Loading...
HomeMy WebLinkAbout06-13-2002 BM MinutesciauFceintews,Lateedfaeletn8payekESiaeeTheya tC | E ri{oAniteoeretBoteaeSe2aanataeree.ALASKA ENERGY AUTHORITY Board Meeting June 13,2002 Minutes Alaska Industrial Development and Export Authority AID 10. AGENDA ALASKA ENERGY AUTHORITY Board of Directors June 13,2002 Anchorage,Alaska CALL TO ORDER BOARD OF DIRECTORS ROLL CALL PUBLIC ROLL CALL PUBLIC COMMENTS PRIOR MINUTES -December 6,and 11,2001 OLD BUSINESS , NEW BUSINESS A.Larsen Bay Project,Resolution No.2002-01 DIRECTOR COMMENTS A.Director's Status Report of AEA Programs and Projects e Legislative Update e Update on Village Management Training Program B.Next Meeting Date -Follows AIDEA Board meeting Dates BOARD COMMENTS ADJOURNMENT H:\ALL\bfuglestad\BOARD\Agenda AEA.doc 813 West Northern Lights Boulevard *Anchorage,Alaska 99503 Alaska Industrial Development and Export Authority Alaska Energy Authority ALASKA ENERGY AUTHORITY BOARD OF DIRECTORS June 13,2002 -4:17 p.m. Anchorage,and Ketchikan,Alaska,Spokane,Washington Held at the Dimond Center Hotel in Anchorage Alaska 1.CALL TO ORDER Chairman Hughes called the meeting of the Alaska Energy Authority to order on June 13,2002,at 4:17 p.m.A quorum was established. 2.BOARD OF DIRECTORS ROLL CALL Directors present in Anchorage:Mr.Wilson Hughes (Chairman/Public Member),Deputy Commissioner Larry Persily (Designee for Department of Revenue),Ms.Helvi Sandvik (Public Member),and Commissioner Joe Perkins (Department of Transportation and Public Facilities). 3.PUBLIC ROLL CALL Staff present in Anchorage:Robert Poe,Jr.(Executive Director),Valorie F.Walker (Deputy Director-Finance),James McMillan,(Deputy Director-Credit),Brenda J.Fuglestad (Administrative Assistant),Lynn Kenney (Development Specialist). Others attending in Anchorage:Brian Bjorkquist and Mike Mitchell (Department of Law). 4.PUBLIC COMMENTS There was no public comment. 5.PRIOR MINUTES -December 6 and 11,2001 The December 6 and 11,2001,minutes were approved as presented. 6.OLD BUSINESS There was no old business. 7.NEW BUSINESS 7A.Resolution No.2002-01,Resolution of the Alaska Energy Authority Authorizing Resolution and Restructuring of Debt Related to the Larsen Bay Hydroelectric Project,and Providing for Related Matters 813 West Northern Lights Boulevard *Anchorage,Alaska 99503 ANT 1 ILO IANN 2LAV ANT 1 VEO DINAA ewacmanns aialann Ave AEA Board Meeting June 13,2002 Meeting Minutes Page 2 Messrs.Poe and Bjorkquist reviewed Resolution No.2002-02 stating it will implement the basic terms of the 1999 agreement between the City of Larsen Bay and the former Division of Energy, Department of Community and Regional Affairs to resolve debt issues related to the Larsen Bay Hydroelectric Project.The resolution will authorize the Authority to use up to $220,000 from the Power Development Fund to call all remaining Larsen Bay bonds;ratify the 1995 action by the former Division of Energy reducing the interest rate on the Larsen Bay Power Project Fund Loan to zero percent;and ratify the expenditures made by the Authority from the Power Development Fund for the operating costs and bond principal and interest payments.He referred the Board to their packets for detailed information. Mr.Bjorkquist gave a brief history and background of the Larsen Bay Hydroelectric Project for the Board stating is consists of a 475 kW turbine/generator,a 140 foot wide by 14 foot high earth am, approximately 6,000 feet of penstock,and with a 600 foot elevation difference.The project was originally projected to costs approximately $525,000.By 1990 the new total estimated cost increased to $1.8 million.Larsen Bay requested that the Authority assume responsibility for construction and ownership of the project.Additional funding to complete the project was obtained through a $500,000 PCE efficiency grant,a $30,000 Department of Administration grant,and bonds issued by the Authority.Mr.Bjorkquist referred the Board to their packets for detailed information on the history and background information. Staff has been working with Larsen Bay to develop a business plan that is modeled after the business plan that the rural energy group does with bulk fuel upgrades to help provide a sustainable project including budgets.In addition,the Authority has been involved in training programs funded by the Denali Commission that helps train the operators how to operate a hydro plant. Staff recommended approval of Resolution No.2002-01. In response to Board questions,Mr.Copolous said the plant has been operating for approximately 6-8 months and is capable of producing 400 kW and it is meeting the entire city's output that is approximately 120 kW.They are also supplying power to the cannery's ice machine which will be running for the summer.To get the plant working there were a number of repairs done to the turbine. MOTION:Commissioner Perkins moved to approve Resolution No 2002-01.Seconded by Ms.Sandvik.There being no further discussion,the question was called.A roll call vote was taken and the motion passed unanimously. 8.|DIRECTORS COMMENTS Mr.Poe gave an update on the Village Management Training Program.He said staff discussed this issue with Sheldon Jackson and the Denali Commission put the training program together.It was conducted a couple of weeks ago and there were approximately 20 attendees.The training covered everything from what is the difference from equity and debt to how to write a federal grant. It also covered a great deal of management and organizational skills that people could benefit from. 9.BOARD COMMENTS There were no Board comments. AEA Board Meeting .June 13,2002 Meeting Minutes Page 3 10.ADJOURNMENT Hearing no objections Chairman Hughes adjourned the meeting at 5:10 p.m. lO Qhestae) James A.McMillan,Assistant Secretary ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY =ALASKA@@E™=ENERGY AUTHORITY 813 WEST NORTHERN LIGHTS BLVD.©ANCHORAGE,ALASKA 99503 ©907/269-3000 ©FAX 907/269-3044 TOLL FREE (ALASKA ONLY)888 /300-8534 ALASKA ENERGY AUTHORITY BOARD OF DIRECTORS December 6,2001 -1:00 p.m. Anchorage,Alaska 1.CALL TO ORDER Chairman Hughes called the meeting of the Alaska Energy Authority to order on December 6, 2001,at 1:00 p.m.A quorum was established. 2.BOARD OF DIRECTORS ROLL CALL Directors present in Anchorage:Mr.Wilson Hughes (Chairman/Public Member),Commissioner Sedwick (Department of Community and Economic Development),Ms.Helvi Sandvik (Public Member),and Deputy Commissioner Larry Persily (Designee for Department of Revenue). 3.PUBLIC ROLL CALL Staff present in Anchorage:Robert Poe,Jr.(Executive Director),Valorie F.Walker (Deputy Director-Finance),James A.McMillan (Deputy Director-Credit),Brenda J.Fuglestad (Administrative Assistant),Peter Crimp (Development Specialist),and Stan Sieczkowski (Operations Manager). Others attending in Anchorage:Brian Bjorkquist (Department of Law),Jan Sieberts (Wells Fargo), Keith Laufer (Foster Pepper Rubini &Reeves LLC),Ken Vassar (Wohlforth Vassar Johnson & Brecht),James Elliston and Brian Nerland (KeyBank),Jim Erickson and Steve Hartung (Gateway Forest Products),Spencer Sneed (Dorsey and Whitney),Bob LeResche (LeResche &Company), Dave Carlson (Four Dam Pool),Theresa Obermeyer (Self). 4.PUBLIC COMMENTS There were no public comments. 5.PRIOR MINUTES -November 13,2001 The November 13,2001,minutes were approved as presented. AEA Board Meeting December 6,2001 Meeting Minutes Page 2 6.OLD BUSINESS There was no old business. 7.NEW BUSINESS 7A.Resolution No.2001-05,A Resolution Of The Alaska Energy Authority Approving The Sale Of The Four Dam Pool Hydroelectric Projects By The Authority To The Four Dam Pool Power Agency,Authorizing The Executive Director To Enter Into A Purchase And Sale Agreement With Respect To The Sale Of The Projects And Taking Related Actions Mr.Poe said the agreement being considered is the resolution to sign the Purchase and Sale Agreement for the Four Dam Pool Projects. Mr.LeResche briefed the Board with regard to the resolution.He stated that the Purchase and Sale Agreement follows the Memorandum of Understanding.AEA is proposing to sell and transfer all of the assets that they control related to the Four Dam Pool to the Joint Action Agency (JAA).The purchase price is $73 million.The JAA receives a $5 million credit toward the purchase price for giving up the $20 million low interest loan for the Southeast Intertie.The key part to the State is that the JAA also assumes all of the risks associated with the projects and releases the State from all obligations that it has had for the past 16 years under the Power Sales Agreement. He said the agreement covers land documents,rights-of-way,transfers of contracts,transfer of warranties,etc.The final Purchase and Sales Agreement tracks the MOU and accomplishes what the Legislation and the Board's previous decisions established as our goals.He recommended that the Board approve the resolution.In order for the closing to be effective it must be approved by the Board,JAA,and the five communities who were the original purchasers of the power,and the FERC licenses must be transferred.Given the fact that it is carried forth past the end of December,the JAA will owe the State an extra amount for energy used during January.This amount comes to approximately $750-$800 thousand dollars,all of which has been appropriated to the PCE Fund along with the rest of the proceeds of the sale. Mr.Carlson said he is currently the divestiture project coordinator for the Four Dam Pool.He said negotiations with the State began in August 1995.The Purchase and Sale Agreement reflects the provisions in the MOU,which was negotiated with the State and approved through Legislation.There are two cooperatives and three municipalities,all of which have differing ways of approving the documents.Even though we are taking final action this month,because of the readings and waiting periods it will go into January 2002. MOTION:Ms.Sandvik moved to approve Resolution No.2001-05.Seconded by Commissioner Sedwick. In response to Board questions,Mr.Bjorkquist said that the total amount going to the PCE will be $90 million,which includes the $10 million that has already been deposited from energy sales over the last two years. Mr.Laufer said that in addition to the $90 million and in connection to the release of other unrelated intertie funds,the Legislature appropriated an additional $100 million to the PCE AEA Board Meeting December 6,2001 Meeting Minutes Page 3 Endowment Fund.Thus,the total amount to the Endowment as a result of HB 447 and the sale is approximately $190 million. Mr.Bjorkquist said that in addition to the $190 million,there was approximately $10 million of revenues from the Four Dam Pool over the last two years that was appropriated into the PCE Fund itself,not the Endowment Fund.In total there is approximately $200 million. Discussions ensued as to the timeline with regard to approving the resolution. Hearing no objections the Board held Item 7A,to be heard and acted upon on December 11, 2001,at 2:00 p.m. 10.ADJOURNMENT MOTION:Commissioner Sedwick moved to recess the December 6,2001,Board meeting to Tuesday,December 11,2001,at 2:00 p.m.Seconded by Deputy Commissioner Persily. There being no further discussion,the question was called.A roll call vote was taken and the motion passed unanimously. Chairman Hughes recessed the December 6,2001,board meeting at 1:25 p.m.to reconvene at 2:00 p.m.on December 11,2001. Robert Poe,Jr.,Secfétary ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY =ALASKA@@E=ENERGY AUTHORITY 813 WEST NORTHERN LIGHTS BLVD.©ANCHORAGE,ALASKA 99503 ©907/269-3000 ©FAX 907/269-3044 TOLL FREE (ALASKA ONLY)888 /300-8534 ALASKA ENERGY AUTHORITY BOARD OF DIRECTORS December 11,2001 -2:00 p.m. Reconvene the December 6,2001,Board meeting Anchorage,Juneau,Ambler,and Petersburg,Alaska,and Washington D.C. Teleconference 1.CALL TO ORDER Chairman Hughes reconvened the December 6,2001,meeting of the Alaska Energy Authority onDecember11,2001,at 2:00 p.m.A quorum was established. 2.BOARD OF DIRECTORS ROLL CALL Directors present in Anchorage:Mr.Wilson Hughes (Chairman/Public Member),CommissionerSedwick(Department of Community and Economic Development). Directors present in Ambler:Ms.Helvi Sandvik (Public Member). Directors present in Juneau:Deputy Commissioner Larry Persily (Designee for Department ofRevenue). Directors present in Washington D.C.:Commissioner Joe Perkins (Department of TransportationandPublicFacilities). 3.PUBLIC ROLL CALL Staff present in Anchorage:Robert Poe,Jr.(Executive Director),Valorie F.Walker (DeputyDirector-Finance),Brenda J.Fuglestad (Administrative Assistant),and Stan Sieczkowski (Operations Manager). Others attending in Anchorage:Brian Bjorkquist (Department of Law),Keith Laufer (Foster PepperRubini&Reeves LLC). Others attending in Juneau:Bob LeResche (LeResche &Company). Others attending in Petersburg:Dave Carlson (Four Dam Pool). AEA Board Meeting December 11,2001 Meeting Minutes .Page 2 7.NEW BUSINESS 7A.Resolution No.2001-05,A Resolution Of The Alaska Energy Authority Approving The Sale Of The Four Dam Pool Hydroelectric Projects By The Authority To The Four Dam Pool Power Agency,Authorizing The Executive Director To Enter Into A Purchase And Sale Agreement With Respect To The Sale Of The Projects And Taking Related Actions Mr.Bjorkquist stated there was a motion pending before the Board to approve Resolution No. 2001-05.However,a Board member who is not present at this time made the motion.He recommended that the Board entertain a new motion to approve the resolution so that the motion is made and seconded by members present. Mr.Poe said that the resolution is for the purchase and sale agreement which is the agreement that would potentially sell the Four Dam Pool Hydroelectric Projects to the Joint Action Agency (JAA).The JAA is the joint quasi-government entity that is formed by the various entities that are supplied power by the Four Dam Pool Hydroelectric projects.The communities are Wrangell, Petersburg,Ketchikan,Valdez,and Kodiak. MOTION:Commissioner Perkins moved to approve Resolution No.2001-05.Seconded by Commissioner Sedwick. Ms.Sandvik joined the meeting at this time. In response to Board questions,Mr.Poe said that AIDEA would be getting a much better rate of return on their money by lending than through the current investments. Mr.Laufer said currently the JAA could disburse and sell the projects to the communities but they could not sell to a third party or a private entity.However,they could sell if they received further legislative approval. He said there is a requirement under the AIDEA financing that certain things be submitted before AIDEA would make the loan.) Mr.Laufer said the AIDEA loan provides for up to $5 million to be loaned to the JAA either for a portion of the funds that would be used to construct the intertie or to pay back the credit. There being no further discussion,the question was called.A roll call vote was taken and the motion passed unanimously. 10.ADJOURNMENT MOTION:Commissioner Sedwick moved to adjourn the meeting.Seconded by Commissioner Perkins.There being no discussion,the question was called.A roll call vote was taken and the motion passed unanimously. Chairman Hughes adjourned the meeting at 2:10 p.m. Robert Poe,Jr.,SecretAry ALASKA ENERGY AUTHORITY RESOLUTION NO.2002-01 RESOLUTION OF THE ALASKA ENERGY AUTHORITY AUTHORIZING RESOLUTION AND RESTRUCTURING OF DEBT RELATED TO THE LARSEN BAY HYDROELECTRIC PROJECT,AND PROVIDING FOR RELATED MATTERS WHEREAS,The Larsen Bay Hydroelectric Project ('Larsen Bay project”)is a 475 kW turbine/generator hydroelectric project constructed to help provide affordable electric power to the residents and other power users in the City of Larsen Bay ("Larsen Bay”); WHEREAS,The Larsen Bay project was originally estimated to cost approximately $525,000,and would be partially funded by a $493,000 Power Project Fund loan ("PPF loan'), but the actual cost to complete the project rose to approximately $1.8 million,and the additional expense was funded through a combination of a $500,000 PCE efficiency grant,a $30,000 Department of Administration grant,and bonds issued by the Authority; WHEREAS,The Authority issued $855,000 fixed rate revenue bonds,Series 1991B,in May 1991.The bonds had annual maturities,beginning on April 1,1993,with a final maturity on April 1,2011.Interest rates ranged from 6.75%to 7.75%.Payment on the bonds are secured by a Letter of Credit from Bank of America (the "Bank'),successor in interest to Security Pacific Bank of Washington.All payments on the bonds are made through the Letter of Credit,with the Bank reimbursed under an agreement between the Authority and the Bank; WHEREAS,The Authority assumed responsibility for construction and ownership of the project in 1990,and continues to have certain responsibilities for operation of the project that are generally fulfilled through a cooperative agreement with Larsen Bay; WHEREAS,Administration of the PPF loan transferred from the Authority to the former Division of Energy in 1993,and then back to the Authority in 1999 as part of various state agency and program reorganizations in those years; Resolution No.2002-01 Page 1 H:\ALL\bfuglestad\BOARD\RESOLUTNAEA Larsen Bay.doc WHEREAS,AS 42.45.010(f)(2)(B)provides that the interest rate on a PPF loan may be at a rate not less than zero,and may be at a rate set that allows the project to meet criteria for financial feasibility, WHEREAS,In 1995,the former Division of Energy reduced the interest rate on the PPF loan to zero percent (0%)after the financial feasibility of the project became questionable and it became obvious that Larsen Bay Utility would have difficulty meeting all of its debt obligations from revenues of its utility;however,the files transferred to the Authority in 1999 fail to document this action; WHEREAS,Larsen Bay and the former Division of Energy in 1999 reached agreement to further resolve debt problems of the Larsen Bay project under which,Larsen Bay would repay the PPF loan then administered by the former Division of Energy,while the Authority would defease outstanding Larsen Bay bonds (then approximately $750,000)and transfer ownership of the project to the former Division of Energy so that the Authority would have had no further 'involvement with the Larsen Bay project; WHEREAS,Administration of the PPF loan and the former Division of Energy were transferred to the Authority in 1999 as part of the reorganization of state programs and agencies under HB 40; } WHEREAS,The Legislature in 2001 appropriated $400,000 to help call the outstanding Larsen Bay project revenue bonds (the Authority's Series 1991B),to further the intent of the 1999 agreement to reduce the debt associated with the Larsen Bay project; WHEREAS,AS 44.83.384 provides that the Power Development Fund ("PDF”)may be used for expenses associated with power projects constructed or acquired by the Authority before August 11,1993,for costs to operate and maintain the project,to defease bonds,and to pay debt service on bonds sold in connection with a power project; WHEREAS,The Authority has expended approximately $304,000 from the PDF towards operating costs of the Larsen Bay project and repayment of interest and principal on the Resolution No.2002-01 Page 2H:\AL Libfuglestad\BOARD\RESOLUTIMEA Larsen Bay.doc outstanding Larsen Bay project revenue bonds (the Authority's Series 1991B),as is depicted in Exhibit A; . WHEREAS,The Authority and Larsen Bay have reached certain understandings to implement the basic concepts incorporated in the 1999 agreement between Larsen Bay and the former Division of Energy to reduce the debt associated with the Larsen Bay project,including that the Authority will call the remaining approximately $210,000 of outstanding Larsen Bay project revenue bonds (the Authority's Series 1991B),that Larsen Bay will agree to repay the PPF loan from revenues of the Utility,that Larsen Bay will assign to the Authority (for deposit into the PDF)certain payments for power purchased by Kodiak Salmon Packers,and that the Authority will continue to work closely with Larsen Bay through implementing a business plan to assist the Larsen Bay project to become sustainable;and WHEREAS,Resolving the debt problems associated with the Larsen Bay project will further the best interests of the people of Larsen Bay and the purposes of the Authority. NOW,THEREFORE,BE IT RESOLVED BY THE ALASKA ENERGY AUTHORITY AS FOLLOWS: Section 1.The Executive Director of the Authority is authorized to expend up to $220,000 from the Power Development Fund (AS 44.83.382)to call the outstanding Larsen Bay project revenue bonds (the Authority's Series 1991B),and to pay such necessary amounts to the bond Trustee on or before June 30,2002. Section 2.The action taken in 1995 by the former Division of Energy,as then administrator of the Power Project Fund,to reduce to zero percent (0%)the interest rate on the Power Project Fund loan made to Larsen Bay related to the construction of the Larsen Bay hydroelectric,but which action is not documented in files transferred to the Authority in 1999,is hereby ratified. Resolution No.2002-01 Page 3 H:\ALL\bfuglestad\BOARD\RESOLUTIAEA Larsen Bay.doc Section 3.The expenditures made by the Authority from the Power Development Fund (AS 44.83.382)for the operating costs and payments toward principal and interest on Larsen Bay project revenue bonds (the Authority's Series 1991B),itemized in Exhibit A,are hereby ratified. Section 4.The Executive Director of the Authority is authorized and empowered to take such actions as he deems necessary or appropriate in order to resolve debt issues related to the Larsen Bay hydroelectric project,as further described in this resolution and the accompanying memorandum. Dated at Anchorage,Alaska this 13th day of June,2002. 0)L -Chairman ATTEST [SEAL] Secretary WA Resolution No.2002-01 Page 4 H:\ALL\bfuglestad\BOARD\RESOLUTIMEA Larsen Bay.doc ALAONA CINCNUT AV INUIT EXHIBIT A LARSEN BAY F 3 PROJECT AEA OUT OF fF ET COSTS ; (TD 1997 1998 1999 2000 2001 2002 2/6/2002 Other O&M Expenses paid by AEA E-401-54XXX-000 Maintenance,Renewal &Replacement 10,843 1,509 70 4,392 56 268 17,139 E-401-54000-000 Land Rents §32 -532 E-401-92401-000 Insurance 12,884 12,934 12,654 12,594 14,359 19,293 84,719 E-401-92402-000 RSA with Risk Management 99 20 20 20 -159 24,359 14,463 12,744 17,006 14,415 19,561 102,548 AEA Administrative Expenses ; E-401-71xxx&73104 Personal Services 9,212 10,264 11,637 8,238 1,461 40,812 E-401-72XXX-XXX Travel 1,808 626 2,499 694 1,229 6,855 E-401-73XXX-XXX Other administrative costs 2,560 2,425 1,070 3,732 3,812 1,038 14,637 E-401-73102-000 Legal Expense --3,640 27,173 3,055 3,091 36,959 13,580 13,315 18,846 39,836 9,556 4,129 99,263 Other Administrative Expenses E-401-92303-000 Professional Services (arbitrage report)900 900 900 1,025 3,725 E-401-92305-000 Trustee and Letter of Credit Fees 10,613 10,179 9,895 9,551 7,626 2,622 50,486 10,613 11,079 10,795 10,451 8,651 2,622 54,211 Less amounts not paid by AEA: E-401-72XXX-XXX AEA travel costs credited against Due from City (850)(150)(135)(1,135) E-401-92305-000 LOC Draw Fees charged direct to Ops fund (200)(200)(200)(200)(200)(100)(1,100) (1,050)(350)(335)(200)(200)(100)(2,235) Loan from Power Dev.Fund for Debt Svc WT207 Larsen Bay Debt Sv fund trsf from PDF 54,000 54,000 WT238 Larsen Bay Debt Sv fund trsf from PDF 22,700 22,700 ----54,000 22,700 76,700 Total AEA Out of Pocket Costs 47,502 38,507 42,050 67,093 86,422.65 48,912.15 330,487.02 Less amounts reimbursed from Operating Fund: Trustee fees prepaid in FY96 (1,989)(1,989) 8/28/96 Reimbursment of FY97 expenses (5,122)(5,122) 6/30/97 Reimbursment of FY97 expenses (18,500)(18,500) Unreimbursed AEA Out of Pocket Costs 21,891 38,507 42,050 67,093 86,423 48,912 304,876 EXH B r-7 :1 =Business Operating Plan Budget REVENUE:2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Customer revenue $112,835) Residentiat Commercial PCE reimbursements $41,375) Utility Revenue from City Sales 154,210]158,836]163,801]168,509]173,565]178.7721 184,135 189,659}195,349]201,209]207,245]213,463{219.867]226,463)233,256]240,254]247,462]254,884 Revenue from Kodiak Salmon Pks assigned to AEA 11,725)11,725 14,725]11,725,11,725)14,725{11,725 11,725 14,725)11,725)11,725)11,725 411,725 11,725 14,725)11,725 11,725)11,725CanneryPowerSaies$10,800}$32,508]$33,483]$34,488]$35,522|$36,588]$37,686 $38,816]$39,981]$41,180]$42,416]$43,688]$44,999]$46,349 $47,739)$49,171]$50,646}$52,166 Total Utility Revenue $176,735]$203,0691$208,810]$214,722]$220,812]$227,0851$233,545]$240,200}$247,054]$254,114]$261,386]$268,876]$276,590]$284,536]$292,721]$301,150]$309,833]$318,776 DIESEL EXPENSES Payroll 30,377;31,288)32,227)33,194]34,189]35,215]36,271 37,360]38,480 39,635)40,824)42,049 43,310 44 609)45,948 47,326 48,746 50,20:Payroll taxes 2,509 2,584)2,662 2,742)2,824)2,909 2,996 3,086 3,178)3,274 3,372 3,473 3,577 3,685 3,795)3,909 4,026 4,147] Contract services 6,770 6,973)7,182 7,398 7,620 7,848 8,084)8,326 8,576)8,833 9,098)9,371 9,652 9,942 10,240)10,547 10,864 11,190Depositreimbursements Fuel oil 36,151 37,235 38,352 39,503]40,688]41,908)43,166 44,461 45,794 47,168 48,583 50,041 51,542 §3,088)54.681 56,321 §8,011 59,751Facilityexpenses-other 1,468 1,512 1,557,4,604 1,652 4,702 1,753 1,805)1,859 1,915 1,973 2,032 2,093}2,156)2,220 2,287 2,355)2,426 Freight 1,686 1,737,1,789 1,842 1,898 1,955 2,013 2,074)2,136 2,200 2,266)2,334 2,404 2,476 2,550)2,627,2,706 2,787] Office supplies /Postage 286 295 304 313 322 332 342 352 362 373 384 396 408 420 433 446 459 473 Electrical supplies 4,112)4,235)4,363 4,493}4,628)4,767 4,910 §,057 5,209)5,365)5,526}|§,692 5,863!6,039)6,220 6,407 6,599 6,797 Lube Oi)203 209 216 222 229 236)243 250 258 265 273 281 290 299 308 317 326 336] Oil /Fuel Filters 1,898 1,955 2,013)2,074 2,136)2,200)2,266 2,334 2,404 2,476)2,551 2,627 2,706)2,787!2,871 2.957|3,045!3,137] Smail tools 200 206 212 219)225 232 239 246 253 261 269 277 285 294 303 312 321 331 Supplies other 41,238!11,575)11,922 12,280 12,649)13,028 13.419 13,821 14,236 14,663;15,103 15,556 16,023)16,503)16,999)17,509)18,034 18,575Electricalutility-other 3,369 3.470 3,575 3.682 3,792 3,906 4,023)4,144)4,268 4,396 4,528!4,664 4,804 4,948 5,096 5,249)§,407|5,569 Total Diesel Expenses 100,267]103,279 106,379 109,564 112,851]116,237]119,72 123,316 127,015)130,82q 134,75:138,799 142,95 147,24 151,66 156,21 160,899 165,724 HYDRO EXPENSES: Per diem 4,820 1,874 1,930 1,988 2,048 2,109:2,173 2,238)2,305 2,374 2,445 2,519}2,594 2,672 2,752 2,835)2,920 3,008 Supplies 1,650 1,699 1,750 1,803 1,857 4,912 1,970 2,029)2,090 2,152 2,217'2,284 2,352)2,423 2,495:2,570!2,647 2,727 Hydro Electric Loan 0 0 0 0 0 0 9 9 9 ie)(°)oO it]ie)ie]0 9 Q Fuel 62 63 65 67 69 71 73 76 78 80 83 85 88 90 93 96 99 102 Telephone 396:408 420 433 446 459 473 487 502 §17|§32 548 565 $82 599 617 635:654) Payroll 10,956 11,285 11,623 41,972 12,331 12,701 13,082)13,475]13,879 14,295 44,724 15,166 15,621 16,089 46,572)17,069 17,581 18,109LodgingExpenses512528543560.577.594 612 630)649 668 688 709 730 752 775 798 822 847 Payroll taxes 1,171 1,206 1,243 1,280 1,318 1,358 1,399 1,441 1,484 1,528 1,574 1621 1,870)1,720 1,772 1,825 4,880 1,936 Freight 122 126)130 134 138)142 146 4150 155 160}164)169 174 480)185 191 196)202) Other 295 304 313 323 332 342 353 363)374 385 397,409 421 434 447 460 474 488) Capital (R&R}Reserve Fund 10,000 40,300 10,609)10,927;11,255 14,593 411,941 12,299]12,668 13,048)13,439)13,842)14,258 14,685 15,126 15,580 16 047 16,52: AEA Expense 15,704]16,176]=16,661]17,181]17,675]18,206]_--18,752|19,314]19,894]-20,494{21,105)21,739]22,391 23,062 23,754 24,467|--25,201{25.95 Debt Service cost 35,000 35,000 35,000;35,000)35,000]35,000)35,000 35,000)35,000 35,000)35,000:35,000;35,000 35,000 35,000 2,800 9 is) Insurance 19,000 19,000}19,000)19,000}19,000)19,000)19,000 49,000}19,000,19,000)19,000 19,000 19,000)19,000!49,000;19,000!49,000)19,000 {-time completion of work left over from 10-21-2001 Cost Reimbursement Agreement 28,000 Total Hydro Expenses 124,68 97,96 99,2881 100,647}102,046 103,488 104,97 106,504 108,077]109,699 111,37 113,091]114,86 116,69)118,57 88,30 87,50 89,558 ! REVENUE LESS EXPENSES:48,22 1,825)3,14!4,511 §.91 7,36 8,849)10,38 11,96.13,59 15,26 16,99 18,77 20,601 22,48 56,63 61,43 63,493 Projected Utility Account Balance undiscounted associated with Hydro Operation after 17 years operation:$294,994 Assumptions:| Total Revenue increases 3%annually from 2001 level. PCE amount for 2003 assumed at 60%of 2001 based on declining PCE rates. Assumed 2003 revenue is 85%of billings -actual revenue numbers not provided by city. Assume cannery Power Sales triple in 2004,when cannery comes back on-line Debt service Payments go to 0 after 15.08 years. Kodiak Salmon Packers Revenue assigned to AEA.I Payroll and payroll taxes increase 3%annually from 2001 level. All other diesel expenses,EXCEPT FUEL OIL,based on 5 year average and 3%annual increase starting in 2003. Diesel fuel oil costs assumed at 3 year average '97 to '99 (when hydro was on)and increasing 3%annually starting in 2003.All hydro costs assumed at 3 year average '97 to '99 (when hydro was on)and increasing 3%annually starting in 2003.__| AEA Expense assumed at 3 year average '97 to '99 (when hydro was on)and increasing 3%annually starting in 2003.| Kodiak Salmon Packers Income assumed equal to power sales to operate ice machine 360000 kwh sold at $.030 cents/kwh =$10800.00/year Cost and Revenue beyond 2003 inflated at 3%annually,except $35,000 annual debt service payment held constant.|All numbers based on unaudited information supplied by the City of Larsen Bay I I | Alaska Industrial Development and Export Authority AID TO:Board of Directors Alaska Energy Authority MEMORANDUM FROM:Robert Poe,Jr. Executive Director DATE:June 13,2002 SUBJECT:Resolution No.2002-01 Larsen Bay Hydroelectric Project Resolution 2002-01 will implement the basic terms of the 1999 agreement between the City of Larsen Bay ("Larsen Bay”)and the former Division of Energy,Department of Community and Regional Affairs ("DOE”)(in conjunction with the Authority)to resolve debt issues related to the Larsen Bay Hydroelectric Project.The resolution will: (1)Authorize the Authority to use up to $220,000 from the Power Development Fund (PDF -AS 44.83.382)to call all remaining Larsen Bay bonds; (2)Ratify the 1995 action by the former Division of Energy reducing the interest rate on the Larsen Bay Power Project Fund loan (PPF loan -AS 42.45.010)to zero percent (0%);and (3)Ratify the expenditures made by the Authority from the PDF for the operating costs and bond principal and interest payments (see itemization,attached as Exhibit A).; The positive story regarding Larsen Bay is that the hydroelectric project now appears to have good prospects for becoming a viable,self-sustaining project.After having not operated for approximately three years,the project was repaired and has produced electric power for Larsen Bay for over one-half year.The Authority undertook these repairs under a reimbursement agreement with Larsen Bay.Funding came from a $100,000 appropriation to Larsen Bay and from a $25,000 Department of Administration grant to Larsen Bay.Larsen Bay will also reimburse the Authority for any costs in excess of $125,000. The Authority is working with Larsen Bay to develop a business plan (modeled after Rural Energy Group's plans for bulk-fuel facilities)to provide for a sustainable project.A significant component of this plan is the establishment of an R&R fund to cover repair costs as they arise.Further,Larsen Bay utility operators and city administrators have participated in training programs for operating small hydroelectric projects and administration of municipal utilities and administering grants. 813 West Northern Lights Boulevard *Anchorage,Alaska 99503 Board of Directors June 13,2002 Page 2 The less positive story is that even after the substantial debt relief afforded by Resolution 2002-01,it is not at all clear that revenue from the Larsen Bay utility will be sufficient. The total projected revenues and expenses are on Exhibit B.Of particular concern is the future operation of Kodiak Salmon Packers ("KSP”).Energy sales to KSP has always been critical to the economic viability of the project.The residents of Larsen Bay do not have sufficient demand for electric power to generate sufficient revenues at affordable energy rates.Due to a surplus supply of canned pink salmon on the market, KSP operations in 2002 will be limited to supplying ice to fishing vessels.KSP currently plans to resume more extensive cannery operations in 2003 or 2004,but that is subject to fish market conditions. History/Background:The Larsen Bay Hydroelectric Project consists of a 475 kW turbine/generator,a 140 ft.wide by 14 ft.high earth dam,approximately 6,000 ft.of penstock,and with a 600 ft.elevation difference. The Larsen Bay project was originally projected to cost approximately $525,000 by Polar Consultants.The Authority in 1987 agreed to provide partial funding for the project with a $493,000 PPF loan.Administration of the PPF loan transferred from the Authority to the former Division of Energy in 1993,and then back to the Authority in 1999 as part of various agency and program reorganizations in those years. By 1990,the original budget amount was substantially expended without significant progress towards completion of the project.The new total estimated cost increased to $1.8 million.Larsen Bay requested that the Authority assume responsibility for construction and ownership of the project.Additional funding to complete the project was obtained through a $500,000 PCE efficiency grant,a $30,000 Department of Administration grant,and bonds issued by the Authority. The Authority issued $855,000 fixed rate revenue bonds,Series 1991B,in May 1991. The bonds had annual maturities,beginning on April 1,1993,with a final maturity on April 1,2011.Interest rates ranged from 6.75%to 7.75%.Payment on the bonds are secured by a Letter of Credit from Bank of America (the "Bank”),successor in interest to Security Pacific Bank of Washington.All payments on the bonds are made through the Letter of Credit,with the Bank reimbursed under an agreement between the Authority and the Bank. The Authority,as owner of the project,has certain obligations to operate the projects under separate agreements with Larsen Bay and with the Bank.Those obligations are generally to be fulfilled pursuant to a cooperative agreement between the Authority and Larsen Bay.Under this agreement,Larsen Bay operates the project and agrees to pay from revenues of the Larsen Bay utility,all operating costs (including those incurred by the Authority)and debt obligations under the Bonds and PPF loan. By the mid 1990's,it became obvious that Larsen Bay would have difficulty meeting all of its debt obligations from revenues of its utility.In 1995,the former Division of Energy reduced the interest rate on the PPF loan to zero percent (0%).The interest rate on a PPF loan may be at a rate not less than zero,and may be at a rate set that allows the project to meet criteria for financial feasibility.AS 42.45.010(f)(2)(B).The former Board of Directors June 13,2002 Page 3 Division of Energy apparently considered the financial feasibility of the project at that time,and reduced the interest rate to zero percent.The files transferred to the Authority in 1999,however,fail to document this action.Resolution 2002-01 ratifies the 1995 reduction of interest rate by the former Division of Energy.As Exhibit B demonstrates,criteria for the project's financial feasibility currently also would support a reduction of interest to zero percent. To retain incentive for timely payments,the new agreement described below will provide that interest shall again be incurred if Larsen Bay defaults by failing to make required payments even though the Larsen Bay utility has sufficient revenues to make the payment. The former Division of Energy,in conjunction with the Authority,also began discussions of a more complete resolution of Larsen Bay project debt.This led to a 1999 agreement. 1999 Agreement Terms:Under the 1999 agreement between Larsen Bay and the former Division of Energy,the Authority would defease outstanding Larsen Bay bonds (then approximately $750,000)and transfer ownership of the project to the former Division of Energy.The Authority then would have had no further involvement with the Larsen Bay project. Larsen Bay would pay the outstanding balance on the PPF loan related to the project of $528,000,in interest free payments.Additionally,Larsen Bay was required to enter into an Administrative Support Service Agreement with the Alaska Village Electric Cooperative,Inc.(AVEC).Under this agreement,entered in 2000,the Larsen Bay utility would operate the utility,including the hydroelectric project,and AVEC would provide oversight and support for utility operations,and provide billing and collection services for the utility. Post 1999 Agreement Events:Certain circumstances changed almost immediately following the 1999 agreement.In June 1999,the agency and program reorganization under HB 40 transferred both the PPF program and the former Division of Energy to the Authority.Thus,the Authority would again have a future involvement with the Larsen Bay project. The relationship between AVEC and Larsen Bay deteriorated rapidly after they entered their agreement in 2000.AVEC complained about not being paid timely,and Larsen Bay complained about the quality of service provided.It became obvious that AVEC and Larsen Bay were unlikely to work well together to ensure success of the Larsen Bay project. 2002 Settlement Terms: Call Bonds:While the Authority will continue to call all outstanding revenue bonds under Series 1991B,the expense to the Authority has been significantly reduced.A 2001 legislative appropriation of $400,000 has already been applied to call outstanding bonds. The approximate total remaining balance necessary to call the bonds on October 1, 2002 (the next available date)is $210,000.The Authority has already expended Board of Directors June 13,2002 Page 4 $76,000 from the PDF to pay bond interest and principal that was due on October 1,2001 and April 1,2002. Resolution 2002-01 authorizes the Authority to use up to $220,000 from the PDF,if necessary,to call these bonds.The resolution further ratifies the Authority's paying $76,000 from the PDF for bond interest and principal.See Exhibit A (expenditures reflected in Exhibit A also include approximately $228,000 paid toward operating costs of the project described below). The Authority will pay to the bond Trustee the amount necessary to call outstanding bonds by June 30,2002,to satisfy an agreement reached with Bank of America.To assist resolving outstanding Larsen Bay debt issues and relieve itself of possible letter of credit liability,Bank of America cooperated with the Authority and Larsen Bay to obtain the 2001 appropriation to call bonds.Bank of America also agreed to waive its letter of credit fees for 2001 and 2002 (more than $10,000)contingent upon the Authority by -June 30,2002,paying sufficient funds to the Trustee to call all outstanding Larsen Bay bonds. Debt Payments:Larsen Bay will agree to pay the outstanding balance on the PPF loan of $528,000,payable in annual,interest free installments of $35,000.The initial payments will be deferred approximately two years to first provide for funding an R&R fund.(See discussion regarding Business Plan below).However,interest shall again be imposed on the PPF loan if Larsen Bay defaults by failing to make required payments even though the Larsen Bay utility has sufficient revenues to make the payment. Additionally,the Authority will receive approximately 11 annual payments of $11,725 (a total of approximately $129,000 over 11 years)assigned from Kodiak Salmon Packers payments for power.These amounts represent debt Kodiak Salmon Packers owe related to bond proceeds that were used to extend power lines from the hydroelectric project to the cannery.These payments will be made to the PDF. Payments to the Authority will continue to be subject the Larsen Bay Utility generating sufficient revenues. Business Plan to Substitute for AVEC Agreement:The Authority will assume a greater role and responsibility overseeing the Larsen Bay project to substitute for the role contemplated in 1999 for AVEC under that failed relationship.The Authority is working with Larsen Bay to develop a business plan (modeled after Rural Energy Group's plans for bulk-fuel facilities)to provide for a sustainable project.The Authority will receive and monitor monthly reports of utility operations,and provide for periodic inspections of the hydroelectric project.Annual budgets will be established,and revenues from the Larsen Bay Utility will cover all operating costs (including expenses of the Authority for oversight). The business plan also provides for the establishment of a R&R fund to provide a funding source for necessary repairs.The Authority's prior experience is that Larsen Bay has not had sufficient funds available to make necessary repairs on a timely basis, creating greater problems for the project.The R&R fund will initially be established at a $60,000 level,with funding provided by deferring approximately the first two years Board of Directors June 13,2002 Page 5 $35,000 payments towards the PPF loan,and transferring those payments instead to the R&R fund.The R&R fund will be held by the Authority,and will be available for the costs of necessary repairs not covered by O&M.The R&R fund will also be security for repayment of the PPF loan. Finally,Larsen Bay utility operators and city administrators have participated in training programs for operating small hydroelectric projects and administration of municipal utilities and administering grants.These training programs are being separately reported on by the Authority at the June 13,2002 meeting.The operators at Larsen Bay are now better able to operate the projects., Ratification of Operating Costs Paid from PDF.Between Fiscal Years 1997 and 2002, the Authority has expended a total of approximately $228,000 from the PDF for costs associated with operations of the Larsen Bay project.Resolution 2002-01 ratifies the Authority's payment of these project operating expenses from_the PDF.See Exhibit A (expenditures reflected in Exhibit A also include $76,000 paid toward bond principal and interest described above). Staff recommends adoption of these proposed amendments to the Bylaws of the Alaska Energy Authority.