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12-16-1998 BM Breakroom
<riesALASKA ENERGY AUTHORITY Board Meeting December 16,1998 'aindas.Breakroom Seaestigs tele f :pel redeGSyi,ST x tty E¢ Baty,y =ynebiepreieeeai)ea ae en ie page es ay ilerie(fh SR ad a SSOPPESRS nicHS ****@ke are ALASKA INDUSTRIAL DEVELOPMENT cEak@ANDEXPORTAUTHORITY/-a:@EEEZS ENERGY AUTHORITY xk * 480 WEST TUDOR ANCHORAGE,ALASKA 99503 907 /269-3000 FAX 907 /269-3044 AGENDA ALASKA ENERGY AUTHORITY Board of Directors December 16,1998 Anchorage and Juneau,Alaska 1.CALL TO ORDER 10. BOARD OF DIRECTORS ROLL CALL PUBLIC ROLL CALL PUBLIC COMMENTS PRIOR MINUTES -June 16,1998 OLD BUSINESS NEW BUSINESS A.Financial Statements/Audit Presentation B.Bradley Lake Refunding,Series 5,Resolution #1998-03 DIRECTOR COMMENTS A.Director's Status Report of AEA Programs and Projects e Tango Settlement Update e Tyee Lake Update e Four Dam Pool Deficiencies Update B.Next Meeting Date BOARD COMMENTS ADJOURNMENT hiall\bjfiboard\agenda1 ALASKA INDUSTRIAL DEVELOPMENT =AND EXPORT AUTHORITY /=ALASKA@mx™=ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE,ALASKA 99503 907 /269-3000 FAX 907 /269-3044 ALASKA ENERGY AUTHORITY BOARD OF DIRECTORS December 16,1998 -12:00 p.m. Anchorage and Juneau,Alaska 1.CALL TO ORDER Chairman Hughes called the meeting of the Alaska Energy Authority to order on December 16, 1998 at 12:00 p.m.A quorum was established. 2.BOARD OF DIRECTORS ROLL CALL Roll call was requested.Directors present in Anchorage:Mr.Wilson Hughes (Chairman/Public Member),Deputy Commissioner Ross Kinney (Designee for Department of Revenue Commissioner),Commissioner Deborah Sedwick (Department of Commerce and EconomicODevelopment),and Commissioner Joe Perkins (Department of Transportation and PublicFacilities). Directors present in Juneau:Mr.Robert Loescher (Public Member). 3.PUBLIC ROLL CALL AIDEA staff present in Anchorage:D.Randy Simmons (Executive Director),Keith A.Laufer (Financial &Legal Affairs Manager),Valorie Walker (Deputy Director -Finance),David E.Germer (Acting Business Development Manager),Dennis V.McCrohan (Deputy Director -Project Development &Operations),Jim McMillan (Deputy Director --Credit),Katelyn Markley (Development Specialist),and Brenda J.Fuglestad (Administrative Assistant). Others attending in Anchorage:Brian Bjorkquist (Department of Law),Kathy Porterfield (KPMG Peat Marwick),Ken Vassar and Cindy Cartledge (Wohlforth,Argetsinger,et al),Jim Dokoozian (Locher Interests Ltd.),John Moore (Prudential Securities),Jeff Brown (Goldman Sachs),and Joe Griffith (Chugach Electric). 4.PUBLIC COMMENTS There were no public comments. 5.PRIOR MINUTES -June 16,1998OTheJune16,1998,minutes were unanimously approved as presented. AEA Board Meeting December 16,1998 Meeting Minutes Page 2 6.OLD BUSINESS There was no old business. 7.NEW BUSINESS TA.Financial Statements/Audit Presentation Ms.Kathy Porterfield,Managing Partner with KPMG Peat Marwick LLP,summarized the audited financial statements and letter to the Board. Ms.Porterfield said the purpose of the audit is for KPMG to gain reasonable assurance that the financial statements are free of material misstatement.KPMG conducted appropriate audit procedures and has concluded that the financial statements are fairly stated in all material respects in accordance with generally accepted accounting principles,resulting in an unqualified or a clean opinion.KPMG obtained reasonable assurance during the audit that the financial statements are free of material misstatement. Ms.Porterfield said there were two changes in accounting policies in 1998.The first is a new accounting pronouncement which involves pension accounting.AEA adopted this new pronouncement as required,but it did not have an impact on the Authority's net income.The other is with regard to the accounting for the Authority's investments.The Authority's investments are now at fair value as opposed to amortized cost.Neither change had any material affect on the financial statements but they are disclosed. Ms.Porterfield said the Authority has an effective system of internal control in place. 7B.Resolution No.1998-03,A Supplemental Resolution Authorizing the Issuance,Sale and Delivery of Power Revenue Refunding Bonds,Fifth Series (Bradley Lake Hydroelectric Project),in an Aggregate Principal Amount Not to Exceed $32,000,000 and Determining Related Matters Mr.Laufer reviewed Resolution No.1998-03 stating the Bradley Lake Hydroelectric Project is a project owned by the Alaska Energy Authority which serves the purchasing utilities (which are all the utilities in the Railbelt).The project was financed in 1989 by the issuance of the Authority's First Series Bonds and in 1990 by the Second Series Bonds.The bonds are general obligations of the Alaska Energy Authority secured by the power sales agreement from the Bradley Lake Project and supported by the moral obligation of the state.Last year,at the request of the purchasing utilities,the Authority entered into a forward refunding transaction whereby the Authority agreed to sell its Third and Fourth Series Bonds for the purpose of refunding portions of the First and Second Series Bonds.It was a forward transaction because the bonds are "private activity bonds”under federal tax law and therefore not eligible for advance refunding.In the 1998 transaction,AEA provided for the refunding of all the bonds with two exceptions:1)there were capital appreciation bonds that could not be refunded,and 2)the final maturity of the First Series Bonds was not refunded.The purpose of the current transaction is to refund a portion of the final maturity of the First Series Bonds. Mr.Laufer said Resolution No.1998-03 authorizes the Authority to enter into a forward refunding transaction,whereby the Authority commits to issue refunding bonds which will be used to refund the final maturity of the First Series Bonds.The resolution grants authority to the Executive AEA Board Meeting December 16,1998 Meeting Minutes Page 3 Director to approve the pricing and finalize the documents to consummate the transaction. However,before the Executive Director can enter into any documents to consummate the transaction,the Bradley Lake Project Management Committee ("PMC”)consisting of the utilities that actually purchase power,must approve the transaction and the form of the documents.This approval is necessary because it is the purchasing utilities,not the Authority,that ultimately provides the revenues to pay the debt service.The purchasing utilities are also the beneficiaries of this refunding transaction. Mr.Griffith,Chugach Electric Association,said the PMC has considered the economics of the proposed deal and has worked through many of the issues.The PMC remains convinced that this is an appropriate action at this time and we are on track for early next week to make a decision on how to proceed.There are two options before us:1)to do a forward,and 2)to wait for the call date.It looks like,with the way the market is going,the best way will be to do the forward.Suffice it to say that the PMC is supportive of this and we do not see any major hurdles that we don't think we can't get over between now and what we hope will be the pricing date during the first week of January.He said he would answer any questions the Board might have from the perspective of the power purchasers. Mr.Moore,Prudential Securities,said that Prudential approached the Authority and the power purchasers in early October with a refunding analysis for the First Series Bonds due in 2021.As mentioned earlier,when the refunding commitment occurred a year ago,it didn't make economic sense to refund the 2021 bonds.We are a year closer to the call date and interest rates have come down so that a term bond,in the current market,would provide approximately $3.5 million of net present value savings.That works out to approximately 11%-12%net present value savings for the bonds that we are refunding.This results in approximately $300,000 savings per year from the year 2000 through and including the year 2014.The savings will be shared by all of the participating utilities.We are currently finalizing documents and we will be meeting on January 5 with the utilities and the Authority to present bond market conditions.If the deal goes forward we will print and mail an official statement on January 5.In the event conditions are bad, the participating utilities have the option to delay the sale and make it a normal current refunding, which would occur sometime in March 1999. Mr.Moore said the current schedule is to price bonds on January 13 with a paper closing in early February and then the settlement. Mr.Vassar reviewed the Resolution for the Board stating the resolution provides authorization, subject to certain conditions,to go forward with the forward delivery bond sale for the Bradley Lake Project.He said the bond sale will go forward only if the PMC approves the final terms of the forward delivery agreement and requests the Authority to execute the forward delivery agreement.This transaction is driven by the beneficiaries,which are the utilities involved in the PMC. Mr.Vassar said this resolution authorizes up to $32 million of Authority bonds for the Bradley Lake Project.The documents allow the Executive Director to determine the final principle amount up to $32 million.The Executive Director will have the authority to accept the maturity schedule and interest rates for the bonds with the limitation that the true interest cost does not exceed 6%.He will have the ability to set redemption and sinking fund provisions and he will also have the ability to determine whether bond insurance is desirable,and if it is,to enter into an agreement with a bond insurer.The resolution also authorizes the Executive Director to deem the official statement final,which is a Securities and Exchange Commission requirement. AEA Board Meeting December 16,1998 Meeting Minutes Page 4 Staff recommended approval of Resolution No.1998-03. MOTION:Commissioner Sedwick moved to approve Resolution No.1998-03.Seconded by Deputy Commissioner Kinney.There being no discussion,the question was called.A roll call vote was taken,and the motion passed unanimously. 8.DIRECTOR COMMENTS A.Status Report of AEA Programs and Projects Mr.Simmons referred the Board to the information in their packets on the following matters: e Tango Settlement Update e Tyee Lake Update e Four Dam Pool Efficiencies Update 9.BOARD COMMENTS Chairman Hughes requested that the Board go into executive session. Mr.Brian Bjorkquist stated that under the open meetings act a body,such as the AEA Board,can go into executive session and have a candid discussion of facts and law,and to discuss personnel issues.The appropriate procedure for doing that is to have a Board member make a motion to go into executive session for that purpose and to vote on that motion. MOTION:Commissioner Perkins moved to go into executive session to discuss personnel matters of the Authority.Seconded by Commissioner Sedwick.There being no discussion,the question was called.A roll call vote was taken,and the motion passed unanimously. EXECUTIVE SESSION --12:23 p.m. The Board reconvened its regular meeting at 12:42 p.m. Roll call was taken and a quorum was established.Chairman Hughes advised that the Board had not taken any formal action on the matters discussed while in Executive Session. 10.ADJOURNMENT There being no objection and no further business of the Board,the meeting was adjourned at 12:45 p.m. 6 22HD.Randy Simmons ,Secretary ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY {=AVSENERGYAUTHORITY 480 WEST TUDOR ANCHORAGE,ALASKA 99503 907 /269-3000 FAX 907 /269-3044 ALASKA ENERGY AUTHORITY BOARD OF DIRECTORS June 16,1998 -3:56 p.m. Anchorage and Juneau,Alaska 1.CALL TO ORDER Chairman Hughes called the meeting of the Alaska Energy Authority to order on June 16,1998 at 3:56 p.m.A quorum was established. 2.BOARD OF DIRECTORS ROLL CALL Roll call was requested.Directors present in Anchorage:Mr.Wilson Hughes (Chairman/Public Member),Deputy Commissioner Ross Kinney (Designee for Department of Revenue Commissioner),and Mr.Robert Loescher (Public Member). Directors present in Juneau:Deputy Commissioner Jeff Bush (Designee for Department of Commerce and Economic Development Commissioner). 3.PUBLIC ROLL CALL AIDEA staff present in Anchorage:D.Randy Simmons (Executive Director),Keith A.Laufer (Financial &Legal Affairs Manager),Dennis V.McCrohan (Deputy Director -Project Development &Operations),and Brenda J.Fuglestad (Administrative Assistant). Others attending in Anchorage:Brian Bjorkquist (Department of Law). 4.PUBLIC COMMENTS There were no public comments. 5.PRIOR MINUTES -December 16,1997 The December 16,1997,minutes were unanimously approved as presented. 6.OLD BUSINESS There was no old business. AEA Board Meeting June 16,1998 Meeting Minutes Page 2 7.NEW BUSINESS A.Line of Credit Approval: >»Resolution No.1998-01.A Resolution of the Alaska Energy Authority Authorizing the Execution of a Line of Credit Agreement for the Alaska Intertie and Providing for Related Matters. >Resolution No.1998-02.A Resolution of the Alaska Energy Authority Authorizing the Execution of a Line of Credit Agreement for the Four Dam Pool and Providing for Related Matters. Mr.Laufer reviewed Resolution Nos.1998-01 and 1998-02 stating that the resolutions are authorizations for the Executive Director to enter into new line of credit agreements for the Alaska Intertie and Four Dam Pool projects. The Alaska Intertie line of credit is for $1 million,which provides a source of credit to pay uninsured liability losses.Under the Alaska Intertie Agreement all of the expenditures of the Authority are recouped through payments by the utilities so the line of credit would only be used in the event that there was some sort of emergency that required the Authority to utilize the funds.The Four Dam Pool line of credit is for $10 million,which provides a source of credit to pay a portion of losses and loss related expenses.Under the Four Dam Pool Power Sales Agreement and Insurance Agreement the Authority is responsible for uninsured facility losses.These lines of credit are backed by the moral obligation of the state. The Authority issued a request for proposals for new lines to local banks.Four proposals were received and the Authority has currently entered into negotiations with First National Bank of Anchorage.If negotiations with First National Bank of Anchorage were to fail for some reason,staff intends to enter into discussions with the next highest ranked bidder. MOTION:Mr.Loescher moved to approve Resolution No.1998-01.Seconded by Deputy Commissioner Kinney.There being no discussion,the question was called.A roll call vote was taken,and the motion passed unanimously. MOTION:Deputy Commissioner Kinney moved to approve Resolution No.1998-02. Seconded by Mr.Loescher.There being no discussion,the question was called.A roll call vote was taken,and the motion passed unanimously. 8.DIRECTOR COMMENTS A.Status Report of AEA Programs and Projects Mr.Simmons referred the Board to the information in their packets on the following matter: e Ketchikan Electric Company Update (Mahoney Lake) Mr.Simmons said the Authority has negotiated indemnification both to the state and to the Four Dam Pool utilities if Mahoney Lake were to be built and if it displaced any Swan Lake power.The Four Dam Pool utilities do not agree with this position.They felt that we should not have looked at AEA Board Meeting June 16,1998 Meeting Minutes Page 3 indemnification but we should have opposed Mahoney Lake funding in Washington D.C.The utilities basic premise is that the Southeast Intertie is the best option and that funding for Mahoney Lake potentially takes money from the Southeast Intertie. 9.BOARD COMMENTS There were no Board comments. 10.ADJOURNMENT There being no objection and no further business of the Board,the meeting was adjourned at 4:05 p.m. veb_O. D.Randy Simmpns,Secretary ****°Ta:ALASKA INDUSTRIAL DEVELOPMENT -4 |ke N AND EXPORT AUTHORITY /«==ALASKAeReGEE"ENERGY AUTHORITY ** 480 WEST TUDOR ANCHORAGE,ALASKA 99503 907 /269-3000 FAX 907 /269-3044 MEMORANDUM TO:Board of Directors uthority FROM:D.Ra y Simmons Executive Director DATE:December 16,1998 SUBJECT:Financial Reports Included with your packet are the June 30,1998,Financial Statements and Letter to the Board of Directors. Ms.Kathy Porterfield,Managing Partner of KPMG Peat Marwick LLP,will be in attendance at the meeting to discuss the Letter to the Board and to answer any questions the Board members may have. h:all\bjffinance\wiwfinancial reports ALASKA INDUSTRIAL DEVELOPMENT = AND EXPORT AUTHORITY =>ALASKA qm )=SOENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE,ALASKA 99503 907 /269-3000 FAX 907 /269-3044 MEMORANDUM TO:Board of Directors Alaska thority FROM:D onsExecutiveDir@ctor DATE:December 16,1998 SUBJECT:Issuance of Alaska Energy Authority Power Revenue Bonds, Fifth Series (Bradley Lake Hydroelectric Project) Due to a very favorable interest rate climate,AEA has been asked by the Bradley Lake Project Management Committee ("PMC”)to enter into a Forward Delivery Bond Purchase Agreement ("Agreement”).The Agreement commits AEA to issue,on or about April 13,1999,up to $32,000,000 of its Alaska Energy Authority Power Revenue Refunding Bonds,Fifth Series (Bradley Lake Hydroelectric Project)to refund up to $29,010,000 of First Series bonds originally issued in 1989.The Bradley Lake bonds currently outstanding are "private activity bonds”under federal tax law and are therefore not eligible for advance refunding.However,the Authority is able to enter into a "forward refunding”transaction in which a buyer commits today to buy a series of current refunding bonds on a legal issuance date (up to 90 days before the call date)at a yield level fixed today. Resolution 1998-03 ("Resolution”)authorizes entering into the Agreement and the sale of the bonds as well as granting the Executive Director the authority to approve the pricing and finalize the documents to consummate the transaction.The Agreement is in substantially final form but the Preliminary Official Statement cannot yet be deemed final;some changes with respect to the information regarding the Purchasing Utilities are anticipated to be made. As you are aware,AEA owns the Bradley Lake Project.The currently outstanding First and Second Series bonds are secured by the revenues from power sales from the Project,as will be the Third Series bonds (to be issued in April 1999)and Fourth Series bonds (to be issued in April 2000);the Fifth Series bonds will be secured from the same source.The outstanding bonds are also secured by bond insurance as will the Third and Fourth Series bonds.Insurance is expected to be obtained for the Fifth Series bonds.The First through Fourth Series bonds are (or will be)further secured by a capital reserve fund that has the moral obligation of the State;the new issue will also be secured by a capital reserve fund and the State's moral obligation,but when the Fifth Series bonds are issued,the reserve fund requirement will decrease. Board of Directors December 16,1998 Page 2 The principal amount of refunding bonds will be greater than the amount of existing bonds that will be refunded,in order to provide funds to pay costs of issuance of the refunding bonds. Using December 3,1998 rates,the net present value savings of refunding the bonds would have been $3.3 million or 11.24%.All of the savings will directly benefit the utilities that purchase power from the Project. Assuming Board approval of the transaction and a continued favorable interest rate environment,the forward transaction is currently scheduled to price and close in early February 1999.As provided in the Resolution,the Authority will not execute the final Agreement until the PMC expressly authorizes and approves the specific details of the transaction and requests that we enter into the transaction. If some unforeseen occurrence causes the bond issuance to be postponed past April 1,1999, this transaction will not be consummated.If it still appears that a refunding transaction would provide favorable results,the Board will be asked to approve a current refunding transaction in 1999. H:\ALL\BJFAFINANCE\VFWBradley?2-16.1.doc ALASKA ENERGY AUTHORITY RESOLUTION NO.1998-03 A SUPPLEMENTAL RESOLUTION AUTHORIZING THE ISSUANCE,SALE AND DELIVERY OF POWER REVENUE REFUNDING BONDS, FIFTH SERIES (BRADLEY LAKE HYDROELECTRIC PROJECT), IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $32,000,000 AND DETERMINING RELATED MATTERS BE IT RESOLVED by the Board of Directors of the Alaska Energy Authority on the 16th day of December 1998,that pursuant to the Power Revenue Bond Resolution adopted on September 7,1989 (hereinafter referred to as the "Resolution"),this Supplemental Resolution is adopted as follows: ARTICLE | Definitions and Authority Section 101 -Short Title.This Resolution may hereafter be cited by the Authority,and is hereinafter sometimes referred to,as the "Fourth Supplemental Resolution.” Section 102-Definitions.(A)All defined terms contained in the Resolution shall have the same meanings,respectively,in this Fourth Supplemental Resolution as such definedtermsaregiveninSection102oftheResolution. (B)In addition,as used in this Fourth Supplemental Resolution,unless the context shall otherwise require,the following terms shall have the following respective meanings: "Beneficial Owner'means the person in whose name a Bond is recorded as the beneficial owner of such Bond by the respective systems of DTC and the DTC Participants or the registered owner of the Bond if the Bond is not then held in book-entry form under Section 203. "Bonds”means the Fifth Series Bonds. "Continuing Disclosure Agreement”means the Continuing Disclosure Agreement executed by the Authority and dated the date of the Closing,as such term is defined in the Forward Delivery Agreement,and relating to the Bonds,as originally executed and as it may be amended from time to time in accordance with the terms thereof. "DTC”means The Depository Trust Company,a limited purpose trust company organized under the laws of the State of New York,and its successors and assigns. "DTC Participant”means a trust company,bank,broker,dealer,clearing corporation and any other organization that is a participant of DTC. "Fifth Series Bonds”means the Bonds of the Authority authorized by this Fourth Supplemental Resolution and herein designated "Power Revenue Refunding Bonds,Fifth Series." "First Series Bonds”means the Authority's Power Revenue Bonds,First Series (Bradley Lake Hydroelectric Project)issued in the initial aggregate principal amount of $105,001,142. "First Series Refunded Bonds”means the First Series Bonds maturing on July 1,2021, or such portion thereof as the Executive Director may select in the Forward Delivery Agreement. "Eirst Supplemental Resolution”means the Supplemental Resolution of the Authority adopted under the terms of the Resolution on September 7,1989. "Forward Delivery Agreement”means the Forward Delivery Bond Purchase Agreement described in Section 301 hereof. "Letter of Representations”means the Blanket Issuer Letter of Representations dated October 24,1997,from the Authority to DTC. "Settlement Date”means April 13,1999,or such other date or dates as may be established for the issuance of the Fifth Series Bonds pursuant to the terms of the Forward Delivery Agreement. "Underwriters”means Prudential Securities Incorporated representing itself and other underwriters which may be included in the Forward Purchase Agreement. Section 103 -Authority for this Resolution.This Fourth Supplemental Resolution is adopted pursuant to the provisions of the Act and the Resolution. ARTICLE Il Authorization,Terms and Issuance Section 201 -Authorization,Principal Amount,Description and Series.(A)In order to provide funds necessary for the purposes specified in Section 205 of the Resolution,in accordance with and subject to the terms,conditions and limitations established herein and in the Resolution,a Series of Power Revenue Bonds is hereby authorized to be issued in an aggregate principal amount to be determined in accordance with Section 301 hereof.The Authority is of the opinion and hereby determines that the issuance of the Bonds in said amount is necessary to provide sufficient funds to be used and expended for the purposes specified in Section 202 of the Resolution.The Bonds of such Series shall be designated and entitled "Power Revenue Refunding Bonds,Fifth Series (Bradley Lake Hydroelectric Project)." (B)The Authority hereby finds and determines that the establishment in the Resolution of the Capital Reserve Fund will enhance the marketability of the Bonds. Section 202 -Purposes;Redemption Accounts.(A)The purpose for which the Bonds are being issued is to refund the outstanding First Series Refunded Bonds. (B)There is hereby established within the Construction Fund the First Series (2021 Maturity)Redemption Account.The Trustee shall deposit proceeds of the Bonds,together with other amounts held in other Funds or any accounts therein as directed by the Authority, AEA/Power Revenue Refunding Bonds,Fifth Series Resolution No.1998-03 HAALL\BJF\BOARDIRESOLUTIN1998-03 Bradley.doc Page 2 into the First Series (2021 Maturity)Redemption Account and shall hold such proceeds and such other amounts in such account for the defeasance of the First Series Refunded Bonds in accordance with Paragraph 2 of Section 1201 of the Resolution;provided,however,that the Executive Director may instruct the Trustee to hold a portion of such proceeds or such other amounts for payment of Costs of Issuance,and the Trustee shall apply such proceeds or such other amounts to pay such costs as instructed by an Authorized Officer.On July 1,1999,or as soon thereafter as possible,the Trustee shall apply the amounts then held in the First Series (2021 Maturity)Redemption Account to the redemption of the First Series Refunded Bonds in accordance with Section 206 of the First Supplemental Resolution.If any amounts remain in the First Series (2021 Maturity)Redemption Account after the redemption of the First Series Refunded Bonds,the Trustee shall treat such remaining amount as Revenues and shall forthwith transfer such Revenues to the Revenue Fund. Section 203 -Issue Date and Form:Book-Entry.(A)The Bonds shall be dated April 1, 1999,or such other date as the Executive Director may select. (B)Subject to (E)of this Section,the Bonds shall be registered initially in the name of "Cede &Co.,”as nominee of DTC,and shall be issued initially in the form of a single Bond for each maturity in the amount of such maturity.Registered ownership of the Bonds,or any portions thereof,may not thereafter be transferred except (i)to any successor of DTC or its nominee,provided that any such successor shall be qualified under any applicable laws to provide the service proposed to be provided by it;(ii)to any substitute depository's successor; or (iit)to any person as provided in paragraph (E)below. (C)Upon the resignation of DTC or its successor (or any substitute depository or its successor)from its functions as depository or a determination by the Authority that it is no longer in the best interest of Beneficial Owners to continue the system of book-entry transfers through DTC or its successors (or any substitute depository or its successor),the Authority may appoint a substitute depository.Any such substitute depository shail be qualified under any applicable laws to provide the services proposed to be provided by it. (D)In the case of any transfer pursuant to clause (i)or (ii)of paragraph (B)above,the Trustee shall,upon receipt of all Outstanding Bonds,together with a written request of an Authorized Officer and a supply of new Bonds,authenticate a single new Bond for each maturity of Bonds then Outstanding,registered in the name of such successor or such substitute depository,or its nominee,as the case may be,all as specified in such written request. (E)In the event that (i)DTC or its successor (or substitute depository or its successor) is not available to function as depository for the Bonds or resigns from its functions as depository,and no substitute depository can be obtained,or (ii)the Authority determines that it is in the best interest of the Beneficial Owners that they be able to obtain Bond certificates,the Bonds may be issued,or ownership of Bonds may then be transferred,to any person or entity as provided in the Resolution,and the Bonds shall not,or shall no longer,be held in book-. entry form.An Authorized Officer shall deliver a written request to the Trustee to issue Bonds as provided in the Resolution in any authorized denomination,together with a supply of definitive Bonds.Upon receipt of all then Outstanding Bonds by the Trustee,together with a written request of an Authorized Officer to the Trustee,new Bonds shall be issued and authenticated in such denominations and registered in the names of such persons as are AEA/Power Revenue Refunding Bonds,Fifth Series Resolution No.1998-03 H:\ALLIBJFIBOARD\RESOLUTI1998-03 Bradley.doc Page 3 requested in such written request. (F)For so long as the Bonds are held in book-entry form under this Section,the Authority and the Trustee may treat DTC (or its nominee)as the sole and exclusive registered owner of the Bonds registered in its name for the purposes of payment of principal or Redemption Price of and interest on such Bonds,selecting such Bonds or portions thereof to be redeemed,giving any notice permitted or required to be given to Bondholders under the Resolution,registering the transfer of such Bonds and obtaining any consent or other action to be taken by Bondholders and for all other purposes whatsoever;and neither the Authority nor the Trustee shail be affected by any notice to the contrary.Neither the Authority nor the Trustee shall have any responsibility or obligation to any DTC Participant,any person claiming a beneficial ownership interest in the Bonds under or through DTC or any DTC Participant,or any other person not shown on the registration books of the Trustee as being a registered owner with respect to the accuracy of any records maintained by DTC or any DTC Participant, the payment by DTC or any DTC Participant of any amount in respect of the principal or Redemption Price of or interest on the Bonds,any notice which is permitted or required to be given to Bondholders under the Resolution,the selection by DTC or any DTC Participant of any person to receive payment in the event of a partial redemption of the Bonds,or any consent given or other action taken by DTC as Bondholder.The Trustee shall pay from monies available under the Resolution all principal and Redemption Price of and interest on Bonds only to or upon the order of DTC,and all such payments shall be valid and effective to fully satisfy and discharge the Authority's obligations with respect to the principal or Redemption Price of and interest on the Bonds to the extent of the sum or sums so paid. Section 204 -Places and Manner of Payment.For so long as all Outstanding Bonds are registered in the name of Cede &Co.or its registered assigns,payment of principal and interest thereon shall be made as provided in the Letter of Representations and the operational arrangements referred to therein as amended from time to time.In the event that the Bonds are no longer registered in the name of Cede &Co.or its registered assigns,(i) payment of interest on the Bonds will be made by check or draft mailed by first class mail to the registered owner at the address appearing on the bond register of the Authority kept at the corporate trust office of the Trustee,or,upon the written request of a registered owner of at least $1,000,000 in principal amount of Bonds received at least 15 days prior to an interest payment date,by wire transfer in immediately available funds to an account in the United States of America designated by such registered owner;and (ii)principal of the Bonds will be payable at the corporate trust office of the Trustee upon surrender of the Bonds representing such principal.Both principal of and interest on the Bonds are payable in any coin or currency of the United States of America which,on the respective dates of payment thereof,shall be legal tender for the payment of public and private debts. Section 205 -Maturities and_Interest Rates.The Bonds shall be issued in denominations of $5,000 or any integral multiple thereof,shall mature on July 1 in the years and principal amounts,and shall bear interest at the rates all as determined by the Executive Director pursuant to Section 301 hereof. Section 206 -Numbers and Letters.Bonds shall be numbered and lettered in such manner as an Authorized Officer of the Authority shall determine prior to delivery thereof. AEA/Power Revenue Refunding Bonds,Fifth Series Resolution No.1998-03 H:AALLIBJFBOARDIRESOLUTI\1 998-03 Bradley.doc Page 4 Section 207 -Redemption.The Bonds shall be subject to redemption (including redemption by application of sinking fund payments)as determined by the Executive Director pursuant to Section 301 hereof. Section 208 -No Redemption of Bonds from Construction Fund Moneys.The Bonds shall not be subject to redemption pursuant to subsection 503(8)of the Resolution. ARTICLE Ill Sale and Delivery of Bonds Section 301 -Sale of Bonds.(A)The Executive Director is hereby authorized to sell the Bonds pursuant to a Forward Delivery Bond Purchase Agreement between the Underwriters and the Authority.The executed Forward Delivery Agreement shall be in substantially the same form and content as the draft Forward Delivery Agreement presented to and made a part of the records of this meeting.The form and content of the Forward Delivery Agreement be,and the same hereby is,in all respects authorized,approved and confirmed, and the Chairman or Vice Chairman or the Executive Director be,and each of them hereby is, authorized,empowered and directed to execute and deliver the Forward Delivery Agreement for and on behalf of the Authority to the Underwriters for the sale of the Bonds substantially in the form and content presented to and made a part of the records of this meeting,but with such changes,modifications,additions,and deletions therein as shall to them seem necessary,desirable or appropriate,the execution thereof to constitute conclusive evidence of their approval of any and all changes,modifications,additions or deletions thereto from the form,and after the execution and delivery of the Forward Delivery Agreement,the Chairman, Vice Chairman and the Executive Director are hereby authorized,empowered and directed to do all such acts and things and to execute all such documents as may be necessary to carry out and comply with the provisions of the Forward Delivery Agreement as executed;provided, however,that notwithstanding the foregoing neither the Chairman,Vice Chairman,nor Executive Director are authorized,empowered,or directed to execute or deliver the Forward Delivery Agreement until the Project Management Committee for the Project shall have approved the final terms of the Forward Delivery Agreement and shall have requested the Authority to execute and deliver the Forward Delivery Agreement. (B)In connection with the final preparation and execution of the Forward Delivery Agreement,in addition to the powers granted to the Executive Director in (A)of this Section, there is hereby delegated to the Executive Director the following powers:(i)to fix (a)the aggregate principal amount of the Bonds (provided that the aggregate principal amount of the Bonds shall not exceed $32,000,000),(b)the maturity schedule and interest rates applicable to each maturity of the Bonds (provided that the true interest cost of the Bonds shall not exceed 6.0%),and (c)the redemption and sinking fund provisions applicable to the Bonds (including the methodology for crediting sinking fund payments in the event of a redemption of the Bonds in part other than by application of sinking fund payments)and (ii)to determine whether any of the Bonds shall be covered by bond insurance and,if so,to select the bond insurance company and enter into such agreements with such bond insurance company as may be necessary to provide such bond insurance. Section 302 -Approval of Official Statement;Continuing Disclosure.(A)The distribution of the Preliminary Official Statement of the Authority in the form presented to and made a part of the records of this meeting is approved.The distribution of a final Official AEA/Power Revenue Refunding Bonds,Fifth Series Resolution No.1998-03 HAALLIBJFIBOARDIRESOLUTI1998-03 Bradley.doc Page 5 Statement,which is in substantially the form and content of the draft Official Statement,and the use thereof by the Underwriters in connection with the offering of the Bonds,is hereby ratified,confirmed and approved.There is hereby delegated to the Executive Director the power to deem the Official Statement,or any draft thereof which he considers appropriate, final on behalf of the Authority for purposes of Securities and Exchange Commission Rule 15c2-12(b)(1). (B)The Authority hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Agreement as the Continuing Disclosure Agreement may be completed and attached as an Exhibitto the final Official Statement. Notwithstanding any other provision of the Fourth Supplemental Resolution,failure of the Authority to comply with the Continuing Disclosure Agreement shall not be considered a default of the Authority's obligations under this Fourth Supplemental Resolution,the Resolution or the Bonds;however,the Beneficial Owner of any Bond may bring an action for specific performance,to cause the Authority to comply with its obligations under this Section. Section 303 -Investment Agreements.The Chairman or Vice Chairman or the Executive Director be,and each of them hereby is,authorized and empowered to execute and deliver appropriate investment agreements with financial institutions providing for investment of proceeds of the Bonds and amounts to be transferred from other funds of the Authority to secure the Bonds in such form and on such terms and conditions as they deem appropriate. Section 304 -Delivery of Bonds.The Chairman,Vice Chairman,Executive Director and such other person or persons as may be designated by the Executive Director are specifically designated as Authorized Officers as defined in the Resolution,and they hereby are severally authorized,after execution of the Bonds,to deliver the Bonds to the Trustee for authentication under the Resolution and,upon authentication and upon receipt of the balance of the purchase price of the Bonds,to deliver to the Trustee a written order in the name of the Authority directing the Trustee to deliver the Bonds to or upon the order of the Underwriters and to receive the proceeds of sale of the Bonds and give a written receipt therefor on behalf of the Authority,to apply said proceeds and the other moneys required to be transferred or deposited in accordance with the terms of the Resolution and this Fourth Supplemental Resolution and in such manner as is required to cause the conditions precedent to the issuance of the Bonds to be complied with,and to do and perform or cause to be done and performed,for and on behalf of the Authority,all acts and things that constitute conditions precedent to the authentication and delivery of the Bonds or that are otherwise required or convenient to be done and performed by or on behalf of the Authority prior to or simultaneously with the delivery of the Bonds.Such Authorized Officers are hereby severally authorized for and on behalf of the Authority to do or cause to be done all acts and things required or desirable to be done by the Authority under and pursuant to the terms of the Resolution and in accordance with the terms and conditions of the Forward Delivery Agreement. ARTICLE IV Paying Agent Section 401.U.S.Bank Trust National Association is appointed Paying Agent for the Bonds pursuant to Section 902 of the Resolution. AEA/Power Revenue Refunding Bonds,Fifth Series Resolution No.1998-03 H:AALLIBJFIBOARDIRESOLUTIM998-03 Bradley.doc Page 6 ARTICLE V Effective Date Section 501.This Resolution shall take effect immediately. Supplemental Resolution approved and adopted by the Alaska Energy Authority on December 16,1998. ALASKA ENERGY AUTHORITY Chairman ISEAL] ATTEST: Secretary AEA/Power Revenue Refunding Bonds,Fifth Series Resolution No.1998-03 HAALL\BJF\BOARDIRESOLUTN1998-03 Bradley.doc Page 7 1priortothetimeecuritiesnorshallndamendment.Thesesecuritiesmaynotbesoldnormayofferstobuybea.cialStatementconstituteanoffertosellorthesolicitationofanoffertobuyOfficialStatementandtheinformationcontainedhereinaresubjecttocomplnentisdeliveredinfinalform.UndernocircumstancesshallthisPrelimina.ThisPrelintheOfficiatherebeQhysuwOfthesesecuritiesinanyjurisdictioninwhichsuchoffer,solicitationorsal.wvudbeunlawfulpriortoregistrationorqualificationunderthesecuritieslaws-,...,suchjurisdiction.PRELIMINARY OFFICIAL STATEMENT DATED JANUARY __,1999 NEW ISSUE RATINGS: FULL BOOK-ENTRY In the opinion of Bond Counsel,based on an analysis of existing statutes,regulations,rulings and court decisions,and assuming, among other things,compliance by the Authority with its covenants relating to certain requirements contained in the Internal Revenue Code of 1986,as amended (the "Code”),interest on the Fifth Series Bonds is excluded from the gross income of owners thereof for federal income tax purposes.Interest on the Fifth Series Bonds is not treated as a preference item to be included in calculating the alternative minimum tax provisions imposed under the Code on individuals and corporations;such interest,however,is included in calculating the "adjusted current earnings”of a corporation for purposes of computing the alternative minimum tax on corporations.Bond Counsel will express no opinion regarding any other tax consequences relating to the ownership or disposition of,or the accrual or receipt of interest on,the Fifth Series Bonds. See "Tax Exemption”herein. [AEA LOGO] $* %ALASKA ENERGY AUTHORITY POWER REVENUE REFUNDING BONDS,FIFTH SERIES (BRADLEY LAKE HYDROELECTRIC PROJECT) Dated:The Settlement Date Due:July 1,2021 The Fifth Series Bonds will be issued as fully registered bonds under a book-entry system,registered in the name of Cede &Co., as nominee of The Depository Trust Company.The Fifth Series Bonds are issuable in denominations of $5,000 or any integral multiple thereof, will bear interest from their date payable on July 1,1999 and semiannually thereafter on January 1 and July 1 of each year and are subject to optional redemption and mandatory sinking fund redemption as described herein. The Fifth Series Bonds are issued for the purpose of refunding $*aggregate outstanding principal amount of the Authority's Power Revenue Bonds,First Series (Bradley Lake Hydroelectric Project)due July 1,2021. The payment of the Fifth Series Bonds is secured under the Authority's Bradley Lake Power Revenue Bond Resolution on a paritywiththeAuthority's outstanding Bradley Lake Power Revenue Bonds by a pledge of the revenues received by the Authority from the operationoftheBradleyLakeHydroelectricProject,including payments to be made by the municipal utilities and electric cooperatives that have agreed to purchase all of the Project Capacity of the Project and to pay the Annual Project Costs of the Project pursuant to the Power Sales Agreement described herein. The Fifth Series Bonds are also secured by a pledge of the moneys and investments in certain funds and accounts maintained under the Bradley Lake Power Revenue Bond Resolution,including the Capital Reserve Fund.The Chairman of the Authority is required to certify at least annually to the Governor and the State Legislature the amount,if any,required to restore the Capital Reserve Fund to the Capital Reserve Requirement.The State Legislature may,but is not required to,make an appropriation in the required amount. The Fifth Series Bonds do not constitute an indebtedness or other liability of the State of Alaska,and the Fifth Series Bonds do not directly,indirectly or contingently obligate the State,or any political subdivision thereof,or the Power Purchasers to levy any form of taxation for the payment of the Fifth Series Bonds.The Authority has no taxing power.Neither the full faith and credit nor the taxing power of the State of Alaska,any political subdivision thereof,or the Power Purchasers is pledged for the payment of the Fifth Series Bonds. [BOND INSURANCE] [BOND INSURANCE LOGO] Price:% Yield:% (Accrued interest to be added) The Fifth Series Bonds are offered when,as and if issued and received by the Underwriters,subject to the approving legal opinion of Wohlforth,Argetsinger,Johnson &Brecht,of Anchorage,Alaska,Bond Counsel,and certain other conditions.Certain legal matters will be passed on for the Underwriters by their counsel,Katten Muchin &Zavis,of Chicago,Illinois;for the Authority by the Attorney General of the State of Alaska;and for the Railbelt Utilities Group by their special counsel,Ater Wynne,LLP,of Portland,Oregon.It is expected that the Fifth Series Bonds will be available for delivery through The Depository Trust Company,in New York,New York,on or about April 13, 1999,. Prudential Securities Incorporated Goldman,Sachs &Co. Dated:,1999 *Preliminary,subject to change. ALASKA ENERGY AUTHORITY 480 West Tudor Road Anchorage,Alaska 99503 Phone:907/269-3000 DIRECTORS Wilson Hughes,Chairman Joe Perkins,Vice Chairman Deborah B.Sedwick Wilson L.Condon Ross Kinney,Delegate of Wilson L.Condon Robert W.Loescher AUTHORITY STAFF D.Randy Simmons,Executive Director Valorie F.Walker,Deputy Director-Finance Dennis V.McCrohan,Deputy Director-Project Development and Operations Keith A.Laufer,Financial and Legal Affairs Manager BOND COUNSEL Wohlforth,Argetsinger,Johnson &Brecht Anchorage,Alaska No dealer,salesman or any other person has been authorized by the Authority or the Underwriters to give any information or to make any representation other than as contained in this Official Statement, and if given or made,such other information or representation must not be relied upon as having been authorized by the foregoing.This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy,nor shall there be any sale of the Fifth Series Bonds by any person,in any jurisdiction in which it is unlawful for such person to make such offer,solicitation or sale.The information set forth herein has been obtained from the Authority,the Power Purchasers,and other sources which are believed to be reliable,but is not guaranteed as to accuracy or completeness,and is not to be construed as a representation by the Underwriters.The information and expressions of opinion contained herein are subject to change without notice,and neither the delivery of this Official Statement nor any sale made hereunder shall,under any circumstances,create any implication that there has been no change in the affairs of the Authority,or any Power Purchaser since the date hereof. TABLE OF CONTENTS Page INTRODUCTION .2...ee eee ee ee eee ee ee eee eee ee ee eee eee 1 Delayed Delivery of Fifth Series Bonds ...0.0.0...ce eee eee ee eee eee ne aes 1 Bond Insurance 2...6.ce ee ee ee ee ee ee ee eee eee eee eee beeen ees 1 The Project 2.0...ce ce ee ee ee ee ee ne eee eee eee eee nee eens 1 Plan of Finance ..2...2.eeeeeneeeeeeeeeeeeeeeeeee 2 Sources and Uses of Funds ...2.2.2...ce ce ee ee eee ee tte eee eee 3 Power Revenue Bonds 2.0......ce ee ee eee eee ee eee ee eee eee ee eee 3SecurityforFifthSeriesBonds...12...ce eee ee eee eee eee tenes 4 Power Sales Agreement 2.2.0...ec ee eee eee ee eee ee ee eee eens 4 Capital Reserve Fund ........2...eee eee eee eeeeeeeeeeeteeeeteeeee 5 Moral Obligation of the State 2...ee ee ee eee eee ee ee ee eee ee nee eens 5 Rate Covenant 2.2....ee te ee ee ee eee eee ee eee ee eee eee 5AdditionalBonds..0...2...ec eeeees em eee eee eee eee teeta eens 5 DESCRIPTION OF THE FIFTH SERIES BONDS ....0...2.cece ec cc ee ee tt ee eee ene 6 General 2...ee ee ee ee ee eee eee eee ee ee eee eee eee tees 6 Optional Redemption .1...0...cece ee ee ee eee eee ee eee eee rete ence eens 7 Sinking Fund Redemption ..2...1...cee ec ee ee ee eee ete ee eee ee eee ee eens 7 Mandatory Redemption Upon a Determination of Taxability ....0.2...0...cee ee eee eee eee ee 8 Notice of Redemption ..0.2...eee ce ee ee eee ee eee teen eee eee enes 8 DELAYED DELIVERY OF FIFTH SERIES BONDS ......0...cece eee ete ete eee eens 8 General 2...ce ce ee ee ee ee ee ee ee ee eee eee eee ee eee eee 8 Updated Official Statement 2...2...ee ee eee eee ee ete eect eee eee eeee 8 Conditions to Settlement ©...1.1...ee eee ee ee eee en eee eee ee eee eee 9TerminationofForwardDeliveryAgreement....20...0...cece ee eee eee eee eee nets 9 Other Investment Considerations 2.0...0...cee ee eee eet eee eee e eee eee ee eees 10 BOOK-ENTRY SYSTEM ..1.2...ec cee ee eee eee eee eee tee eee ees 11 SECURITY AND SOURCES OF PAYMENT FOR THE FIFTH SERIES BONDS ............-.-2.000505 13 Pledge Effected by the Bond Resolution ..2...0...ee ce ce cc ee ee ee eee eee tte eens 13 Power Sales Agreement 1.0...cece ce ee eee ee eee eee e tenet eee eee ees 13 Rate Covenant 2...6.ec ee ee ee ee ee ee eee ee eee eee ee eee eee tee e eee eeee 16 Capital Reserve Fund and Moral Obligation of the State 2.2...eee eee eee 16 Additional Bonds ..............Le ee eee ee ee eee eee ee ee ete ten eee ete teen aee 17 Pledge of the State...ee eee ee eee eee ee eee eee ee ee eee eee eens 17 BOND INSURANCE ..0...eee eee ee ee ee ee eee ee eee eee ee ett eee eee eee eas 17 RIGHTS OF BOND INSURERS ...2...eee ccc ee eee eee tee eee eee eee eet neae 17 ANNUAL DEBT SERVICE REQUIREMENTS 2...2.0...cece eee ee eee eee eee eee eee eens 18 THE BRADLEY LAKE HYDROELECTRIC PROJECT ........0...cece eee ete eee eee eae 18 General Description...6...ccc ce eee ee eee ee eee ee eee eee eet ee teen ens 18 Permits and Licenses 2...0...eee cee ee ee eee ee ee ee ee eee eet e eee ee eee eees 19 Geologic and Seismic Considerations ......0.0.cece cc ce eee eee ee eee t eet ete nen nnes 19 Power Production 2.0....cee ee ee ee ee eee eee eee ete e eee ete eee t eee ees 20 Water Availability 2...ce ee ee ee ee eee ee eee eee eet ee tee e eee eens 20 Historical Annual Project Costs 2.0.....ec ce ee eee ete eee tee ee ett eee eet e ete eees 21 Transmission 2.0...ee ee eee ee ee en eee eet eee eet eee ett ee eens 21 Project Management Committee ..0...ee ee ee ee ee ete eee eee eee tent ee eees 22 Project Operation and Maintenance ..10...6.oe ce ce eee eee ete tee ete e eee e tates 23 THE POWER PURCHASERS .......cc cece cece eee ee eee eee eee eet te ean eee eeeeeeees 23 Introduction 2...ce ee ee ee ee ee eee eee tee e eee eee nent eee ees 23 Rate Regulation.2...1.ee ee eee eee eee ee eee ete teen eee ee eens 24 Power Requirements 2.......cece ce tt te eee ee ee eee ee eee eee ane ee eee eeees 24 Generation Resources and Utilization of the Project 2.0...0...cee ee ee eee eee eee eee eeee 25 Municipality of Anchorage d/b/a Municipal Light and Power ...1.0.....cece eee e ence eee ee eees 26 Chugach Electric Association,Inc.2...0...cc ce ee ee ee ee eee eet eee e eee eee 28 Golden Valley Electric Association,Inc.2.1....cece eee etter eee ete e eens 30 Homer Electric Association,Inc.2...0.1 cc ee ee eee ee ee eee eee ee ee eee ene eens 32 Matanuska Electric Association,Inc.2...0.ee ee eee eee wee ee ee ee ee nee enaees 34 City of Seward 2.0...ee ee ee ee eee tee eee eee teeter e teens 36 Year 2000 Computer Problem 2.1.2...2...eee cee te ee eee ee eee eee eee ee tte e ten ee aes 36 STATE AND FEDERAL INITIATIVES REGARDING COMPETITION IN THE ELECTRIC UTILITY INDUSTRY 2.2...ccc ce ce ee ee eee eee eee ee ene e nee enone eens 37 THE ALASKA ENERGY AUTHORITY .2.0.2...eee eee ee ee eee tenet etree eee seen 38 General oo.ee ee ee ee eee eee eee eee ete teen etna teenies 38 Reorganization of Authority...2...kee cc eee ee ee eee eee et ene eee nee 38 General Projects and Transmission Facilities...1...1.cece ee ee ec eee eet eee 39 Board of Directors 6...1.ce ee eee eee eee eee ee eee ete teen e ee eet ee eeee 39 Administration 0.0.0...ccc ee ee ee eee ee eee eee eee eee ee te eect eee e ee cene 41 PRIVATIZATION INITIATIVE .......222 eee ee eee eee tee eet ener e er eees 42 LITIGATION 2.0.0 cc ce et ee eee ne ee ee ee eee eee eee ene teeta eeees 43 FN29(6)6 5 43 Power Purchasers 2.1...0.cece ce ee ee ee eee ee ee eee ee eee eee eee eee eee teens 43PENDINGDISPUTES......0...c cece eee cee eee eee tee tee te ee eeeeesLee eee ree) MEA Offer to Purchase Chugach 2.0.6....cc eee ec eee eee ee tere eee eee nee teeta teaee 43 Chugach -ML&P Gas Field Dispute ...0...0.cece ccc eee eee eee ete eet eee eee ees 44 Healy Project Power Sales Agreement Litigation ..2.6...0...cece ee eee eee eee renee eee tenes 44COMMITMENTTOPROVIDECONTINUINGINFORMATION.........0.0 c eee e cect ence eer ncees 45 CERTAIN LEGAL MATTERS ...2.2...02.c cece cece eee ee ee eee ee eee eee n eee teeeees 45 UNDERWRITING ...2...2.ee eee eee eee eee ee eee teeter ee eee neee 45 LEGALITY FOR INVESTMENT IN ALASKA ..2...2...ee cee ce ee ee tent etn eens eseees 46 SOURCES OF CERTAIN INFORMATION ..2...ce ee ee ee eee eter eee eeee 46 FINANCIAL STATEMENTS 2......cee eee ee ete eee eee eee tee teen eee eee eee eeees 46 CERTAIN VERIFICATIONS 2.2...00.eee cee ee ce eee eee ee eee teen ete eee e eens 47B08OO47 TAX EXEMPTION ...2.2...ccc cc ee ee eee eee eee ee eee eee ene eee e eee 47 MISCELLANEOUS 2...cc cc ee eee eee eee teen enter eee eee ete e ee et rece 47 APPENDIX A -Summaries of the Act and the Basic Documents -The Alaska Energy Authority Act -The Power Sales Agreement -The Bond Resolution APPENDIX B -_Form of Opinion of Bond Counsel APPENDIX C -_Form of Continuing Disclosure Agreement APPENDIX D -Financial Statements of the Authority APPENDIX E -_Specimen Municipal Bond Insurance Policy (ii) IN CONNECTION WITH THIS OFFERING,THE UNDERWRITERS MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE FIFTH SERIES BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.SUCH STABILIZING,IF COMMENCED,MAY BE DISCONTINUED,AND IF DISCONTINUED THEN RECOMMENCED,AT ANY TIME. THE FIFTH SERIES BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,AS AMENDED,NOR HAS THE POWER REVENUE BOND RESOLUTION OR THE FOURTH SUPPLEMENTAL RESOLUTION BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939,AS AMENDED,IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. THE REGISTRATION OR QUALIFICATION OF THE FIFTH SERIES BONDS IN ACCORDANCE WITH APPLICABLE PROVISIONS OF SECURITIES LAWS OF THE STATES IN WHICH THE FIFTH SERIES BONDS HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR QUALIFICATION IN OTHER STATES CANNOT BE REGARDED AS A RECOMMENDATION THEREOF.NEITHER THESE STATES NOR ANY OF THEIR AGENCIES HAVE PASSED UPON THE MERITS OF THE FIFTH SERIES BONDS OR THE ACCURACY OR COMPLETENESS OF THIS OFFICIAL STATEMENT.ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE. (iii) OFFICIAL STATEMENT $* ALASKA ENERGY AUTHORITY Power Revenue Refunding Bonds,Fifth Series (Bradley Lake Hydroelectric Project) INTRODUCTION This Official Statement,including the cover page and Appendices hereto,provides certain information in connection with the issuance and sale by the Alaska Energy Authority (the "Authority”) of $*aggregate principal amount of its Power Revenue Refunding Bonds,Fifth Series (Bradley Lake Hydroelectric Project)(the "Fifth Series Bonds”).The Fifth Series Bonds are issued pursuant to the Alaska Energy Authority Act,constituting Chapter 83 of Title 44 of the Alaska Statutes (the "Act”)and the Bradley Lake Power Revenue Bond Resolution,adopted by the Board of Directors of the Authority on September 7,1989,as amended,and as supplemented by the Fourth Supplemental Resolution,adopted by said Board of Directors on December 16,1998 (collectively,the "Bond Resolution”or the "Resolution”).Under the Bond Resolution,U.S.Bank Trust National Association, of Seattle,Washington,has been appointed as trustee (the "Trustee”). Delayed Delivery of Fifth Series Bonds The Fifth Series Bonds will be sold by the Authority to the Underwriters pursuant to a Forward Delivery Bond Purchase Agreement (the "Forward Delivery Agreement”).The Authority anticipates that the Fifth Series Bonds will be issued and delivered on April 13,1999,or such later date on or before April 16,1999 (the "Settlement Date”).Issuance and celivery of the Fifth Series Bonds is contingent upon the delivery of certain certificates and legal opinions and the satisfaction of certain other conditions as of the Settlement Date.For additional information concerning the delayed delivery of the Fifth Series Bonds, see "Delayed Delivery of Fifth Series Bonds.” Bond Insurance [To COME] The Project The Bradley Lake Hydroelectric Project (the "Project”)is located in south central Alaska at the southern end of the Kenai Peninsula.The Project includes a 610 foot long,125 foot high concrete-faced and rock-filled gravity dam,a 3.5 mile power tunnel and steel-lined penstock.Construction of the Project was substantially completed in 1991.The Project has 126 megawatts of installed capacity that is normally scheduled at 90 megawatts to minimize losses.Since 1991,the Project has had an average annual output of 367.4 million kilowatt hours.Two 20 mile,115 kilovolt transmission lines connect the Project to a transmission system on the Kenai Peninsula.The Project provides electric power to the most populous areas of Alaska,including the Kenai Peninsula,the Municipality of Anchorage,the Matanuska-Susitna *Preliminary,subject to change. O O Borough and the Fairbanks area.The Authority has sold 100%of the capacity of the Project to two municipalities and three cooperative utilities (the "Power Purchasers”)under agreements with the Power Purchasers and two Additional Parties that are cooperative utilities (the "Power Sales Agreement”).See "The Bradley Lake Hydroelectric Project”herein. Plan of Finance The Fifth Series Bonds are issued for the purpose of refunding $*outstanding principal amount of the Authority's Power Revenue Bonds,First Series (Bradley Lake Hydroelectric Project)due July 1,2021 (the "Prior Bonds”).The Prior Bonds will be redeemed on July 1,1999,ata redemption price of par,plus accrued interest to the redemption date.Pursuant to an Escrow Agreement by and between the Authority and the Trustee,the Authority will irrevocably deposit direct and general obligations of the United States of America (the "Government Obligations”)with the Trustee,which Government Obligations will bear interest at such rates and will be scheduled to mature at such times and in such amounts so that,when paid in accordance with their terms,sufficient moneys will be available, together with an initial cash deposit,to make full and timely payment of the redemption price of the Prior Bonds and the interest due on the Prior Bonds to the July 1,1999 redemption date. The mathematical calculations of the adequacy of the deposits to provide for the payment of the Prior Bonds will be verified at the time of delivery of the Fifth Series Bonds by KPMG Peat Marwick, LLP,independent certified public accountants.See "Certain Verifications.”All moneys and Government Obligations deposited for the payment of the Prior Bonds,including interest thereon,are pledged solely and irrevocably for the benefit of the holders of the Prior Bonds. Upon the issuance of the Fifth Series Bonds and in reliance upon the report of KPMG Peat Marwick,LLP,referred to above with respect to the sufficiency of amounts held under the Escrow Agreement to pay the redemption price of,and interest on,the Prior Bonds,Wohlforth,Argetsinger, Johnson &Brecht,Bond Counsel to the Authority,will deliver its opinion stating that by reason of such deposit the lien upon the Revenues of the Project as security for the payment of the Prior Bonds has been defeased. Sources and Uses of Funds The table below shows estimated sources and uses of funds in connection with the refunding vik and the issuance of the Fifth Series Bonds. Sources of Funds: Bond Proceeds (1)$ Accrued Interest Available Funds Total Sources of Funds $ Uses of Funds: Refund Prior Bonds Deposit to Interest Account Costs of Issuance (2) Total Uses of Funds $ (1)Principal amount,less original issue discount. (2)Includes legal,accounting,printing and bond insurance policy premium,underwriters'discount and other expenses associated with the issuance of the Fifth Series Bonds. Power Revenue Bonds The Authority has heretofore issued its Power Revenue Bonds,First Series (Bradley me) Hydroelectric Project (the "First Series Bonds”)and its Power Revenue Bonds,Second Series (Bradley Lake Hydroelectric Project)(the "Second Series Bonds”)for the purpose of permanently financing a portion of the construction cost of the Project.Pursuant to a supplemental resolution adopted October 29, 1997,the Authority has authorized the issuance of $59,485,000 principal amount of Power Revenue Refunding Bonds,Third Series (Bradley Lake Hydroelectric Project)(the "Third Series Bonds”)for the purpose of refunding a portion of the First Series Bonds and has authorized the issuance of $47,710,000 principal amount of Power Revenue Refunding Bonds,Fourth Series (Bradley Lake Hydroelectric Project) (the "Fourth Series Bonds”)for the purpose of refunding a portion of the Second Series Bonds. On December 12,1997,the Authority and Goldman,Sachs &Co.entered into a Forward Delivery Bond Purchase Agreement pursuant to which the Authority has sold to Goldman,Sachs &Co.,the Third Series Bonds and the Fourth Series Bonds.The Third Series Bonds are scheduled to be issued and delivered on April 6,1999,or such later date on or before April 9,1999 (the "Third Series Settlement Date”)and the Fourth Series Bonds are scheduled to be issued and delivered on April 4,2000,or such later date on or before April 7,2000 (the "Fourth Series Settlement Date”). In this Official Statement,the term "Bonds”includes the First Series Bonds,the Second Series Bonds,the Third Series Bonds,the Fourth Series Bonds,the Fifth Series Bonds and any Additional Bonds issued pursuant to the Bond Resolution.References in the Official Statement to "Outstanding Bonds,” "Annual Debt Service”and "Maximum Annual Debt Service”are made on the assumption that the Third Series Bonds will be issued on the Third Series Settlement Date and that the Fourth Series Bonds will be issued on the Fourth Series Settlement Date.O Security for Fifth Series Bonds The Fifth Series Bonds are direct and general obligations of the Authority and the full faith and credit of the Authority are pledged to the payment of the principal of and interest on the Fifth Series Bonds.The payment of the Fifth Series Bonds is secured on a parity with the Outstanding Bonds by a pledge of the Revenues of the Project,including all payments to be made by the Chugach Electric Association,Inc.,the Golden Valley Electric Association,Inc.,the Alaska Electric Generation & Transmission Cooperative,Inc.(acting on behalf of Homer Electric Association,Inc.and Matanuska Electric Association,Inc.),the Municipality of Anchorage and the City of Seward,as Purchasers (collectively the "Power Purchasers”or the "Purchasers”)under the Agreement for the Sale and Purchase of Electric Power,dated and entered into on December 8,1987 (the "Power Sales Agreement”)by and among the Power Purchasers and the Authority.No other revenues or assets of the Authority are pledged as security for the payment of the Fifth Series Bonds. The Fifth Series Bonds do not constitute an indebtedness or other liability of the State of Alaska,and the Fifth Series Bonds do not directly,indirectly or contingently obligate the State,or any political subdivision thereof,or the Power Purchasers to levy any form of taxation for the payment of the Fifth Series Bonds.The Authority has no taxing power.Neither the full faith and credit nor the taxing power of the State of Alaska,any political subdivision,or the Power Purchasers is pledged for the payment of the Fifth Series Bonds. Power Sales Agreement Pursuant to the Power Sales Agreement the Authority has sold percentage shares of the Project Capacity of the Project to the Power Purchasers and the Power Purchasers have agreed to pay a like percentage of the Annual Project Costs of the Project,as follows: Power Purchaser Percentage Share Chugach Electric Association,Inc.30.4% Municipality of Anchorage 25.9 Alaska Electric Generation &Transmission Cooperative,Inc.25.8 (acting on behalf of Homer Electric Association,Inc.- 12.0%and Matanuska Electric Association,Inc.-13.8%) Golden Valley Electric Association,Inc.16.9 City of Seward _10 Under the provisions of the Power Sales Agreement,the Power Purchasers are obligated to make payments to the Authority in an aggregate amount sufficient to pay all Annual Project Costs,including costs resulting from the ownership,operation and maintenance of the Project,debt service on all Bonds and any amounts required to maintain the reserves established under the Bond Resolution. Each Power Purchaser is unconditionally obligated to pay from its gross revenues its percentage share of the Annual Project Costs notwithstanding a suspension or reduction in the amount of power supplied by the Project. If the Authority projects that the amounts to be deposited into the Revenue Fund will be insufficient to pay Annual Project Costs because of a payment default by a Power Purchaser,the Authority -4- may increase each other Power Purchaser's Percentage Share of Annual Project Costs and Project Capacity pro rata to the extent,and for the period,necessary to compensate for such insufficiency;provided that no Power Purchaser's Percentage Share may be increased by more than 25%above the amount set forth in the Power Sales Agreement. Annual Project Costs incurred by a Power Purchaser pursuant to the Power Sales Agreement must be allowed by the Alaska Public Utilities Commission (the "APUC”),by statute,in the schedule of consumer rates and charges established by each Power Purchaser and submitted to the APUC. Capital Reserve Fund Under the Bond Resolution,the Authority is required to establish and maintain the Capital Reserve Fund in an amount equal to the Capital Reserve Requirement.As of the date of issuance of the Fifth Series Bonds,the Capital Reserve Requirement will be $,an amount equal to Maximum Aggregate Debt Service on the Bonds. Moral Obligation of the State The Act requires that the Chairman of the Authority,at least annually,but not later than January 2 of each year,certify in writing to the Governor and the State Legislature the sum,if any,required to restore the Capital Reserve Fund to the Capital Reserve Requirement.The Bond Resolution requires the Chairman to make such certification whenever the Trustee transfers funds from the Capital Reserve Fund to pay principal of or interest on the Bonds.The State Legislature may,but is not obligated to, appropriate to the Authority the sum certified by the Chairman of the Authority.Under the Alaska Constitution,appropriations passed by the State Legislature are subject to line item veto by the Governor. The Authority is required to deposit in the Capital Reserve Fund any amounts so appropriated during the then current Fiscal Year. Rate Covenant The Authority,acting in conjunction with the Project Management Committee,is required to determine Annual Project Costs in such amounts as shall be sufficient when collected from the Power Purchasers to provide Revenues in each Fiscal Year,together with available funds,sufficient for the payment of the sum of (a)Operating Expenses of the Project during such Fiscal Year,(b)the amount necessary to restore the Operating Reserve Account to the Operating Reserve Account Requirement,(c) Aggregate Debt Service due on all Bonds during such Fiscal Year,(d)the amount necessary to restore the Capital Reserve Fund to the Capital Reserve Requirement,(e)the amount to be paid during such Fiscal Year to the Renewal and Contingency Reserve Fund to restore such Fund,over a period of not greater than four years,to the Renewal and Contingency Reserve Fund Requirement or such larger amount determined by the Project Management Committee and (f)all other charges or liens whatsoever required to be paid out of Revenues during such Fiscal Year. Additional Bonds Additional Bonds may be issued under the Bond Resolution on a parity with outstanding Bonds for the purpose of paying the Cost of Acquisition and Construction of any Capital Improvement (related to the Project)upon receipt by the Trustee of (i)evidence that the Project Management Committee has approved the Capital Improvement and (ii)a written opinion of the Consulting Engineer that neither the issuance of the Additional Bonds nor the payment of the Cost of Acquisition and Construction of the -5- © Capital Improvement will impair the ability of the Authority to pay Debt Service through the collection of revenues under the Power Sales Agreement.Additional Bonds may also be issued for the purpose of refunding outstanding Bonds upon receipt by the Trustee,among other things,of a certificate of the Project Management Committee stating that the Supplemental Resolution authorizing such Additional Bonds has been adopted in accordance with the Power Sales Agreement. Brief descriptions of the Authority,the Fifth Series Bonds,the security for the Fifth Series Bonds, the Municipal Bond Insurance Policy,the Project,the Power Purchasers,the Power Sales Agreement,the Act and the Bond Resolution are included in this Official Statement.All summaries herein of documents and agreements are qualified in their entirety by reference to such documents and agreements,and references herein to the Fifth Series Bonds are qualified in their entirety by reference to the information included in the aforesaid documents and agreements,copies of which are available for inspection at the office of the Authority,480 West Tudor Road,Anchorage,Alaska 99503.Copies of the most recent audited financial statements of each Power Purchaser are available for inspection at the office of the Authority. Certain terms used in this Official Statement,and not otherwise defined herein,are defined in Appendix A,"Summaries of the Act and the Basic Documents”under the captions "The Power Sales Agreement -Definitions”and "The Bond Resolution -Definitions”. This Official Statement contains statements which,to the extent they are not recitations of historical fact,constitute "forward-looking statements.”In this respect,the words "estimate,”"project,” "anticipate,”"expect,”"intend,”"believe”and similar expressions are intended to identify forward- looking statements.A number of important factors affecting the Project and the business and financial results of the Power Purchasers could cause actual results to differ materially from those stated in the forward-looking statements. DESCRIPTION OF THE FIFTH SERIES BONDS General The Fifth Series Bonds are issuable only as fully registered bonds,registered in the name of Cede &Co.,as nominee for The Depository Trust Company,New York,New York ("DTC”),as securities depository for the Fifth Series Bonds.The principal of,redemption premium,if any,and interest on the Fifth Series Bonds are payable by U.S.Bank Trust National Association,in the City of Seattle, Washington,as Trustee,to DTC.Individual purchases of the Fifth Series Bonds will be made in book- entry form only in the principal amounts of $5,000 or integral multiples thereof. So long as the Fifth Series Bonds are in book-entry form,the principal of,redemption premium, if any,and interest on the Fifth Series Bonds are payable to Cede &Co.as registered owner thereof and will be redistributed by DTC and the DTC Participants as described under "Book-Entry System.”The Authority and the Trustee may treat and consider Cede &Co.,as the holder and owner of the Fifth Series Bonds for the purpose of payment of principal and interest with respect to the Fifth Series Bonds,and for all other purposes. The Fifth Series Bonds are dated as of the Settlement Date,mature on July 1,2021,and bear interest from their date at the rate of %per annum,payable on July 1,1999 and semiannually the rates set forth on the cover page of this Official Statement.] Optional Redemption Regular.The Fifth Series Bonds are subject to redemption prior to maturity,at the option of the Authority,at any time on and after 1,20__,at the redemption prices (expressed as a percentage of the principal amount of Fifth Series Bonds to be redeemed)set forth below,plus accrued interest to the date of redemption. Redemption Period Redemption Price 1,20__through 20 % 1,20__through 20__ 1,20__and thereafter In the event of a regular optional redemption of Fifth Series Bonds,the Authority may direct the [maturity or maturities and]amounts thereof to be redeemed.If less than all of the Fifth Series Bonds [of a single maturity]are to be redeemed,the particular Fifth Series Bonds [of such maturity]to be redeemed shall be selected by lot as provided in the Bond Resolution. In the event of the regular optional redemption of less than all of the Fifth Series Bonds,the principal amount so redeemed shall be credited against the unsatisfied balance of the Principal Installments established with respect to the Fifth Series Bonds,in such amount and against such Principal Installments as shall be allocated by the Authority in a certificate filed with the Trustee prior to the mailing of notice of redemption of the Fifth Series Bonds or,in the absence of such determination,shall be creduwa against all such Principal Installments pro-rata. Sinking Fund Redemption The Fifth Series Bonds are subject to mandatory redemption in part and by lot,on each July 1 on and after July 1,20__,at a redemption price of par,from Sinking Fund Installments,which are required to be made in amounts sufficient to redeem on July 1 of each of the years set forth in the following table, the principal amount of the Fifth Series Bonds specified for each of such years: Principal Amount $ Year 20__20__ 20__ 20__ 20__ 20 2021 (Maturity) Amounts accumulated in the Debt Service Fund with respect to any Sinking Fund Installment may be applied,prior to the due date of such Sinking Fund Installment,to purchase Fifth Series Bonds [of thmaturityforwhichsuchSinkingFundInstallmentwasestablished].(See Appendix D,"Summaries oC)Act and the Basic Documents”under the caption "The Bond Resolution -Debt Service Fund.”) -7- Mandatory Redemption Upon a Determination of Taxability The Fifth Series Bonds are subject to mandatory redemption as a whole,at any time,at a redemption price of par,plus accrued interest to the date of redemption,on the earliest practicable date selected by the Trustee after consultation with the Authority,but in no event later than 180 days following the Trustee's receipt of notification of the Determination of Taxability with respect to the Fifth Series Bonds. {DEFINITION OF "DETERMINATION OF TAXABILITY”TO COME FROM BOND COUNSEL] Notice of Redemption At least 30 days,but not more than 60 days,prior to the date upon which any Fifth Series Bonds are to be redeemed,the Trustee will mail a notice of redemption to the registered owner of any Fifth Series Bond all or a portion of which is to be redeemed,at the owner's last address appearing on the registration books of the Authority kept by the Trustee. Cede &Co.,as nominee of DTC and as the only registered owner of the Fifth Series Bonds will receive all redemption notices.Individual purchasers of the Fifth Series Bonds will not receive any notice of redemption directly from the Trustee,but may expect to receive information concerning any redemption of their Fifth Series Bonds through the DTC system as described under "Book-Entry System.” DELAYED DELIVERY OF FIFTH SERIES BONDS The following is a description of certain provisions of the Forward Delivery Agreement.This description is not a full statement of the terms of the Forward Delivery Agreement and is qualified by and subject to reference to the full text thereof. General Pending the issuance and delivery of the Fifth Series Bonds (the "Settlement”),the Authority has agreed that it will not (i)with respect to the Project,offer or issue any bonds,notes or other obligations for borrowed money,or incur any material liabilities,direct or contingent,which would materially adversely affect the rights of the Underwriters under the Forward Delivery Agreement or the security for the Fifth Series Bonds or (ii)take any action which would prevent the issuance and delivery of any of the Fifth Series Bonds on the Settlement Date. It is a condition to the Authority's obligation to sell and delivery the Fifth Series Bonds to the Underwriters that the entire authorized principal amount of the Fifth Series Bonds be purchased,accepted and paid for by the Underwriters at the Settlement.It is a condition to the Purchaser's obligation to purchase and accept delivery of the Fifth Series Bonds that the entire authorized principal amount of the Fifth Series Bonds be issued,sold and delivered by the Authority at the Settlement. Updated Official Statement During the period of time from the date of this Official Statement to the Settlement Date,certain information in the Official Statement could change in a material respect.In the Forward Delivery Agreement,the Authority has agreed to prepare an updated Official Statement relating to the Fifth Series -8- Bonds (the "Updated Official Statement”)dated between March 8,1999 and March 22,1999 (both dates inclusive). Conditions to Settlement General.The Bond Resolution constitutes full authorization for,and no additional action by the Authority is necessary in connection with,the issuance and sale of the Fifth Series Bonds by the Authority. The Forward Delivery Agreement does not permit the Underwriters to refuse to accept delivery of and pay for the Fifth Series Bonds because of any material adverse change in the business or affairs of the Authority unless either any such change has not been accurately and completely described in the Official Statement or the Updated Official Statement or in a supplement or amendment to the Official Statement or the Updated Official Statement,or if such change would cause the Authority or another party to be unable to deliver any of the documents required to be delivered at Settlement in the form and with the substance provided for in the Forward Delivery Agreement. Nevertheless,the completion of the Settlement is subject to and conditioned upon the fulfillment of the conditions and delivery of the documents required by the Forward Delivery Agreement,the Bond Resolution and the Power Sales Agreement.Failure to complete the requirements of the Settlement, including failure of the Authority or the Power Purchasers to deliver any of the documents in the form and substance provided for in the Forward Delivery Agreement (unless such failure is waived by the Underwriters),will mean the Fifth Series Bonds will not be issued and delivered.The Underwriters have the right,but are under no obligation,to waive any such failure. Opinion of Bond Counsel.It is a condition to the issuance of the Fifth Series Bonds at the Settlement that Bond Counsel deliver their approving opinion in substantially the form attached hereto as Appendix B.Bond Counsel has advised the Authority and the Underwriters that,assuming satisfaction by the Authority and the Underwriters of their respective obligations to be satisfied in the Forward Delivery Agreement,and no change in any applicable law,regulations or rulings,or in interpretations thereof,or in any other facts or circumstances which are material to its opinion,Bond Counsel expects to be able to issue their approving opinion in substantially the form attached hereto as Appendix B. Bond Insurance Policy.It is also a condition to the Settlement of the Fifth Series Bonds that a municipal bond insurance policy for the Fifth Series Bonds in substantially the form attached as Appendix D hereto (the "Insurance Policy”)be issued by (the "Bond Insurer”) on the Settlement Date.The Authority has received from the Bond Insurer a commitment to issue an Insurance Policy (the "Commitment”),pursuant to which the Bond Insurer has agreed,upon the terms and conditions set forth therein,to issue its Insurance Policy on the Settlement Date.The Authority is not aware of any reason why the Insurance Policy will not be issued on the Settlement Date for the Fifth Series Bonds. Ratings.It is also a condition to Settlement that the Fifth Series Bonds be assigned ratings,as of the Settlement Date,by Moody's Investors Service and Standard &Poor's Ratings Services equal to the then-current ratings of the claims paying ability of the Bond Insurer by each such rating agency. Termination of Forward Delivery Agreement The Authority will have no obligation to issue,sell and deliver the Fifth Series Bonds if,because of a "Change in Law”(defined below),the Authority is or would be prohibited from lawfully issuing and selling the Fifth Series Bonds.The Underwriters may terminate the Forward Delivery Agreement,without -9- 8 liability,by notification to the Authority if,at any time on or prior to the Settlement Date,as a result of a Change in Law,the Underwriters are or would be prohibited from lawfully underwriting the Fifth Series Bonds.Consequently,the occurrence of a Change in Law will discharge the Authority and the Underwriters from their respective obligations under the Forward Delivery Agreement and neither party will have any liability to the other party or to prospective purchasers of the Fifth Series Bonds for its failure to perform. A "Change in Law”is defined in the Forward Delivery Agreement as:(i)any change in or addition to applicable federal or state law,whether statutory or as interpreted by the courts,including any changes in or new rules,regulations or other pronouncements or interpretations by federal or state agencies,(ii)any legislation enacted by the Congress of the United States or introduced therein or recommended for passage by the President of the United States (if such enacted,introduced or recommended legislation has a proposed effective date which is on or before the Settlement Date),(ii)any law,rule or regulation proposed or enacted by any governmental body,department or authority (if such proposed or enacted law,rule or regulation has a proposed effective date which is on or before the Settlement Date)or (iv)any judgment,ruling or order issued by any court of administrative body,which in any such case,would,as to any Underwriter,prohibit (or have the retroactive effect of prohibiting,if enacted,adopted,passed or finalized)such Underwriter from purchasing the Fifth Series Bonds as provided for in the Forward Delivery Agreement or selling the Fifth Series Bonds or beneficial ownership interests therein to the public or,as to the Authority,would make the issuance,sale or delivery of the Fifth Series Bonds illegal (or have the retroactive effect of making such issuance,sale or delivery illegal,if enacted,adopted,passed or finalized);provided,however,that such change in or addition to law, legislation,law,rule or regulation or judgment,ruling or order shall have become effective,been enacted, introduced or recommended,been proposed or been issued,as the case may be,subsequent to January __, 1999. Other Investment Considerations Events which may occur prior to the Settlement Date may have significant consequences to investors who have agreed to purchase Fifth Series Bonds on the Settlement Date.The value of the Fifth Series Bonds on the Settlement Date is unlikely to be the same as the purchase price therefor,and such difference may be substantial.Several factors may adversely affect such value including,but not limited to,a general increase or decreased in interest rates for all obligations and other indebtedness,any threatened or adopted change in the federal income tax laws affecting the relative benefits of owning tax- exempt securities versus other kinds of investments,such as fully taxable obligations,or any adverse development with respect to the Authority's results of operations,financial condition or prospects or with respect to the ratings of the Authority's outstanding bonds.In addition,changes or proposed changes in federal income tax laws or regulations or interpretations thereof could affect the market value of tax- exempt securities generally,including without limitation,the Fifth Series Bonds,without preventing thedeliveryoftheFifthSeriesBondsattheSettlement. The Underwriters are not obligated to make or maintain a secondary market for the Fifth Series Bonds.No assurance can be given that a secondary market for the Fifth Series Bonds will exist during the period prior to the Settlement Date.Prospective purchasers of the Fifth Series Bonds should assume that the Fifth Series Bonds will be illiquid prior to the Settlement Date. -10- BOOK-ENTRY SYSTEM The following information concerning The Depository Trust Company ("DTC”)of New York,New York has been furnished by DTC for use in this Official Statement.Neither the Authority,the Power Purchasers nor the Underwriters take responsibility for its accuracy or completeness. DTC will act as securities depository for the Fifth Series Bonds.The Fifth Series Bonds will be issued as fully-registered securities registered in the name of Cede &Co.(DTC's partnership nominee). One fully-registered bond will be issued for [each maturity of]the Fifth Series Bonds,in the aggregate principal amount [of the Fifth Series Bonds,][of such maturity,]and will be deposited with DTC. DTC is a limited-purpose trust company organized under the New York Banking Law,a "banking organization”within the meaning of the New York Banking Law,a member of the Federal Reserve System,a "clearing corporation”within the meaning of the New York Uniform Commercial Code,and a "clearing agency”registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934.DTC holds securities that its participants ("Participants”)deposit with DTC.DTC also facilitates the settlement among Participants of securities transactions,such as transfers and pledges,in deposited securities through electronic computerized book-entry changes in Participants'accounts,thereby eliminating the need for physical movement of securities certificates.Direct Participants include securities brokers and dealers,banks,trust companies,clearing corporations,and certain other organizations.DTC is owned by a number of its Direct Participants and by the New York Stock Exchange,Inc.,the American Stock Exchange,Inc.,and the National Association of Securities Dealers,Inc.Access to the DTC system is also available to others such as securities brokers and dealers,banks,and trust companies that clear through or maintain a custodial relationship with a Direct Participant,either directly or indirectly ("Indirect Participants”).The rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. Purchases of the Fifth Series Bonds under the DTC system must be made by or through Direct Participants,which will receive a credit for the Fifth Series Bonds on DTC's records.The ownership interest of each actual purchaser of each Fifth Series Bond ("Beneficial Owner”)is in turn to be recorded on the Direct and Indirect Participants'records.Beneficial Owners will not receive written confirmation from DTC of their purchase,but Beneficial Owners are expected to receive written confirmations providing details of the transaction,as well as periodic statements of their holdings,from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction.Transfers of ownership interests in the Fifth Series Bonds are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners.Beneficial Owners will not receive certificates representing their ownership interests in the Fifth Series Bonds,except in the event that use of the book- entry system for the Fifth Series Bonds is discontinued. To facilitate subsequent transfers,all Fifth Series Bonds deposited by Participants with DTC are registered in the name of DTC's partnership nominee,Cede &Co.The deposit of Fifth Series Bonds with DTC and their registration in the name of Cede &Co.effect no change in beneficial ownership.DTC has no knowledge of the actual Beneficial Owners of the Fifth Series Bonds;DTC's records reflect only the identity of the Direct Participants to whose accounts such Fifth Series Bonds are credited,which may or may not be the Beneficial Owners.The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants,by Direct Participants to Indirect Participants,and by Direct Participants and Indirect Participants to Beneficial -11- Owners will be governed by arrangements among them,subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices will be sent to Cede &Co.If less than all of the Fifth Series Bonds [of like maturity]are being redeemed,DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede &Co.will consent or vote with respect to the Fifth Series Bonds.Under its usual procedures DTC mails an "Omnibus Proxy”to the Authority as soon as possible after the record date.The Omnibus Proxy assigns Cede &Co.'s consenting or voting rights to those Direct Participants to whose accounts the Fifth Series Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal and interest payments on the Fifth Series Bonds will be made to DTC.DTC's practice is to credit Direct Participants'accounts on the payment date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on the payment date.Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices,as is the case with securities held for the accounts of customers in bearer form or registered in "street name,”and will be the responsibility of such Participant and not of DTC,the Authority,or the Trustee,subject to any statutory or regulatory requirements as may be in effect from time to time.Payment of principal and interest to DTC is the responsibility of the Authority or the Trustee, disbursement of such payments to Direct Participants shall be the responsibility of DTC,and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DTC management is aware that some computer applications,systems,and the like for processing data ("Systems”)that are dependent upon calendar dates,including dates before,on,and after January 1, 2000,may encounter "Year 2000 problems.”DTC has informed its Participants and other members of the financial community (the "Industry”)that it has developed and is implementing a program so that its Systems,as the same relate to the timely payment of distributions (including principal and interest payments)to securityholders,book-entry deliveries,and settlement of trades within DTC ("DTC Services”),continue to function appropriately.This program includes a technical assessment and a remediation plan,each of which is complete.Additionally,DTC's plan includes a testing phase,which is expected to be completed within appropriate time frames. However,DTC's ability to perform properly its services is also dependent upon other parties, including but not limited to issuers and their agents,as well as third party vendors from whom DTC licenses software and hardware,and third party vendors on whom DTC relies for information or the provision of services,including telecommunication and electrical utility service providers,among others. DTC has informed the Industry that it is contacting (and will continue to contact)third party vendors from whom DTC acquires services to:(i)impress upon them the importance of such services being Year 2000 compliant;and (ii)determine the extent of their efforts for Year 2000 remediation (and,as appropriate, testing)of their services.In addition,DTC is in the process of developing such contingency plans as it deems appropriate. DTC may discontinue providing its services as securities depository with respect to the Fifth Series Bonds at any time by giving reasonable notice to the Authority and the Trustee.Under such circumstances,if a successor securities depository is not obtained,certificates for the Fifth Series Bonds are required to be printed and delivered. -12- The Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository).In that event,certificates for the Fifth Series Bonds will be printed and delivered. SECURITY AND SOURCES OF PAYMENT FOR THE FIFTH SERIES BONDS The Fifth Series Bonds constitute direct and general obligations of the Authority,and the full faith and credit of the Authority are pledged to the payment of the principal of and interest on the Fifth Series Bonds.There are no significant revenues,moneys or assets of the Authority that are available or are expected to be available for the payment of the principal of and interest on the Fifth Series Bonds other than the revenues of the Project and the moneys,securities and funds held under the Bond Resolution. The Fifth Series Bonds do not constitute an indebtedness or other liability of the State of Alaska,and the Fifth Series Bonds do not directly,indirectly or contingently obligate the State,or any political subdivision thereof,or the Power Purchasers to levy any form of taxation for the payment of the Fifth Series Bonds.The Authority has no taxing power.Neither the full faith and credit nor the taxing power of the State of Alaska,any political subdivision,or the Power Purchasers is pledged for the payment of the Fifth Series Bonds. In the event of a default under the Bond Resolution,the Trustee is authorized to proceed to protect and enforce its rights and the rights of the holders of the Bonds,including the right to apply for the judicial appointment of a receiver for the Project.However,neither the Trustee nor the Bondholders may declare all the Bonds due and payable or otherwise accelerate the payment of the Bonds (see,Appendix A, "Summaries of the Act and the Basic Documents”under the caption "The Bond Resolution”). Pledge Effected by the Bond Resolution Pursuant to the Bond Resolution,all of the revenues derived by the Authority from the operation of the Project,including payments to be made by the Power Purchasers pursuant to the provisions of the Power Sales Agreement (the "Revenues”)and all moneys,securities and funds (except the Excess Investment Earnings Fund)held or set aside under the Bond Resolution are pledged and assigned to secure the payment of the principal of,redemption premium,if any,and interest on the Bonds,subject only to the provision of the Bond Resolution permitting the application thereof for the payment of Operating Expenses of the Project and for other purposes specified in the Bond Resolution.No other revenues or assets of the Authority are pledged as security for the payment of the Bonds. The Act provides that any pledge made in respect of the Bonds shall be valid and binding from the time when the pledge is made,that the moneys or property so pledged and thereafter received by the Authority shall immediately be subject to the lien of such pledge without any physical delivery or further act and that the lien of any such pledge shall be valid and binding against all parties having any claims of any kind in tort,contract or otherwise against the Authority irrespective of whether the parties have notice. Power Sales Agreement Under the provisions of the Power Sales Agreement,the Authority has sold 100%of the Project Capacity (and associated energy)of the Project to the Power Purchasers in specified percentage shares and -13- the Power Purchasers have agreed to pay a like percentage of the Annual Project Costs of the Project.The percentage share of each Power Purchaser is set forth in the following table: Power Purchaser Percentage Share Chugach Electric Association,Inc...2...2...eee eee eee 30.4% Municipality of Anchorage .....0.0...0 cee eee eee eee 25.9 Alaska Electric Generation &Transmission Cooperative,Inc...25.8 (acting on behalf of Homer Electric Association,Inc.-12.0% share and Matanuska Electric Association,Inc.-13.8%share) Golden Valley Electric Association,Inc.................16.9 City of Seward ................-eeeeeee 1.0 100.0% The Alaska Electric Generation &Transmission Cooperative,Inc.(*AEG&T”)will purchase power under the Power Sales Agreement for use by the Homer Electric Association,Inc.and the Matanuska Electric Association,Inc.,both of which have also executed the Power Sales Agreement.If AEG&T at any time fails to meet its payment obligations under the Power Sales Agreement,then,to the extent of such failure by AEG&T and for so long as such failure continues,Homer Electric Association and Matanuska Electric Association are each obligated to meet directly its respective Percentage Share of Annual Project Costs (12.0%for Homer Electric Association and 13.8%for Matanuska Electric Association). The Power Purchasers are obligated to make annual payments to the Authority in an aggregate amount sufficient (together with available funds held under the Bond Resolution)to pay all Annual Project Costs,including all Operating Expenses of the Project,Aggregate Debt Service on all Bonds and any amounts required to maintain the Operating Reserve Account,the Capital Reserve Fund and the Renewal and Contingency Reserve Fund (see,"Rate Covenant”herein). The Power Sales Agreement is in full force and effect and will terminate (i)on September 1,2041 (being 50 years after the Date of Commercial Operation of the Project),or (ii)when no Bonds are outstanding under the Bond Resolution and all payment obligations under the Power Sales Agreement have been satisfied or provided for,whichever occurs later. Each Power Purchaser is obligated unconditionally to pay its proportionate share of the Annual Project Costs notwithstanding a suspension or reduction in the amount of power supplied by the Project. Similarly,this unconditional obligation continues notwithstanding circumstances in which the Project is completely inoperable and in which the Authority has not remedied the situation that caused such inoperable status. All payments to be made pursuant to the Power Sales Agreement constitute Revenues of the Project and are pledged under the Bond Resolution.The right of the Authority to receive such payments and its right to enforce the payment obligations of the Power Purchasers under the Power Sales Agreement have been assigned to the Trustee pursuant to the Bond Resolution.Concurrently with the issuance of the Fifth Series Bonds,Bond Counsel will issue its opinion that the Power Sales Agreement is in full force and effect and constitutes a valid and binding agreement authorized by the Act and enforceable in accordance with its terms.For additional information regarding the provisions of the Act authorizing the Power Sales Agreement and granting express authority to the Power Purchasers and the Authority to enter into power -14- sales agreements of like kind and character as the Power Sales Agreement,see Appendix A,"Summaries of the Act and the Basic Documents”under the caption "The Alaska Energy Authority Act -Power Sales Contracts”.The full text of the opinion of Bond Counsel with respect to the Fifth Series Bonds and the Power Sales Agreement is set forth in Appendix B. The Authority has covenanted in the Bond Resolution to enforce the provisions of the Power Sales Agreement and to perform its covenants and agreements thereunder.The Authority has also covenanted that it will not consent or agree to permit any termination,rescission of or amendment to the Power Sales Agreement,which will reduce the payments required thereunder or materially impair or materially adversely affect the rights of the Authority thereunder or the security of the Bondholders under the Bond Resolution. The amounts payable under the Power Sales Agreement are operating expenses of each Power Purchaser's system,and are valid and binding obligations of each Power Purchaser,payable only from the gross revenues of the Power Purchaser's system as a cost of purchased electric power,and are not payable from any taxes.At the time of issuance of the First Series Bonds,the Authority obtained opinions of counsel from each Power Purchaser with respect to the validity and enforceability of the Power Sales Agreement as to such Power Purchaser.At the time of issuance of the Fifth Series Bonds,the Authority will obtain the opinion of Ater Wynne,LLP of Portland,Oregon,special counsel to the Railbelt Utilities Group,an organization representing the Power Purchasers,Homer Electric Association,Inc.and Matanuska Electric Association,Inc.with respect to the continued validity and enforceability of the Power Sales Agreement as to each Power Purchaser,other than the City of Seward. The Authority is not subject to the jurisdiction of the Alaska Public Utilities Commission ("APUC”)with respect to the Project.The Power Sales Agreement is not subject to APUC jurisdiction until all Bonds are retired.Annual Project Costs incurred by a Power Purchaser pursuant to the Power Sales Agreement must be allowed by the APUC,by statute,in the schedule of consumer rates and charges established by each Power Purchaser.Some of the Power Purchasers are subject to APUC jurisdiction. If the Authority projects that the amounts to be deposited into the Revenue Fund will be insufficient to pay Annual Project Costs because of a payment default by a Power Purchaser,the Authority may increase every other Power Purchaser's Percentage Share of Annual Project Costs and Project Capacity pro rata to the extent,and for the period,necessary to compensate for such insufficiency; provided that no Power Purchaser's Percentage Share may be increased by more than 25%above the amount set forth in the Power Sales Agreement. The Power Sales Agreement establishes the Project Management Committee and contains other substantive provisions relating to the operation of the Project and the sale of power generated by the Project.The Project Management Committee has operation,maintenance,budgetary and other responsibilities under the Power Sales Agreement.Committee actions regarding operation and maintenance arrangements,sufficiency of the annual budget and power rates are subject to Authority approval.The Authority retains the right to take action necessary to meet its obligations under the Act and the Bond Resolution.For more information concerning the Power Sales Agreement,see Appendix A,"Summaries of the Act and the Basic Documents -The Power Sales Agreement.” -15- Rate Covenant The Authority has covenanted in the Bond Resolution that it shall charge and collect from each Power Purchaser that Power Purchaser's Percentage Share of Annual Project Costs.The Authority,acting in conjunction with the Project Management Committee,or separately to the extent necessary,shall determine Annual Project Costs in such amounts as shall be required to provide Revenues at least sufficient in each Fiscal Year,together with other available funds,for the payment of the sum of: (a)Operating Expenses of the Project during such Fiscal Year; (b)the amount required to restore the Operating Reserve Account to the Operating Reserve Requirement (20%of the Operating Expenses component of the Annual Budget,or such other amount as may be determined pursuant to the Power Sales Agreement); (c)an amount equal to the Aggregate Debt Service due on all outstanding Bonds during such Fiscal Year; (d)the amount,if any,to be paid during such Fiscal Year into the Capital Reserve Fund,which shall be the amount,if any,necessary to restore the Capital Reserve Fund to the Capital Reserve Requirement; (e)the amount to be paid during such Fiscal Year to the Renewal and Contingency Reserve Fund required to restore the Renewal and Contingency Reserve Fund,over a period of not greater than four years,to the Renewal and Contingency Reserve Fund Requirement ($5 million)or such larger amount determined by the Project Management Committee;and (f)all other charges or liens payable out of Revenues during such Fiscal Year. Capital Reserve Fund and Moral Obligation of the State Pursuant to the Bond Resolution,the Authority covenants and agrees to establish and maintain with the Trustee the Capital Reserve Fund in an amount at least equal to the Capital Reserve Requirement (an amount equal to the lesser of Maximum Aggregate Debt Service or ten percent of the proceeds of Bonds; or such lesser amount as is required in order to maintain the tax-exempt status of the Bonds).As of the date of issuance of the Fifth Series Bonds,the Capital Reserve Requirement will be $> an amount equal to Maximum Aggregate Debt Service.As of the date of issuance of the Fourth Series Bonds (expected on or about April 4,2000)Maximum Aggregate Debt Service and the Capital Reserve Requirement will be $.The moneys on deposit in the Capital Reserve Fund shall be used for the payment of principal,redemption premium,if any,and interest on Bonds,but only when and to the extent that moneys are not available therefor in the Debt Service Fund. The Act requires that the Chairman of the Authority,at least annually,but no later than January 2 of each year,certify in writing to the Governor and the State Legislature the sum,if any,required to restore the Capital Reserve Fund to the Capital Reserve Requirement.The Bond Resolution requires the Chairman to make such certification whenever the Trustee transfers funds from the Capital Reserve Fund to pay principal of or interest on the Bonds.The State Legislature may,but is not obligated to, appropriate to the Authority the sum certified by the Chairman of the Authority.Under the Alaska Constitution,appropriations passed by the State Legislature are subject to line item veto by the Governor. -16- The Authority is required to deposit in the Capital Reserve Fund any amounts so appropriated during the then current Fiscal Year. Additional Bonds Additional Bonds may be issued under the Bond Resolution on a parity with the then Outstanding Bonds for the purpose of paying a Cost of Acquisition and Construction of any Capital Improvement (related to the Project)upon receipt by the Trustee of (i)evidence that the Project Management Committee has approved the Capital Improvement and (ii)a written opinion of the Consulting Engineer that neither the issuance of the Additional Bonds nor the payment of the Cost of Acquisition and Construction of the Capital Improvement will impair the ability of the Authority to pay Debt Service through the collection of Revenues under the Power Sales Agreement.Additional Bonds may also be issued for the purpose of refunding outstanding Bonds upon receipt by the Trustee,among other things,of a certificate of the Project Management Committee stating that the Supplemental Resolution authorizing such Additional Bonds has been adopted in accordance with the Power Sales Agreement. Pledge of the State Pursuant to the Act,the State has pledged and agreed with the holders of the Bonds that it will not limit or alter the rights or powers vested in the Authority by the Act to fulfill the terms of a contract (including the Bond Resolution)made by the Authority with such holders,or in any way impair the rights or remedies of such holders until the Bonds,including the interest on them with interest on unpaid installments of interest,and all costs and expenses in connection with any act or proceeding by or on behalf of such holders,are fully met and discharged..O BOND INSURANCE [TO COME] RIGHTS OF BOND INSURERS Under the terms of the Bond Resolution,,as the Bond Insurer of Fifth Series Bonds will at all times be deemed the exclusive owner of all Fifth Series Bonds for the purpose of all approvals,consents,waivers,the institution of any action and the direction of all remedies (See,Appendix D,"Summaries of the Act and the Basic Documents”under the caption "The Bond Resolution -Special Provisions Relating to the Bond Insurer”).Payment of the principal of and interest on the First Series Bonds and Second Series Bonds is insured by MBIA Insurance Corporation ("MBIA”). Payment of the principal of and interest on the Third Series Bonds and the Fourth Series Bonds is expected to be insured by Financial Security Assurance Inc.("FSA”).The rights granted to as the Bond Insurer of the Fifth Series Bonds are similar to the rights granted to MBIA and FSA. [FSA SPECIAL PAYMENT RIGHTS -TO BE DISCUSSED] O -17- ANNUAL DEBT SERVICE REQUIREMENTS THE BRADLEY LAKE HYDROELECTRIC PROJECT General Description The Project has 126 megawatts of installed capacity that is normally scheduled at 90 megawatts to minimize losses.The Project is located at the northeast end of Kachemak Bay about 27 miles from the City of Homer at the southern end of the Kenai Peninsula. The Project consists of a concrete-faced,rock filled dam,125 feet high and 610 feet long.A 13 foot diameter,concrete-lined power tunnel,18,610 feet in length,transports water from the tunnel intake located at Bradley Lake (elevation 1,080 feet)to a powerhouse at sea level.The powerhouse contains two generators capable of providing in excess of 45 megawatts each,with provision for a third generator if needed in the future.Associated facilities at the Project site include two airstrips,a barge dock,two small diversion structures to direct additional water to Bradley Lake and a diversion tunnel. The Project includes a 20 mile overhead transmission line,consisting of two parallel 115 kilovolt lines.The transmission line connects with the Fritz Creek-Soldotna transmission line at Bradley Junction. -18- The Project is the largest hydroelectric facility in the State.Since 1991,the Project has delivered an average of 367.4 million kilowatt-hours of electricity annually.Through interconnection with the existing transmission system,which extends north a distance of 450 miles,the Project serves customers from the Kenai Peninsula to Fairbanks.Approximately 72%of the State's population resides in this area. Power from the Project is used by the purchasing utilities primarily to meet peak seasonal and daily load demands,thus offsetting a portion of the need for fossil fuel generation and deferring capacity upgrades and additions. Permits and Licenses The Project was originally authorized as a federal project under the Flood Control Act of 1962. The development of the site as a hydroelectric project was studied by the U.S.Army Corps of Engineers from 1962 through 1982.Although the Corps determined the Project to be economically feasible,federal funds were not available for design and construction.Because of the State's interest and ability to finance the Project,the United States Congress deauthorized Bradley Lake as a federal project in December 1982, clearing the way for development by the Authority. The Authority initiated the permitting and licensing process in April 1984,by filing application for a Federal Energy Regulatory Commission ("FERC”)license.The FERC license is the primary regulatory approval governing project development.The license application was accepted by FERC in June 1984,and a license to construct,operate and maintain the Project was issued to the Authority in December 1985.There are no pending matters before the FERC relating to the FERC license for the Project.The FERC license expires on December 31,2035.All state and local permits and licenses required to operate the Project have been issued and remain current. Geologic and Seismic Considerations In conjunction with the planning and design of the Project,a number of studies and investigations were performed by Stone and Webster Engineering Corporation,the Design Engineer,and others to ascertain the geologic and geotechnical conditions of the Project site and of the various Project structures. The investigatory work done by the Design Engineer was performed in a manner consistent with levels of effort normally exercised by the geotechnical profession under similar geologic conditions. The south-central coastal area of Alaska in which the Project is located has a history of seismic activity.In 1964,a major earthquake reported to have a magnitude of 8.5 on the Richter Scale occurred in the Prince William Sound of south-central Alaska,with an epicenter approximately 145 miles northeast of the Bradley Lake site.As such,the "Maximum Credible Earthquake”event occurring on a regional basis and assumed for design purposes by the Design Engineer is an event of magnitude 8.5 on the Richter Scale.According to the Design Engineer an earthquake of this magnitude could cause some structural damage to the Project but all systems would be repairable if damaged.The "Design Basis Earthquake”, up to which level the Project would subsequently continue operation with minimal downtime,is an earthquake of magnitude 6.3. Considering the site geologic conditions,including the two fault zones which cross the tunnel, certain features have been incorporated into the Project design to mitigate damage from earthquake events. For example,to control rock fall within the tunnel,a concrete lining is provided throughout the power tunnel with reinforcement as necessary,except in those areas where geology permits otherwise.Other mitigating features include provisions for dewatering the power tunnel for repairs,specifications of a rock- -19- filled dam to accommodate settling and shifting of the underlayment,and the foundation of major Project facilities,including the powerhouse,on or in bedrock.The Design Engineer stated that the overall approach taken to address geologic and seismic conditions in the Project design was appropriate for the Project site.Seismic design considerations and the results of the site investigations were reviewed and found prudent for the Project by both the Project's Technical Review Board and the FERC Board of Consultants. Power Production The Project includes two 45 megawatt turbine generators with a combined nameplate rating of a nominal 90 megawatts.Each turbine is capable of producing 63 megawatts under certain conditions, including power plant water availability,transmission system operating conditions,and system power factor.Under optimal conditions,the Project is capable of producing 126 megawatts. The 1989 Design Engineer's evaluation estimated that,with average water available,the Project would be capable of generating 375,920,000 kilowatt-hours of electricity annually and,after transmission losses,of delivering 372,200,000 kilowatt-hours annually to Bradley Junction,the delivery point for power sales under the Power Sales Agreement.Since 1991,the Project have delivered annually an average of 367.4 million kilowatt hours of electricity.Set forth below are annual power purchase statistics for the annual periods ended May 31 of the years 1992 to 1997 and for the five month period ended October 31, 1998. Project Power Production (Megawatt Hours) Golden Valley HEA ML&P Chugach MEA Seward Total June 1991 to May 1992 53,501 28,992 99,175 103,846 47059 3,394 335,967 June 1992 to May 1993 56,418 45,599 74,054 85,192 38,686 2,820 302,769 June 1993 to May 1994 64,435 49,342 129,525 125,537 56,454 4,043 429,336 June 1994 to May 1995 77,590 54,973 85,135 138,767 63,467 4,627 424,559 June 1995 to May 1996 62,806 44,656 108,766 113,373 51,230 3,699 384,530 June 1996 to May 1997 51,792 36,480 65,293 91,199 42,560 3,153 290,477 June 1997 to May 1998 62,449 43,985 98,458 109,964 51,317 3,802 369,975 June 1998 to October 1998 29,044 60,942 20,458 51,142 23,867 1,768 187,221 458,035 364,969 680.864 819.020 374,640 27,306 2,724,834 Water Availability Water levels in Bradley Lake are managed between 1,178 feet (spill level)and 1,080 feet (minimum level).This volume of water (assuming average water availability)equates to approximately one year of expected generation from the Project of approximately 376,000,000 kilowatt-hours.Water availability,repairs and planned maintenance on the Project,together with the Power Purchasers' generation requirements and outage schedules for their own generating units,are taken into account in managing Project power generation. Homer Electric Association,Inc.("HEA”),as plant operator,measures and records inflows,lake level,and outflows.In addition,local weather forecasts are received from the National Weather Service -20- quarterly and snow pack levels are received quarterly from the United States Coast Guard.These are reported to the Project Management Committee's Operating and Dispatch Sub-Committee to enable the Project and each Power Purchaser to plan their generation requirements.This weather and water information is used to forecast water availability for 12 months. Historical Annual Project Costs The Power Sales Agreement provides for the payment by the Power Purchasers of all the Authority's Annual Project Costs associated with the ownership and operation of the Project.Historical Annual Project Costs for the operating years ended June 30,1994 through 1998 are shown on the following table: Historical Annual Project Costs (Operating Years Ended June 30) ($000) 1994 1995 1996 1997 1998 Operations and Maintenance .$1,501 $1,353 $1,422 $1,239 $1,144 Administrative and General .548 445 508 512 305 Insurance ...........--.244 328 324 316 300 Renewals and Replacements .0 0 0 0 22 Subtotal ........$2,293 $2,126 $2,254 $2,067 $1,771 Debt Service ...........13,388 13,391 13,391 13,391 13,017 Less:Investment Income ...(1,879)(1,923)(1,950)(1,878)(1,818) Total Cost of Power $13,802 $13,594 $13,695 $13,580 $12,970 Energy Delivered (mwh)...430,300 425,648 381,491 258,662 (1)402,953 Total Unit Cost of Power (cents/kWH)..-.......-.3.21 3.19 3.59 5.25 3.22 Source:Alaska Energy Authority (1)Reflects reductions in power generation substantially due to low levels of water during the operating year ended June 30,1997. Transmission The Project includes approximately 20 miles of two parallel,115-kilovolt transmission lines to connect the power plant to a switching station at Bradley Junction (the "Project Transmission Line”). To transmit power from Bradley Junction to each of the Power Purchasers,the Power Purchasers or their designated power suppliers have entered into two related transmission agreements,one governing transmission over power lines owned by HEA,and the other providing wheeling rights over power lines owned by Chugach Electric Association,Inc.("Chugach”).The transmission agreement with HEA governs transmission of Project power between the Bradley Junction and the Soldotna Substation,along the 59 mile,115-kilowatt transmission line built by HEA.The Power Purchasers or their designated power suppliers acquired transmission capability and either have prepaid the capital costs associated with their share of such line or pay such capital costs quarterly.Operation and maintenance expenses for the HEA line are paid monthly by the Power Purchasers based on actual costs. -21- S oO In the transmission agreement with Chugach (the "Chugach Agreement”),Chugach has agreed to wheel Project power over its transmission facilities from the Soldotna Substation to each Power Purchaser's designated delivery point,either by direct transmission or displacement,for a period commensurate with the projected 50-year life of the Project,or as otherwise agreed by the parties. Chugach has priority use of its transmission facilities for its own system purposes and as a result the Chugach Agreement allows Chugach to ratably reduce the wheeling capacity available to the other Power Purchasers during any period that the Chugach system needs and the needs of the other Power Purchasers exceed available wheeling capacity.However,a number of provisions in the Chugach Agreement provide options for offsetting this lack of wheeling capacity,including power storage services,Chugach's agreement to offer to purchase power that cannot be wheeled,and Chugach's agreement to offset power that cannot be wheeled by delivery of other Chugach power.In addition,the other Power Purchasers may request and pay for upgrades of Chugach's transmission facilities. Project Management Committee Chugach,Golden Valley Electric Association,Inc.("Golden Valley”),the Municipality of Anchorage d/b/a Municipal Light &Power ("ML&P”),HEA,Matanuska Electric Association,Inc. ("MEA”),the City of Seward d/b/a Seward Electric System ("Seward”)and the Authority each have a designated representative and an alternate on the Project Management Committee.MEA and HEA represent themselves and AEG&T for purposes of the Project Management Committee.The Project Management Committee is responsible for the management,operations,maintenance and improvement of the Project,subject to the Authority's nondelegable rights,duties and responsibilities.Specifically,the Project Management Committee is charged with the following duties: 1.To oversee the operation and maintenance of the Project,and the scheduling, production and dispatch of Project power. 2.To establish procedures for the use of each Power Purchaser's water allocation. 3.To adopt a budget of Annual Project Costs for each fiscal year. 4.To establish the estimated annual payment obligation of each Power Purchaser, and a schedule of monthly payments designed to cover that obligation. 5.To determine the actual Annual Project Costs at the conclusion of each fiscal year. From that determination it is to determine the actual annual payment obligation of each Power Purchaser and the amount of any additional payment to be made by the Power Purchasers,or the amount due them to reimburse overpayments. 6.To evaluate alternative methods of carrying out and funding required project maintenance,repairs,renewals,replacements,improvements or betterments. 7.To adopt provisions to evaluate and approve optional maintenance,repairs, renewals,replacements,improvements or betterments. 8.To adopt procedures for conflict resolution. 9.To make an initial determination of the appropriate amount of,and to obtain, insurance for the Project. -22- 10.To adopt maintenance schedules. 11.To adopt procedures relating to power reserves;and 12.To consider the need for and approve any additional amount of funds to be set aside in the Renewal and Contingency Reserve Fund above that required by the Bond Resolution. The Project Management Committee has been meeting on an as needed basis since 1988. Project Operation and Maintenance HEA is responsible for the on site operation and maintenance of the Project.Chugach has scheduling and dispatch responsibility for the Project to satisfy the scheduling requirements of the Power Purchasers.ML&P submits a desired schedule for its share of Project output.Chugach either pools or coordinates the shares of the remaining Power Purchasers to allow efficient operation of Chugach's thermal resources and meet its other obligations to such Power Purchasers. Project capacity and energy are used to reduce the peak loads that must be supplied from thermal resources with the objective of avoiding or delaying the start of thermal units.Secondarily,the Project is used to replace the energy normally supplied from combined cycle plants when they are scheduled out for annual maintenance.The Project Management Committee Operating and Dispatch Subcommittee monitors Project activities. HEA provides normal maintenance which is controlled through an automated maintenance management system that uses technical criteria established by the architects and engineers for the Proj and by the Authority.HEA provides emergency operation and maintenance services for the Project.1 Authority performs an annual inspection by a licensed engineer,FERC performs an annual inspection by a certified independent FERC engineer,and the Project insurer performs an annual insurance inspection. HEA prepares annual Project operation and maintenance budgets.These budgets are reviewed for technical content by the Operation and Dispatch Subcommittee and by the Budget Subcommittee for costs. The budget must be approved by the Project Management Committee and requires the consent of the Authority. [Y2K PROBLEM AND PROJECT OPERATION] THE POWER PURCHASERS Introduction The Power Purchasers are five electric utilities (one of which,AEG&T,purchases power on behalf of its members,HEA and MEA)located in south-central Alaska serving nearly all of the electricity requirements for the area between the communities of Seward and Homer on the southern end of the Kenai Peninsula,through Anchorage and into Fairbanks in the interior of the State.This area is generally referred to as Alaska's Railbelt because it corresponds to the route of the Alaska Railroad,a major ground transportation link between the communities of Seward,Anchorage and Fairbanks.The Railbelt is divided economically and geographically into three distinct regions;the Kenai Peninsula,the Anchorage Matanuska-Susitna area and the Fairbanks area.The population of the Railbelt is presently estimate -23- be approximately 438,000 representing approximately 72 percent of the total State population.Anchorage, with a population of approximately 250,000 is the largest city in Alaska followed by the greater Fairbanks area with a population of approximately 82,000. The Railbelt Utilities Group ("RUG”)is a group formed for the purpose of advancing common interest of its members,among other things,as parties to the Power Sales Agreement.RUG acts only with the duly authorized consent of all of its members.The members of RUG are the Power Purchasers,HEA and MEA.Ater Wynne,LLP,has served as special counsel to RUG on certain matters of common interest to the members since August 1989,and is serving as special counsel to RUG in connection with matters relating to the Fifth Series Bonds.Ater Wynne,LLP,does not represent any of the Power Purchasers in any other capacity,with the exception of Golden Valley. Three of the Power Purchasers,Chugach,AEG&T (and its two members,HEA and MEA)and Golden Valley are electric cooperatives though Chugach and MEA are no longer Rural Utilities Service (federal)borrowers.The remaining two Power Purchasers,ML&P and Seward are municipally-owned electric utilities.The electric systems of the Power Purchasers are interconnected through a transmission system owned in part by the Power Purchasers and in part by the Authority. The following table provides selected statistics for the Power Purchasers for 1997.In this table the statistics for AEG&T are broken out to reflect separate data for HEA and MEA. Selected Statistics for Calendar Year 1997 Golden ML&P Chugach (1)Valley HEA MEA (2) Average Number of Customers ........29,456 66,595 29,300 21,594 34,368 Peak Load (kilowatts)...........+--149,000 397,000 134,000 79,402 97,594 Energy Sales (megawatt-hours)........905,820 1,025,250 653,088 424,129 451,564 Operating Revenues ($000)...........-82,575 143,948 58,187 38,560 45,907 Gross Investment in Utility Plant ($000)..426,178 650,030 244,462 138,262 167,002 Average Cost of Power to Retail Customers (cents/kilowatt-hour)...........00005 8.22 8.82 9.06 8.94 9.95 Source:Indicated Power Purchasers (1)Data includes retail sales only;excludes sales for resale. (2)Excludes Unalakleet Division. Rate Regulation The electric rates of the Power Purchasers (except Seward),HEA and MEA are regulated by the Alaska Public Utilities Commission (*APUC”).By statute,Annual Project Costs incurred by a Power Purchaser (and Additional Parties,HEA and MEA)pursuant to the Power Sales Agreement must be allowed in the utility's rates by the APUC. Power Requirements [UPDATE] During the period 1992 through 1996,the energy requirements of the Power Purchasers'systems in total have grown by 12%.Since 1992,energy requirements in the Anchorage area have increased an average of 2.4 percent per year.Energy requirements on the Kenai Peninsula have increased an average of 1.9 percent per year during the same period.Golden Valley has experienced average growth in energy -24- requirements of 6.2 percent per year from 1992 to 1996.Over this period of time,the estimated population of the Railbelt Region increased from 420,036 to 437,673.The 1998 Power Requirements study of Chugach forecasts an increase in load of approximately 1.2%on the Chugach system in 1998. A summary of the historical energy requirements and peak demands of the Power Purchasers is provided in the following table: Power Purchasers'Power Requirements Total Energy Requirements (Megawatt-hours) 1993 1994 1995 1996 1997 ML&P..........851,576 890,952 916,810 916,073 950,902 Chugach (1)......944,357 974,209 994,509 1,012,428 1,025,250 Golden Valley .....571,201 594,617 597,915 715,065 953, HEA ...........416,129 429,942 450,255 456,906 451,063 MEA........-.-.-438,460 457,907 469,786 490,225 491,142 Seward .........50,674 56,590 55,044 51.476 Total .....3,272,397 3,404,217 3,484,319 3,642,174 Non-Coincident Peak Hourly Demand (Megawatts) 1993 1994 1995 1996 1997 ML&P..........140 148 148 150 149 Chugach (1)......191 193 197 203 202 Golden Valley .....102 101 110 134 163 HEA ...........69 73 74 74 79 MEA...........87 88 94 94 98 Seward ........._9 _9 __10 _9 _ Total .....598 612 633 664 Source:Indicated Power Purchasers (1)Data includes retail sales only;excludes sales for resale. Generation Resources and Utilization of the Project The existing power supplies for the Power Purchasers consist of Power Purchaser-owned generation.MEA purchases all,and HEA purchases the majority,of its power requirements from Chugach through AEG&T.Seward purchases its entire power supply from Chugach.Presently,the Power Purchasers own,or contract for,1,290 megawatts of installed generation of which 177 megawatts is hydroelectric,51 megawatts is coal-fired steam turbines,856 megawatts is natural gas-fire combustion turbines and 206 megawatts is oil-fired combustion turbines.The Project provides the Power Purchasers with a firm source of power and an important diversification in their resource bases that are heavily dependent on natural gas as a fuel.The Power Purchasers use the output of the Project to offset fossil-fuel generation and defer capacity upgrades and additions. The Power Purchasers have no firm plans for the development of new additional generating resources in the next ten years,except that Golden Valley is obligated to purchase all power generated by the Healy Clean Coal Project ("HCCP”)once it becomes commercially operable.This project is a 53 megawatt plant owned by the Alaska Industrial Development and Export Authority ("AIDEA”)that is undergoing operational testing.In addition,as the result of its recent acquisition of the electric distribution and transmission system formerly owned by the City of Fairbanks d/b/a Fairbanks Municipal Utilities -25- System ("FMUS”),Golden Valley has entered into an agreement with Aurora Energy,LLC to purchase the power produced by the Chena power facility formerly owned and operated by FMUS.Such agreement is subject to the approval of the APUC. Golden Valley has initiated litigation against AIDEA in a dispute regarding,among other things, the commercial operation of the HCCP as provided in the Power Sales Agreement for the HCCP.(See, "Pending Disputes”under the caption "Healy Project Power Sales Agreement Litigation.”)The sale of the FMUS properties to Golden Valley and other parties has been challenged in a proceeding scheduled to be heard in Alaska Superior Court in Fairbanks in the first quarter of 2000.If the sale is rescinded, Golden Valley's payment to the City of Fairbanks for the electric distribution and transmission system would be subject to recovery from the City.Golden Valley would continue to meet the debt service on the $29,000,000 borrowed from the Cooperative Financial Corporation to enable acquisition of such properties until the amounts paid by Golden Valley to the City of Fairbanks were recovered. Municipality of Anchorage d/b/a Municipal Light and Power The Municipality of Anchorage has owned and operated ML&P since 1932.A five-member commission appointed by the Mayor of Anchorage reviews electric service policies,practices,budgets and operations of ML&P and,among other responsibilities,recommends to the Mayor adoption of electric rates,regulations and electric system expansions.Direct management responsibility for ML&P resides with the Mayor's administration.The Anchorage Assembly approves and authorizes the annual expenditure budget.ML&P provides electric service to a large portion of the commercial and high-density residential areas within the Municipality of Anchorage.Chugach and MEA serve the remainder of the electric power requirements within the Municipality. In 1997,ML&P sold 838,533 megawatt-hours of electric energy to an average of 29,456 retail customers.In addition,67,287 megawatt-hours of energy was sold to Chugach,FMUS and Golden Valley.Peak hourly demand for ML&P in calendar year 1997 was 149 megawatts. ML&P owns and operates seven natural gas-fire turbines and one waste heat recovery steam turbine with a total capacity of 328 megawatts and 53%of the Eklutna hydroelectric plant,which has 44 MW capacity. -26- The following table summarizes ML&P's historical energy loads and resources used to meet its loads. Municipality of Anchorage d/b/a Municipal Light and Power Energy Loads and Resources (Megawatt-hours) 1993 1994 1995 1996 1997 SALES TO CUSTOMERS:: Residential ...............143,354 147,067 147,408 148,022 144,108 Commercial ............--648,579 659,666 664,331 676,835 687,804 Other...0.2...eee ee eee 19,271 22,877 19,029 11,597 6,621 Sales for Resale ...............12,627 26,969 $0,079 40,571 67,287 Total Energy Sales .......825,831 856,579 880,847 877,025 905,820 System Losses and Owner Use .....25,745 34,373 35,963 39,048 45 082 Total Energy Requirements ..851,576 890,952 916,810 916,073 950,902 ENERGY RESOURCES: Own Resources ........--6-651,584 717,382 734,763 749,161 810,689 Other ........--eee ee eee 199,992 173,570 182,047 166,912 140,213 Total Energy Resources ....851,576 890,952 916,810 916,073 950,902 Source:Municipality of Anchorage d/b/a Municipal Light and Power -27- The following table summarizes operating results for ML&P for the calendar years 1993 through 1997: Municipality of Anchorage d/b/a Municipal Light and Power Historical Operating Results ($000) 1993 1994 1995 1996 1997 GROSS REVENUES: Revenues from Sales of Electricity $66,986 $67,210 $68,783 $69,145 $70,591 Other Operating Revenues ......1,219 889 2,200 504 11,984 Total Gross Revenues ......$68,205 $68,099 $70,983 $69,649 $82,575 OPERATING EXPENSES: Cost of Power ..............$1,577 $1,381 $1,596 $1,427 $826 Bradley Lake ...............3,601 3,605 3,493 3,372 3,392 Production ............2.00.24,262 22,287 23,616 22,205 21,010 Total Cost of Power .......$29,440 $27,273 $28,705 $27,004 $25,228 Other Operating Expenses .........$14,146 $14,860 $14,500 $14,854 $17,118 Total Net Revenue Excluding Depreciation and Amortization ......$24,619 $25,966 $27,778 $27,791 $40,229 Debt Service .............---..$16,950 $17,182 $17,148 $18,662 -$25,943 Source:Municipality of Anchorage d/b/a Municipal Light and Power In 1996,ML&P completed the acquisition from Shell Oil Company of a one-third interest in the Beluga River natural gas field in order to procure a long-term source of natural gas to reduce the volatility of its earnings and cost of power caused by fluctuations in natural gas prices.(See,"Pending Disputes” under the caption "Chugach -ML&P Gas Field Dispute.”) Chugach Electric Association,Inc. Chugach is Alaska's largest electric utility supplying power to over 68,000 member-customers in the Anchorage and upper Kenai Peninsula areas.In addition to its own retail sales,Chugach supplies nearly all of the power requirements of MEA,HEA and Seward.Chugach also sells non-firm energy to Golden Valley over the Alaska intertie.The Chugach board of directors establishes policy and directs the utility and consists of seven members elected from the Chugach membership on staggered three-year terms. On October 12,1998,MEA made an unsolicited offer to purchase Chugach.(See,"Pending Disputes”under the caption "MEA Offer to Purchase Chugach.”) In 1996,Chugach sold 1,025,250 megawatt-hours of electric energy to its retail customers and 961,243 megawatt-hours of electric energy to its wholesale customers excluding economy energy sales to Golden Valley.Revenue from the sale of electric energy to its retail customers in 1997 totaled $98,738,776,distributed as 52 percent residential,46 percent commercial and two percent street lighting. Revenue from sales for resale in 1997 totaled $49,007,231.Chugach's highest hourly peak demand on -28- record of 398 megawatts for its entire system,including coincident peak demand of its wholesale customers,occurred in January 1997. Chugach owns and operates 402 miles of transmission lines,931 miles of overhead distribution lines,[64]miles of underground distribution lines,484.2 megawatts of natural gas-fired combustion turbines and 28.9 megawatts of hydroelectric generation capacity. The following table summarizes Chugach's historical energy loads and resources used to meet its loads,including its share of Project capability:, Chugach Electric Association,Inc. Energy Loads and Resources (Megawatt-hours) 1993 1994 1995 1996 1997 SALES TO CUSTOMERS: Residential ...........005.453,487 461,964 469,580 480,634 479,802 Commercial .........0..-.-484,465 506,707 $20,057 527,006 540,572 Other.....eee ee et eee 6,405 5,538 4,872 4,789 4,877 Sales for Resale .........--0005:.1,065,759 1,141,127 1,142,091 1,203,412 1,244 203 Total Energy Sales .......2,010,116 2,115,156 2,136,600 2,213,842 2,269,453 System Losses and Owner Use .....112,839 126,408 120,081 127,619 117,460 Total Energy Requirements ..2,122,955 2,241,564 2,256,681 2,343,461 2,386,913 ENERGY RESOURCES: Own Resources ..........-.--1,811,42 889,605 1,864,388 2,045,371 2,044,200 Bradley Lake ..............-212,461 224,418 213,506 155,408 123,243 Other (Eklutna,Soldotna #1)....99,052 127,541 178,787 142,682 219,470 Total Energy Resources ....2,122,955 2,241,564 2,256,681 2,343,461 2,386,913 Source:Chugach Electric Association,Inc. Chugach has enjoyed favorable natural gas prices for a significant portion of its generation fuel supply as a result of long-term contracts originally executed with suppliers in the mid-1960s.Gas supplied under these long-term contracts was limited to a fixed quantity in total that Chugach exhausted in 1996. Chugach renegotiated fuel contracts extending the supply period to between 2015 and 2025 depending upon supply options available under the contracts.Prices to Chugach for new volumes of gas are indexed to market prices. -29- The following table summarizes operating results for Chugach for the calendar years 1993 through 1997. Chugach Electric Association,Inc. Historical Operating Results ($000) 1993 1994 1995 1996 1997 GROSS REVENUES: Revenues from Sales of Electricity $120,422 $129,480 $127,810 $133,355 $142,424 Other Operating Revenues ......1,804 1,488 1,570 1,521 1,524 Total Gross Revenues ......$122,226 $130,968 $129,380 $134,876 $143,948 OPERATING EXPENSES: Cost of Power ...........0-,$3,025 $4,019 $4,040 $4,140 $8,113 Bradley Lake ...............6,283 6,292 6,096 5,885 5,920 Production .........0.20000)31,212 26,948 31,534 37,066 45,879 Total Cost of Power .......$40,520 $37,259 $41,670 $47,091 $59,912 Other Operating Expenses .........$32,198 $33,090 $33,617 $32,226 $30,900 Total Net Revenue Excluding Depreciation and Amortization ......$73,059 $79,997 $76,467 $81,976 $91,936 Debt Service ....0...eeeees $32,064 $32,039 $35,655 $32,446 $37,503 Source:Chugach Electric Association,Inc. Golden Valley Electric Association,Inc. Golden Valley was incorporated in 1946 as a Rural Electrification Administration cooperative to provide electric service to rural areas in central Alaska near the City of Fairbanks.A seven-member board of directors elected from Golden Valley's membership sets policy and provides guidance to utility operation.Presently Golden Valley serves over 35,000 electric member-customers in the Fairbanks,Delta, Nenana,Healy and Cantwell areas.The Golden Valley electric system includes the transmission and distribution system and related retail customers formerly operated by FMUS.In addition Golden Valley is interconnected with the electrical facilities of the University of Alaska and three military bases:Eielson Air Force Base,Fort Wainwright and Fort Greely and sells power to these entities under separate arrangements.Golden Valley is interconnected with the electric utility systems in the Anchorage area via the Alaska Intertie. Golden Valley sold 841,820 megawatt-hours of electric energy to its retail customers in 1997.An additional 39,845 megawatt-hours of energy was sold to FMUS,a sales-for-resale customer.Total revenue from the sale of electric energy in 1997 was $69,126,000,of which 28 percent and 72 percent were accounted for from residential and commercial sales,respectively.Golden Valley's maximum hourly demand in 1997 for firm and nonfirm loads was 163 megawatts.In 1997,Golden Valley achieved its record high system demand for firm and nonfirm loads of 169 megawatts. Golden Valley owns and operates 221 megawatts of generation capacity of which 25 megawatts is a coal-fired steam turbine.The remaining 196 megawatts is from four oil-fired combustion turbines. -30- An agreement in 1988 between Golden Valley and Chugach provides for the purchase by Golden Valley of available non-firm energy from Chugach.This agreement expires in 2008.Golden Valley will purchase all power generated by the Healy Clean Coal Project,a clean coal 53 MW generation project once it becomes commercially operable.(See,"Pending Disputes”under the caption "Healy Project Power Sales Agreement Litigation.”)Golden Valley has entered into an agreement with Aurora Energy, LLC to purchase the power produced by the 28 MW Chena power facility formerly owned and operated by FMUS. The following table summarizes Golden Valley's historical energy loads and resources used tomeetitsloads,including its share of Project capability: [PLEASE UPDATE 1997] Golden Valley Electric Association Energy Loads and Resources (Megawatt-hours) 1993 1994 1995 1996 1997 SALES TO CUSTOMERS: Residential .........-2200-209,156 219,312 223,545 231,225 239, Commercial ..........2000-286,117 305,581 324,692 380,451 602, Sales for Resale ............24-18,526 9,643 176 41,411 39, Total Energy Sales .......513,799 534,536 548,413 653,088 881, System Losses and Owner Use .....57,402 60,081 49,502 61,977 71, Total Energy Requirements ..571,201 594,617 597,915 715,065 953, ENERGY RESOURCES: Own Resources ........----368,572 329,876 325,415 406,264 554, Purchases ......0-eee eee 202.629 264,741 272,500 308,801 398, Total Energy Resources ....571,201 594,617 597,915 715,065 Source:Golden Valley Electric Association,Inc. -31- The following table summarizes Golden Valley's operating results for the calendar years 1993 through 1997. Golden Valley Electric Historical Operating Results ($000) 1993 1994 1995 1996 1997 GROSS REVENUES: Revenues from Sales of Electricity $46,377 $47,115 $48,448 $57,023 $67,958 Other Operating Revenues ......1,255 1,307 1,285 1,164 1,168 Total Gross Revenues ......$47,632 $48,422 $49,733 $58,187 $69,126 OPERATING EXPENSES: Cost of Power ........-2005-$5,056 $5,294 $5,759 $7,417 $10,923 Bradley Lake ...............2,349 2,550 2,451 2,373 2,515 Production .........0002ees 15,120 13.865 13,709 19.079 25,908 Total Cost of Power .......$22,525 $21,709 $21,919 $28,869 $39,346 Other Operating Expenses .........$10,638 $10,310 $10,433 $11,699 $12,066 Total Net Revenue Excluding Depreciation and Amortization ......$10,911 $11,641 $12,726 $12,773 $12,320 Debt Service .....2.eee ee ee es $10,016 $10,901 $11,598 $11,736 $12,352 Source:Gold Valley Electric Association,Inc. Homer Electric Association,Inc. HEA,incorporated in 1945,serves the majority of the electricity needs on the Kenai Peninsula south of Anchorage.HEA's service territory includes the communities of Seldovia,English Bay and Port Graham on the south side of Kachemak Bay and Soldotna and Kenai in the northwest area of the Kenai Peninsula. In 1997,HEA sold 424,129 megawatt-hours of electric energy to an average 21,594 customers. Revenues from sales of electricity were $37,929,552 of which 43.5 percent and 56.1 percent were attributed to residential and commercial sales,respectively.Maximum hourly demand in 1997 was 79 megawatts equaling HEA's record peak. HEA purchases all of its power from AEG&T,which in turn,purchases most of its power from Chugach to sell to HEA.AEG&T also operates a 38.5 megawatt gas-fired combustion turbine generator that is dispatched by Chugach.HEA is required to pay AEG&T for all of the costs associated with the generator to the extent that power is not generated for sale to other utilities.In addition HEA pays for 73 megawatts which AEG&T purchases on its behalf under an agreement with Chugach.HEA's requirements exceeding 73 megawatts are supplied by the Project or AEG&T generation in some cases. HEA and AEG&T are currently negotiating with Kenai Fertilizer Company,LLC to develop the Nikiski Co-Generation Project.The project,whether or not undertaken,would not effect HEA's contractual obligation to AEG&T. -32- The following table summarizes HEA's historical energy loads and resources used to meet its loads,including its share of Project capability: Homer Electric Association,Inc. Energy Loads and Resources (Megawatt-hours) 1993 1994 1995 1996 1997 TOTAL ENERGY SALES: Residential ..............-130,144 135,100 139,756 146,497 143,996 Commercial ..........6-0%252,792 261,153 277,588 279,168 278,815 Other......--.eee eee eee 664 661 695 1,281 1,318 System Losses and Owner Use .....32,529 33,028 32,216 29,960 26,934 Total Energy Requirements ..416,129 429,942 450,255 456,906 451,063 ENERGY RESOURCES:: Own Resources .........--.68 95 89 98 139 Purchases ....-...-.2-.-2000:416,061 429,847 450,166 456,808 450,924 Total Energy Resources ....416,129 429,942 450,255 456,906 451,063 Source:Homer Electric Association,Inc. The following table summarizes operating results for HEA for the calendar years 1992 through 1997. Homer Electric Association,Inc. Historical Operating Results ($000) 1993 1994 1995 1996 1997 GROSS REVENUES: Revenues from Sales of Electricity $35,805 $36,253 $37,100 $37,325 $37,930 Other Operating Revenues ......878 769 767 734 630 Total Gross Revenues ......$36,683 $37,022 $37,867 $38,059 $38,560 OPERATING EXPENSES: Cost of Power .........0000-$16,625 $17,121 $17,444 $18,121 $18,286 Bradley Lake ...........-..-.1,668 1,670 1,618 1,562 1,704 Production .......-.....+--40 45 48 34 51 Total Cost of Power .......$18,333 $18,836 $19,110 $19,717 $20,041 Other Operating Expenses .........$7,617 $8,179 $8,328 $8,675 $8,169 Total Net Revenue Excluding Depreciation and Amortization ......$8,786 $7,936 $8,108 $7,387 $7,144 Debt Service ..........00eeeeee $6,214 $6,191 $6,337 $6,289 $6,273 Source:Homer Electric Association,Inc. -33- Matanuska Electric Association,Inc. Incorporated in 1941,MEA is Alaska's oldest electric cooperative.MEA provides electric service to over 36,000 customers in its service territory that includes the northeast part of the Municipality of Anchorage (Eagle River/Chugiak)and extends through the communities of Palmer,Wasilla,Willow,Sutton and Talkeetna in the Matanuska-Susitna Borough.Under a Transmission Services Agreement with the Authority,excess capacity on approximately 20 miles of MEA's 115 kV transmission system is made available to the Authority and is operated at 138 kV as part of the Alaska Intertie.MEA purchases essentially all of its power supply from AEG&T,which in turn purchases all of its power from Chugach to sell to MEA.MEA's Eklutna and Project shares are net-billed through Chugach.MEA is governed by a seven member board of directors elected from its membership. On October 12,1998,MEA made an unsolicited offer to purchase Chugach.(See,"Pending Disputes”under the caption "MEA Offer to Purchase Chugach.”) MEA sold 451,564 megawatt-hours of electric energy to an average of 34,368 customers and received revenues from electric sales totaling $44,923,848 in calendar year 1997.Residential customers provided 67 percent and commercial customers provided 33 percent of the revenues received from sales. Maximum hourly peak demand in 1997 was 97.6 megawatts. MEA also owns the electrical system serving the community of Unalakleet in Northwestern Alaska.The electric system comprising the Unalakleet division is operated and managed by the Unalakleet Valley Electric Cooperative.The Unalakleet division has its own management staff,and is not interconnected with any other utility.All electric energy sold by the Unalakleet division is produced by on-site diesel generators.As of December 31,1997,the Unalakleet division had a gross plant investment of $2,126,537 and 319 customers.Operating revenues in 1997 totaled $966,719 on sales of 3,953 megawatt hours of electric energy.The Unalakleet division has its own retail rate schedules,which are subsidized by the State of Alaska's Power Cost Equalization program.Except as set forth in this paragraph all data pertaining to MEA excludes the Unalakleet division. -34- The following table summarizes MEA's historical energy loads and resources used to meet its loads,including its share of the Project. Matanuska Electric Association Energy Loads and Resources (1) TOTAL ENERGY SALES: Residential ...........006- Commercial ..........+.24- System Losses and Owner Use ..... Total Energy Requirements .. ENERGY RESOURCES: Purchases ..2.0.2...-eee eee Total Energy Resources .... (Megawatt-hours) 1993 1994 1995 1996 1997 252,700 265,955 267,823 284,566 276,767 154,183 159,935 169,756 176,533 174,299 359 391 439 468 498 31,218 31,626 31,768 28,659 39,578 438,460 457,907 469,786 490,226 491,412 438,460 457,907 469,786 490,226 491,142 438,460 457,907 469,786 490,226 491,142 Source:Matanuska Electric Association,Inc. (1)Excludes Unalakleet division. -35- S The following table summarizes MEA's operating results for the calendar years 1993 through 1997. Matanuska Electric Association,Inc. Historical Operating Results (1) ($000) 1993 1994 1995 1996 1997 GROSS REVENUES: Revenues from Sales of Electricity $40,227 $42,863 $42,487 $45,020 $44,924 Other Operating Revenues ......1,071 931 1,068 1,040 983 Total Gross Revenues ......$41,298 $43,794 $43,555 $46,060 $45,907 OPERATING EXPENSES: Cost of Power ........----55 $18,478 $20,171 $20,005 $21,144 $22,530 Bradley Lake ...............1,918 1,921 1,861 1,797 1,807 Production ......--..-+--+--a 3 I 9 ___14 Total Cost of Power .......$20,396 $22,095 $21,867 $22,950 $24,351 Other Operating Expenses .........$10,770 $11,764 $12,789 $12,421 $12,078 Total Net Revenue Excluding Depreciation and Amortization (2)....$7,866 $7,425 $6,670 $8,011 $6,234 Debt Service (3).......-+-2-05-$5,780 $28,793 $31,008 $7,428 $7,411 Source:Matanuska Electric Association,Inc. (1)Data excluding Unalakleet Division. (2)Revenue (both operating and nonoperating)less: Total Operation and Maintenance Expense Tax Expense -Property and gross receipts Tax Expense -Other (3)Includes refinancing of Rural Utilities Service debt (principal retirements of $23,335,033 in December,1994 and $23,992,176 in March,1995;both net of prepayment discounts). City of Seward The City of Seward,located on the Kenai Peninsula,owns and operates the Seward Electric System.Seward provides electric service to the City of Seward and to areas up to 25 miles north of the City of Seward adjacent to the Seward Highway.The northern terminus of the Seward transmission system interconnects with a Chugach transmission line at Dave's Creek Substation located 45 miles north of the City of Seward.Seward is a Power Purchaser under the Power Sales Agreement,but its Percentage Share of the Project Capacity is only 1%. Year 2000 Computer Problem The "Year 2000 Problem”arose because many exiting computer software programs use only the last two digits to refer to a year.The use of two-digit year fields was a common practice in recent years because of the need to address computer memory/storage constraints.These computer programs cannot properly recognize a year that begins with "20"instead of "19.”If this situation is not corrected,many time-sensitive computer software applications could fail or create erroneous results. -36- The utilities involved in the Bradley Lake Project consider the identification and correction of any Year 2000 problems a major initiative.At the most fundamental level this initiative is about ensuring business continuity and continuing to provide service in the Year 2000 and beyond. To this point,none of the participating utilities have detected Year 2000 related issues that would ultimately impact system reliability.Until all utilities have completed their research,it is conceivable that a Year 2000 issue could cause system reliability problems,if uncorrected.However,there are manual procedures in place to deal with automation failures in the respective utility systems. All business application systems have the potential for disruption due to Year 2000 issues. Similarly,the operating systems which support the business applications,as well as the hardware infrastructure,can present reliability problems.Finally,mechanical systems that included embedded chips are vulnerable to failures,if not Year 2000 compliant.None of the participating utilities have uncovered any Year 2000 issues that cannot be rectified. By Order R-98-2(1)dated July 24,1998,the Alaska Public Utility Commission instituted an investigation into Year 2000 issues and the measures which certificated public utilities are taking to address these issues.Participation by all Alaska certificated utilities is mandatory.At the national level,the North American Electric Reliability Council (NERC)now requires detailed monthly reports from every utility on Year 2000 compliance.The Council has been tasked by the U.S.Department of Energy to coordinate the Year 2000 effort in order to assure the maintenance of a reliable supply of electricity during the Year 2000 transition. Each of the participating utilities has thoroughly inventoried both internal and vendor-supported information processing systems.A variety of procedures to identify critical systems that are subject to date-related failures have been employed.The risk of failure and the potential for impact upon utility operations has been identified and has either been corrected or is in the process of being corrected.Indeed,many of the systems are now Year 2000 compliant.It is expected that all affected systems of the participating utilities will be Year 2000 compliant by the 3rd quarter of 1999. STATE AND FEDERAL INITIATIVES REGARDING COMPETITION IN THE ELECTRIC UTILITY INDUSTRY As the result of the enactment of the Federal Energy Policy Act of 1992 (the "Energy Policy Act”),competition in the electric utility business has become a major focus throughout the nation.The Energy Policy Act gave FERC the authority to require a transmitting utility to provide transmission service to an applicant on essentially a cost of service basis.The Energy Policy Act amended Sections 211 and 212 of the Federal Power Act to set up a procedure for FERC to require a "transmitting utility”to provide wholesale transmission services at rates,charges,and terms and conditions which permit the recovery of all costs incurred in connection with the transmission services to promote the economically efficient transmission and generation of electricity.Under the Energy Policy Act,municipal and consumer-owned utilities are "transmitting utilities”covered by these sections.The application of the Energy Policy Act to Alaska is not resolved with respect to transmitting utilities whose transmission systems are not interconnected with transmission systems in other states. The Energy Policy Act specifically prohibited FERC from ordering "retail wheeling”under which one utility or a utility retail customer could require another utility to deliver another entity's power over its electric distribution system.That responsibility currently rests with the individual states and their -37- regulatory bodies.To date,legislation has not been enacted by the Alaska Legislature or Congress to mandate or expressly authorize competition among electric utilities or independent power generators to serve retail customers in the State.No legislation has been enacted requiring "retail wheeling”by utilities in the State.However,as in other states of the United States,various bills proposing deregulation of the electric industry have been submitted to the Alaska Legislature,and it can be anticipated that additional proposals at the State and federal levels for "open access transmission”and "retail wheeling”will be considered in the future.In addition,it has been alleged that utilities may be subject to antitrust laws if they deny access to their retail customers. The 1998 Alaska Legislature established a joint House-Senate committee charged with heresponsibilitytostudythemeritsofrestructuringtheelectricutilityindustryandissueareporttothe1999 Legislature in January of 1999.The committee has determined that the complexity of the issue is such that a professional study is warranted and together with the APUC has issued a request for proposals for study, which are due in May,1999. Each of the individual Power Purchasers may have different interpretations of the current and future regulatory framework and may pursue different strategies regarding open competition.Currently, Chugach has advised ML&P that there are customers in ML&P's service area interested in becoming customers of Chugach.An independent power marketer/aggregator has approached Chugach with a request to procure wholesale power to serve customers in both ML&P's and Chugach's traditional service areas.ML&P filed a formal protest of the Chugach initiative with the APUC on the grounds that selling power outside of one's own retail service area is not authorized by existing regulation and law.The APUC is considering ML&P's protest,and it is unclear how it may rule or when a decision may be made. If federal or state law requires or a utility opts for "open access transmission”and/or "retail wheeling,”the loads and revenues of individual Power Purchasers could be materially affected. THE ALASKA ENERGY AUTHORITY General The Authority was created by the Alaska Legislature in 1976 under the provisions of the Act.The purpose of the Authority,as stated in the Act,is to promote,develop and advance the general prosperity and economic welfare of the people of the State of Alaska by providing a means of financing and operating power projects and facilities that recover and use waste energy. Reorganization of Authority In 1993,the Alaska Legislature enacted legislation that significantly reorganized the Authority by transferring the Authority's programs affecting rural Alaska to the Alaska Department of Community and Regional Affairs and by eliminating the Authority's power to construct and acquire energy projects.The Authority continues to own and operate a number of significant power projects in the State,including theProject.See "Generation Projects and Transmission Facilities”herein. As provided in the legislation,the members of the Board of Directors of the Alaska Industrial Development and Export Authority ("AIDEA”)also serve as the Board of Directors of the Authority and the Chairman and Vice Chairman of AIDEA's Board hold the same offices of the Authority.AIDEA and the Authority also share a common staff;however,the Authority and AIDEA remain separate legal -38- entities.There is no commingling of funds between the Authority and AIDEA,and there was no assignment to AIDEA of any liabilities of the Authority. For a further description of the provisions of the Act,see Appendix A -"Summaries of the Act and the Basic Documents.” General Projects and Transmission Facilities The following description of various other projects undertaken by the Authority is included only to give beneficial owners and holders of the Fifth Series Bonds an understanding of the scope of the Authority's activities.The revenues derived from these projects and facilities are neither pledged nor available as security for the repayment of the Bonds. Generation Projects.At present,the Authority owns and operates six hydroelectric projects with a total generating capacity of 164 megawatts and owns in excess of 400 miles of transmission lines.The net book value of the Authority's assets is approximately $575 million.The Authority's projects (other than the Project)are: Four Dam Pool.The four facilities comprising the Four Dam Pool projects include Solomon Gulch (12 megawatts),Swan Lake (22 megawatts),Terror Lake (20 megawatts),and Tyee Lake (20 megawatts).These facilities were financed with State grants totaling $295 million and a $181 million loan to the Authority from the State.Revenues received by the Authority from the sale of power under a long term Power Sales Agreement are used to pay operating and maintenance costs for the projects and the debt service on the loan.Power is sold to the utilities serving the communities of Valdez,Glennallen,Ketchikan,Kodiak,Wrangell and Petersburg. The Four Dam Pool projects are operated under contracts with the local utilities benefitting from them.Overall project management is accomplished through Four Dam Pool Project Management Committee.The Committee is comprised of representatives from the Authority and each power purchaser benefitting from a project.Repairs to the Terror Lake and Lake Tyee projects began in 1995 and are expected to be completed in 1998. Larsen Bay.The 0.5 megawatt Larsen Bay Hydroelectric 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. Transmission Facilities.Transmission facilities owned by the Authority include the Alaska Intertie and four smaller transmission lines that interconnect communities in rural Alaska.The Alaska Intertie is a 170 mile,345 kilovolt transmission line (presently operated at 138 kilovolts)that interconnects the power systems in the Anchorage and Fairbanks areas. Board of Directors The powers of the Authority are vested in a Board of Directors,which is the same five-member Board that serves as the Board of Directors of AIDEA.The membership of the Board of Directors consists of two members of the general public appointed by the Governor for two-year terms and three ex- officio members.The ex-officio members are the Commissioner of Commerce and Economic Development,the Commissioner of Revenue and one other member of the Governor's cabinet appointed -39- at the Governor's discretion who serves for a two-year term.The Commissioner of the Department of Transportation and Public Facilities is the cabinet member currently appointed by the Governor as his discretionary cabinet appointee.The Board meets periodically to set policy,review and,if appropriate, pass resolutions and monitor the actions of the Authority.The current members of the Board of Directors of the Authority are: Wilson Hughes,Chairman.Mr.Hughes is currently the Executive Vice President and General Manager of General Communications,Inc.(GCI).He has also held executive positions with Northern Air Cargo,Enserch and Frank Moolin &Associates.Mr.Hughes also served as an officer in the Army Signal Corps,stationed at Fort Richardson,Alaska.Mr.Hughes earned his degree in electrical engineering from the University of Missouri and his master's degree in science and engineering management from the University of Alaska,Anchorage.He also has been active in the community,serving as a board member for the Anchorage Chamber of Commerce,Alaska International Airport System Marketing Advisory Board,Iditarod Trail Committee and Hilltop ski area,among others.Mr.Hughes was appointed to the Authority's Board in February of 1995.His terms expires July 1,2000. Joe Perkins,Vice Chairman.Commissioner,Alaska Department of Transportation and Public Facilities.Mr.Perkins spent 21 years (1961-1982)with the U.S.Army Corps of Engineers before joining the former Alaska Power (now Energy)Authority ("APA”).As Project Director for the APA from 1982 through 1985,Mr.Perkins oversaw the construction of the Bradley Lake,Terror Lake,and Lake Tyee hydroelectric projects,and the Alaska Intertie.He later served as the Vice President of Ebasco Services, a division of Enserch,managing construction projects in the State including the regional landfill and accelerated roads project in Anchorage,the Loussac Library,the Kenai School,and 100 post offices across the State.Mr.Perkins'other work assignments have taken him to Vietnam,Saudi Arabia and Chile. Most recently he worked as Project Manager for Advanced Power Technologies in Washington,D.C.Mr. Perkins was appointed Commissioner of Transportation and Public Facilities in January 1995.He term expires July 1,2000. Wilson L.Condon,Member.Commissioner,Alaska Department of Revenue.Prior to his appointment as Commissioner,Mr.Condon was a partner in the law firm of Condon,Partnow &Sharrock in Anchorage,Alaska.Mr.Condon served as a State Assistant Attorney General and then the Deputy Attorney General from 1971 to 1980 and as the State's Attorney General from June 1980 to 1982.Mr. Condon received his political science degree from Stanford University and his law degree from Stanford School of Law.Mr.Condon is currently a member of the American Bar Association and was a founder of the Environmental Law Society.He also served as a member of the Board of Trustees of the Alaska Permanent Fund (1980-82);Chairman of the Governor's Commission on the Administration of Justice (1980-82);Governor's Alaska Gas Pipeline Task Force (1980-81);and the Alaska Code Revision Commission (1983-91).Mr.Condon was appointed as Commissioner of Revenue in January 1995. Ross Kinney,Member.Deputy Commissioner,Alaska Department of Revenue.(Mr.Kinney serves on the Board as the First Delegate of Wilson Condon).Before his appointment as Deputy Commissioner,Mr.Kinney was the Director of Finance and Administrative Officer for the Kenai Peninsula Borough,Alaska for eight years.His duties at the borough included investment planning and tax collection for 21 jurisdictions.From 1976 until 1984,Mr.Kinney was Finance Director for the City of Kenai,Comptroller for the Kenai Peninsula Borough,and Assistant Director of Finance for the Kenai Peninsula Borough.Mr.Kinney attended Louisiana State University from 1965 to 1969 before entering the United States Army.Mr.Kinney also serves as an Alaska State Pension Investment Board Trustee and previously served as President of the Municipal Finance Officers Association of Alaska.Mr.Kinney was appointed Deputy Commissioner of Revenue in November 1995. -40- Robert W.Loescher,Member.Mr.Loescher is presently the Chief Executive Officer of Sealaska Corporation,having been with that company for 17 years.He was formerly employed with Alaska Legal Services,Tlingit-Haida Central Council-Office of Department Planning,Tlingit-Haida Regional Housing Authority (as Executive Director),Tlingit-Haida Regional Electrical Authority and Tlingit-Haida Housing Development Corporation.Mr.Loescher earned his business administration degree from Fort Lewis College,Durango,Colorado.Mr.Loescher is a shareholder of Sealaska Corporation and Goldbelt, Incorporated,a member of the Tlingit (Eagle)Tribe,Chookanedi Clan of Glacier Bay and Hoonah, Alaska,an Assemblyman of the Central Council of the Tlingit-Haida Indians of Alaska,a federally recognized tribal government,and a member of Juneau ANB Camp No.2.His other professional and community affiliations include the Society of American Foresters,Alaska Forest Association,Resource Development Council,Nature Conservancy,Governor's Task Force on Market Alaska,Alaska Long Range Fiscal Planning Commission and the Southeast Alaska Native Subsistence Commission.He was formerly a member of the City Council and the first Assembly of the City and Borough of Juneau.Mr. Loescher was appointed as an Authority Board member in November 1995.His term expires July 1, 1999. Deborah B.Sedwick,Member.Commissioner,Alaska Department of Commerce and Economic Development.Prior to Ms.Sedwick's appointment as Commissioner she served as the Department's Assistant Commissioner.Previously,she was Vice-President of an Anchorage brokerage firm,Jack White Real Estate.Her responsibilities included residential services,business development and community relations.Ms.Sedwick received her bachelor of science degree from Boston University and a master's degree from the University of Alaska Anchorage.Ms.Sedwick has served on numerous boards and commissions including the Anchorage Equal Rights Commission (as Chair),Anchorage Parking Authority (as Vice Chair),the Mayor's Task Force on Alcohol,and the Board of the Alaska Center for the Performing Arts (as Chair).Ms.Sedwick was appointed Assistant Commissioner of Commerce and Economic Development in September 1995,and as Commissioner in December 1997. Administration The Authority is under the direction of the Executive Director,who serves at the pleasure of the Board of Directors and also serves as the Executive Director of AIDEA.The Executive Director is responsible for implementing the policies adopted by the Board,hiring personnel,reviewing staff performance and managing the general operations of the Authority.The following people are key members of the Authority's management and staff. D.Randy Simmons,Executive Director.Mr.Simmons was appointed Executive Director on December 16,1996.Previously he served as the Development and Finance Manager for the AIDEA beginning in February 1995.Before joining AIDEA,Mr.Simmons served as Deputy Commissioner of Management and Finance for the Department of Transportation and Public Facilities for five years.In that position,he was responsible for all facets of finance and budgeting for the Department.Mr.Simmons also spent six years with the tax department of an international certified public accounting firm.He is a certified public accountant and holds a Jaw degree from the University of Oregon. Valorie F.Walker,Deputy Director-Finance.Ms.Walker was appointed to this position in 1987. Her responsibilities include accounting,bonding,budgeting,investments,personnel and data processing. Before joining AIDEA,Ms.Walker was employed in the finance division of an Alaska commercial bank for five years and worked for an international certified public accounting firm for seven years.Ms. Walker is a certified public accountant in Alaska and received a degree in business administration from the University of Notre Dame. -41- =) Dennis V.McCrohan,Deputy Director-Project Development and Operations.Mr.McCrohan was appointed Deputy Director in February 1994.Before that he served under contract for AIDEA,as Design/Construction Manager for the Healy Clean Coal Project.Mr.McCrohan has been employed as a process engineer,start-up engineer and project manager by a major architectural engineering company building energy projects in the United States and overseas.He has also been employed as a director of a major electrical utility.He is a registered professional engineer in Alaska,Nevada and Florida and a member of the Royal Institute of Australian Engineers.Mr.McCrohan has a bachelor's degree in engineering and a master's degree in science from Cornell University. Keith A.Laufer,Financial and Legal Affairs Manager.Mr.Laufer was appointed to this position in 1997.For the four years before joining AIDEA,Mr.Laufer served as Assistant Attorney General with the Alaska Department of Law,representing AIDEA and the Authority.Previously,Mr.Laufer worked for four years at a private Orange County,California law firm where he specialized in commercial transactions.He also spent two years with an international certified public accounting firm and served as law clerk to the Chief Justice of the Alaska Supreme Court.Mr.Laufer is a certified public accountant and holds a law degree from the University of California,Davis. [AEA'S Y2K PLAN] PRIVATIZATION INITIATIVE Article XI of the Alaska Constitution grants to the people of the State the power to propose and enact laws by the process of an initiative.In July of 1998,a group known as "Alaskans for Privatization” filed an application with the Lieutenant Governor of the State seeking to place on the Statewide ballot an initiative measure that,if approved by the voters of the State,would require the competitive sale to qualified bidders of hydroelectric projects,including the Bradley Lake Hydroelectric Project,that are owned by the Alaska Industrial Development and Export Authority or the Authority and have been in operation for more than five years. If the Lieutenant Governor certifies the application,then the sponsors may circulate a petition seeking to place the initiative on the ballot.The initiative will be approved for submission to the electorate if the petition is signed by qualified voters,equal in number to ten percent of those who voted in the preceding general election and resident in at least two-thirds of the election districts of the State. Approximately 227,000 votes were cast at the 1998 general election. If the requisite signatures are obtained,the initiated measure would be placed on the ballot for the first statewide general election held more than 125 days after adjournment of the legislative session following the filing of the petition.If,before the election,the Legislature enacts a law that is substantially the same as the initiated measure then the petition is void and no proposition need be submitted to the electorate. If an initiated measure is approved by a majority of the votes cast on the proposition,then the measure becomes a law ninety days after the election results have been certified.An initiated law is not subject to veto by the Governor and may not be repealed by the Legislature within two years of its effective date.An initiated law may be amended at any time. The Authority is not able at this time to predict the prospects for success of the privatization initiative proposed by Alaskans for Privatization.The earliest time that the initiative could be submitted -42- to the voters is the general election to be held in November of 2000.If enacted,the implementation of the initiated law would be subject to Article I,Section 10 of the Constitution of the United States which provides that "no state shall ...pass any ...law impairing the obligation of contracts”;and Article I, Section 15 of the Alaska Constitution,which provides that "no law impairing the obligation of contracts,...shall be passed.” LITIGATION Authority There is no litigation pending or threatened against the Authority other than various legal proceedings arising out of the ordinary course of business of the Authority and having no material impact on the financial condition of the Authority.Upon the delivery of the Fifth Series Bonds,the Attorney General of the State will furnish a certificate to the effect that,among other things,there is no litigation pending in any court to restrain or enjoin the issuance or delivery of the Fifth Series Bonds,or in any way contesting the validity or enforceability of the Fifth Series Bonds,the Bond Resolution or the Power Sales Agreement. Power Purchasers Upon the delivery of the Fifth Series Bonds,the General Manager and Chief Financial Officer of each Power Purchaser will furnish a certificate to the effect that,among other things,to the knowledge of such officer after reasonable inquiry,there is no litigation pending in any court in any way contesting the validity or enforceability of the Power Sales Agreement. PENDING DISPUTES There are a variety of disputes,issues and proceedings challenging rates,contract matters and other matters among some of the Power Purchasers,HEA,MEA and the Authority.Some of these disputes,issues and proceedings could affect an individual utility's costs,revenues,resources and loads. However,none of these disputes,issues or proceedings affect the obligations of the Power Purchasers, HEA,MEA or the Authority regarding the Power Sales Agreement. MEA Offer to Purchase Chugach _MEAhas made an unsolicited proposal to acquire substantially all of Chugach's assets in exchange for the assumption of Chugach's liabilities.Although MEA has not yet provided many details of its proposal,it has stated that the generation and transmission assets of Chugach would be transferred to a subsidiary of MEA,the assets comprising the Chugach's distribution system would be transferred to MEA itself,and Chugach's members would become members of MEA.MEA has also stated that,at the time of the acquisition,it would borrow enough money to defease or refinance Chugach's outstanding First Mortgage Bonds,plus an additional $42.5 million that would be distributed in cash to the members of the combined organization. [It appears that either MEA itself,or MEA's proposed new generation-and-transmission subsidiary (but it is not clear which of these entities),would assume Chugach's obligations under the Power Sales Agreement if MEA were to acquire Chugach's assets.][TO BE DISCUSSED.] -43- Chugach and MEA are organized under the Alaska Electric and Telephone Cooperative Act, Chapter 10.25 of the Alaska Statutes (the "Coop Act”).The Coop Act prohibits a cooperative such as Chugach from disposing of a substantial portion of its assets unless the disposition is approved by a majority of the members of Chugach and by at least 2/3 of those actually voting on the proposal,except that the Coop Act permits a majority to sell its assets to another cooperative if the transaction is approved by a majority of those voting in an election in which 10%of the membership votes and the purchaser expressly agrees to assume the cooperative's obligations under existing collective bargaining agreements. The board of directors of Chugach has rejected the MEA acquisition proposal.MEA has begun circulating a petition to gather a sufficient number of signatures from Chugach's members to force a special meeting of Chugach's members for the purpose of considering a sale of assets to MEA or MEA's proposed subsidiary.Under the Coop Act,a special meeting of the members of Chugach may be called by 10%of Chugach's 55,000 members.MEA has taken the position that the board of directors would be compelled to approve the sale if 2/3 of the members voting at a special meeting of the members approve the transaction and those voting in favor of the transaction constitute a majority of all of Chugach's members.Chugach believes that,although member approval clearly is a prerequisite to any sale to MEA, no such sale could legally occur unless Chugach's board of directors also approves the sale in the exercise of its independent judgment. At this time,it is unclear whether a special meeting of Chugach's members will be called to consider the MEA proposal,whether Chugach's members would approve the proposal if its were submitted at a special meeting,what legal effect (if any)approval by Chugach's members would have in light of opposition to the MEA proposal by Chugach's board of directors,and whether any acquisition -even if approved by Chugach -would be approved by the APUC.it is therefore not possible at this time to determine the likelihood that MEA will acquire Chugach's assets. If MEA were successful in its effort to acquire Chugach and to allocate Chugach's assets as described in its acquisition plan,MEA and its generation and transmission subsidiary,as successors toChugach,would be jointly and severally liable for the payment obligations of Chugach under the Power Sales Agreement.[TO BE DISCUSSED] Chugach -ML&P Gas Field Dispute In 1996,the Municipality of Anchorage,acting on behalf of ML&P,purchased a one-third working interest in the Beluga River Gas Field from Shell Western E&P,Inc.and Shell Onshore Ventures, Inc.The Municipality issued tax-exempt bonds to finance a portion of the acquisition cost of the working interest in the Gas Field.The APUC is presently investigating the terms pricing methods that ML&P is seeking and the method of reflecting costs of gas from other contracts in the rates charged to customers. Chugach has intervened in the proceedings before the APUC.Chugach believes that the pricing method proposed by ML&P will result in below-cost retail rates now for electricity,but above-cost rates for generating electricity in later years.Chugach also has asserted that it was improper for the Municipality to issue tax-exempt bonds to finance the acquisition cost of the working interest in the Gas Field. Healy Project Power Sales Agreement Litigation [To COME] -44- COMMITMENT TO PROVIDE CONTINUING INFORMATION Pursuant to Rule 15c2-12 of the Securities and Exchange Commission (the "SEC”),the Authority has undertaken for the benefit of beneficial owners of the Fifth Series Bonds to provide certain financial information and operating data relating to the Project and the Power Purchasers (other than Seward),HEA and MEA (the "Annual Financial Information”),and to provide notices of the occurrence of certain enumerated events,if material.The Annual Financial Information will be filed by or on behalf of the Authority and the Power Purchasers with each Nationally Recognized Municipal Securities Information Repository recognized by the SEC ("NRMSIR”)and with the State Information Depository for the State, if one is recognized by the SEC for purposes of the Rule (the "SID”).A failure by the Authority to provide the Annual Financial Information in a timely manner and notices of material events will be filed by or on behalf of the Authority with the NRMSIRs or with the Municipal Securities Rulemaking Board, and with the SID,if any.The Authority's undertaking to provide ongoing disclosure will be substantially in the form of the Continuing Disclosure Agreement set forth in Appendix C hereto. CERTAIN LEGAL MATTERS Legal matters incident to the authorization,issuance and sale by the Authority of the Fifth Series Bonds are subject to the approving legal opinion of Wohlforth,Argetsinger,Johnson &Brecht,of Anchorage,Alaska,Bond Counsel.The proposed form of the opinion of Bond Counsel is included herein as Appendix B.Certain legal matters will be passed upon for the Underwriters by their counsel,Katten Muchin &Zavis,of Chicago,Illinois;for the Authority by the Attorney General of the State of Alaska; and for the Railbelt Utilities Group by their special counsel Ater Wynne,LLP,of Portland,Oregon. The enforceability of the rights and remedies of the Trustee or the owners of the Bonds under the Bond Resolution are in many respects dependent upon judicial actions that are often subject to discretion and delay.Under existing constitutional and statutory law and judicial decisions,including specifically Title 11 of the United States Code (the Federal bankruptcy code),the enforceability of such rights and remedies under the Bond Resolution may be limited. The various legal opinions to be delivered concurrently with the delivery of the Fifth Series Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by bankruptcy,reorganization,insolvency or other similar laws affecting the rights of creditors generally,and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). UNDERWRITING Prudential Securities Incorporated and Goldman,Sachs &Co.(the "Underwriters”)have agreed, jointly and severally,to purchase the Fifth Series Bonds subject to certain conditions,and have agreed to pay therefor a price of $(representing an underwriting discount of $ and an original issue discount of $)plus accrued interest.The Underwriters will be obligated to purchase all the Fifth Series Bonds,if any Fifth Series Bonds are purchased. The price and other terms respecting the offering and sale of the Fifth Series Bonds may be changed from time to time by the Underwriters after the Fifth Series Bonds are released for sale,and the Fifth Series Bonds may be offered and sold at prices other than the initial offering prices,including sales -45- O to dealers who may sell the Fifth Series Bonds into investment accounts.In connection with the offering of the Fifth Series Bonds,the Underwriters may over-allot or effect transactions which stabilize or maintain the market price of the Fifth Series Bonds at a level above that which might otherwise prevail in the open market.Such stabilizing,if commenced,may be discontinued at any time. LEGALITY FOR INVESTMENT IN ALASKA The Fifth Series Bonds are securities in which all public officers and bodies of the State of Alaska and all municipalities and municipal subdivisions,all insurance companies and associations and other persons carrying on an insurance business,all banks,bankers,trust companies,savings banks,savings associations,including savings and loan associations and building loan associations,investment companies and other persons carrying on a banking business,all administrators,guardians,executors,trustees and other fiduciaries,and all other persons whatsoever who are now or may hereafter be authorized to invest in bonds or other obligations of the State,may properly and legally invest funds,including capital in their control or belonging to them.Notwithstanding any other provisions of law,the Fifth Series Bonds are also securities which may be deposited with and may be received by all public officers and bodies of the State and all municipalities and municipal subdivisions for any purpose for which the deposit of bonds or other obligations of the State is now or may hereafter be authorized. SOURCES OF CERTAIN INFORMATION Information in this Official Statement concerning the Power Purchasers and their electric systems has been furnished by the Power Purchasers. The Underwriters make no representations as the accuracy of information in this Official Statement,other than the information under the caption "Underwriting.”The Authority makes no representation with respect to the accuracy of information in this Official Statement concerning the Power Purchasers,HEA and MEA,the information under the caption "State and Federal Initiatives Regarding Competition in the Electric Utility Industry,”or the information concerning DTC and the Bond Insurer. Concurrently with the issuance of the Fifth Series Bonds,the General Manager and,except for AEG&T, _Chief Financial Officer of each Power Purchaser,HEA and MEA,respectively,will deliver a certificate with respect to the accuracy of the information in this Official Statement relating to such Power Purchaser, HEA or MEA,the Project and the information in the sections titled "Introduction,”"Rate Regulation,” "Power Requirements”and "Generation Resources and Utilization of the Project”under the caption "The Power Purchasers,”and the information under the captions "State and Federal Initiatives Regarding Competition in the Electric Utility Industry”and "Pending Disputes.”However,the Power Purchasers, HEA and MEA make no representation as to the accuracy of the other information in this Official Statement. FINANCIAL STATEMENTS The financial statements of the Authority have been examined by KPMG Peat Marwick,LLP,of Anchorage,Alaska,independent certified public accountants,to the extent and for the periods indicated in their report.Such financial statements have been appended to this Official Statement as Appendix D. -46- CERTAIN VERIFICATIONS Upon delivery of the Fifth Series Bonds,KPMG Peat Marwick,LLP,will deliver a report to the Authority and the Underwriters,stating that the firm,at the request of the Authority and the Underwriters, has examined the arithmetical accuracy of certain computations included in the schedules provided by the Underwriters relating to the sufficiency of principal and interest received on Government Obligations to be applied,together with other available funds,to timely pay the redemption price and interest on the Prior Bonds.Such assumptions were based solely upon assumptions and information supplied by the Underwriters on behalf of the Authority. KPMG Peat Marwick,LLP has restricted its procedures to examining the arithmetical accuracy of certain computations and has not made any study or evaluation of the assumptions and information upon which the computations are based and,accordingly,has not expressed an opinion on the data used,the reasonableness of the assumptions,or the achievability of the forecasted outcome. RATINGS Moody's Investors Service has assigned the Fifth Series Bonds a rating of "”and Standard &Poor's Ratings Services has assigned the Fifth Series Bonds a rating of "”.Each such rating is conditioned upon the issuance of the Municipal Bond Insurance Policy.No application was made to any other rating agency for the purpose of obtaining an additional rating on the Fifth Series Bonds.A rating reflects only the views of the rating agency assigning such rating and an explanation of the significance of such rating may be obtained from such rating agency.The Authority has furnished to such rating agencies certain information and materials relating to the Fifth Series Bonds and the Authority,including certain information and materials which have not been included in this Official Statement.Generally, rating agencies base their ratings on such information and materials and investigations,studies and assumptions by the respective rating agency.There is no assurance that any rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by such rating agency if,in its judgement,circumstances so warrant.Any downward revision or withdrawal of any rating of the Fifth Series Bonds may have an adverse effect on the market price of the Fifth Series Bonds.The Underwriters have assumed no responsibility either to bring to the attention of the owners of the Fifth Series Bonds any proposed change in or withdrawal of any rating or to contest any such revision or withdrawal. TAX EXEMPTION [UPDATE FROM BOND COUNSEL] MISCELLANEOUS The summaries or descriptions of provisions in the Act,the Bond Resolution and the Power Sales Agreement contained in this Official Statement,and all references to other materials not purporting to be quoted in full are only brief outlines of certain provisions thereof and do not constitute complete statements of such documents or provisions and reference is hereby made to the complete documents relating to such matters for further information,copies of which will be furnished by the Authority on request. -AT- S O Any statements made in this Official Statement indicated to involve matters of opinion or estimates are represented as opinions or estimates in good faith.No assurance can be given,however,that the facts will materialize as so opined or estimated. The Authority has authorized the distribution of this Official Statement.This Official Statement has been duly executed and delivered by the Executive Director of the Authority on behalf of the Authority. ALASKA ENERGY AUTHORITY /s/ Executive Director Doc #:CH02 (66810-00031)879294v3;12/7/1998/Time:10:10 -48- APPENDIX A Summaries of the Act and the Basic Documents TABLE OF CONTENTS Page THE ALASKA ENERGY AUTHORITY ACT .........0.0...ee eee eee ee ee eens A-1 PUIPOSE 2 ee ee ee ee ee eee eee A-1 POWETS 221 eee ee eee eee tees A-1 Power Sales Contracts 2...1...ce eee eet eee eee A-2 Relationship to the Alaska Public Utilities Commission .................00200e A-3 Rate Covenant 2.0...cee ce ee ee ee ee ee tee eet tee eee A-3 Capital Reserve Funds .........0...cc eee eee ee ee et nee tee tenes A-3 Validity of Pledge 2...ce ee eee eee eee eee ee eee A-4 Nonliability on Bonds 2.0....ee ee eee ee et tee teens A-4 Pledge of the State 2...keeeeeeeeeeeeeeee A-4 Tax Exemption...2...eee ee ee eee ne eee ee eee A-4 Power Development Fund...1...0...cece eee ee ee eee ne ee teens A-4 Operation of Power Project...2...6.cee eee ee ee ee eee teense A-5 THE POWER SALES AGREEMENT ..........2...ee eee eee eee te ee eee ee eee A-5 Certain Definitions 2...0...eee ee eee eee tee ee eee tenes A-5 Term of Agreement .......0...ce eee eee ee eee eet eee eee eee eee A-8 Electric Service 2...eeceeeeeeteteens A-9 Electric Power Reserves for the Project...2.....cee eee eee ees A-9 Obligations Under Bond Resolution;Completion of Project ....................A-10 Payment Obligation...0...ee ee ee ee ee ee eee te eee A-10 Obligations in the Event of Default...2...ee ee ee ee eee A-11 Purchasers'Systems 2...0...ce ee eee ee ee ee ee ens A-12 Bond Resolution...20....2...ee ee ee eee ee eens A-13 Project Management Committee...0...ee ee ee eee ene A-13 End of Project 2...2...ee ee ce ee ee ee ee ee tee eee eee tees A-15 Covenants To Maintain Integrity of Agreement .............002.2 eee ee eens A-16 Arrangements Regarding AEG&T 2.0...cc ce ee ee ee ee ens A-17 THE BOND RESOLUTION ......0...eee cee ee ee ee eee teens A-17 Certain Definitions ©...2...ee ceeeetneeeeeeens A-18 Resolution to Constitute Contract 2...0...ee ee ee eee tee ee eee A-23 Pledge of Revenues and Other Funds ..........0...cc eee eee eee ee eee A-23 Additional Bonds 2.0....ce ee ee eee eee eee eee eee eee A-23 Funds and Accounts ......0...cece ee ee ee ee ee ee eee ee eee eee A-24 Construction Fund ..2...ee ee ee ee eee eee eee A-24 Revenues and Revenue Fund ..........0...cece eee eee eee eee eens A-26 Operating Fund 2.0...ee ee ee ee ee eee te eee tenes A-26 Payments Into Certain Funds ........0.ccc eee eee teen ene A-26 Debt Service Fund 1........cece ee ee eee eee tenes A-27 Capital Reserve Fund...1.2...ee ee ee eee ee te eee A-27 Renewal and Contingency Reserve Fund .....0...0...eee eee ee eee ene A-28 Excess Investment Earnings Fund ....2.0...0.eee ee ee ee et eee ene A-28 Deposits 2.0...ce ee ee eee nee eee eee ee eee A-29 Investment of Certain Funds ...1......eee eee eee eee ee eae A-29 Valuation of Investments ...1.0...0...ce eee ee ee ee ee eee et tent eee A-29 Payment of Bonds ..1...eee eee ee ee tte eee eens A-30 Power to Issue Bonds and Pledge Revenues and Other Funds ...................A-30 Creation of Liens;Sale and Lease of Property...2...2.....cee eee eee ee eee A-30 Annual Budget 2...0...ce ee ee ee ee eee eee teeta A-31 Limitations on Operating Expenses and Other Costs .........0...ce eee eee eens A-31 Project Operation and Maintenance .....2...0...cece eee ee eee eee eae A-31 Rates,Fees and Charges...1...ec ee ee eee ee eee eens A-32 Power Sales Agreement ..0.....ce ee ee ee ee te te nett eee eens A-32 Insurance 2...ee ee ee ee ee eee eee ee eet A-33 Reconstruction...0....ee ee eee ee eee eee weeeeeeeteeeeeee A-34MaintenanceofCapitalReserveFund.......2.2.....cece eee eee eens A-34 Accounts and Reports 2.1......cece ee ee eee ee eee ee eee eee eee nee A-34 Tax Covenants 2....ee ee ee eee ete ene ee ene A-35 Payment of Taxes and Charges .........eee eee eee te eee eens A-35 Special Provisions Relating to the Bond Insurer ...........-..-.-eee ee eeees A-35EventsofDefault2.0...ee ce ee eee eee eee nett eens A-35 Application of Revenues and Other Moneys After Default .................-00-.A-36 Proceedings Brought by Trustee...1...ee ee ee ee te eee A-37 Restriction on Bondholder's Action...2.2...-.cc eee eee eee eee ee ete eens A-37 Notice of Default 2...cee ee eee ee ee eee ens A-38ResponsibilitiesofTrustee2...1...ee ec ee eee eee tee eae A-38SupplementalResolutions..1.0....0...eee eee ee eee ee ee eee ee ete e nes A-38 Defeasance 2.1...ee ee ee ee eet ee ete eee rete ene A-39 (ii) THE ALASKA ENERGY AUTHORITY ACT The Alaska Energy Authority Act,constituting Chapter 83 of Title 44 of the Alaska Statutes,was originally enacted in 1976 and has been amended several times thereafter.The Act creates the Authority as a public corporation of the State of Alaska in the Department of Commerce and Economic Development but with separate and independent legal existence.The following is a general summary of certain provisions of the Act.This summary is not to be considered a full statement of the terms of the Act and accordingly is qualified by reference thereto and is subject to the full text thereof.Capitalized terms not defined in this Official Statement have the meanings set forth in the Act.No assurance can be given that the Act will not be amended in the future,but the State has agreed that it will not limit or alter the rights or powers vested in the Authority by the Act to fulfill the terms of its contracts with Bondholders.Copies of the Act may be obtained from the Authority. Purpose The purpose of the Authority is to promote,develop and advance the general prosperity and economic welfare of the people of Alaska by providing a means of financing and operating power projects and facilities that recover and use waste energy. Powers In furtherance of its corporate purposes,the Authority has the following powers in addition to its other powers: (1)to sue and be sued; (2)to have a seal and alter it at pleasure; (3)to make and alter bylaws for its organization and internal management; (4)to adopt regulations governing the exercise of its corporate powers; (5)to improve,equip,operate and maintain power projects; (6)to issue bonds to carry out any of its corporate purposes and powers,including the establishment or increase of reserves to secure or to pay the bonds,and the payment of all other costs or expenses of the Authority incident to and necessary or convenient to carry out its corporate purposes and powers. (7)to sell,lease as lessor or lessee,exchange,donate,convey or encumber in any manner by mortgage or by creation of any other security interest,real or personal property owned by it,or in which it has an interest,when,in the judgment of the Authority,the action is in furtherance of its corporate purposes; (8)to accept gifts,grants,or loans from,and enter into contracts or other transactions regarding them,with any person; (9)to deposit or invest its funds,subject to agreements with bondholders; (10)to enter into contracts for the financing,operation and maintenance of a power project,either inside or outside the State,and for the sale or transmission of power from a project or any right to the capacity of its or for the security for any bonds of the Authority issued or to be issued for the project; (11)_to enter into contracts for the purchase,sale,exchange,transmission,or use of power from a project or any right to the capacity of it; (12)to apply for such permits,licenses,or approvals as may be necessary,and to maintain and operate power projects in accordance with the licenses or permits,and to obtain,hold and use the licenses and permits; (13)to enter into contracts or agreements with respect to the exercise of any of its powers,and do all things necessary or convenient to carry out its corporate purposes and exercise the powers granted in this chapter; (14)to recommend to the legislature (A)the pledge of the credit of the State to guarantee repayment of all or any portion of revenue bonds issued to assist in construction of power projects;(B)an appropriation from the general fund (i)for debt service on bonds or other project purposes;or (ii)to reduce the amount of debt financing for the project. Power Sales Contracts The Authority is required to provide a method by which utilities,or other persons authorized by law to engage in the distribution of electricity,may secure a reasonable share of the power generated by a project,or any interest in a project,or for any right to the power and to sell the power or cause the power to be sold at the lowest reasonable prices,which cover the full cost of the electricity or services, including capital and operating costs,debt coverage as considered appropriate by the Authority,and other charges that may be authorized by the Act. The Authority and any municipality or public or private entity operating an electric utility,or a municipality or private entity and another municipality or private entity,may enter into a contract providing for or relating to the sale of electric power by the Authority to the municipality or entity,or by the municipality or entity to another municipality or entity.The contract may provide: (1)that the amounts payable under the contract are operating expenses of the utility and are valid and binding obligations of the municipality or other entity payable from the gross revenues of the utility; (2)for one or more appropriations of the amounts payable under the contract; (3)for the municipality or other entity to assume the obligations of another contracting party in the event of a default by that party; (4)that after completion of a project the municipality or other entity is obligated to make payments notwithstanding a suspension or reduction in the amount of the power supplied by the project; or (5)that payments under the contract are not subject to reduction by offset or otherwise. A-2 © O O Relationship to the Alaska Public Utilities Commission The Authority is not subject to the jurisdiction of the Public Utilities Commission.Nothing in the Act grants the Authority jurisdiction over the services or rates of any public utility or diminishes or otherwise alters the jurisdiction of the Alaska Public Utilities Commission with respect to any public utility,including the right the Commission may have to review and approve or disapprove contracts for the purchase of electricity by a public utility.However,the Power Sales Agreement for the Bradley Lake Hydroelectric Project is not subject to review or approval by the Alaska Public Utilities Commission until all Bonds issued for the Project are retired. Rate Covenant Any bond resolution or trust agreement constituting a contract with bondholders must contain a covenant by the Authority that it will at all times maintain rates,fees or charges sufficient to pay,and that a contract entered into by the Authority for the sale,transmission or distribution of power shall contain rates,fees or charges sufficient to pay the costs of operation and maintenance of the project,the principal of and interest on bonds as the same severally become due and payable,to provide for debt service coverage as considered necessary by the Authority for the marketing of its bonds and to provide for renewals,replacements and improvements of the project,and to maintain reserves required by the terms of such bond resolution or trust agreement. Capital Reserve Funds Capital reserve funds shall be established only if the Authority determines that the establishment would enhance the marketability of the bonds.Money held in a capital reserve fund shall be used as required,solely for (1)the payment of the principal of,and interest on,bonds or of the sinking fund payments with respect to those bonds,(2)the purchase or redemption of bonds,or (3)the payment of a redemption premium required to be paid when those bonds are redeemed before maturity;however,money may not be withdrawn from a capital reserve fund at any time in an amount which would reduce the amount of that fund to less than the capital reserve fund requirement,except for the purpose of making, with respect to those bonds,payment,when due,of principal,interest redemption premiums and the sinking fund payments for the payment of which other money of the Authority is not available. Bonds secured by such a capital reserve fund may not be issued if the amount in the capital reserve fund is less than the capital reserve fund requirement unless the Authority,at the time of issuance of the bonds,deposits in the capital reserve fund,an amount which,together with the amount then in the fund, will not be less than the capital reserve fund requirement. The Chairman of the Authority shall annually,no later than January 2,make and deliver to the Governor and the Legislature his certificate stating the sum,if any,required to restore any capital reserve fund to the capital reserve fund requirement The Legislature may appropriate such a sum,and all sums appropriated during the then current final year by the Legislature for such restoration shall be deposited by the Authority in the proper capital reserve fund.This does not create a debt or liability of the State. The State Commissioner of Revenue may lend surplus money in the State general fund to the Authority for deposit in a capital reserve fund in an amount equal to the capital reserve fund requirement A-3 Validity of Pledge It is the intention of the Legislature that a pledge made in respect of bonds shall be valid and binding from the time the pledge is made;that the money or property so pledged and thereafter received by the Authority shall immediately be subject to the lien of the pledge without physical delivery or further act;and that the lien of the pledge shall be valid and binding as against all parties having claims of any kind in tort,contract or otherwise against the Authority irrespective of whether the parties have notice. Neither the bond resolution nor any other instrument by which a pledge is created need be recorded or filed under the provisions of the Uniform Commercial Code to be valid,binding or effective against the parties. Nonliability on Bonds Bonds issued by the Authority do not constitute an indebtedness or other liability of the State or of a political subdivision of the State,except the Authority,but shall be payable solely from the income and receipts or other funds or property of the Authority.The Authority may not pledge the faith or credit of the State or of a political subdivision of the State,except the Authority,to the payment of a bond and the issuance of a bond by the Authority does not directly or indirectly or contingently obligate the State or a political subdivision of the State to apply money from,or levy or pledge any form of taxation whatever to the payment of the bond. Pledge of the State The State pledges to and agrees with the holders of bonds issued under the Act that the State will not limit or alter the rights and powers vested in the Authority by the Act to fulfill the terms of a contract made by the Authority with the holders,or in any way impair the rights and remedies of the holders until the bonds,together with the interest on them with interest on unpaid installments of interest,and all costs and expenses in connection with an action or proceeding by or on behalf of the holders,are fully met and discharged. Tax Exemption All property of the Authority is public property and is exempt from all taxes of the State or a political subdivision of the State.All bonds issued under the Act are issued by a body corporate and public of the State and for an essential public and governmental purpose and the bonds and the interest and income on and from the bonds and all income of the Authority are exempt from taxation except for transfer,inheritance and estate taxes. Power Development Fund A Power Development Fund (the "Fund”)is established in the Authority to carry out the Authority's purposes.The Fund includes money appropriated it by the Legislature.The Fund may be used by the Authority to provide money for the defeasance of bonds,or the payment of debt service on loans for or on an issue of bonds sold in connection with a power project constructed or acquired before August 11,1993;the cost of operating and maintaining power projects constructed or acquired before August 11,1993;and debt service on power projects constructed or acquired before August 11,1993. The Alaska Department of Revenue invests the money in the Power Development Fund and provides money in the Fund to the Authority only after costs have been incurred or amounts in the Fund A-4 have been otherwise obligated under contracts for the acquisition and construction of a project.Amounts that have been obligated,but for which costs have not yet been incurred,may be segregated by the Department of Revenue or transferred to the Authority only with the prior approval or agreement of the Commissioner of Revenue.Income received on money that is segregated or transferred must be deposited in the State general fund. Operation of Power Project A power project may be operated for the Authority under a contract or lease entered with a qualified utility.The Authority is required to enter into such a contract or lease when the applicant utility is the only wholesale power customer to be served directly by the power project unless the Authority determines that the utility is not a qualified utility or is not capable of operating that power project efficiently and in a manner that is consistent with national standards for the industry and with agreements with bondholders. When the Authority permits a power project to be operated by a qualified utility,the Authority is required to review and approve the annual budget for the operation and maintenance of the power project;and to assure that the project is being operated efficiently and in a manner that is consistent with national standards for the industry and agreements with bondholders. THE POWER SALES AGREEMENT The following is a general summary of certain provisions of the Power Sales Agreement.This summary is not to be considered a full statement of the terms of the Power Sales Agreement and accordingly is qualified by reference thereto and is subject to the full text thereof.Certain capitalized 'terms not defined under the heading "Certain Definitions”are defined in this Official Statement or in the Summary of the Bond Resolution.Copies of the Power Sales Agreement may be obtained from the Authority. Certain Definitions "Annual Payment Obligation”means the total amount payable by a Purchaser in or for a Fiscal Year. "Annual Project Budget”means the budget for the Project as adopted or in effect for a particular Fiscal Year,as amended or supplemented from time to time. "Annual Project Costs”means all of the costs resulting from the ownership,operation, maintenance of and renewals and replacements to the Project,properly incurred or paid during each Fiscal Year,including: (i)Amounts required to be set aside by the Authority for the payment of Debt Service on Bonds issued to pay the Cost of Acquisition and Construction in an aggregate principal amount up to but not exceeding the Recoverable Construction Cost; (ii)Amounts required to be set aside for the payment of Debt Service on other Bonds and debt service on other obligations approved in accordance with the Agreement; (iii)Amounts required to restore the funds established under the Bond Resolution to the levels required by the Bond Resolution to be maintained therein; (iv)Amounts which may be required to pay for Required Project Work,to the extent that such costs are not covered by insurance or Bond proceeds or by the Renewal and Contingency Reserve Fund; (v)Other amounts determined by the Committee to be necessary or appropriate to supplement and to be paid into the Funds established under the Bond Resolution; (vi)Excess Payment Amounts (applicable when Bonds are no longer outstanding); (vii)All other costs of producing and delivering Project power (excluding depreciation) not accounted for by the payments out of funds and reserves specified in the foregoing sections and properly chargeable to the Project under the Uniform System of Accounts,less any credits against said costs by reason of revenues from sources other than the direct sale of power to Purchasers,and also less any credits for interest earned during construction and available for Project purposes;provided,that income from interest earned on reserve funds shall be used at least annually to accumulate and maintain said reserve funds in the amounts required under the Bond Resolution or in such greater amounts as may be determined by the Committee,or to reduce Annual Project Costs. "Bonds”means bonds,notes or other evidences of indebtedness (including refunding bonds)issued pursuant to the Bond Resolution,the proceeds of which are used to pay or reimburse Costs of Acquisition and Construction and Required or Optional Project Work. "Committee”means the Project Management Committee established pursuant to the Agreement. "Consultant”means an independent individual or firm (i)of nationwide and favorable reputation, having demonstrated expertise in the field or the matter or the item referred to it under various specific provisions of the Agreement,and (ii)approved by the Authority and the Committee in accordance with rules of procedure to be adopted by the Committee to govern such approval. "Cooperative Purchasers”means Chugach Electric Association,Inc.,Golden Valley Electric Association,Inc.,and Alaska Electric Generation &Transmission Cooperative,Inc.The term "Cooperative Purchasers”includes Homer Electric Association,Inc.,and Matanuska Electric Association, Inc.,only to the extent specified in the Agreement. "Cost of Acquisition and Construction”means the Cost of Acquisition and Construction (as defined in the Bond Resolution)of the Project. "Date of Commercial Operation”means the date on which engineers retained for this purpose by the Authority have reasonably declared that the Projectis fully available to be operated at not less thanninetymegawatts(90MW),and its output can be scheduled on a commercial basis. "Debt Service”means amounts that the Authority is required to set aside for the payment of principal of,premium,if any,sinking fund payments,and interest on the Bonds,as the same are scheduled to become due and not by reason of any acceleration. "Fiscal Year”means that twelve-month period starting July 1 of a calendar year through and including June 30 of the succeeding calendar year.The initial Fiscal Year for purposes of the Agreement is that portion of the twelve-month period starting on the Date of Commercial Operation through and including the following June 30.If the portion of the period is shorter than 90 days the parties shall determine the initial Fiscal Year,which must end on a June 30 and may not be longer than 456 days. "Municipal Purchaser”means the Municipality of Anchorage d/b/a Municipal Light and Power, and the City of Seward d/b/a Seward Electrical System. "Optional Project Work”means Project repairs,renewals and replacements,improvements, betterments,additions,or expansions that do not constitute Required Work. "Percentage Share”means the ,expressed as a percent and set forth below for each Purchaser,as the same may be amended from time to time,used to compute the amount of each Purchaser's entitlement to Project Capacity and obligation to pay Annual Project Costs. Percentage Purchaser Share Alaska Electric Generation &Transmission Cooperative,Inc.....25.80% Chugach Electric Association,Inc..............000 eee 30.40 Golden Valley Electric Association,Inc................2055 16.90 Municipality of Anchorage,d/b/a Municipal Light and Power ....25.90 City of Seward,d/b/a Seward Electric System ..............1.00 TOTAL 2...ee ee ee te eee 100.00% "Project Capacity”means the amount of electric capacity capable of being produced by the Project (including capacity attributable to Required or Optional Project Work)at any and all times from the Date of Commercial Operation under the operating conditions that exist during such times,including periods when the Project may be not operating or inoperable or the operation thereof is suspended,interrupted, interfered with,reduced,or curtailed,in each case in whole or in part for any reason whatsoever,after corrections for station and Project use,and depletions required under any federal license for the Project. "Prudent Utility Practice”shall mean at a particular time any of the practices,methods and acts engaged in or approved bya significant portion of the electric utility industry at such time,or which,in the exercise of reasonable judgment in light of facts known at such time,could have been expected to accomplish the desired results at the lowest reasonable cost consistent with good business practices, reliability,safety and reasonable expedition.Prudent Utility Practice is not required to be the optimum practice,method or act to the exclusion of all others,but rather to be a spectrum of possible practices, methods or acts which could have been expected to accomplish the desired result at the lowest reasonable cost consistent with reliability,safety and expedition.Prudent Utility Practice includes due regard for manufacturers'warranties and the requirements of governmental agencies of competent jurisdiction and shall apply not only to functional parts of a Project,but also to appropriate structures,landscaping, painting,signs,lighting and other facilities.In evaluating whether any matter conforms to Prudent Utility Practice,the parties shall take into account (i)the nature of the parties hereto under the laws of the State of Alaska and their statutory duties and responsibilities,and (ii)the objective of integrating Project Capacity with the generating resources of the Purchasers,including resources available under contract,to A-7 achieve optimum utilization of the resources and achieve efficient and economical operation of each Purchaser's System."National standards for the industry”means Prudent Utility Practice. "Purchaser”means,as of any particular time,such of the Municipality of Anchorage d/b/a Municipal Light and Power,Chugach Electric Association,Inc.,Golden Valley Electric Association,Inc., the City of Seward as have executed the Agreement,and the Alaska Electric Generation &Transmission Cooperative,Inc.("AEG&T”).The term "Purchaser”includes Homer Electric Association,Inc.,and Matanuska Electric Association,Inc.,only to the extent specified in the Agreement. "Purchaser's System”means a Purchaser's electric utility system for the distribution,transmission, and generation of electrical power and which is owned and operated by the Purchaser.If Purchaser's electric utility system is combined with other utilities of the Purchaser,then "Purchaser's System”includes only those facilities,activities,and revenues properly allocable to Purchaser's electric utility service. "Purchaser's Water Allocation”means the number of acre feet of water from the Project allocated for generation purposes by the Committee to a Purchaser from time to time,based on that Purchaser's Percentage Share. "REA”means the Rural Electrification Administration*,an agency of the United States Department of Agriculture. "Recoverable Construction Cost”means an amount equal to $175,000,000 less one half the amount,if any,by which $350,000,000 exceeds the Cost of Acquisition and Construction,plus the principal amount of additional Bonds (if any)issued pursuant to the Agreement. "Required Action”means an action that must be taken in order for the Authority to comply with federal or state law,the orders of licensing and regulatory agencies,the Bond Resolution,or the Agreement. "Required Project Work”means repairs,maintenance,renewals,replacements,improvements or betterments required by federal or state law,a licensing or regulatory agency with jurisdiction over the Project,or the Agreement,or otherwise necessary to keep the Project in good and efficient operating condition,consistent with (1)sound economics for the Project and the Purchasers,and (2)national standards for the industry. Term of Agreement The payment obligations of each Purchaser under the Agreement commence on the Date of Commercial Operation;provided,that the Purchasers shall be obligated to pay certain costs of the Committee regardless of whether the Date of Commercial Operation occurs. The Agreement shall terminate (i)50 years after the Date of Commercial Operation,or (ii)when no Bonds are Outstanding under the Bond Resolution and all payment obligations under the Agreement have been satisfied or provided for,whichever occurs later;provided,that if the Date of Commercial Operation does not occur before January 1,1996,then the Agreement shall terminate on January 1,1996. The parties may mutually agree to terminate or to renew the Agreement prior to termination,subject, however,to the written approval of the Administrator of REA if then required,and the terms and *The Rural Utilities Service A-8 conditions of covenants and agreements between the Authority and holders of Bonds.Any Purchaser may renew the Agreement for successive additional terms (such terms to equal 40 years or,if shorter,the remaining useful life of the Project),upon written notice to the Authority by the Purchaser. Electric Service In accordance with the Agreement,the Authority sells,and each Purchaser purchases,that Purchaser's Percentage Share of Project Capacity (together with associated energy)from the Project. The Authority shall at all times,except when prevented by a cause or event not within its control, make power available to the Purchasers from the Project in an amount equal to the amount the Purchasers may schedule from the Project,within the limitations imposed by available Project capability,available water,and the scheduling procedures adopted by the Committee. The Authority shall make or cause to be made all Required Project Work,provided that funds are legally available to the Authority for this purpose.The costs of Required Project Work shall be included in Annual Project Costs.The Authority shall give reasonable notification to all Purchasers prior to making or causing to be made any Required Project Work.Alternative methods of carrying out and funding Required Project Work shall be subject to approval by the Committee. The Authority shall not make or cause to be made Optional Project Work unless such Optional Project Work is approved by the Committee.Any Optional Project Work shall be at the expense of the benefitted Purchaser(s),as determined in advance by the Committee,in proportion to the value of the benefit conferred upon each such Purchaser.If such Optional Project Work has an adverse impact upon the operations or finances of a Purchaser as determined by the Committee,the benefitted Purchaser(s)shall compensate the adversely affected Purchaser(s)for the increased costs and reduced benefits resulting from such impact. Electric Power Reserves for the Project The parties recognize that (i)electric power from the Project may be unavailable periodically because of generation and transmission outages,repairs,maintenance,inspections,testing,and similar events,and (ii)each Purchaser is responsible for maintaining (or contracting for the use of)generation reserves in amounts sufficient to protect its own loads in the event that Project power is unavailable. The Committee shall adopt and implement procedures under which,in as cost-effective a manner as possible: (i)the Authority shall have the right to require the operation of specific amounts of generating capacity owned by a Purchaser and made available to the Authority,and to use the power produced by such operation to provide reserves to requesting Purchasers for some or all Project power,to the extent such capacity would otherwise be idle or its output would otherwise not be needed by the owner of that capacity to enable that Purchaser to meet its own loads or to make power sales to other utilities; (ii)the additional costs incurred by any Purchaser in making such capacity available and in operating the same for the Authority shall be computed equitably and reimbursed promptly to such Purchaser;and (iii)the costs of so reimbursing any Purchaser shall be included in Annual Project Costs. Obligations Under Bond Resolution;Completion of Project Assignment or Payment to Trustee.The parties recognize and agree that (i)the Authority may assign its rights to receive payments under the Agreement as security for the payment of the Bonds to the Trustee under the Bond Resolution for the benefit of the holders of the Bonds,and (ii)the Authority may direct that amounts payable to it under the Agreement be paid directly to the Trustee. Project Funding.The Authority shall issue Bonds,or otherwise obtain funds (including appropriations),sufficient to pay or reimburse the Cost of Acquisition and Construction.Annual Project Costs shall include Debt Service on Bonds issued pay the Cost of Acquisition and Construction in an aggregate principal amount up to but not exceeding the Recoverable Construction Cost.The Authority may estimate the Recoverable Construction Cost and issue Bonds at any time in amounts up to the amount of such estimate.As soon as practicable after the Date of Commercial Operation,the Authority shall adjust (and readjust when necessary)Annual Project Costs to reflect actual Recoverable Construction Cost. Other Projects.The Authority covenants that it will not cause rates for Project power to increase by reason of any bond resolution,covenant or agreement contained in any trust indenture or trust agreement entered into by the Authority in connection with a power project other than the Project,nor on account of any inadequacy in its actual or projected aggregate revenues,other dw revenues from the Project,nor will the Authority include in Annual Project Costs debt service payable on debt incurred for any purpose except in respect of the Project. Project Completion and Operation.The Authority agrees to use its best efforts to complete the Project expeditiously and in accordance with sound engineering practice and with the provisions of the Bond Resolution.The Authority shall also use its best efforts consistent with Prudent Utility Practice to construct and complete,and to operate and maintain the Project (or to arrange for such operation and maintenance)to provide power at the lowest reasonable cost to the Purchasers in a manner that is compatible with the Purchasers'Systems and consistent with the Act,the Bond Resolution,and the Agreement. Best Efforts By Purchasers.To the extent that the cost of Project power is or may be affected by actions of the Committee,each Purchaser agrees to use its best efforts consistent with Prudent Utility Practice to assist in assuring that the Project provides power at the lowest reasonable cost to the Purchasers in a manner that is compatible with the Purchasers'Systems and consistent with the Act,the Bond Resolution,and the Agreement. Payment Obligation Each Purchaser agrees to pay its Percentage Share of Annual Project Costs for each Fiscal Year. The procedures for determining the amount of,and for making such payments,are set forth under the caption "Project Management Committee”herein. Each Purchaser shall make payments in the amounts and at the times required by the Agreement notwithstanding a suspension or reduction in the amount of power supplied by the Project.Such payments shall not be subject to any reduction,by offset or otherwise.The parties intend and interpret the foregoing two sentences to mean that the obligation to make such payments shall be absolute and unconditional and A-10 O O unaffected by any interruption,interference,or curtailment in whole or in part of power supplied by the Project.In the event that (i)the Project is no longer operable,or its operation is interrupted or curtailed for any reason whatsoever in whole or in part,and (ii)the Authority does not restore the Project to full operation within a reasonable time,then the Purchasers may upon reasonable notice to the Authority and at their own expense take such action as,they deem necessary to so restore the Project.The taking of such action by the Purchasers shall not alter each Purchaser's obligation to pay its Percentage Share of Annual Project Costs. Obligations in the Event of Default Upon failure of a Purchaser to perform any obligation under the Agreement,the Authority may bring any suit,action or proceeding at law or in equity ("Suit”),including mandamus,injunction and action for specific performance,as may be necessary or appropriate to enforce any covenant,agreement or obligation of the Agreement against that Purchaser.The Authority may bring such Suit (i)thirty days after giving the Purchaser a written demand for performance,in the case of default by the Purchaser on any obligation other than a payment obligation,and (ii)immediately,in the case of default by the Purchaser on any payment obligation.Each Purchaser shall continue to make payments in the event of any dispute regarding performance of any obligation by any party under the Agreement or in the event of any dispute under the Bond Resolution,and this obligation of continued payment pending resolution of disputes shall be immediately enforceable by any party upon application to any court of competent jurisdiction. In addition,if a Purchaser has for any reason suspended or reduced,or has failed to make or has been prevented from making,payments required under the Agreement,the Authority may terminate or suspend the delivery of power to that nonpaying Purchaser if,after consulting with the other Purchasers, the Authority reasonably determines that such termination or suspension is more effective than other available alternatives in minimizing adverse impacts on such other Purchasers. If the Authority so terminates or suspends deliveries,the Authority shall: (A)_offer to other Purchasers,on terms and conditions applicable to other power sold under the Agreement,any power not delivered to the nonpaying Purchaser,and if necessary allocate such power pro rata on the basis of Percentage Shares among Purchasers accepting such offer, (B)offer any power not sold under (A)to any qualified utility (including the other Purchasers)on terms and conditions deemed favorable by the Authority after consultation with the Committee;and (C)if the Authority projects that the amounts to be deposited into the Revenue Fund will nonetheless be insufficient to pay Annual Project Costs,increase every other Purchaser's Percentage Share of Annual Project Costs and Project Capacity pro rata to the extent and for the period necessary to compensate for such insufficiency;provided,that no Purchaser's Percentage Share shall be increased by more than 25 percent above the amount set forth in the Agreement without the written consent of that Purchaser. If the Authority determines that the process of offering power to others would delay exercise of the Authority's rights under (C),and that as a result the Authority will be unable to make deposits when required under the Bond Resolution,the Authority may exercise its rights under (C)immediately and take A-11 the actions required under (A)and (if necessary)under (B)as soon as practicable thereafter.No exercise by the Authority of any of its rights (or any failure by the Authority to exercise any of its rights)shall relieve any nonpaying Purchaser of any payment obligation or relieve such Purchaser of any liability for damages resulting from nonpayment. To the extent that the Authority uses Project reserve funds to permit it to make timely payments under the Bond Resolution following nonpayment by a Purchaser,the amount needed to replenish such reserve funds shall be added to the Annual Payment Obligation of the nonpaying Purchaser. If Purchasers'Percentage Shares are increased pursuant to (C),then the Authority shall,and any other Purchaser(s)may,immediately initiate and diligently pursue litigation in any court of competent jurisdiction to compel full and timely payment by the nonpaying Purchaser,to recover amounts needed to compensate Purchasers whose Percentage Shares have been increased,and to obtain such other relief as shall be fair and equitable.The same or similar litigation against any nonpaying Purchaser may also be initiated and pursued by the Authority and/or by any paying Purchaser if in response to any nonpayment the Authority takes action pursuant to (A)or (B). In the event of any default by the Authority with respect to a Purchaser,that Purchaser may,upon 30 days written notice to the Authority,bring any suit,action or proceeding,at law or in equity,including mandamus,injunction and action for specific performance,as may be necessary or appropriate to enforce any covenant,agreement or obligation against the Authority.No payment obligation of a Purchaser under the Agreement is subject to offset,however. Purchasers'Systems The amounts payable under the Agreement are operating expenses of each Purchaser's System, and are valid and binding obligations of each Purchaser,payable only from the gross revenues of said Purchaser's System as a cost of purchased electric power,and not payable from any taxes. Each Purchaser agrees that it will establish,charge and collect rates,fees,and charges with respect to that Purchaser's System in accordance with applicable law to provide revenues sufficient to meet its obligations under the Agreement and sufficient to pay,together with any other funds or monies available therefor,any and all other amounts payable from or which constitute or may constitute a charge and lien upon such revenues including,but not limited to,amounts sufficient to meet obligations to service debt incurred by the Purchaser to [*]finance the Purchaser's System. Each Purchaser covenants and agrees that it will operate and maintain its System in good repair, working order and condition and in accordance with Prudent Utility Practice. Each Purchaser covenants and agrees not to enter voluntarily into any contract or agreement to take or to take or pay for power,other than the Agreement,payable from the revenues of the Purchaser's System on a parity with or superior to the payment of its obligations under the Agreement,except that a Purchaser may enter into such a contract or agreement of not to exceed two years'duration under which the Purchaser's payment obligation is on a parity with the payment of its obligations under the Agreement. These limitations shall not apply to contracts or agreements creating obligations on a parity with obligations under the Agreement if a written opinion from a Consultant is rendered that (i)the contractoragreementisreasonablyexpectedtocontributetotheconductofthebusinessofthePurchaser's System =) in an efficient and economical manner consistent with Prudent Utility Practice,and (ii)the contract or O A-12 agreement will not impair the ability of the Purchaser to raise revenues sufficient to meet its obligations under the Agreement*. Bond Resolution Except as hereafter provided the Authority will not amend or supplement the Bond Resolution or adopt a new Bond Resolution in connection with the refunding of the Bonds,which would materially adversely affect the ability of a Purchaser to fulfill the terms of the Agreement or impose any increased burden or obligation,financial or otherwise,on a Purchaser,without the consent of the Purchaser,unless: (i)the Committee has approved the Authority's proposed action by an affirmative vote of members whose Percentage Shares equal or exceed 80 percent of Project Capacity and of Annual Project Costs;or (ii)the Committee by majority vote of the Purchasers requests that Required Project Work be paid for out of the proceeds of Bonds,and such Work is projected to cost in excess of the amount of money then available in the Renewal and Contingency Reserve Fund,plus available insurance proceeds,in which event,if such Bonds can then be legally issued and can be sold,the Authority shall issue such Bonds,payable from the Revenues of the Project (as defined in the Bond Resolution),to pay the portion of such costs which exceed insurance proceeds,if any,and to restore said Reserve Fund to its required level. The Purchasers consent to the adoption by the Authority of supplemental Bond Resolutions as necessary to comply with the Authority's obligation to finance and construct the Project and the Authority's obligation to use its best efforts to complete the Project expeditiously and in accordance with sound engineering practices and with the provisions of the Bond Resolution.Unless otherwise approved such supplemental Bond Resolutions shall:(a)provide that the total amounts required for the payment of Debt Service when due shall be,on an annual basis,as nearly equal as practicable;and (b)provide that the final maturity of Bonds issued pursuant to such supplemental Bond Resolutions shall not be earlier than 25 years from the date when the first of such Bonds is issued. Project Management Committee Composition of the Committee.The Project Management Committee shall consist of the Authority and the Purchasers.Alaska Electric Generation &Transmission Cooperative,Inc."AEG&T”)shall have no direct vote,but shall be represented by and through Homer Electric Association,Inc.,and Matanuska Electric Association,Inc.,each of which shall be entitled to vote as a Purchaser member for purposes of Committee procedure.The Committee shall meet not less than once each quarter.Costs of the Committee (other than costs incurred by the Authority)which are incurred prior to the Date of Commercial Operation shall be [*]borne by the Purchasers in accordance with the Percentage Shares of each. *The Letter Agreement between the parties dated November 7,1988 provides that this paragraph is not intended to provide any payment priority with respect to any existing contracts of the parties or the proposed tripartite power sales agreement among Alaska Electric Generation & Transmission Cooperative,Inc.,Homer Electric Association,Inc.and Matanuska Electric Association,Inc.,or any amendments thereto if such amendment does not substantially increase the obligation of the parties to such agreement. A-13 Adoption of Rules of Procedure.The Committee shall adopt,by the affirmative vote of a majority of the Purchasers and the affirmative vote of the Authority,procedural rules governing the conduct of the Committee's affairs.Committee approval of operations and maintenance arrangements for the Project,the sufficiency of the annual budget and wholesale power rates,and the undertaking of Optional Project Work shall require the affirmative vote of a majority of the Purchasers and the affirmative vote of the Authority. Committee Responsibilities;Approval By the Authority.As the legal owner and licensee of the Project,the issuer of Project debt,and the agency charged by statute with various duties affecting or affected by the Project,the Authority has certain nondelegable rights,duties,and responsibilities with respect to the Project.Subject to such nondelegable rights,duties,and responsibilities,the Committee shall be responsible for the management,operation,maintenance,and improvement of the Project. The Committee shall take the following actions,subject to the provisions of the Bond Resolution, federal and state law,the requirements of licensing and regulatory agencies,and the rights of the Authority and the Purchasers under other provisions of the Agreement: (A)Arrange for the operation and maintenance of the Project,and the scheduling, production,and dispatch of Project power; (B)Establish procedures for the use of each Purchaser's Water Allocation in a manner consistent with the needs and desires of other Purchasers and the capabilities of the Project; (C)Adopt in each Fiscal Year (and revise as necessary or prudent during such Fiscal Year)a budget of Annual Project Costs for that Fiscal Year,which budget shall be in an amount estimated by the Committee to be sufficient to pay all Annual Project Costs; (D)Establish for each Fiscal Year the estimated Annual Payment Obligation of each Purchaser,together with a schedule for each Purchaser of equal monthly payments that such Purchaser shall be required to make during that Fiscal Year,which payment schedule shall be (i) designed to recover such estimated Annual Payment Obligation from that Purchaser during the Fiscal Year,and (ii)revised during such Fiscal Year to reflect any revisions to the budget of Annual Project Costs for that Fiscal Year; (E)Determine after the conclusion of each Fiscal Year the actual Annual Project Costs for that Fiscal Year,the actual Annual Payment Obligation of each Purchaser for that Fiscal Year, and the amount of any additional payment required from (or the amount of any refund to be returned to)each Purchaser to ensure that the total of all payments received from each Purchaser for each Fiscal Year is equal to that Purchaser's actual Annual Payment Obligation for that Fiscal Year, (F)Evaluate and select among alternative methods of carrying out and funding Required Project Work; (G)Adopt provisions to evaluate and approve Optional Project Work,and to determine the compensation (if any)to be provided if the Committee approves any such Optional Project Work; A-14 (H)Adopt procedures consistent with the Agreement for the resolution of disputes that may arise between or among the Purchasers and the Authority concerning the interpretation of the Agreement,the obligations created by the Agreement,or the performance of such obligations; (I)Make an initial determination of "customary”insurance within the meaning of the insurance covenant in the Bond Resolution and determine the appropriate amount of,and obtain, insurance for or related to the Project,in addition to such insurance as may be required by the Bond Resolution; (J)Adopt maintenance schedules for the Project that do not interfere unreasonably with the operations of the Purchasers; (K)Adopt and implement procedures relating to electric power reserves for the Project in accordance with the Agreement;and (L)Consider the need for and approve any additional amount to be added to the Renewal and Contingency Reserve Fund over and above the Renewal and Contingency Reserve Requirement. Payment Obligation Unimpaired.Notwithstanding any Committee action or inaction,each Purchaser's obligation to make the monthly payments necessary to pay its Purchaser's Percentage Share of Debt Service,costs of operation and maintenance,and all other amounts to be paid by Purchasers shall be absolute and unimpaired. The Authority's Ability to Take Required Action.In the event the Committee fails to take any of the actions set forth in (C)through (E)above,in a timely fashion,or fails to take any other action which the Authority believes to be a Required Action,and as a result the Authority determines that it will be unable to meet any of its obligations imposed by statute,by the Bond Resolution,by the Agreement,or by any licensing or regulatory agency,then the Authority may (i)adopt a budget of Annual Project Costs, (ii)estimate the Annual Payment Obligation of each Purchaser,(iii)require each Purchaser to make payments on the basis of such estimated Annual Payment Obligation,and (iv)take such other action as the Authority deems necessary to meet such obligations.Failure of the Committee to adopt an Annual Project Budget by the 90th day prior to the beginning of a Fiscal Year shall permit the Authority to adopt an Annual Project Budget. Each Purchaser shall make payment as required by the Authority as a result of any action taken by the Authority under this paragraph,but such payment shall not constitute a waiver of any Purchaser's rights under the Agreement.Any Purchaser may seek review of such action in accordance with the dispute resolution procedures adopted by the Committee,or may seek to enforce the Agreement judicially in accordance with the Agreement if no applicable dispute resolution procedures have been adopted. End of Project The Authority shall declare the Project ended,and the Authority's obligations to make power available to the Purchasers and to operate and maintain the Project shall also end,if and when (i)the Project can no longer be operated in accordance with Prudent Utility Practice;or (ii)if all of the following conditions are met: A-15 (4)the Project cannot be operated at full capacity in a manner consistent with Prudent Utility Practice absent repairs,modifications,or additions ("Repairs”)to the Project;(2)a Consultant retained by the Committee concludes that such Repairs are not cost-effective in comparison with other power supply alternatives then available to the Purchasers;and (3) Committee members who are Purchasers and whose Percentage Shares total 80%vote that such Repairs should not be undertaken. After the Authority has declared the Project ended,each Purchaser shall complete its payment obligation for Project Capacity and associated energy delivered to such Purchaser before the Project ended, and shall do so by paying its Percentage Share of Annual Project Costs until all Bonds have been paid or provision has been made for the payment of the Bonds in accordance with the Bond Resolution. Covenants To Maintain Integrity of Agreement Retail Rate Approval.Each Purchaser will affirmatively and promptly pursue all administrative and judicial remedies necessary to secure Alaska Public Utility Commission approval of retail rates required to meet the terms of the Agreement. Compliance With Law.Each Purchaser will take all necessary steps to comply with applicable -federal and state laws and regulations,licenses and permits relating to the use and operation of the Purchaser's System. Sales,Mergers and Assignments.No Purchaser shall abandon,sell,mortgage,lease or otherwise dispose of the Purchaser's System or any assets of that System,or assign the Agreement or any interest thereunder to any assignee or successor in interest,unless:(1)such disposal or assignment accords with the terms of any of the Purchaser's covenants or agreements with the holders of the Purchaser's bonds, notes or other evidences of indebtedness;and (2)such disposal or assignment is:(A)consented to in writing by a majority of the Committee,including the Authority's representative;or (B)made to another utility that is already a Purchaser under the Agreement and is able to meet the obligations resulting from the disposal or assignment;or (C)limited to assets that the Purchaser determines to be surplus to the needs of that Purchaser's System,but the depreciated value of assets so disposed of or assigned in any given year shall not exceed five percent of the depreciated value of the assets of the Purchaser's System prior to the disposal or assignment;or (D)evaluated by a Consultant and that Consultant certifies that,taking into account the other obligations of the Purchaser or of the assignee or successor in interest,the Purchaser or the assignee or successor in interest will have (i)substantially the same or greater ability to produce sufficient revenues to meet its payment obligations as would the Purchaser absent the transaction,and (ii) the ability to perform all obligations under the Agreement. Any assignee of the Agreement must assume in writing all of the assigning Purchaser's obligations under the Agreement,must pay any amounts due and owing from the assigning Purchaser under the Agreement,and (unless the assignee is already a Purchaser)must provide the Authority and the Purchasers with an opinion of counsel that the Agreement is enforceable against the assignee. Status of Bonds.The parties will not take any action,including entry into power sales agreements,which would cause the interest on any Bond which is originally issued on a tax-exempt basis to become taxable under the Internal Revenue Code of 1986.as the same may be amended from time to time. A-16 Licenses and Permits.The parties will take all necessary steps within their control to comply with applicable federal and state laws and regulations,and to obtain and thereafter comply with all applicable licenses and permits relating to the use and operation of the Project,including without limitation,the Federal Energy Regulatory Commission license applicable to the Project.The Authority will take all necessary steps to cause the Federal Energy Regulatory Commission license to be renewed,if necessary, so that it is in effect during the term of the Agreement or any renewal hereof. Assignment.A Cooperative Purchaser shall have the right to assign its assets,including its rights under the Agreement for security purposes,to REA,or to a lender or guarantor in connection with loans to such Cooperative Purchaser where the proceeds of such loans are used to refinance obligations of such Cooperative Purchaser to REA or the Federal Financing Bank under Section 311 of the Rural Electrification Act or otherwise;provided,however,that (A)neither REA nor any secured lender or guarantor shall be entitled to exercise the rights of the Cooperative Purchaser under the Agreement unless the obligations of such Cooperative Purchaser shall have been performed,(B)no such assignment shall in any way relieve such Cooperative Purchaser of any obligations,and (C)no assignment shall be permitted if such assignment would adversely affect the tax exemption of interest on any Bonds. The Letter Agreement between the parties dated November 7,1988 provides that the foregoing provisions on sales,mergers and assignment shall not apply to any mortgage of a Cooperative Purchaser's electric utility system or any assets of that system given to secure loans made or guaranteed by REA or another lender for approved REA purposes. Arrangements Regarding AEG&T Homer Electric Association,Inc.("HEA”)and Matanuska Electric Association,Inc.("MEA”) have previously entered into contracts with the Alaska Electric Generation &Transmission Cooperative, Inc.("AEG&T”)under which AEG&T is to sell and HEA and MEA are to buy electric power in amounts necessary to meet the full requirements of HEA and MEA.AEG&T is a Purchaser on behalf of HEA and MEA,and AEG&T's payment obligations are secured by HEA's and MEA's respective obligations to provide at all times the monies necessary for the performance of AEG&T's payment obligations. If AEG&T at any time fails to meet its payment obligations,then HEA and MEA shall each be obligated to meet directly its respective share of AEG&T's payment obligations in the same manner as if HEA and MEA were individual Purchasers.All rights and remedies available to the Authority and/or to the other Purchasers against AEG&T shall also be available against HEA and MEA to the extent of their respective individual share.For these purposes,HEA's share shall be a Percentage Share of Project Capacity equal to 12.0 percent,and MEA's share shall be a Percentage Share of Project Capacity equal to 13.8 percent. _THE BOND RESOLUTION The following is a general summary of certain provisions of the Power Revenue Bond Resolution adopted by the Board of Directors of the Authority on September 7,1989.This summary is not to be considered a full statement of the terms of the Bond Resolution and accordingly is qualified by reference thereto and is subject to the full text thereof.Certain terms not defined under the heading "Certain Definitions”are defined in this Official Statement or in the summary of the Power Sales Agreement. Copies of the Bond Resolution may be obtained from the Authority. A-17 Certain Definitions "Accountant's Certificate”shall mean a certificate signed by a firm of independent certified public accountants of recognized national standing,selected by the Authority,which may be the firm of accountants which regularly audits the books of the Authority. "Aggregate Debt Service”for any period shall mean the sum of the amounts of Debt Service for such period with respect to all Series. "Bond Insurer”shall mean Bond Investors Guaranty Insurance Company and its successors. "Bond Year”shall mean each period of 12 calendar months ending on each July 1. "Capital Improvements”shall mean (a)repairs,maintenance,renewals,replacements, improvements or betterments required by federal or state law,a licensing or regulatory agency with jurisdiction over the Project,or the Power Sales Agreement,or otherwise necessary to keep the Project in good and efficient operating condition,consistent with (1)sound economics for the Project and the Purchasers and (2)national standards for the industry,which Capital Improvements constitute Required Project Work under the Power Sales Agreement;or (b)repairs,renewals and replacements,improvements, betterments,additions or expansions which Capital Improvements do not constitute Required Project Work,but which are approved by the Committee as Optional Project Work."National standards for the industry”shall mean Prudent Utility Practice. "Capital Reserve Requirement”shall mean (i)an amount equal to the lesser of Maximum Aggregate Debt Service or ten per cent of the proceeds of Bonds;or (ii)such other lesser amount as is required in order to maintain the tax-exempt status of the Bonds. "Committee”shall mean the Project Management Committee established in the Power Sales Agreement. "Construction Engineer”means an independent engineer or engineering firm or corporation having a nationwide and favorable reputation and demonstrated experience in the field of construction engineering and construction management at the time retained by the Authority to perform the acts and carry out the duties provided for such Construction Engineer in the Resolution.' "Consulting Engineer”means an independent engineer or engineering firm or corporation having a nationwide and favorable reputation and demonstrated experience in the field of consulting engineering for power systems at the time retained by the Authority to perform the acts and carry out the duties provided for such Consulting Engineer in the Resolution. "Cost of Acquisition and Construction”shall mean all costs and expenses of planning,designing, acquiring,constructing,installing and financing the Project or a Capital Improvement,placing the Project or a Capital Improvement in operation,and obtaining governmental approvals,certificates,permits and licenses with respect thereto,heretofore or hereafter paid or incurred by or on behalf of the Authority or by any Purchaser which has heretofore entered into a contract or contracts with the Authority with respect to construction or acquisition of the Project or a Capital Improvement.The Cost of Acquisition and Construction shall include,but shall not be limited to: A-18 S (1)Costs of preliminary investigation and development,feasibility and planning studies,the securing of regulatory approvals,costs for land and land rights,water and water rights,engineering,contractors'fees,labor,materials,equipment,utility services and supplies, accounting,legal and financing fees and expenses; (2)Working capital and reserves as required during construction of the Project or a Capital Improvement and to place the Project or a Capital Improvement in operation and such additional amounts of working capital and reserves as are required by the Resolution; (3)Interest accruing on Bonds prior to and during construction and for such additional period as the Authority may reasonably determine to be necessary for the placing of the Project or a Capital Improvement or any facility thereof in operation; (4)Amounts required to be paid from the proceeds of Bonds issued to finance the Cost of Acquisition and Construction into any Funds or Accounts; (5)The payment of any bond anticipation note or evidence of indebtedness issued in anticipation of Bonds for the purpose of financing the Cost of Acquisition and Construction of the Project or a Capital Improvement,including the Variable Rate Demand Bonds; (6)Training and testing costs which are properly allocable to acquisition and construction; (7)All costs of insurance applicable to the period of construction; (8)The cost of restoring and repairing property damaged or destroyed in the construction of the Project or a Capital Improvement,or the amount required by law to be paid as adequate compensation for such damages,or amounts required to be paid with respect to the restoration,relocation,removal,reconstruction or duplication of property made necessary or caused by the construction and installation of the Project or a Capital Improvement to the extent not paid out of the proceeds of insurance; (9)Legally required or permitted Federal,state and local taxes and payments in lieu of taxes applicable to the period of construction; (10)'All other costs incurred by or on behalf of the Authority and properly allocable to the acquisition and construction of the Project or a Capital Improvement;and (11)Costs of issuance of Bonds. "Counsel's Opinion”or "Opinion of Counsel”shall mean an opinion of counsel of nationwide recognized standing in the field of municipal bonds,selected by the Authority and not objected to by the Trustee. "Debt Service”for any period shall mean,as of any date of calculation and with respect to any Series,an amount equal to the sum of (i)interest accruing during such period on Bonds of such Series, except to the extent that such interest is to be paid from deposits in the Interest Account in the Debt Service Fund made from Bond proceeds and (ii)that portion of each Principal Installment for such Series which would accrue during such period if such Principal Installment were deemed to accrue daily in equal A-19 amounts from the next preceding Principal Installment due date for such Series (or,if there shall be no such preceding Principal Installment due date,from a date one year preceding the due date of such Principal Installment or from the date of issuance of the Bonds of such Series,whichever date is later). Interest and Principal Installments with respect to interest accreting on compound interest or zero coupon or like interest paying Bonds shall be deemed to accrue in the 12 months immediately prior to the final maturity of such Bonds;and the Authority may determine that interest will accrue on variable rate Bonds at a rate equal to the actual rate during a prior period. "Depositary”shall mean any bank or trust company organized under the laws of any state of the United States or any national banking association selected by the Authority and approved in writing by the Trustee., "Excess Investment Earnings”shall mean that amount determined by the Authority to be required to be rebated to the United States Government pursuant to the Code. "Federal Obligation”shall mean any direct obligation of,or any obligation the full and timely payment of principal of and interest on which is guaranteed by,the United States of America. "Fiduciary”or "Fiduciaries”shall mean the Trustee,the Bond Registrar,the Paying Agents,or any or all of them,as may be appropriate. "Fiscal Year”shall mean the twelve-month period commencing on July 1 of each year and including June 30 of the succeeding calendar year. "Insured Bonds”shall mean the Bonds insured by the Municipal Bond Insurance Policy. "Investment Securities”shall mean and include any of the following securities,if and to the extent the same are at the time legal for investment of the Authority's funds: (i)Federal Obligations; (ii)obligations of the Government National Mortgage Association,the Federal National Mortgage Association to the extent that such obligations are guaranteed by the Government National Mortgage Association,the Federal Financing Bank,the Federal Intermediate Credit Banks,Federal Banks for Cooperatives,Federal Land Banks,Federal Home Loan Banks, Farmers Home Administration and Federal Home Loan Mortgage Association; (ili)new housing authority bonds issued by public agencies or municipalities and fully secured as to the payment of both principal and interest by a pledge of annual contributions under an annual contributions contract or contracts with the United States of America;or project notes issued by public agencies or municipalities and fully secured as to the payment of both principal and interest by a requisition or payment agreement with the United States of America; (iv)direct and general obligations of any state of the United States of America,to the payment of the principal of and interest on which the full faith and credit of such state is pledged, provided that at the time of their purchase under the Resolution such obligations are rated not less than Aa or AA or their equivalents by Moody's Investors Service,Inc.and Standard &Poor's Corporation,or their successors; A-20 (v)certificates of deposit,whether negotiable or nonnegotiable,issued by any bank or trust company organized under the laws of any state of the United States of America or any national banking association (including any Fiduciary),provided that such certificates of deposit shall be purchased directly from such a bank,trust company or national banking association and shall be either (1)continuously and fully insured by the Federal Deposit Insurance Corporation, or (2)continuously and fully secured by Qualified Collateral,which shall have a market value (exclusive of accrued interest)at all times at least equal to 100%of the principal amount of such certificates of deposit and shall be lodged with the trust department of the Trustee or with a Federal Reserve Bank or branch,as custodian,by the bank,trust company or national banking association issuing each such certificate of deposit required to be so secured; (v1)repurchase agreements with banks which are members of the Federal Reserve System or with government bond dealers recognized as primary dealers by the Federal Reserve Bank of New York that are secured by Federal Obligations or the obligations referred to in paragraph (ii)(herein called "Other Obligations”),having a current market value at least equal to 100%of the amount of the repurchase agreement,marked to market weekly,and which Federal Obligations or Other Obligations shall have been deposited in trust by such bank or dealer with the trust department of the Trustee or with a Federal Reserve Bank or branch,or with another third party custodian approved by the Trustee,by such bank or dealer and by the Authority,as collateral security for such repurchase agreements; (vii)"commercial paper”rated either "A-1"or "P-1",or corporate bonds or notes,in each case issued by a United States corporation,rated in one of the two highest rating categories by Standard &Poor's Corporation and Moody's Investors Service,Inc.; (viii)investment agreements with any corporation,including banking or financial _institutions,the corporate debt of which is rated,at the time of investment,"Aa”or better by Moody's Investors Service,Inc.and "AA”or better by Standard &Poor's Corporation,or secured in the same manner as repurchase agreements in paragraph (vi); (ix)guaranteed investment contracts or similar funding agreements issued by insurance companies,the corporate debt of which,at the time of investment,is rated "Aa”or better by Moody's Investors Service,Inc.and "AA”or better by Standard &Poor's Corporation or Bests, and the contract is pari passu with senior debt,or the contract is rated in one of the two highest rating categories by Standard &Poor's Corporation and Moody's Investors Service,Inc.or Bests: and (x)units of a taxable government money market fund consisting of obligations guaranteed by the full faith and credit of the United States of America and repurchase agreements secured as provided in paragraph (vi). "Maximum Aggregate Debt Service”shall mean the greatest amount of Aggregate Debt Service payable in any unexpired Bond Year. "Municipal Bond Insurance Policy”shall mean the municipal bond insurance policy insuring the payment of the principal of and interest on the Insured Bonds. "Operating Expenses”shall mean (i)the Authority's operation,maintenance,administrative and general expenses of the Project,and shall include,without limiting the generality of the foregoing,costs A-21 of investigations,insurance,ordinary repairs of the Project,fuel costs,rents,engineering expenses,legal and financial advisory expenses,Committee expenses,refunds for overpayments by Purchasers,salaries and required Project employee costs,any taxes or payments in lieu of taxes,(ii)any other current expenses or obligations required to be paid by the Authority,all to the extent properly allocable to the Project,or required to be incurred under the Power Sales Agreement,and (iii)the fees and expenses of the Fiduciaries. "Operating Reserve Account Requirement”shall mean zero until the earlier of the Date of Commercial Operation or the date of retirement of all of the Variable Rate Demand Bonds,and thereafter shall mean an amount equal to 20 percent of the Operating Expense component of the Annual Budget as calculated annually,or such other amount as may be determined pursuant to the Power Sales Agreement. "Principal Installment”shall mean,as of any date of calculation and with respect to any Series (i) the principal amount of Bonds of such Series due on a certain future date for which no Sinking Fund Installments have been established,or (ii)the unsatisfied balance of any Sinking Fund Installments due on a certain future date for Bonds of such Series,plus the amount of the sinking fund redemption premiums, if any,which would be applicable upon redemption of such Bonds on such future date in a principal amount equal to said unsatisfied balance of such Sinking Fund Installments,or (iii)if such future dates coincide as to different Bonds of such Series,the sum of such principal amount of Bonds and of such unsatisfied balance of Sinking Fund Installments due on such future date plus such applicable redemption premiums,if any. "Qualified Collateral”shall mean:(i)obligations described under items (i),(ii)and (iii)of the definition of Investment Securities;and (ii)direct and general obligations of any state of the United States of America which are rated not less than "AA”or "Aa”or their equivalents by Standard &Poor's Corporation and Moody's Investors Service,Inc.,or their successors. "Redemption Price”shall mean,with respect to any Bond,the principal amount thereof plus the applicable premium,if any,payable upon redemption thereof. "Renewal and Contingency Reserve Requirement”shall mean zero until the earlier of the Date of Commercial Operation or the date of retirement of all of the Variable Rate Demand Bonds,and thereafter shall mean an amount equal to $5,000,000. "Revenues”shall mean (i)all revenues,income,rents and receipts,derived or to be derived by the Authority from,or attributable to the ownership and operation of,the Project,including all revenues attributable to the Project or to payment of the costs thereof including,without limitation,all revenues received or to be received by the Authority under the Power Sales Agreement or under any other contract for the sale of power,energy,transmission or other service from the Project or any part thereof or any contractual arrangement with respect to the use of the Project or any portion thereof or the services,output or capacity thereof,and (it)interest received or to be received on any moneys or securities (other than in the Construction Fund or in the Excess Investment Earnings Fund)held pursuant to the Resolution and required to be paid into the Revenue Fund. "Series”shall mean all of the Bonds authenticated and delivered on original issuance and identified as a separate Series of Bonds. "Sinking Fund Installment”means,with respect to the outstanding Bonds of any Series,the amount required to be paid in any event by the Authority on a single future date for the retirement of A-22 Bonds of such Series which mature after said future date,but does not include any amount payable by the Authority by reason only of the maturity of a Bond. o Resolution to Constitute Contract The Resolution shall constitute a contract between the Authority,the Trustee and the holders from time to time of the Bonds,a trust agreement under the Act and a security agreement under the Alaska Uniform Commercial Code.The pledge and assignment made in the Resolution and the covenants and agreements set forth in the Resolution to be performed on behalf of the Authority shall be for the equal benefit,protection and security of the holders of any and all of the Bonds,all of which shall be of equal rank without preference,priority or distinction of any of the Bonds over any other thereof except as expressly provided in or permitted by the Resolution. Pledge of Revenues and Other Funds A pledge of the Revenues,and of all moneys,securities and funds,except the Excess Investment Earnings Fund,held or set aside or to be held or set aside by the Authority or any Fiduciary under the Resolution,is made,and the same are pledged and assigned to secure the payment of the principal and Redemption Price of and interest on the Bonds and any Sinking Fund Installments for the retirement thereof,subject only to the provisions of the Resolution permitting the payment,setting apart or appropriation thereof for or to the purposes and on the terms,conditions,priorities and order set forth in the Resolution.This pledge shall be valid and binding from the time when it is made;the Revenues so pledged and then or thereafter received by the Authority shall immediately be subject to the lien of such pledge without any physical delivery or further act;and the lien of such pledge and the obligation to perform the contractual provisions made by the Resolution shall be valid and binding as against all parties having claims of any kind in tort,contract or otherwise against the Authority,irrespective of whether such parties have notice thereof. The Bonds shall be direct and general obligations of the Authority for the payment of which the full faith and credit of the Authority are pledged and neither the State of Alaska nor any political subdivision (other than the Authority)nor any Purchaser shall be obligated to pay the principal or Redemption Price thereof or interest thereon and neither the faith and credit nor the taxing power of the State of Alaska or any political subdivision thereof (other than the Authority)or of any Purchaser is pledged to the payment of the principal or Redemption Price of,or interest on,the Bonds., Nothing in the Resolution prevents the Authority from financing through the issuance of its bonds any facilities which do not constitute a part of the Project;provided that such bonds shall not be payable out of or secured by the Revenues or any Fund held under the Resolution and neither the cost of such facilities nor any expenditure in connection therewith or with the financing thereof shall be payable from the Revenues or from any such Fund. Additional Bonds Additional Bonds may be issued on a parity with any outstanding Bonds for the purpose of paying all or a portion of the Cost of Acquisition and Construction of any Capital Improvements,upon compliance with certain conditions including: 1.Such Capital Improvements have been approved by the Committee in accordance with the Power Sales Agreement. A-23 2.The filing with the Trustee of an opinion of the Consulting Engineer that neither the issuance of the Additional Bonds nor the payment of the Cost of Acquisition and Construction of the Capital Improvements will impair the ability of the Authority to pay Debt Service through collection of revenues under the Power Sales Agreement. 3.The filing with the Trustee of a certificate of the Authority stating that the Authority is not in default in the performance of any of the covenants,conditions,agreements or conditions contained in the Resolution. 4.After application of the proceeds of sale of the Additional Bonds,the amount held in the Capital Reserve Fund equals the Capital Reserve Requirement and the amount held in the Renewal and Contingency Reserve Fund equals the Renewal and Contingency Reserve Requirement. 5.The filing with the Trustee of a certificate from the Committee (if required under the Power Sales Agreement)stating that the supplemental resolution authorizing the Additional Bonds has been adopted in accordance with the provisions of the Power Sales Agreement requiring the approval of the Committee prior to the authorization or issuance of Additional Bonds. Additional Bonds may be issued on a parity with any outstanding Bonds for the purpose of refunding outstanding Bonds upon satisfaction of certain terms and conditions including 4 and 5 above, and upon the application of the proceeds of such Additional Bonds to establish with the Trustee an irrevocable trust for the payment of the Bonds to be refunded. Funds and Accounts The Resolution establishes the following funds and accounts to be held by the Trustee: 1.Construction Fund, 2.Debt Service Fund,consisting of an Interest Account and a Principal Account, 3.Capital Reserve Fund, 4,Renewal and Contingency Reserve Fund,and 5.Excess Investment Earnings Fund. The Resolution establishes the following funds and account to be held by the Authority: 1.Revenue Fund,and 2.Operating Fund,which shall include therein an Operating Reserve Account. Construction Fund Amounts in the Construction Fund shall be applied to the Cost of Acquisition and Construction, and until so applied are pledged for the security of and the payment to Bondholders of the principal or Redemption Price of and interest on the Bonds and shall at all times be subject to the lien of such pledge. A-24 There shall be established within the Construction Fund separate accounts for the Project and for each undertaking of Capital Improvements for which Bonds are authorized to be issued. The proceeds of insurance and any self-insurance fund maintained against physical loss of or damage to the Project or Capital Improvements,or of contractor's performance bonds or other assurances of completion with respect thereto,pertaining to the period of construction thereof,shall be paid into the appropriate separate account in the Construction Fund. Before any payments by the Trustee shall be made from the Construction Fund,the Authority shall file with the Trustee its requisition therefor and a certificate of the chief financial officer of the Authority stating that (1)the obligation to be paid from the Construction Fund has been properly incurred,is a proper Cost of Construction and Acquisition of the Project or Capital Improvements and has not been paid, (2)that such payment is not subject to any lien or attachment against the person named in such requisition or if any such lien or attachment has been filed or served against the Authority,that it has been released or discharged,and (3)that such requisition contains no item representing payment on account of any retained percentages which the Authority is at the date of such certificate entitled to retain. Any requisition for the payment of the cost and expense of the acquisition of any lands,easements, or rights or interest in lands must be accompanied by a Counsel's Opinion as to the sufficiency,for the purposes of the Authority,of the title or lesser interest to be acquired by the Authority. When the Construction Engineer shall determine that (i)the Project or Capital Improvements conforms to the plans and specifications thereof and is ready for normal continuous operation;(ii) acquisition,construction and installation of the Project or Capital Improvements has been completed in every material respect;and (iii)costs (including contingencies),as estimated by the Construction Engineer, of all work remaining to be done in order to complete such acquisition,construction and installation will not exceed 2%of the Cost of Acquisition and Construction of the Project or Capital Improvements,the Construction Engineer shall file a report to that effect with the Authority and the Trustee. As soon as practicable after the date of the filing of such report or the Date of Commercial Operation of the Project or Capital Improvements,whichever is the later,the Construction Engineer will file with the Authority and the Trustee a report setting forth among other things,the amounts required to be reserved in the Construction Fund for the payment of Cost of Acquisition and Construction to be paid and for contractor claims against the Authority and other contingencies. Upon the filing of certificates of the Authority specifying the amount to be reserved in the Construction Fund (being not less than the amount specified in the report of the Construction Engineer) and a Counsel's Opinion with respect to title to property and outstanding liens,the balance in excess of the amount,if any,stated in such certificate shall be transferred to the Capital Reserve Fund,if and to the extent necessary to make the amount of such Fund equal to the Capital Reserve Requirement,and any balance shall be applied,if and to the extent a Counsel's Opinion states that such application is necessary to preserve the tax-exempt status of interest on the Bonds,to the retirement of Bonds by purchase or redemption. The Trustee shall,during the construction of the Project or Capital Improvements,pay from the appropriate separate account in the Construction Fund to the Authority,upon its requisitions therefor not more than $250,000,to be used as a revolving fund for the purpose of paying such items of the Cost of Acquisition and Construction thereof as cannot conveniently be paid from the Construction Fund.So long as the amount in such revolving fund shall at any time be less than $250,000,such revolving fund shall A-25 be reimbursed by the Trustee from time to time for such expenses so paid,by payments from the Construction Fund upon requisitions and certificates of the Authority. Revenues and Revenue Fund All Revenues shall be promptly deposited by the Authority and the Trustee,as the case may be, upon receipt thereof to the credit of the Revenue Fund. Operating Fund As soon as practicable after deposit of Revenues in the Revenue Fund and in any case no later than the last business day of each month after the deposit,the Authority shall withdraw from the Revenue Fund and pay to the Operating Fund a sum which,together with any amount therein not set aside in the Operating Reserve Account or as a reserve for working capital,is equal to one-twelfth (or such other fraction as may be appropriate if the period with respect to which such amount is withdrawn is other than monthly)of the total moneys appropriated for Operating Expenses in the Annual Budget for the then current Fiscal Year.The Operating Reserve Account shall be maintained at all times in an amount not less than the Operating Reserve Account Requirement.Amounts in the Operating Reserve Account may be expended for Operating Expenses to the extent other amounts in the Operating Fund are not available. Amounts in the Operating Fund shall be paid out from time to time by the Authority for reasonable and necessary Operating Expenses.Any amounts budgeted by the Committee in the Annual Budget for Annual Project Costs constituting costs of the Committee shall be paid out from time to time to the Committee by the Authority. Payments Into Certain Funds After the payment has been made to the Operating Fund,the Authority shall apply moneys from the Revenue Fund and deposit said amounts with the Trustee on the dates set forth below and the Trustee shall deposit said amounts in the following order in the amounts and in the Funds set forth below. 1.In the Debt Service Fund (i)semiannually on June 1 and December 1,for credit to the Interest Account,unless the sum on deposit therein equals or exceeds the interest due on all Bonds on the next succeeding interest payment date,an amount equal to the interest due on such interest payment date less the interest to be paid on such interest payment date from Bond proceeds held in said Account for such purpose:provided,however,that for the purposes of computing the amount on deposit in said Account,there shall be excluded the amount,if any,set aside in said Account for the payment of interest due after the next succeeding interest payment date;(ii) annually on December 1 for credit to the Principal Account,unless the sum on deposit therein equals or exceeds all Principal Installments due on the next succeeding July 1,an amount equal to one-half of such Principal Installments;and (iii)annually on June 1,for credit to the Principal Account,the amount,if any,necessary to cause the sum on deposit therein to equal all Principal Installments due on the next succeeding July 1;provided that the Authority may establish payments into the Debt Service Fund at different times and in different amounts as necessary for interest paid other than semiannually and in fixed amounts. 2.In the Capital Reserve Fund,the amount,if any,required so that the balance in the Fund equals the Capital Reserve Requirement. A-26 3.Semiannually on June 1 and December 1,in the Operating Reserve Account,the amount,if any,required so that the balance in the Account equals the Operating Reserve Account Requirement. 4.In the Renewal and Contingency Reserve Fund,the amount,if any,required so that the balance in the Fund,within a period no greater than four years from the initial deposit and thereafter from the most recent withdrawal therefrom,shall equal the Renewal and Contingency Reserve Requirement or such larger amount as may be determined by the Committee to be included in the calculation of Annual Project Costs. 5.Annually ona date or dates to be determined by a Supplemental Resolution,to the credit of the Excess Investment Earnings Fund,in such amount as is necessary to cause the amount on deposit in the Excess Investment Earnings Fund to be equal to estimated Excess Investment Earnings for the Bond Year,from amounts in the Revenue Fund or from moneys transferred from the Construction Fund. Debt Service Fund The Trustee shall pay out of the Debt Service Fund to the respective Paying Agents (i)out of the Interest Account,on or before each interest payment date for any of the Bonds the amount required for the interest payable on such date;(ii)out of the Principal Account,on or before each Principal Installment due date,the amount required for the Principal Installment payable on such due date;and (ili)out of the Interest Account,on or before any redemption date for the Bonds,the amount required for the payment of interest on the Bonds then to be redeemed.The Trustee shall also pay out of the Interest Account the accrued interest included in the purchase price of Bonds purchased for retirement. Amounts accumulated in the Principal Account with respect to any Sinking Fund Installment (together with amounts accumulated in the Interest Account with respect to interest on the Bonds for which such Sinking Fund Installment was established)may,and if so directed by the Authority,shall,be applied by the Trustee,on or prior to the 60th day preceding the due date of such Sinking Fund Installment,to (i)the purchase of the Bonds of the Series and maturity for which such Sinking Fund Installment was established,or (ii)the redemption at the applicable sinking fund Redemption Price of such Bonds.After the 60th day but on or prior to the 45th day preceding the due date of such Sinking Fund Installment,any amounts then on deposit in the Principal Account may,and if so directed by the Authority,shall,be applied by the Trustee to the purchase of Bonds of the Series and maturity for which such Sinking Fund Installment was established in an amount not exceeding that necessary to complete the retirement of the unsatisfied balance of such Sinking Fund Installment.All purchases of any such Bonds shall be made at prices not exceeding the applicable sinking fund Redemption Price of such Bonds plus accrued interest, and such purchases shall be made by the Trustee as directed by the Authority.As soon as practicable after the 45th day preceding the due date of any such Sinking Fund Installment,the Trustee shall proceed to call for redemption,on such due date Bonds of the Series and maturity for which such Sinking Fund Installment was established in such amount as shall be necessary to complete the retirement of the unsatisfied balance of such Sinking Fund Installment. Capital Reserve Fund If five business days prior to any date on which a Principal Installment or interest is due the amount in the Debt Service Fund shall be less than the amount required to be in such Fund to pay said A-27 Principal Installment or interest,the Trustee shall apply amounts from the Capital Reserve Fund to the extent necessary to make good the deficiency. Whenever the moneys on deposit in the Capital Reserve Fund shall exceed the Capital Reserve Requirement,until the Date of Commercial Operation of the Project,such excess shall be deposited in the Construction Fund and thereafter such excess shall,on the request of the Authority,be transferred to the Authority for deposit in the Revenue Fund at least annually. In the event of the refunding of Bonds,the Trustee shall,upon the direction of the Authority, withdraw from the Capital Reserve Fund amounts accumulated therein with respect to the Bonds being refunded and deposit such amounts with itself as Trustee to be held for the payment of the principal or Redemption Price,if applicable,and interest on the Bonds being refunded;provided that such withdrawal shall not be made unless (a)immediately thereafter the Bonds being refunded shall be deemed to have been paid and (b)the amount remaining in the Capital Reserve Fund after such withdrawal shall not be less than the Capital Reserve Requirement. Renewal and Contingency Reserve Fund Amounts in the Renewal and Contingency Reserve Fund shall be applied to the costs of Capital Improvements,the payment of extraordinary operation and maintenance costs,and contingencies,including payments with respect to the prevention or correction of any unusual loss or damage in connection with the Project or to prevent a loss of Revenues therefrom,all to the extent not provided for in the then current Annual Budget or by reserves in the Operating Fund or from the proceeds of Bonds. No payments shall be made from the Renewal and Contingency Reserve Fund if and to the extent that the proceeds of insurance,including the proceeds of any self-insurance fund,or other moneys recoverable as the result of damage,if any,are available to pay the costs otherwise payable from such Fund. Any balance of moneys and securities in the Renewal and Contingency Reserve Fund in excess of the Renewal and Contingency Reserve Requirement or such larger amount as may be determined from time to time by the Committee to be included in the calculation of Annual Project Costs shall be transferred to the Revenue Fund at least annually. Excess Investment Earnings Fund The Trustee shall establish within the Excess Investment Earnings Fund a separate account for each Series of Bonds.Within 30 days after the end of each Bond Year the Authority shall determine the Excess Investment Earnings with respect to each Series of Bonds for such Bond Year and the Trustee,at the direction of the Authority,shall transfer from the Construction Fund or the Revenue Fund such amount as shall be necessary to cause the amount held in such account to equal the Excess Investment Earnings for such Series of Bonds accrued as of the end of such Bond Year and not previously paid to the United States. Moneys in the Excess Investment Earnings Fund shall be applied by the Trustee to pay rebate amounts due the United States,as provided in Section 148(f)of the Code and the applicable Income Tax Regulations.All moneys in the Excess Investment Earnings Fund shall be held by the Trustee free and clear of the lien of the Resolution.If at any time,the amount held in any account in the Excess Investment Earnings Fund exceeds the accrued and unpaid Excess Investment Earnings attributable to the Series of A-28 Bonds for which such account is maintained;then the Trustee,at the direction of the Authority,shall transfer such excess to the Revenue Fund.If and to the extent necessary,the Authority shall take all action required to cause amounts to equal Excess Investment Earnings to be included as Operating Expenses and therefore as Annual Project Costs. Deposits All Revenues and other moneys held by any Depositary may be placed on demand or time deposit, if and as directed by the Authority,provided that such deposits shall permit the moneys held to be available for use at the time when needed.All moneys held by any Fiduciary,as such,may be deposited by such Fiduciary in its banking department on demand or,if and to the extent directed by the Authority and acceptable to such Fiduciary,on time deposit,provided that such moneys on deposit be available for use at the time when needed.Such Fiduciary shall allow and credit on such moneys such interest,if any, as it customarily allows upon similar funds of similar size and under similar conditions or as required by law. All moneys held by the Trustee or any Depositary shall be (a)either (1)continuously and fully insured by the Federal Deposit Insurance Corporation,or (2)continuously and fully secured by lodging with the Trustee,any Federal Reserve Bank or branch,or another third party custodian approved by the Trustee and the Authority,Qualified Collateral having a market value (exclusive of accrued interest)not less than 100%of the amount of such moneys,and (b)held in such other manner as may then be required by applicable Federal or State of Alaska laws and regulations and applicable state laws and regulations of the state in which the Trustee or such Depositary (as the case may be)is located,regarding security for, or granting a preference in the case of,the deposit of trust funds;provided,however,that it shall not be necessary for the Fiduciaries to give security for the deposit of any moneys with them held in trust and set aside by them for the payment of the principal or Redemption Price of or interest on any Bonds,or for the Trustee or any Depositary to give security for any moneys which shall be represented by obligations or certificates of deposit purchased as an investment of such moneys. Investment of Certain Funds Moneys held in any Fund or Account shall be invested and reinvested by the Trustee (in accordance with instructions received from the Authority)to the fullest extent practicable in Investment Securities which mature not later than such times as shall be necessary to provide moneys when needed for payments to be made from such Funds and Accounts.Proceeds of sale of the First Series Bonds deposited in the Debt Service Fund shall be invested in Federal Obligations maturing at such times and in such amounts as are necessary to match the interest payments for which the amounts are expected to be expended. Any amount in any fund in excess of the amounts required to be on deposit therein shall be paid into the Revenue Fund,provided,however,that any such amount shall be paid into the Construction Fund to the extent the amount is realized prior to the Date of Commercial Operation of the Project.Interest earned on amounts in the Interest Account shall be held in such Account for the purposes thereof. Valuation of Investments Obligations purchased as an investment of moneys in any Fund shall be deemed at all times to be part of such Fund and any profit realized from the liquidation of such investment shall be credited to such Fund and any loss resulting from the liquidation of such investment shall be charged to the respective A-29 Fund.In computing the amount in any Fund,obligations purchased as an investment of moneys therein shall be valued at the market value thereof exclusive of accrued interest,or otherwise as may then be required by the Code.Such computations shall be determined not less frequently than quarterly in each year. Payment of Bonds The Authority shall duly and punctually pay or cause to be paid,the principal or Redemption Price,if any,of every Bond and the interest thereon,at the dates and places and in the manner mentioned in the Bonds according to the true intent and meaning thereof. Power to Issue Bonds and Pledge Revenues and Other Funds The Authority is duly authorized under the Act and all other applicable laws to issue the Bonds and to adopt the Resolution and to pledge and assign the Revenues and other moneys,securities and funds purported to be subject to the lien of the Resolution in the manner and to the extent provided in the Resolution.Except to the extent otherwise provided in the Resolution,the Revenues,and other moneys, securities and funds so pledged are and will be free and clear of any pledge,lien,charge or encumbrance thereon or with respect thereto prior to,or of equal rank with,the pledge and assignment created by the Resolution,and all corporate or other action on the part of the Authority to that end has been and will be duly and validly taken.The Bonds and the provisions of the Resolution are and will be valid and legally enforceable obligations of the Authority in accordance with their terms and the terms of the Act and the Resolution.The Authority shall at all times,to the extent permitted by law,defend,preserve and protect the pledge and assignment of the Revenues and other moneys,securities and funds pledged under the Resolution and all the rights of the Bondholders under the Resolution against all claims and demands of all persons whomever. Creation of Liens;Sale and Lease of Property The Authority shall not issue any bonds,notes,or other evidences of indebtedness,other than the Bonds,secured by a pledge of or other lien or charge on the Revenues (including amounts which the Authority may thereafter be entitled to expend for Operating Expenses)and shall not create or cause to be created any lien or charge on such Revenues or on any amounts held by any Fiduciary under the Resolution;provided,however,that the Authority may issue bonds or notes or other obligations (i) payable out of,or secured by a pledge of,Revenues to be derived on and after such date as the pledge of the Revenues provided in the Resolution shall be discharged and satisfied,(ii)secured by a pledge of amounts which is in all respects subordinate to the lien and pledge created by the Resolution. No part of the Project shall be sold,leased,mortgaged or otherwise disposed of,except as follows: (a)The Authority may sell or exchange any property or facilities constituting part of the Project only in accordance with,and in a manner that will not impair the Authority's obligations under,the provisions of the Power Sales Agreement and if (i)it shall determine that such property or facilities are not useful in the operation of the Project,or (ii)the proceeds of such sale are less than 2%of the prior Bond Year's Debt Service,or it shall file with the Trustee an opinion of the Consulting Engineer stating that the fair market value of the property or facilities exchanged are less than 2%of the prior Bond Year's Debt Service or (iii)if such proceeds or fair market value exceeds 2%of the prior Bond Year's Debt Service it shall file with the Trustee an opinion of the Consulting Engineer stating that the sale or exchange of such property or facilities A-30 will not impair the ability of the Authority to comply during the current or any future Fiscal Year with the provisions of its rate covenant with Bondholders. (b)In addition to the Power Sales Agreement,the Authority may lease or make contracts or grant licenses for the operation of,or make arrangements for the use of,or great easements or other rights with respect to,any part of the Project,provided that any such lease, contract,license,arrangement,easement or right (i)does not impede the operation of the Project and (ii)does not in any manner impair or adversely affect the rights or security of the Bondholders,and (iii)does not adversely affect the exemption from federal income taxation of the interest on the Bonds;and provided,further,that if the depreciated cost of the property to be covered by any such lease,contract,license,arrangement,easement or other right is in excess of 2%of the prior Bond Year's Debt Service the Authority shall first file with the Trustee an opinion of the Consulting Engineer that such action does not impair the ability of the Authority to comply during the current or any further Fiscal Year with the provisions of its rate covenant with Bondholders.Any payment received under or in connection with any such lease,contract,license, arrangement,easement or right shall constitute Revenues and shall be deposited in the Revenue Fund. Annual Budget The Authority,acting in conjunction with the Committee or separately in accordance with the Power Sales Agreement,shall adopt an Annual Budget each Fiscal Year and file a copy thereof with the Trustee.Each Annual Budget shall set forth in reasonable detail the estimated Revenues and Operating Expenses including Annual Project Costs for the Fiscal Year,and including provision for the estimated amount to be deposited during such Fiscal Year in each Fund and Account established under the Resolution and the requirements,if any,for the amounts estimated to be expended from each Fund and Account established under the Resolution.Such Annual Budget shall be revised as necessary or prudent during each Fiscal Year to reflect unanticipated changes in actual Revenues,Operating Expenses or other . requirements,or if there are at any time during any such Fiscal Year extraordinary receipts or payments of unusual costs,and,if appropriate,there shall be filed with the Trustee an amended Annual Budget for the remainder of the then current Fiscal Year. Limitations on Operating Expenses and Other Costs The Authority shall not incur Operating Expenses or other costs payable from the Renewal and Contingency Reserve Fund in any Fiscal Year in excess of the reasonable and necessary amount of such expenses or costs,respectively,and shall not expend any amount from the Operating Fund for Operating Expenses or from the Renewal and Contingency Reserve Fund for costs payable therefrom for such Fiscal Year in excess of the respective amounts provided therefor in the Annual Budget as then in effect. Project Operation and Maintenance The Authority shall at all times use its best efforts to operate or cause the Project to be operated properly and in an efficient and economical manner,consistent with the Power Sales Agreement and Prudent Utility Practice,and shall use its best efforts to maintain,preserve,reconstruct and keep the same or cause the same to be so maintained,preserved,reconstructed and kept,with the appurtenances and every part and parcel thereof,in good repair,working order and good condition,and shall from time to time make,or use its best efforts to cause to be made,all necessary and proper repairs,replacements and renewals so that at all times the operation of the Project may be properly and advantageously conducted. A-31 The Authority shall take all necessary steps to comply with applicable federal and state laws and regulations relating to the use and operation of the Project,including the terms of the Federal Energy Regulatory Commission license applicable to the Project. Rates,Fees and Charges The Authority,acting in conjunction with the Committee or separately under the Power Sales Agreement,shall at all times after the date of Commercial Operation charge and collect,as a wholesale power rate,from each Purchaser pursuant to the Power Sales Agreement that Purchaser's Percentage Share (as defined in the Power Sales Agreement)of Annual Project Costs.The Authority,acting in conjunction with the Committee or separately under the Power Sales Agreement,shall determine Annual Project Costs in such amounts as shall be required to provide Revenues at least sufficient in each Fiscal Year,together with other available funds,for the payment of the sum of: (a)Operating Expenses during such Fiscal Year; (b)The amount,if any,to be paid during such Fiscal Year into the Operating Reserve Account which shall be the amount,if any,necessary to restore the Operating Reserve Account to the Operating Reserve Account Requirement; (c)An amount equal to the Aggregate Debt Service during such Fiscal Year; (d)The amount,if any,to be paid during such Fiscal Year into the Capital Reserve Fund,which shall be the amount,if any,necessary to restore the Capital Reserve Fund to the Capital Reserve Requirement; (e)The amount to be paid during such Fiscal Year into the Renewal and Contingency Reserve Fund which shall be the amount,if any,necessary to restore the Renewal and Contingency Reserve Fund over a period no greater than four years to the Renewal and Contingency Reserve Requirement or such larger amount as may be determined from time to time by the Committee to be included in the calculation of Annual Project Costs;and (f)All other charges or liens whatsoever required to be paid out of Revenues during such Fiscal Year. Power Sales Agreement The Authority shall collect and forthwith deposit in the Revenue Fund all amounts payable to it pursuant to the Power Sales Agreement or payable to it pursuant to any other contracts for the use of the capability of the Project or the sale of the output,capacity or service of the Project or any part thereof. The Authority hereby pledges,assigns and transfers to the Trustee acting on behalf of the Bondholders all of its rights under the Power Sales Agreement or any other contracts for the use of the capability of the Project or the sale of the output,capacity or service of the Project or any part thereof and the Trustee shall enjoy and hold for the benefit of the Bondholders the rights and privileges so assigned,including,without limiting the foregoing,the rights of the Authority to receive payments thereunder.The Authority shall enforce the provisions of the Power Sales Agreement and duly perform its covenants and agreements thereunder.The Authority will not consent or agree to or permit any termination,rescission of or amendment to or otherwise take any action under or in connection with the Power Sales Agreement which A-32 will in any manner materially impair or materially adversely affect the rights or security of the Bondholders. Insurance The Authority shall keep and maintain the Project at all times insured against such risks and in such amounts,with such deductible provisions,or provide for a source of self-insurance,as is customary in connection with the operation of facilities of a type and size comparable to the Project and as may reasonably and economically be obtained or secured.The determination of what is "customary”and what may be "reasonably and economically obtained or secured”shall be made by an independent insurance consultant or by the State Division of Risk Management.If so required,the Authority shall carry and maintain,or cause to be carried and maintained,and pay or cause to be paid timely the premiums for,the following insurance with respect to the Project and the Authority: (a)insurance coverage for buildings,works,plants and facilities comprising the Project for all risks of direct physical loss,at all times in an amount not less than an amount necessary giving regard to co-insurance provisions to pay and retire and redeem all the outstanding Bonds; (b)general public liability insurance in minimum amounts per occurrence,for annual aggregate claims,and with a deductible amount,to the same extent that other entities comparable to the Authority and owning or operating facilities of the size and type comparable to the Project carry such insurance; (c)comprehensive automobile liability insurance; (d)workers'compensation insurance or self-insurance as required by the laws of the State of Alaska; Each insurance policy (i)shall be issued or written by a financially responsible insurer,or by an insurance fund established by the United States or State of Alaska or an agency or instrumentality thereof, (ii)shall be in such form and with such provisions (including loss payable clauses payable to the Trustee, waiver of subrogation clauses,provisions relieving the insurer of liability to the extent of minor claims and the designation of the named assureds)as are generally considered as provisions for the type of insurance involved,and (iii)shall prohibit cancellation or substantial modification by the insurer without at least thirty days'prior written notice to the Trustee and the Authority. The Authority covenants to review each year the insurance carried with respect to the Authority and the Project and,to the extent feasible and economically prudent,it will carry insurance insuring against the risks and hazards specified above to the same extent that other entities comparable to the Authority and owning or operating facilities of the size and type comparable to the Project,and taking into account any special circumstances of the Project,carry such insurance.The Authority shall employ an independent insurance consultant or the State Division of Risk Management for the purpose of reviewing the insurance coverage of,and the insurance required for,the Authority and the Project and making recommendations respecting the types,amounts and provisions of insurance that should be carried with respect to the Authority and the Project and their operation,maintenance and administration. The Authority may establish a fund to provide self-insurance against the risks and hazards relating to the properties of the Project and the interests of the Authority and the Bondholders. A-33 Reconstruction If any useful portion of the Project shall be damaged or destroyed,the Authority shall,as expeditiously as possible,continuously and diligently prosecute or cause to be prosecuted the reconstruction or replacement thereof,unless the Authority declares the Project ended pursuant to the Power Sales Agreement,or unless the Consulting Engineer shall state that such reconstruction and replacement is not consistent with Prudent Utility Practice or is not in the interest of the Purchasers and the Bondholders. Maintenance of Capital Reserve Fund In order better to secure the Bonds and to make them more marketable and to maintain in the Capital Reserve Fund an amount equal to the Capital Reserve Requirement,the Authority shall in compliance with the provisions of the Act,cause the Chairman annually,on or before the second day of January of each year and whenever the Trustee transfers funds from the Capital Reserve Fund to pay Principal Installments or interest on the Bonds,to make and deliver to the Governor of the State and the Chairmen of the House and Senate Finance Committees of the Alaska State Legislature his certificate stating the amount,if any,required to restore the Capital Reserve Fund to the Capital Reserve Requirement and requesting such amount.A copy of such certificate shall be promptly delivered to the Trustee.Any such moneys received by the Authority from the State in accordance with the provisions of the Act pursuant to any such certification shall be paid to the Trustee for deposit and credit to the Capital Reserve Fund. Accounts and Reports The Authority shall keep or cause to be kept proper books of records made of its transactions relating to the Project and each Fund and Account and relating to its costs and charges under the Power Sales Agreement and which,together with the Power Sales Agreement and all other books and papers of the Authority,including insurance policies,relating to the Project,shall at all times be subject to the inspection of the Trustee and the holders of an aggregate of not less than 5%in principal amount of the Bonds then outstanding or their representatives duly authorized in writing. The Authority shall annually,within 120 days after the close of each Fiscal Year,file with the Trustee,a copy of an annual report for such Fiscal Year,accompanied by an Accountant's Certificate. Such Accountant's Certificate shall state whether or not,to the knowledge of the signer,the Authority is in default with respect to any of the covenants,agreements or conditions on its part contained in the Resolution,and if so,the nature of such default. The Authority shall file with the Trustee (a)forthwith upon becoming aware of any Event of Default or default in the performance by the Authority of any covenant,agreement or condition contained in the Resolution,a certificate specifying such Event of Default or default and (b)within 120 days after the end of each Fiscal Year,a certificate stating that there does not exist any default by the Authority or any Event of Default or other event which,with the lapse of time would become an Event of Default,or, if any such default or Event of Default or other event shall so exist,specifying the same and the nature and status thereof. With respect to the Project and each Capital Improvement for which a Construction Engineer is retained,the Authority shall cause such Construction Engineer to (A)prepare and submit to the Authority such drawings,designs,plans,specifications,surveys and reports as are necessary for the proper A-34 acquisition and construction of the Project or Capital Improvement,and approve and supervise any necessary modifications in the designs,plans and specifications thereof;(B)prepare and submit to the Authority quarterly reports of progress during the period of construction of the Project or Capital Improvement;(C)continuously supervise and inspect the acquisition and construction of the Project or Capital Improvement;and (D)upon completion and testing of the Project or Capital Improvement,certify to the Authority that the Project (or,with respect to a Capital Improvement,the Project with such Capital Improvement)is ready for normal continuous operation. Tax Covenants The Authority shall at all times do and perform all acts and things necessary or desirable including, but not limited to,compliance with provisions of a letter of instructions from Bond Counsel,as the same may be revised from time to time,in order to assure that interest paid on the Bonds shall,for the purposes of federal income taxation,be excludable from the gross income of the recipients thereof and exempt from such taxation,except in the event that such recipient is a "substantial user”or "related person”within the meaning of Section 147(a)of the Code. The Authority shall not permit at any time or times any of the proceeds of the Bonds,Revenues or any other funds of the Authority to be used directly or indirectly to acquire any securities or obligations the acquisition of which would cause any Bond to be an "arbitrage bond”as defined in Section 148(a)and (e)of the Code. Payment of Taxes and Charges The Authority will pay and discharge,or cause to be paid and discharged,all taxes,assessments and other governmental charges,or required payments in lieu thereof,lawfully imposed upon the properties of the Authority or upon the rights,Revenues,income,receipts,and other moneys,securities and funds of the Authority when the same shall become due,and all lawful claims for labor and material and supplies,except those taxes,assessments,charges or claims which the Authority shall in good faith contest by proper legal proceedings if the Authority shall in all such cases have set aside on its books reserves deemed adequate with respect thereto. Special Provisions Relating to the Bond Insurer The Bond Insurer shall at all times be deemed the exclusive owner of all Insured Bonds for the purpose of all approvals,consents,waivers,institution of any action,and the direction of all remedies. No Event of Default shall be waived without the Bond Insurer's consent.To the extent the Bond Insurer makes payment of the principal of and interest on Insured Bonds,it shall become the owner of such Insured Bonds or right to payment of such principal and interest and shall be fully subrogated to all of the registered owner's rights thereunder. Events of Default The following shall constitute Events of Default: (i)if default shall be made in the due and [*]punctual payment of the principal of or Redemption Price,if any,when and as the same shall become due on or with respect to any Bond, whether at maturity or upon call for redemption or otherwise; A-35 (ii)if default shall be made in the due and punctual payment of any installment of interest on any Bond or the unsatisfied balance of any Sinking Fund Installment therefor,when and as such interest installment or Sinking Fund Installment shall become due and payable; (iii)if default shall be made by the Authority in the performance or observance of any other of the covenants,agreements or conditions on its part in the Resolution or in the Bonds contained,and such default shall continue for a period of 60 days after written notice thereof to the Authority by the Trustee or to the Authority and to the Trustee by the holders of not less than 25%in principal amount of the Bonds outstanding; (iv)if there shall occur the dissolution or liquidation of the Authority or the filing by the Authority of a voluntary petition in bankruptcy,or the commission by the Authority of any act of bankruptcy,or adjudication of the Authority as a bankrupt,or assignment by the Authority for the benefit of its creditors,or the entry by the Authority into an agreement of composition with its creditors,or the approval by a court of competent jurisdiction of a petition applicable to the Authority in any proceeding for its reorganization instituted under the provisions of the federal bankruptcy act,as amended,or under any similar act in any jurisdiction which may now be in effect or hereafter enacted; (vy)if an order or decree shall be entered,with the consent or acquiescence of the Authority appointing a receiver or receivers of the Project,or any part thereof,or of the rents, fees,charges,or other Revenues therefrom,or if such order or decree,having been entered without the consent or acquiescence of the Authority,shall not be vacated or discharged or stayed within 90 days after the entry thereof;and (vi)if judgment for the payment of money shal!be rendered against the Authority as the result of the construction,improvement ownership,control or operation of the Project,and any such judgment shall not be discharged within 90 days after the entry thereof,or an appeal shall not be taken therefrom or from the order,decree or process upon which or pursuant to which such judgment shall have been granted or entered,in such manner as to set aside or stay the execution of or levy under such judgment,or order,decree or process or the enforcement thereof. Application of Revenues and Other Moneys After Default If an Event of Default shall happen and shall not have been remedied,the Authority upon the demand of the Trustee,shall pay over or cause to be paid over to the Trustee (i)forthwith,all moneys, securities and funds then held by the Authority in any Fund or Account under the Resolution,and (ii)all Revenues as promptly as practicable after receipt thereof. During the continuance of an Event of Default,the Trustee shall apply all moneys,securities, funds and Revenues received by the Trustee as follows and in the following order: (i)Expenses of Fiduciaries -to the payment of the reasonable and proper fees, charges,expenses,including attorney's fees and expenses,and liabilities of the Fiduciaries; (ii)Operating Expenses -to the payment of the amounts required for reasonable and necessary Operating Expenses;and (iii)Principal or Redemption Price and Interest. A-36 First:Interest -To the payment of all installments of interest then due in the order of the maturity of such installments,together with accrued and unpaid interest on the Bonds theretofore called for redemption;and Second:Principal or Redemption Price -To the payment of the unpaid principal or Redemption Price of any Bonds which shall have become due,whether at maturity or by call for redemption,in the order of their due dates. Proceedings Brought by Trustee If an Event of Default shall happen and shall not have been remedied,then and in every such case, the Trustee may proceed,and upon written request of the holders of not less than 25%in principal amount of the Bonds outstanding shall proceed,to protect and enforce its rights and the rights of the holders of the Bonds under the Resolution forthwith by a suit in equity or at law,whether for the specific performance of any covenant,or in aid of the execution of any power granted under the Resolution or any remedy granted under the Act or for an accounting against the Authority as if the Authority were the trustee of an express trust,or in the enforcement of any other legal or equitable right as the Trustee,being advised by counsel,shall deem most effectual to enforce any of its rights or to perform any of its duties under the Resolution. The holders of not less than a majority in principal amount of the Bonds at the time outstanding may direct the time,method and place of conducting any proceeding for any remedy available to the Trustee,or exercising any trust or power conferred upon the Trustee,provided that the Trustee shall have the right to decline to follow any such direction if the Trustee shall be advised by counsel that the action or proceeding so directed may not lawfully be taken,or if the Trustee in good faith shall determine that the action or proceeding so directed would involve the Trustee in personal liability or be unjustly prejudicial to the Bondholders not parties to such direction. The Trustee shall not take any action which will unreasonably interfere with the performance of the Power Sales Agreement.The Trustee shall have the right to apply in an appropriate proceeding for the appointment of a receiver of the Project. Restriction on Bondholder's Action No Bondholder shall have any right to institute any suit,action or proceeding for the enforcement of any provision or for any remedy under the Resolution,unless such holder shall have previously given to the Trustee written notice of the happening of an Event of Default,and the holders of at least 25%in principal amount of the Bonds then outstanding shall have filed a written request with the Trustee,and shall have offered it reasonable opportunity either to exercise the powers granted in the Resolution or by the Act or by the laws of the State of or to institute such action,suit or proceeding,and unless such holders shall have offered to the Trustee adequate security and indemnity against the costs,expenses and liabilities to be incurred,and the Trustee shall have refused to comply with such request for a period of 60 days after receipt of such notice,request and offer of indemnity.No Bondholder shall have any right to affect,disturb or prejudice the pledge created by the Resolution,or to enforce any right under the Resolution,except in the manner provided in the Resolution;and all proceedings to enforce any provision of the Resolution shall be for the equal benefit of all Bondholders. A-37 Notice of Default The Trustee shall promptly mail written notice of the occurrence of any Event of Default of which it has actual knowledge to each registered owner of Bonds then outstanding at his address,if any, appearing upon the registry books of the Authority,and to each Purchaser. Responsibilities of Trustee The Trustee,prior to the occurrence of any Event of Default and after the curing of all Events of Default which may have occurred,undertakes to perform such duties and only such duties as are specifically set forth in the Resolution.In case an Event of Default has occurred (which has not been cured)the Trustee shall exercise such of the rights and powers vested in it by the Resolution,and use the same degree of care and skill in their exercise,as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. Supplemental Resolutions A supplemental resolution may be adopted at any time and shall be fully effective with the consent of the Committee,but without the consent of the Trustee or Bondholders for the following purposes:to limit the issuance of Bonds or other indebtedness;to add limitations and restrictions to be observed by the Authority;or to authorize a Series of Bonds;to confirm,as further assurance,the pledge of the Resolution;and to modify any of the provisions of the Resolution,but only if such modification shall be effective only after all Bonds outstanding at the date of the adoption of such supplemental resolution shall cease to be outstanding. A supplemental resolution may be adopted at any time and shall be fully effective upon the consent of the Trustee and the Committee for the following purposes;to cure any ambiguity,supply any omission, or cure or correct any defect or inconsistent provision in the Resolution;to add provisions clarifying matters or to make changes which do not materially and adversely affect the rights of the Bondholders. The Trustee,in determining whether any amendments or supplements to the Resolution may be made without the consent of Bondowners and in determining whether any action should be taken,shall consider the effect of such amendment,supplement or action on,the rights of Bondowners as if the Municipal Bond Insurance Policy were not in effect. Any modification or amendment of the Resolution and of the rights and obligations of the Authority and of the holders of the Bonds may be made with the consent of the Committee and,if required by the terms of a written commitment for Bond insurance,the consent of the Bond insurer,and with the written consent given as provided in the Resolution of the holders of at least a majority in principal amount of the Bonds outstanding at the time such consent is given,and (ii)in case less than all of the several Series of Bonds then outstanding are affected by the modification or amendment,of the holders of at least a majority in principal amount of the Bonds of each Series so affected and outstanding at the time such consent is given,and (iii)in case the modification or amendment changes the terms of any Sinking Fund Instaliment,of the holders of at least a majority in principal amount of the Bonds of the particular Series and maturity entitled to such Sinking Fund Installment and outstanding at the time such consent is given; provided,however,that if such modification or amendment will not take effect so long as any Bonds of any specified like Series and maturity remain outstanding the consent of the holders of such Bonds shall not be required.No such modification or amendment shall permit a change in the terms of redemption or maturity of the principal of any outstanding Bond or any installment of interest thereon or a reduction in the principal amount or the Redemption Price thereof or in the rate of interest thereon without the A-38 consent of the holder of such Bond,or shall reduce the percentages or otherwise affect the classes of Bonds the consent of the holders of which is required to effect any such modification or amendment,or shall change or modify any of the rights or obligations of any Fiduciary without its written assent thereto. Defeasance If there shall be paid to the holders of all Bonds the principal or Redemption Price,if applicable, and interest due or to become due thereon,at the time and in the manner stipulated in the Bonds in the Resolution,then the pledge and assignment of any Revenues,and other moneys and securities pledged under the Resolution and all covenants,agreements and other obligations of the Authority to the Bondholders,shall thereupon cease,terminate and become void and be discharged and satisfied.If there shall be paid to the holders of all outstanding Bonds of a particular Series,or of a particular maturity within a Series,the principal or Redemption Price,if applicable,and interest due or to become due thereon,at the times and in the manner stipulated in such Bonds and in the Resolution,such Bonds shall cease to be entitled to any lien,benefit or security under the Resolution,and all covenants,agreements and obligations of the Authority to the holders of such Bonds shall thereupon cease,terminate and become void and be discharged and satisfied. Bonds or interest installments for the payment or redemption of which moneys shall have been set aside and shall be held in trust by the Paying Agents at the maturity or redemption date thereof shall be deemed to have been paid if (a)in case any of said Bonds are to be redeemed on any date prior to their maturity,the Authority shall have given to the Trustee irrevocable instructions to mail notice of redemption of such Bonds on said date,(b)there shall have been deposited with the Trustee either moneys in an amount which shall be sufficient,or Federal Obligations (not subject to redemption other than at the option of the holder)the principal of and the interest on which when due will provide moneys which, together with the moneys,if any,deposited with the Trustee at the same time,shall be sufficient to pay when due the principal or Redemption Price,if applicable,and interest due and to become due on said Bonds on or prior to the redemption date or maturity date thereof,as the case may be,and (c)the Authority shall have given the Trustee irrevocable instructions to mail a notice to the holders of such Bonds that the deposit required by (b)above has been made and that said Bonds are deemed to have been paid and stating such maturity or redemption date upon which moneys are to be available for the payment of said Bonds.The form and substance of any escrow deposit agreement used in connection with the defeasance of Bonds must be acceptable to the Bond Insurer. A-39 APPENDIX B Form of Opinion of Bond Counsel APPENDIX C Form of Continuing Disclosure Agreement CONTINUING DISCLOSURE AGREEMENT This Continuing Disclosure Agreement (the "Disclosure Agreement”)is executed and delivered by the ALASKA ENERGY AUTHORITY (the”Authority”)and U.S.BANK TRUST NATIONAL ASSOCIATION (the "Dissemination Agent”)in connection with the issuance by the Authority of its Power Revenue Refunding Bonds,Fifth Series (Bradley Lake Hydroelectric Project)(the "Bonds”).The Bonds are being issued pursuant to the Power Revenue Bond Resolution adopted by the Authority on September 7,1989,and a Fourth Supplemental Resolution adopted by the Authority on December 16, 1998 (together,the "Bond Resolution”).U.S.Bank Trust National Association has been appointed to serve as trustee for the Bonds (the "Trustee”)under the Bond Resolution.Pursuant to Section 302(B)of the Fourth Supplemental Resolution,the Authority,the Trustee and the Dissemination Agent covenant and agree as follows: Section 1.Purpose of the Disclosure Agreement.This Disclosure Agreement is being executed and delivered by the Authority,the Trustee and the Dissemination Agent for the benefit of the holders of the Bonds and in order to assist each Participating Underwriter in complying with the Rule (defined below). Section 2.Definitions.In addition to the definitions set forth in the Bond Resolution,which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: "Agreement to Support Refunding”shall mean the Agreement to Support Refunding among the Authority,the Power Purchasers and the City of Seward d/b/a Seward Electric System.' "Annual Report”shall mean any Annual Report provided by the Authority or a Power Purchaser as described in,Sections 3 and 4 of this Disclosure Agreement. "Audited Financial Statements”shall mean,with respect to the Authority and any Power Purchaser,the audited financial statements for the most recent fiscal year of that entity,prepared (except as otherwise noted therein)in accordance with generally accepted accounting principles (or such other accounting principles as may be applicable to such entity in the future pursuant to applicable law or accounting standards board). "Authority”shall mean the Alaska Energy Authority. "Beneficial Owner”shall mean any person holding a beneficial ownership interest in the Bonds through nominees or depositories (including any person holding such interest through the book-entry-only system of The Depository Trust Company),together with any other person who is intended under the Rule to be a beneficiary of this Disclosure Agreement. "Bond Trustee”shall mean U.S.Bank Trust National Association,as trustee for the Bonds. "Chugach”shall mean the Chugach Electric Association,Inc.,a rural electric cooperative. C-1 "Disclosure Representative”shall mean (a)With respect to the Authority,the Executive Director of the Authority,or his or her designee,or such other person as the Authority designates in writing to the Bond Trustee and the Dissemination Agent from time to time;and (b)With respect to the Power Purchasers,the Chairman of the Project Management Committee,or his or her designee,or such other person as the Project Management Committee designates in writing to the Bond Trustee,the Authority and the Dissemination Agent from time to time. "Dissemination Agent”shall mean First Trust National Association,acting in its capacity as Dissemination Agent hereunder,or any successor Dissemination Agent designated in writing by the Authority and which has filed with the Bond Trustee a written acceptance of such designation. "Final Official Statement”shall mean the final official statement prepared and delivered with respect to the Bonds,as such official statement may be amended or supplemented. "Fiscal Year”shall mean the fiscal year of the Authority and of each Power Purchaser,as such fiscal year may change from time to time. "Golden Valley”shall mean the Golden Valley Electric Association,Inc.,a rural electric cooperative. "HEA”shall mean the Homer Electric Association,Inc.,a rural electric cooperative. "Listed Events”shall mean any of the events listed in Section 5(a)of this Disclosure Agreement. "MEA”shall mean the Matanuska Electric Association,Inc.,a rural electric cooperative. "ML&P”shall mean the Municipality of Anchorage d/b/a Municipal Light and Power. "MSRB”shall mean the Municipal Securities Rulemaking Board. "National Repository”shall mean any Nationally Recognized Municipal Securities Information Repository designated by the SEC in accordance with and for the purposes of the Rule.A list of the National Repositories designated as of the date of this Agreement is attached hereto as Exhibit B. "Participating Underwriter”shall mean Prudential Securities Incorporated;Goldman,Sachs &Co. and any other firm so designated pursuant to the Rule. "Power Purchaser”shall mean each Purchaser or Additional Party under the Power Sales Agreement that has purchased 10%or more of the capacity (and associated energy)of the Project or is otherwise deemed to be an "obligated person”for purposes of the Rule (collectively,the "Power Purchasers”).The initial Power Purchasers are ML&P,Chugach,HEA,Golden Valley and MEA. "Power Sales Agreement”shall mean the Bradley Lake Hydroelectric Project Agreement for the Sale and Purchase of Electric Power dated as of December 8,1987,by and among the Authority as Seller; Chugach,Golden Valley,ML&P,the City of Seward d/b/a Seward Electric System,and the Alaska C-2 Electric Generation &Transmission Cooperative,Inc.,as Purchasers;and HEA and MEA,as Additional Parties. "Project”shall have the meaning assigned to such term in the Bond Resolution. "Project Management Committee”shall mean the Project Management Committee established under the Power Sales Agreement. "Repository”shall mean each National Repository and the State Repository,if any. "Rule”shall mean Rule 15c2-12(b)(S)adopted by the SEC under the Securities Exchange Act of 1934,as the same may be amended from time to time. "SEC”shall mean the United States Securities and Exchange Commission. "State Repository”shall mean the public or private repository or entity designated by the State of Alaska and recognized by the SEC as a state repository for the purpose of the Rule.As of the date of this Disclosure Agreement,there is no State Repository. "Tax-exempt”shall mean that interest on the Bonds is excluded from gross income for federal income tax purposes,whether or not such interest is includable as an item of tax preference or otherwise includable directly or indirectly for purposes of calculating any other tax liability,including any alternative minimum tax. Section 3.Provision of Annual Reports. (a)The Authority shall,or,by written direction,shall cause the Dissemination Agent to,not later than March 31 of each year (the "Authority Submission Date”),commencing on March 31,2000, provide to each Repository the Authority's Audited Financial Statements and Annual Report consistent with the requirements of subsection 4(a)of this Disclosure Agreement.Not later than 15 days before the Authority Submission Date,the Authority shall provide its Annual Report to the Dissemination Agent, together with a certificate of the Authority stating that the Annual Report constitutes the Annual Report required to be furnished by the Authority hereunder.The Dissemination Agent may conclusively rely upon such certificate of the Authority. (b)Pursuant to the Agreement to Support Refunding,the Disclosure Representative of the Power Purchasers will provide to the Dissemination Agent not later than 15 days before September 30 of each year (the "Power Purchasers'Submission Date”),commencing September 30,1999,each Power Purchaser's Annual Report consistent with the requirements of subsections 4(b)of this Disclosure Agreement. ) (c)If not provided as part of the Annual Reports provided under subsections (a)and (b),the Disclosure Representative of the Authority or the Power Purchasers,as applicable,shall,or,by written direction,shall cause the Dissemination Agent to,provide to each Repository the Audited Financial Statements of the Authority and of each Power Purchaser when available. (d)If by 15 days prior to the Authority Submission Date or the Power Purchasers'Submission Date,the Dissemination Agent has not received a copy of the Annual Report of the Authority or any Power Purchaser,as applicable,the Dissemination Agent shall contact the Disclosure Representatives of C-3 the Authority and the Power Purchasers,and the Bond Trustee (if the Bond Trustee is not the Dissemination Agent)to determine if the Authority and the Power Purchasers are in compliance with subsections (a)and (b). (e)If the Dissemination Agent is unable to verify that an Annual Report has been provided to each Repository by the applicable Submission Date,the Dissemination Agent shall send a notice to each Repository or the MSRB in substantially the form attached as Exhibit A. (f)The Dissemination Agent shall: (i)determine each year prior to the Submission Date the name and address of each Repository;and (ii)to the extent the Authority and the Power Purchasers have previously provided or caused to be provided the Annual Reports to the Dissemination Agent pursuant to subsections (a) and (b),file a report with the Disclosure Representative of the Authority and the Power Purchasers certifying that the Annual Reports have been provided pursuant to this Disclosure Agreement, stating the date each Annual Report was provided,and listing all the Repositories to which it was provided. Section 4.Content of Annual Reports. (a)Annual Report of Authority.The Annual Report of the Authority shall contain or incorporate by reference the following: (i)Audited Financial Statements of the Authority or,if the Audited Financial Statements of the Authority are not available on the Authority Submission Date,the unaudited financial statements for the most recent Fiscal Year in a format similar to the Audited Financial Statements most recently prepared for the Authority;and (ii)Information regarding the annual operating and maintenance costs of the Project of the type included in the Final Official Statement. (b)Annual Reports of Power Purchasers.The Annual Report of each Power Purchaser shall contain or incorporate by reference the following: (i)Audited Financial Statements of the Power Purchaser or,if the Audited Financial Statements of a Power Purchaser are not available on the Power Purchasers'Submission Date,the unaudited financial statements for the most recent Fiscal Year in a format similar to the Audited Financial Statements most recently prepared for that Power Purchaser;and (ii)Financial information and operating data regarding the Project and the Power Purchaser of the type containedin the Final Official Statement under the caption "THE POWER PURCHASERS”in the following tables: (A)Selected Statistics for Calendar Year 1997; (B)Power Purchasers'Power Requirements; C-4 (C)Energy Loads and Resources;and (D)Historical Operating Results. Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues with respect to which the Authority or a Power Purchaser is an "obligated person”(as defined by the Rule),which have been filed with each Repository.If the document incorporated by reference is a "final official statement”(as defined by the Rule),it must be available from the Municipal Securities Rulemaking Board (the "MSRB”).Each such other document so incorporated by reference will be clearly identified. Section 5.Reporting of Significant Events. (a)This Section 5 shall govern the giving of notices of the occurrence of any of the following events (the "Listed Events”)with respect to the Bonds: 1.Principal and interest payment delinquencies; 2.Non-payment related defaults; 3.Unscheduled draws on debt service reserves reflecting financial difficulties; 4,Unscheduled draws on credit enhancements reflecting financial difficulties; 5.Substitution of credit or liquidity providers,or their failure to perform; 6.Adverse tax opinions or events affecting the Tax-Exempt status of the Bonds; 7.Modifications to rights of holders of the Bonds; 8.Bond calls (other than scheduled mandatory redemptions of term bonds); 9.Defeasances; 10.Release,substitution,or sale of property securing repayment of the Bonds;and 11.Rating changes. (b)The Bond Trustee shall,promptly after obtaining actual knowledge of the occurrence of any of the Listed Events (except events listed in clauses (a)(5),(8)or (9),contact the Authority's Disclosure Representative,inform such person of the event,and request that the Authority promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to subsection (f).The Bond Trustee shall,promptly after obtaining actual knowledge of the occurrence of any of the Listed Events described in clauses (a)(5),(8)or (9),inform the Dissemination Agent and the Authority's Disclosure Representative of the event,and request that the Dissemination Agent report the event pursuant to subsection (f).For purposes of this Disclosure Agreement with respect to the Bond Trustee,"actual knowledge”of the occurrence of such Listed Events shall mean actual knowledge by the officer or officers at the corporate trust office of the Bond Trustee with regular responsibility for the administration of the Bond Resolution. C-5 (c)Whenever the Authority obtains knowledge of the occurrence of a Listed Event,because of a notice from the Bond Trustee or otherwise,the Authority shall as soon as possible determine if such event would constitute material information,within the meaning of such term under federal securities laws, for holders of the Bonds. (d)If the Authority has determined that knowledge of the occurrence of a Listed Event would be material,the Authority shall promptly notify the Dissemination Agent in writing.Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (g). (e)If in response to a request under subsection (b),the Authority determines that the Listed Event would not be material,the Authority shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence pursuant to subsection (g). (f)If the Dissemination Agent has been instructed by the Authority to report the occurrence of a Listed Event,the Dissemination Agent shall file a notice of such occurrence with each Repository or the MSRB with a copy to the Authority.Notwithstanding the foregoing: (i)notice of the occurrence of a Listed Event described in subsections (a)(5),(8).(9) or (11)shall be given by the Dissemination Agent upon notice from the Bond Trustee of such event(s)unless the Authority gives the Dissemination Agent affirmative instructions not to disclose such occurrence;and (ii)notice of Listed Events described in subsections (a)(8)and (9)shall not be given under this subsection any earlier than the notice (if any)of the underlying event is given to the holders of affected Bonds pursuant to the Bond Resolution. (g)Each notice of the occurrence of a Listed Event shall be delivered with a cover sheet in the form attached hereto as Exhibit A. Section 6.Termination of Reporting Obligation.This Disclosure Agreement shall terminate upon the legal defeasance,prior redemption or payment in full of all of the Bonds. Section 7.Dissemination Agent. (a)Appointment and Resignation.The Authority may,from time to time,appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement,and may discharge any such Dissemination Agent,with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign at any time upon at least 30 days'prior written notice to the Authority and the Bond Trustee.If at any time there is not any designated Dissemination Agent under this Disclosure Agreement,the Bond Trustee shall be the Dissemination Agent.The Authority shall notify the Disclosure Representative of the Power Purchasers of any change in the identity of the Dissemination Agent. (b)Duties,Immunities and Fees.The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement and no implied duties or obligations shall be read into this Disclosure Agreement against the Dissemination Agent.The Dissemination Agent shall not be required to take any action whatsoever to cause the Authority or any Power Purchaser to comply with its obligations under this Disclosure Agreement other than those specifically set forth in this Disclosure Agreement.The Dissemination Agent has no power or authority to enforce the performance by the C-6 Authority,the Project Management Committee or any Power Purchaser of their respective duties and obligations under this Disclosure Agreement.The Authority agrees to indemnify and save the Dissemination Agent,its officers,directors,employees and agents harmless against any losses,costs, expenses,claims and liabilities of any kind whatsoever,including without limitation,fees and expenses of its attorneys and extraordinary fees of the Dissemination Agent which the Dissemination Agent may incur related to or arising from the acceptance and execution of this Disclosure Agreement by the Dissemination Agent or in the exercise of and performance of its duties and responsibilities hereunder, including the costs and expenses of defending against any claim of liability hereunder.The Dissemination Agent shall be paid compensation by the Authority in accordance with the fee schedule,provided to the Authority,as such fee schedule may be amended from time to time,and all of its expenses,including but not limited to legal fees and expenses,and the extraordinary fees'of the Dissemination Agent.The Dissemination Agent shall have no duty or obligation to review and information provided to it hereunder and shall not be deemed to be acting in a fiduciary capacity.The obligations of the Authority under this Section 7(b)shall survive resignation of the Dissemination Agent or the termination of this Disclosure Agreement.The Dissemination Agent shall have no duty to prepare any Annual Report,notice of the occurrence of a Listed Event or other information,not provided to it by or on behalf of the Authority or any Power Purchaser in a form suitable for filing.Notwithstanding the foregoing,the Authority's duty to indemnify and defend the Dissemination Agent and to pay,costs,fees and expenses in accordance with this section shall be limited to amounts actually received from the Power Purchasers specifically for such purpose. (c)Not a Party to Any Other Agreement.The Dissemination Agent shall not be a party to and shall not be bound by any agreements related hereto unless the Dissemination Agent has actually entered into such agreements ("other documents”).The Dissemination Agent's duties and obligations under this Disclosure Agreement shall be wholly separate and distinct from any duties and obligations arising from such other documents,if any,and any knowledge,duties or obligations arising under such other documents shall in no way create any implied or actual knowledge,duty or obligation of the Dissemination Agent under this Disclosure Agreement. (d)Not Responsible for Information.The Dissemination Agent assumes no responsibility for the determination of items to be disseminated pursuant to the Rule,nor shall the Dissemination Agent be responsible for the contents of the information so disseminated. Section 8.Amendment;Waiver.Notwithstanding any other provision of this Disclosure Agreement,the Authority,the Power Purchasers,the Bond Trustee and the Dissemination Agent may amend this Disclosure Agreement (and the Bond Trustee and the Dissemination Agent shall agree to any amendment so requested by the Authority,except that neither the Bond Trustee nor the Dissemination Agent shall be obligated to agree to any amendment that modifies or increases its duties or obligations hereunder)and any provision of this Disclosure Agreement may be waived,if (i)the amendment or waiver is necessary to reflect a change in circumstances that arises from a change in legal requirements,a change in law,a change in the identity,nature or status of an obligated person,or a change in the type of activities or business conducted by the Authority or other obligated person;(ii)the undertaking,as amended,would have complied with the requirements of the Rule at the time of the primary offering of the Bonds,after taking into account any amendments or interpretation of the Rule by the SEC any such change in circumstances;and (iii)it is determined by a party unaffiliated with the Authority or any other obligated person and acceptable to the Authority,such as nationally bond counsel or other counsel expert in federal securities laws,or pursuant to a favorable "no-action”letter issued by the SEC,that the amendment or waiver does not materially impair the interests of Beneficial Owners. C-7 Section 9.Additional Information.Nothing in this Disclosure Agreement shall be deemed to prevent the Authority,the Project Management Committee or the Power Purchasers from disseminating any other information,using the means of dissemination set forth in this Disclosure Agreement or any other means of communication,or including any other information in any Annual Report or notice of occurrence of a Listed Event,in addition to that which is required by this Disclosure Agreement.If the Authority or any Power Purchaser chooses to include any information in any Annual Report or notice of occurrence of a Listed Event,in addition to that which is specifically required by this Disclosure Agreement,neither the Authority nor any Power Purchaser shall have any obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 10.Default.In the event of a failure of the Authority or the Dissemination Agent to comply with any provision of this Disclosure Agreement,the Bond Trustee shall,at the request of any Participating Underwriter or the Beneficial Owners of at least 25%aggregate principal amount of Outstanding Bonds and upon receipt of indemnification from any cost,expense or liability,including without limitation fees and costs of its attorneys,satisfactory to the Bond Trustee,or any Beneficial Owner may,take such actions as may be necessary and appropriate,including seeking specific performance by court order,to cause the Authority or the Dissemination Agent,as the case may be,to comply with its obligations under this Disclosure Agreement.A default under this Disclosure Agreement shall not be deemed an Event of Default under the Bond Resolution,and the sole remedy under this Disclosure Agreement in the event of any failure of the Authority or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance. Section 11.Beneficiaries.This Disclosure Agreement shall inure solely to the benefit of the Authority,the Dissemination Agent,the Bond Trustee,each Participating Underwriter,and the Beneficial Owners from time to time of the Bonds,and shall create no rights in any other person or entity. Section 12.Counterparts.This Disclosure Agreement may be executed in several counterparts,each of which shall be an original and all of which shall constitute but one and the same instrument. ALASKA ENERGY AUTHORITY By: Executive Director U.S.BANK TRUST NATIONAL ASSOCIATION, as Dissemination Agent and Bond Trustee By: Authorized Officer Approved: BRADLEY LAKE HYDROELECTRIC PROJECT PROJECT MANAGEMENT COMMITTEE By Its Authorized Representative Dated:,1999. Cc-9 EXHIBIT A MATERIAL EVENT NOTICE COVER SHEET Issuer's and/or Other Obligated Person's Name: Issuer's Six Digit CUSIP Number(s): or Nine-Digit CUSIP Number(s)to which this material event notice relates: Number of pages of attached material event notice: Description of Material Events Notice (Check One): Principal and interest payment delinquencies Non-Payment related defaults Unscheduled draws on debt service reserves reflecting financial difficulties Unscheduled draws on credit enhancements reflecting financial difficulties Substitution of credit or liquidity providers,or their failure to perform Adverse tax opinions or events affecting the tax-exempt status of the security Modifications to rights of securities holders Bond calls Defeasances 10.Release,substitution,or sale of property securing repayment of the securities 11.Rating changes 12.Failure to provide annual financial information as required 13.Other material event notice (specify)eonanaurwWn>I hereby represent that I am authorized by the issuer or its agent to distribute this information publicly: Signature: Name:Title: Employer: Address: City,State,Zip Code: Voice Telephone Number (») Please print the material event notice attached to this cover sheet in 10-point type or larger.The cover sheet and notice may be taxed to the MSRB at (703)6&3-1930.Contact the MSRB at (202) 223-9503 with questions regarding this form or the dissemination of this notice. C-10 EXHIBIT B NATIONAL REPOSITORIES Thomson/NRMSIR Attn:Municipal Disclosure 395 Hudson Street,3rd Floor New York,New York 10014 Phone:(212)807-5001 or (800)689-8466 Fax:(212)989-2078 Internet:Disclosure @ Muller.com Kenny Information Systems,Inc. Attn:Kenny Repository Service 65 Broadway,16th Floor New York,New York 10006 Phone:(212)7704595 Fax:(212)797-7994 Bloomberg Municipal Repositories P.O.Box 840 Princeton,New Jersey 08542-9840 Phone:(609)297-3200 Fax:(609)279-5962 DPC Data Inc. One Executive Drive Fort Lee,New Jersey 07024 Phone:(201)346-0701 Fax:(201)947-0107 E-Mail:nnnsir@dpcdata.com C-11 APPENDIX D Financial Statements of the Authority APPENDIX E Specimen Municipal Bond Insurance Policy $- %Alaska Energy Authority Power Revenue Refunding Bonds,Fifth Series (Bradley Lake Hydroelectric Project) Due July 1,2021 FORWARD DELIVERY BOND PURCHASE AGREEMENT January __,1999 Alaska Energy Authority - 480 West Tudor Road Anchorage,Alaska 99503 Dear Sirs: The undersigned Prudential Securities Incorporated and Goldman,Sachs &Co.and the other underwriters,if any,listed in Schedule I attached hereto (collectively,the "Underwriters”)for whom Prudential Securities Incorporated is acting as the representative (the "Representative”)offer to enter into this Forward Delivery Bond Purchase Agreement (the "Forward Delivery Agreement”)with the Alaska Energy Authority (the "Authority”)which,upon the Authority's acceptance of this offer,will be binding upon the Authority and the Underwriters. Upon the Authority's acceptance of this offer,the Power Purchasers (defined below),though not parties to this Forward Delivery Agreement,shall,pursuant to the Power Sales Agreement and the Project Management Committee Approval (as such terms are defined below),be bound by the payment obligations incurred hereunder by the Authority and shall be obligated to perform other obligations arising hereunder pursuant to the Agreement to Support Forward Refunding (defined below).This offer is made subject to the Authority's written acceptance hereof on or before 5:00 p.m.,Alaska time,on January __,1999. 1.Background and Definitions.(a)The Authority presently has outstanding its Power Revenue Bonds,First Series (Bradley Lake Hydroelectric Project)maturing on July 1, 2021in the outstanding principal amount of $29,010,000,which are subject to redemption on July1,1999,at a redemption price of par.. (b)In addition to the terms defined elsewhere in this Forward Delivery Agreement,the following terms as used in this Forward Delivery Agreement shall have the indicated meanings: "Agreement to Support Forward Refunding”shall mean that certain Agreement to Support Forward Refunding dated ,1998,by and among the Authority,the Power Purchasers and the City of Seward d/b/a Seward Electric System. "Bond Counsel”shall mean the law firm of Wohlforth,Argetsinger,Johnson & Brecht,or any nationally recognized bond counsel appointed by the Authority. "Bond Insurance Commitment”shall mean the "Commitment for Municipal Bond Insurance”issued to the Authority by the Bond Insurer pursuant to which the Bond Insurer has agreed,upon the terms and conditions set forth in such Commitment,to issue the Bond Insurance Policy on the date of the Settlement. "Bond Insurance Policy”shall mean a municipal bond insurance policy insuring the principal of and interest on the Fifth Series Bonds when due,in substantially the form to be attached as Appendix to the Official Statement. "Bond Insurer”shall mean "Bond Resolution”shall mean the General Resolution,together with the Fourth Supplemental Resolution (Resolution No.)of the Authority adopted on December 16, 1998,authorizing the issuance of the Fifth Series Bonds,the refunding of the Prior Bonds and related matters. "Change in Law”shall mean (i)any change in or addition to applicable federal or state law,whether statutory or as interpreted by the courts,including any changes in or new rules, regulations or other pronouncements or interpretations by federal or state agencies,(ii)any legislation enacted by the Congress of the United States or introduced therein or recommended for passage by the President of the United States (if such enacted,introduced or recommended legislation has a proposed effective date which is on or before the date of the Settlement),(iii)any law,rule or regulation proposed or enacted by any governmental body,department or agency (if such proposed or enacted law,rule or regulation has a proposed effective date which is on or before the date of the Settlement)or (iv)any judgment,ruling or order issued by any court or administrative body,which in any such case,would,as to any Underwriter,prohibit (or have the retroactive effect of prohibiting,if enacted,adopted,passed or finalized)such Underwriter from purchasing the Fifth Series Bonds as provided herein or selling the Fifth Series Bonds or beneficial ownership interests therein to the public or,as to the Authority,would make the issuance,sale or delivery of the Fifth Series Bonds illegal (or have the retroactive effect of making such issuance,sale or delivery illegal,if enacted,adopted,passed or finalized)or,as to one or more Power Purchasers,would make the fulfillment of their obligations under the Power Sales Agreement illegal (or have the retroactive effect of making such fulfillment illegal,if enacted, adopted,passed or finalized)to such an extent that the Authority would be precluded from obtaining,pursuant to all applicable provisions of the Power Sales Agreement,Revenues sufficient to pay Annual Project Costs;provided,however,that such change in or addition to law, legislation,rule or regulation or judgment,ruling or order shall have become effective,been enacted,introduced or recommended,been proposed or been issued,as the case may be, subsequent to the date of this Forward Delivery Agreement. "Closing”shall mean all of the actions described in Section 8 of this Forward Delivery Agreement. "Continuing Disclosure Undertaking”means the undertaking of the Authority, attached as Appendix to the Official Statement,to furnish certain annual financial information and notice of the occurrence of certain events,if material. "Depository”or "DTC”means The Depository Trust Company,New York,New York,or any successor thereto,which maintains a book-entry-only system for the Fifth Series Bonds. "Escrow Agreement”shall mean that certain Escrow Agreement to be dated as of the date of the Closing between the Trustee and the Authority relating to the application of the proceeds of the Fifth Series Bonds to refund the Prior Bonds. "Exchange Act”shall mean the Securities Exchange Act of 1934,as the same shall from time to time be supplemented or amended. "Fifth Series Bonds”shall mean the Authority's Power Revenue Refunding Bonds, Fifth Series (Bradley Lake Hydroelectric Project),authorized by the Bond Resolution to be issued to refund the Prior Bonds. "General Resolution ”shall mean the Power Revenue Bond Resolution of the Authority adopted on September 7,1989. "Power Purchaser”shall mean each Purchaser and Additional Party under (and as defined by)the Power Sales Agreement;provided,however,that for the purposes of SEC Rule 15c2-12 and the Continuing Disclosure Undertaking the term Power Purchaser shall not include any such Purchaser or Additional Party whose Percentage Share under (and as defined by)the Power Sales Agreement is less 10%. "Power Sales Agreement”shall mean the Bradley Lake Hydroelectric Project Agreement for the Sale and Purchase of Electric Power dated as of December 8,1987,by and among the Authority as Seller;the Chugach Electric Association,Inc.,the Golden Valley Electric Association,Inc.,the Municipality of Anchorage d/b/a Municipal Light and Power,the City of Seward d/b/a Seward Electric System,and the Alaska Electric Generation &Transmission Cooperative,Inc.,as Purchasers;and the Homer Electric Association,Inc.,and the Matanuska Electric Association,Inc.,as Additional Parties. "Prior Bonds”means $of the $29,010,000 outstanding principal amount of Power Revenue Bonds,First Series (Bradley Lake Hydroelectric Project)maturing July 1,2021. "Project”shall have the meaning assigned to such term in the Bond Resolution. "Project Management Committee”shall mean the Bradley Lake Hydroelectric Project Project Management Committee established under Section 13 of the Power Sales Agreement. "Project Management Committee Approval”shall mean that certain Approving Resolution adopted by the Project Management Committee on , "Railbelt Utilities Group”or "RUG”shall mean that group formed to further the common interests of the Power Purchasers and the City of Seward d/b/a Seward Electric System under the Power Sales Agreement,whose members consist of the Power Purchasers and the City of Seward dfb/a Seward Electric System,and that acts only upon the duly authorized consent of all its members. "Revenues”shall have the meaning assigned to such term in the Bond Resolution. "Rule 15c2-12"shall mean Rule 15c2-12 promulgated by the SEC pursuant to the Exchange Act,as said rule shall from time to time be supplemented or amended,together with all interpretive guidance or other interpretation or explanations thereof that are promulgated by the SEC,except to the extent such interpretive guidance,interpretations or explanations have no binding legal effect and are generally regarded by the municipal securities industry as not being legally correct. "SEC”shall mean the United States Securities and Exchange Commission. "Settlement”shall mean the accomplishment of all of the transactions described in Section 9 of this Forward Delivery Agreement in respect of the delivery by the Authority of and the payment by the Underwriters for the Fifth Series Bonds. "Settlement Date”shall mean the Fifth Series Settlement Date specified in Section 9(a)for Settlement. "Special Counsel to RUG”shall mean the law firm of Ater Wynne,LLP,or any successor counsel to RUG appointed by RUG. "Underwriters'Counsel”shall mean the law firm of Katten Muchin &Zavis,or any successor counsel to the Underwriters appointed by the Representative. (c)Capitalized terms not otherwise defined herein shall have the respective meanings ascribed thereto in the hereinafter defined Official Statement. 2.The Fifth Series Bonds.(a)On or prior to the date hereof,the Project Management Committee on behalf of the Power Purchasers has,pursuant to the Project Management Committee Approval,approved the terms of this Forward Delivery Agreement,the proposed sale,issuance and delivery of the Fifth Series Bonds,and the Continuing Disclosure Undertaking,and the Authority has adopted the Bond Resolution which authorizes the issuance and specifies certain terms,provisions and details of the Fifth Series Bonds and approves and authorizes related actions by the Authority. (b)Pursuant to the Bond Resolution,the Fifth Series Bonds will be general obligations of the Authority secured by and payable from a pledge of the Revenues derived by the Authority from the operation of the Project on a parity with the outstanding Bradley Lake Power Revenue Bonds.The Fifth Series Bonds shall be dated as of their Settlement Date,or such other date agreed upon by the Authority and the Representative,and shall have the maturities and bear interest at the rates per annum shown on Schedule I to this Forward Delivery Agreement,such interest being payable on January 1 and July 1 of each year,commencing on July 1,1999,to the date of maturity or any redemption,whichever occurs first.The terms and provisions of the Fifth Series Bonds shall be as provided for in the Bond Resolution and in Schedule I hereto.Settlement of the Fifth Series Bonds will be made through the Depository's book-entry-only system. 3.Purpose of Fifth Series Bonds.The Authority will use proceeds of the Fifth Series Bonds to refund in a current refunding the entire principal amount of the Prior Bonds through the redemption thereof on July 1,1999 at a redemption price of 100%of the principal amount thereof. 4,Purchase and Sale of Fifth Series Bonds;Underwriters'Compensation; Offering.(a)Upon and subject to the terms and conditions and upon the basis of the representations,warranties and agreements set forth herein,the Underwriters,jointly and severally,hereby agree to purchase from the Authority,and the Authority hereby agrees to sell and deliver to or on behalf of the Underwriters,in the manner provided herein,an aggregate of $principal amount of the Fifth Series Bonds. (b)The purchase price for the Fifth Series Bonds shall be $ (the "Purchase Price”),representing the principal amount of the Fifth Series Bonds ($)plus original issue premium ($)and less the Underwriters' Compensation (as defined below)of $ (c)It shall be a condition to the Authority's obligation to sell and deliver the Fifth Series Bonds to the Underwriters that the entire principal amount of Fifth Series Bonds shall be purchased,accepted and paid for by the Underwriters at the Settlement.It shall be a condition to the Underwriters'obligation to purchase,to accept delivery of and to pay for the Fifth Series Bonds that the entire principal amount of the Fifth Series Bonds shall be issued,sold and delivered by the Authority at the Settlement.Each party to this Forward Delivery Agreement agrees to notify the other party and the Power Purchasers promptly upon becoming aware of any fact which, in its reasonable judgment,casts doubt upon or questions its ability to perform its obligations hereunder. (d)In connection with the structuring of the Fifth Series Bonds and the sale thereof by the Underwriters,the Underwriters shall be paid from proceeds of the Fifth Series Bonds and/or Revenues of the Authority compensation and expenses aggregating $("Underwriters'Compensation”)as follows: (i)On the Settlement Date (if all other conditions to the Settlement have been satisfied),and as a condition to the Settlement Date,the Underwriters shall be paid the Underwriters'Compensation. (ii)If the Closing is completed and the Settlement is not completed,then (subject to the provisos at the end of this clause (ii))on April 16,1999,the Authority shall pay to the Underwriters the Underwriters'Compensation;provided,however,that no such payment shall be due if the Settlement was not completed as a result of (1)a termination by the Underwriters of this Forward Delivery Agreement in accordance with Section 12(b) hereof,(2)a Change in Law affecting the Authority or one or more Power Purchasers,(3) a default by the Underwriters in their obligation to take delivery of and pay the Purchase Price for the Fifth Series Bonds when due in accordance with the terms and conditions of this Forward Delivery Agreement or (4)a change in federal tax law applicable to the Fifth Series Bonds that precludes Bond Counsel from delivering the opinion required by Section 13(a)(4)hereof;and provided further that the Underwriters'Compensation shall be a payment obligation of the Power Purchasers.The Authority covenants that any portion of the Underwriters'Compensation that is not paid by a Power Purchaser on the Settlement Date,together with interest thereon accruing from the Settlement Date,at the rate of eight percent per annum,will be included in the Annual Payment Obligation of such Power Purchaser under the Power Sales Agreement and that any sums collected by the Authority with respect to the Underwriters'Compensation shall be paid over to the Representative on behalf of the Underwriters. 5.Official Statement;Amendments and Supplements Thereto.(a)The Authority has caused to be prepared a Preliminary Official Statement,dated1999,relating to the Fifth Series Bonds (such Preliminary Official Statement,including the cover page,the inside cover page,and the appendices thereto and any amendments and supplements thereto that may be authorized or approved by the Authority for use with respect to the Fifth Series Bonds being herein referred to as the "Preliminary Official Statement"),which the Authority has authorized to be circulated,and the Authority hereby consents to and ratifies the use of the Preliminary Official Statement by the Underwriters in the offering of the Fifth Series Bonds prior to the date hereof. (b)The Preliminary Official Statement was "deemed final”by the Authority, as of the date of its initial mailing within the meaning,and for the purposes of,the Rule.The Authority agrees to cooperate with the Underwriters to provide a supply of final Official Statements within seven business days of the date hereof in sufficient quantities to comply with the Underwriters'obligations under applicable rules of the Municipal Securities Rulemaking Board and the Rule.The Underwriters will use their best efforts to assist the Authority in the preparation of the final Official Statement in order to ensure compliance with the aforementioned rules. (c)Notwithstanding any prior amendments or supplements to the Official Statement made pursuant to subsection (d)of this Section 5,the Authority,in cooperation with the Underwriters and with the cooperation and assistance of the Project Management Committee -6- and the Power Purchasers,shall prepare an updated Official Statement dated a date between March 8,1999 and March 22,1999 (both dates inclusive)(the "Updated Official Statement”) which,as of such date,will be correct and complete in all material respects and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein,in the light of the circumstances under which they were made,not misleading. The Authority shall,with the cooperation and assistance of the Project Management Committee and the Power Purchasers,furnish to the Underwriters,on or before March 22,1999,two copies of the Updated Official Statement manually executed by its Executive Director and at least 200 printed,conformed copies of the Updated Official Statement,or such greater quantity as the Representative shall reasonably require.As used herein,the term "Official Statement”shall mean (i)at any point in time during the period from the date of the Official Statement mentioned in subsection (a)of this Section 5 to but not including the date of delivery of the Updated Official Statement to the Underwriters pursuant to this subsection (c),the Official Statement mentioned in subsection (a)of this Section 5 and (ii)from and after the date of such delivery of the Updated Official Statement,the Updated Official Statement.References herein as of a specific date to the Official Statement shall mean the Official Statement applicable on such date in accordance with the preceding sentence. (d)Each party hereto agrees that it will notify the other parties hereto and the Power Purchasers if,within the period from the date of Closing to and including the date which is 25 days following the End of the Underwriting Period (as hereinafter defined),such party discovers any pre-existing or subsequent fact or becomes aware of the occurrence of any event, in any such case which might cause the Official Statement (as the same may have been theretofore supplemented or amended)to contain any untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein,in the light of the circumstances under which they were made,not misleading.If,in the written opinion of Underwriters'Counsel,the preparation and publication of a supplement or amendment to the Official Statement is,as a result of such fact or event (or any other event which becomes known to the Authority or the Underwriters during such period),necessary so that the Official Statement does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein,in the light of the circumstances under which they were made,not misleading,the Authority will,at its expense,supplement or amend the Official Statement in such a manner so that the Official Statement,as so supplemented or amended,does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein,in the light of the circumstances under which they were made,not misleading,and furnish copies of such supplement or amendment to the Underwriters in such numbers as the Representative may reasonably request.The Authority and the Underwriters agree that they will cooperate in the preparation of any such amendment or supplement. (e)For purposes of this Forward Delivery Agreement,the "End of the Underwriting Period”shall mean the Settlement Date,or,if the Authority has been notified in writing by the Representative,on or prior to the Settlement Date,that the "end of the underwriting period”within the meaning of Rule 15c2-12 will not occur on the Settlement Date, such later date on which the "end of the underwriting period”within such meaning has occurred. In the event that the Authority has been given notice pursuant to the preceding sentence that the -7- "end of the underwriting period”will not occur on the Settlement Date,the Representative agrees to notify the Authority in writing of the date it does occur as soon as practicable following the "end of the underwriting period”for all purposes of Rule 15c2-12;provided,however,that if the Representative has not otherwise so notified the Authority of the "end of the underwriting period” by the Settlement Date,then the "end of the underwriting period”shall be deemed to occur on the Settlement Date unless otherwise agreed to by the Authority. (f)At any time from the date of the Closing to the End of the Underwriting Period,the Representative may from time to time request,and,if such request is made,the Authority shall deliver or cause to be delivered to the Representative as soon as reasonably practicable thereafter,a certificate of the Authority signed by its Executive Director and/or a certificate of the Power Purchasers in the form set forth as Exhibit A-1 or A-2 hereto,as applicable,dated a date (and speaking as of such date)not earlier than the date of such request. (g)In connection with any amendments or supplements to the Official Statement that are made pursuant to Section 5(d)hereof,the Representative may request such additional certificates and opinions of counsel as the Representative shall reasonably deem necessary to evidence the accuracy or completeness of such amendment or supplement. 6.Certain Covenants and Agreements of the Authority.(a)The Authority hereby authorizes and consents to the use by the Underwriters of the Bond Resolution,the Continuing Disclosure Undertaking,the Preliminary Official Statement,the Official Statement, the Updated Official Statement (including all supplements or amendments to any thereof),the Power Sales Agreement and the Escrow Agreement,and the information therein contained,in connection with the offering and sale of the Fifth Series Bonds (at the time and in the manner contemplated by this Forward Delivery Agreement). (b)Between the date of this Forward Delivery Agreement and the Settlement Date,the Authority will not (i)with respect to the Project,offer or issue any bonds,notes or other obligations for borrowed money,or incur any material liabilities,direct or contingent,in either case,which would materially adversely affect the rights of the Underwriters hereunder or the security for the Fifth Series Bonds,or (ii)take any other action that would prevent the issuance and delivery of any of the Fifth Series Bonds on the Settlement Date. (c)The Authority will furnish such information,execute and deliver such instruments and take such other action in cooperation with the Underwriters as the Representative may reasonably request in order (i)to qualify the Fifth Series Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Representative may designate and (11)to determine the eligibility of the Fifth Series Bonds for investment under the laws of such states and other jurisdictions,and will use its best efforts to continue such qualifications in effect so long as required for the distribution of the Fifth Series Bonds;provided,however,that the Authority shall not be required to execute a general consent to service of process or qualify to do business in connection with any such qualification or determination in any jurisdiction. 7.Representations,Warranties and Agreements.(I)The Authority hereby represents and warrants or agrees (as appropriate)as follows: (a)The Authority is a public corporation of the State of Alaska (the "State”) duly created,organized and existing pursuant to AS 44.83 (the "Act”)and has or had (with respect to those actions taken before the date hereof)full legal right,power and authority:(i)to enter into this Forward Delivery Agreement,the Escrow Agreement,the Power Sales Agreement and the Continuing Disclosure Undertaking;(ii)to adopt the Bond Resolution;(iii)to own and operate the Project pursuant to the license granted to the Authority by the Federal Energy Regulatory Commission;(iv)to collect and pledge the Revenues of the Project to secure the payment of the Fifth Series Bonds pursuant to the Bond Resolution;(v)to sell,issue and deliver the Fifth Series Bonds to the Underwriters as provided herein;and (vi)to carry out and consummate the transactions contemplated by this Forward Delivery Agreement,the Bond Resolution,the Continuing Disclosure Undertaking,the Escrow Agreement,the Official Statement and the Power Sales Agreement;and the Authority will at the Settlement be in compliance in all respects,with the its obligations in connection with the issuance of the Fifth Series Bonds contained in the Bond Resolution,the Fifth Series Bonds,this Forward Delivery Agreement,the Continuing Disclosure Undertaking,the Escrow Agreement and the Power Sales Agreement; (b)By all necessary official action,the Authority has duly adopted the Bond Resolution,has duly approved the form of the Official Statement and the delivery thereof to the Underwriters at the time and in conformity with the requirements of this Forward Delivery Agreement,has duly authorized and approved the Official Statement and the furnishing of the Updated Official Statement as required herein and the delivery thereof to the Underwriters,has duly authorized and approved the execution and delivery of the Continuing Disclosure Undertaking,has duly authorized and approved the execution and delivery of,and the performance by the Authority of the obligations in connection with the issuance of the Fifth Series Bonds on its part contained in,the Fifth Series Bonds,the Bond Resolution,this Forward Delivery Agreement,the Continuing Disclosure Undertaking,the Escrow Agreement and the Power Sales Agreement and the consummation by it of all other transactions contemplated by this Forward Delivery Agreement and the Power Sales Agreement in connection with the issuance of the Fifth Series Bonds;the Bond Resolution,the Continuing Disclosure Undertaking,the Escrow Agreement (upon its execution and delivery),this Forward Delivery Agreement and the Power Sales Agreement constitute the legal,valid and binding obligations of the Authority,enforceable in accordance with their respective terms,subject to applicable bankruptcy,insolvency and similar laws affecting creditors'rights generally and subject,as to enforceability,to general principles of equity (regardless of whether enforcement is sought ina proceeding in equity or at law);the Fifth Series Bonds,if and when issued,authenticated and delivered to the Underwriters in accordance with the Bond Resolution and this Forward Delivery Agreement,will constitute legal, valid and binding obligations of the Authority,enforceable in according with their terms,subject to applicable bankruptcy,insolvency and similar laws affecting creditors'rights generally and subject,as to enforceability,to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law); (c)The Authority has never been in default with respect to the payment of any obligations issued by the Authority and is not in material breach of or default under the Federal Energy Regulatory Commission license to operate the Project,any applicable constitutional provision,law or administrative regulation of the State or the United States or any applicable judgment or decree or any loan agreement,indenture,bond,note,ordinance,resolution, agreement or other instrument to which the Authority is a party or to which the Authority or any of its property or assets is otherwise subject,the effect or result of which breach or default could have a material adverse effect on the operations or financial position of the Project or the Authority taken as a whole,and no event has occurred and is continuing which with the passage of time or the giving of notice,or both,would constitute a material default or event of default under any such instrument with such effect or result;and the execution and delivery of the Fifth Series Bonds,this Forward Delivery Agreement,the Escrow Agreement and the Power Sales Agreement and the adoption of the Bond Resolution and the Continuing Disclosure Undertaking and compliance with the provisions on the Authority's part contained therein,will not conflict with or constitute a breach of or default under any constitutional provision,law,administrative regulation,judgment,decree,loan agreement,indenture,bond,note,ordinance,resolution, agreement or other instrument to which the Authority is a party or to which the Authority or any of its property or assets is otherwise subject,nor will any such execution,delivery,adoption or compliance result in the creation or imposition of any lien,charge or other security interest or encumbrance of any nature whatsoever upon any of the property or assets of the Authority or under the terms of any such law,regulation or instrument,except as provided by the Fifth Series Bonds,the Bond Resolution and this Forward Delivery Agreement; (d)All authorization,approvals,licenses,permits,consents and orders of any governmental authority,legislative body,board,agency or commission having jurisdiction of the matter which are required for the due authorization of,which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by the Authority of its obligations in connection with the issuance,sale and delivery of the Fifth Series Bonds under this Forward Delivery Agreement and the Bond Resolution have been duly obtained,except for such approvals,consents and orders as may be required under the Blue Sky or securities laws of any state in connection with the offering and sale of the Fifth Series Bonds; and,except as described in or contemplated by the Official Statement,all authorizations, approvals,licenses,permits,consents and orders of any governmental authority,board,agency or commission having jurisdiction in the matter which are required for the due authorization of, which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by the Authority of its respective obligations under this Forward Delivery Agreement,the Continuing Disclosure Undertaking,the Escrow Agreement and the Power Sales Agreement have been duly obtained; (e)The Fifth Series Bonds,if and when issued,will conform to the description of the terms and provisions thereof set forth on Schedule I to this Forward Delivery Agreement and to the description thereof to be contained in the Official Statement under the caption "Description of the Fifth Series Bonds”;the summaries of the terms and provisions of the Bond Resolution to be contained in the Official Statement under the caption "Security and Sources of Payment for the Fifth Series Bonds”and in Appendix A to the Official Statement will in all -10- material respects conform to the form of the Bond Resolution;the summaries of the Act and the Power Sales Agreement to be contained,in Appendix A to the Official Statement will in all material respects conform to the forms thereof,and the Continuing Disclosure Undertaking will be in the form attached to the Official Statement as Appendix C and will in all material respects conform to the description thereof contained in the Official Statement under the caption "Introduction,”"Commitment to Provide Continuing Information;” (f)The financial statements of the Authority and the other financial information with respect to the Authority contained in the Official Statement,including the financial information with respect to the Project,fairly presents the financial condition and results of operations of the Authority as of the dates and for the periods shown therein in accordance with generally accepted accounting principles applicable to governmental entities,and there has been no material adverse change in the financial position and results of operations of the Authority since the date of such financial statements; (g)The Fifth Series Bonds,if and when issued,authenticated and delivered in accordance with the Bond Resolution and as provided herein,will be validly issued and outstanding general obligations of the Authority,entitled to the benefits of the Bond Resolution, and upon such issuance,authentication and delivery the Bond Resolution will provide,for the benefit of the holders from time to time of the Fifth Series Bonds,a legally valid and binding pledge of and lien on the Revenues and the funds and accounts pledged under the Bond Resolution,including the Capital Reserve Fund,on a parity with any outstanding Power Revenue Bonds subject only to the provisions of the General Resolution permitting the application thereof on the terms and conditions set forth in the General Resolution; (h)As of the date hereof,to the actual knowledge of the Authority after due inquiry,there is no action,suit,proceeding,inquiry or investigation,at law,or in equity,before or by any court,government agency,public board or body,pending or,to the actual knowledge of the Authority after due inquiry,threatened against the Authority,affecting the corporate existence of the Authority or the titles of its officers to their respective offices,or affecting or seeking to prohibit,restrain or enjoin the issuance or delivery of the Fifth Series Bonds or the collection of the Revenues pledged or to be pledged to pay the principal of and interest on the Fifth Series Bonds,or the pledge of and lien on the Revenues,funds and accounts pursuant to the Bond Resolution,or contesting or affecting as to the Authority the validity or enforceability of the Fifth Series Bonds,the Bond Resolution,this Forward Delivery Agreement,the Power Sales Agreement or the Escrow Agreement,or contesting the tax-exempt status of interest on the Fifth Series Bonds or the Prior Bonds,or contesting the completeness or accuracy of the Official Statement or any supplement or amendment thereto,or contesting the powers of the Authority or any authority for the issuance of the Fifth Series Bonds,the adoption of the Bond Resolution or the Continuing Disclosure Undertaking,or the execution and delivery by the Authority of this Forward Delivery Agreement,the Escrow Agreement or the Power Sales Agreement,nor,to the best knowledge of the Authority is there any basis for any such action,suit,proceeding,inquiry or investigation,wherein an unfavorable decision,ruling or finding would materially adversely affect the financial condition or operations of the Authority or the validity or enforceability or the authorization,execution,delivery or performance by the Authority of the Fifth Series Bonds,the -11- Bond Resolution,the Continuing Disclosure Undertaking,the Power Sales Agreement,this Forward Delivery Agreement or the Escrow Agreement; (i)At the time of the delivery thereof to the Underwriters,the Official Statement will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein,in the light of the circumstances under which they were made,not misleading (except that the Authority shall not be required to make any representation or warranty with respect to statements under the captions "Bond Insurance,”"The Power Purchasers,”"State and Federal Initiatives Regarding Competition in the Electric Utility Industry,”or "Book Entry System”);and the Official Statement,as the same may be supplemented or amended to the date of the Updated Official Statement pursuant to the provisions of this Forward Delivery Agreement,and the Updated Official Statement,as of its date and as the same may be supplemented or amended pursuant to the provisions of this Forward Delivery Agreement,will not,in either case except for brief periods between changes in any relevant circumstances and the timely amendment or supplement of the Official Statement or Updated Official Statement (as the case may be)to reflect such change,contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein,in the light of the circumstances under which they were made,not misleading (except that the Authority shall not be required to make any representation or warranty with respect to statements under the captions "Bond Insurance,”"The Power Purchasers,”"State and Federal Initiatives Regarding Competition in the Electric Utility Industry”or "Book Entry System”); (j)If the Official Statement (to the date of the Updated Official Statement)or the Updated Official Statement is supplemented or amended pursuant to the provisions of this Forward Delivery Agreement,at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to the provisions of this Forward Delivery Agreement)at all times subsequent thereto up to the date of the Updated Official Statement (in the case of the Official Statement)or the Settlement Date (in the case of the Updated Official Statement),the Official Statement or the Updated Official Statement (as the case may be)as so supplemented or amended will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein,in the light of the circumstances under which they were made,not misleading (except that the Authority shall not be required to make any representation or warranty with respect to statements under the captions "Bond Insurance,” "The Power Purchasers,”"State and Federal Initiatives Regarding Competition in the Electric Uulity Industry”or "Book Entry System”); (k)=The Authority is not presently contemplating taking any action which,to its knowledge,would result in a material adverse change in the market price or marketability of the Fifth Series Bonds;and (1)The Authority is not in material breach of or material default under the Power Sales Agreement or the General Resolution or any resolution supplemental thereto and no event has occurred and is continuing which,with the passage of time,the giving of notice or both, would constitute a default or any event of default by the Authority under the Power Sales Agreement or the General Resolution or any resolution supplemental thereto;and,to the best of -12- the Authority's knowledge,no material default or event of default has occurred,and no event has occurred and is continuing which,with the passage of time,the giving of notice or both,would constitute a material default or an event of default under the Power Sales Agreement by any of the other parties thereto. (II)The Underwriters represent to and covenant with the Authority as follows: (a)the Bonds will be offered and sold by the Underwriters in accordance with applicable state and federal laws;(b)the Representative is duly organized and validly existing under the laws of the jurisdiction of its organization and,if relevant under such laws,in good standing;(c)the Representative has the power and the authority to bind the Underwriters to this Agreement,and the person executing this Agreement on behalf of the Representative is authorized to do so;(d) this Agreement,when duly executed and delivered by the parties hereto,will constitute a valid and binding agreement of the Underwriters enforceable in accordance with its terms;and (e)the Representative is not in violation of any securities law that would adversely impact its ability to perform under the terms of this Agreement. 8.Closing.At 9:00 a.m.,,time,on ,1999,or such other date and time as shall have been mutually agreed upon by the Authority and the Representative,but in any event not later than ,1999,the certificates,opinions and other documents required by Section 11 below shall be executed anddelivered.The Closing shall take place at the offices of in , ,or at such other location as shall be mutually agreed upon by the Authority,the Power Purchasers and the Representative.Assuming the Closing is completed in accordance with the provisions of this Forward Delivery Agreement then,subject to the provisions of thisForwardDeliveryAgreement,the Underwriters shall be obligated to purchase the Fifth Series Bonds and pay the Purchase Price therefor (and the Authority shall be obligated to issue and deliver such Fifth Series Bonds)at the Settlement. 9.Settlement.(a)At or before 8:00 a.m.,Anchorage,Alaska time,on Tuesday,April 13,1999,or at such later date,but not later than Friday,April 16,1999,as may be mutually agreed upon by the Authority and the Representative (the "Settlement Date”),(i)the Authority will,subject to the terms and conditions hereof,deliver the Fifth Series Bonds to DTC on behalf of the Underwriters,registered in the name of Cede &Co.,duly executed and authenticated,and deliver or cause to be delivered to the Representative the other documents required by Section 13 hereof,(ii)the Underwriters will,subject to the terms and conditions hereof,accept such delivery and pay or cause to be paid the Purchase Price as set forth in Section 4(b)hereof by wire transfer in immediately available funds to the Authority;and (iii)the Authority will pay to the Underwriters the Underwriters'Compensation by wire transfer in immediately available funds to such account as shall be designated by the Representative. Delivery and payment as aforesaid shall be made at the offices of Bond Counsel,or such other place as shall have been mutually agreed upon by the Authority and the Representative. (b)The Authority will have no obligation to issue,sell and deliver the Fifth Series Bonds,and the Underwriters will have no obligation to purchase the Fifth Series Bonds if, because of a Change in Law,such issuance,sale and delivery would be illegal as to the Authority. -13- In such event,the Authority will have no liability whatsoever for its failure to issue,sell and deliver the Fifth Series Bonds and the Underwriters will have no liability for its failure to purchase the Fifth Series Bonds. 10.Certain Conditions to Underwriters'Obligations at Closing and Settlement.The Underwriters have entered into this Forward Delivery Agreement in reliance upon the representations and warranties of the Authority contained herein,and in reliance upon the representations and warranties to be contained in the documents and instruments to be delivered at the Closing and the Settlement,and upon the performance by the Authority of its obligations hereunder,both as of the date hereof and as of the date of the Closing and as of the Settlement Date.Accordingly,the Underwriters'obligations under this Forward Delivery Agreement to purchase,to accept delivery of and to pay for the Fifth Series Bonds shall be conditioned upon the performance by the Authority of its obligations to be performed hereunder and the delivery of the documents and instruments required to be delivered hereby at or prior to the Closing and the Settlement,and shall also be subject to the following additional conditions: (a)Between the date hereof and the time of the Closing,there shall have been no material adverse change in the financial position,results of operations or condition,financial or otherwise,of the Authority in relation to the Project or the Power Sales Agreement. (b)At the time of the Closing,the Official Statement does not in the judgment of the Representative differ from the Preliminary Official Statement in any way that would materially and adversely affect the marketability of the Fifth Series Bonds; (c)The representations and warranties of the Authority contained herein shall be true,complete and correct in all material respects on the date hereof,at the date of the Closing and at the Settlement Date; (d)Both at the time of the Closing and the Settlement,this Forward Delivery Agreement,the Bond Resolution,the Continuing Disclosure Undertaking and the Power Sales Agreement and,at the time of the Settlement,the Escrow Agreement,shall be in full force and effect in accordance with their respective terms and shall not have been amended,modified or supplemented in any manner which will materially adversely affect (i)the ability of the Authority to issue the Fifth Series Bonds or perform its obligations thereunder or under this Forward Delivery Agreement or (ii)the security for the Fifth Series Bonds;and both at the time of the Closing and the Settlement,the Official Statement and the Updated Official Statement shall not have been supplemented or amended except pursuant to the provisions of this Forward Delivery Agreement; (e)Both at the time of the Closing and the Settlement,no "Event of Default” (as defined in the General Resolution)and no event of default under the Power Sales Agreement shall have occurred or be continuing and no event shall have occurred which,with the passage of time or the giving of notice (or both),would constitute such an Event of Default under the General Resolution or an event of default under the Power Sales Agreement; -14- (f)Both at the time of the Closing and the Settlement,all official action of the Authority and all actions required to be taken by all the other parties to consummate the transactions contemplated by this Forward Delivery Agreement,the Fifth Series Bonds,the Bond Resolution,the Continuing Disclosure Undertaking,the Escrow Agreement and the Power Sales Agreement shall have been taken and shall be in full force and effect in accordance with their respective terms and shall not have been amended,modified or supplemented in any respect without the consent of the Representative; (g)At the date hereof,the Project Management Committee Approval shall have been adopted,in form and substance satisfactory to the Authority and the Underwriters,approving the terms of (i)the Fifth Series Bonds,(ii)this Forward Delivery Agreement,(iii)the Bond Resolution,and (iv)the Continuing Disclosure Undertaking,all as required by Section 11 of the Power Sales Agreement,and both at the time of the Closing and the Settlement,the Project Management Committee Approval shall not have been amended,altered or repealed and shall be in full force and effect;and (h)At the date hereof,the Agreement to Support Forward Refunding shall have been duly authorized,executed and delivered by all of the parties thereto,and both at the time of the Closing and the Settlement,the Agreement to Support Forward Refunding shall not have been amended or altered (except for any amendment or alteration approved in writing by the Representative)or repealed and shall be in full force and effect. 11.Closing Conditions.(a)The Underwriters'obligations under this Forward Delivery Agreement shall be conditioned upon the performance by the Authority of its obligations to be performed hereunder,and the applicable conditions of Section 10 hereof having been satisfied,and the tender by the Authority of its performance at the Closing as described in Section 8 hereof,which Closing shall not be completed unless the Underwriters shall receive at the time of the Closing the following: (1)The Official Statement and each supplement or amendment,if any,thereto, executed on behalf of the Authority by its Executive Director, (2)One transcript of all proceedings relating to the authorization and issuance of the Fifth Series Bonds through the date of the Closing certified by the Executive Director of the Authority or,in the case of the Project Management Committee Approval, certified by an authorized representative of the Project Management Committee; (3)The Bond Resolution,certified by the Executive Director of the Authority as having been duly adopted by the Authority and as being in effect,with such supplements or amendments as may have been agreed to by the Representative; (4)An opinion,dated the date of Closing and addressed to the Authority,of Bond Counsel,in substantially the form attached hereto as Exhibit B,together with a letter of such counsel,dated the date of the Closing and addressed to the Underwriters and the -15- Power Purchasers,to the effect that the foregoing opinion may be relied upon by the Underwriters to the same extent as if such letter were addressed to them; (5)An opinion,dated the date of the Closing and addressed to the Underwriters and to each Power Purchaser,of Bond Counsel to the effect that (i)this Forward Delivery Agreement has been duly authorized,executed and delivered by,and constitutes a legal, valid and binding agreement of,the Authority enforceable against the Authority in accordance with its terms,except to the extent that enforcement may be limited by bankruptcy,insolvency or other laws affecting creditors'rights generally;(ii)the Power Sales Agreement constitutes a legal,valid and binding agreement of the Authority enforceable against the Authority in accordance with its terms,except to the extent that enforcement may be limited by bankruptcy,insolvency or other laws affecting creditors' rights generally;(iii)assuming no change in applicable law from the law in effect on the date of such opinion,the Fifth Series Bonds,if issued,will not be subject to the registration requirements of the Securities Act of 1933,as amended,and the Bond Resolution,on such date of issuance,will be exempt from qualification pursuant to the Trust Indenture Act of 1939,as amended;(iv)the statements contained in the Official Statement under the captions "Introduction,”"Description of The Fifth Series Bonds,” "Security and Sources of Payment of the Fifth Series Bonds,”"Litigation,”and "Tax Exemption”in,and in Appendix A to,the Official Statement,insofar as such statements © contained under such captions purport to summarize certain provisions of the Fifth Series Bonds,the Bond Resolution,the Power Sales Agreement and the Escrow Agreement,are accurate in all material respects and nothing has come to their attention which leads them to believe that such information contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein,in the light of the circumstances under which they were made,not misleading;and (v)if the Fifth Series Bonds were issued on the date of the Closing,the Continuing Disclosure Undertaking would be a valid,binding and enforceable obligation of the Authority; (6)An opinion of the Attorney General in substantially the form attached hereto as Exhibit C; (7)A certificate,dated the date of the Closing,signed by the Executive Director and Deputy Director Project Development and Operations of the Authority in substantially the form attached hereto as Exhibit D (but in lieu of or in conjunction with such certificate the Representative may,in its sole discretion,accept certificates or opinions of Bond Counsel,or of other counsel acceptable to the Representative,that,in the opinion of such counsel,the issues raised in any pending or threatened litigation referred to in such certificate are without substance or that the contentions of all plaintiffs therein are without merit); (8)Certificates,each signed by the General Manager and Chief Financial Officer of each Power Purchaser,in substantially the form attached hereto as Exhibit F; -16- (9)An opinion,dated the date of the Closing and addressed to the Authority and the Underwriters,of Special Counsel to RUG,in substantially the form attached hereto as Exhibit E,together with a reliance letter in form and substance satisfactory to the Authority and the Underwriters,dated the date of the Closing and addressed to Special Counsel to RUG,the Authority and the Underwriters,from counsel to each of Chugach Electric Association,Inc.,the Municipality of Anchorage d/b/a Municipal Light and Power,Golden Valley Electric Association,Inc.,Matanuska Electric Association,Inc.and Homer Electric Association,Inc.; (10)An opinion,dated the date of the Closing and addressed to the Underwriters,of Underwriters'Counsel,to the effect that (1)assuming no change in applicable law from the law in effect on the date of such opinion,the Fifth Series Bonds, if issued,will not be subject to the registration requirements of the Securities Act of 1933, as amended,and the Bond Resolution,on such date of issuance,will be exempt from qualification pursuant to the Trust Indenture Act of 1939,as amended;(ii)if the Fifth Series Bonds were issued on the date of the Closing,and assuming that the Continuing Disclosure Undertaking is a legal,valid and binding obligation of the Authority enforceable in accordance with its terms and that the Underwriters have a reasonable basis for relying on the Authority's assurances contained therein,the Continuing Disclosure Undertaking would be in a form sufficient to permit the Underwriters to reasonably determine that the Authority has undertaken,in a written agreement or contract for the benefit of the holders of the Fifth Series Bonds,to provide the annual financial information and notices,all as required by paragraph (b)(5)of Rule 15c2-12 in effect as of the date of the Closing;and (iii)based upon their participation in the preparation of the Official Statement as counsel for the Underwriters (which participation will not extend beyond the date of the Official Statement or the last amendment thereto)and without having undertaken to determine independently the accuracy,completeness or fairness of the statements contained in the Official Statement,as of the date of the Closing nothing has come to the attention of such counsel causing them to believe that (A)the Official Statement as of its date contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made,not misleading (except for the statements contained in the Official Statement and the Appendices thereto relating to the book-entry-only system,DTC,the Bond Insurer and the Bond Insurance Policy,all engineering,financial and statistical data or forecasts,numbers,charts,estimates, projections,assumptions or expressions of opinion,as to all of which no view need be expressed),or (B)the Official Statement (as supplemented or amended pursuant to Section 5 hereof,if applicable)as of the date of the Closing contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein,in the light of the circumstances under which they were made, not misleading (except as aforesaid); (11)|Evidence satisfactory to the Representative that the claims paying ability of the Bond Insurer is rated,at the time of the Closing,"AAA”by S&P and "Aaa”by Moody's; -17- (12)Acopy of the Bond Insurance Commitment executed by the Authority and the Bond Insurer in the form previously approved by the Representative; (13)Favorable opinions of counsel to the Bond Insurer,satisfactory in form and scope to the Representative,dated the date of the Closing and addressed to the Authority, the Underwriters and each Power Purchaser,as to the power and authority of the Bond Insurer to issue the Bond Insurance Commitment and to deliver the Bond Insurance Policy pursuant thereto,and as to the validity and enforceability of such Commitment and,when issued and paid for,the Bond Insurance Policy,and as to such other matters as the Representative may reasonably request;and (14)Suchadditionallegal opinions,certificates,instruments and other documents as the Representative may reasonably request to evidence the truth and accuracy,as of the date hereof and as of the date of the Closing,of the Authority's representations and warranties contained herein and of the statements and information contained in the Official Statement and the due performance or satisfaction by the Authority on or prior to the date of the Closing of all the agreements then to be performed and conditions then to be satisfied by it. (b)All the opinions,letters,certificates,instruments and other documents mentioned above shall be deemed to be in compliance with the provisions hereof if,but only if, they are in the forms of the pertinent exhibits attached hereto or otherwise in form and substance satisfactory to the Representative. 12.Termination of Agreement.(a)The Underwriters may terminate this Forward Delivery Agreement,without liability therefor as provided in Section 16(d)hereof,by notification to the Authority if at any time on or after the acceptance by the Authority of this Forward Delivery Agreement and on or prior.to the Closing: (i)the marketability of the Fifth Series Bonds or the market price thereof,in the reasonable opinion of the Representative,has been materially adversely affected by: (1)an amendment to the Constitution of the United States,or -(2)any legislation (A)enacted by the United States,(B)recommended to the Congress or otherwise endorsed for passage,by press release,other form of notice or otherwise,by the President of the United States,the Treasury Department of the United States,the Internal Revenue Service or the Chairman or ranking minority member of the Committee on Finance of the United States Senate or the Committee on Ways and Means of the United States House of Representatives,(C) presented as an option for consideration by either such Committee by the staff of such Committee or by the staff of the Joint Committee on Taxation of the United States Congress or (D)favorably reported for passage to either House of the Congress by any Committee of such House or by a Conference Committee of both Houses to which such legislation has been referred for consideration,or -18- (3)any decision of any court of the United States or by any ruling or regulation (final,temporary or proposed)on behalf of the Treasury Department of the United States,the Internal Revenue Service or any other authority of the United States,or (4)any comparable legislative,judicial or administrative development, in any such case affecting the federal tax status of the Authority,its property or income,or the interest on its bonds (including the Fifth Series Bonds); (ii)there shall have occurred any outbreak or escalation of hostilities or any national or international calamity or crisis,the effect of which on the financial markets of the United States being such,as in the reasonable judgment of the Representative,would make it impracticable for the Underwriters to market the Fifth Series Bonds or to enforce contracts for the sale of the Fifth Series Bonds; (iii)there shall have occurred the declaration of a general banking moratorium by any authority of the United States or the States of New York or Alaska;or (iv)there shall have been any downgrading,suspension or withdrawal,or any official statement issued subsequent to the date of execution of this Forward Delivery Agreement as to a possible downgrading,suspension or withdrawal,of the claims paying ability of the Bond Insurer. (b)The Underwritersmay terminate this Forward Delivery Agreement,without liability therefor as provided in Section 16(d)hereof,by notification to the Authority if,at any time on or prior to the Settlement Date,as a result of a Change in Law,any Underwriter is or would be prohibited from lawfully purchasing the Fifth Series Bonds as provided herein or lawfully selling the Fifth Series Bonds or beneficial ownership interests therein to the public. 13.Settlement Conditions.(a)The Underwriters'obligations under this Forward Delivery Agreement to purchase,to accept delivery of and to pay for the Fifth Series Bonds at the Settlement shall be conditioned upon the performance by the Authority of its obligations to be performed hereunder,including,without limitation,the Closing having been completed,the Authority having tendered performance of its obligations under Section 9 hereof with respect to the Settlement,and the applicable conditions of Section 10 hereof having been satisfied,which Settlement shall not be completed unless the Underwriters shall receive at the time of the Settlement the following: (1)Two copies of the Updated Official Statement and each supplement or amendment thereto,manually executed on behalf of the Authority by its Executive Director,and such number of conformed copies as the Representative shall reasonably require; (2)The Escrow Agreement,duly executed by the Authority and the Trustee; -19- (3)A certificate,dated the Settlement Date,of the Executive Director of the Authority to the effect that the Bond Resolution is in full force and effect and has not been modified,supplemented or amended (except as may have been agreed to in writing by the Representative); (4)An opinion,dated the Settlement Date and addressed to the Authority,of Bond Counsel in substantially the form included in the Official Statement as Appendix B, together with a letter of such counsel,dated the Settlement Date and addressed to the Underwriters and to each Power Purchaser,to the effect that the foregoing opinion addressed to the Authority may be relied upon by the Underwriters to the same extent as if such opinion were addressed to it; (5)An opinion,dated the Settlement Date and addressed to the Underwriters and each Power Purchaser,of Bond Counsel,to the effect that (i)this Forward Delivery Agreement has been duly authorized,executed and delivered by,and constitutes a legal, valid and binding agreement of,the Authority enforceable against the Authority in accordance with its terms,except to the extent that enforcement may be limited by bankruptcy,insolvency or other laws affecting creditors'rights generally;(ii)the Power Sales Agreement constitutes a legal,valid and binding agreement of the Authority enforceable against the Authority in accordance with its terms,except to the extent that enforcement may be limited by bankruptcy,insolvency or other laws affecting creditors' rights generally;(iii)the Fifth Series Bonds are not subject to the registration requirements of the Securities Act of 1933,as amended,and the Bond Resolution is exempt from qualification pursuant to the Trust Indenture Act of 1939,as amended;(iv)the statements contained in the Official Statement under the captions "Introduction,”"Description of the Fifth Series Bonds,”"Security and Sources of Payment of the Fifth Series Bonds,” "Litigation”and "Tax Exemption”in,and in Appendix A to,the Official Statement, insofar as such statements under such captions purport to summarize certain provisions of the Fifth Series Bonds,the Bond Resolution,the Power Sales Agreement and the Escrow Agreement,are accurate in all material respects and nothing has come to their attention which leads them to believe that such information contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein,in the light of the circumstances under which they were made,not misleading;and (v)the Continuing Disclosure Undertaking is a valid,binding and enforceable obligation of the Authority; (6)A certificate,dated not later that the Settlement Date,of an accountant or a firm of accountants acceptable to the Representative (the "Verification Agent”)to the effect that it has verified the accuracy of the mathematical computations of the adequacy of the maturing principal amounts of the Government Obligations (as defined in the Escrow Agreement)to be held by the Trustee together with the interest earned and to be earned thereon to make full and timely payment of all interest due with respect to all of the Prior Bonds and to redeem the Prior Bonds on July 1,1999 at the redemption price of par; -20- (7)An opinion of the Attorney General in substantially the form attached hereto as Exhibit C; (8)A certificate,dated the Settlement Date,signed by the Executive Director and the Deputy Director-Project Development and Operations of the Authority in substantially the form attached hereto as Exhibit D (but in lieu of or in conjunction with such certificate the Representative may,in its sole discretion,accept certificates or opinions of Bond Counsel,or of other counsel acceptable to the Representative,that,in the opinion of such counsel,the issues raised in any pending or threatened litigation referred to in such certificate are without substance or that the contentions of all plaintiffs therein are without merit); (9)Certificates,dated the Settlement Date,each signed by the Chief Financial Officer and Manager of each Power Purchaser,in substantially the form attached hereto as Exhibit F; (10)An opinion,dated the Settlement Date and addressed to the Authority and the Underwriters,of Special Counsel to RUG,in substantially the form attached hereto as Exhibit E; (11)Anopinion,dated the Settlement Date and addressed to the Underwriters, of Underwriters'Counsel to the effect that (i)the Fifth Series Bonds are not subject to the registration requirements of the Securities Act of 1933,as amended,and the Bond Resolution is exempt from qualification pursuant to the Trust Indenture Act of 1939,as amended,(ii)assuming that the Continuing Disclosure Undertaking is a legal,valid and binding obligation of the Authority enforceable in accordance with its terms and that the Underwriters have a reasonable basis for relying on the Authority's assurances contained therein,the Continuing Disclosure Undertaking is in a form sufficient to permit the Underwriters to reasonably determine that the Authority has undertaken,in a written agreement or contract for the benefit of the holders of the Fifth Series Bonds,to provide the annual financial information and notices,all as required by paragraph (b)(5)of Rule 15c2-12 in effect as of the Settlement Date;and (iii)based upon their participation in the preparation of the Updated Official Statement as counsel for the Underwriters (which participation will not extend beyond the date of the Updated Official Statement or the last amendment thereto)and without having undertaken to determine independently the accuracy,completeness or fairness of the statements contained in the Updated Official Statement,as of the Settlement Date nothing has come to the attention of such counsel causing them to believe that (A)the Updated Official Statement as of its date contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein,in the light of the circumstances under which they were made,not misleading (except for the statements contained in the Updated Official Statement and the Appendices thereto relating to the book-entry only system, DTC,the Bond Insurer and the Bond Insurance Policy,all engineering,financial and statistical data or forecasts,numbers,charts,estimates,projections,assumptions or expressions of opinion,as to all of which no view need be expressed),or (B)the Updated -21- Official Statement (as supplemented or amended pursuant to Section 5 hereof,if applicable)as of the Settlement Date contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein,in the light of the circumstances under which they were made,not misleading (except as aforesaid); (12)TheLetterof Representations or evidence of other appropriate arrangements with DTC; (13)A letter from Moody's and a letter from S&P confirming that each rating agency,respectively,has given the Fifth Series Bonds a credit rating that is the same as the credit rating it then would assign to any other obligations insured by the Bond Insurer and issued on the Settlement Date; (14)Evidence satisfactory to the Representative that the Bond Insurance Policy for the Fifth Series Bonds has been issued in substantially the form set forth as Appendix D to the Updated Official Statement; (15)Favorable opinions of counsel to the Bond Insurer,satisfactory in form and scope to the Representative,dated the Settlement Date,and addressed to the Underwriters and each Power Purchaser,as to the power and authority of the Bond Insurer to deliver the Bond Insurance Policy,and as to the validity and enforceability of the Bond Insurance Policy,and as to such other matters as the Representative may reasonably request; (16)Accertified copy of the Project Management Committee Approval required in connection with the issuance of the Fifth Series Bonds; (17)Two transcripts of all proceedings relating to the authorization and issuance of the Fifth Series Bonds and the authorization and execution by the Authority and the Power Purchasers,of the Power Sales Agreement,each certified by the Executive Director of the Authority;and (18)Suchadditionallegal opinions,certificates,instrumentsand other documents as the Representative may reasonably request to evidence the truth and accuracy,as of the date hereof and as of the Settlement Date,of the Authority's representations and warranties contained herein and of the statements and information contained in the Official Statement and the due performance or satisfaction by the Authority on or prior to the Settlement Date of all the agreements then to be performed and conditions then to be satisfied by it. 14.Expenses.(a)The Underwriters shall be under no obligation to pay,and the Authority shall pay,any expenses incident to the performance of the Authority's obligations hereunder including,but not limited to:(i)the cost of preparation,printing and delivery of the Bond Resolution;(ii)the costs of preparing,printing and delivering to the Underwriters the Official Statement and the Updated Official Statement and any supplements and amendments to any of such Official Statements;(iii)the cost of preparation and printing of the Fifth Series Bonds; -22- (iv)the fees and disbursements of Bond Counsel;(v)the fees and disbursements of any financial advisor for its services as financial advisor to the Authority or the Power Purchasers;(vi)the fees and disbursements of any engineers,accountants,and other experts,consultants or advisers retained by the Authority;(vii)the fees for the ratings on the Fifth Series Bonds required hereunder;(viii)the fees and disbursements of the Verification Agent in connection with the certificate to be delivered pursuant to this Forward Delivery Agreement;and (ix)the costs of the Bond Insurance Policy.The Authority shall have no obligation to pay any such expenses other than from funds budgeted and made available therefor under and pursuant to the Power Sales Agreement. (b)The Underwriters shall pay only:(i)the cost of the printing of the Forward Delivery Agreement and the Blue Sky Survey;(ii)all advertising expenses and Blue Sky filing fees in connection with the public offering of the Fifth Series Bonds;(iii)the fees and disbursements of Underwriters'Counsel;(iv)fees and expenses of the Underwriters;and (v)all other expenses incurred by the Underwriters in connection with the public offering of the Fifth Series Bonds. 15.Notices.Any notice or other communication to be given to the Authority under this Forward Delivery Agreement may be given by delivering the same in writing to the Authority's address set forth above;and any notice or other communication to be given to the Underwriters under this Forward Delivery Agreement may be given by delivering the same in writing to Prudential Securities Incorporated,1201 Third Avenue,Suite 5350,Seattle, Washington 98101,Attention:John C.Moore,Managing Director;or,in each case,to such different address for a party as such party shall have notified the other party as aforesaid. 16.Termination and its Effect.(a)Ifthe Authority fails or is unable,after using all reasonable efforts in good faith,to satisfy the conditions herein to the completion of the Closing (unless waived by the Underwriters)by the time such completion is required,then this Forward Delivery Agreement shall terminate,and neither the Authority nor the Underwriters shall have any further obligation or liability to,or any rights against,the other. (b)If the Closing shall have occurred but the Authority is unable,after using all reasonable efforts in good faith,to satisfy the conditions herein to the completion of the Settlement (unless waived by the Underwriters)by the time such completion is required,or is otherwise unable,after using all reasonable efforts in good faith,to satisfy the conditions to the obligation of the Underwriters to purchase,accept delivery of and pay for the Fifth Series Bonds as set forth in this Forward Delivery Agreement (unless waived by the Underwriters)by the time such completion is required,then this Forward Delivery Agreement shall terminate,and neither the Authority nor the Underwriters shall have any further obligation or liability to,or any rights against,the other except as otherwise provided in this Forward Delivery Agreement (including without limitation as provided in Section 4(d)(ii)and Section 16(e)hereof). (c)If the Closing shall have occurred but the Underwriters fail to purchase, accept delivery of and pay for the Fifth Series Bonds as provided herein for a reason permitted hereunder,including without limitation the failure of the Authority to comply with Sections 9,10 -23- and 13 hereof,then this Forward Delivery Agreement shall terminate,and neither the Underwriters nor the Authority shall have any further obligation or liability to,or rights against, the other except as otherwise provided in this Forward Delivery Agreement (including without limitation as provided in Section 4(d)(ii)and Section 16(e)hereof). (d)If at any time the Underwriters terminate this Forward Delivery Agreement as permitted in Section 12 hereof,then this Forward Delivery Agreement shall terminate,and neither the Underwriters nor the Authority shall have any further obligation or liability to,or rights against,the others,except as provided in Section 16(e)hereof. (e)Notwithstanding the foregoing,the provisions of Sections 14,16 and 17 hereof shall survive any termination of this Forward Delivery Agreement. 17.'Parties in Interest,Survivability of Representations,Warranties and Agreements.This Forward Delivery Agreement is made solely for the benefit of the Authority, the Underwriters and the Power Purchasers and no other person shall acquire or have any right hereunder or by virtue hereof.All of the Authority's representations,warranties and agreements contained in this Forward Delivery Agreement shall remain operative and in full force and effect, regardless of:(i)any investigations made by or on behalf of the Underwriters;(ii)delivery of and payment for the Fifth Series Bonds pursuant to this Forward Delivery Agreement;and (iii)any termination of this Forward Delivery Agreement. 18.Effectiveness.This Forward Delivery Agreement shall become effective upon the execution of the acceptance hereof by the Authority and shall be valid and enforceable at the time of such acceptance.- 19.Governing Law.This Forward Delivery Agreement will be governed by and construed in accordance with the laws of the State of Alaska. -24- 20.Headings.The headings of the sections of this Forward Delivery Agreement are inserted for convenience only and shall not be deemed to be a part hereof. Accepted by the Alaska Energy Authority, this day of ; 1999. ALASKA ENERGY AUTHORITY By Executive Director Approved on behalf of the Power Purchasers, this day of , 1999. BRADLEY LAKE HYDROELECTRIC PROJECT PROJECT MANAGEMENT COMMITTEE By Authorized Representative -25- Very truly yours, Prudential Securities Incorporated Goldman,Sachs &Co. PRUDENTIAL SECURITIES INCORPORATED as Representative By Managing Director SCHEDULE I LIST OF UNDERWRITERS Prudential Securities Incorporated Goldman,Sachs &Co. MATURITY SCHEDULE Maturity Principal Amount Interest Rate Sinking Fund Installments: Term Bonds of 2021 Year Amount Optional Redemption Provisions: -26- Reoffering Price EXHIBIT A-1 $Principal Amount Power Revenue Refunding Bonds,Fifth Series (Bradley Lake Hydroelectric Project) CERTIFICATE OF AUTHORITY REQUIRED BY SECTION 5(f)OF THE FORWARD DELIVERY BOND PURCHASE AGREEMENT I,D.Randy Simmons,Executive Director of the Alaska Energy Authority (the "Authority”),hereby certify that,although I make no representation to the effect that I have independently verified the statements contained in the Official Statement dated _,,relating to the above-captioned bonds (the "Official Statement”),as such Official Statement has been amended by [an Addendum/Addenda]dated ,199 , on the basis of my reading of the Official Statement,except for the statements under the captions "Bond Insurance,”"The Power Purchasers,”"State and Federal Initiatives Regarding Competition in the Electric Utility Industry”and "Book Entry System”as to which I express no opinion, nothing has come to my attention that would give me reason to believe that the Official Statement, as of its date or the date hereof,contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements contained therein, in the light of the circumstances under which they were made,not misleading. Dated: ALASKA ENERGY AUTHORITY Executive Director A-1-1 EXHIBIT A-2 $Principal Amount Power Revenue Refunding Bonds,Fifth Series (Bradley Lake Hydroelectric Project) CERTIFICATE OF POWER PURCHASER REQUIRED BY SECTION 5(f)OF THE FORWARD DELIVERY BOND PURCHASE AGREEMENT I ,General Manager of (the "Power Purchaser”),certify that,although I make no representation to the effect that I have independently verified the statements contained in the Official Statement dated , relating to the above-captioned bonds (the "Official Statement”),as such Official Statement has been amended by [an Addendum/Addenda]dated ,199 _,I have read the statements contained in the Official Statement under the caption "The Bradley Lake Hydroelectric Project,”in the sections titled "Introduction,”"Rate Regulation,”"Power Requirements”and "Generation Resources and Utilization of the Project”under the caption "The Power Purchasers,” and under the caption "State and Federal Initiatives Regarding Competition in the Electric Utility Industry,”and to my actual knowledge statements under such captions of the Official Statement, did not,as of its date,and does not,as of the date hereof,contain any untrue statement of a material fact,nor did it nor does it omit to state a material fact required to be stated therein or -necessary to make the statements contained therein,in the light of the circumstances under which they were made,not misleading. Dated: [POWER PURCHASER] General Manager A-2-1 EXHIBIT B [Letterhead of Wohlforth,Argetsinger,Johnson &Brecht) [Closing Date] Alaska Energy Authority 480 West Tudor Road Anchorage,Alaska 99503 [Prudential] [Goldman] Ladies and Gentlemen: We have acted as bond counsel in connection with the Forward Delivery Bond Purchase Agreement (the "Purchase Agreement”),dated as of ,1999,by and between the Alaska Energy Authority (the "Authority”)and Prudential Securities Incorporated and Goldman,Sachs &Co.(the "Underwriters”),providing for the purchase of up to $of the Authority's Power Revenue Refunding Bonds,Fifth Series (the "Bonds”). In such connection,we have reviewed Chapter 83,Title 44 of the Alaska Statutes, as amended (the "Act”),the Authority's Power Revenue Bond Resolution adopted on September 7,1989,as amended,and Resolution No.of the Authority adopted on December 16,1998,authorizing the issuance of the Bonds (collectively,the "Resolution”).We have also reviewed the certificate as to arbitrage of the Authority dated the date hereof (the "Tax Certificate”),an opinion of counsel to the Authority,certificates of the Authority and others,and such other documents,opinions and matters to the extent we deemed necessary to render the opinions set forth herein. The opinions expressed herein are based on an analysis of existing laws, regulations,rulings and court decisions and cover certain matters not directly addressed by such authorities.Such opinions may be affected by actions taken or omitted or events occurring after the date hereof.We have not undertaken to determine,or to inform any person,whether any such actions or events are taken or do occur.We disclaim any obligation to update this letter.We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies)by any parties other than the Authority and the due and legal execution and delivery thereof by any parties other than the Authority.We have not undertaken to verify independently,and have assumed,accuracy of the factual matters represented,warranted or certified in the documents,referred to in the preceding paragraph.Furthermore,we have assumed compliance with the covenants and agreements contained in the Resolution and the Tax Certificate, B-1 including (without limitation)covenants and agreements compliance with which is necessary to assure that future actions,omissions or events will not cause interest on the Bonds to be included in gross income for federal income tax purposes.We call attention to the fact that the rights and obligations under the Bonds,the Resolution and the Tax Certificate may be subject to bankruptcy, insolvency,reorganization,arrangement,fraudulent conveyance,moratorium and other laws relating to or affecting creditors'rights generally,to the application of equitable principles and the exercise of judicial discretion in appropriate cases.Finally,we express no opinion as to the Official Statement or other offering material relating to the Bonds. Based upon the foregoing,and in reliance thereon,as of the date hereof we are of the opinion that,under existing law: 1.All necessary proceedings (except for the execution and delivery of the Bonds)have been taken by the Authority for the issuance of the Bonds. 2.The Purchase Agreement has been duly executed and delivered by the Authority and (assuming due authorization,execution and delivery by and validity against the Underwriters)constitutes a valid and binding agreement of the Authority. If the issuance and delivery of the Bonds were to occur on the date hereof pursuant to the Purchase Agreement,and the proceeds thereof were applied in accordance with the Tax Certificate,based upon our review and analysis of existing laws,regulations,rulings and court decisions,we would be able to render a final legal opinion substantially in the form set forth in Appendix B to the draft Official Statement. Sincerely, WOHLFORTH,ARGETSINGER,JOHNSON &BRECHT EXHIBIT C [Opinion of Attorney General] April __,1999 Alaska Energy Authority 480 West Tudor Road Anchorage,Alaska 99503 Prudential Securities Incorporated 1201 Third Avenue,Suite 5350 Seattle,Washington 98101 Gentlemen: This office acts as counsel for the Alaska Energy Authority (the "Authority”),and has served in such capacity in connection with the issuance on this date by the Authority of its $Alaska Energy Authority Power Revenue Refunding Bonds,Fifth Series (Bradley Lake Hydroelectric Project)(the "Bonds”).In such capacity,I have examined,among other things,the following: 1.The Constitution and statutes of the State of Alaska (the "State”)that I consider necessary for the purpose of this opinion,including,without limitation,the provisions of Chapter 83 of Title 44 of the Alaska Statutes (the "Act”). 2.The proceedings of the Board of Directors of the Authority regarding the adoption of the Bradley Lake Hydroelectric Project Power Revenue Bond Resolution (the "Power Revenue Bond Resolution”)and the Bradley Lake Hydroelectric Project Fourth Supplemental Resolution (the "Supplemental Resolution”)authorizing,among other things,the following (being hereafter referred to collectively as the "Instruments”): . (a)the execution and delivery of the Agreement for the Sale and Purchase of Electric Power dated and entered into on December 8,1987,by and between the Authority and the Power Purchasers named therein (the "Power Sales Agreement”); (b)the execution and delivery of the Forward Delivery Bond Purchase Agreement,dated ,1999,by and among the Authority and Prudential Securities Incorporated and Goldman,Sachs &Co.,as underwriters. C-1 3.Certified copies of the Power Revenue Bond Resolution and the Supplemental Resolution;and executed counterparts of the Instruments. 4.The Official Statement,dated ,1999 (the "Official Statement”),relating to the Bonds. 5.The Federal Energy Regulatory Commission License No.,With respect to the Bradley Lake Hydroelectric Project (the "Project License”)and the Order of the Federal Energy Regulatory Commission granting the Project License to the Authority. 6.Such other certificates,documents and instruments as I have deemed relevant and necessary. The law covered by the opinions expressed herein is limited to the Federal law of the United States and the law of the State. In rendering my opinions,I have made the following assumptions: (a)All legal requirements applicable to parties,as such,to the issuance of the Bonds,and the documents and instruments,including the Instruments,executed in connection therewith,other than the Authority,have been satisfied. (b)As to documents that have been submitted to me for review,each is accurate and complete,each original is authentic,each copy conforms to an authentic original and all signatures (other than those of the Authority)are genuine. Based on the foregoing,and in reliance thereon,it is my opinion that,as of the date hereof: (i)The Authority is empowered by the Act,the Power Revenue Bond Resolution and the Supplemental Resolution,to execute,deliver and perform the Instruments,and to issue and sell the Bonds. (ii)|The Power Revenue Bond Resolution was duly adopted by the Board of Directors of the Authority,in accordance with the Act,has not been repealed or amended,and remains in full force and effect. (iii)|The Supplemental Resolution was duly adopted by the Board of Directors of the Authority in accordance with the Act,has not been repealed or amended and remains in full force and effect. (iv)The Instruments and the Bonds have been duly authorized,executed and delivered by the Authority,and constitute the legal,valid and binding obligations of the Authority, enforceable in accordance with their terms. (v)The adoption and performance of the Power Revenue Bond Resolution and the Supplemental Resolution,and the execution,delivery and performance by the Authority of the Bonds,and the Instruments,do not violate any provision of law or any resolution of the Authority or,to the best of my knowledge after reasonable investigation,any judgment,order,rule or regulation of any court or of any public or governmental agency or authority applicable to the Authority. (vi)Tothe best of my knowledge and in reliance upon representations of officers of the Authority,there is no action,suit,proceeding,inquiry or investigation at law or in equity before or by any court,public board or body pending or threatened,or any basis for any such action,suit,proceeding,inquiry or investigation,including any proceedings before the Federal Energy Regulatory Commission,wherein any unfavorable decision,ruling or finding would have a material adverse effect on the Authority's rights to own or operate the Bradley Lake Hydroelectric Project,or the validity or enforceability of the Bonds,the Power Revenue Bond Resolution,the Supplemental Resolution or the Instruments,or any transaction contemplated by the Authority arising therefrom,or the ability of the Authority to perform its obligations thereunder. (vii)No additional or further approval,consent,authorization or other order of any governmental or public authority or agency (not already obtained)is legally required of the Authority for the adoption by the Board of Directors of the Authority of the Power Revenue Bond Resolution and the Supplemental Resolution,in the execution and delivery by the Authority of the Instruments or the Bonds;and no additional or further approval,consent,authorization on other order of any governmental or public authority on agency (not already obtained)is legally required, which,if not obtained,would materially impair the ability of the Authority to own and operate the Bradley Lake Hydroelectric Project or to perform its obligations under the Project License, the Power Revenue Bond Resolution,the Supplemental Resolution or any of the Instruments. (viii)The payments to be received by the Authority pursuant to the Power Sales Agreement and the right of the Authority to enforce the obligations of the Power Purchasers under the Power Sales Agreement have been validly assigned by the Authority to the Trustee in accordance with the terms of the Power Sales Agreement and the Power Revenue Bond Resolution. (ix)All meetings of the governing body of the Authority at which action was taken in connection with the Power Revenue Bond Resolution,the Supplemental Resolution,the Instruments and the authorization,sale and issuance of the Bonds were duly and legally called and held and such meetings were open to the public at all times to the extent required by State law, and notice of the time and place of each such meeting was given as required by State law and the procedural rules of the Authority. (x)The information and statements contained in the Official Statement under the captions "Introduction,”"The Authority”and "Litigation,”as such pertains to the Authority, are accurate statements or summaries of the matter therein set forth and fairly present the information purported to be shown,and do not contain any untrue statement of a material fact or C-3 omit to state any material fact required to be stated therein or necessary to make the statements therein,in light of the circumstances under which they were made,not misleading. With respect to the enforceability of the Power Revenue Bond Resolution,the Supplemental Resolution,the Instruments and the Bonds,this opinion is subject to the qualifications that:(i)the enforceability of such document or instrument may be limited by Alaska or Federal bankruptcy,insolvency,reorganization,moratorium or other similar laws relating to or affecting the enforcement of creditors'rights generally from time to time in effect; (ii)the enforceability of equitable rights and remedies provided in such document or instrument is subject to judicial discretion and may be limited by general principles of equity;(iii)the enforceability of such document or instrument may be limited by public policy;and (iv)certain of the remedial and waiver provisions of such document or instrument may be unenforceable; provided,however,in my opinion,the unenforceability of these provisions would not affect the validity of such document or instrument or prevent the practical realization of the benefits thereunder. Very truly yours, BRUCE E.BOTELHO ATTORNEY GENERAL By Keith A.Laufer Assistant Attorney General C-4 EXHIBIT D ALASKA ENERGY AUTHORITY $Principal Amount Power Revenue Refunding Bonds,Fifth Series (Bradley Lake Hydroelectric Project) CERTIFICATE REQUIRED BY [SECTION 11(a)(7)/13(A)(8)]OF THE FORWARD DELIVERY BOND PURCHASE AGREEMENT The undersigned Executive Director and Deputy Director-Project Development and Operations of the Alaska Energy Authority (the "Authority”)hereby certify that: 1.this certificate is being delivered in satisfaction of the conditions of Section [11(a)(7)/13(a)(8)]of the Forward Delivery Bond Purchase Agreement dated_____(the "Forward Delivery Agreement”),between the Authority and Prudential Securities Incorporated and Goldman,Sachs &Co.,and all capitalized terms usedin this certificate have the meanings given such terms in the Forward Delivery Agreement; 2.the representations and warranties of the Authority contained in the Forward Delivery Agreement with respect to the sale by the Authority of the above-captioned bonds (the "Fifth Series Bonds”),are true and correct in all material respects on and as of the date of the [Closing or Settlement,as applicable],as if made on the date of the [Closing or Settlement,as applicable]; 3.no action,suit,proceeding,inquiry or investigation,at law or in equity, before or by any court,government agency,public board or body,is pending or,to our actual knowledge,threatened against the Authority (nor to our actual knowledge is there any basis therefor),affecting the corporate existence of the Authority or the titles of its officers to their respective offices,or affecting or seeking to prohibit,restrain or enjoin the sale,issuance or delivery of the Fifth Series Bonds or the right of the Authority to collect the Revenues of the Authority pledged to pay the principal of and interest on the Fifth Series Bonds,or the pledge thereof and lien on the Revenues,funds and accounts pursuant to the Bond Resolution,or in any way contesting or affecting the validity or enforceability with respect to the Authority of the Forward Delivery Agreement,Fifth Series Bonds,the Bond Resolution,the Continuing Disclosure Undertaking,the Escrow Agreement or the Power Sales Agreement,contesting the tax-exempt status of interest on the Fifth Series Bonds or the Prior Bonds,or contesting the completeness or accuracy of the [Updated]Official Statement dated ;(the "Official Statement”)],(the "Updated Official Statement”)],or contesting the powers of the Authority or any authority for the issuance of the Fifth Series Bonds,the adoption of the Bond Resolution or the Continuing Disclosure Undertaking or the execution and delivery by the Authority of the D-1 Forward Delivery Agreement or the Escrow Agreement,nor,to the best of my knowledge,is there any basis for any such action,suit,proceeding,inquiry or investigation wherein an unfavorable decision,ruling or finding would materially adversely affect the validity or enforceability of or the performance by the Authority of the Fifth Series Bonds,the Bond Resolution,the Continuing Disclosure Undertaking or the Power Sales Agreement; 4.we have read the [Updated]Official Statement and to our actual knowledge, except for statements under the captions "Bond Insurance,”"The Power Purchasers,”"State and Federal Initiatives Regarding Competition in the Electric Utility Industry”and "Book Entry System”as to which no opinion is expressed,the [Updated]Official Statement as of its date did not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein,in the light of the circumstances under which they were made,not misleading,and no event has occurred since the date of the [Updated]Official Statement which should be disclosed in the [Updated]Official Statement so that the [Updated]Official Statement will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein,in the light of the circumstances under which they were made,not misleading,and which has not been disclosed in a supplement,or amendment to the [Updated] Official Statement; 3.to the best of our knowledge,the Authority has complied with the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the date hereof pursuant to the Forward Delivery Agreement with respect to the issuance of the Fifth Series Bonds;and 6.the Power Sales Agreement constitutes a legal,valid and binding agreement of the Authority enforceable against the Authority in accordance with its terms,except to the extent that enforcement may be limited by bankruptcy,insolvency or other laws affecting creditors'rights generally;the Authority is not in material breach of or material default under the Power Sales Agreement or the Bond Resolution and no event has occurred and is continuing which,with the passage of time,the giving of notice or both,would constitute a default or any event of default by the Authority under the Power Sales Agreement or the Bond Resolution;and, to the best of our knowledge,no material default or event of default has occurred,and no event has occurred and is continuing which,with the passage of time,the giving of notice or both, would constitute a material default or an event of default under the Power Sales Agreement by any of the other parties thereto. ALASKA ENERGY AUTHORITY Executive Director Deputy Director-Project Development and Operations [Closing Date] [Settlement Date] D-3 EXHIBIT E [TO BE UPDATED BY ATER WYNNE] [To BE DISCUSSED] Alaska Energy Authority 490 West Tudor Road Anchorage,Alaska 99503 Prudential Securities Incorporated 1201 Third Avenue,Suite 5350 Seattle,Washington 98101 Goldman,Sachs &Co. 85 Broad Street New York,New York 10004 Re:|Update Opinion in Connection with the Issuance by the Alaska Energy Authority of its $Power Revenue Refunding Bonds,Fifth Series (Bradley Lake Hydroelectric Project)pursuant to a Forward Delivery Bond Purchase Agreement dated between the Alaska Energy Authority, Prudential Securities Incorporated and Goldman,Sachs &Co.,as Underwriters and approved and agreed to by the Bradley Lake Hydroelectric Project Management Committee (the "Forward Delivery Agreement”)(collectively the "Transaction”) Ladies and Gentlemen: The Railbelt Utilities Group ("RUG”)is a group of utilities formed for the purpose of advancing common interests of its members and acting only with the duly authorized consent of all its members,among other things,as parties to the PSA described below.The members of RUG are Alaska Electric Generation &Transmission Cooperative,Inc.;Chugach Electric Association,Inc.;Golden Valley Electric Association,Inc.;Homer Electric Association,Inc.; Matanuska Electric Association,Inc.;The Municipality of Anchorage d/b/a Municipal Light and Power;and the City of Seward d/b/a Seward Electric System (the "utilities”).Ater Wynne,LLP, serves as counsel to RUG,but not to its individual members,other than Golden Valley Electric Association,Inc. E-1 Unless otherwise provided,capitalized terms used herein shall have the meanings as set forth in the PSA (defined below).The Transaction Documents are: (1)The Settlement Agreement dated among all the parties to the Bradley Lake Hydroelectric Project Agreement for the Sale and Purchase of Electric Power; (2)Opinions of Power Purchaser's Counsel on the Settlement Agreement as Exhibits -; (3)[Resolutions regarding Settlement Agreement]; (4)Preliminary Official Statement of the Alaska Energy Authority; (5)Forward Delivery Bond Purchase Agreement ("FDA”); (6)The Managers'Certificates attached as Exhibits -; (7)The Certificates attached as Exhibits -required by the FDA; (8)Approving Resolution of Bradley Lake Hydroelectric Project -Project Management Committee; (9)Agreement to Support Forward Refunding;and (10)"Reliance Letters”from counsel for the utilities attached as Exhibits Assumptions and Reliance With your permission,we have relied,without investigation upon the assumptions set forth below: a.Natural persons who are involved on behalf of the utilities have sufficient legal capacity to into and perform the Transaction or to carry out their role in it. b.Each party to the Transaction (other than the utilities and the Project Management Committee defined below)his satisfied those legal requirements that are applicable to it to the extent necessary to make the Transaction Documents enforceable against it. Cc.Each party to the Transaction (other than the utilities)has complied with all legal requirements pertaining to its status as such status relates to its rights to enforce the mon against the utilities. d.Each Transaction Document,including without limitation the Certificates (as defined below),submitted to us for review is accurate and complete,each such document that is an original is authentic,each such document that is a copy conforms to an authentic original, all signatures on each such document are genuine,and that the Certificate givers and those executing the other Transaction Documents have been duly authorized by their respective utility to execute the Transaction Documents,give the Certificates and the Reliance Letters and make the representations and agreements contained therein. e.There has not been any mutual mistake of fact or misunderstanding,fraud, duress or undue influence in connection with this Transaction. f.The conduct of the parties to the Transaction has complied with all applicable requirements of good faith,fair dealing and conscionability. g.The opinion recipients and any agent acting for them in connection with the Transaction have acted in good faith and without notice of any defense against the enforcement of any rights created by,or adverse claim to any interest transferred or created as part of,the Transaction. h.There are no agreements or understandings among the parties,written or oral,and there is no usage of trade or course of prior dealing among the parties that would,in either case,define,supplement or qualify the terms of the Transaction Documents. i.All statutes,judicial and administrative decisions,and rules and regulations of governmental agencies constituting the law of Alaska,are generally available (i.e.,in terms of access and distribution following publication or other release)to lawyers practicing in Alaska,and are in a format that makes legal research reasonably feasible. j.The constitutionality or validity of a relevant statute,rule,regulation or agency action is not in issue unless a reported decision in Alaska has specifically addressed but not resolved,or has established,its unconstitutionality or invalidity. k.The utilities will not in the future take any discretionary action (including a decision not to act)permitted under the Transaction Documents that would result in a violation of law or constitute a breach or default under any agreement or court order to which it is subject. 1.The utilities will obtain all permits and governmental approvals required in the future,and take all actions similarly required,relevant to subsequent consummation of the Transaction or performance of the Transaction. m.All parties to the Transaction will act in accordance with,and will refrain from taking any action that is forbidden by,the terms and conditions of the Transaction Documents. E-3 As counsel to RUG,with your permission we have reviewed and relied upon the Certificates of members of RUG (collectively,the "Certificates”)attached as Exhibits -.In addition with your permission,we have assumed (without independent verification and without ourselves opining thereon)and based on the Reliance Letters,that the Bradley Lake Hydroelectric Project Agreement for the Sale and Purchase of Electric Power dated as of December 8,1987,as clarified by letter agreement dated November 7.1988 ('PSA”), among the Authority and the members of RUG as Purchasers or Additional Parties under the PSA, was the valid and binding obligation of the Authority,Purchasers and Additional Parties thereto, enforceable in accordance with its terms against all parties thereto as of the date of issuance of the Original Opinions defined below.We have also reviewed the Approving Resolution of the Bradley Lake Project Management Committee (i.e.,the Project Management Committee established under Section 13 of the PSA)dated October __,1997,Resolution No. ("PMC Approving Resolution”)and the Authority's Supplemental Resolution No.1997-03 respecting the issuance of the referenced bonds and the forward delivery bond agreement.With your permission we also have assumed and relied upon the accuracy as of the date thereof (without independent verification and without ourselves opining thereon)of [opinions of counsel of utility members of RLJG]as to the authorization.execution,delivery,validity,binding effect, and enforceability of the Settlement Agreement (dated )as to each of the Purchasers and Additional parties to the PSA (collectively,the "Settlement Opinions”).In addition,with your permission of the opinion giver,we have relied (without independent verification and without ourselves opining)on the opinions of for the conclusion that the PSA was the.valid and binding obligation of enforceable in accordance with its terms against as of the date of the described opinion (the "Original Opinions”). Opinions Upon the assumptions contained herein and on review and reliance on the law of Alaska Federal law and on the Certificates,Settlement Opinions and Original Opinions,and subject to all assumptions,limitations and qualifications contained herein and in the Certificates, it is our opinion that: 1.The Project Management Committee has duly authorized the PMC Approving Resolution in accordance with the applicable requirements of the PSA,including without limitation the provisions of Sections 11 and 13 thereof,and the PMC Approving Resolution is in full force and effect. 2.Pursuant to the PMC Approving Resolution,the obligations of the Purchasers and Additional Parties under the PSA include the payment obligations of the Purchasers and Additional Parties by Authority on their behalf the Forward Delivery Agreement, which payment obligations have been approved as Annual Project Costs (as defined in Section 8(a) of the PSA)by the PMC Approving Resolution. 3.The PSA remains in full force and effect and is the legal,valid and binding obligation of the Purchasers and Additional Parties enforceable in accordance with its term against the Purchasers and Additional Parties subject to the qualifications contained in this letter. E-4 4,The statement contained in the Official Statement under the captions "Security and Sources of Payment of the Fifth Series Bonds -Power Sale Agreement,”"The Bradley Lake Hydroelectric Project -Project Management Committee,”"The Power Purchasers,”"State and Federal Regarding Competition in the Electric Utility Industry,” "Litigation”and "Disputes Among the Authority,the Power Purchasers,HEA and MEA,”insofar as the statements other than financial statements,engineering data,numbers,assumptions or expressions of opinion about which we express no opinion)contained under such captions purport summarize certain provisions of the Power Sales Agreement and to describe the Principal Power Purchasers and certain provisions relating to the electric utility industry in the State of Alaska,are fair es in all material respects and,to our actual knowledge,such statements under such captions do not contain any untrue statement of a material fact or omit to state a materia fact to make the statements under such captions,in light of the circumstances under which they were made,not misleading. Qualifications This opinion letter is subject to the effect of bankruptcy,insolvency,reorganization, receivership,moratorium and other similar laws affecting the rights and remedies of creditors generally.This exception includes: a.The Federal Bankruptcy Code and thus comprehends,among others,matters of turn-over,automatic stay,avoiding powers,fraudulent transfer,preference,discharge, conversion of a non-obligation into a recourse claim,limitations on ipsofacto and anti-assignment clauses and the coverage of pre-petition security agreements applicable to after a petition is filed; b.all other Federal and state bankruptcy,insolvency,reorganization, receivership,moratorium,arrangement and assignment for the benefit of creditors laws that affect the rights and remedies of creditors generally (not just creditors of specific types of debtors); c.all other Federal bankruptcy,insolvency,reorganization,receivership, moratorium,arrangement and assignment for the benefit of creditors laws that have reference to or affect generally only creditors of specific types of debtors and state laws of character affecting generally only creditors of municipal corporations; d.state fraudulent transfer and conveyance laws;and e.judicially developed doctrines relevant to any of the foregoing laws,such as substantive consolidation of entities. This opinion letter is subject to the effect of general principles of equity,whether applied by a court of law or equity.This limitation includes principles: E-5 a.governing the availability of specific performance injunctive relief or other equitable remedies,which generally place the award of such remedies,subject to certain guidelines,in the discretion of the court to which application for such relief is made; b.affording equitable defenses (e.g.,waiver,laches estoppel)against a party seeking enforcement; c.requiring good faith and fair dealing in the performance and enforcement of a contract by the party seeking its enforcement; d.requiring reasonableness in the performance and enforcement of an agreement by the party seeking enforcement of the contract; e.requiring consideration of the materiality of (i)the parties'breach and (ii) the consequences of the breach to the party seeking enforcement; f.requiring consideration of the impracticability or impossibility of performance at the time of attempted enforcement;and g.affording defenses based upon the unconscionability of the enforcing party's conduct after the parties have entered into the contract. This opinion letter is subject to the effect of generally applicable rules of law that: a.limit the availability of a remedy under certain circumstances where another remedy has been elected; b.limit the enforceability of provisions releasing,exculpating or exempting a party from,or requiring indemnification of a party for,liability for its own action or inaction, to the extent the action or inaction involves gross negligence,recklessness,willful misconduct or unlawful conduct; Cc.may,where less than all of a contract may be unenforceable,limit the enforceability of the balance of the contract to circumstances in which the unenforceable portion is not an essential part of the a exchange; d.governand afford Judicial discretionregarding the determination of damages and entitlement to attorneys'fees and other costs; e.may permit a party who has materially failed to render or offer performance required by the contract to cure that failure unless (i)permitting a cure would unreasonably hinder the aggrieved party from making substitute arrangements for performance,or (ii)it was important in the circumstances to the aggrieved party that performance occur by the date stated in the contract. E-6 This opinion letter speaks only as of its date.We disclaim any obligation to advise the opinion recipients (or any third party)of changes of law or fact that occur after the date of this opinion letter,even though the change may affect the legal analysis or a legal conclusion in this opinion letter. This opinion deals only with the specific legal issues it explicitly addresses. Accordingly,an express opinion concerning a particular legal issue does not address any other matters. This opinion letter does not address any of the following legal issues: a.Except as to opinion 4 above,federal securities laws and regulations administered by the Securities and Exchange Commission (other than the Public Utility Holding Company Act of 1935),state "Blue Sky”laws and regulations,and laws and regulations relating to commodity (and other)futures and indices and other similar instruments; b.Federal and state antitrust and unfair competition laws and regulations; c.compliance with fiduciary duty requirements; d.fraudulent transfer and fraudulent conveyance laws; e.Federal and state environmental laws and regulations; f.Federal and state tax laws and regulations; g.Federal and state health and safety laws and regulations (e.g.,OSHA);and h.Federal and state labor laws and regulations. Only the opinion recipients are entitled to rely upon or to assert any legal rights based upon this opinion letter,and the opinion recipients may rely on this opinion only for the purpose contemplated by the Transaction.Without our prior written consent,this opinion letter may not be used or relied upon by the opinion recipients or any other person for any other purpose whatsoever,except for its use (i)in connection with review of the Transaction by a regulatory agency having supervisory authority over the opinion recipient or other person,for the purpose of confusing the opinion's existence,(ii)in connection with the assertion of a defense as to which the opinion is relevant and necessary,or (iii)in response to a court order. Respectfully submitted, ATER WYNNE,LLP Counsel to the Railbelt Utilities Group EXHIBIT F [To BE ADJUSTED FOR AG&T] CERTIFICATE OF POWER PURCHASER REQUIRED BY SECTION [11(a)(S)/13(a)(9)]OF THE FORWARD DELIVERY BOND PURCHASE AGREEMENT We,and General Manager and Chief Financial Officer,respectively,of the [Chugach Electric Association,Inc.,] [Golden Valley Electric Association,Inc.,][Municipality of Anchorage d/Ib/a Municipal Light and Power,][Alaska Electric Generation &Transmission Cooperative,Inc.,][Homer Electric Association,Inc.,][Matanuska Electric Association,Inc.](the "Power Purchaser”),hereby certify that: 1.This certificate has been executed in connection with the [Closing/Settlement]under (and as defined in)the Forward Delivery Bond Purchase Agreement (the "Forward Delivery Agreement”)dated ,between the Alaska Energy Authority (the "Authority”)and Prudential Securities Incorporated and Goldman,Sachs &Co., as Underwriters,relating to the issuance and sale by the Authority of its $ principal amount Power Revenue Refunding Bonds,Fifth Series (Bradley Lake Hydroelectric Project),(the "Fifth Series Bonds”),as more fully described in the [Updated]Official Statement of the Authority dated ,relating to the Fifth Series Bonds (the "Official Statement”).Any capitalized term used and not otherwise defined in this certificate has the meaning given such term in the Forward Delivery Agreement. 2.The description of the business and properties of the power system of the Power Purchaser included in the Official Statement under the caption "The Power Purchasers” including the financial information and operating and statistical data of the Power Purchaser included under such caption,and the description of the Bradley Lake Hydroelectric Project included therein,as of the date of the Official Statement and at all times subsequent thereto up to and including the date thereof,was and is true and accurate.[ADD APPLICABLE CAPTIONS UNDER THE SECTION "PENDING DISPUTES”FOR GVEA,MEA,AND CEA.] 3.The Power Sales Agreement has not been amended,altered or repealed and is in full force and effect. 4.The Project Management Committee Approval given by the Project Management Committee pursuant to the Power Sales Agreement has not been amended,altered or repealed and is in full force and effect,and all payment obligations incurred by the Authority in respect of the Forward Delivery Agreement and the Fifth Series Bonds are included in the Power Purchaser's Percentage Share of Annual Project Costs for all purposes and within the meaning of the Power Sales Agreement and the Bond Resolution. 3.To our actual knowledge after reasonable inquiry,no litigation is pending or threatened in any court in any way affecting the corporate existence of the Power Purchaser, or the titles of its officers to their respective offices,or in any way contesting or affecting the validity or enforceability of the Power Sales Agreement,including the right or authority and obligation of the Power Purchaser to pay its Percentage Share of Annual Project Costs under and as defined by the Power Sales Agreement,or to our actual knowledge without investigation seeking to prohibit,restrain or enjoin the sale,issuance or delivery of the Fifth Series Bonds or in any way contesting or affecting the validity or enforceability of the Fifth Series Bonds,the Bond Resolution,the Forward Delivery Agreement,the Agreement to Support Forward Refunding,the Escrow Agreement,or the pledge of the Revenues pursuant to the Bond Resolution,or the Project Management Committee Approval,or contesting in any way the completeness or accuracy of the Official Statement. 6.We have read the statements contained in the Official Statement under the caption "The Bradley Lake Hydroelectric Project,”in the sections titled "Introduction,”"Rate Regulation,”"Power Requirements”and "Generation Resources and Utilization of the Project” under the caption "The Power Purchasers,”and under the caption "State and Federal Initiatives Regarding Competition in the Electric Utility Industry,”and to our actual knowledge statements under such captions in the Official Statement,did not,as of its date,and does not,as of the date hereof,contain any untrue statement of a material fact,nor did they nor do they omit to state a material fact required to be stated therein or necessary to make the statements contained therein, in the light of the circumstances under which they were made,not misleading. [Chugach Electric Association,Inc.] [Golden Valley Electric Association,Inc.] {Municipality of Anchorage d/b/a Municipal Light and Power] [Alaska Electric Generation &Transmission Cooperative,Inc.] [Homer Electric Association,Inc.] [Matanuska Electric Association,Inc.] By General Manager By Chief Financial Officer [Closing Date] {Settlement Date] Doc #:CHO02 (66810-00031)881209v3;12/5/1998/Time:17:30 LAW OFFICES PyBircu,HorToN,BITTNER AND CHEROF (9 iG lores AgRPORATION127WESTSEVENTHAVENUE«ANCHORAGE,ALRSK gasouedsa ELEPHONE (907)276-1550 ©(800)478-1550 *FACSIMILE (907)276-3680 HAL R.HORT!44-\.'LedORTON(1944-1998)\aod 1 we THOMAS L.ALBERT*tt RALPH V.ERTZ JAMES H,LISTER *t2 °D.C.BA KEY BANK BUILDING RONALD G.BIRCH*?JOSEPH W.EVANS**THOMAS R,MANNIELLO 3 2 01C>ANG ALASKA BAR 100 CUSHMAN STREET,SUITE 311 WILLIAM H.BITTNER TINA M.GROVIER GREGORY A,MyUeR FEE!OM MARYLAND BAR FAIRBANKS,ALASKA 93701-4672 KATHRYN A.BLACK WILLIAM P,HORN I,MICHAaLU.PARISE Aui GIRGINIA BAR (907)452-1666 «(800)478-1666 PHILIP BLUMSTEIN STEPHEN H.HUTCHINGS DAVID G.sapere 2 Ort ALL OTHERS ALASKA BAR FACSIMILE (907)456-5055 CORY R.BORGESON ROY S.JONES,JR.*TMoTe)OS DOUGLAS S.BURDIN®MARA E.KIMMEL ELIZABETH A.PHILLIPS JOHN J.BURNS THOMAS F.KUNKNER ERIC D.REICIN®115S CONNECTICUT AVE.,N.W. SUZANNE CHEROT HARVEY A.LEVINGt ELISABETH H.ROSS**SUITE 1200 JOHN J.CONNORS STANLEY T.LEWIS JAMES A.WEBSTER WASHINGTON,D.C.20036 KIM DUNN :(202)659-5800 FACSIMILE (202)659-1027 WRITER'S DIRECT DIAL NO.(907)263-7267 September 10,1998 Mr.Dennis McCrohan Alaska Energy Authority 480 W.Tudor Road Anchorage,Alaska 99503 Re:Tango Appeal :- Our File No.503,357.73 Dear Dennis: Per your direction,we were able to negotiate with TangoanditscounselafullreleaseanddismissalofTango's claimsin exchange for AEA's agreement not to pursue Tango for attorneys' fees and costs incurred on appeal to the Superior Court.(As you know,Tango has new counsel with a speciality in bankruptcy law, suggesting recovery of fees and costs would have been problematic.) Copies of the dismissal and release are enclosed. Please note that the enclosed release executed by Tango expressly releases the claim of attorney lien filed by Tango's earlier counsel,Rick DeYoung. .You will also recall that Tango's claims at both the agency stage (including hearings before the hearing officer)and on appeal focused principally on contractor costs allegedly incurred due to changes made necessary by defects in project design, specification and supervision provided by R.W.Beck.Tango's persistent requests for trial de novo were based on its desire to join R.W.Beck as a party defendant.(AEA determined that AEA would defend the claims and defer until later any decision whether to seek financial assistance or contribution from R.W.Beck.)In the settlement negotiated with Tango,we required that in addition F:\S03357\73\TKM3363 .WPD 'BIRCH,HORTON,BITTNER AND CHEROT A PROFESSIONAL CORPORATION Mr.Dennis McCrohan Alaska Energy Authority September 10,1998 Page 2 to releasing AEA,Tango release both the Four Dam Pool and R.W. Beck from any claims Tango might have against either entity arising from work on the Terror Lake Project.; Thus,AEA defended against claims that Beck provided defective plans and specifications and,pursuant to the settlement reached,AEA bought Beck's release from any and all Tango claims. The enclosed settlement could serve as a basis for any renewed discussion with R.W.Beck concerning Beck's responsibility for contribution if you wish. I am very pleased to have been able to assist AEA in this case.I thoroughly enjoyed working with you,Tommie,Stan,Dave Eberle and other present and former AEA/AIDEA representatives.If you have any questions or there are other issues on which I can help,please do not hesitate to give me a call. Best wi hes,© BIRCH}//HORTON,BITTNER and CHEROT Steptrén H.Hutchings SHH/mkm Enclosure cc:Mr.D.Randy Simmons Mr.Keith Lauffer (w/enclosure) F:\503357\73\TKM3363 .WPD ELEASE _SETTLEME F_ALL CLAIM DEFINITIONS 1."Releasee"means the ALASKA ENERGY AUTHORITY,as well as its shareholders,partners,subsidiaries,affiliates (including expressly the Alaska Industrial Development Export Authority,the Four Dam Pool and R.W.Beck),directors,officers, agents,employees,insurers,executors,administrators,attorneys, successors and predecessors,trustees,assigns and/or any other persons or entities who may be liable for the acts of the above people or entities. 2."Releasors"means TANGO CONSTRUCTION COMPANY,TONY NEAL,their agents,heirs,executors,administrators,attorneysand |. assigns. 3."Claims"means all demands,actions,causes of action,suits,controversies and damages,of every kind and nature, whether arising from an assertion of a tort obligation or duty,a contractual obligation or duty,or a statutory obligation or duty. This includes,but is not limited to,all claims of contractual obligation,breach of contract,breach of the implied covenant of good faith and fair dealing or breach of any tort or other duty in any way arising from any request for proposals,contract or work in conjunction with rock trap remediation at or otherwise involving the Terror Lake Hydroelectric project and sequelae."Claims" expressly includes,but is not limited to,all causes of action and RELEASE AND SETTLEMENT OF ALL CLAIMS qr Page 1 of 8 F:\503357\73\TGF1091.WPD claims including claims for prejudgment interest,costs and attorney's fees which were or could have been set forth in the administrative hearing and/or its appeal,n n Lon m v k Authorit ,3AN-96-2563 CI,filed in the Superior Court for the State of Alaska,Third Judicial District at Anchorage ("3AN-96-2563 CI”)."Claims"also includes all causes of action,including negligence,and damages,whether known or unknown,whether mature or to mature in the future that were or could have been asserted against the Releasee,including without limitation all claims or demands which Releasors have or may have against Releasee for damages of every kind. RELEASE AND SETTLEMENT 4.IN CONSIDERATION for the dismissal of Releasee's claims for costs-and attorneys'fees,Releasors hereby release and fully discharge Releasee from any and all claims and forego any right to request reconsideration of the Superior Court's decision and any rights to petition,appeal or otherwise request the Alaska Supreme Court to review the findings and decisions of the Superior Court in 3AN-96-2563 CI. 5.Releasors hereby covenant and agree that they will not,themselves or in concert with others,or by virtue of any judicial or administrative proceeding whatsoever,make,acquiesce in or assist in the bringingof any future claim or action for damages against Releasee arising out of,or based upon,or in any RELEASE AND SETTLEMENT OF ALL CLAIMS .TN Page 2 of 8 F:\503357\73\TGF1091.WPD way whatsoever related to circumstances given rise to or described in 3AN-96-2563 CI. } 6.It is understood by Releasors that any and all parties,including,but not limited to,lawyers,partners,persons retained for purposes of this claim and/or insurance or bonding companies,who have or may have assignment rights or a subrogated interest in and/or a lien upon any consideration obtained by Releasors as a result of this settlement will be paid and satisfied from such consideration or from Releasors'own personal funds,and that Releasors agree to release,defend,indemnify and hold harmless Releasee from any and all such claims specifically the attorney's lien filed by Wade &DeYoung on August 12,1997.It is further understood that any such party who may have,or assert to have,a lien or subrogated or assigned interest shall have no cause of action of any nature against Releasee. 7.Upon execution of this Release and Settlement of All Claims,Case No.3AN-96-2563 CI shall be dismissed with prejudice, with each side bearing its own costs and attorneys'fees. 8.Releasors acknowledge that all of Releasee's obligations under this Release and Settlement are met with the above-described dismissal and Releasors agree to defend,indemnify and hold Releasee harmless from and against all claims by Releasors,from and against any claim to consideration for this Release and Settlement by third parties,and from and against all =cRELEASE AND SETTLEMENT OF ALL CLAIMS Page 3 of 8 F:\503357\73\TGF1091.WPD claims,demands,obligations,actions,causes of actions,damages, costs and expenses of any kind. 9.Releasors acknowledge that they have received advice of counsel and have been advised of and are familiar with,the decisions of the Alaska Supreme Court in the cases of Witt v., Watkins,579 P.2d 1065 (Alaska 1978);Alaska Airlines v.Sweat,568 P.2d 916 (Alaska 1977);and Young v,State of Alaska,455 P.2d 889 (Alaska 1969),and further acknowledge that all persons, partnerships,corporations,unincorporated associations or other entities,whether specifically named herein or not,who could at any future date possibly be made defendants,are released from any and all claims which arise out of facts giving rise to this case. This waiver is effective whether the claims are known at this time or are discovered subsequently,even if the claims are different in character or based on damages different in extent from damages of which Releasors are aware at this date. 10.Releasors hereby acknowledge and assume all risk that they may have incurred damage resulting from the circumstances described above which are neither known nor anticipated by Releasors as of this date,and that any known damage suffered as a result of this matter may become permanent,progressive or more extensive than is now known or anticipated.It is Releasors' intention to assume this risk and to release all claims,regardless of the evolution of any damage in the future.As of this date, Releasors are not financially disadvantaged because of the nature RELEASE AND SETTLEMENT OF ALL CLAIMS Nn Page 4 of 8 F:\S03357\73\TGF1091.WPD of the damages suffered in the above-described incident,nor do Releasors feel that they have been pressured or harried into accepting settlement of these claims by the Releasee or any entity or anyone representing it. 11.In executing this release,Releasors do not rely upon any statement or representation made by any person,firm or corporation hereby released,or by any agent or any other person representing the Releasee concerning the nature,extent or duration of any damage or loss resulting from these matters,or the legal liability therefor. 12.Releasors understand that this settlement is in compromise of disputed claims and that the settlement is not to be construed as an admission of liability on the part of Releasee by whom liability is expressly denied. 13.This Release and Settlement of All Claims constitutes the entire agreement of the parties.There are no other oral or written understandings.No amendment of this Release and Settlement shall be effective unless expressed in writing and executed by all parties.Releasors specifically release any right they may now or hereinafter have to reform,rescind,modify or set aside this Release and Settlement of All Claims through mutual or unilateral mistake,or otherwise.The risk of such uncertainty and mistake is hereby expressly assumed by the Releasors in consideration of the forbearance of Releasee in pursuing costs and wo RELEASE AND SETTLEMENT OF ALL CLAIMS WwW Page S of 8 F;\503357\73\TGF1091.WPD fees referenced herein and in consideration of this being a full and final settlement. 14.This Release and Settlement of All Claims shall be construed and enforced in accordance with the laws of the State of Alaska.Releasors hereby irrevocably submit to the jurisdiction of the courts of the State of Alaska,venue to be in the Third Judicial District,for any action or proceeding brought to enforce, or otherwise arising out of or relating to,this Release and Settlement of All Claims. 15.This Release and Settlement of All Claims may be executed in counterparts so long as each of the Releasors to this Release and Settlement executes at least one counterpart;and all such executed counterparts shall collectively constituteone and the same original document. RELEASORS ACKNOWLEDGE THAT THEY ARE REPRESENTED BY LEGAL COUNSEL IN REGARD TO THIS RELEASE AND FURTHER DECLARE THAT THE TERMS OF THIS RELEASE HAVE BEEN CAREFULLY READ AND ARE FULLY UNDERSTOOD AND VOLUNTARILY ACCEPTED FOR THE PURPOSE OF MAKING A FULL AND FINAL COMPROMISE,ADJUSTMENT AND SETTLEMENT OF ALL CLAIMS, DISPUTED OR OTHERWISE,ARISING OUT OF OR BASED UPON OR IN ANY WAY WHATSOEVER RELATED TO THE INCIDENT DESCRIBED ABOVE.THIS RELEASE CONTAINS THE ENTIRE AGREEMENT BETWEEN THE PARTIES HERETO,AND THE TERMS OF THE RELEASE ARE CONTRACTUAL AND NOT MERELY A RECITAL.THE RELEASE AND SETTLEMENT OF ALL CLAIMS cw Page 6 of 8 F:\503357\73\TGF1091.WPD SOLE CONSIDERATION FOR THIS SETTLEMENT AND RELEASE IS EXPRESSED ABOVE. This Release and Settlement of All Claims contains eight (8)pages. RELEASORS: TANGO CONSTRUCTION COMPANY, an Alaska Corporation -?DATED:©Sewf@s By:[pte 'TONY /NHAL,President ,-- DATED:oY Seat §[Om7t"4. TONY NEAL,F#dividually STATE OF ALASKA ) )ss: THIRD JUDICIAL DISTRICT ) THIS IS TO CERTIFY that on this At fe day of , 1998,the undersigned,a Notary Public in and for the State of Alaska,duly commissioned and sworn as such,personally appeared Tony Neal,to me known to be the President of TANGO CONSTRUCTION COMPANY,an Alaska corporation,and known to me to be the person who executed the RELEASE AND SETTLEMENT OF ALL CLAIMS for and on behalf of said corporation by authority duly vested in said person; and said individual acknowledged to me that he signed the same freely and voluntarily for the uses and purposes therein mentioned. IN WITNESS WHEREOF,I have hereunto set my hand and seal the day and year first herein above written. QUelennagy "ai "ny," ;D.,A ivac5S 4.", JS _Notary Public for Alaska ' My Commission expires:2S4/GYfof "MyLy"JLZ>NfKenutter,\)MyA>Zo+SS1,<>"Aww"Le og%OFwy OSRELEASEANDSeprighit?J&sALL CLAIMS TW Page 7 of 8 "tw F:\503357\73\TGF1091.WPD STATE OF ALASKA ) )ss: THIRD JUDICIAL DISTRICT )THIS IS TO CERTIFY that on this LTV day oe SL1998,the undersigned,a Notary Public in and for the State of Alaska,duly commissioned and sworn as such,personally appeared before me TONY NEAL,to me known to be the individual described in and who executed the RELEASE AND SETTLEMENT OF ALL CLAIMS and acknowledged that he signed the same as his free and voluntary act and deed,for the uses and purposes therein mentioned. UUUeUe iter,IN |i Sih JREOF,I have hereunto set my hand and sealthedayandSax'fits eiexein above written.&Os lL)Midgarww-GE EF38Pupsos Notary Public fof Alaska%oer My Commission expires:2S 4E¢/GGGqOFS77MG**S"My *«*ty wwREVIEWEDANDAPPRO S TO FORM AND CONTENT this day of Super"1998.PP)LM bor William D.Artus,Attorney for Tango Construction Company REVIEWED AND APPROVED AS TO FORM AND CONTENT this 974 day of"y LER.R.DeYoung,Attorney for Tango Construction Company REVIEWED AND APPROVEDAS TO FORMANDCONTENTthisArThb.aay ofsat1998.Within tzWilliamD.Artus,Attorney for Tony Neal RELEASE AND SETTLEMENT OF ALL CLAIMS Page 8 of 8 F:\503357\73\TGF1091.WPD os BIRCH,HORTON,BITTNERANDCHEROTAttomeysAtLaw1127WestSeventhAvenueAnchorage,Alaska99501-3399Telephone(907)276-1550«Facsimile(907)276-3680IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE TANGO CONSTRUCTION COMPANY, an Alaskan corporation, Appellant, vs. ALASKA ENERGY AUTHORITY, Appellee.Case No.3AN-96-2563 CI STIPULATION FOR DISMISSAL WITH PREJUDICE Appellant Tango Construction Company and Appellee Alaska Energy Authority,by and through their respective counsel of record,and pursuant to Appellate Rules 606(a)and 511(a), hereby stipulate and agree to the dismissal with prejudice of this action,including all claims and counterclaims asserted or capable of assertion herein.It is further stipulated that the parties waive all rights to appeal,to petition for review,for hearing,or for reconsideration of the final decision in this matter dated July 17,1998.Finally,it is agreed that the parties hereto shall bear all of their own costs and attorneys' fees. WADE &DEYOUNG Attorneys for Appellant Tango Construction Company DATED:PILILXS By:LL E-=>" R.R.DeYoung,#7705015 F:\503357\73\TKM3293 .WPD -1- BIRCH,HORTON,BITTNERANDCHEROTAttorneysAtLaw1127WestSeventhAvenueAnchorage,Alaska99501-3399Telephone(907)276-1550«Facsimile(907)276-3680DATED:d/-3199ff| F:\503357\73\TKM3293 .WPD BIRCH,HORTON,BITTNER AND CHEROT Attorneys for AppelleeOdaeAuthority/eepen F nascA #7705026 ALASKA INDUSTRIAL DEVELOPMENT a”AND EXPORT AUTHORITY x>ALASKAMEENERGYAUTHORITY 480 WEST TUDOR ANCHORAGE,ALASKA 99503 907 /269-3000 FAX 907 /269-3044 MEMORANDUM TO:D.Randy Simmons Executive Director FROM:Dennis V.McCrohan,P.E. Deputy Director -Project Development and Operations DATE:December 7,1998 SUBJECT:Operating Efficiencies Four Dam Pool In response to your memorandum of December 16,1997,to the AEA Board concerning Four Dam Pool options,the Board directed staff to support and assist the Four Dam Pool utilities in improving operating efficiencies and reducing operating and maintenance (O&M)costs.To date,these efforts have focused on reduction in O&M costs for the Tyee Lake and Swan Lake hydroelectric plants through insurance cost savings and operating labor efficiencies.The status of these efforts are: e Insurance Cost Savings Several meetings have been held among the utility insurance team,AEA,and Risk Management.Discussions have included: m The utilities obtaining their insurance direct from a carrier and achieving cost savings. m™AEA changing the annual fixed utility insurance contribution to an annual calculated contribution while maintaining other provisions of the current Insurance Agreement and risk allocation.Insurance savings could be used by the utilities to fund capital projects which increase revenue and reduce risk. Memorandum December 7,1998 Page 2 The Four Dam Pool PMC is considering these options and will adopt a course of action in the January 1999 PMC meeting. Operating Efficiency A consulting firm (HDR Engineering)has been selected by the Operating Cost Reduction Committee of the Four Dam Pool to perform a centralized dispatch study for the Southeast plants.The existing dispatch is accomplished at Wrangell for Tyee Lake and Ketchikan for Swan Lake.The study has been completed and a draft report issued.The draft report suggests single centralized dispatch control of Tyee Lake and Swan Lake in Ketchikan.This centralized dispatch center would substantially reduce operating labor costs at Wrangell and Petersburg,reducing the Four Dam Pool O&M costs.AEA has agreed to fund 50%of the study up to $25,000. Please let me know if any additional information is needed. ALASKA INDUSTRIAL DEVELOPMENT =AND EXPORT AUTHORITY =>ALASKA mm =ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE,ALASKA 99503 907 /269-3000 FAX 907 /269-3044 MEMORANDUM TO:D.Randy Simmons Executive Director FROM:Dennis V.McCrohan,P.E. Deputy Director -Project Development and Operations DATE:December 7,1998 SUBJECT:Tyee Lake Transmission Line Phase 3 Progress Four Dam Pool Self Help Projects As a result of the Four Dam Pool litigation and subsequent settlement,AEA is making repairs on the Tyee Transmission line connecting the Petersburg and Wrangell and the Tyee Lake hydroelectric project.Due to the length of the line,short work season,and the impact on the communities,the construction was divided into 3 phases. Phase 1 and Phase 2 were completed by the fall of 1997 for a total cost of $6,012,917.Phase 1 included line clearing.Phase 2 involved repairs on Vank and Mitkof Islands.Phase 3,estimated to cost $13,383,914,involves the remaining line section repairs including the Wrangell and Woronkofski Islands and the Cleveland Peninsula. Phase 3 construction work was first bid in late 1997.All engineering was complete.Four bids were received.Three bids were above the engineer's estimate and one bid was significantly below the engineers estimate.The low bidder subsequently acknowledged a bidding error and sought to increase their bid price.After legal advice from the Attorney General's office,all bids were rejected. The construction was delayed one year and a new RFP was issued this summer.Our engineer's are currently evaluating the low bidder pricing,the bidders ability to perform the work,and the bidders methodology for performing the work.The low bidder is Whitewater Engineering Corporation and Alaska Power and Telephone (a joint venture).Their bid is about 8%below the engineer's estimate and below AEA's budget.Construction would start in the spring of 1999,with two outages scheduled to start in March 1999 and September 1999 if necessary.The contract award is tentatively scheduledtobemadethefirstweekofJanuary1999. This date may be impacted by a Four Dam Pool and AEA dispute regarding whether the utilities should be reimbursed for incremental generating and operating costs during the self-help repair outages.These costs could add as much as 10%to the cost of the construction work and reduce self-help funds for the Terror Lake repairs in 2000. Please let me know if you have any questions.