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HomeMy WebLinkAboutAEA Annual Report 1995'ENERGY AUTHORITY ° :ye rs -;_| ;.a -- oo "--oo a a uo o vo Alaska.>>; :.oe __.Energy :i Authority . Shes "1995- Annual Report " S _ t ' i 1 [.na :,ah.i x , oe N L a re wer <.=ae 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. CONTENTS MISSION STATEMENT EXECUTIVE DIRECTOR'S STATEMENT AEA PROJECTS INDEPENDENT AUDITORS'REPORT FENANCTAL STATEMENTS AEA BOAREL MEMBERS bewSNNORoH EXECUTIVE DIRECTOR'S STATEMENT When the Alaska Legislature restructured the Alaska Energy Authority (AEA)in 1993,it turned oversight responsibilities for AEA- owned projects over to the Alaska Industrial Development and Export Authority (AIDEA),and directed AEA to transfer day-to-day operations of its projects to the private sector.This transfer is now complete and local utilities now operate the six AEA hydro- electric projects and oversee the Anchorage-Fairbanks Intertie.With the short-term mandate fulfilled,AEA can now shift its focus to other areas. The Alaska Legislature clearly intended that AEA get out of the energy business and it is AEA desire to transfer ownership of its projects to the local utilities wherever it can.These transfers,however,are highly complicated procedures that require the reso- lution of federal license transfers,assignment of permit obligations and compliance with statutory and constitutional require- ments.While it will take months,maybe years,to finalize the process,the first steps have been taken. Below is a summary of the steps taken with various projects: Negotiations for transfer have commenced with the utilities that operate the projects which are collectively called the Four Dam Pool Project.The Authority is hopeful legislation will be introduced and passed in the 1996 Alaska legislative session approving the transfer of the projects to the utilities.However,there are a number of issues still to be resolved before such legislation is introduced. From an operational standpoint of the Four Dam Pool Project,much needed repairs to the Terror Lake and Tyee Lake Hydroelectric Projects commenced in 1995.The repairs are scheduled to be completed in 1997. Power generation at the Bradley Lake Hydroelectric Project continues to exceed forecasts and the project is operating with mini- mal problems. Because of the reduced AEA role,there are a number of potential energy projects under review and consideration that may be financed through AIDEA.These projects include the Black Bear Lake project on Prince of Wales Island and the Goat Lake project near Skagway. Respectfully submitted, de.PSU William R.Snell Executive Director ALASKA ENERGY 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,AEAs 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.(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 and projects under review and consideration.Due to the reduced role of AEA, energy projects that may be acquired or constructed may be financed through AIDEA. [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 approximately $328 million (including reserve fund balances), 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.In 1994 and 1995,AEA returned a total of $12.1 million to the state's General Fund from surplus Bradley Lake appropriations that were reimbursed as a result of cost savings on project construction. [Four Dam Poo.PRovect | The Solomon Gulch,Swan Lake,Terror Lake and Tyee Lake 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 conducting divestiture negotiations.In addition,AEA has initiat- ed major repairs to the Tyee project. |ANCHORAGE-FAIRBANKS INTERTIE | The 170-mile,345-kV transmission line runs between Willow and Healy.The Intertie allows Golden Valley Electric Association in Fairbanks to purchase electricity produced less expensively 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.AEA intends to initiate divestiture discussions in 1996. [|LARSEN BAY HYDROELECTRIC PRovecT | This 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. REPORTINDEPENDENTAUDITORS' THE BOARD OF DIRECTORS ALASKA ENERGY AUTHORITY: We have audited the accompanying combined balance sheet of Alaska Energy Authority (A Component Unit of the State of Alaska)as of June 30,1995,and the related combined statements of revenues and expenses,changes in equity,and cash flows for the year 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 audit.The accompanying combined financial statements of Alaska Energy Authority as of June 30,1994 were audited by other audi- tors whose report thereon dated September 23,1994 expressed an unqualified opinion on those combined statements. We conducted our audit 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 mis- statement.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 manage- ment,as well as evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis for our opinion. In our opinion,the 1995 combined financial statements referred to above present fairly,in all material respects,the finan- cial position of Alaska Energy Authority (A Component Unit of the State of Alaska)as of June 30,1995,and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. KKIMG Fear Merwe LLP August 28,1995 Anchorage,Alaska COMBINED BALANCE SHEETS ALASKA ENERGY AUTHORITY (A COMPONENT UNIT OF THE STATE OF ALASKA) Juneé 30,1995 and 1994 --a te ---wee ee ee ee 2 ASSETS 8 19958 1994 Property,plant and equipment (note 4)$932,696,435 930,822,079 |_Less accumulated depreciation 195,021,172 171,954,951 |- _Net property,plant and equipment "737,675,263 SCSC*«*58,867,128 | __Other assets -cash and investments-restricted (note 3);47,181,334 49,633,830 Current assets: Operating revenue receivable 7,242,036 11,398,243 Accrued interest receivable 1,138,567 1,150,939 |___Other ee _-7 ; -42,722_ _Total current assets ee _-____8,380,603 12,591,904 me ee We ee.$__793,237,200 ss 821,092,862 __LIABILITIESAND FUND Equity ae ee - Fund equity: Contributed capital 619,800,808 619,800,808 i Defictt -(182,814,700)(163,607,345)||ss Totalfundequity a __436,986,108 ==456,193,463|[- Long-term debt,net of current portion (note 5): :Bonds payable 154,878,493 156,975,681 Power Development Revolving Loan Fund loan payable 184,571,726 184,571,726 | a Arbitrage interest payable _ee _221,452 460,992 {______Total long-term debt _-339,671,671 _342,008,399 | Current liabilities: |Accounts payable 1,132,724 1,101,634 Retainage payable 103,432 207,733 Current portion of bonds payable (note 5)2,820,000 2,650,000 Current portion of arbitrage interest payable (note 5)308,690 1,333,192 Due to State of Alaska: Refund of Bradley Lake Hydroelectric Project construction cost savings -582,500 Power Development Revolving Loan Fund accrued interest 6,368,525 10,734,405 Other 71,996 659,434 Other accrued interest 5,312,891 5,396,784 __Other liabilities :461,163 -_-s-225,818| ___Total current liabilities -a 16,579,421 22,891,000| $793,237,200 821,092,862beseeestrSeSSOWotSE= SEE ACCOMPANYING NOTES TO COMBINED FINANCIAL STATEMENTS. COMBINED STATEMENTS OF REVENUES AND EXPENSES ALASKA ENERGY AUTHORITY (A COMPONENT UNIT OF THE STATE OF ALASKA) Years Enpep June 30,1995 anp 1994 ae a oo ___1995 (1994 Revenues:| State of Alaska appropriations $-1,091,603 | Revenue from operating plants 23,847,208 28,134,190 ||___Interestand investment income _2,898,590 83,110,395 __Totalrevenues we ee 8,745,798 -_32,336,188 _| Expenses: General and administrative 844,941 858,740 | Plant operating 4,258,721 5,624,056 |Depreciation 23,066,221 23,012,984 | Interest -oo 17,783,270 =2,225,485 ____Total expenses 45,953,153 1,721,265| Deficiency of revenues over expenses $(19,207,355)(19,385,077) SEE ACCOMPANYING NOTES TO COMBINED FINANCIAL STATEMENTS. COMBINED STATEMENTS OF CHANGES IN EQUITY ALASKA ENERGY AUTHORITY (A COMPONENT UNIT OF THE STATE OF ALASKA) Years EnpbeD JUNE 30,1995 and 1994 Accumulated Contributed ee _;oe _____deficit oe capital =-_-Totalequity _ Balance at June 30,1993 $(144,222,268 )619,800,808 475,578,540 Deficiency of revenues over expenses _(19,385,077)-(19,885,077) 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 NED ACCOMPANYING NOTTS PO COMBINED Financ IAL STATEMENTS. |___Transfer of discontinued segment |__Cash and investments at end ofyear Depreciation Repayment of bonds Interest paid on borrowings Repayment of bonds Cash flows from investing activities: COMBINED STATEMENTS OF CASH FLOWS ALASKA ENERGY AUTHORITY (A COMPONENT UNIT OF THE STATE OF ALASKA) YEARS ENDED JUNE 30,1995 AnD 1994 oo ;oe 1995 1994 Reconciliation of deficiency of revenues over expenses to net cash provided by operating activities: Deficiency of revenues over expenses $(19,207,355)(19,385,077) Adjustments to reconcile deficiency of revenues over expenses to net cash provided by operating activities: 23,066,221 23,012,984 Amortization of deferred interest and bond discount 679,172 634,198 Amortization of bond issuance costs 43,640 44,266 Bond interest expense 10,656,525 10,812,616 Power Development Revolving Loan Fund interest 6,368,525 10,734,405 Investment income (2,898,590)(3,110,395) Changes in assets and liabilities: Increase (decrease)in other due to State of Alaska (635,569)1,247,009 (Increase)decrease in operating revenue receivable 4,156,207 (832,870) Increase in accounts payable 31,090 717,444 (Increase)decrease in other current assets 42,722 (86,887) _____Increase in other liabilities 235,845 256,974 Net cash provided by operating activities __,22,538,433 24,044,667 Cash flows from noncapital financing activities: (2,495,000) Refund to State of Alaska for Bradley Lake Hydroelectric Project construction cost savings -(11,500,000) }to - =(110,178) _Net cash used in noncapital financing activities ee 2 (14,105,178)| Cash flows from capital financing activities: (10,740,418)(10,902,835) Payment of arbitrage interest (1,333,192 }- (2,650,000)- Power Development Revolving Loan Fund loan interest paid (10,734,405)(10,203,870) Power Development Revolving Loan Fund interest from investments -(45,697)| Construction of capital projects (1,978,657)(3,029,056) Refund to State of Alaska for BradleyLakeHydroelectric Projectconstructioncost savings _(582,500)7d _.Net cash used in capital financing activities (28,019,172)(24,181,458)| Interest received from Bradley Lake Hydroelectric Project investments 2,289,484 3,417,892 |____Interest received from other investments _____738,759 411,589 ____Net cash providedby investing activities a _3,028,243 3,829,481 | Net decrease in cash and investments (2,452,496 )(10,412,488) Cash and investmentsatbeginning of year 49,633,830 60,046,318 | $47,181,334 49,633,830_ SEE ACCOMPANYING NOTES TO COMBINED FINANCIAL STATEMENTS. NOTES TO COMBINED FINANCIAL STATEMENTS ALASKA ENERGY AUTHORITY (A COMPONENT UNIT OF THE STATE OF ALASKA) |June 30,1995 ann 1994 LL .a wee [(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)established to promote the general welfare of the people in the State by reducing consumer power costs and encouraging long-term economic 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 public corporation and a political subdivi- sion of the State,assumed responsibility as the Board of Directors of the Energy Authority.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 Bay Hydroelectric Project.It is 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. 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 related 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 years Intangible 30-50 Production 30-50 Transmission 20-40 |General 5-80L 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 contributed capital. 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 governmental function or from any public utility.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 liquid investments.All of the Energy Authority's cash and investments are restricted. NOTES TO COMBINED ALASKA ENERGY AUTHORITY (A COMPONENT UNIT OF THE STATE OF ALASKA)|June 30,1995 anp 1994 [(3)CASH AND INVESTMENTS | FINANCIAL STATEMENTS 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: _;a __1995 Bradley Lake Hydroelectric Project: Capital Reserve Fund $13,392,890 Debt Service Fund 8,093,145 Unallocated Construction Fund 3,208,453 Renewal and Contingency Fund 5,000,009 Excess Earnings Fund 562,407 Revenue Fund 481,307 Operating Reserve Fund 535,000 |__Operating Fund _ee oe _2,004,613 33,277,824 Four Dam Pool Self-insurance 12,781,601 Four Dam Pool Construction 342,819 Four Dam Pool Operations 394,606 Four Dam Pool Renewal and Replacement Revolving Loan Fund 244,284 Anchorage-Fairbanks Intertie Operations 492 Larsen Bay Hydroelectric Project 139,413__Alaska Energy Authority Administration _ 295 ____Total cash and investments $47,181,334 __.1994 13,392,890 8,006,623 3,890,215 5,000,009 1,796,003 486,443 535,000 1,516,838 34,624,021 11,776,124 1,372,045 582,684 1,111,167 11,082 156,707 49,633,830 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 1 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 counter- party,or by its trust department or agent but not in the Authority's name.The carrying value approximates market value at June 30,1995:PP. |U.S.Treasury and Agency securities|Repurchase agreements|___Other investments $12,907,305 a ne eee [(4)Property,PLANT AND EQUIPMENT | ___$12,907,305___90,060,054___4,204,975 _ A summary of property,plant and equipment and related accumulated depreciation is as follows at June 30: _1995 Utility plant: Intangible Production Transmission General $2,996,169 583,078,514 339,021,585 7,600,167 ce |Accumulated depreciation = ____Net property,plant andequipment 932,696,435 Category 1 Categoryé -Category3 4,065,562 =30,069,054 139,413 195,021,172 -$_787,675,263 Carrying amount at June 30,1995 "12,907,305 4,065,562 30,208,467 -1994 2,974,654 581,278,877 339,032,337 7,536,211_ 930,822,079 _177,954,951 758,867,128 47,181,334 NOTES TO COMBINED FINANCTAL STATEMENTS 'ALASKA ENERGY AUTHORITY (A COMPONENT UNIT OF THE STATE OF ALASKA) June 30,1995 anp 1994 [(5)Lone-term Dest | Following is a summary of long-term debt at June 30: ; 1995 1994BradleyLakePowerRevenueBondFirstSeries(a)_$98,960,214 ==---- « S2CS 7B, Bradley Lake Power Revenue Bond Second Series (a)97,999,249 58,687,687 Larsen Bay Fixed Rate Revenue Bond (b)739,030 759,822 Arbitrage interest payable (c}530,142 1,794,184 Note payable to State of Alaska Power Development Revolving Loan Fund loan (¢)184,571,726 ; 184,571,726 342,800,361 345,991,591 Less: Current portion of bonds payable 2,820,000 2,650,000 Current portion of arbitrageinterest payable ;; 308,690 1,333,192 _Totallong-termdebt $339,671,671 342,008,399 (a)The Energy Authority issued the power revenue bonds,first and second series,in September 1989 and August 1990,respectively,for the long-term financ- ing of the construction costs of the Bradley Lake Hydroelectric Project and refunded the Energy Authority'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 heid or set aside are pledged and assigned to secure the payment 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.After the date of commercial operation of the project,the Energy Authority shall charge and collect from each power purchaser a percentage share of annual project costs.The power revenue bonds,first and sec- ond series,mature annually each July 1 through the year 2021 with interest rates ranging from 6.4%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 of the Larsen Bay Hydroelectric Project.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 6.8%to 7.8%. (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 for the Power Development Revolving Loan Fund at June 30,1995 and 1994 is subject to the terms and conditions of a loan agreement effective October 28,1985,as amended. The loan proceeds are restricted to financing initial hydroelectric projects under the energy program for the State.Any interest earned on the unexpended proceeds of the note must be paid to the State.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 circumstances. 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 between the Energy Authority and the Four Dam Pool Project power purchasers. 11 12 NOTES TO COMBINED FINANCIAL STATEMENTS ALASKA ENERGY AUTHORITY (A COMPONENT UNIT OF THE STATE OF ALASKA) June 30,1995 anp 1994 Scheduled maturities of long-term debt as of June 30,1995 are as follows: BradleyLake Larsen Power Power Revenue Bonds Total Bay Development First Second Bradley Revenue _Revolving Loan Maturity date_a Series -Series Lake --s Bond ---s Fund Loan Total|Fiscal year ending:7 Oo 1996 $1,680,000 1,115,000 2,795,000 25,000 -2,820,000 1997 1,790,000 1,185,000 2,975,000 30,000 -3,005,000 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 | 2001-2005 13,385,000 8,800,000 22,185,000 220,000 7,341,784 29,746,784 2006-2010 16,590,000 11,365,000 27,955,000 325,000 13,004,127 41,284,127 2011-2015 21,740,000 12,565,000 34,305,000 80,000 19,107,329 53,492,329 2016-2020 30,830,000 17,605,000 48,435,000 -28,074,934 76,509,934 2021-2025 15,385,000 8,955,000 24,340,000 -41,251,289 65,591,289 2026-2030 ----60,611,677 60,611,677 2031 -- .-2.15,180,586 15,180,586 107,515,000 65,635,000 173,150,000 780,000 184,571,726 358,501,726 _Bond discount anddeferred interest.(8,554,786)(7,635,751)(16,190,537)(40,970)===(16,231,507) Total $98,960,214 --57,999,249 156,959,463 739,030 184,571,726 342,270,219 Interest expense on borrowings totaled $17,783,270 in 1995 and $22,225,485 in 1994.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 provide for quarterly principal and interest payments to the Rural Electrification Administration (REA)in connection with the Solomon Gulch Hydroelectric Project.At June 30,1995,the unpaid principal balance was $35,269,075.Concurrent with the assumption,the Energy Authority deposited with a trustee an investment in treasury notes with a 14%rate of return suffi- cient to satisfy and provide for timely repayment of all principal and interest due on the assumed REA loans.Accordingly,the loans and related trust assets are not included in the combined financial statements of the Energy Authority.At June 30,1995,the assets in this trust have a carrying value of $20,930,206. [(6)PRovECT INFORMATION AND DISCONTINUED OPERATION | 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. New legislation,Chapter 18,SLA 1993,mandated transfer of rural energy programs administered by the Energy Authority to DCRA (note 1).The legislation signed by the Governor on June 11,1993 also mandated that the transfer be completed no later than December 31,1993.The Energy Authority recorded the transfer as discontinued operation in 1994 and 1993 according to Accounting Principles Board Opinion No.30. Programs transferred included the state energy loan programs,the power cost equalization program,technical assistance programs and technology develop- ment functions.Since those programs were accounted for in separate funds of the Energy Authority,all assets and liabilities of those funds were transferred. The funds transferred included:Administration Fund,Rural Facilities Operation Fund,Power Project Loan Fund,Rural Electrification Revolving Loan Fund and Power Development Revolving Loan Fund. The responsibility for the Energy Authority's rural energy programs was accepted by the newly created Division of Energy within DCRA,effective August 18, 1993. NOTES TO COMBINED FINANCIAL STATEMENTS ALASKA ENERGY AUTHORITY (A COMPONENT UNIT OF THE STATE OF ALASKA) June 30,1995 ano 1994 The balance sheet as of June 30,1995 and the statement of revenues and expenses for the year then ended by project are as follows: Anchorage- Bradley Lake Fairbanks Larsen Bay Hydroelectric Four Dam Intertie Hydroelectric Combined BALANCE SHrET Administration Project Pool Project Project Project total Assets Current assets: Operating revenue receivable $636 -6,701,502 491,915 47,983 7,242,036 Accrued interest receivable -1,004,616 133,951 --1,138,567 Total current assets _636 1,004,616 6,835,453 491,915 47,983 8,380,603 Property,plant and equipment -306,545,783 500,303,371 124,245,687 1,601,594 932,696,435 Less accumulated depreciation -29,716,906 136,772,586 32,382,303 149,377 =195,021,172 Net property,plant and equipment -280,828,877 +-363,530,785 91,863,384 _1,452,217 737,675,263 Other assets -cash and investments -restricted 295 33,277,824 13,763,310 492 139,413 47,181,334 7 $931 315,111,317 384,129,548 92,355,791 1,639,613 793,237,200 Liabilities and fund equity Current liabilities: Accounts payable 1,243 416,181 483,809 230,662 729 1,132,724 Retainage payable -103,432 ---103,432 Current portion of bonds payable -2,795,000 °-25,000 2,820,000 Current portion of arbitrage interest payable -308,690 ---308,690 Due to State of Alaska,Power Development Revolving Loan Fund accrued interest --6,368,525 --6,368,525 Due to State of Alaska -other 6,129 -65,867 --71,996 Other accrued interest -5,298,143 --14,748 5,312,891 Other liabilities (5,805)247,238 |(57,312)238603 38439 461,163 | Total current liabilities _;;1,567 -s-9,168,684 --6,860,989 _469,265 -_-*78,916 16,579,421 _ Long-term debt,net of current portion: Bonds payable -154,164,463 --714,030 154,878,493 Power Development Revolving Loan Fund loan payable --184,571,726 --184,571,726 _Arbitrage interest payable oo os 221,452 -oe 221,452| Total long-term debt _>.154,385,915 184,571,726 _-.___.714,030 339,671,671 _ Fund equity: Contributed capital 12,887,326 162,975,045 318,766,180 124,249,577 922,680 619,800,808 Deficit oe (12,887,962)(11,418,327)(126,069,347)(32,363,051)(76,013)(182,814,700) Total fund equity (636)151,556,718 _192,696,833 91,886,526 846,667 436,986,108 $931 315,111,317 384,129,548 92,355,791 1,639,613 793,237,200 STATEMENTS OF REVENUES AND EX®ENSES Revenues: Revenue from operating plants $-13,919,968 8,503,425 1,261,695 162,120 23,847,208 Interest and investment income -2,124,209 762,257 4,408 7,716 2,898,590 Total revenues -16,044,177 9,265,682 1,266,103 169,836 26,745,798 Expenses: General and administrative 636 229,066 492,733 96,200 26,306 844,941 Plant operating -1,845,085 1,201,754 1,168,706 43,176 4,258,721 Depreciation -6,954,163 =12,672,533 3,401,493 38,032 23,066,221 Interest ee -_11,314,889 6,388,913 1,197 |_78,271 _17,783,270 Totalexpenses 636 -20,343,203 20,755,933 4,667,596 185,785 =45,953,153 Deficiency of revenues over expenses $(636)(4,299,026)(11,490,251)(3,401,493) (__(1549)(19207355) 14 NOTES TO COMBINED FINANCIAL STATEMENTS ALASKA ENERGY AUTHORITY (A COMPONENT UNIT OF THE STATE OF ALASKA) June 30,1995 ano 1994 [|(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 com- pensation 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 gen- erated for the Energy Authority.Total salaries for the Energy Authority and AIDEA employees that provided services to the Energy Authority covered by PERS for the years ended June 30,1995 and 1994 amounted to $332,800 and $768,269,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 30,1995,the Energy Authority's contribution was 15.17%of covered payroll.The combined contribution requirement for the year ended June 30,1995 was $73,000. 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 30,1994,the most recent actuarial valuation (in millions): Projected benefit obligation:| Current retirees and terminated participants $1,293 Current employees 1,338 2,631 Net assets available for benefits 2,412 Unfunded pension benefit obligation -$219 [(8)ConpurT FINANCING | City and Borough of Sitka -Utility Revenue Bonds,Series 1992:In May 1992,the Energy Authority issued $56,890,000 tax-exempt bonds (Bonds)that allowed the City and Borough of Sitka to refinance its 1979 municipal bonds,resulting in significant debt service savings to Sitka.These obligations are not included in these financial statements. The Bonds are special obligations of the Energy Authority secured under a trust indenture by and between the Energy Authority and Seattle-First National Bank,as trustee.The 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 the City held by the Energy Authority under the trust indenture,the obligation of the City 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 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 sub- division 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 the City is pledged for the payment of the Bonds. [(9)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 employ- ees;and natural disasters.The Energy Authority obtains coverage for its risks through 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. Property -Boiler and Machinery:The Energy Authority covers these risks arising from its ownership of hydroelectric and transmission facilities through a combination of acquisition of commercial coverage and risk retention. |NOTES TO COMBINED FINANCIAL STATEMENTSALASKAENERGYAUTHORITY(A COMPONENT UNIT OF THE STATE OF ALASKA) June 30,1995 anp 1994 a.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 inexcessof$10,000,000 up to $60,000,000.The risk of losses for the first $10,000,000 is retained.However,the Authority maintains a line of credit for $10,000,000,secured by a capital reserve fund to cover the self-retained risks and other non-insurable risks. The Energy Authority's self-insurance for the FDP is funded through:{a)annual insurance premium payment from the FDP project management com- mittee,(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 property risk associated with the Anchorage-Fairbanks Intertie.The Energy Authority maintains a line of credit for $1,000,000 for cost of repairs that would ultimately be reimbursed by the utilities utilizing the facility. 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. b.Boiler and Machinery These risks are covered 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 premi- um 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 utili- ties 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 kilo- watt hours purchased each month,with an annual settlement to adjust the payments to actual cost.The PMC makes monthly payments for a fixed annual administrative fee and the Energy Authority's share of annual payments for debt service component 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 opera- tion 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. Bradley Lake Project Management Committee:Effective December 7,1987,the Energy Authority entered into a power sales agreement with utilities purchas- ing 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 payments to actual costs,which includes a fixed annual administrative fee to the Energy Authority. [(11)Braptey 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 activi- ties 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 and $11,500,000 were remitted in 1995 and 1994,respectively. 15 16 NOTES TO COMBINED FINANCIAL STATEMENTS ALASKA ENERGY AUTHORITY (A COMPONENT UNIT OF THE STATE OF ALASKA) JUNE 30,1995 AND 1994 [(12)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 man- ages 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 is not presently expected to have a material adverse effect on the Authority's combined financial statements. Four Dam Pool Project Repairs and Improvements:In July 1995 the Energy Authority received $4,000,000 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 on the Power Development Revolving Loan Fund.Additional amounts for repairs are expected to be required in the future,which may reduce Energy Authority income depending upon future State appropriations. (End of financial statements.) Chairman:Harry J.Porter,Civic leader and retired CEOVice-Chairman:|Wilson Hughes,Executive Vice President and General Manager,GCIOtherBoardMembers:_Willie Hensley,Commissioner of Alaska Department of Commerce and Economic Development Wilson L.Condon,Commissioner of Alaska Department of Revenue Joe Perkins,Commissioner of Alaska Department of Transportation and Public Facilities This publication was released by the Alaska Energy Authority,produced at a cost of $4.43 per copy to report the activities and financial condition of the Authority,and was printed on recycled paper in Anchorage,Alaska by Alaska Printing.Design and production by Northwest Strategies.This publication is required by AS 44.83.940. .-a ,. A.-8 . ;-oa . a tr: iS meg 2 f 2s je =i" ra 'bet ee x -_a ;cs 2, ne :LA :NL ' .oi_a 5 i eos - 'ae” L 4 . of " S -a4 7 T ln - we Lon my © - ”__ .:r m7 ' > -2S : 4 ro, s S :-ee -2 LTAoeoNN' 4 poe " . 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