,503 60,675,503 2027-2031 --=-54,302,428 54,302,428 105,835,000 64,520,000 170,355,000 755,000 184,571,726 355,681,726 Bond discount and deferred interest (8,167,445)(7,256,881)(15,424,326)(36,881)-(15,461,207) Total $97,667,555 57,263,119 154,930,674 718,119 184,571,726 340,220,519 Interest expense on borrowings totaled $11,278,766 in 1996 and $17,783,270 in 1995.Obligations issued are not deemed to constitute a debt of the State. Other Debt:In 1982 the Energy Authority 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,the Energy Authority 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 combined financial statements of the Energy Authority.At June 30,1996,the unpaid principal balance of the notes was $34,162,951 and the trust assets had a cost of $31,690,219. (6)Project Information The Energy Authority maintains enterprise funds which account for the Four Dam Pool Project,Anchorage-Fairbanks Intertie, Larsen Bay Hydroelectric Project,Bradley Lake Hydroelectric Project and Alaska Energy Authority Administration. Notes to Combined Financial Statements Alaska Energy Authority (A Component Unit of the State of Alaska) June 50,1996 and 1995 The balance sheet as of June 30,1996 and the statement of revenues and expenses for the year then ended by project are as follows: Anchorage- Bradley Lake Fairbanks -Larsen BayHydroelectricFourDamIntertieHydroelectric CombinedBalancesheetAdministrationProjectPoolProjectProjectProjectTotal Current assets: Operating revenue receivable $636 -323,238 458,070 42,692 824,636 Accrued interest receivable -1,000,871 189,550 --1,190,421 Total current assets 636 1,000,871 512,788 458,070 42,692 2,015,057 Property,plant and equipment -306,601,978 498,002,504 124,245,687 1,601,593 930,451,762 Less accumulated depreciation -32,679,560 149,416,338 35,783,796 187,409 218,067,103 Net property,plant and equipment -273,922,418 348,586,166 88,461,891 1,414,184 712,384,659 Other assets -cash and investments -restricted 133 31,932,428 20,041,597 679 154,173 52,129,010 Total assets $769 306,855,717 369,140,551 88,920,640 1,611,049 766,528,726 Current liabilities: Accounts payable 657 322,774 223,258 401,610 4,538 952,837 Retainage payable -103,432 ---103,432 Current portion of bonds payable -2,975,000 --25,000 3,000,000 Current portion of arbitrage interest payable ------ Due to State of Alaska -other 1,559 -63,590 --65,149 Other accrued interest -5,207,863 --14,130 5,221,993 Other liabilities (812)(82,544)3,591,579 40,522 20,340 3,569,085 Total current liabilities 1,404 8,526,525 3,878,427 442,132 64,008 12,912,496 Long-term debt,net of current portion: Bonds payable -151,955,674 --693,119 152,648,793 Four Dam Pool Transfer Fund loan payable --184,571,726 --184,571,726 Arbitrage interest payable -275,453 -==275,453 Total long-term debt 152,231,127 184,571,726 -693,119 337,495,972 Fund equity: Contributed capital 12,887,327 162,975,045 318,766,180 124,249,576 922,680 619,800,808 Deficit (12,887,962)(16,876,980)(138,075,782)(35,771,068)(68,758)(203,680,550) Total fund equity (635)146,098,065 180,690,398 88,478,508 853,922 416,120,258 Total liabilities and fund equity $769 306,855,717 369,140,551 88,920,640 1,611,049 766,528,726 Statement of Revenues and Expenses Revenues: Revenue from operating plants $-13,054,838 1,898,114 1,476,154 180,537 16,609,643 Interest and investment income -2,058,101 821,727 2,376 8,247 2,890,451 Total revenues -15,112,939 2,719,841 1,478,530 188,784 19,500,094 Expenses: General and administrative -368,748 718,274 80,238 18,405 1,185,665 Plant operating -2,058,253 1,346,577 1,400,016 50,736 4,855,582Depreciation-6,962,654 12,643,752 3,401,493 38,032 23,045,931 Interest -11,181,937 17,673 4,800 74,356 11,278,766 Total expenses -20,571,592 14,726,276 4,886,547 181,529 40,365,944 Excess (deficiency)of revenues over expenses (5,458,653)(12,006,435)(3,408,017)7,255 (20,865,850) Deficit at June 30,1995 (12,887,962)(11,418,327)(126,069,347)=(32,363,051)(76,013)(182,814,700) Deficit at June 30,1996 $(12,887,962)(16,876,980)(138,075,782)(35,771,068)(68,758)(203,680,550) Notes to Combined Financial Statements Alaska Energy Authority (A Component Unit of the State of Alaska] June 30,1896 and 1995 (7)Pension Plan As of December 15,1993 employees of the Energy Authority became employees of AIDEA.Subsequent to that date,AIDEA assumed responsibility for compensation and benefits of the employees providing services to Energy Authority projects. All previous full-time employees of the Energy Authority participated in the State of Alaska Public Employees'Retirement System (PERS),a multiple employer public retirement system.AIDEA also participates in PERS.The Energy Authority is a part of the State of Alaska and detailed pension information is not generated for the Energy Authority.Total salaries for the AIDEA employees charged directly to the Energy Authority covered by PERS for the years ended June 30,1996 and 1995 amounted to approximately $80,000 and $333,000,respectively. The PERS-covered employees were required to contribute 6.75%of their annual salaries to PERS.The Energy Authority contributed the remaining amounts necessary to fund the actuarially determined contribution for the year.For the fiscal year ended June 30, 1996,the Energy Authority's contribution rate was 14.08%of covered payroll.The combined contribution requirement for the year ended June 30,1996 was approximately $16,000. Employees hired prior to July 1,1986 with five or more years of credited service are entitled to annual pension benefits beginning at normal retirement age fifty-five or early retirement age fifty.For employees hired after June 30,1986,the normal retirement age is sixty and the early retirement age is fifty-five.The normal annual pension benefit is equal to 2%of the member's highest three-year average monthly compensation for the first ten years of service,2.25%for the second ten years of service and 2.5%thereafter.All service earned prior to July 1,1986 is calculated using the 2%multiplier.Employees with thirty or more years of credited service may retire at any age and receive a normal benefit.Major medical benefits are provided without cost to all retirees first hired before July 1,1986.Members first hired after June 30,1986 may elect major medical benefits. The pension benefit obligation,the actuarial present value of credited projected benefits,is a standardized disclosure measure of the present value of pension benefits adjusted for the effects of projected salary increases estimated to be payable in the future as a result of employee service to date.The following is information related to the State as an employer taken as a whole and is as of June 30, 1995,the most recent actuarial valuation (in millions): Projected benefit obligation: Current retirees and terminated participants $1,400 Current employees 1,408 2,808 Net assets available for benefits 2,619 Unfunded pension benefit obligation $189 (8)Conduit Financing City and Borough of Sitka -Utility Revenue Bonds,Series 1992:In May 1992,the Energy Authority issued $56,890,000 tax-exempt bonds (Sitka Bonds)that allowed the City and Borough of Sitka (Sitka)to refinance its 1979 municipal bonds,resulting in significant debt service savings to Sitka.These obligations are not included in these financial statements.As of June 30,1996,the outstanding balance was $54,120,000. The Sitka Bonds are special obligations of the Energy Authority secured under a trust indenture by and between the Energy Authority and First Trust National Association,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 the Energy Authority under the trust indenture,the obligation of Sitka to make payments under its loan agreement with the Energy Authority and the money and securities held under the trust indenture,including a capital reserve fund. 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. (3)Risk Management The Energy Authority is exposed to various risks of loss related to torts;theft of,damage to,and destruction of assets;errors and omissions;injuries to employees;and natural disasters.The Energy Authority 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. 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 Combined Financial Statements Alaska Energy Authority {A Component Unit of the State of Rlaska) June 30,1996 and 1995 Property 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 isretained.However,the Energy Authority maintains a line of credit for $10,000,000,secured by a capital reserve fund,to cover theselfretainedrisksandothernoninsurablerisks. The Energy Authority's self-insurance for the FDP is funded through:(a)an annual insurance premium payment from the FDP pro- ject management committee,(b)initial borrowings from the Power Development Revolving Loan Fund totaling $6,500,000,(c) investment revenue from investment of the self insurance capital reserve and (d)revenues received under the interruptible power sales agreements. Anchorage-Fairbanks Intertie:The utilities participating in the Anchorage-Fairbanks Intertie operating agreement retain the proper-ty risk associated with the Anchorage-Fairbanks Intertie.The Energy Authority maintains a line of credit for $1,000,000 for cost ofrepairsthatwouldultimatelybereimbursedbytheutilitiesutilizingthefacility. Bradley Lake and Larsen Bay Hydroelectric Projects:The risks are covered hy 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 MachineryTheserisksarecovered by commercial insurance purchased through the State Division of Risk Management and a private carrier. Additionally,utilities benefiting from the use of the facilities owned by the Energy Authority participate in the responsibility for deductibles and self insured retentions under the terms of the respective agreements. Workers Compensation Insurance:The Energy Authority participates in the State Risk Management Pool.The risks are transferred to the pool and the premium is charged to the Energy Authority based on payroll expenditures. (10)Related Parties Alaska Industrial Development and Export Authority:Pursuant to understandings and agreements between AIDEA and the Energy Authority,AIDEA provides administrative,treasury,personnel,legal,data processing,communications,and other services to the Energy Authority. Four Dam Pool Project Management Committee:Effective October 28,1985,the Energy Authority entered into a long-term power sales agreement with utilities purchasing electric power from the FDP Project.Pursuant to the agreement a Project Management Committee (PMC)was formed.The PMC is comprised of a representative from the Energy Authority and each of the utilities. The participating utilities make monthly payments to the PMC,net of each utility's operating costs associated with the respective FDP facility,for the utility's share of total estimated annual costs,including debt service,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 the Energy Authority for a fixed annual administrative fee.The PMC makes annual payments to the Energy Authority for the debt service com- ponent of the wholesale power rate and for insurance. Anchorage-Fairbanks Intertie Operating Committee:Effective May 1,1986,the Energy Authority entered into an agreement with utilities using the Anchorage-Fairbanks 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 the Energy Authority and each of the utilities.The Energy Authority 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 he terminated by mutual agreement of the participants. Bradley Lake Project Management Committee:Effective December 7,1987,the Energy Authority entered into a power sales agree- ment with utilities purchasing electric power produced by the Bradley Lake Hydroelectric Project.Pursuant to the agreement,a Project Management Committee (PMC)was formed.The PMC is comprised of a representative from the Energy Authority and each of the utilities.The participating utilities make monthly payments directly to the bond trustee based on their respective percentage share of the estimated annual project costs for each fiscal year,including debt service,with an annual settlement to adjust the pay- ments to actual costs,which includes a fixed annual administrative fee to the Energy Authority. we.E Notes to Combined Financial Statements Alaska Energy Authority (A Component Unit of the State of Alaska] June 30,1996 and 1995 (Il)Bradley Lake Construction Funds Reimbursed to State Pursuant to the Bradley Lake Variable Rate Demand Bonds Indenture,the State deposited with the bond trustee $166,000,000 restricted to construction activities of the Bradley Lake Hydroelectric Project.The State funds were fully expended as of June 30, 1991.However,due to savings on construction costs,$12,082,500 was refunded to the State;$582,500 was remitted in 1995. (iz)Commitments and Contingencies Litigation:The Energy Authority,in the normal course of business,is involved in various claims and pending litigation.The State Department of Law manages all pending litigation of the Energy Authority,and any liability arising from the settlement of pending claims is a liability for which the Department of Law or the Energy Authority requests an appropriation from the Legislature to satisfy judgment in the event that the judgment exceeds available funds.In the opinion of management,the disposition of current claims and pending litigation are not presently expected to have a material adverse effect on the Energy Authority's combined financial statements. Four Dam Pool Project Repairs and Improvements:In August 1996 and July 1995 the Energy Authority received $10,953,419 and $4,000,000,respectively from the Four Dam Pool (FDP)purchasing utilities to be expended for repairs and improvements to the FDP projects,in lieu of interest payments on the note payable to the State's Four Dam Pool Transfer Fund.These funds were deposited into the Four Dam Pool Self-Help Fund.Additional amounts for repairs are expected to be required in the future,which may reduce Energy Authority income depending upon future State appropriations.The Energy Authority's commitments for future repairs to the FDP facilities approximates $26,000,000. (End of financial statements) This publication was released by the Alaska Energy Authority,produced at a cost of $3.98 per copy to report the activities and financial condition of the Authority,and was printed on recycled paper in Anchorage,Alaska by Pyramid Printing.Design and production by Northwest Strategies.This publication is required by AS 44.83.940 Alaska Energy Authority 480 West Tudor Road ®Anchorage,AK 99503 Tel.(907)269-3000 ©Fax (907)269-3044