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Home My WebLink AboutMakushin Geothermal Project notes and correspondance 1995CITY OF UNALASKA P.O.BOX 89 UNALASKA,ALASKA 99685 (907)581-1251 FAX (907)581-1417 -oOMarch 21,1995 Riley Snell,Executive Director Alaska Industrial Development and Export Authority ¢I awed, 480 West Tudor Roa end Exeen fohedyAnchorage,Alaska 99503 Dear Mr.Snell: We were pleased to hear that AIDEA has decided to proceed with the Makushin geothermal project contingent on successful negotiation of power sales agreements.Your recently completed report,Comparative Analysis of the Makushin Geothermal Project,confirms the City's position that this project has the potential for meeting the long-term power needs of the community in a manner that will alleviate air quality concerns.We are analyzing data provided by R.W.Beck and Associates to determine the effect of your rate proposals on City customer rates for the purpose of negotiating the power sales agreements. |would like to formally invite you and your staff to present the Makushin report and an update on the project status at the April 4,1995,work session of the Unalaska City Council.This meeting will begin at 7:00 p.m.in the City Hall. Thank you for your time and effort an this proiect.We look forward to your presentation next month. Sincerely,"hk Gamat Mark Earnest City Manager cc:Mayor and Members of the Council David Denig-Chakroff,Utilities Director ePR--1 YT 8S ron 123358 R.zwW.Beck _Anchorage P.oi +o ;Ne FAX TRANSMITTAL R.W.Beck 2522 Arctic Blvd.,Suite 110 Anchorage,Alaska 99503 Phone:907/272-6225 Fax:907/274-4525 DATE:Monday,April 17,1995 -1:04 PM PAGES:(with cover):2 TONRiley,Snefh,Dennis McCrohan FROM:Mike Hubbard x ebfb APR-17-9Ss row 12:38 R.W.Beck _AnNchorasse 1 °TayoeOw : BATTLE MOUNTAIN GOLD COMPANY _fe coon woes .eres ee April 6,1995 Bw Bars MOURN Mr.Todd W.Filsinger Associate and Executive Engineer R.W.Beck 1117 17th Street Suite 1900 Denver,Colorado 80202-2615 RE:February 28,1995 Final Report -Comparative Power Costs and AnalysisoftheMakushinGeothermalProject Dear Mr.Filsinger: I reviewed R.W.Beck's February 28,1995 Final Report -Comparative Power Costs and Analysis of the MakushinGeothermalProjectwithgreatinterest.In my review,I noted something that caused me concern.The Report states that a subsidiary of OESI Power Corporation is the leaseholder of thegeothermalrightsproposedtobemadeuseofintheMakushin Geothermal Project.This is erroneous.Battle Mountain Gold Company owns said geothermal rights free and clear of any lease.OESI Power Corporation previously had a leasehold interest,but its lease expired by its own terms on January 1, 1995. I must caution you to be more careful in making statements about matters of serious legal import.Please do not hesitate to contact me with any questions or comments that you may have. Sincerely, BurGregV.Etter Corporate Attorney ec:Fred Reisbick Dave Dehlin A2\950405C 333 CLAY STREET 42ND FLOOR HOUSTON,TEXAS 77002-4103 (713)650-6400 FAX (713)650-3636 TELEX 763604 eR Met,Stee Power DESon FelliCorporation April 14,1995 Mr.Dennis McCrohan Deputy Director-Energy Alaska Industrial Development and Export Authority 480 West Tudor Anchorage,AK 99503 Subject!MAKUSHIN GEOTHERMAL PROJECT Dear Mr.McCrohan:- Over the past few months OESI Power Corporation ("OESI")has been experiencing serious cash flow problems and has found it increasingly more difficult to maintain its commitments in key areas of its businesses that do not generate a positive cash flow to the company.In addition,OESI has been informed by LFC Financial Corporation ("LFC")that LFC will be unable to provide any further advances to OESI to fimd its operating cash requirements.LFC indirectly owns approximately 60%of the outstanding common stock and all of the outstanding preferred stock of OESI. As a result of these conditions and actions,I have been directed by the senior management of the company to develop a plan which would enable the company to cither bring in a development parmer or transfer our interests in the project to a third party. There is strong belief in the company that with the forward momentum the project has generated on local,state,and federal levels,and with continued support from the Alaska Industrial DevelopmentandExportAuthority,there remains a strong likelihood that the project can ultimately be fundedandconstructed.(This does not attempt to minimize the many significant issues the project still must overcome to reach these key milestones). OESI has generated a list of potential candidates to discuss this issue with.Included on the list arecompaniessuchasCaliforniaEnergy,Calpine,ORMAT,Constellation,Oxbow,Entergy,ThermoEcotekandothers.If AIDEA has any specific companies that you would like us to contact,I would very much appreciate receiving that input. ce.RS )W cert - Building One,Suite 255 *4000 Kruse Way Place *Lake Oswego,OR 97035 ®(503)636-9620 *FAX (503)697-0286 OESI intends to retain the services of both Bob LeResche and Larry Markley,along with the support of Jack Wood,to help in this effort.I am personally committed to doing whatever I can to help bring this necessary change to a successful conclusion. I have been in communication with Jack Wood on the issue of the leasehold for the geothermal resource,and Jack advises me that there is positive headway between Battle Mountain Gold and the Aleut Corporation for retum of the native lands to the Aleuts.I expect that this process will continue forward as we try to sort out these other issues. After you have received this letter,please call me to discuss AIDEA's thoughts and ideas as to how we can continue to move the project forward, Very truly yours, Patrick J.Lijec Vice President ce:William R.Snell Executive Director,AIDEA MCALLISTWMAKUMIDEAI04.LTR BATTLE MOUNTAIN GOLD COMPANY @ ir |ECE]A inyFREDB.REISBICK eae MOUNTANVICEPRESIDENTaD2"a aminEXPLORATIONclas Alaska Industricl Qovelommert f verity:vite April 3,1995 and Exrert Au! Hon.William R.Snell,Executive Director Alaska Industrial Development and Export Authority 480 West Tudor Road Anchorage,Alaska 99503 Via:Fax 907-561-8998 Dear Mr Snell: As you know,Battle Mountain Gold Company owns the fee interest in those lands that contain the Makushin,Alaska Geothermal reservoir.At the present time,the geothermal reservoir is not subject to a leasehold interest by any third party. We understand that AIDEA is actively considering development of a geothermal electrical generation project which would be fueled by Makushin geothermal fluids,and that AIDEA requires assurances of the availability of the geothermal fluids to the project. Battle Mountain Gold company favors development of a commercially viable geothermal electric generating project utilizing the Makushin reservoir,under a business arrangement equitable to Battle Mountain.We favor this development under the aegis of the State of Alaska with other competent entities we deem able and willing to honor equitable contract obligations involving the reservoir. We encourage AIDEA to continue in its development efforts toward this important project. Sincerely, Fred B.Reisbick FBR/If cc:Greg Etter 333 CLAY STREET 42ND FLOOR HOUSTON,TEXAS 77002-4103 (713)653-7218 FAX (713)650-3636 TELEX 763604 *kK 16O°390d TWWLOL *x xe.OMNidRo leHLS Mac klea'Ss BATTLE MOUNTAIN GOLD COMPANY FRED B.REISBICK BATTLE MOUNTAIN VICE PRESIDENT GOLD COMPANY EXPLORATION April 3,1995 Hon.Wiliam R.Snell,Executive Director Alaska Industrial Development and Export Authority 480 West Tudor Road Anchorage,Alaska 99503 Via:Fax 907-561-8998 Dear Mr Snell: As you know,Battle Mountain Gold Company owns the fee interest in those lands that contain the Makushin,Alaska Geothermal reservoir.At the present time,the geothermal reservoir is not subject to a leasehold interest by any third party. We understand that AIDEA is actively considering development of a geothermal electrical generation project which would be fueled by Makushin geothermal!fluids,and that AIDEA requires assurances of the availability of the geothermal fluids to the project. Battle Mountain Gold company favors development of a commercially viable geothermal electric generating project utilizing the Makushin reservoir,under a business arrangement equitable to Battle Mountain.We favor this development under the aegis of the State of Alaska with other competent entities we deem able and willing to honor equitable contract obligations involving the reservoir. We encourage AIDEA to continue in its development efforts toward this important project. Sincerely, Fred B.Reisbick FBR/AF cc:Greg Etter 333 CLAY STREET 42ND FLOOR HOUSTON,TEXAS 77002-4103 (713)653-7218 FAX (713)650-3636 TELEX 763604 186°39d Q109 NIYLINNOW AIlLlva wodd 6@:rl SB.&ads March 8,1995 Mr.Dennis McCrohan Alaska Industrial Development and Export Authority 480 West Tudor Anchorage,Alaska 99503 Dear Dennis: Subject:Makushin Rate Stabilization Pursuant to your request,I have estimated the amount of rate stabilization required for the Makushin Geothermal Project using various assumptions regarding delivered wholesale rates, load growth,rate escalation,and other factors.This letter provides an overview of why rate stabilization is required,the process in determining how much is required,the development of the various cases investigated,and the results of the analysis.The analysis reflects comments from both Dave Eberle and Bob LeResche. OVERVIEW Past negotiations with the City and the self-generators on the island have shown that the users are not willing to sign a take-or-pay contract where they are obligated to pay for all costs over the life of the Project.Accordingly,negotiations have centered around a requirements contract where the users will pay for Makushin power that they can use.Payment provisions in requirements contracts can take a number of forms.However if rates were to be set such that all annual Project costs are recovered,the power purchasers would probably find this unacceptable since:: 1.Per kilowatt-hour costs could become insupportable if a large load is lost,and 2.Per kilowatt-hour costs during the initial years of Project operations are higher than alternative sources of generation. Consequently,the Letters of Intent signed by the City and the major self-generators are based on the concept of AIDEA selling power at a specified initial rate and method of escalation. Preliminary discussions have focused on 10.5 cents/kilowatt-hour in 1992 dollars.This rate, however,is expected to provide annual revenues less than actual Project costs during the early years of operations,and a source of external funds are required to make up the difference.This external funding is referred to as rate stabilization.As the wholesale power rate or power sales increase,revenues from power sales may become greater than Project costs.At that point,the rate stabilization can be repaid with the excess revenues. RSF1.DOC File.WS-2156-AAS-GA 2522 Arctic Boulevard,Suite 200 Anchorage,AK 99503-2516 Phone (907)272-6225 Fax (907)274-4525 @® Mr.Dennis McCrohan March 8,1995 Page 2 ASSUMPTIONS The assumptions used in this analysis are the same as those used in our February 28,1995, report entitled "Comparative Power Cost Analysis of the Makushin Geothermal Project.”For clarity,the major assumptions are reiterated below. »Construction costs -$109,879,000 =»Grant used during construction -$45 million »Cost of capital -8 percent =»Debt amortization -20-year level debt service =»Project operations -1998 =»General inflation -3.5 percent ANALYSIS A number of different cases were run to see what might make sense with regard to an initial delivery rate and an escalation factor.These cases are described below and the results are provided in Table 1.The results shown in Table 1 include the: =»Amount of rate stabilization required assuming a reinvestment rate of 5.5 percent «»Return to AIDEA on the rate stabilization deposit over 20 years and 30 years.The large difference between the two amounts reflects the bond debt being paid off in the 19th year. =»Number of years before Project costs are expected to be lower than the assumed wholesale power rates Case 1:This case is based on the current Letters of Intent with an initial delivery rate of 10.5 cents/kilowatt-hour and the escalator set at inflation.(Note:All rates are expressed in 1992 dollars unless stated otherwise.) Case 2:Same as Case 1,but the escalator is set at 50 percent of the increase in fuel prices. Fuel prices are assumed to increase annually at 1.2 percent (real)--the amount used by the Department of Revenue in their Fall 1994 forecast.A case using 75 percent of the increase in fuel prices in lieu of 50 percent would yield an expected annual increase of approximately 3.5 percent which is the same as that used in Case 1.Therefore,a 75 percent case was not run. Case 3:Same as Case 2,but fuel is assumed to increase at 2.5 percent per year (real). Mr.Dennis McCrohan March 8,1995 Page 3 Case 4:The City has indicated that should the wholesale power cost be 10.5 cents/kilowatt-hour,they would want to add a mark-up to that rate for power delivered to the self-generators.Therefore,a case was run with the wholesale rate set at 9.0 cents/kilowatt-hour in order to eliminate the need for the City's mark-up. Case 5:The rate stabilization in Case 4 may be somewhat higher than the amount AIDEA is willing to provide,and Case 5 was therefore run with a higher wholesale rate.A two-tier rate was established using 9.5 cents/kilowatt-hour and 10.0 cents/kilowatt-hour for deliveries to the City and the self-generators,respectively.The higher rate to the self- generators was thought to be acceptable since their current variable cost of power is thought to be a bit higher than the City's.Revenues from this additional amount charged to the self-generators were assumed to flow directly to AIDEA and not to the City as in past analyses. Case 6:Since a large portion ofthe self-generators'costs are tied to fuel,it was felt that they may be more willing to accept an escalator indexed to fuel.Therefore,Case 6 was run with the escalator set at 100 percent of the assumed fuel escalation of 1.2 percent (real). Since this is a higher escalation than that used in Case 2,a lower wholesale rate was felt to be sustainable,and 9.5 cents/kilowatt-hour was used. Case 6D was run to determine the effects if fuel escalated at a rate closer to inflation than the 1.2 percent real escalation assumed.This was run for the 3 percent load growth scenario only,but the results for other load growth scenarios can be interpolated. The above cases provide various rate stabilization amounts assuming various initial rates and escalation factors.However,AIDEA probably has an idea of how much it is willing to put into the Project and what it would like to set as a minimum target return.The City and the self- generators,on the other hand,probably have an idea on the desired initial rate and some feeling on rate escalation.That leaves Project costs,load growth and,to a certain extent,rate escalation as variables.Since Project costs are relatively fixed,load growth and rate escalation remain the only major variables. Two cases were run based on this concept,and the results are shown in Tables 2 and 3.For purposes of this analysis,the following assumptions were made: 1.The rate stabilization fund is initially sized at $7 million. 2.A minimum 20-year target return ts set at 5 percent. Mr.Dennis McCrohan March 8,1995 Page 4 3.The initial rate is set at 9.5 cents/kilowatt-hour for the City and 10.0 cents/kilowatt- hour for the self generators. Case 7,shown in Table 2,investigates the rate escalation required given the above assumptions and various load growth assumptions.Case 8,shown in Table 3,provides the load growth required given the above assumptions with the initial escalation set at inflation. I look forward to meeting with Riley,John and you tomorrow to go over these results.Should you have any questions prior to then,please give me a call at 272-6225. Very truly yours, R.W.BECK Deh hu Michael D.Hubbard Director,Alaska Operations Attachments c:David Denig-Chakroff Bob LeResche Pat McAllister Table 1 Makushin Rate Stabilization Wholesale Rate!”Return to AIDEA Case Rate Year Stabilization Crossover |Principal 1992$1998$Escalation' 'Load Growth”?Deposit'20-year |30-year Year Repaid 1A 10.5/10.5 12.9/12.9 Inflation No Growth §,004 11.1%16.8%7 14 1B 3%Growth 3,262 23.6%25.8%4 9 1c Load Loss 8,582 10.9%16.2%8 14 2A 10.5/10.5 12.9/12.9 50%low fuel No Growth 19,608 <0 5.7%19 22 2B 3%Growth 8,941 43%11.9%9 19 2C Load Loss 18,843 <0 8.1%15 21 3A 10.5/10.5 12.9/12.9 50%high fuel No Growth 8,970 2.1%11.2%13 20 3B 3%Growth 5,113 14.6%18.7%6 12 3C Load Loss 11,930 5.1%12.4%10 18 4A 9.0/9.0 1L.1/i1.1 Inflation No Growth 19,416 <0 7TA%16 22 4B 3%Growth 12,175 5.6%12.3%9 18 4C Load Loss 20,706 0.4%9.3%13 20 5A 9.5/10.0 11.7/12.3 Inflation No Growth 9,928 3.3%11.6%12 20 5B 3%Growth 6,394 13.9%18.1%6 12 5C Load Loss 13,413 5.8%12.7%9 18 6A 9.5/9.5 12.5/12.5 100%low fuel No Growth 5,030 16.8%20.6%6 11 6B 3%Growth 3,790 26.5%28.2%4 8 Pp8C_feLoad Loss _|__8,370 __|15.0%_|19.1%_|7 |6D 9.5/9.5 |1L71L7 3.5%|3%Growth 8,510 10.2%15.4%7 14 (1)Rate in cents/kilowatt-hour delivered to City/Self-generators.Amounts for 1998 assume escalation from 1992. (2)The following escalation factors were assumed: Inflation -3.5% Low Fuel -1.2%(real) High Fuel -2.5%(real) (3)Corresponds to the load scenarios used in the February 28,1995,report. No Growth:3%growth to 1998 and stable thereafter. 3%Growth:Annual growth of 3%throughout study period. Load Loss:Loads decrease by 15%in 1998,after which loads increase by 1.5%thereafter. (4)Assumes interest earnings accrue to the fund based on a 5.5%reinvestment rate. Table 2 Makushin Rate Stabilization Wholesale Rate Return to AIDEA Rate Rate Rate Escalation |Escalation Year Case 1992$1998$Stabilization 20-year Return |Load Growth to after Crossover |PrincipalDeposittoAIDEACrossover|Crossover Year Repaid 7A 9.5/10.0 12.0/12.6 $7,000 5%No Growth 3.9%2.7%9 19 7B 11.6/12.2 3%Growth 3.4%1.4%8 19 7C 12.4/13.1 Load Loss 4.6%1.0%7 16 Table 3 Makushin Rate Stabilization Wholesale Rate Return to AIDEA Rate Rate Rate Required Escalation |Escalation Year Case 1992$1998$Stabilization 20-year Return |Load Growth to after Crossover |PrincipalDeposittoAIDEACrossover|Crossover Year Repaid 8 9.5/10.0 11.7/12.3 $7,000 5%2.6%3.5%2.0%7 19 Walasun fib MAKUSHIN GEOTHERMAL COMPANY i February 1,1995 iiawk. palaskeo at Sibaa!ooweloomernt Dennis V.McCrohan and typort Authority David R.Eberle Alaska Industrial Development and Export Authority 480 West Tudor Road Anchorage,AK 99503 Dear sirs: This is to advise you that OESI Alaska,Inc.,a company incorporated in the State of Alaska,has changed its name toMakushinGeothermalCompany.The address provided below remains unchanged. 4000 Kruse Way Place Building One,Suite 255 Lake Oswego,OR 97035 Should you have any questions,please do not hesitate to call me at (503)697-0263. Sincerely, Greg Chidat Project Manager Magana\GR\GRR113.1tr /CC!WRS bwB DRE Vine ew 4000 Kruse Way PLace @ BUILDING ONE,SuITE 255 @ Lane Osweco,OR 97035 ®@ (503)636-9680 ®@ Fax (503)697-0288 ty Services (907)274-1056 pare DEC 15 1994 DUTCH HARBOR FISHERMAN Client No.YrLoOAMakushinproject study starts |¥20Q 2/0H Representatives from OESI Alaska Power Corporation,the Alaska Industrial Development and Export Authority and consultant R.W.Beck are in Unalaska this week to begin a economic feasibil- ity 'study-for the Makushin Geothermal Project.The $558,000 study,payed for in part by the state, will compare alternatives for pow- er generation in Unalaska over a 30-year period.Team members hope to visit the geothermal site at Study ... Yaonr 210H From page 4 help them get state funding for the project.- In recent years,atlempts at conven- tional financing for the project have failed,although testing has shown thatalargegeothermalresourceliesbelowthevolcanoandthattheprojectistech- nically feasible.The project,which would gen-erate 17 megawatts,is expected to cost about $100 million to get Makushin volcano,to look at pos- sible hydroelectric sites,and to vis- it the diesel generating plants in the community.They will also be meet- ing with community members and groups. Project developers OESI Alaska' Power Corporation hope the study will prove to the state that the Makushin Geothermal Project is the best longterm alternative for power generation in Unalaska and. See Study,page 5 up and running.Despite the highinitialcost,proponents say thatbecausegeothermalpoweris''renewable,'it is relatively inex-pensive in the long run.It couldhelpsolve.Unalaska's air qualityproblems,which are limiting thecity's ability to expand its diesel generation.Developers say based on a 30-year cycle,geothermal can be com-petitive with diesel and other typesofpowergeneration.The finalreportfromR.W.Beck is expected Feb.5. _adele biollined (FO Carson Clty N me Ki feAAPPEAL-Tuesday,Oct.5,1993GeothermalplantByGEOFFDORNAN Appeal Staff Writer The.attorney for the Yankee Caithness geothermal plant be-tween Reno and Carson City isaskingforasummaryjudgmentagainsttheinsurancecompaniesthatrefusedtodefendtheminan environmental case. Attorney Daniel Walsh of Carson City said the motion asks for court costs of more than $500,000 plus $5millionpunitivedamages-fromeachofthetwoinsurancecompa-nies. Yankee Caithness began gener-ating electricity from geothermalhotwaterspringsatSteamboatandsellingittoSierraPacificPowerin February 1988. The company was sued April 7,1989,by a group of 20 PleasantValleyresidentswhosaidemis-sions from the plant were pollutingtheirairandgroundwater. Yankee Caithness had insurance through that period,first from Na- tional Union Fire Insurance and then from Planet Insurance Com- pany,the suit said.It said the premiums on those two policies to-talled $101,000. The alleged environmental prob-lem began while the company was insured by National Union but,ac- cording to the suit filed in Carson City District Court,the companyrefusedtodefendYankeeCaith- ness, The company was insured withPlanetwhentheactuallawsuitwas filed,but according to Walsh's motion,Planet was fully aware of the Pleasant Valley complaints andmadenoexclusioninthepolicy. Planet nonetheless refused to de- fend Yankee Caithness against the lawsuit,the suit alleges. *Plaintiff contends that liability of both National Union and Planet is clear and that there was an intentional,malicious and fraudu- lent attempt by both companies to avoid the very substantial cost of defending the 1989 lawsuit,” Walsh's motion says. Yankee Caithness defended the lawsuit itself and won a summary judgment after presenting exten- at issue sive scientific evidence there wasnoairorwaterpollutionfromthe':operation of the plant.Because of the expert witnesses'and scientific monitoring needed '£o"prove there was no pollution,Yan: kee Caithnessis seeking $577,657,aincourtcostsplusinterest.In addition,the company asked the court to order each of the two”insurance companies to pay $5 mil-lionin punitive damages.Walsh said punitive damages are'.based in part on the assets of the'companies and are designed to behighenoughsothatthosecompa-nies and others will avoid futtireviolations.He pointed out that NationalUnionisworthmorethan$7 billion”and that Planet's parent corpora-tion is worth a similar amount,”saying a minimum of $5 millionjis.justifiedin this case.The motion for summary judgmentwasfiledFriday. ' wer Reno Gazette-Journal Wednesday,October 6,1993- Nevada Bell managers offered early retirement Nevada Bell Tuesday offered voluntary early retirement to 144 management-level employees,though only about half that number will actually be able to accept the offer. Nevada Bell President and Chief Executive Officer Mac King Jr.said theofferwasmadetostreamlinethe_ management team and "accelerate the transition we are making toa competitive entity.” Of the company's 244 managers, those whose current age and years of service add up to 65 are eligible,with no penalty for taking their pensions early.To increase pension amounts,the company said,four years will be added to each eligible manager's service time and a supplement of 10 percent will beincludedinthepensionuntiltheretired employee reaches the age of 62.Seventy eligible managers will be able to leave the company under the offer. Ki fe WY local wows own yeuF......Gazette-Journal {f wyNanny hi p-HONEY LAKE 'Zodsy-October4.199938 Comment deadline extended By Faith Bremner GAZETTE-JOURNAL The U.S.Bureau of Land Man- agement last week granted yet an-other extension for public com-ment on Washoe County's controversial Honey Lake Valleywaterimportationproject.The public now has until Oct.22tocommentona500-page draft environmental impact statementpreparedbyWashoeCountyun-der the direction of the BLM.This is the second extension of the pub- lic comment period since the doc-ument was released last May. _As of Sept.23 -the old dead-line --the BLM had received 1,328 comments:306 individual letters,370 form letters and 652 petition signatures.It could taketheBLManywherefromtwomonthstooneyeartorespondtoallthecomments,BLM_pressspokesmanDaveLoomissaid.The BLM granted the latest ex-tension at the request of the Sierra Club,Citizen Alert,Public Re- source Associates and Lassen _County,Calif.The reason for theextensionistogivethosegroupsmoretimetoreviewthedraft study"Extending this comment peri-od helps us get the best informa-tion possible to make a decisionontheseapplications,”BLM's na-tional director Jim Baca said. Washoe County has applied foraright-of-way for a pipeline overfederalland.The BLM required the county to conduct the two-year study to show what its impacts ontheenvironmentwouldbe. EIS comments James M.Phillips Lahontan Area ManagerU.S.Bureau of Land Management1535HotSpringsRoadSuite300CarsonCity,NV 89706-0638 PQs -aw' North Star Steel 2 county managers:They're playing us against 'each other q Carson City NEVADA APPEAL-Wednesday,Oct.6,1993 By GEOFF DORNAN Appeal Staff Writer County managers in both Lyon County and Mohave County,Arizo-na,say North Star Steel officials are playing them against each oth- er to get more concessions for the company's proposed steel recyclingplant. North Star plans to build the$125 million industrial plant in either Kingman,Ariz.,or Wabuska near Yerington.When completed,it will employ up to 175 people andproduceahalfmilliontonsofstee products a year.Lyon County officials have been working with the company for near-ly two years to get the state-of-the- art plant.During that process,theyhavearrangedforavarietyofcon- cessions,zone changes and even tax breaks from Nevada. Mohave County officials have also been working with North Starfortwoyears.Same story:zone|changes,planning concessions and a property tax break. Contacted Tuesday,North Star spokesman Greg Lauser said both communities are still in the run- ning for the plant,but could give noestimateonwhenafinalselectionwouldbemade.He said Arizona was somewhat ahead in the process at present. "I suspect theyre leveraging Kingman against us,”said LyonCountyManagerSteveSnyder."I think you could drag that same story out of me,”said Mohave County Manager David Grisez."It has appeared to us over the time that we've been involved in this process that's what has been going on.” He said North Star periodically points out some concession Nevada has made,saying they need to match it. -David Grisez -- Steve Snyder...|Lyon County Manager =. out of me.9 Mohave County Manager.' ">|suspect they're leveraging Kingman'against us.¥ye eee Gil think you could drag that same story _Snyder said that sounds verysimilartohisdealingswiththe company. "They don't want to discourageus.They just want to keep thatmotivationgoingtogivethemthebestdealtheycanget,”he said.'Nevada seemed to have the leadearlierthisyearaftertheLegisla-|ture passed a recycling tax break'that would allow North Star to cut :its equipment and personal proper--ty taxes by 75 percent if it builds in Wabuska,near Yerington. 'Recently,however,electrical'utility negotiators in Arizona did_make what Grisez termed "an ar-:rangement”with the steel compa- ny.That,coupled with a propertytaxbreakforrecyclingcompaniesbytheArizonaLegislature,he said,puts them "very much in the run- ning.”Lauser said Tuesday the compa- ny is having difficulty negotiatingwithSierraPacificPowerforabulk electricity contract. "The negotiations have been en- couraging in Arizona and therefore we've moved ahead on environmen- tal permitting,”he said."So far,wehavenotbeenabletomakegood progress with the utility (in Ne- vada).” Sierra Pacific officials were un- available for comment,but Snyder said in their defense he under- stands they have made three sepa- rate proposals,reducing theirpriceseachtime,and are still nego- te tiating for a mutually agreeable|deal. "It's interesting that they makethosecomments,”said Snyder,"when they tell us they're goingaheadwithpermitsinKingmanjusttobringthemuptoalevelplayingfield.” Grisez said this has been goingonthroughoutthenegotiations. "It gets to the point where itkindofwearsonyouafterawhilebutit's part of the game,”he said."Everybody does it.In their shoes,I would probably do the same thing.” Snyder agreed the process was wearing on him after two years,but said he too still believes Wabuskais very much in the running to get the plant.Wherever it is built,the steel plant will produce upwards of ahalfmilliontonsofsteelforcon- struction -rebar and other such materials -each year from junkcarsandappliances. Lauser said North Star has been . working on selecting a site for near-ly five years and that,whether the final choice is Kingman or Wabus- ka,"we build things for the longterm.”* "7 -.12,15°85 9 1bsud Bsus vs7 1730 OESI/LFC (001/011 MEMORANDUM TO:Allison Smith,Dames and Moore,VIA FAX (907)562-1297 CC:Bill Lewis,Power Engineers,VIA FAX (208)788-2082 Stan Sostrom,Power Engineers,VIA FAX (907)696-4776 Mike Hartley,Peratrovich,VIA FAX (907)563-4220 Joe Fahrendorf Pat McAllister Zvi Krieger Stu Johnson Terry Crowson Dave Brown Jim Porter,VIA MAIL Jack Wood,VIA FAX (916)269-0828 Chun Chin Yehuda Morag FROM:Greg Retzlaff Bb DATE:December 7,1993 , SUBJECT:Makushin Project Description Attached is the draft Project Description for permitting of the Makushin Project.It is importantthatweproperlyidentifyexactlyhowandwhatwéuild.Please carefully reviewandidentifyanydiscrepanciestomeimmediately.Alhson,please indicate if there are any areasrequiringadditionaldetailorthataresensitiveandrequireadditionalconsiderationbyusbeforepreparingtheapplications. Figures 7 and 8 are not attached as they are being revised by Peratrovich and Power Engineersrespectively. GRR449,MEM|jem Attachment oT -- re brand fax transmittal memo 7674 {ot pages»//To MIKE Ade From pn iyo.BXLE Co.tee x (Lee Ler2tadt Me Crs HAr Dept.a Phone ¢ oo 'Pax us Fax# 12,13/93 16:10 505 697 1730 UESI/LFC 002/011 DRAFT PROJECT DESCRIPTION MAKUSHIN GEOTHERMAL ELECTRIC GENERATION PROJECT A.BACKGROUND The Makushin Geothermal Electric Generation Project is a 18 MW nameplate geothermal power production facility to be located approximately 14 miles east of Dutch Harbor on the Island of Unalaska,at a remote site near the base of Makushin Volcano (see Figures 1 and 2.)The Alaska Geologic Survey has studied this area for ten years,and authorized a $5 million study conducted by Republic Geothermal in the early 1980's.This plant will be owned by the State of Alaska when completed and will sell power to the City of Unalaska to allow them to meet the demands of their customers,including the large fish processors that will be interconnected as part of the project.The majority of power currently produced in the Dutch Harbor/Unalaska area is self-generated by several larze fish processors.This plant will replace significant amounts of self-generated power, which is facing fluctuating fuel oil prices and increasing pressures to reduce air emissions.This power will provide a stable price to the Dutch Harbor/Unalaska powcr supply,while providing a base of electrical generation necessary to allow future growth in the local community and economy. B.-WELL FIELD The three 4000 feet deep production wells,one located approximately 1000 feet south and the other located 1000 feet east of the test well ST-1 drilled by the State on the South Plateau (see Figure 3),will generate approximately 1,560,000 pounds per hour ofgeothermalsteamandbrineatatemperatureof290°F at the surface.These wells are isan)and will flash into steam and brine for utilization by the power generation facility described below.After passing through the generation facility,the geothermal fluid and condensed steam will be reinjected into two 4000 feet deep injection wells located 2500 feet north-northwest of the plant facility,and 350 feet below the South Plateau on thevalleyfloor.This fluid will be reinjected at approximately 180°F,allowing the geothermal field to be recharged.All materials for the drilling operation including the drill rig,mancamp,personnel and supplies will be mobilized to the South Plateau by helicopter,All work activities during the drilling operation will be supported by helicopter as the road to the South Plateau will not be completed in time to provide acccss. A pad 260 feet long by 250 feet wide will be prepared for each well prior to the drill rig mobilization by helicopter from an Unalaska staging area.This pad,called a "location", 12/13/93 16:10 303 697 1730 VEST /LFC 71003/011 Page 2 will be constructed using native material and will provide a level compacted area on which the drill rig and equipment will be placed.A basin approximately 50'x 50°x 12' deep will also be constructed at each location.This basin will be utilized for storing used drilling mud and drilling cuttings (rock and native material brought to the surface during the drilling process).Once the drilling is complete,the mud,cuttings,and basin will be reclaimed by covering it with the original material removed to construct the basin. Approximately 6,000 gallons of water per day will be drawn from small surface water streams near the drilling site during the drilling operation.The drilling operation will span approximately nine months of a two year project,unless a winter layover is required.Diesel for the drilling operation will be stored in two temporary 8,000 gallon above ground tanks,as the drilling equipment will use approximately 2,500 gallons per day of fuel.This fuel will be brought to the South Plateau by helicopter in 55 gallon containers or approved bladders where it will be transferred into the storage tank by an electric transfer pump.These diesel storage tanks will be moved to each well location as the wells are completed.These tanks are easily monitored regularly for leaks because of their proximity to the drilling operation and the need for regular replenishment. A 60 man mancamp will be employed for the drilling operation which will be located on the South Plateau.Native materials and rock from the approved material borrow sources, will be utilized to create a level firm pad for the mancamp by leveling and compacting.This camp will utilize approximately 360 gallons of water per day from the above mentioned surface water.The mancamp will cover an area approximately 100°x 150'. Septic disposal will be incinerated and grey water will be leached on site after goingthroughasettlingprocess. Crews will remain on site to sleep,with crew changes occurring approximately every 2 weeks.Replacement crews,contractors,and supplies will be brought in by helicopter. C.PLANT FACILITY The power plant will be constructed after the wells are completed,on the South Fox Canyon Plateau in the vicinity of the future production wells and ST-1 Discovery Well drilled by the State of Alaska.The plant will utilize approximately 1,560,000 pounds perhourofgeothermalfluidinitsfourmodularturbinegenerators,which employ a closed, binary,hydrocarbon cycle.The plant cooling will be provided by four air condensing units located adjacent to each of the turbine modules (see Figure 4).A plant substation to step up the power from 13.8 kv to 34.5 ky for transmission to the City will be provided.The fire protection equipment will include a 350,000 gallon fire water tank, fire pump and jockey pump.The Plant will also include ancillary electric equipment,an emergency diesel generator with a bermed 15,000 gallon diesel storage tank,a control and maintenance building complete with maintenance and hotel facilities for the crews. 12/13/93 16:11 503 697 1730 OESI/LFC Page 3 A geothermal basin 125 feet x 125 feet x 8 feet deep will be constructed adjacent to the plant facility by removing the native material and placing it next to the basin creating a berm.This geothermal basin will be utilized initially to "develop"the wells by letting the wells free flow into the basin one at time.This will cause small amounts of rock and mud to be discharged into the basin along with the geothermal brine.This liquid will be removed from the basin as described below.This process is only required when the well is initially drilled or major rework to the well is required. D.OPERATION During normal operation there will be little geothermal brine or steam present except within the plant cycle.For occasional maintenance and well warm up activities after the well has been inoperative for some period,geothermal brine will be discharged into the geothermal basin described above,which will contain the fluid on the South Plateau.The fluid in the basin will be removed by evaporation which will leave small amounts of precipitate in the basin along with trace amounts of rock and mud from developing the well as described above.If the weather and/or time of the year preclude water removal by evaporation,a pump will be employed to move the liquid from the basin into the injection system,returning it to the subsurface resource..These warm up and maintenance procedures will occur approximately six to twelve times per year and will discharge approximately 200,000 gallons of liquid into the basin.This basin will also accept the discharge from the safety relief valves should a plant upset occur resulting in an over pressure condition.These upset conditions are estimated to occur only approximately twice per year and will cause approximately 200,000 gallons of brine to be discharged into the basin during each occurrence. Combustible trash will be burned on site.Remaining trash will be hauled to the Unalaska land fill.. The plant will be manned around the clock with maintenance crews normally working during the day shift.The plant will utilize a total crew of fourteen. E.ROAD AND PIER DESCRIPTION A twelve mile road will be constructed from Nateekin Bay to the Makushin Valley,where it will intersect with what remains of an existing World War II road built by the Corp of Engineers on the valley floor of the Makushin Valley (see Figure 7).The road alignment will follow the existing road in the gravelly area adjacent to the river,approximately 6'A additional miles to the base of the existing switchback road where the valley narrows. At this point the road crosses to the south side of the valley and climbs the valley wall and traverses to the west before dropping into the Makushin Valley and finally up to the South Plateau,which is approximately 1200 feet above sea level.Approved material ood/o1. 12/13/93 PROIDESC 16:12 503 697 1730 Page 4 sources for rock will be utilized for road and plant pad construction.Refer to Figure 7 for road construction details. The roads between the wells will be constructed similar to the construction represented by sheet 4 of 23 of Figure 7,utilizing native materials and gravel from the approved material borrow sources. A pier will be constructed in Nateekin Bay supported by steel piles.It will be approximately 16 feet wide and 230 feet long (see Figures 6 and 7).A beach landing facility will also be required at this location for occasional heavy loads to be delivered by barge during operation.A small building 30 feet by 40 feet,for supplies and accommodations for an overnight stay will be located at Nateekin Bay for those times when the weather is inclement,making travel either to the plant or to Unalaska unsafe. CONSTRUCTION During construction of the plant facility,road and pier,a 70 man mancamp will be located near the beach of Broad Bay (see Figure 5)and will utilize 450 gallons of water per day drawn from the Makushin River.Septic waste will be incinerated and grey water will be leached on site after a settling process.All supplies,plant equipment and personnel during the plant construction will be brought in by barge beach landing craft or fixed wing air craft utilizing the existing airstrip in Broad Bay. A temporary barge beach landing area will be prepared on the beach of Broad Bay for off loading plant equipment and construction equipment (see Figure 5).This road will have precast concrete or untreated wood mats added to the surface to provide support for vehicles accepting loads from the barge.This landing area will be reclaimed once construction is complete.Combustible trash will be burned on site during construction. TRANSMISSION SYSTEM DESCRIPTION A 34.5 kv 3-conductor,single cable 250 kcmil copper will be buried from the South Plateau ten miles to Broad Bay,adjacent to the road (see Figure 8).The transmission line will connect with a submarine cable of similar construction placed across Unalaska Bay near the existing cable right-of-way to Dutch Harbor,where it will intertie with the City of Unalaska's distribution system.A small above ground connection facility with a building will be located at Broad Bay. Deceaber 7,1993 OESI/LFC 00 5/011 006/011OESI/LFC316:12S12/13/93036871730aFIGURE 1] Figure 1 PROJECT LOCATION MAP DONE Ot ww),ww wwDroTGaioswn vorcano &wewwe Der]ZE/STOL°MolPOWsEXSETEUL)i|g35,';;0229022"NYaNALAEKA Sesee SS Laces UNALASKA ISLAND Sy 5 @®Temperature Gradient Hole we0GeothermalExplorvetoryWell(8T-4) Approximate Site Location Zeg-SCALE 3:250 000 );C)t 10 15 20 MULES See ry 9 3 10 is 20 KILOMETERS Makushin Geothermal Electric Generation Project FIGURE 2 = -o 1 ia 4 w-ek -as 1 '.:.''\ote atte .ete T ==eevee fone ere eee eee -tee 'dee H -er om:"a Tse '..'om de . «!.ssa aw Seek oe eee nee et Ry <=°=woe wa teams tamorat 4 ee abet Se AT Bed TE a et isCONTOURSNTERVALKDOELER .TRSNv:-cer ak SLOP UIMENTANY COPDUE INTIAL 1 PERSCORLLLHORTPEPEESLVTE18APPENDGMATEUMEUbRe Am anted BALETHROAMBANCOFTEFSAPTRCOMATELESF tpleeeee;woeIhmeg ast!Te PANELS beethowepoenyengSS. j Me ISTH wpalie.negenbeoeaa ! .ae!ay!ae\=p sr.q_ vs Vas iS aN 'SS)'Bidor %seeeeTo) ae'n Ons -a ser > wtae A Ne ace)RBI AN sn na |eT:at£69Ca¢o¢LtTTO/L008 l25x125x8' FOX CREEK WyFOX CREEK RESOURCE kisMAN CAMP |}.150x100 .oem ie | yy AJ ST=1 SDUTH PLATEAU 50x50x12' 1000' 13-2 ZB REINJECTION PIPING 13° access ROAD ¢S $¢Ry NORTH 0 500 1000 1000 =--=aso onl SCALE IN FEET Ey -_-_- SOUTH PLATEAU SITE MAKUSHIN GEOTHERMAL ELECTRIC GENERATION PROJECT 12-7-93 TT:9T€B/CT£0cQ,OCLT1693417ISOTt0/s00R 'IGURE 4 *C6-CT/eTTT:9TG169€0OELTDAIT/ISAOasa"| 7 180800 GAL |noo. POWER PLANT SUBSTATION Pils or 9fl 250,000 GAL POE FIRE WATER TANK ACCIPaIRA RSD,AR COW,ruecrapal rr weve''FIRE rue ane aR Coie cr "ik]sor NORTH 4 >RORTWARLE T ITMeateii |oteaSoaOeIH'|SEALE FECTroutEsBeneeeGEMLRATINTUBAERATORau 4 >Mectitalg' , Oo '|urceien --b--b-4 -be bee tt -dt 4 FF 4 4 aN Fe Bk Carat] ae -a '1 1 1 eva||am An rt ConLED aneHaCONCENEDR1CONTCKaER|lad IESOPEMTANE TANK as n 5 : at)Ga :yrs owerno10600i-,Olt Corporation serv\Pie SnSerre|Ne /ele a er ergomWAKUSHIN,GEUTHERMAL . ELECTRIC GENERATION whe PLANT SITE PLAN=rare 7 -|=coat a sero ere BAX_PLNT carer oe a me ete nmcomomm2 ene age Cre peImens teceeerbeeens ce en bce:sn ET RRL TTT 3 3 wT treacert TTIO/600R) \EXISTING f LANDING STRIF WA ore -_ BROAD BAY UNDERWATER MAGNETIC NORTH DS POWER CABLE 14.75 DEG EASTSHELTERAWNNY20x15x8 -- TEMPORARY CONSTRUCTION BARGE LANDING AREA we 200° 200°™0 1000 SCALE FEETQ 41/1540CeveTeotTT:9FTOFLT189cocaTTIoO"0TOR FIGURE 6 t S 200°7 a it|& [o>] wo "I ee 3 oS Qo200°: a MAGNE TIC NORTH 14.79 DEG EAST 1000 SNATEEKIN BAY >fcPORTDOCKSCALEFEETS WENT BTAGCTOR TEIGCOPLEP 7020 +12-2-93 $Since 90746554424 08-HOLH 907 581 8998;%1 WALTER J.HICKEL,GOVERNOR DEPARTMENT OF COMMERCE AND P.O.BOX 110800 IE:(907)465OFFICEOFTHECOMMISSIONERFAX(0)aaneeer December 2,1998 Mr.Riley SnellExecutiveDirector Alaska Industrial DevelopmeatandExportAuthority1016W.Sixth Ave.,Ste.400Anchorage,AK 99501-1963 -FAX #561-8998 Dear Riley, Thank you for your interest and support of the MakushinGeothermalprojectinUnalaska.garding my letter ofNovember30,1993,proposing a December 16 meeting inSeattle,I have found too many scheduling conflicts to holdasuccessfulmeeting.Therefore,AIDEA is scheduling ameetinginthenextfewweekswiththeCityofUnalaskafollowedbyameetingwiththelargepowerusers.AIDEAwillbecontactingyoudirectlytoschedulethesemeetings. I appreciate your ongoing interest in this project and I lookforwardtoournextmeeting.I would also likte to take thisopportunitytowishyou,your families,and staff a veryhappyholidayseason. Very truly yours, enn E.Reed eputy Commissioner GER/lvs226.gr120293a LeReache &Co.W907.566-6453 11/23/93 11:08 AM Bel MEMORANDUM To:MR.WILLIAM R.$NELL,EXECUTIVE DIRECTOR Alaska Industrial Development &Export Authority From:Robert E.LeResche Date:November 23,1993 Re:Draft "Requirements”Contracts for Makushin Geothermal Project At your request,I have been working with Dave Eberle and John Rubini in drafting "Requirements”Power Sales Contracts applicable to the Makushin Geothermal Project.I have begun with a form requirements contract provided by Mr.Rubini,and am in the process of creating applicable contracts from it.The contracts should be complete by the end of this week,or before. After fiddling with several potential contract structures,I have concluded that there should be three forms of contract,applicable to different sellers and buyers.Irecommend that AIDEA be the seller in only one of these contracts --a full requirements contract between AIDEA as seller and the City of Unalaska as buyer.There are two reasons behind this suggestion: First,1 do not believe that it is in AIDEA's or the Project's interest for AIDEA to seek certification from the APUC as a public utility regarding the Makushin Project.If AIDEA has only one wholesale customer (the City)Ido not believe you are required to recelve APUC certification or approval of the power sales contract (the City may be so required if it chooses to be regulated).With several private sector customers,I believe APUC certification and regulation would become necessary. Second,under the old Energy Authority statutes,the AEA was prohibited from retail sales of energy.I believe that restriction survived the revision of those statutes.Were AIDEA to sell to retail customers (the industrial users),this prohibition may become a problem. I am therefore drafting three contracts,as follows: 1.The Full Requirements Contract between AIDEA (seller)and the City of Unalaska (buyer). 2.A Full Requirements Contract between the City (seller)and industrial users who will not sell peaking power back to the City (buyers);and, LeResche &Co. LeReachie &Co.@ 907.586-8339 2611/25/93 911:05 AM 63/3 Mr.William R.Snell,Executive Director Alaska Industrial Development and Export AuthorityNovember23,1993 Page 2 3.A Net Requirements Contract between the City (seller)and industrial users who will sell peaking power back to the City (buyers). The upshot of this commercial structure would be a rationally organized electric grid system covering all of the City of Unalaska and including residential,commercial and industrial customers.This system would be dispatched and optimized by the City utility,and would make the most efficient use of Makushin energy,City generation and surplus industrial capacity.In my mind,this is the only rational and efficlent structure that will make the best use of the Makushin asset. This structure will require that the City create a genuine central electric system with modern dispatch and control systems.Such a system is already a component of the Project budget and design.I understand that the City has expressed an eagerness to do this to solve current and projected problems. Unalaska loads and demands are currently far In excess of the size and complexity that requires such a system. Finally,I believe that such a contract structure will simplify AIDEA financing of the Project.Any revenue-based financing will be based upon the AIDEA/City of Unalaska contract,with the industrial contracts viewed as supportive of that agreement.In my experience,this is more conventional and less troublesome to both the bond market and the industrial customers than the alternative case,wherein individual industrial customers agreements are offered directly as revenue sources. You may wish to have an attorney verify my assumptions regarding APUC involvement.Dave Eberle also suggests that AIDEA should meet with the City regarding their role in the Project before discussing the matter formally with the industrial customers.I endorse this suggestion,and request that OESI representatives may wish to support AIDEA at this meeting. cc:Mr.Jim Porter,OESI Power Corp. Mr.Jack Wood,OESI Power Corp. Mr.Greg Retzlaff,OESI Power Corp. Dave Eberle,AIDEA LeResche &Co. q LERESCHE «CO.SG7S586e833e LeResche &Co. 4270 Glacter Hy.*Jomeaw Alaska *99801 »USA8338 Fax:907.586-8339 FAX Cover Sheet Date:November 24,1993 -10:39 AM (AST) Numberof pages including cover:2 Please Deliver To:© "N\RILEY SNELL/DAVE EBERLE AIDEA/Anchorage Message: Riley &Dave -- As you can see,the Snettisham transfer bill passed the house.The only problem is that what passed was the original Gore language,with none of our changes. Not to worry,however.The Senate has already had one hearing on it, and will take it up again next year --probably February.Apparently Bennett Johnston is all for it,and will insert our suggest changes.Logically,the Houseshouldn't object during the conference committee since Snett is only a small partofthebill. Things look good. Best regards, REL;jlc »@l RWTBECK GOT eet)GeenaPius AND ASSOCIATES,INC. Pe Noted by BJF 2522 Arctic Boulevard,Suite 210 m Anchorage,Alaska 99503-2516 a USAFile #Voalachka Gorths-..*\ Telephone (907)272-6225 m Fax (907)246-4757274-4525 WS-1559-IA1-BX E c EE DY ge gaQctober 24,1993LsMr.Greg Retzlaff LFC Power Systems Corporation OCT 27 1993 Building One,Suite 255 Alaska tnciin "4000 Kruse Way Place ang ate2!DevelopmentLakeOswego,Oregon 97035 Hort AuthoriRy Dear Greg: It is my understanding that one of the tasks agreed to at the afternoon meeting on Tuesday,October 19,was to come to some sort of closure on the Dutch Harbor/Unalaska loads and usable energy from the geothermal project.Accordingly,I am providing you with the loads that we used in running the computer model to estimate energy sales.As you may recall,this information was not available when I spoke to you in September regarding our task of revising the loads.It was only at the last minute that we received certain data that was required to do the analysis,and the combined weekly loads were forwarded to you shortly after we got our draft report out. Attachments 1 -6 include the monthly peak and energy requirements that were used for the City and the self generators on the island.While the tables are fairly self explanatory, certain explanations are in order. City Loads -Roe Sturgulewski provided us with monthly peak and energy requirements for the fiscal year ending June 30,1993.These amounts, however,included approximately 500,000 kWh of sales to SeaLand for the last half of the year only.Therefore,energy sales for FY 94 were estimated by first adding an additional 500,000 kWh during the first half of the year based on a monthly distribution suggested by Roe.The resulting monthly amounts were then adjusted upwards on a pro rata basis such that the annual total was the 24.7 million kWh that Roe expected to be generated in that year.The annual total represented an approximate 13 percent increase from the 21.9 kWh generated or purchased in FY 93. For FY 95,Roe felt that generation requirements would be an additional 1.5 million kWh over that required in FY 94,This increase was distributed monthly based on monthly FY 94 requirements. Peak requirements were estimated using the load factors experienced in FY 93. Austin,TX #Boston,MA @ Columbus,NE @ Denver,CO a Indianapolis,IN @ Irvine,CA @ Minneapolis,MN Nashville,TN #Orlando,FL &Phoenix,AZ @ Sacramento,CA s San Jose,CA @ Seattle,WA Mr.Greg Retzlaff October 24,1993 Page 2 SeaLand -Mike Lynch at SeaLand did not have all that much information regarding actual energy requirements,let alone projections.However through a couple of faxes,we were able to make an estimate of annual and monthly peak and energy requirements.Based on the City's actual sales to SeaLand,I believe that these estimates are on the higi side;but they were used in the model. Westward -Marcus Alden felt that certain additions of equipment and servicing of more boats would increase energy requirements from that presently experienced.However,he also felt that the shorter,more intense season would act to reduce energy requirements somewhat,with the result being about a "wash"with no net change in load. Unisea -Unisea's FY 93 loads were adjusted for two factors.First,the peak and energy amounts included sales to the City.Since these were included in the City loads,they were netted out of Unisea's figures.The second adjustment was for future changes.The Grand Aleutian hotel will add to their FY 93 figures,but the removal of the Unisea Barge to St.Paul Island will reduce the load.Don Henderson felt that the net change would be about a 500 kW reduction in load.Energy generation was therefore reduced by 500 kW at historical monthly load factors. Unisea has seven separate feeders that they record monthly peaks on. However,the overall monthly peak for their combined system will not be the simple addition of these seven figures,since their is some diversity in the loads. Don Henderson state that their overall peak was around 7,200 kW.This equates to a 77.5 percent coincidence factor which we applied to the remaining months after netting out the 500 kW load reduction. Combined-It should be noted that the individual peaks of each processor and the City cannot be added together to come up with the combined peak requirement for a month.As with Unisea,there will be a certain diversity between loads where individual peaks will occur at differing times.The computer model derives the system peaks based on the hourly load shapes entered. Peak and energy requirements are highly dependent on fish processing taking place,and we have been told by the processors that processing can be somewhat random on a daily basis.One day they can be busy processing and the next sitting and waiting for the next boat of fish to show up.We can't really account for this randomness in our model,and we have therefore developed "typical"weeks based primarily on monthly peak and energy requirements but also accounting for load patterns during processing and non- processing periods.Our load patterns probably shift some of the energy RW.BECK eee AND ASSOCIATES,INC. De Mr.Greg Retzlaff October 24,1993 Page 3 associated with the "spikes"into the low requirement periods.This,in turn, tends to overestimate geothermal energy sales.We have run the analysis using more of a blocked load shape,and these tend to reduce geothermal sales.For these and other reasons,we have leaned more towards the lower range in our estimates.* Greg,if you have information that would change any of our assumptions on present or future loads,let's get together on the phone to discuss them.Once we have the loads and the revised Project capabilities entered into the computer,estimates of total energy sales can quickly be developed. Please feel free to contact me either at the office (907/272-6225)or at home (907/345- 4526);although at home,I may or may not have the data with me. Very truly yours, R.W.BECK AND ASSOCIATES,INC. Pde Ll Michael D.Hubbard Director,Alaska Operations Attachments c:John Olson Dave Eberle Glenn Reed Roe Sturgulewski RW.BECK -Eeee AND ASSOCIATES,INC. Es Ze N Beegciea Paper Pr atuer FY 93: Energy Sales Residential Commercial Community Industrial Total Sales Station Use Line Loss Purchases Generation Requirements Peak (Generating) Load Factor (Generation) FY 94 FY 93 Sales Adjust for full year of ScaLand Subtotal Adjust to 24,700,000 FY 95 FY 94 Generation Addition of 1.5 GWh Subtotal Assumed Load Factor Estimated Peak Jul-92 276,326 366,073 111,141 592,006 1,345,546 36,000 173,954 1,555,500 2,565 81.5% Jul-93 1,345,546 66,667 1,412,213 1,637,007 Jul-94 1,637,007 99,413 1,736,420 81.5% 2,863 Aug-92 295,151 383,748 119,267 559,634 1,357,800 42,960 68,700 1,469,460 2,530 78.1% Aug-93 1,357,800 116,667 1,474,467 1,709,170 Aug-94 1,709,170 103,796 1,812,966 78.1% 3,121 Sep-92 290,180 471,609 102,405 539,140 1,403,334 28,000 120,666 1,552,000 2,900 74.3% Sep-93 1,403,334 116,667 1,520,001 1,761,952 Sep-94 1,761,952 107,001 1,868,953 743% 3,380 Oct-92 Nov-92 =Dec-92 Jan-93 Feb-93 =Mar-93 328,774 379,671 360,424 367,639 365,353 390,279 442,679 526,542 §82,120 605,084 534,118 658,321 122,847 122,531 124,834 175,387 242,089 245,648 634,620 714,720 849,440 888,580 1,007,280 1,081,180 1,528,920 1,743,464 1,916,818 2,036,690 2,148,840 2,375,428 38,800 41,120 40,320 39,760 35,600 33,120 214,160 169,636 121,358 -7,190 143,160 110,072 174,600 545,676 1,781,880 1,779,620 1,532,820 2,069,260 2,327,600 2,518,620 3,270 3,475 3,855 4,160 4,435 4,170 73.2%71.1%53.4%66.9%78.1%81.2% Oct-93 Nov-9 Dec-93 Jan-94 Feb-94 Mar-94 1,528,920 1,743,464 1,916,818 2,036,690 2,148,840 2,375,428 66,667 66,667 66,667 0 0 0 1,595,587 1,810,131 1,983,485 2,036,690 2,148,840 2,375,428 1,849,570 2,098,265 2,299,213 2,360,888 2,490,889 2,753,545 Oct-94 Nov-94 Dec-94 Jan-95 Feb-95 =Mar-95 1,849,570 2,098,265 2,299,213 2,360,888 2,490,889 2,753,545 112,322 127,425 139,628 143,374 151,269 167,219 1,961,892 2,225,690 2,438,841 2,504,261 2,642,158 2,920,765 73.2%71.1%53.4%66.9%78.1%81.2% 3,600 4,206 6,134 5,035 4,547 4,836 Swe”Altyd/Povel2°) FY 93 - Energy Sales Residential Commercial Community Industrial Total Sales Station Use Line Loss Purchases Generation Requirements Peak (Generating) Load Factor (Generation) FY 94 FY 93 Sales Adjust for full year of SeaLand Subtotal Adjust to 24,700,000 FY 95 FY 94 Generation Addition of 1.5 GWh Subtotal Assumed Load Factor Estimated Peak Apr-93 330,811 577,713 147,357 740,800 1,796,681 42,640 25,819 1,865,140 3,705 69.9% Apr-94 May-93 303,000 464,112 151,302 640,500 1,558,914 31,120 72,586 1,662,620 3,280 68.1% May-94 1,796,681 0 1,796,681 2,082,674 2,082,674 126,478 2,209,152 69.9% 4,247 1,558,914 0 1,558,914 1,807,060 May-95 1,807,060 109,740 1,916,800 68.1% 3,781 1,595,756 32,960 166,744 1,795,460 3,155 79.0% Jun-94 1,595,756 0 1,595,756 1,849,766 Jun-95 1,849,766 112,334 1,962,100 79.0% 3,337 Annual Total 20,808,191 1,101,789 21,909,980 20,808,191 500,000 21,308,191 24,700,000 24,700,000 1,500,000 26,200,000 $ev02ABD[LMPypoyvityPores<wsS OoWnANRWN=Jul-92 16,821 15,965 15,490 14,747 14,496 16,172 16,176 15,756 15,680 15,423 15,569 14,978 16,213 18,382 24,076 31,426 64,164 64,536 62,158 58,747 65,595 61,453 57,101 52,733 57,271 59,002 59,826 63,811 57,999 59,274 60,277 1,181,317 Aug-92 49,587 63,654 57,567 60,824 59,762 59,154 64,109 64,755 61,979 51,602 60,252 60,347 60,455 60,003 59,301 59,279 48,405 56,514 55,633 58,639 58,298 58,895 59,229 60,701 47,983 56,117 60,731 60,674 59,517 57,701 57,772 1,809,439 Sep-92 49,607 53,368 60,148 60,555 58,204 57,179 54,725 58,876 52,751 52,666 59,166 59,163 56,141 57,474 60,477 59,172 52,816 58,856 58,366 55,482 57,823 60,384 60,410 59,843 41,894 21,516 18,456 20,596 19,537 18,228 1,513,879 Oct-92 18,212 18,129 16,220 14,889 16,812 16,654 16,309 16,093 15,949 14,810 14,326 15,520 15,455 15,153 15,374 15,260 15,269 14,520 15,132 15,563 15,532 15,864 15,426 15,200 15,010 16,105 16,006 16,107 16,449 16,793 17,228 491,369 ATTACH sen 7 3 - Daily Energy (kWh) Nov-92 Dec-92 16,435 23,676 17,996 26,693 17,975 23,851 18,463 25,364 17,967 21,118 18,306 20,382 18,329 20,993 16,870 18,103 24,965 19,540 28,964 18,576 23,253 24,063 18,797 24,913 21,202 19,764 17,157 21,507 21,744 19,316 18,082 23,411 17,717 21,173 17,554 19,002 17,836 19,246 19,448 21,628 17,239 20,875 15,785 18,070 18,622 17,231 22,823 16,923 19,383 16,060 20,115 18,383 23,865 16,412 24,505 18,560 21,998 18,956 26,668 19,535 16,519 600,063 629,843 A CYESKA Jan-93 Feb-93 15,790 30,285 17,389 30,710 16,115 34,740 20,578 31,407 21,101 23,470 17,970 38,818 17,466 59,259 19,717 59,657 19,501 61,846 17,837 69,848 19,612 66,495 19,969 65,769 18,539 66,731 21,944 49,376 18,326 61,891 23,897 67,718 22,424 68,465 22,033 67,381 20,437 65,239 25,412 61,357 31,170 60,460 30,425 51,287 26,828 62,960 26,592 69,216 28,026 61,505 25,703 62,964 32,646 69,435 29,875 61,566 31,680 25,371 30,667 715,040 1,579,855 Peak requirements not available.Strip charts show peak 2,300 -3,400 kW during processing, approximately 1.200 during clean-up each week,and 800 kW during non-processing. Mar-93 64,470 71,060 51,286 62,658 62,565 64,394 59,681 59,241 62,803 67,429 52,044 62,434 60,260 60,580 59,762 69,453 72,661 65,152 68,241 71,153 64,826 65,026 63,057 63,447 65,747 63,603 53,058 28,192 35,264 59,325 50,008 1,878,880 Apr-93 41,583 29,240 43,431 28,558 24,883 35,792 58,835 41,753 28,647 44,768 24,727 30,752 28,714 28,501 28,570 26,581 30,503 20,501 28,742 27,610 26,030 24,845 21,344 26,481 27,410 29,138 24,921 27,285 26,552 28,543 915,240 May-93 27,711 26,183 25,108 28,668 21,731 23,524 24,925 27,581 20,599 26,907 28,524 25,781 19,813 20,313 18,162 17,162 21,161 18,908 19,359 19,990 19,153 17,930 17,054 20,183 20,453 20,874 21,191 21,707 19,719 17,906 17,242 675,522 Jun-93 19,384 19,446 18,307 18,974 18,071 17,324 20,995 20,099 19,984 19,649 21,793 23,377 21,783 21,100 19,457 18,974 18,019 17,200 16,877 18,903 19,423 18,954 19,654 18,944 18,778 17,679 16,727 18,838 18,946 17,840 575,499 Jul-92 Aug-92 Sep-92 Oct-92 Nov-92 Dec-92 Jan-93 Feb-93 Mar-93 Apr-93 May-93 Jun-93 AT7 ACW tenT 2 Peak Demand per Feeder (kW)-1,447 1,623 1,701 1,624 1,624 1,624 1,623 1,623 1,546 1,559 1,206 1,206 iy1,704 1,704 1,374 1,704 1,704 2,200 2,126 2,126 1,122 1,383 1,043 1,122 bs c SiEA 2 6 1,369 320 1,805 320 1,525 357 1,909 321 691 339 2,230 378 2,705 377 1,447 377 1,578 226 1,676 246 1,382 183 678 213 mMTotal 6,483 7,573 8,353 7,932 6,732 8,806 9,296 8,142 6,519 7,202 4,465 3,870 Energy (kWh) 3,164,000 3,105,000 1,855,000 1,180,000 1,382,000 2,553,400 1,339,000 3,102,000 3,208,000 1,725,000 1,662,000 1,368,000 City Purchases (kWh) 174,600 545,676 Net (kWh) 3,164,000 3,105,000 1,855,000 1,180,000 1,207,400 2,007,724 1,339,000 3,102,000 3,208,000 1,725,000 1,662,000 1,368,000 Peak (kW) 500 500 500 500 500 500 500 500 500 500 500 500 Energy (kWh) 244,023 205,005 111,038 74,382 89,676 113,998 72,020 190,494 246,050 119,758 186,114 176,744 Net (kWh) 2,919,977 2,899,995 1,743,962 1,105,618 1,117,724 1,893,726 1,266,980 2,911,506 2,961,950 1,605,242 1,475,886 1,191,256 23,093,822 ArTAcduen7 4 les meaty Energy Generation Peak (kWh)(kW) Dec-91 $93,202 n/a Jan-92 926,701 n/a Feb-92 1,542,097 n/a Mar-92 1,168,934 n/a Apr-92 624,606 n/a May-92 853,863 n/a Jun-92 870,178 n/a Jul-92 1,402,055 n/a Aug-92 1,494,919 n/a Sep-92 1,799,254 n/a Oct-92 666,935 n/a Nov-92 646,364 n/a Peak data not available.Peak on high load day approximately 3,600 kW. ATTAC Huu $7 Sea Lan dS (A)Van Load 5.0 kW/Van (B)%of reefers on at any one time 75% (C)%of time any reefer on 60% (D)City Load 130 vans (1)(2)(3)(4) Average Hours/Peak No.Vans on-line Month Month of Vans per month Jan 744 400 275 Feb 672 400 325 Mar 744 400 300 Apr 720 300 200 May 744 130 130 Jun 720 130 130 Jul 744 400 200 Aug 744 400 400 Sep 720 400 300 Oct 744 130 130 Nov 720 130 130 Dec 744 130 130 Col.5 =Col.3 *Factor A *Factor B Col.6 =Col.4 *Col.2 *Factor A *Factor C Col.7 =Minimum(Col.4,Factor D)*Col.2 *Factor A *Factor C Col.8 =Col.6 -Col.7 (5) Peak Load (kW) 1,500 1,500 1,500 1,125 488 488 1,500 1,500 1,500 488 488 488 (6) Energy (kWh) 613,800 655,200 669,600 432,000 290,160 280,800 446,400 892,800 648,000 290,160 280,800 290,160 (7) Purchased from City (kWh) 290,160 262,080 .290,160 280,800 290,160 280,800 290,160 290,160 280,800 290,160 280,800 290,160 3,416,400 (8) Self Self Generation Generation (kWh)(kW) 323,640 1,013 393,120 1,013 379,440 1,013 151,200 638 0 0 0 0 156,240 4 1,013 602,640 1,013 367,200 1,013 0 0 0 0 0 0 2,373,480 Aqrac Hu eny & OTHKEK, Other Loads (APL,OSI,Icicle,other) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Energy 888,206 1,172,625 1,291,421 846,097 646,786 572,519 598,360 573,254 495,800 707,570 761,260 736,102 9,290,000 Peak 1,990 2,908 2,893 1,959 1,449 1,325 1,340 1,284 1,148 1,585 1,762 1,649 o™ae ; UnitPUBLICFINANCIALMANAGEMENT,INC.Pact Financial and investment Advisors 1000 Sw Broadway.Suite 1500 Porand,Oregon 97205-3003 503-223-3383 (Fax)503-223-7002 DATE:L443 CLIENT NUMBER: --to:K/oe SVE FAX NUMBER: To:dbW dLohn FAX NUMBER: TO:FAX NUMBER: TO:FAX NUMBER: TO:FAX NUMBER: TO:FAX NUMBER: FROM: PAT CLANCY CHRIS DEARTH JANET GALLAGHER Gar GARONES?ERIC JOHANSEN NAOMI KECK GERDA NEWBOLD KIEU-OANH NGUYEN CHIP PIERCE JO PIERRE DAVID THURMAN AMY WARREN Total number of pages (including cover}:G For transmittal problems,please contact Amy Warren or Jo Pierre at (503)223-3383. COMMENTS: Adanta Austin Boston Denver Fort Myers = Harrisburg.«=Memphis)=New York =Orfando Philadelphia Porand San Francisco An Affihate of M3aring Midland Bank,NA. c™\ro] |PFVI | PUBLIC FINANCIAL MANAGEMENT,INC.Financlal and Investment Advisors 1060 SW Broadway,Suite 1500 Portland,Oregon 97205-3067 503-223-3383 (Fax)503-223-7002 MEMORANDUM.-*****Confidential *****DRAFT September 14,1993 TO:Michael D.Hubbard Director,Alaska Operations R.W.Beck and Associates Fax #(907)276-1751 CC:Riley Snell -Executive Director -AIDEA John B.Olson,Deputy Director,Development -AIDEA J.Miller,S.Clements,C.Pierce,K-O Nguyen -PFM FROM:Mark Gardiner RE:Unalaska Geothermal {Note:This memo contains preliminary analysis and credit opinions,based on PFM's professional ”experience and judgement,which bear directly on the creditworthiness of a publicly-traded _corporation,The analysis and credit opinions,which are based on published and unpublished information,are for the sole purpose of determining whether and how AIDEA/AEA and the State of Alaska should be involved in the Unalaska Geothermal project.Reproduction of this memo,or distribution beyond the addressees is strictly probibited without written permission from PFM]. This memo summarizes our preliminary analysis of the Unalaska Geothermal Project. As we discussed on the phone on Friday,we are expecting some more information from OESI which will be relevant to AIDEA's analysis of the efficacy of the project and OESI's proposal.Our final analysis will also require the updated energy load estimates which you will be providing.Therefore,the conclusions and recommendations in this draft should be considered preliminary and subject to change. Aflanta Austin Boston Denver Fort Myers Harrisburg Houston Los Angeles Memphis New York Orlando Philadelphia Portland San Francisco An Affiliaia of Marine Midiand Bank,N.A. . 6j Confidential --Unalaska Geothermal Credit Analysis 9/14/93 I.Response to Mike Hubbard Sept.3,1993 Memo In your memo of 9/3/93,you asked a number of specific questions: I.Shouldn't the reserve fund be fully funded from the start? Yes,given the relatively high risk nature of the project,at least a full years average annual debt service should be reserved at the closing of each bond sale.Also,ina previous memo you indicated that you think there is a withdrawal from the debt service reserve fund in the early years.It would be highly unusual,and not at all well received in the credit markets,to enter into a financing with a plan to use the debt service reserve fund as a de facto rate stabilization fund. 2.&6.Any problems with the assumptions that no rate stabilization fund is required? The OESI proposal uses ramped debt service rather than a rate stabilization fund as a means of keeping the cost of power at or below 12.0 cents/kWh in 1992 dollars.Itis theoretically possible to achieve this by,for example,using some level of non-coupon bonds (capital appreciation bonds,zero coupons),or simply by back-loading the debt service.However,the more conservative approach would be to require one form or other of equity investment (ie.the "rate stabilization fund"referred to in some of the project documents)for this purpose.This approach would both enhance the credit and provide a more normal debt service pattern. _Ona related matter,the level of renewal and replacement funding for the project may be low.PFM often sees funding set aside for this purpose at levels of 0.5%to 0.75%of (initial capital cost)per year from the very first year of operations.In this case that would be $450,000 to $675,000 --well above the $300,000 initial amount planned for this project (although close to the $650,000 ultimate level). 3.Given the ramped debt service,the security provided by a requirements contract,and other issues,is the interest rate realistic,too high,too low? The interest rate assumption of 6.0%for a 27 year final maturity issue with the credit and structuring proposed is probably too optimistic for planning purposes.Even though current investment grade tax-exempt rates are well below this level (even taxable Treasuries are),there can be no assurance that these rates will prevail at the time of the proposed 1994 financing much less the 1995 --if the project can achieve the OESI schedule.PFM would suggest that something more like 6.5%to 7.0%would be more not be overly conservative for planning purposes at this stage of this project. Public Financial Management,Inc.Page -2- a | ° Confidential --Unalaska Geothermal Credit Analysis 9/14/93 4.Should the cost of bond insurance be included in the analyses? No,it is highly unlikely that this project will achieve the credit status required to interest bond insurers (unless there is some form of State or AIDEA credit enhancement --which is a different discussion). 5.Is 2.59%of the bond issue size realistic for issuance costs? It is good enough for planning purposes for this project. 7.Should the power sales agreement be between the AIDEA and the City who in turn sells power to its own customers as well as the self-generators,or should the agreement be between AIDEA and each user? The seafood processors provide the real base for the vast majority of the demand for energy,including the City's load.Without the processors,the population of Unalaska, and therefore the power needed by the City,would drop dramatically.As aresult,even a take-or-pay contract with the City would be of little value as a credit support for the project,unless it was back-stopped with take-or-pay contracts with the processors (assuming that the processors'are creditworthy).PFM has been led to believe,however, that the processors are extremely unlikely to undertake take-or-pay contracts. Requirements contracts between the processors and either the City or AIDEA would provide some level of credit support for a project financing,There are three basic scenarios: Direct contracts between AIDEA and each processor,and between AIDEA and the City. A single contract between AIDEA and the City,AND City contracts with each processor. A Single set of agreements among all three parties (AIDEA,City,Processors) Each approach has some advantages and disadvantages from AIDEA's perspective: The direct AIDEA/Processor contract approach removes any question of City performance or the enforceability of City contracts. The City/Processor contract approach liberates AIDEA from the role of a direct energy provider to non-public customers (although this could also be mitigated by contracting these functions to the City utility). The three-party agreement approach has the advantage of directly linking all parties,but may be more cumbersome and complex to implement. Public Financial Management,Inc.Page -3 - Ww OO5 oOConfidential--nan Geothermal Credit Analysis 9/14/93 In reality,for this project to be successful,it will take the full commitment of all three parties not only to some form of power sales agreements,but also to power layoff/sharing agreements,intertie protocols,etc,The desired form of the power sales agreements likely will ultimately be more a qrestion of policy and administrative convenience than creditworthiness. WW.Summary of Project Credit Risk Analysis PFM's analysis of the project's credit risks focused on three areas:market demand, geothermal risk,and technology and construction risks.While itis not within PFM''s preview or expertise to evaluate the level of geothermal or technical risks,a review of the financial implications of those risks is appropriate. a.Market Demand and Project Revenue Potential Unalaska electricity demand is largely driven by the needs of the seafood processing industry.The current conditions in Unalaska,and the past performance of the local economy,provide some positive support for the economic base of the project: o Worldwide seafood demand has been rising consistently in recent years re)Unalaska and Dutch Harbor have a proven track record of production and capability fe)The major processors have made significant investment in plant and other facilities in Unalaska axe)The processors,residents and City government-have common interests in the .development of Unalaska fe)The current reliance on diesel generation may prompt regulatory action in favor of alternative resources. On the other hand,there are many factors which credit analysts would consider to be serious negative indicators: o Unalaska's economic base is clearly dominated by a single industry -seafood processing.That industry is subject to numerous potentially damaging factors, including: -Global market competition -Potential resource depletion -Weather and environmental risk -Regulatory uncertainty Public Financial Management,Inc.Page -4 - "008 | | | i } :Confidential --a «ie Credit Analysis 9/14/93 © Oo The industry has proven to be relatively footloose (note the movement of the Unisea barge to the Pribiloffs.) . fe)Unalaska'a isolated location and relatively hostile environment present significant barriers to economic diversification rf)The existing electric generation and distribution system on the island reflects theneedsandcorporatestrategiesofthemajorenergyconsumers: Independence from competitors in the same industry Industrial use of diesel generating waste heat System redundancy Accommodation of shifting seasonality of peak requirements fo)"Perceived"energy cost with the current resources is substantially below the projected cost of energy from the Makushin geothermal plant -Processors base energy cost analysis solely on variable cost (principally fuel) -Current perceived costs are estimated at 6 to 9 cents /kWh,vs.12 cents -Diesel fuel costs have not been subject to constant inflation fe)Recent estimates of the overall level and the patterns of energy demand may indicate a reduced revenue capacity for the Makushin project. -Shortening of a number of the fishing seasons may accentuate peaks -Loss of some potential base load (e.g.Unisea barge)may reduce demand [Note:R.W.Beck is currently preparing a demand study which could influence this analysis] On balance,these factors indicate a very high level of uncertainty regarding the initial and ongoing levels of demand for the project output.Evenif the issues related to. business decisions by major individual customers and the aggregate estimates of demand were resolved,the downside exposure from dependence on the fisheries presents a formidable barrier to credit market acceptance of the project. Bb.Geothermal Risk Any generating development project involves some resource risk.In the case of geothermal projects,the risks include: re)Drilling-related problems with both source and re-injection wells including: blowouts,failure to find the resource,"communication"between source and re- injection wells. Public Financial Management,Inc.Page -5 - \oO Confidential --Unalaska Geothermal Credit Aualysis 9/14/93 fe)Resource capacity problems including:low pressure flow,low temperature fluids, inadequate re-injection capacity. °Inadequate longevity of geothermal field capacity. The Makushin geothermal field has been intensively explored and analyzed by the State, OES]and others.The consensus opinion seems to be that the field has sufficient capacity (flow pressure,temperature,longevity)to support the projected output of the project over its expected 20 to 30 year life. Drilling-related problems result either from difficulties related to the structure of the steam field itself,inadequate drilling skill or inappropriate practices,or some combination of the two factors.PFM has detected some difference of opinion about the relative difficulty of the Makushin field.Some technical experts have expressed opinions that the Makushin project will entail challenges due to the geology of the area.Others rate the field development risks relatively low.A credit analysis of this issue awaits a consensus technical opinion. OESI's plan for development of the Makushin project mitigates the geothermal risk in two ways.First,the project schedule calls for full development and testing of the geothermal field prior to initiating powerplant development.Second,if the geothermal field requires additional wells (cither source or reinjection),the cost of those wells would be deducted from OES]'s future fluid fees.In that case,however,AIDEA would have to - invest more in the field development,increasing the debt requirements of the project. c.Technology and Construction Risks As with the development of the resource itself,the construction and the technology of the generating plant also involve some inherent risks.Project sponsors and developers can _teduce these risks by: 9)Installing proven generating technology o Planning,designing,and budgeting for construction appropriate to the site The Ormat geothermal technology is now in use in number of plants in the United States and around the world.While the longest running comparable plant has not yet reached the projected life of the Makushin project,technical experts have no reason,based on the existing experience,to expect longevity problems.Presumably,some level of vendor warranty on the plant would also be forthcoming. OESI project development staff have considerable experience with powerplant development and other constniction projects in the Alaskan environment.OESI has stated that the plan,design,and budget for the Unalaska project are appropriate for Alaska conditions and for the site. Public Financial Management,Inc.Page -6 - ae ° Confidential --Unalaska Geothermal Credit Analysis 9/14/93 UI.Impacts of State Credit Enhancement for the Unalaska,Project PEM has been asked to evaluate potential State or AIDEA credit enhancement --in the form of either State moral obligation or AIDEA General Obligation --for the Unalaska Geothermal project.This analysis examines the effect of these potentials from two perspectives --project Financeability and financing cost and credit impact on the State or AIDEA. a.Impact of Credit Enhancement on Project Financing Either the State moral obligation or the AIDEA General Obligation would substantially reduce the cost of financing for the project,by wrapping an investment grade rating around the project financing.When compared with a non-rated,speculative rate for this type of project (were such financing available),an investment grade rating would provide substantial savings.The low overall interest rate environment cushions the impact of the lower rating --any financing in this environment is less costly than even a year ago. The table below provides some analysis of the relative borrowing of the two alternatives --non-rated/speculative and AIDEA G.O.or State Moral Obligation. Non-Rated Investment Grade Speculative Enhanced Interest Rate (20 yr.Tax Exempt)5.75%7.00%to 8.00% 'Annual Interest Cost (on $110 mm)$6.325 mm $7.7 to $8.8 mm The above analysis of costs assumes that all three financings are feasible,and that the financing itself does not have an impact on the rating of AIDEA or the State (see next section on this).PFM believes there is some question whether the project can be financed without some form of credit enhancement.Obviously if a non-rated financing were not available,this analysis would be moot. b.Potential Credit Impacts of State/AIDEA Credit Enhancement The Makushin project,as proposed by OESI,would require approximately $110 million in tax exempt financing.The assumption is that AIDEA would finance and own the project,with OESI acting as a contract operator,and project output sold to the City and the processors (either directly or indirectly). Public Financial Management,Inc.Page -7 - Om o Confidential --Unalaska Geothermal Credit Analysis 9/14/93 If the State (acting through AIDEA)were to provide a moral obligation pledge for the project,this amount would be added to the State's existing indebtedness,and would included in credit analyses of the State's debt.The addition of $110 million of relatively high risk moral obligation debt would certainly be considered a negative for the State's overall credit. In order to ensure against a negative rating action,the State would have to demonstrate both the importance of the project to the State,the self-supporting nature of the debt,and the ability to meet the moral obligation without adversely affecting the State's operations or finances. AIDEA has a portfolio of approximately $450-500 million of loans and projects,all ofwhichareintendedtobeself-supporting project financings.A certain portion of that total (approximately $125 million)has been financed through General Obligation bonds. AIDEA's board adopted a strategic financial policy in 1992 which favors the use of project-revenue bonds over G.O.s,and which promotes only the most credit worthy projects for AIDEA G.O.financing. The addition of $110 million of G.O.debt for such a relatively high risk project would certainly endanger AIDEA's credit. V.Developer Credit Analysis IV.Conclusions and Recommendations To be delivered under separate cover. Public Financial Management,Inc.Page -8- nar Mike Bolobeed yo.914%'Noted by BJFSosY Deve Ebacle mH File #Unalaska CGeetnecras --se0 CITY OF UNALASKA Vly Ltigsiiv a bsP.O.BOX 89 Le beUNALASKA,ALASKA 99685(907)581-1251 SEP 13 4553 & September 8,1993 Bo ee Be ge Paes La meant ,moe meMarkGardinerPe”UNALASKA,ALASKA Public Financial Manhagement,Inc. 1000 Southwest Broadway,Suite 1500 Portland,Oregon 97205-3067 REFERENCE:Makushin Geothermal Project,Your letter dated September 1,1993 Dear Mr.Gardiner: As requested this provides response to the request for information presented in your recent letter. Item 1 -Audited financial reports for the last three years. Find attached. Item 2 -Capital Improvement Plan.Be advised the City is creating both a comprehensive City wide Capital Improvement Plan and a 3 year strategic plan.Find attached two draft five year plans specific to the electric utility.The earlier edition was prepared based on the uncertainty of construction of the Makushin project.The latter was prepared after an extended period of no involvement on the project by the utility. Item 3 -Debt record,credit rating.Debt information is contained in the annual audit reports.Discussions with the City Treasurer reveal that because of the size of the community we do not have a standard credit ranking.The Treasurer also indicates we provide information to Standard and Poors on an annual basis and that they may be contacted for information.If you have more specific questions do not hesitate to contact me. Item 4 -Unalaska's economic base:Major industries and players- numbers,financial health,projected growth,economic trends. Find attached a February 1992 report prepared by ResourcEcon Northern Economics as well as the City's Planning Departments five year projections.Also attached is a memo to AIDEA from Public Works that discusses the load profile and presents the department's short term projections on the status of industry. Item 5 -Status of negotiations with potential power uses (e.g. processors).The City has not directly and actively pursued negotiation to sell geothermal generated power to major self- generators.Negotiations have been accomplished in the past primarily by the project team as well as the developers.We believe it is important to obtain timely concurrence from the processors on an acceptable cost per kilowatt target level.The utility does not believe this has yet occurred. Item 6 -City plans for upgrading the power distribution system. See the most recent five year plan. Item 7 -Current and projected power demand vs.supply. Generating capacity of City and processors.The City is limited by permit to slightly more than 23 million KWH from its Dutch Harbor plant.We have relocated generator #7 which would allow for theoretical maximum generation of an additional 7 million KWH.Without significant plant upgrades a more realistic estimate for this unit is 4 to 5 million KWH annually This unit will go on line in the fall of 1993.It is anticipated to be subject to additional permitting requirements in the future.The City's projection for FY 94 production is 24.7 million KWH which contains a purchase allowance of 1 million KWH from Unisea Seafoods.Our demand projection for FY 95 with a similar allowance is 26.2 million KWH.We have not developed longer term demand/supply projections.Given the variability in processing load and the uncertainty of Prevention of Significant Degradation (PSD)resolution the level of demand can somewhat be moderated by not picking up all available industrial load and revised pricing. We anticipate the City will become limited by demand in FY 94. We anticipate making up the deficit by locking in a fixed load with Unisea during peak seasons.Because of our operating permit limit for the Dutch Harbor power plant we believe we will become limited by energy in about FY 96.Successful achievement of a PSD permit or installation of the Pyramid Hydro project will relieve the short term energy constraint but not the demand constraint. Our understanding of the actual production capabilities of the local major processors (and City)was as follows: Westward 7.2 megawatts Unisea 13.2 megawatts Alyeska 6.4 megawatts City Power Plant 6.1 megawatts We have received conflicting information on plant capacities in the past.Recently ADEC performed an emission inventory.Our interpretation of the published list is as follows: Westward 6.7 megawatts Unisea 18.4 megawatts Alyeska 6.4 megawatts City Power Plant 6.2 megawatts 'Of the Unisea capability an apparent 1900 KW will leave when the Unisea barge is relocated to the Pribilof Islands. We do not have a clear understanding of the permitted capability of these self-generating plants.Our understanding is Westward has an "avoidance"permit that allows for continuous generation of 4.4 to 4.8 MW.We believe Unisea and Alyeska are operating under compliance agreements and are subject to fines after generation of an unknown amount of KWH.We believe Unisea is restricted to operate a maximum of three 2.2 to 2.4 MW units at one time. Item 8 -Current cost of power and marginal cost of additional power (City and processors).As determined by RW Beck the City's avoided cost of power is 6.5 cents.Of this about 5.5 cents is fuel.From discussions with Unisea we believe their avoided cost is closer to 8 cents resulting from added fuel taxes and lower operating efficiencies.The other plants are likely somewhere in between.We are unaware of any detailed reviews by the processors on their actual production costs or the fixed costs that would remain if geothermal was utilized as a baseload source.The City currently sells energy to industrial users at 12 cents,large commercial users at 17 cents,residential users at 20 cents and small commercial users at 21 cents.A copy of the current ordinance including demand charges is attached. These values are adjusted monthly based on fuel cost variations from a benchmark of 85 cents per gallon.As indicated by a recent rate study the existing rates are marginally inadequate to long term maintain/expand the plant. Item 9 -Does the City intend to purchase power from the project on requirements basis or on a take-or-pay basis?The City would prefer to purchase power on a requirements basis. Item 10 -What agreements does the City have with the processing facilities to furnish power?The electric utility has had substantial discussions with Unisea,Inc.regarding purchase of power.We have the plant inplace to currently purchase up to 1.5 megawatts and with the installation of a larger transformer we could purchase up to 10 megawatts if it were available from their plant.No written agreement is in effect.In FY 93 we purchased approximately 1 million kilowatt hours (KWH)at a cost of 9 1/2 to 10 1/2 cents per KWH.Discussions have also occurred with Westward Seafoods who is on the City grid with a small 750 KVA transformer.While they have expressed interest in selling power and reportedly have an avoidance permit that would allow for up to 35 million KWH annual generation they have expressed reservation for sales near their marginal cost of production. Prior to escalation of PSD related issues we received an unsolicited proposal from the engine supplier of the Westward plant to sell power to the City for slightly over 12 cents per KWH. od Please contact me if you have any questions on the presentedinformation. Sincerely, m |a Roe Sturgulewski Public Works Director ' cc:Riley Snell,AIDEA w/o attachments Mark Earnest,City Manager w/o attachments 94301-ao attachments: RS/jh .C Lo Pl teenob PUBLIC FINANCIAL MANAGEMENT,INC.} Financial and Investment Advisors 1000 SW Broadway,Suite 1500 Noted by BJFPortland,Oregon 97205-3067 503-223-3383 (Fax)503-223-7002 File #{he)\ke Geotn eerna| September 1,1993 Mr.James W.Porter,Jr. Chief Executive Officer and President OESI Power Corporation Building One,Suite 255 4000 Kruse Way Place Lake Oswego,OR 97035 Dear Mr.Porter: Public Financial Management has been engaged by the Alaska Industrial Development and Export Authority to conduct an analysis of the proposed Unalaska Geothermal Project.We are trying to schedule a meeting with you when you return.However,in the interest of time,we are advancing a request for information now. Attached is our request list.Your prompt reply will allow us to complete our analysis expeditiously.I look forward to meeting you in person. Sincerely, aa - Mark Gardiner Managing Director cc:Mr.John Olsen,AIDEA Mr.Michael D.Hubbard,R.W.Beck Atlanta Austin Boston Denver Fort Myers Harrisburg Houston Los Angeles Memphis New York Orlando Philadelphia Portland San Francisco An Affiliate of Marine Midland Bank,N.A. 10. 11. 12. UNALASKA GEOTHERMAL PROJECT REQUEST FOR INFORMATION OESI Power Corporation Audited financial reports for last three years Current financial statements Description of principals of firm and project team Record of other similar projects including technology,financial data,construction timeline,operating/maintenance,expenses,cost overruns,safety records,financing etc.(budgeted vs.actual) Any information on risks associated with:geothermal field,construction completion, technology,operations OESI 's process for advancing a proposal Forms of completion guarantee Plan of insurance for facility (during and after construction) Lead time needed for ordering generator and other equipment Detailed costs and fees for construction of project Status of negotiations,if any,with the City and the potential power customers (e.g.| processors,etc.).What is the expected allocation of risk to purchase power generated among OESI,the City,and the power customers? Status of tax credit for energy developers |PFIVI PUBLIC FINANCIAL MANAGEMENT,INC. Financial and Investment Advisors 1000 SW Broadway,Suite 1500 Portland,Oregon 97205-3067 503-223-3383 (Fax)503-223-7002 September 1,1993 Mr.Roe Sturgulewski Public Works Director City of Unalaska P.O.Box 89 City of Unalaska,AK 99685 Dear Mr.Sturgulewski: TOM seg Unalata Gee ;ntonel) -tag SEP -7 1253 Srae SS Noted by BJF File #Val sks Gooticcre{ Public Financial Management has been engaged by the Alaska Industrial Development and Export Authority to conduct an analysis ofthe proposed Unalaska Geothermal Project. In order for us to accomplish this task,we would like to obtain the information outlined in the attached request.Your prompt reply will allow us to complete our analysis expeditiously. Thank you for your assistance. Sincerely, Mark Gardiner Managing Director cc:Mr.John Olsen,AIDEA Mr.Michael D.Hubbard,R.W.Beck Atlanta Austin Boston Denver Fort Myers Harrisburg Houston Los Angeles Memphis New York Orlando Philadelphia Portland San Francisco An Aftiliate of Marine Midland Bank,N.A. UNALASKA GEOTHERMAL PROJECT REQUEST FOR INFORMATION City of Unalaska 1.Audited financial reports for last three years 2.Capital Improvement Plan 3.Debt record,credit rating 4.Any report on Unalaska's economic base: Major industries and players--numbers,financial health Projected growth,economic trends,etc. 5.Status of negotiations with potential power users (e.g.processors) 6.City plans for upgrading the power distribution system 7.Current and projected power demand vs.supply. Generating capacity of City and processors 8.Current cost of power and marginal cost of additional power (City and processors) 9.Does the City intend to purchase power from the project on requirements basis or on a take-or-pay basis? 10.What agreements does the City have with the processing facilities to furnish power? 09/03/93 15:32 veyMSTAaEa a aN Se tcc SRST RTE es ee a ”a i _CITY OF UNALASKA -Department of Public Works NGP.O.Box 89 'tt a Unalaska,Alaska 99685 to Phone:907-581-1260 bywoTax:907-581-2187 2 Goer UNALASKA,ALASKADATE:©[=|ATS ..TO:1K we Snee |A br rons FROM:"ews SS REFERENCE:{(V\AKRUS HIN CB GOTHERMAL PAGES (INCLUDING COVER):7 HARD COPY TO FOLLOW IN MAIL CJ vEs 1 NO COMMENTS: ATIACNED - \rEESTURYARROD SCAKOROS azlai-ulaz: COA.jANGDS, - TAS WANK TOE TORO NCSe WS FOrrUe Com iumue eSRONGOTDseenTeMOuWGAMEenrwmWHSwrerc.(Te Peet MAIL.ICT MA INOT BAKO PTUAYED *ET. mm Vl LAS INFORMED MC Oe anSasMOTComMPuciDISASOATA.C7). --CALL IF NOW AE RUcsMoAs IF YOU NO NOT RECEIVE ALL Tift PAGES,PLEASE CAI,SENDER AS SOON AS POSSIBLE AT $81-1260.SENDER: J 09/03/93 15:33 jy SEP-G2-1993 19703 + yoy WESTWARD SFD DUTCH HARBORjo .f coe cr canes a -_KWUATS LAr rag Py 23 22-246200SHABIS22-141,22-141BY Saw TY oe cu"enmotaw SASUmMANy FeGQUan= MaAnRerI A Pew avy JUNE ued By 638T TeOTes her, Sd&Tagder Arava tEn 843,292 Kwon A2Z6,Far wana 1S4#2,089%erste V,048 434%Kone GULF GOOG Kume @S3,863 Kone Bt IFS KeoMaA 1 joo LOG 5 Swern 1,494,919 Kern LV,FaAA 254 Kw re 666,435 Keone 646 ,326¢Ment ae.e cmsgp.wT fae Ge Gos X0*9-7-93,SEP -7 153 MEMORANDUM zm iadrepbfibyee tee Betaseed hoe a SIE TO:Riley Snell,AIDA {ZS oot Aggy FROM:Roe Sturgulewski,1.Works Director,City of Unalaska REF:Makushin Geothermal Project DATE:September 2,1993 As previously noted the Public Works Department believes that in order to more clearly understand the projects risk allocation the overall electrical load profile within the community needs to be reevaluated given the shortening of the processing seasons. Find attached information received from Unisea,Inc.,Alyeska, Inc.as well as the City Powerhouse.Westward Seafoods has made a commitment to provide data which we will transmit upon receipt. Be advised that along with transfer of the data one of the processors has requested the names of the producers be kept confidential.I would suggest that instead of using names they be called processors 1,2 and 3. When evaluating the data it is important to understand the major component of the monthly fluctuations are based on the level of processing activity during the period.Over the past few years the start dates of the openings have fluctuated and the overall length of the processing seasons has decreased.Surimi processing has changed from an eleven month activity in 1989 to about a four and one half month activity in 1993.The extent of the processing activity for crab has also decreased in terms of the length of the season.While twelve months of data for 1993 are not available the Department believes the year reflects a reasonable short term outlook on what processing will be like in the future.1993 had an "A"pollock season that went from January 20 to mid-March.The opilio crab fishery went from January 15 through the end of March.The pollock B season started on August 15 and is projected to be finished by mid- October.The months of November and December will likely be similar to 1992 when there was little processing activity until December when bairdi crab started. There are a few other items that need to be taken into consideration.The 1992 opilio crab season went from January through June with a quota of 330 million pounds.The 1993 fishery reflected an opilio quota of around 150 million pounds with much of the processing done in the Pribilofs.Unisea's barge the "Unisea"is being permanently relocated from Unalaska to the Pribilofs to be closer to the fishing grounds.The City's FY 93 data reflects the purchase of approximately 1 million KWH from Unisea.The specific monthly totals have not been calculated.The bulk of the purchase occurred from late November through early January with about 20%to 30%of the total occurring in the last four months of the fiscal year.The City picked up 100 refer plugs from Sealand at their storage yard in January of 1993.We have committed to pick up another 100 plugs which are scheduled to be activated by January 1994.The City's FY 93 numbers reflect approximately 500,000 KWH of Sealand load of which a maximum demand reading of about 500 KW occurred in February 1993.Existing loads do not fully reflect all of the new buildings that have been constructed or are under construction.The City's current estimate for FY 94 which includes a component of purchased power from Unisea is 24,700,000 KWH.We estimate the impacts of new loads that have a reasonable level of certainty beyond FY 94 will add another 1,500,000 KWH. Please do not hesitate to have members of your staff contact me if there are questions on the community's load profile. cc:Mark Earnest,City Manager MEMOS\DPW\MAKUSHIN.PRO Se)UniSea 27 Aug -93 17:03:52 TO:MR.ROE STURGULEWSKI CITY OF UNALASKA,DEPT.OF PUBLIC WORKS FROM:AL SPENCER UNISEA,INC. PER YOUR REQUEST THE FOLLOWING REPRESENTS ELECTRICAL CONSUMPTION FOR THE CALENDAR YEAR OF 1992: Vee ELON 'aeUd EES 4hMONTHCONSUMPTIONarcuedBSJANG-LEMEO Whe weINKW)*CONSUMPTISN OFSAWALTAIN JANUARY 1,430,000 1334,CoS MET,Cos +aFEBRUARY3,189,000 %(O02 ,COa 13.038 GOS ™MARCH 2,673,000 7,104,O00 2B ISS,eu0 APRIL 2,179,000 th 12S ms WISB.cos MAY 1,527,000 t.@O%,000 1 1£S0,o00 ,,USOG9(369,02 4TH ER Ces 154 ou:JUNE 1,934,000 ies IW EC--wWSIWioee |{tasaJULY3,164,000 - AUGUST 3,105,000 SEPTEMBER 1,855,000 OCTOBER 1,180,000 NOVEMBER 1,382,000 DECEMBER 2,553,400 TOTAL 26,171,400 UniSea,Inc. Pouch 500,Dutch Harbor,Alaska 99692 (907)581-1258 FAX (907)581-7228 R.W.BECK AND ASSOCIATES,INC. 2522 Arctic Boulevard, Suite 110 Anchorage,Alaska 99503-2516 Telephone:(907)272-6225 Fax:(907)274-4525 Fax Transmission To: Phone; Cor.Sweqve Er S$__-7 From:beg Yih hace Pages sent including cover sheet:¥ Time Sent: Date Sent: 12:04,SOR CEN ONT Catnanttataatitnes 1 ee ee een "fe.UNISEA POWER HOUSE pate:_|/a5/Ge Start of Month End of Month wag otal Generator #1 DATA un 555!uw BOF wan Generator #2 770 MH T7>s___Mw Pa wma Generator #3 TATA MWH BYAC vm a Generator #4 S71TG MWH SEI MWH LA3 ch MedGenerator#5 ABT.MWH AUGS MWH JBl-'MWH Generator #6 LTT MWH OLA mens BS =MWK"TOTAL POWER USED:aa MWH oom JAS 7.MINH ae Power Produced =: End of Month:MWH 7 :Start of ae MWK |' Total Produced:MWH - | \ e |: End of Month Start of Month Total Peak Demand MH MWH MWH KW Meal Plant Feeder:SBA 7 SOLZ | G-2 Surimi Feeder:b9IUAW 6783 Refrigeration Feeder:_COHES 35 LS Inter-tie Feeder:159 HY.SIIN6 G-1 Surdimi Feeder:36 At BLOF . Station Service:3636 BORK TOTAL POWER CONSUMED we"ao SUBMITTED BY: eee A a Kw I At =So UNISEA POWER HOUSE pate:62 }lo )ZS44 LU Start of Month End of Month Total . Generator #1 558)MWH B58 1 mw Co "MWH Generator #2 T7Z.WH VISH _van C392.sm Generator #3 SYA MWH 9350 -ww GOH won Generator #4 BS)4 MWH GA Sf 3 MWH +}}He :MW Generator #5 A Ug MWH 3035 MWH 5 DB 7 "vat Generator #6 ¥)a MWH 55Y 4 MWH H 732 *waeTOTALPOWERUSED:eo MWH oo MWH 13,039 ww ee Power Produced re End 6 ak MWH '):a 1 Start of Month:MWH .Po Total Produced:-°,U End of Month Start of Month Total Peak benand Meal Plant Feeder:SUSE SAIT 739 ar Oe G-2'Surini Feeder:7319 GIAY 390 Refrigeration Feeder:FOHA CG AS a BIL Inter-tie Feeder:(OHIO GS9H-B/6 .oe G-1 Surimi Feeder:HAGS ZG+A]GAT :é Station Service:3ITA 3636 136 ETOTALPOWERCONSUMED:----pee BIOAP oe SUBMITTED BY:KL CE UNISEA POWER HOUSE Start of Month End of Month Generator #1 SSX!MWH le L /MWH Generator #2 _|\33 MWH |44 Generator #3 q 450 MWH OY AutGenerator#4 4283 MWH Alett| Generator #5 SOB MWH 4 L |4 Generator #6 800 MWH Akh TOTAL POWER USED:MWH Power aeEndofMonth:MWR Start of Month:MWH Total Produced:MWK End of Month Start of Month MWHHeadPlantFeeder:Ds (Uf SaSt MWH anegSh oe"peak DDemandKW G-2 "gurimi Feeder:qn |TAS USa .Refrigeration Feeder:GS 72 A UQ S30 Inter -tie Feeder:LO,SLO 10 LUA UNOG -"3 Surimi Feeder;S0KS U2 Lf 148 Station Service:BRAS 372 LAS TOTAL POWER CONSUMED:2208 Start of Month Generator #1 we,coats UNISEA POWER HOUSE ae?if .DATE:.:uke G3 b67? Generator #2 1499 Generator #3 WAY Generator #4 Get Generator #5 36/3 Generator #6 AlbS TOTAL POWER USED: Power Produced iEndofMonth: Start of Month: Total Produced: Meal Plant Feeder: G-2 Surimi Feeder: "Refrigeration Feeder: Inter-tie Feeder: :G#1 Surimi Feeder: |Station Service: S MOTAL POWER CONSUMED: End of Month Total -*mn D4 AY mn 232 mmsMWH1SOFMWHLO:MWHMHDE|MWH OD mae MH 672 vm 3]_:orMWH433%mw BO -*inemn=_SY Moni AWE we MWH |MWH [284 Mie yy End of Month Start of Month Total:|Peak Demand MWH 72S2- MWHLae 4g DUES 2771 AY A784 OSTA.._Ala [623.LO8G.S92 SAla Sb63 L49: LOIS 28957 120%5 ty Balt vat «ae aah'apt aor " "en 4 redatOX.ub wi NY in cn or ne .i Saas ao '3,wo weaeseeBeSgt'' «",:..f 2SUBMITTEDBY:fh Bonk ee ae Generator Generator Generator Generator Generator Generator abyeaaecpcanepe@eeeseeepeteEttacaSiaceaUNISEA POWER HOUSE Start of Month W424 ANO9 End of Month O72 232, aAnmeoehoras& MWH MWH MWH MWH MWH MWH SEP -A F THU End of Month: e:2na R-bktJ.Beck -A,yvvy Ps 4o Power Produced Start of Month: Total Produced: ao” Meal Plant Freder: G-2 Surimi Feeder: Refrigeration Feeder: Inter-tie Feeder: G-1 Surimi Feeder: Station Service: TOTAL FOWSR CONSUMED: +)Keeper ofanneTg,PIIa7 MW MWH MWH End of Month Start of (tonth Total MWH MW MWH TSA aN 2 2a SiO44 enhen 119 ORR AM _GQ?AMO ek 2d St.SAM 24 Wiad ADS.Wo Jas AVL 387 0)Ut | |bba SUBMITTED I<AileenA:rT Tree Tt ee oete heeds sper etome (eens,.D .Peak.Demane KW EE eye Smee8ae)seh eae ts rE es se ree a on sane Pee ree waos pee Pt TD pnp8OS we te 00 Ce CEA608)+ tae re Oremen00 se OW ee UNISEA POWER HOUSE START OF MONTH GENERATOR #1 03|MWH GENERATOR #2 (SOS MWH GENERATOR #3 AAI MWH GENERATOR #4 ome MWH GENERATOR #5 L483 MWH GENERATOR #6 AGaY MWH G-1 CAT #1 ESIC MWH G-1 CAT #3 \S4O MWH TOTAL POWER USED: #1 FEEDER MEAL PLANT?- #2 FEEDER G-2 SURIMI: #3 FEEDER REFRIGERATION: #4 FEEDER INTER-TIE: #5 FEEDER G-1 SURIMI! #6 FEEDER STATION SRVC.1 '#7 FEEDER CITY-TIE: TOTAL POWER CONSUMED: START OF MONTH END OF MONTH END OF MONTH ES 8 a MWH \SQ6 awe OSVE svn ASV wwe SS23_we D124 owe \$80 evn pate _lo lat E 2 TOTAL SS _MWH © |]MWH ©_iveLSaweSud”"Mw QC)!*wa . O |_308|X 1g MWH a Ig MWH\S47TOTAL :\MYH MWH MYH2.co: 1SO4 7610 |WweBOYYa3Wae O88 OSbE a3 AAW 2450 S28|b TieS336soiHX)LLNS (nue GAL 387 USB)o At o Mie ONT SUBMITTEDBY: wemsea em et ae 00sreeteeBaettamenMeee Labo8| 2 ME LUMEN Om em emnew ee mene co 8 (nprenene see Be #1 i '3 #2 #3 , #5 #6 :oad”rOTAL POWER CONSUMED: START OF MONTH FEEDER MEAL PLANT: UNISEA POWER HOUSE ; START OF MONTH END OF MONTII ee GENERATOR #1 BS 87 awe 2070 _awe *GENERATOR #2 Wale wwe JIN DQ nwa :GENERATOR #3 OFA nw AQ _wwaeeGENERATOR#4 OBIS ww ALU nwaEGENERATOR#5 S833 wn STO nwt 7 GENERATOR #6 QDY wn _AABle swt ot G-1 CAT #1 1880 mw ARNO seve e G-1 CAT #3 \S1%wwe (ADS awe 4 TOTAL POWER USED: ie MWH LLLO MWH 14 END OF MONTH TOTAL..WH09 FEEDER G=2 SURIMI1 223 $34U VAS FEEDER REFRIGERATION:ASbs ISG SeFEEDERINTER-TIE:AGSO ASbl toler FEEDER G-1 SURIMI:D220 S$d2 hte ;(5:at FEEDER STATION SRVC.+U2Qy W275 FEEDER CITY-TIE:1.387 LV. Fy PR yh Me NagYr. >=«_+!5 _-.fom 2 -_SErP---2-7 Ss tou ieee MeNe DOR wrens ahs .UNISEA POWER HOUSEOf DATE:S[2.6% Start of Month End of Month Total Generator #1 14 Bet MWH KO3 \MWH Sal Generator #2 LS04 MWK \SO4 MWH OQ Generator #3 O39 |MWH G3Q |MWH |O MWH Generator #4 Ab72 MWH Arb MWH uu MWH Generator #5 232 mw UG32 wwe bLSO Men Generator #6 Qs |MW A244 MWH uy 3 |MWH PORAL HORER USED:3 Mitt MH 1384 oteSte]LSA l L880 oOG1-%LBSy \SUG Vo Power Produced MWH MWS End of Month:7”MW Start of Month:MWH Total Produced:|MWH | End of Month Start of Month Total -Peak DeriandMWHMWHMWHheaRW Meal Plant Feeder:TSO4 TRS a mad Q z G-2 Surimi Feeder:¥iO44 TWAXS 119 *aRefrigerationFeeder:O 8%AIG qo ”fs _:_ "Inter-tie Feeder:AdDIO loth 22 Bey7G-1 Surimi Feeder:Sas Sala 24 :ao ae aoStationService:Way HOW |jo :=_!"!gorab POWER CONSUMED:_Ja5{[_oo &a7 Feeper WAA387 0 Mite ;Tobe ye vd©ge Ali y aaAqsaSUBMITEDBY: \iit --OK ye oo eee ©Cewacedemasewernae-ePraOoOmMnNDA&AWM=-kmhekObOH=631 ALYESKA SEAFOOOS ELECTRICAL USAGE 1992 JAN FEB MAR APR MAY JUN JUL AUG SEPT CCT NOV CEC 13695 3ue22 60741 01S 21334 2036316821 4855749607 1821216435 25676 20062 63013 371943804 =21334 41480 $965 83654 S336 18129 17996 26693 2145965309 «67370-36278 =21304 $6835 =«15490-7567 =BOT4B 1622017975 =23851 20524 «54738 «=63090 «52628 «=«19742 36140 s«*14747°=60824 =«0555s 14889)-s«18463 =25364 19691 63871 B2070 45190-19290 S1041 14496 «=59762 58204 16B812--s«17967 =28148 20604 60908 56280 59217 28097 50200 16172 59154 57179 16664 18306 20382 19449 62005 Ss «6441065823.27008 «=SU1S6-s«*NEI'76G0--«=4109s «54725 «16309-s«13323 =2099322440469554796352815=«19733-45061 =-s«15756 =«E4755 ="S8876 =«16083.s16870 =18103 22890 «33324.5628933215 18054 =21996 s«15680)=-«T9879.52751 =«15949-24965 =1954020538«=«49104.56292,40162 -s«17497-=s«-23136 «15423.$1602 526661480 =5964 =-«1857622002-60615 58331-7236 «=18396 «=3250215569 =60252 SETS =«14326 «=23253 240632050943075G1665ss50S42sis18186=59024-14978 «=GOT)59163 =15820-18797 2491320765«43067-39239 62676 -«18181 =57748 ="16213-60455 SB 14t =15455 212021976421996=$5464 262216 1222s«s17644=-58787 =«18382_-s-siWS.-s«SFATA =1515317187?=21507 23960 66215 30114 =6022 =:18035 29826 «=407E-58301 «=OAT)'15374 2744 =19316 24941 66736 =31429,56317 «17354 «=20827 31426 =89279 SS172 =15260 =1808224142234906445403112336735-16739 ASOT)GHIG4 =48405 52816 =1526917717 21473 26230 «64050 2690242549 «175800 22848 «=4536 56514 88856.14520-17554 19002 30220 «62150 25068 )«=_«30070S «1852319146 =S 62158 «=55633.$8366.15132 1783619246 30727,58280 «=27294 =39107.«18541 «=20059 58747 =88639 5548215563 =19448 276283051332963-27183 35970 «=23792 16ST =85595 =88208 «=8782418532 «=17239=S 20875 52909 49772 20344 «37543.«s«19704 =«17954.61453.88895 6084 1586415785 =:18070 57441 61930 «19503.31130-18971 162887101 =59229 GO410-s18426-1862217231601S26366225264=«0670-18045 =18084 =52733.S701 =59843-15200)22823169236434162123-35685 =4980-30858 s17041=-sS7271 =47983 =«41894 =15010 =1938316060 60329.65295 80123.)42245 391St =16873.=S 9002s SGI?)=BIStS =1610520115 18383 66748 63780 52424 27417 41584 16754 59826 60731 18456 16008 23865 168412 62858 64967 32637 18871 42533 18233 63811 60874 20596 16107 24505 16560 60877 64428 «=«43180 =18590-s«34191Ss«17098 «=57999 SOS17 «19537 16449 21908 =189564693561015=-s«21318 =28216 =15618 =«80274 =«S701 «=:18228 «=16793 68E3«19885 43095 44770 19982 BQ277_-.«87772 17228 16519 ToTas {10570701 18509965|t368655[t249486|zoosss [910732 |1181317 |1809439 r 1513879|491369 |600083 |629843 TOTALP.@1 ALYESKA SEAFOODS ELECTRICAL USAGE 1993 JAN FEB MAR APR MAY JUNE JULY AUG 1 15790 30285 64470 41583 27711 19386 18296 18176 2 17389 30710 71060 29240 26183 19446 17915 19638 3 16116 34740 §1286 43431 25108 18307 17833 18980 4 20578 31407 62668 28558 28668 18974 18153 19337 5°21101 23470 62565 24883 21731 18071 17623 2119161797038818643943579223524173241803129689 7 17466 59259 59681 58835 24925 20995 17753 22901 8 19717 689657 59241 41753 27581 20099 17451 20695 9 19501 61846 62803 28647 20599 19984 17232 22673 10 17837 69848 «=«6742948768 «=26907 «19649 -S«16880 =«189321119672«=«66495 52044 «=24727,28524 =«21793.«16386=-«18527 12 19069 «65769.62434-30752)25781 «=«23377 =21086 =200871318539«=66731 «=0260-28714.«19813 «=21783 «=S(«$8997 «=.245941421944«=49876 =60580-28501 =«20313.=21100)22797 27547 15 18326 61891 59762 28570 18162 19457 21091 29205 16 23897 67718 69453 26581 17162 18974 20343 28999 17 22424 68465 =72661 |30503 f 21161 18019 37943 359991822033673816515220501189081720034966[{59042 |19 20437 |65239 68241 28742 19359 16877 33826 62632 20 28412 61357 71153 27610 19990 18903 34184 67761 21 31170 60460 64826 26030 19153 19423 25036 66819 22 30425 4287 65026 24845 17930 18954 19006 66497 23 26828 «=62066 «=63057 21344.«17054.=«19654.«418971 --67007 24 26592 69216 63447 26481 20183 18944 18762 25 28026 61505 65747 27410 20453 18778 17809 26 25703 62064 63603 29138 20874 17679 18696 27 32646 «=69435553058 «=«24921 2119t +=:16727 =:18710 28 29875 61566 28192 27285 21707 18838 18345 29 37580 35264 26552 «79719-78946 «19685 30.25731 50325 28543 17906 17840 20947 . 34 30667 50008 17242 20623 TOTALS 71545C 1879855 1878880 915249 675522 575499 656246 |780927 Zo:Roe From}Ste Teh CE61-Po-Sostce:QTWWNTSONUNSLINTIBWSHS3Aqb9T18S266TeTB"d °COPY FOR YOUR INFORMATION AENCITYOFUNALASKA= ELECTRIC UTILITY OPERATING RESULTS AUGUST 30,1993 FY 93 - MONTH YEAR KWH GENERATED KW PEAK JULY 92 1,555,500 2,565 AUGUST 92 1,469,460 2,530 SEPTEMBER 92 1,552,000 2,900 OCTOBER 92 1,781,880 3,270 NOVEMBER 92 1,779,620 3,475 DECEMBER 92 1,532,820 3,855 JANUARY 93 2,069,260 4,160 FEBRUARY 93 2,327,600 4,435 MARCH 93 2,518,620 4,170 APRIL 93 1,865,140 3,705 MAY 93 1,662,620 3,280 JUNE 93 1,795,460 3,155 TOTAL 21,909,980 * *In addition to self generation approximately 1,000,000 KWH was purchased from self generators in FY 93.(Unisea) FY 94 - MONTH YEAR KWH GENERATED KW_PEAK JULY 93 1,817,060 3,600 ADMIN\ELEC\OPERAT-F.Y93 CITY OF UNALASKA ELECTRIC UTILITY OPERATING RESULTS AUGUST 31,1993 FY 92 - MONTH YEAR KWH GENERATED KW_PEAK JULY 91 1,432,320 2,502 AUGUST 91 1,396,160 3,029 SEPTEMBER 91 1,186,820 2,560 OCTOBER 91 1,949,440 3,282 NOVEMBER 91 1,757,120 3,218 DECEMBER 91 1,692,300 3,368 JANUARY 92 1,879,900 3,670 FEBRUARY 92 2,215,060 3,990 MARCH 92 2,343,080 3,725 APRIL 92 1,807,420 3,620 MAY 92 1,577,420 2,745 JUNE 92 1,533,720 2,395 TOTAL 20,770,760 |oD i er 0 .9-B-FD2)0ViM |&Operating "ne 'ShServicesDiryeboCorporation September 1,1993 Mr.Mike Hubbard VIA FEDERAL EXPRESS R.W.Beck and Associates,Inc.meSuite210ee et2522ArcticBoulevard- Anchorage,Alaska 99503-2516 Subject:Makushin Proforma Dear Mike: Enclosed you will find a hard copy and floppy of the proforma for the Makushin Project as promised in our recent meeting in Anchorage. This proforma differs somewhat from the one in the development plandistributedduringtherecentmeeting,but has the same essential result.The goal of a 12¢sales price in 1992 dollars is realizable without the need for cash contributions or a "rate stabilization fund"from the State. Some additional comments on the proforma follow: 1.As before,the proforma is based on a 100%tax exempt project based revenue bond financing with a State moral guarantee.A debt amortization period of 25 years was used.However,based on some alternative runs at 4.5%inflation,a 20 year debt retirement appears possible.Note that a small principal repayment is now made in the first year,and that debt service is levelized in the tenth year. 2.Based on a two-year construction period starting in the spring of 1994,a mid-1996 start of operations was used.Thus,the first year of operations is now taken at 6 months. 3.As noted above,the rate stabilization fund is zero. 4.A 6 month debt reserve fund is initially established.This -fund builds to a one year's reserve in about year 14,due to accumulated interest and annual contributions. 5.The $9.3 million debt reserve fund is available for rate reduction or other distribution in the year 2020. 6.Although the Makushin project would appear to qualify,no advantage has been taken from the Federal Renewable EnergyIncentive.If available,this incentive payment could be used for rate reduction or earlier retirement of the debt. Building One,Suite 255 e 4000 Kruse Way Place «Lake Oswego,OR 97035 ©(503)636-9620 ©FAX (503)697-0288 Mr.Michael D.Hubbard September 1,1993 Page 2 7.The 1.5¢/kWh to the City has been included. 8.Costs/savings associated with the recommended program alternatives,i.e.,helicopter mobilization and deletion of the Nateekin road and pier,are not included in the proforma to retain the same scope as the December 1991 plan. 9.Energy production has been maintained at 82,000 MWh/year.An annual increase in the load would appear supportable and would materially enhance project economics. 10.A Reserve and Contingency Fund has now been included. 11.The Working Capital Fund escalates with inflation. 12.Note that in terms of real dollars,power costs to the users actually decline after year 2005. 13.A Bond rate of 6%was utilized in this proforma.It is likely that a lower rate is obtainable in light of today's business environment. Should you have any questions,do not hesitate to contact me or Roy Ruel. Sincerely, L Greg wl Retzlaff. Project Manager GRR424.Let:jsn Enclosures ccs Riley Snell,AIDEA Dave Eberle,AEA Glenn Reed,DCED 1027/103/015 30-fug-93 06:46:49 OESI Power Corporation AEA/AIDEA UNALASKA GEOTHERMAL PROJECT Bond Sizing Analysis File Name:Casel_25yr.wkl CASE DESCRIPTION Base Case (Alternates Not Incl) Debt amortization 25 Years (Dollars in Thousands} As Adjusted 10 Years Levelized 15 Years CAPITAL COST DATA/PARAMETERS FINANCING DATA Interest capitalized thru construction Construction Cost 81,940 Bond Issue Dates (EOM)Mar-94 Jun-95 AIDEA return on equity NA Drilling,Field Development,etc.14,900 Cost of Capital 6.00% Alternatives 1 &2 Net °Reinvestment Rate 4.00% Target Base Rate =12.0 cents/kWh Total Development Costs Cost of Issuance 2.50%0f bonds 1992 year (w/o financing costs)96,840 Other Costs ° Less: : Initial Studies 200 Moral State Guarantee To Bond Holders Grant °Bond Insurance 0.00%0f debt svc Equity Participation R&C Fund Requirement 1,000 Bond Issuance Dates:"Ar Mar-94 AIDEA i')Working Capital 1,000 "Bo Jun-95 Processors is}Bond Funded OSR 3.83%0f bonds Bond Financed Amount 96,840 Oebt Amortization Period 25 years Repayment Period Semi-annual Initial Debt Service Reserve 0.5 year OPERATING COST DATA 2 Rate Stabilization Fund Net Present Value OPERATING COSTS $o Annual O&M 1996 $2,900 Bond Size $110,800 Wellfield Maintenance (included above) Fluid Fee Sxof expenses Average Annual Escalation Factor: State Grant $oO Admin &General 135 General 4.50% Insurance 150 Federal Renewable Energy Incentive °.Wellfield Insurance w» Available 0 cents/kWh Well Reserve Fund Deposit "Input Steamfield Royalty OSR Available For Distribution 9,309 Facility On-line Date Mid 1996 Years 1-5 3.5%0f busbar cost In Year 2020 Years 6-11 4.5%0f busbar cost Years 12-thereafter -7.0%0f busbar cost @nnual Energy Sold 82,000 MWh ALTERNATES NOT INCLUDED Energy Losses: Busbar to Load 0.00% Alternate 1 Helicopter Mobilization Added Cost 2,800 City Costs (Levelized)1.5 cents/kWh Alternate 2 Delete Nanteekin Access Savings 1,150 /027/103/015 1027/103/015 Oate Oct-93 Oct-93 Nov-93 Dec-93 Jan-94 Mar-94 sApr-94 May-94 Jun-94 Jul-94 Aug-94 Aug-94 Sep-94 Oct-94 Nov-94 Dec-94 Jan-95 Mar-95 Apr-9S May-95 Jun-95 Jul-95 Aug-98 Aug-95 Sep-95 Oct-95 Nov-95 Dec 95 Jan-96 Mar-96 Mar -96 Apr-96. May-96 /027/103/015 CONSTRUCTION PERIOD SUMMARY -Pug-93 CASH FLOW Design,ConstructionCapitalize Grant Total Grant FundBond Fund Interest Fund (%)($000)($000)($000) ox °0 ox °ry ox °0 ° 3%°2,905 3%°2,905 6%0 5,810 5%0 4,842 5%°4,842 "2%°1,937 1,662 3%ry 2,9052%ry 1,9372%r)1,937 2%ry 1,937 ax °3,874 6%©5,610 1,662 2%°1,937 ax °3,874 6%0 5,810 6x °5,810 5%°4,8422%ry 1,937 1,662 ax o 3,874 3%°2,905 6%az)5,810 6%ry 5,810 6%0 5,8107%°6,779 1,662 0 ° 0 ° 0 r)831 100%0 °96,840 7,479 oooogocgvnooceococcaococoaocoaoaoaooaacs09:04:07 END-OF PERIOO BALANCES Bond Const Cap Int Interest Earnings Fund Fund DSR WC/RC Grant Bonds ce) ° Qo ce)Q 9° fe]Le]°Le Qo °°°té)0 47,054 7,479 4,242 2,000 0 ° 44,347 7,479 4,242 2,000 °198 41,630 7,479 4,242 2,000 °189 35,995 7,479 4,242 2,000 °175 31,310 7,479 4,242 2,000 0 158 26,610 7,479 4,242 2,000 QO 142 24,805 5,817 49,242 2,000 0 131 22,018 5,817 4,242 2,000 Qo 119 20,191 $,817 4,242 2,000 °110 18,359 5,817 4,242 2,000 °104 16,520 5,817 4,242 2,000 0 938 12,735 5,617 4,242 2,000 °89 6,993 4,155 4,242 2,000 °73 5,116 4,155 4,242 2,000 ce)55 1,283 4,155 4,242 2,000 °4s 42,561 4,155 4,242 2,000 3°29 36,917 4,155 4,242 2,000 °167 32,225 4,155 4,242 2,000 oO 180 30,427 2,493 4,242 2,000 ie]139 26,677 2,493 4,242 2,000 te)124 23,685 2,493 4,242 2,000 te)113 18,174 2,493 4,242 2,000 °99 12,444 2,493 4,242 2,000 i°]80 6,694 2,493 4,242 2,000 °61 (45)S31 4,242 2,000 t¢]40 (21)S31 4,242 2,000 °23 2 831 4,242 2,000 °24 26 fe)4,242 2,000 fe)24 °2,757 SOURCES AND USES OF FUNDS SOURCES: Bonds Grant Equity Interest Earnings .Grant Bond Funds Total Sources USES: Construction: Project Site Development Alternates 1 &2 Cost of Issuance Bond Insurance Initial Studies Capitalized Interest DSR R&C/WC Funds Equalization Factor Total Uses 110,600 2,757 113,557 81,940 14,900 ° 2,770 113,557 /027/103/0158 09:04:07 33-Aug-93 CASE DESCRIPTION Base Case OESI Power Corporation Calendar Year EXPENSES. Operations and Maintenance: Fluid Fee Insurance Wellfield Insurance General &Administrative (owner) Royalty Total Cost of Operations Other Costs: Deposit to DSR Fund Deposit to Well Reserve Deposit to R &C Fund Debt Service To Working Capital Fund City Costs Rate Stabilizaton Fund (RSF)Repayment TOTAL EXPENSES INTEREST &OTHER INCOME From Working Capital Fund Interest Earnings: DSR Rate Stabilizaton Fund (RSF)Payment TOTAL OTHER INCOME COST OF POWER Net.Revenue Required From Power Sales Delivered Cost To Ratepayers Nominal Dollars 1992 Price Levels Cummlative Value RSF Net Present Value RSF 1027 /103/015 ALASKA ENERGY AUTHORITY UNALASKA GEOTHERMAL PROJECT Annual Costs of Power (Baseline) (Dollars in Thousands) 1 2 3 4 5 6 ?8 9 10 11 12 13 14 15 1996 1997 1996 1999 2000 2001 2002 2003 2004 2005 2006 2007 2006 2009 2010 1,450 3,031 3,167 3,309 3,458 3,614 3,777 3,946 4,124 4,310 4,504 4,706 4,918 5,139 5,371 73 303 317 331 35?373 390 408 426 480 501 S24 548 572 5938 78 187 164 171 179 187 198 204 213 223 233 243 254 266 278 1S 31 33 34 36 37 39 a1 43 45 47 a3 51 $3 56 68 141 147 154 161 168 176 134 192 201 210 219 229 239 250 205 429 448 469 630 658 633 719 751 1,221 1,276 1,333 1,393 1,456 1,821 1,885 4,092 4,276 4,469 4,821 5,038 5,264 §,501 5,749 6,478 6,770 7,075 7,393 7,726 8,073 °°150 150 150 150 150 150 150 150 150 150 150 9°0 °150 300 314 328 342 358 374 391 406 427 446 466 487 509 te)sO $2 $5 87 60 62 65 68 71 74 100 105 109 114 3,342 6,735 6,801 7,168 7,402 7,797 8,210 8,641 9,093 9,093 8,198 8,193 8,193 8,198 8,198 1,025 1,050 1,097 1,147 1,198 1,252 1,309 1,368 1,429 1,494 1,561 1,631 1,704 1,761 1,861 615 1,230 1,230 1,230 1,230 1,230 1,230 1,230 1,230 1,230 1,230 1,230 1,230 1,230 1,230 °°0 0 QO °0 1°)0 °o °fe]°° 6,867 13,307 13,907 14,532 15,186 15,6869 16,583 17,329 18,109 18,924 18,409 18,829 19,245 19,530 19,985 1,000 1,045 1,092 1,141 1,193 1,246 1,302 1,361 1,422 1,486 1,553 1,623 1,696 1,772 1,852 i)°°0 o °0 i)0 te]i)fe)[?)0 372 °i)fe)°1°)°°°o °°°te)°° 1,000 1,045 1,092 1,141 1,193 1,246 1,302 1,361 1,422 1,486 1,553 1,623 1,696 1,772 2,224 5,867 12,262 12,814 13,390 13,994 14,623 15,261 15,969 16,687 17,433 16,856 17,206 17,550 17,758 17,761 14.3 15.0 15.6 16.3 17.1 17.8 18.6 19.5 20.4 21.3 20.6 21.90 21.4 21.7 21.7 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 11.2 10.8 10.6 10.2 9.8 £°)°°o 9 °°°0 fe)i)0 9 i*)i) ° /027/103/015 09:04:07 30-fug-93 CASE DESCRIPTION Base Case OESI Power Corporation 16 17 :18 19 20 21 22 23 24 25 26 2?23 2 30 Calendar Year 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2028 EXPENSES Operations and Maintenance:5,612 5,865 -6,129 6,405 6,693 6,994 7,309 7,638 7,98L 8,340 8,716 9,108 9,518 9,946 10,394 Fluid Fee 625 653 682 713 748 mn?g14 850 689 929 970 1,014 1,060 1,107 1,157 Insurance 290 303 317 331 346 362 378 395 413 431 451 471 492 $14 $33 Wellfield Insurance 53 61 63 66 69 72 76 79 83 86 90 94 338 103 106 General &Administrative (owner}261 273 265 298 312 326 340 356 372 383 406 424 443 463 484 Royalty 1,590 1,661 1,736 1,614 1,696 1,981 2,070 2,163 2,261 2,362 2,469 2,580 2,696 2,817 2,944 Total Cost of Operations 8,437 8,816 9,213 9,627 10,061 10,513 10,987 11,481 11,998 12,537 13,102 13,691 14,307 14,951 15,624 Other Costs:: Deposit to O0SR Fund °te)9 ie]°ce)°[e)i?)oO ie)°0 QO ° Deposit to Well Reserve §32 586 581 607 634 663 692 724 758 790 826 863 902 942 985 Deposit to R &C Fund 119 125 150 157 164 200 209 218 350 366 382 393 417 436 456 Debt Service 8,196 8,196 8,193 8,193 6,198 8,198 8,198 8,193 8,193 8,198 i)0 i?)ce)QO To Working Capital Fund 1,945 2,032 2,124 2,220 2,319 2,424 2,533 2,647 2,766 2,890 3,020 3,156 3,296 3,447 3,602 City Costs 1,230 1,230 1,230 1.230 1,230 1,230 1,230 1,230 1,230 1,230 1,230 1,230 1,230 -1,230 1,230 Rate Stabilizaton Fund (RSF)Repayment °°fe]°te)°°0 °0 °°°°° TOTAL EXPENSES 20,460 20,957 21,495 22,038 22,606 23,228 23,849 24,497 28,297 26,011 18,560 19,340 20,155 21,006 21,896 INTEREST &OTHER INCOME From Working Capital Fund 1,935 2,022 2,113 2,206 2,308 2,412 2,520 2,634 2,752 2,876 3,008 3,141 3,282 3,430 3,584 Interest Earnings: OSR 372 372 372 372 372 372 372 372 372 372 0 (e]i]ce]0 Rate Stabilizaton Fund (RSF)Payment °0 [?)fe)0 fe)°fe]0 [e)te]i?)fe]i+)(¢) TOTAL OTHER INCOME 2,308 2,395 2,486 2,581 2,680 2,784 2,893 3,006 3,125 3,248 3,005 3,141 3,282 3,430 3,584 COST OF POWER Net Revenue Required From Power Sales 18,153 18,562 19,009 19,457 19,925 20,443 20,956 21,491 22,173 22,763 15,555 16,199 16,873 17,577 18,312 Delivered Cost To Ratepayers Nominal Dollars 22.1 22.6 23.2 23.7 24.3 24.9 25.6 26.2 27.0 27.6 19.0 19.8 20.6 21.4 22.3 1992 Price Levels 9.6 9.4 9.2 9.90 8.8 8.7 8.5 B.3 8.2 8.1 5.3 §.3 5.3 5.2 5.2 Cumulative Value RSF ce)0 0 °9 ce)i?)°fe)i?)i]0 ce)ce)oO Net Present Value RSF /027/103/015 £027/103/015 WO-Fug-93 .ALASKA ENERGY AUTHORITY 09:04:07 UNALASKA GEOTHERMAL PROJECT Reserve Fund Interest Earnings (Dollars in Thousands) i 2 3 4 5 6 7 8 9 10 di 12 13 14 15 Year 1996 1997 1998 1999 2000 2001 2002 2003 2004 2008 2066 2007 2008 2009 2010 Working Capital Fund Beginning of Period Balance 1,000 1,045 1,092 4,141 1,193 1,246 1,32 1,361 1,422 1,486 1,553 1,623 1,696 1,772 1,882 Annual Deposit 1,025 1,050 1,097 1,147 1,193 1,252 1,309 1,368 1,429 1,494 1,561 1,631 1,704 1,781 1,661 Interest Earnings 20 42 a4 46 48 sO 52 54 5?s9 62 658 68 70 74 Annual Withdrawal (1,000)(1,045)(1,092)(1,141)(1,193)(1,246)(1,302)(1,361)(1,422)(1,486)(1,553)(1,623)(1,696)(1,772)(1,852) End of Period Balance 1,045 1,092 1,141 1,193 1,246 1,302 1,361 1,422 1,486 1,553 1,623 1,696 1,772 1,852 1,935 Debt Service Reserve Fund Beginning of Period Balance 4,242 4,327 4,500 4,830 5,174 5,530 5,902 ,6,263 6,689 7,107 7,541 7,993 8,463 8,951 9,309 Annual Deposit f+)0 150 150 150 150 150 18 180 150 150 150 150 °° Interest Earnings 8s 173 180 193 207 221 236 282 268 284 302 320 339 358 372 Annual Withdrawal ce]°°0 °fe]te)°[9]°0 °°°(372) Debt Service Shortfall °°°3 0 0 9°[*]°0 °0 fe]°° End of Period Balance 4,327 4,500 4,830 5,174 5,530 5,902 6,208 6,689 7,107 7,541 7,993 8,463 8,951 9,309 9,309 Well Reserve Fund Beginning of Period Balance °c)153 462 7A 1,141 1,513 89 472 680 1,314 1,776 2,266 2,787 864 Annual Deposit re)150 300 314 328 342 3338 374 391 408 427 ad46 466 487 $09 Well Rehab (1,783)(2,427) Interest Earnings °3 9 16 22 30 2 9 1?26 35 a4 55 17 27 End of Period Balance 3 153 462 791 1,141 1,513 ao 472 630 1,334 1,776 2,266 2,787 B64 1.400 R &C Fund Beginning of Period Balance 3,000 1,030 1,122 914 1,007 1,10S B48 943 1,047 723 824 933 §53 682 B21 Annual Deposit °50 52 55 S7 60 62 65 638 a A 100 105 109 114 Renewals (300)(358).(427)(509)(607) Interest Earnings 30 a2 40 33 41 33 38 33 35 30 34 29 24 23 23 End of Period Balance 1,030 1,122 914 1,00?1,105 B45 943 1,047 723 324 .933 553 682 821 351 4027/103/015 4027/103/015 30-Aug-93 09:04:07 15 16 17 18 19 20 21 22 23 24 2s 26 27 238 29 Be) Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Beginning of Period Balance 1,852 1,935 2,022 2,113 2,206 2,308 2,412 2,520 2,634 2,782 2,876 3,005 3,141 3,262 3,430 3,584 fnnual Deposit 1,861 1,945 2,032 2,124 2,220 2,319 2,424 2,533 2,647 2,766 2,890 3,020 3,156 3,298 3,447 3,602 Interest Earnings 74 77 81 85 838 92 96 101 105 110 115 120 126 132 13?143 Annual Withdrawal (4,852)(1,935)(2,022)(2,113)(2,208)(2,308)(2,412)(2,520)(2,634)(2,752)(2,876)(3,005)(3,141)(3,282)(3,430)(53,584) End of Period Balance 1,935 2,022 2,113 2,208 2,308 2,412 2,520 2,634 2,752 2,876 3,005 3,141 3,282 3,430 3,584 3,745 Beginning of Period Balance 9,309 9,309 9,309 9,309 9,309 9,309 9,309 9,309 9,309 9,309 9,309 Annual Deposit °°°°°QO °°°Q ° Interest Earnings 372 372 372 372 372 3.2 372 372 372 372 372 Annual Withdrawal (372)(372)(372)(372)(372)(372)(372)(372)(372)(372)(372) Debt Service Shortfall °(*)°°°i')i)°°°° End of Period Balance 9,309 9,309 9,309 9,309 9,309 9,309 9,309 9,309 9,309 9,309 9,309 Beginning of Period Balance 864 1,400 1,970 2,576 3,220 3,903 4,628 2,026 2,774 3,568 4,410 5,304 6,253 7,258 8,323 9,450 Annual Deposit Soo $32 556 581 607 634 663 692 724 756 790 826 863 902 942 985 Well Rehab (3,303) Interest Earnings 2?39 51 63 77 91 40 54 70 86 104 123 142 163 1685 203 End of Period Balance 1,400 1,970 2,576 3,220 3,903 4,628 2,028 2,774 3,568 4,410 §,304 6,253 7,258 8,323 9,450 10,643 Beginning of Period Balance 821 351 487 633 144 309 489 (61)150 379 (148)223 621 17 444 906 Annual Deposit 114 119 125 150 1S?164 200 209 218 350 366 362 399 417 436 456 Renewals (607)(655)(758)(878)(1,016) Interest Earnings 23 16 22 1S 9 16 8 2 10 Ss 2 17 13 9 26 4s End of Period Balance 351 487 633 144 309 489 (61)150 379 (145)223 621 17 444 906 1,407 MEMORANDUM TO:Riley Snell,AIDA R ig Sobor Authority FROM:Roe Sturgulewski,C of Unalaska Public Works REF:Makushin Geothermal DATE:August 20,1993 This is to provide limited comment to the OESI Power Corporation Development Plan Report dated August 18,1993.I have reviewed the report on a cursory basis and offer the following. Page two of the report states "The above mentioned R.W.Beck report projected an area load demand of 82 million megawatt hours in 1994.The 1995 City projected demand is greater than the R.W. Beck projection."This could be interpreted that the City has reviewed the community load profile since publication of the R.W. Beck report.I would like to clarify that the City has not done this.We have provided OESI with a 1 year estimate of annual production and peak demand information for the City Power Plant. Given the shortening in the processing seasons that has arisen since preparation of the R.W.Beck report we believe it is important to reevaluate the existing community generation load profile to determine the portion of the year where consumption is less than the capability of the proposed plant.We believe this analysis is necessary to determine the estimated charge rates over the short term and would also be beneficial in understanding longer term demand risk. Please contact me if you have any questions.co pnd f}oeFFINbicc:Greg Retzlaff,OESI BoDanShocket,GEO Electric Power Company OoMarkEarnest,City Manager Fb E., MEMOS\DPW\MAK-OESI.820 AUG--235-935 mon 9:44 R.W.Beck _AMchoradge ; 2 -qe.IN”RW BECK Je "hsANDASSOCIATES,INC,et ye) 2522 Arctic Boulevard,Suite 210 a Anchorage,Alaska 99503-2516 @ USA {ate -Us Q L. Telephone (907)272-6225 @ Fax (907)276-1751 WS-1559-IA1-BX ,August 20,1993 Mr.Mark $8.Gardiner,Managing Director Public Financial Management,Inc. 1000 SW Broadway,Suite 1500 Portland,OR 97205-3003 Dear Mark: On Wednesday,I scnt you a copy of the handout that OESI provided at the meeting with AIDEA/AEA.Most of the numbers are fairly self-explanatory,but I thought I would provide you with a few observations to help you in your review.Some of these are somewhat minor but have been included for sake of completeness.I have asked for a copy of their computer model on disk,it hasn't arrived yet.At that time,I will probably have a few more comments, Start Date -The OESI analysis is based on starting construction in April 1994.T have been told that it would be physically possible to do this.However,I'm not sure if this date is realistic as Tm not sure AIDEA would want to do much prior to receiving all permits. Furthermore,the turnkey agreement,power sales agreements,power layoft/sharing agreements,right-of-ways,etc.,would have to be completed prior to financing. Energy Sales -OESI has assumed encrgy sales of 82,000 megawatt-hours per year,They feel that this is conservative as the plant can produce more than that amount and certain loads have been added since R.W,Beck reviewed the area energy requirements in 1991, They also feel it is conservative as no load growth is assumed for the future and the 82,000 figure is held constant throughout the study period. Several points nced to be made here.First,higher than expected total energy requirements does not necessarily mean an equal amount of increased energy sales from the Project.Part of the load may represent a peak demand greater than the capability of the Project and would have to be met with other generation, Second,our study in 1991 did assume some load growth although probably not quite as much as that which has occurred.However to simply say that the Westward expansion, the Margaret's Bay development and other developments (page 2)requires an increase in the load forecast is not valid.Part of these were included in our December 1991 analysis. Austin,TX g Boston,MA @ Columbus,NE Denver,CO mt Lodianapolia,1N Irvine,CA i Minneapolis,MN Nashville TN wm Orlunds,FL gs Phocnix,AZ @ Sacramento,CA ti San Jose,CA i Seattle,WA ee A Reewled Paper Proliet AUG--23-73 Mon Jidcst R.wW.Beck -Anchorage Mr.Mark Gardiner August 20,1993 Page 2 Third,as I am sure you are aware,the assumption of holding the sales amount constant does not make it conservative.Should the fishing industry reduce operations on the island,energy requirements would certainly decrease without another industry taking up the gap. Construction Costs -OEST's paper states that the construction costs used in our October 15,1992,report were in 1992 dollars and independently reviewed by us.The $84,947,000 amount used by us was not in 1992 dollars but rather at 1994 and 1995 price levels.Furthermore,they were based on OESI's earlier estimates and then increased by AEA to include larger amounts for certain budget components as well as to include a contingency,We have never independently reviewed the cost estimate. Type of Bonds -At the meeting,OESI stated that the bonds would be AIDEA revenue bonds and not G.O.bonds.It would appear to me that the security is fairly light given that the powcr sales agreements are to be based on requirements. Debt Service Reserve Fund -Their model assumes that half of the debt service rescrve fund is funded from bonds and the other half is funded with annual deposits from years 3 through 15,(There is a typo on the spreadsheet showing annual costs -Deposit toR &C fund should read Deposit to DSR Fund.)I would think that the bondholder would want to see the DSR Fund fully funded from the start. Debt Service -The analysis assumes that debt service is ramped such that the cost of power remains at 12.0 cents/kWh in 1992 dollars,Essentially,debt service is acting as the rate stabilization fund, Two things come to mind.First,I believe that there is a withdrawal from the DSR in the first year to pay part of the debt service.1 wouldn't think the bondholders would be too wild about that.Second,since you would have to set up the debt service schedule when the bonds were sold,revenues to cover any operating cost increases or reduction in salcs would have to come from some other source than debt service.Therefore the mechanics of a rate stabilization fund may have to be set up prior to issuing bonds. O&M Costs -OESI has developed a operating and maintenance budget estimate of $2.9 million in 1993 dollars (Appendix 4).However the spreadsheet bases it on 1996 price levels,Also,the A&G,insurance,and wellfield insurance are the same as what I have assuined.However,mine (based on what OESI gave me in the past)were in 1994 dollars, Payment Period -Quarterly bond payments are assumed instead of semi-annual. Turnkey -AIDEA bonds are assumed to be issued in March 1994 and June 1995.Two issues were assumed such that the IDC is hcld down plus the bulk of the bonds are not issucd until after the resource is proven up,In other words,it's not a typical turnkey where the owner doesn't put anything up until construction is completed and operation commences. RW.BECK AND ASSOCIATIA ING, neers \eOG A Mteeveled Dance Prodact AUG---2SsS-395 MON 9s45 R.W.Beck -Anmchoradgde Mr,Mark Gardiner August 20,1993 Page 3 When I receive the computer disk with the spreadsheet model,I will send a copy down to you. If we can't make connections on Monday,I'll try you later in the weck.I will be in Sitka Tuesday -Friday (August 24 -27).The number at the hotel is (907)747-6241. Very truly yours, R.W.BECK AND ASSOCIATES,INC. BeTbe Coban?Michael D.Hubbard Director,Alaska Operations c:Dave Eberle John Olson RW,BECK EEANDOASSOCTATESING.eeeeeerees anytye A Reeyetad Mapor Pratt AUG-2S3-935 MoOW 9Sr143 >. R.W.BECK AND ASSOCIATES,INC. 2522 Arctic Boulevard, Suite 110 Anchorage,Alaska 99503-2516 Telephone:(907)272-6225 Fax:(907)274-4525 -Anchorage Fax Transmission To :Soin bison Phone: From:Micé Mrsthad> Pages sent including cover sheet: Time Sent: 4 Date Sent:3/23/43 ,XC -shy Jt 8°" ,2PM pol Un tlharb Geeks PUBLIC FINANCIAL MANAGEMENT,INC. Financial and Investment Advisors 1000 SW Broadway,Suite 1500 Portland,Oregon 97205-3003 503-223-3383 (Fax)503-223-7002 com,ih.5oommTgeme MEMORANDUM .-BY FAX August 18,1993 TO:John B.Olson,P.E. Deputy Director (Development) Alaska Industrial Development &Export Authority CC:David Eberle -AEA Mike Hubbard -R.W.Beck J.Gallagher,P.Clancy,C.Dearth,J.Miller,S.Clements -PFM FROM:Mark Gardiner RE:Unalaska Workplan Attached you will find our estimated workplan and fee estimate,and our standard project initiation form for the Unalaska Geothermal project.I discussed this plan,which was based on your memo of July 27,with Dave and Mike last week.Based on that conversation,I believe we have prepared a work program which will allow a timely response to the expected proposal from OESI.Please note that,in addition to Chris,Pat and myself,we expect John Miller and Scott Clements (two of our power gurus)to assist in this project. Assuming that OESI does produce the proposal at today's meeting,it would be helpful to have both an NTP (or other form as you see fit)from you and a letter of introduction which we can use in seeking information from OESI and related parties. I am on vacation this week,so please let Chris or Pat know as soon as possible about the outcome of the meeting.Thanks.Sorry I missed you in Anchorage last week and hope you are fully recovered. Atlanta Austin Boston Denver FortMyers =Harrisburg ©Memphis NewYork Orlando Philadelphia Portland -San Francisco An Affiliate of Marine Midland Bank,N.A. Unalaska Geothermal Credit Analysis Total Total Hours Fees |.Analysis of Requirements vs.Take-or-Pay 16 $2,608 Advantages/disadvantages of requirements vs.take-or-pay Interest premium and other cradit issues of requirements vs.t-o-p ll.Analysis of State Credit Enhancements on Project Financing 8 $1,304 Potential forms of state credit enhancment Impact of alternatives on project capital cost /availability lil.Analysis of AIDEA/AEA Credit Impact 20 $3,260 Effect of state moral obligation pledge on future state financings Effect of project financing on AIDEA/AEA credit Effect of credit enhancement on AIDEA/AEA credit IV.Recommended Contract Provisions 16 $2,608 Recommended aspects of turnkey contract for successful financing Recommended aspects of requirements contract for successful financing V.Credit Report on Project Developer 30 $4,890 Information gathering and due-diligence on project developer and related entities Analysis of Developer's credit Confidential report on project developer's credit TOTAL =Unalaska Geothermal Hours 90 Fees $14,670 Expenses Telecommunications,production,etc.100 $100 Trips to Anchorage 1 Cost 1000]1000 $1,000 TOTAL -Fees and Expenses 1,000 $15,770 SMC/PFM|MDs:Mark Gardiner MD Mc c Total John Miller %of Work Plan 40%40%20%100%Pat Clancy Hourly Rates:$175 $175 $115 $163 SMC:Scott Clements Hours:36 36 18 90IC:Chris Dearth Fees:6,300 6,300 2,070 14,670 MD=Managing Director SMC-Sr.Managing Consultant,MC=Managing Consultant C=Consultant Public Financial Management,Inc. ME152A.XLS 8/18/93 Page1 Alaska Industrial Development and Export Authority Task Assignment Budget for Unalaska Georthermal Task Assignment No.12 Financial Advisor Services AIDEA 92-014 Proposed Completion Date:September 30,1993 Professional Service Fees Job Classification/Individual Estimated Hourly Estimated Cost Hours Rate Account Manager/Mark Gardiner 20 $175 $3,500 Senior Staff/Pat Clancy 4 175 700 Senior Staff/John Miller 12 175 2,100 Senior Staff/Scott Clements 36 175 6,300 Associate Staff/Chris Dearth 18 115 2,070 Direct Expenses Purpose/Description of Travel Individual(s)Traveling Estimated Cost One round trip to Anchorage Mark Gardiner $1,000 Description/Purpose of Materials Estimated Cost None expected under this work item Description of Other Direct Expenses Estimated Cost Telephone,Facsimile,Copying $100 Total Proposed Price $15,770 ALASKA ENERGY AUTHORITY 701 East Tudor Road P.O.Box 190869 LeEvveR @F TRANSMITTAL%Wp tol Skebornop Pts id "Anchorage,Alaska 99518.086s:Ceben ph a _j aconarreatEAS JUL 6 BS AA Prwak oti To Ooh ur Olserisaka Incuctial Boystopment A\\ocahm fer ' AivEr tine Raper etry Dnalaclen Oectherma TO WW.luror RaAB FtnceHoe nce,AK 49593-6690GENTLEMEN: WE ARE SENDING YOU Attached O Under separate cover via the following items: O Shop drawings O Prints O Plans O Samples O Specifications x Copy of letter O Change order 0 COPIES DATE |NO.DESCRIPTION /|a/u/er LTRS Form $32% L |2fur/42 Mewo:Kiinkuer +o Mayu;ve!Vslume Coe Allocated ]L[r2zftz LeHer!Ca rtledge to froutm re;Unalas ke.Geothevma \|fey /4}.Memos Boutin Yo Stoke Bond Committe e- )t/z[43 Spreads leet funn Ak Depth of Revenueve!G\\ocations aud Cavvey fevrwavds THESE ARE TRANSMITTED as checked below: REMARKS O)For approval O For your use As requested O For review and comment OU O FOR BIDS DUE O Approved as submitted O Resubmit_______copies for approval O Approved as noted O Submit_____copies for distribution O)Returned for corrections O Return_____corrected prints 19 O PRINTS RETURNED AFTER LOAN TO US Re kuna é Corvespencley ce ey)FLO 000,000volume.Yscapallocatkim for Wue facheCeothevunl.Ero}ect copy to__D.&bette If enclosures are not as noted,kindly notify us at once. m )8 3 2 8 Carryforward Election of Unused (Rev.March 1990)Private Activity Bond Volume Cap OMB No.1545-0874 Department of the Treasury (Under Section 146(f))Expires 2-28-93 Enter the calendar year for which the electionis made 1991 . GEE]Reporting Authority . Issuer's name Employer identification number Alaska Energy Authority 92-6001185 Address (number and street) P.O.Box 190869 City or town,state,and ZIP code Anchorage,Alaska 99519-0869 [ZRII Computatinn of 'Inused Volume Cap 1 Total volume cap of theissuer for the calendar year .: 2 Aggregate face amount of private activity bonds issued to date whicharetakenintoaccountundersection146(see instructions)..... 2 $855,000 1 |$80,855,000 3 Total amount of volume cap exchanged for authority to issue mortgage credit certificates (see instructions)......3 04Totalamountofvolumecapallocatedtoprivateactivityportionofgovernmentalbonds(see instructions)............C4 0 8 Add lines 2 through 4 6 Unused volume cap (subtract line 5 from line 1). 5 855,000 6 80,000,000 GEE]Purpose and Amount of Each Carryforward 7 Qualified student loan bonds 8 Qualified mortgage bonds or mortgage credit certificates . 9 Qualified redevelopment bonds 10 Exempt facility bonds: a Mass commuting facilities (section 142(aX3)) b Water furnishing facilities (section 142(aX4)). e Sewage facilities (section 142(aX5)) d Solid waste disposal facilities (section 142(aX6)). e Residential rental projects (section 142(aX7)) f Facilities for the local furnishing of electric energy or gas (section 142(a)8)) g Local district heating or cooling facilities (section 142(aX9)). h Qualified hazardous waste facilities (section 142(aX10)). |25%of bonds for high-speed intercity rail facilities (section 142 (aX11)). 11 Total carryforward amount (add lines 7 through 10i) 1ot|80,000,000 101 11}80,000,000 Please belief-%1s true,correct,and complete. Sign \ah EE 2 Ulaun Da C.(Bucs elfberruary 11,1 2 Under penaities of penury,|deciare that |have examined this return,mmcloding accompanying schedules as'atemerts,and to the best of my knowledge and Charlie Bussell Executive Director VF Sgnature ui autnorized pudiic official 7 Date Title For Paperwork Paduction .\ct Notice,see instructions on back.Form 8328 (Rev.3-90) Form 8328 (Rev.3-90) General Instructions (Section references are to the Internal Revenue Codeunlessotherwisestated.) Paperwork Reduction Act Notice We ask for this information to carry out the Internal Revenue laws of the United States.We need it to ensure that taxpayers are complying with these laws.You are required to give us this information. The time needed to complete and file this form will vary depending on individual circumstances.The estimated average time is: Recordkeeping ..Shrs.,§9 min.Learning about the law or the form ....2h. Preparing and sending the form to IRS .2hrs.,10 min. If you have comments concerning the accuracy of thesetimeestimatesorsuggestionsformakingthisformmoresimple,we would be happy to hear from you.You can writetotheInternalRevenueService,Washington,DC 20224,Attention:IRS Reports Clearance Officer,T:FP;or theOfficeofManagementandBudget,Paperwork ReductionProject(1545-0874),Washington,DC 20503. Purpose of Form Form 8328 is to be filed by the issuing authority of privateactivitybondstoelectundersection146(f)to carry forward its unused volume cap for one or more carryforward purposes.If the election is made,bonds issued with respect to any carryforward purpose are not subject to the volume cap under section 146(a)during the 3 calendar years following the calendar year in which the carryforward arose,but only to the extent that the amount of such bonds does not exceed the amount of the carryforward elected for that purpose. When To File Form 8328 must be filed by the earlier of (1)February 15 of the calendar year following the year in which the excess amount arises,or (2)the date of issue of bonds issued pursuant to the carryforward election. Once Form 8328 is filed,the issuer may not revoke the carryforward election or amend the carryforward amounts shown on this form. Where To File File Form 8328 with the Internal Revenue Service Center,Philadelphia,PA 19255. Bonds Taken into Account Under Section 146 All private activity bonds issued during a calendar year are taken into account under section 146 except: 1.Qualified 501(¢3)bonds. 2.Exempt facility bonds for governmentally owned airports,docks and wharves,and solid waste disposalfacilities. 3.75%of any exempt facility bonds for high-speedintercityrailfacilities. Page 2 4.Qualified veterans'mortgage bonds.»- 5.Bonds issued pursuant to a carryforward election under section 146(f). 6.Certain current refundings.See section 146(i). 7.Certain bonds issued by Indian tribal governments fortribalmanufacturingfacilities.See section 787 1(c)(3). in addition,the private activity portion of governmentalbondsistakenintoaccounttotheextentthatthe nonqualified amount exceeds $15 million.See sections 141(b)(5)and 146(m). Bonds Eligible for Election An election under section 146(f)may be made only by theissuingauthorityforthefollowingtypesoftax-exempt bonds: 1.Qualified student loan bonds, 2.Qualified mortgage bonds (or mortgage credit certificates), 3.Qualified redevelopment bonds,and section 146. Specific Instructions All parts of this form must be completed to properly electthecarryforwardprovisionsofsection146(f). Part Il.-Computation of Unused Volume Cap Line 1.-Enter the issuing authority's volume cap undersection146forthecurrentcalendaryear.Take intoaccountanyreductionintheamountofthevolumecapundersection25(f)(relating to reduction where certainrequirementsarenotmet).See section 146(n}2). Line 2.-Enter the total amount of private activity bonds issued by the issuing authority during the current calendaryearwhicharetakenintoaccountundersection146.See"Bonds Taken Into Account Under Section 146.” Line 3.-Enter the total amount of qualified mortgage bonds the issuing authority has elected not to issue undersection25(c\(2){Aii).See section 146(n\1). Line 4.-Enter the total amount of volume cap allocated by the issuer to the private activity portion of governmental bonds.See sections 141(b)(5)and 146(m). Part I!!._-Purpose and Amount of Each Carryforward Enter the amount of unused volume cap the issuer elects to carry forward for each carryforward purpose and the totalcarryforwardamount.The total may not exceed the unusedvolumecap(line 6). Signature Form 8328 must be signed by an authorized public officialresponsibleformakingallocationsoftheissuingauthority's private activity bond limit. @U.S.Government Printing Office:1990-262-151/00107 PETER ARGETSINGER WOHLFORTH,ARGETSINGER,JOHNSON &BRECHT&PROFESSIONAL CORPORATION CYNTHIA L.CARTLEOGE JULIUS J.BRECHT ATTORNEYS AT LAW (907)276-6401 ROBERT M.JOHNSON 900 WEST STH AVENUE,SUITE 600 TELECOPY THOMAS F.KLINKNER ANCHORAGE,ALASKA 99501 BARBARA E.KISSNER ANDREW M.LEBO BRADLEY €.MEYEN JAMES A.SARAFIN -.VASSAR ERIC E.WOHLFORTH RECEIVED a MEMORANDUMFEM)1992 ALASKA ENERGY AUTUNRITY TO:Ms.Gloria Manni Director,Accounting and Administration Alaska Energy Authority FROM:Thomas F.Klinkner DATE:February 11,1992 SUBJECT:Volume Cap Allocations for Alaska Energy Authority Our File No.3610.0004 1.Unalaska Project. The State Bond Committee,by Resolution 92-1 (copy attached), allocated $80,000,000 of 1991 volume cap to the Alaska Energy Authority for the Unalaska Project.To preserve this allocation,the Energy Authority must file with the Internal Revenue Service before February 15,1992,the enclosed volume cap carryforward election.Please have the election signed by Charlie Bussell and return it to me as soon as possible to assure its timely filing. 2.Snettisham Project. Tom Boutin of the State Department of Revenue informed me that the State Bond Committee allocated $66,205,000 of 1988 volume cap to the Snettisham Project.However,this allocation has expired because it was not used within three years.A new volume cap allocation will be required for the Snettisnam Project,because the bonds issued to finance the acquisition of Snettisham will be private activity bonds. You also had requested an explanation of the volume cap allocation procedure.|will prepare and forward to you such an explanation in the near future. AFFO2041 TELEPHONE (907)276-8093 WOHLFORTH,ARGETSINGER,JOHNSON &BRECHT PETER ARGETSINGER JULIUS J.BRECHT CYNTHIA L.CARTLEDGE ROBERT M.JOHNSON BARBARA E.KISSNER THOMAS F.KLINKNER ANOREW M.LEBO BRADLEY E.MEYEN JAMES A.SARAFIN A PROFESSIONAL CORPORATION ATTORNEYS AT LAW 900 WEST STH AVENUE,SUITE 600 ANCHORAGE,ALASKA 9950! TELEPHONE (907)276-6401 TELECOPY (907)276-5093 KENNETH ©.VASSAR ERIC E.WOHLFORTH RECEIVED January 22,1992 JAN 2 >1999 ALASKA ENERGY AUTHORITY Department of Revenue o F c :Treasury Division en State Office Building,11th Floor Fa ge gangP.O.BoxS UNE AD eee Juneau,Alaska 99811 4.ASKS DEPARTMENT GF REVENGE TREASURY DIVISION SUNEAUAttention:Tom H.Boutin Debt Manager Dear Mr.Boutin: I have reviewed the proposed financing by the Alaska Energy Authority in connection with said Authority's anticipated issuance of Power Revenue Bonds, Series 1992 (Unalaska Geothermal Project)(the "Bonds").The Authority will require an allocation of the States private activity bond volume cap in order to issue its Bonds.This opinion is being provided to you for delivery to the State Bond Committee in connection with the Authority's application for that allocation of volume cap. Based upon our review of the proposed financing,including discussions held with the participants,we are of the preliminary opinion that the Bonds will require an allocation of the private activity bond ceiling under Section 103 of the Internal Revenue Code of 1986,as amended.We are further of the preliminary opinion that interest on the bonds will be exempt from federal income taxation under Section 103 of the Internal Revenue Code of 1986,as amended. Very truly yours, WOHLFORTH,ARGETSINGER, JOHNSON &BRECHT By Cte!Oe Cynthia L.Cartledge ™ AFFOLF7TA SENT B3Y*WoHLFORTH,ARGETSINGER +1-22-92 +10+24AM |G072785093 AK ENERGY AUTACRITY:#2 WOHLFORTH,ARGETSINGER,JOHNSON &BRECHT PETER ARGETSINGER a pmo!™_TELEPHONE JULIUS JW.BRECH?LA (@O7)276-640!CYNTHIA L.CAMTLEDQE ATTORNEYS AT w ROBERT M.JOHNSON 600 WEST STH AVENUE,BUITE 600 TELECOPYBARGARAEC.KISENER wor avencesTHOMASF.KLINKNER ANCHGRAGE,ALASKA @0801ANOREWM.LESBO BRADLEY E.WEYEN JAMEG A,SARAFINKENNETHE.VASSARCASEB.WOMLFORTM January 22,1992 Department of Revenue Treasury Division State Office Building,11th Floor P.O,Box § Juneau,Alaska 99811 Attention:Tom H.,Boutin Debt Manager Dear Mr,Boutin: I have reviewed the proposed financing by the Alaska Energy Authority inconnectionwithsaidAuthority's anticipated issuance of Power Revenue Bonds,Series 1992 (Unalaska Geothermal Project)(the "Bonds").The Authority willrequireanallocationoftheState's private activity bond volume cap in order to issue its Bonds.This opinion is being provided to you for delivery to the State Bond Committee in connection with the Authority's application for that allocation of volume cap. Based upon our review of the proposed financing,including discussions held with the participants,we are of the preliminary opinion that the Bonds will require an allocation of the private activity bond ceiling under Section 103 of the Internal Revenue Code of 1986,as amended.We are further of the preliminary opinion that interest on the bonds will be exempt from federal income taxation under Section 103 of the Interna]Revenue Code of 1986,as amended. Very truly yours, WOHLFORTH,ARGETSINGER, JOHNSON &BRECHT By lps,AA nthia L,ledge AFFOIFIA oe ame Voces ome meme ee oe eer :vee :a ee .ok enerewe8 >( MEMORANDUM STATE OF ALASKA STATE BOND COMMITTEE TO:Glenn Olds DATE:January 24,1991 Chairman RECEIVEDLeeFisher Secretary JAN 39 1231 Millett F.Keller Member ALASKA ENERGY AUTHORITY, TELEPHONE NO:465-2350 FROM:Tom Bouty¥n RE:Allocation of Remaining 1990 Department e Private Activity Bond Volume Limit I recommend that the State Bond Committee allocate the remaining amount of 1990 private activity bond volume limit to the North Slope Borough.Total expected issuance through the end of 1993 is less than the total volume limit which will be available. The total amount of limit available through the end of 1993 is $524,705,000.The remaining amount of 1990 volume limit is $74,705,000.The annual limit for each year is $150 million. The estimated need for volume limit by the North Slope Borough to finance this waste treatment facility is $300,000,000,of which $200,000,000 or less will be issued in 1992.Therefore,an additional $225,295,000 in volume limit might be needed in order to finance this project. Additional needs for private activity bond volume limit allocations are;(1)an expected request for $850,000 by the Alaska Energy Authority to finance a power project in Larsen Bay; (2)issuance of up to $17,500,000 in student loan revenue bonds by the Alaska Student Loan Corporation during the first half of 1991;and (3)the need for as much as $50,000,000 during 1991 for the issuance of mortgage revenue bonds by the Alaska Housing Finance Corporation.If the Student Loan Corporation and AHFC issued those same amounts during each of the next two years (assuming the sunset date for tax-exempt mortgage revenue bonds is extended beyond 12/31/91),and there were no other issuers ofprivateactivitybonds,there would be at least $38,855,000 in )unused volume limit at the end of 1992,and $121,355,000 at the end of 1993. cc:Jane Byers Maynard,Alaska Student Loan Corporation Marcey Rawitscher,Alaska Energy Authority”_ Mark Cameron,Alaska Housing Finance Corporation Bert Wagnon,Alaska Industrial Development &Export Authority VEL #18074652394 AKENERGYAUTHORITYTT21AM5T=2-933SENTBY:XeroxTelecopier7020Settee REY BSRof to ! ALASKA PRIVATE ACTIVITY BOND CEILING ALLOCATIONS,USE,AND CARRYFORWARDS FROM INCEPTION”| Calendar Total invalid or Expired Remaining Unused Year Ceiling _Allocation Use Garryforward”Canryforward Cartyforward” 1986 $250,000,000 $125,000,000 to AIDEA $14,780,000 by AIDEA $110,220,000 for Student $110,220,000 for Student Loan Bonds Loan Bonds 425,000,000 to AHFC .125,000,000 for AHFC 1987 259,000,000 50,000,000 by AHFC 185,590,000 for AHFG 185,590,000 for AHFC °64,410,000 for AEA Power 64,410,000 for AEA Power Projects Projects 1988 150,000,000 83,795,000 to ASLC 83,795,000 by ASLC 66,205,000 for AEA lor 66,205,000 for AEA for .Snettisham Snottisham 1889 150,000,006 31,160,000 to ASLC 31,160,000 by ASLC 2,190,000 to AHFC 77,190,000 by AHFC 116,650,000 to AEA 116,650,000 by AEA for ;Power Projects 1990 =150,000,000 33,000,000 to ASLC --.33,000,000 by ASLC 4,500,000 by AEA4,200,000 to Yakutal 1,195,000 dy Yakutat 74,705,000 by North Slope Borough $74,705,000 for North 1,200,000 to Bond Bank 1,195,000 by Bond Bank Sipe Borough 50,000,00 to AHFC 95,405,060 by AHFC 1,500,000 fo AEA 3,000,000 to AEA 74,705,000 to North Slope Borough 1991 150,000,000 15,000,000 to ASLC =15,000,000 by ASLC --80,000,000 by AEA $0,000,000 for AEA _20,000 to AEA 20,000 by AEA 54,145,000 by ASLC $35,000 to AEA 836,000 by AEA 80,000,000 to AEA 4,500,000 by AEA 54,145,000 to ASLC 1992 $50,000,000 1,325,000 to Petersburg47,500,000 by ASLC 145,550,000 to be allocated 116,650,000 for AEA Power 6,645,000 for ASLC2,200,000 to Bond Bank 1,305,000 by Petersburg and carried Power Projects™145,550,000 'tp be alocaied 2,170,000 by Bond Bank forward and carried 975,000 by AIDEA 975,000 by AIDEA forward Total $1,250,000,000 $802,900,000 $400,025,000 $1,026,975,000 $543,075,000 $06,900,000 f No entity other than those identified in the tables has ever applied for an allocation.Ceiling for 1993 ($150,000,000)not shown. 2.Carrytorwards expire after three calendar years. January 15,1993 Syont Brian Andvews "Dayh of Reveuvet/z/a3 SENT BY+Xerox Telecopier 7020 +6-11-93 511-43AM 5 90746554429 907 561 8998s 2 oa fatedahacke Cather Makushin Geothermal Project (0)([AMeetingJune24,1993 [p tf9:00AM-4:00PM Commissioner's Conference Room Department of Commerce and Economic Development Juneau,Alaska 9:00AM Commissioner Paul Fuhs introduces Governor Walter J. Hickel for welcome and opening remarks 9:00AM-History and development of geothermal resources in 9:45AM -Unalaska.To include an overview of the political,social,& environmental issues.Also touch on possible national interest issues.-Commissioner Fuhs 9:45AM-Project presentation to include current project concepts, 10:30AM_the three general financing scenarios,and technical issues of the project.Mr.Dan Schochet,President, Geoelectric Power Company 10:30AM-Break 10:45AM 10:45AM-Presentation of the role of AIDEA/AEA potential 11:30AM financing participation in applicable scenarios.Define need for power sales agreements. 11;30AM-Gov,Walter J.Hickel addresses the group. 11:45AM 11:45AM-Lunch Break 1:30PM 1:30PM-Remarks and questions from invitees regarding the 3:30PM project. 3:30PM-Discuss next steps following the meeting. 4:00PM OR AE T peat BY+Xerox Telecopier 7020 +6-11-93 311:44AM 3}90746554424 WALTER J.HICKEL 907 561 8998se 3 P.O.Bex NOOO Juneau,Alasks 9Sait-ooo1 (807)485-2500 GOVERNGA SratvTE OF ALASKA OrFFIce OF THE GOVERNOR JuewEeat May 7,1993 Mr.Kejiro Nakabe,PresidentTalyoFisheryCompany,Ltd.7-2 Ohtemachi 1-chome Chiyoda-ku Tokyo 100JAPAN Dear Mr.Nakabe: The partnership between the Siate of Alaska and thé fishing industry has been anextremely'Posiive and éffective one.You may recall that we made a strong case withtheUnitedStatesSecretaryofCommerceontheonshore/offshore fisheries issueswhichresultedinaguaranteeoffishquotafortheonshoreplants.- |am writing now to invite you to attend a June 24,1993,meeting in Juneau,Alaska,Our Siate Capital,to consider a project that |believe holds great promise for you andthestata. AS you may know,in the past few years,the state has invested more than $6 million in...exploratory drilling,design,and feasibility determinations for the Makushin Geothermal'Electrical Generation Project at Unalaska,All our studies suggest this project will offerstableandcost-effective electrical energy to Unalaska's major electrical users as wellasmitigatetheairemissionsregulatoryissuesfortheexistingdieselelectricalgenerators.More detalled information on this project is enclosed. We are now at the point where we believe the project is viable if we can secure theparticipationofmajorend-users,Iike you,In this project. Alaska has long pursued an aggressive policy that assists the private sector InestablishingprofitableonshoreprocessingcapabilitiesInUnalaska.|belleve theMakushinGeothermalElectricalGenerationProjectisakeypartofsuchaStrategy.|invite you to attend the meéting with private and public officials scheduled for June 24,.1993,In Juneau,Alaska.; |have asked my Tokyo Office of international Trade to contact you regarding anyquestionsyoumighthave. With best regards.”"6 Sincerely,hlWaiterJ.Hickel ; Governor Enclosure SENT BY:+6-18-93 5 14:28 +AK ENERGY AUTHORITY>907 561 8998;#2 A State of AlaskaDNWalterJ.Hicke!,Governer =ralbele FilAlaskaEnergyAuthority A Public Corporation June 18,1993 The Honorable Paul Fuhs CommissionerAlaskaDepartment of Commerce &Economic DevelopmentP.O.Box 110800 Juneau,Alaska 99811-0800 Subject:Makushin Geothermal Project Dear Commissioner Fuhs: The Alaska Energy Authority wishes to support your effort to encourage communication between potential providers and users of the Makushin GeothermalResourcesnearUnalaska.We are quite familiar with the resource and its potentialsincetheEnergyAuthority,including some of its present staff,managed theexplorationeffortintheearly1980's that discovered the commercial grade geothermalresourceonMt.Makushin.In the mid-1980's we prepared technical and economic feasibility studies on the use of hot fluids from Makushin for electric power generationandmorerecentlywehavemonitoredandencouragedtheeffortsofprivatedevelopers to obtain financing and necessary contractual arrangements for the project. Our consultants technical review indicates a project of at least 12 MW should be sustainable based on known reservoir characteristics and actual drilling experience on the mountain.Eventual development of the project will require agreements between those using electrical power from the project and project owners and operators, We believe now is a good time for serious negotiations on the project because: 1.National and state agencies are proceeding with the implementation of recent laws that govern exhaust emissions from diesel power plants.In some casesadditionalcleanupofexhaustgasesmaybenecessarytomeetlocalstandards. Additional investment in clean up equipment might be avoided if electric power needs came from a "cleaner"resource that did not require such regulation. 2,Federal tax policy and the National Energy Act of 1992 provides some favorable benefits for private financing of geothermal projects. PO.Box 190869 701 EastludorRoad Anchorage Alaska 99519-0869 (907)561-7877 Fax;(907)561-8584 S3Q2A5005(1) a SENT BY:>6-18-93 +14:27 +AK ENERGY AUTHORITY 907 561 8998;#3 Letter to:The Honorat..2aul Fuhs |Subject:Makushin Geothermal ProjectJune18,1993 3.A geothermal based electric power supply would be sheltered from sudden changes in fuel oil prices that could affect electric power costs for utilities and fish processing plants. 4,The staffs of the Energy Authority and Alaska Industrial Development andExportAuthorityarefamiliarwiththeprojectandcouldassistinaccessingcapitalmarketsifrequired. It is clear that the major electric power users in Unalaska would need to be participantsinsuchaprojecteitherthroughpowerpurchaseagreementsthatsecurefinancingorperhapsasequityinvestorsthemselves.We will be happy to be of assistance to youandothersifrequested.I wish you,industry representatives,and city officials every success in your meeting on June 24,1993. Sincerely, Ronald A.Garzini Executive Director BNP:RAG:ja cc:Riley Snell,Alaska Industrial Development and Export AuthorityJohnOlson,Alaska Industrial Development and Export Authority Mark Earnest,City of Unalaska Roe Sturgelewski,City of Unalaska 93Q2VA5005(2) see menos +wsececs 18 atopwoe oes fo as eee ner ono +ore moore oo ee SENT BY:Xerox Telecopier 7020 +6-10-93 +3:10PM +90746554424 907 561 8998.8 2 ro FRIDAY JUNE 11,1993 poe Unehaeke.CrrtherrdTELECONFERENCE|pypet -8:30AM-9:30AM(Alaska) PARTICIPANTS: Paul Fuhs Glenn Reed Ron Garzini Brent Petrie Riley Snell John Olsen Jack Wood Dan Schochet Agenda General overview of June 24 meeting 2.Discuss agenda A.Order of presentations B.Who will make each presentation Discuss each agency's role at June 24 meeting 4,Discuss desired goal and potential next steps following meeting February 24,1993 cal i United Mining Announces Extension Of Letter Of Intent To Merge With GEOlectric RENO,NV -United Min- ing Corporation announced that it had extended the Letter of Intent to merge with GEOlectric Power Company,a privately-"Held Reno based geothermalpowerplantdeveloper.Under the terms of the extension the nerger is to be completed by larch 5,1993 subject to United raising up to $1.25 million,in a convertible note private place- ment,for working capital of the merged company.In addition, United will convert the majority of its debt to common stock and issue 5.5 million shares of its common stock to GEOlectric. Timothy Collins,President of United,stated that the merged company will change itsnametoGEOlectricResources Company and should become a major factor in the rapidly expanding domestic and foreign geothermal/renewable energy field. GEOlectric has entered into Asarco Troy Mine To Temporarily Close In Mid-April 1993 NEW YORK,NY -ASAR- CO Incorporated announced that due to low metals prices and falling production it will tem- irarily close its Troy mine Drill Program Completed On Southern Cross VANCOUVER -Interna- tional Mahogany Corp.Presi- dent Anton Hendriksz an- nounced that Asarco had com- pleted a limited drill program on the Southern Cross property in Montana.Although the assay results obtained from this pro- gram were not significant, Asarco has advised the com- pany that it will proceed with near Libby,Montana in mid- April 1993.The closure will affect approximately 300 employees. Troy is a silver/copper mine that has operated continuously since 1981.The mine produced 13,100 tons of copper and 3.0 million ounces of silver in 1992. Robert J.Kupsch,vice presi- dent,operations for Asarco attributed the shutdown decision to persistent lower metal prices, declining production due to low ore grades and the inability of the company to accomplish its goal of bringing into production the Rock Creek mining project in nearby Sanders County,"Our plan had been to phase out Troy as Rock Creek was brought on stream.However,low metals development service contracts and a purchase agreement with OESI Power Company (OESI) of Lake Oswego,Oregon to seek two Power Sales Agree- ments from Sierra Pacific Power Company (SPPC)in response to SPPC's Request for Proposals of January 4,1993 for 100 megawatts (MW)of power to be on line by November 1995. The first contract involves GEOlectric's exclusive option to acquire 6400 acres of geo- thermal development rights in the Crescent Valley near Beowawe,Nevada. United,with the support of GEOlectric management,has entered into an exclusive long term agreement with a U.S./ Philippine group who will rep- resent Unite ectric re- Other geothermal projectscontinuetobeadvancedby GEOlectric at two resource areas located in central Califor- nia and Southwest New Mexico which have been drilled and flow tested and are located near transmission lines in growing power markets. The company's address is 5301 Longley Lane,#5A - Quail Park,Reno,NV 89511, (702)828-2500. PsFrontienKemperConstructors,inc. SERVING THE MINING INDUSTRY SHAFT SINKING TUNNELING RAISE BORING GROUND FREEZING MINE DEVELOPMENT P.O.BOX 6548 EVANSVILLE,IN 47719-0548 812-426-2741 TELEX 27-2141 FAX 812-428-0337 garding the development of geo- thermal projects in the Philip-pines.The group is registeredt6participateinthebiddingofthe Leyete-Luzon project.The size and magnitude of this project is evidence of the substantial inter- national potential for geother- mal development and United/ GEOlectric,Collins said. 1 be ,getShe ee en gt was ew,tetyakYourPhe|aes>oti,iieaitainaaaaksveeeesipingPate5=weesheii'aapSET wgFlDuGaNPRODUCTION.CORPORATION -Sa Seth 8 HeosueieatYscTIMBERWOLEMINERALSLtb*Property'Submittals invited xcenitIntersstinCreo.Yan Sdcat aaaeAP.O.Box 869ar*Morrison,CO BOL68 per---|F oii See ea awe"$diemTatty>Oxide a f Free ¢LteeBeeedieloe&Fn the reProfessionalServices:_= ARCH CORPORATION Serving the Minerals Industry World Wide L-t eo,4 Miia he ty i a Nee bate ka wotesed -QFEB-1 1833 Pare tDovelomment taiwa Lawears ALOE Memorandum Summary of Financing Scenarios for theUnalaskaGeothermalProject January 20,1993 P.O.Box 18181 *Reno,Nevada 89511 *(702)849-0653 QLECTRIC POWER COMPANY Memorandum Summary of Financing Scenarios for theUnalaskaGeothermalProject January 20,1993 P.O.Box 18181 *Reno,Nevada 89511 *(702)849-0653 Memorandum January 18,1993 TO:Distribution FROM:Dan Schochet GEOlectric Power Company SUBJECT:Summary of Financing Scenarios for the Unalaska Geothermal Project REF:Analysis Report by Michael D.Hubbard of R.W.Beck, Anchorage,Alaska I.ASSUMPTIONS This memorandum describes three preliminary financing scenarios for the Unalaska Geothermal project.These financing scenarios are subject to modification based on the degree and type of participation by the Unalaska/Dutch Harbor industrial power users.The scenarios are based on the following assumptions with consideration of three cases ie.(i)Case 1-assumes no private equity ownership,(ii)Case 2-assumes partial private ownership in a joint participation with the State of Alaska and (iii)Case 3-assumes 100%private ownership of the project. 1.Capital Costs The capital cost of the project is assumed to be the "high" estimate from the referenced R.W.Beck analysis,including inflationary cost escalation and project contingencies. 2.Plant Capacity The power plant capacity will be 12 MW nominal with an average winter-summer capacity of 10,400 KW.At 95% capacity factor the plant can produce an annual energy output of 86,500,000 KWHRS.It should be noted that the infrastructure to be constructed can support an 18 MW plant with an overall cost increment of 10%to 15%of project capital cost. 3.Power Consumption The base case for geothermal power distribution by the Unalaska City Utility will be 75,000,000 KWHRS annually. This was estimated by R.W.Beck in the "Loads and Resources Analysis"of December 18,1991,with the geothermal plant supplying up to 78,000,000 KWHRS/year to the then projected Unalaska Island Power Supply demand. -1- 4. 5. II. Electricity Power Rates The total price to be charged for electricity to the industrial users will be 12¢/KWHR in 1992 dollars (without time of use differential).Annual escalation will be assumed as 4.5%,which is approximately the average general U.S.inflation rate. Operating Expenses The project operations and maintenance costs will be as in the reférenced R.W.Beck preliminary analysis. Proposed Financing Scenarios Case 1:AEA Plant and Field Ownership-No Equity Ownership This scenario is as listed in the October 15,1992 R.W. Beck report as "Case 14 -Table 3"and has the following financing profile: a.Total construction and development cost,including City Distribution System and Project (scope)Reserves. $84,908,000 b.Tax exempt Bond funding,including all transaction and soft costs. $119,605,000 Cc.Bond Amortization period 20 years d.Bond rate 6.5% This case assumes that there is no private equity ownership in the project.With 75,000,000 KWHRS/YR in geothermal electricity production a "Power Cost Equalization"fund would be required.This "Fund",in the absence of the 1.5¢/KWHR U.S.Department of Energy Subsidy as provided for in the 1992 National Energy Act,would have a net present value of $15,700,000 in 1992 and would be utilized from 1996 (the first full year of operation)through 2007, in annual increments ranging from $170,000 to $3,193,000 to maintain the project debt coverage ratio at 1 to 1 over this period.Over the full 30 year life of the project the Fund would be repaid with a net rate of return of 9.33% on a cash basis.With the U.S.DOE Subsidy for a 10 year period the net present value of this Fund would be reduced from $15,700,000 to $6,400,000 with substantial increase in the percentage return.An increase in power usage from 75,000,000 KWHRS/YR could eliminate the need for this fund. It is assumed that this "Fund"would be provided by the State of Alaska. For this financing scenario it will be necessary to have the tax exempt bonds backed by a credit support such as a Bond Insurance Policy or a standby Letter of Credit. This type of credit support will probably require the moral obligation of the State of Alaska and very firm Power Sales Agreements with the industrial power users. The required committment from the power users,in the absence of ownership equity investments,will be ""take- or-pay"Power Purchase Agreements for the amount of average baseload power to be consumed by the particular power user. There may be possible variations in the "take-or-pay" requirement and these may be explored prior to the proposed meeting with the industrial power users. 2.Case 2:Partial Private Equity Ownership in the Project In order to utilize the U.S.Department of Energy 1.5¢/KWHR municipal geothermal subsidy as well as tax exempt bonding it is necessary for the equity investors to own the transmission lines,roads,docks,and infrastructure facilities and the AEA to own the power generation facilities.This scenario is similar to Case 12 Table 3 of the R.W.Beck report . The structure and results of the financial analysis are summarized below: (a)Project private equity investment including capital cost of power plant plus portion of capital equipment renewal reserves and $250,000 of equity soft costs $39,576,000 (b)Total bond debt funding including transaction costs, debt service reserves and other reserves but excluding City Distribution System ($1,750,000)and Project (scope)Reserves ($5,950,000) $53,232,000 (c)Project (scope)Reserves and City Distribution System Costs,are assumed to be funded as a grant or subordinated loan from the State of Alaska. $7,700,000 The equity based structure outlined above further assumes the following: (a)The equity investment is available to fund infra- structure construction,which would begin in 1994. The equity return is based on the proposed funding date and the anticipated annual revenues after the project is in operation. (b)The Project (scope)Reserves and the City Distribution System upgrade costs (totaling $7,700,000)will be funded by a separate grant or loan which will be repaid at 4.5%nominal interest from revenues derived from annual energy sales above the 75,000,000 KWHR base case. (c)The tax exempt bond funding will have the basic structure as in the October 15,1992 R.W.Beck report with the following parameters: Bond Amortization Period 20 years Bond Rate (assumed)6.5% Interest Only Period First 5 years Principal and Interest Repayment Period 15 years The results of the investment structure as above,is as follows: (a)Equity Return (i)At 75,000,000 KWHRS/YR Pre Tax Return 12.8% After Tax Return 10.9% (ii)At 86,500,000 KWHRS/YR Pre Tax Return 15.4% After Tax Return 13.1% (b)Debt Coverage Ratio (full year)min 1.2 max 2.3 ave 1.5 We also should assume that for energy sales above 75,000,000 KWHRS per year the revenues would be used first to repay the AEA $7.7M loan and then to enhance the equity returns. If the energy sales are at 86,500,000 KWHRS/YR -95% capacity factor -the $7.7M AEA loan is repaid in full in 20 years with 4.5%interest (actually an inflation adjustment to what is essentially an interest free loan) and the equity return increases as above. -4- UNALASKA GEOTHERMAL PROJECT Exhibit A Case l Case 1 Case 2 Case 3 UNALASKA GEOTHERMAL PROJECT Exhibits In this case the Power Sales Agreements could be take or pay or a combination of take or pay and requirements type Since the debt coverage ratios and the equity investment may be large enough to allow for a high comfort level by the bond insurers,underwriters,and the rating agencies. Under a requirements agreement the users would agree to purchase their contractual baseload requirements from the City Utility with some guarantees,before they utilize their self generation. 100%Private Equity Ownership of the Project In order to evaluate the possibility of an all private ownership scenario we have considered an unleveraged 100% equity financing for the project.This approach is often used by major corporations to evaluate project economics. In addition,since we do not know what the private debt parameters would be,or the nature of leveraged structure preferred by the potential owners,the unleveraged equity case can provide a base case for private ownership. The financing parameters for this scenario are as follows: a.The unleveraged case assumes no soft costs such as (i)bond transaction costs,(ii)interest during construction or debt service and capital equipment renewal and replacement reserves. b.The total value of the project including the plant, the field,and the infrastructure,but excluding the Project (scope)Reserves and the City of Unalaska distribution system upgrade is $77,270,000 Cc.This scenario.assumes that the $7,700,000 required for the Project (scope)Reserves and the City distribution upgrade will come from a State grant. d.The private investor will be able to avail himself of the 10%energy tax credit for geothermal power projects as well as accelerated depreciation. CAPITAL COST DATA/PARAMETERS Construction Cost Drilling,Field Development,etc. Total Development Costs (w/o financing costs) Less: Grant Equity Participation AIDEA Processors Bond Financed Amount OPERATING COST DATA o&M 1,700 Wellfield Maintenance 350 Admin &General 135 Insurance 150 Well field Insurance 30 Well Reserve Fund Dep Input Steamfield Royalty AEA/AIDEA UNALASKA GEOTHERMAL PROJECT Bond Sizing Analysis (Dollars in Thousands) 68,245 Bond Issue Date (E0M) 16,663 Cost of Capital Reinvestment Rate 84,908 Cost of Issuance Other Costs 0 Initial Studies Bond Insurance R&C Fund Requirement 0 Working Capital 0 Bond Funded DSR Debt Amortization Period 84,908 Base Year of Operating Costs Annual Escalation Factors: General Years 1-5 3.5%0f busbar cost Years 6-1 4.5%o0f busbar cost Years 12-thereafter 7.0%0f busbar cost Annual Energy Usage 75,000 MWh Energy Losses: Busbar to Load 0.00% Additional City Costs 1.5 cents/kwh casel4s 21-Dec-92 14:32:02 Jun-93 6.50% 4.50% 2.50%0f bonds 0 200 1.25%0f debt svc 1,000 1,000 9.08%0f bonds 20 years 1994 4.50% SOURCES AND USES OF FUNDS SOURCES: Bonds 113,400 Grant 0 Equity 0 Interest Earnings Grant 0 Bond Funds 6,205 Total Sources 119,605 USES: Construction: Project 68,245 Site Development 16,663 Cost of Issuance 2,835 Bond Insurance 2,780 Initial Studies 200 Capitalized Interest 16,585 DSR 10,292 R&C/WC Funds 2,000 Rounding 5 Total Uses 119,605 Annual Energy Usage 75,000 MWh REVENUES Revenues from Sales Interest Earnings: OSR WC Fund Total Revenues EXPENSES Annual Debt Service Operations and Maintenance: Well field Operations Wellfield Maintenance Property Taxes Insurance Wellfield Insurance Royalty Total Operating Costs (w/Debt Service) Other Costs: Deposit to R &C Fund Deposit to Well Reserve Total Project Costs w/o Equity Equity Payment: Grant Rep 9.3% Total Project Costs w/Equity Revenues from Sales (cents/kwh) City Costs Delivered Costs Nominal Dollars 1992 Price Levels Power Equalization Fund Analysis Fund Repayments (Requirements) Net Present Value of Fund Requirements (15,634) Energy Act Payments NPV of Fund w\Energy Act Payments (6,421) Calendar Year 1995 4,547 232 17 4,779 563 1,975 1996 9,504 463 45 9,967 8,831 1,856 382 147 164 12,040 1997 9,932 463 45 10,395 10,292 1,940 399 154 171 34 393 13,383 0 250 13,633 ALASKA ENERGY AUTHORITY UNALASKA GEOTHERMAL PROJECT Annual Costs of Power (Dollars in Thousands) 1998 1999 2000 2001 2002 10,379 10,846 11,334 11,844 12,377 463 463 463 463 463 45 45 45 45 45 10,842 11,309 11,797 12,307 12,840 10,292 10,292 10,292 10,292 10,292 2,027 2,119 2,214 2,313 2,418 417 436 456 476 498 161 168 176 184 192 179 187 195 204 213 36 37 39 41 43 410 429 576 602 629 13,522 13,668 13,948 14,112 14,284 0 0 50 50 50 250 250 250 300 300 13,772 13,918 14,268 14,462 14,634 14,839 (2,027)(3,193)(2,885)(2,564)(2,406)(2,110)(1,749)(1,397) 10,012 12.7 1.6 14.3 12.0 (2,027) 1,125 (902) 10,440 (3,193) 1,125 (2,068) 10,887 11,354 11,842 12,352 12,885 13.8 14.5 15.1 15.8 16.5 1.8 1.9 2.0 2.0 2.1 15.6 16.3 17.1 17.8 18.6 12.0 12.0 12.0 12.0 12.0 (2,885)(2,564)(2,406)(2,110)(1,749) 1,125 1,125 1,125 1,125 1,125 (1,760)(1,439)(1,281)(985)(624) 13,442 17.2 2.2 19.5 12.0 (1,397) 1,125 (272) casel4s 21-Dec-92 10:15:33 2004 13,516 463 45 13,979 10,292 2,640 544 210 233 47 687 14,651 75 300 15,026 (1,002) 14,024 18.0 2.3 20.4 12.0 (1,002) 1,125 123 Annual Energy Usage 75,000 MWh REVENUES Revenues from Sales Interest Earnings: DSR WC Fund Total Revenues EXPENSES Annual Debt Service Operations and Maintenance: Well field Operations Wellfield Maintenance Property Taxes Insurance Wellfield Insurance Royalty Total Operating Costs (w/Debt Service) Other Costs: Deposit to R &C Fund Deposit to Well Reserve Total Project Costs w/o Equity Equity Payment: Grant Rep .9.3% Total Project Costs w/Equity Revenues from Sales (cents/kWh) City Costs Delivered Costs Nominal Dollars 1992 Price Levels Power Equalization Fund Analysis Fund Repayments (Requirements) Net Present Value of Fund Requirements (15,634) Energy Act Payments NPV of Fund w\Energy Act Payments (6,421) 2005 14,124 463 45 14,587 10,292 2,759 568 219 243 49 1,116 15,246 5 300 15,621 (989) 14,632 18.8 2.4 21.3 42.0 (989) 563 (427) 2006 14,760 463 45 15,223 10,292 2,883 594 229 254 51 1,167 15,469 100 300 15,869 (601) 15,268 19.7 2.5 22.2 12.0 (601) (601) 2007 15,424 463 45 15 ,887 10,292 3,013 620 239 266 53 1,219 15,702 100 300 16,102 (170) 15,932 20.6 2.7 23.2 12.0 (170) (170) 2008 16,118 463 45 16,581 10,292 3,148 648 250 278 56 1,274 15,946 100 350 16,396 230 16,626 21.5 2.8 24.3 12.0 230 230.3 2009 16,843 463 45 17,306 10,292 3,290 677 261 290 58 1,331 16,200 100 350 16,650 701 17,351 22.5 2.9 25.4 12.0 701 701.2 2010 17,601 463 45 18,064 10,292 3,438 708 273 303 61 1,391 16,466 200 350 17,016 1,093 18,109 23.5 3.0 26.5 12.0 1,093 1093.3 2011 18,393 463 45 18,856 10,292 3,593 740 285 317 63 1,456 16,746 200 350 17,296 1,607 18,901 24.5 3.2 27.7 12.0 1,607 1607.5 1636.7 2198.2 casel4s 21-Dec-92 10:19:33 2785.0 Annual Energy Usage 75,000 MWh REVENUES Revenues from Sales Interest Earnings: DSR WC Fund Total Revenues EXPENSES Annual Debt Service Operations and Maintenance: Wellfield Operations Wellfield Maintenance Property Taxes Insurance Wellfield Insurance Royalty Total Operating Costs (w/Debt Service) Other Costs: Deposit to R &C Fund Deposit to Well Reserve Total Project Costs w/o Equity Equity Payment: Grant Rep 9.3% Total Project Costs w/Equity Revenues from Sales (cents/kWh) City Costs Delivered Costs Nominal Dollars 1992 Price Levels Power Equalization Fund Analysis Fund Repayments (Requirements) Net Present Value of Fund Requirements (15,634) Energy Act Payments NPV of Fund w\Energy Act Payments (6,421)3348.2 5,146 0 4,477 4,679 922 963 356 372 395 413 79 83 13,786 9,002 9,135 14,950 22,921 23,953 30.6 31.9 4.0 4.1 34.5 36.1 12.0 12.0 9,135 14,950 9134.9 14950.4 350 9,380 15,650 25,031 33.4 4.3 37.7 42.0 15,650 15650.2 2019 26,157 0 0 26,157 9,776 16,381 26,157 34.9 4.5 39.4 12.0 16,381 16381 .5 17,146 17145 .6 17,894 17894 .2 18,729 18728.7 19600.7 casel4s 21-Dec-92 10:19:33 20512.0 Annual Energy Usage 86,500 MWh REVENUES Revenues from Sales Interest Earnings: OSR WC Fund Total Revenues EXPENSES Annual Debt Service Operations and Maintenance: Wellfield Operations Wellfield Maintenance Property Taxes Insurance Wellfield Insurance Royalty Total Operating Costs (w/Debt Service) Other Costs: Deposit to R &C Fund Deposit to Well Reserve Total Project Costs w/o Equity Equity Payment: Grant Rep 17.8% Total Project Costs w/Equity Revenues from Sales (cents/kwh) City Costs Delivered Costs 'Nominal Dollars 1992 Price Levels Power Equalization Fund Analysis Fund Repayments (Requirements) Net Present Value of Fund Requirements (2,990) Energy Act Payments NPV of Fund w\Energy Act Payments N\A ALASKA ENERGY AUTHORITY UNALASKA GEOTHERMAL PROJECT Annual Costs of Power (Dollars in Thousands) Calendar Year 1995 5,245 232 17 5,476 649 2,731 1996 1997 1998 1999 2000 2001 2002 10,961 11,455 11,970 12,509 13,072 13,660 14,275 463 463 463 463 463 463 463 45 45 45 45 45 45 45 11,425.11,918 12,433 12,972 13,535 14,123 14,738 8,831 10,292 10,292 10,292 10,292 10,292 10,292 1,856 1,940 2,027 2,119 2,214 2,313 2,418 382 399 417 636 456 476 498 147 154 161 168 176 184 192 164 171 179 187 195 204 213 33 34 36 37 39 41 43 433 453 473 494 664 6%725 11,847 13,443 13,585 13,733 14,036 14,206 14,380 0 0 0 0 50 50 50 250 250 250 250 250 300 300 12,097 13,693 13,835 13,983 14,336 14,554 14,730 (628)(1,731)(1,357)(966)(756)(386)52 11,470 11,963 12,478 13,017 13,580 14,168 14,783 12.7 13.2 13.8 14.5 15.4 15.8 16.5 1.6 1.7 1.8 1.9 2.0 2.0 2.1 14.3 15.0 15.6 16.3 17.1 17.8 18.6 12.0 12.0 12.0 12.0 12.0 12.0 12.0 (628)(1,731)(1,357)(966)(756)(386)52 1,298 1,298 1,298 1,298 1,298 1,298 1,298 670 (433)(59)331 541 911 1,350 2003 14,917 463 45 15,380 10,292 2,526 520 201 486 1,298 1,783 casetds 21-Dec-92 10:23:20 2004 15,588 463 45 16,051 10,292 2,640 544 210 233 47 792 14,757 rh) 300 15,132 965 16,096 18.0 2.3 20.4 12.0 965 1,298 2,262 Annual Energy Usage 86,500 MWh REVENUES Revenues from Sales _Interest Earnings: OSR WC Fund Total Revenues EXPENSES Annual Debt Service Operations and Maintenance: Wellfield Operations Wellfield Maintenance Property Taxes Insurance Wellfield Insurance Royalty Total Operating Costs (w/Debt Service) Other Costs: Deposit to R &C Fund Deposit to Well Reserve Total Project Costs w/o Equity Equity Payment: Grant Rep 17.8% Total Project Costs w/Equity Revenues from Sales (cents/kWh) City Costs Delivered Costs Nominal Dollars 1992 Price Levels Power Equalization Fund Analysis Fund Repayments (Requirements) Net Present Value of Fund Requirements (2,990) Energy Act Payments NPV of Fund w\Energy Act Payments :N\A 649 1,654 2006 17,023 463 45 17,486 10,292 2,883 594 229 254 51 1,346 15,648 100 300 16,048 1,483 17,531 19.7 2.5 22.2 12.0 1,483 1,483 2007 17,789 463 45 18,252 10,292 3,013 620 239 266 53 1,406 15,889 100 300 16,289 2,008 18,297 20.6 2.7 23.2 12.0 2,008 2,008 2008 18,589 463 45 19,052 10,292 3,148 648 250 278 56 1,469 16,141 100 350 16,591 2,506 19,097 21.5 2.8 24.3 12.0 2,506 $2,506 2009 19,426 463 45 19,889 10,292 3,290 677 261 290 58 1,536 16,404 100 350 16,854 3,080 19,934 22.5 2.9 25.4 12.0 3,080 $3,080 2010 20,300 463 45 20,763 10,292 3,438 708 273 303 61 1,605 16,679 200 350 17,229 3,579 20,808 23.5 3.0 26.5 12.0 3,579 $3,579 2011 21,213 463 45 21,677 10,292 3,593 740 285 317 63 1,677 16,967 200 350 17,517 4,205 21,722 24.5 3.2 27.7 12.0 4,205 $4,205 $4,351 $5,035 caseld4s 21-Dec-92 10:23:20 $5,749 casel4s 21-Dec-92 Annual Energy Usage 10:23:20 86,500 MWh REVENUES 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Revenues from Sales 25,297 26,436 27,625 28,869 30,168 31,525 32,944 34,426 35,976 37,594 Interest Earnings: DSR 0 0 0 0 0 0 0 0 0 0 WC Fund 0 0 0 0 0 0 0 0 0 0 Total Revenues 25,297 26,436 27,625 28,869 30,168 31,525 32,944 34,426 35,976 37,594 EXPENSES Annual Debt Service 10,292 5,146 0 0 0 0 0 0 0 0 Operations and Maintenance:4,284 4,477 4,679 4,889 5,109 5,339 5,579 5,830 6,093 6,367 Well field Operations Wellfield Maintenance 882 922 963 4,007 1,052 1,099 1,149 1,200 1,254 1,311 Property Taxes 340 356 372 388 406 424 443 463 484 506 Insurance 378 395 413 431 451 471 492 514 538 562 Wellfield Insurance 76 79 83 86 90 94 98 103 108 112 Royalty 2,900 2,090 2,184 2,282 2,385 2,492 2,604 2,721 2,844 2,972 Total Operating Costs (w/Debt Service)18,252 13,464 8,693 9,084 9,493 9,920 10,366 10,833 11,320 11,829 Other Costs: Deposit to R &C Fund 250 250 250 250 250 250 300 300 300 300 Deposit to Well Reserve 350 350 350 350 350 350 350 350 350 350 Total Project Costs w/o Equity 18,852 14,064 9,293 9,684 10,093 10,520 11,016 11,483 11,970 12,479 Equity Payment: Grant Rep 17.8%6,446 12,372 18,333 19,185 20,075 21,006 21,928 22,944 24,005 25,115 Total Project Costs w/Equity 25,297 26,436 27,625 28,869 30,168 31,525 32,944 34,426 35,976 37,594 Revenues from Sales (cents/kwWh):29.2 30.6 31.9 33.4 34.9 36.4 38.1 39.8 41.6 43.5 City Costs 3.8 4.0 4.1 4.3 4.5 4.7 4.9 5.1 5.4 5.6 Delivered Costs Nominal Dollars 33.0 34.5 36.1 37.7 39.4 41.2 43.0 44.9 47.0 49.1 1992 Price Levels 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 Power Equalization Fund Analysis Fund Repayments (Requirements)6,446 12,372 18,333 19,185 20,075 21,006 21,928 22,944 24,005 25,115 Net Present Value of Fund Requirements (2,990) Energy Act Payments NPV of Fund w\Energy Act Payments N\A $6,446 $12,372 $18,333 $19,185 $20,075 $21,006 $21,928 $22,944 $24,005 $25,115 UNALASKA GEOTHERMAL PROJECT Exhibit B Case 2 Budget Catagory I.Plant &Infrastructure 1.Plant (direct) 2.Fluid gathering 3.Trans\substation 4.Distribution 5.Roads &dock 6.Construct support 7.Start-up &test 8.O&M supplies 9.a.Design-plant 9.b,c,d,e Design-other 9.f,9 Permit &misc 10.Const.Management 11.Administration Subtotal Il.Field Development 1.Purchase rights 2.Field design 3.Drilling &mat'ls _4.Test &evaluate 5.Admin,CM,insur. Subtotal I.Plant &Infrastructure Direct cost Escalation Contract Contingency Subtotal Il.Field Development Direct cost Escalation Contract Contingency Subtotal III.Project Reserves Grand Totat Breakout by Workscope Budget Pro-Rata (High) 4,750 ee ee ee AEA Budget Estimates (Oct 7,92) Plant (Bond) In-structure (Equity) weceresece Field (Equity)ooIn-structure (Grant) 1,750 SOURCES AND USES OF FUNDS SOURCES: Bonds 53,232 Grant 7,677 Equity 39,576 Interest Earnings Grant 0 Bond Funds 2,515 Total Sources 103,000 USES:; Construction: Plant 37,944 Field 31,464 Infrastructure 15,539 Cost of Issuance 1,331 Bond Insurance 1,159 Initial Studies 200 Capitalized Interest 7,785 DSR 5,323 Working Capital Fund 1,000 R &C Fund 4,000 Equity Transaction Costs 250 Rounding 0 Total Uses 102,995 CAPITAL COST DATA/PARAMETERS Plant Construction Cost Infrastructure Construction Cost Drilling,Field Development,etc. Total Development Costs (w/o financing costs) Less: Equity Participation Grant Bond Financed Amount OPERATING COST DATA O&M 1,700 Wellfield Maintenance 350 Admin &General 135 Insurance 150 Wellfield Insurance 30 Weil Reserve Fund Dep Input Steamfield Royalty 37,964 31,464 15,539 84,947 39,576 7,677 37,694 AEA/AIDEA UNALASKA GEOTHERMAL PROJECT Bond Sizing Analysis (Dollars in Thousands) Bond Issue Date (EOM)Jun-93 Cost of Capital 6.50% Reinvestment Rate 4.50% Cost of Issuance Other Costs 0 Initial Studies 200 Bond Insurance R&C Fund Requirement 1,000 Working Capital 1,000 Bond Funded DSR Debt Amortization Per (5 yrs interest only) Base Year of Operating Costs 1994 Annual Escalation Factors: General 4.50% Years 1-5 3.5%of busbar cost Years 6-11 4.5%o0f busbar cost Years 12-thereafter 7.0%0f busbar cost Annual Energy Usage 75,000 MWh Energy Losses: Busber to Load 0.00% Additional City Costs 1.5 cents/kwh equity2 20-Jan-93 2.50%0f bonds 1.25%of debt sv 10.00%0f bonds 15.0 years Annual Energy Usage: 75,000 Mwh Calendar Year 1994 1995 REVENUES Fluid Fee 2,806 Energy Act Payments 563 Total Revenues 3,368 EXPENSES Field -Operating Expenses 527 Field -Well Rehab Expenses 0 Grant Repayment 0 Total Operating Costs 527 PRE-TAX CASH 2,841 CASH ON CASH RETURN: Investment Required 26,912 12,664 Cash On Cash IRR 12.8% TAX COMPUTATION Pre-tax Cash 0 2,841 Less: Intangible Orilling Costs 5,948 2,799 15 &20 Year MACRS Depr.966 Taxable Income (5,948)(924) Tax Benefit/(Liability)@ 34%2,022 314 Energy Tax Credit 0 AFTER-TAX RETURN 2,022 3,155 Investment Required 26,912 12,664 After-Tax IRR 10.9% 1996 3,648 1997 3,769 ALASKA ENERGY AUTHORITY UNALASKA GEOTHERMAL PROJECT Equity Return Analysis (Dollars in Thousands) 1998 3,865 1,125 4,990 3,205 1999 3,180 1,125 4,305 2,656 2000 3,522 41,125 4,647 2,705 2001 2,861 2002 3,077 equity2 20-Jan-93 15249324 2003 200 4,735 5,20. 1,125 1,125 5,860 6,328 1,646 1,720 0 0 0 0 1,646 1,720 4,214 4,609 4,214 4,609 0 0 1,541 1,541 2,673 3,067 (909)=(1,043: 3,306 3,566 Annual Energy Usage: 75,000 MWh Calendar Year REVENUES Fluid Fee Energy Act Payments Total Revenues EXPENSES Field -Operating Expenses Field -Well Rehab Expenses Grant Repayment Total Operating Costs PRE-TAX CASH CASH ON CASH RETURN: Investment Required Cash On Cash IRR 12.8% TAX COMPUTATION Pre-tax Cash Less: Intangible Drilling Costs 15 &20 Year MACRS Depr. Taxable Income Tax Benefit/(Liability)a 34% Energy Tax Credit AFTER-TAX RETURN Investment Required After-Tax IRR 10.9% 2005 5,693 563 6,255 3,203 2006 6,179 6,179 3,088 2007 6,713 6,713 4,316 0 1,541 2,776 (943)(1,079)(1,240)(1,496)(1,795) 3,372 ALASKA ENERGY AUTHORITY UNALASKA GEOTHERMAL PROJECT Equity Return Analysis (Dollars in Thousands) 2008 9,546 9,546 1,561 3,175 3,637 2009 7,806 7,806 1,541 3,646 3,948 2010 8,315 8,315 1,178 4,401 4,083 2011 8,953 8,953 815 5,278 4,299 2012 2013 12,217 915,713 12,217 15,713 2,988 3,122 0 0 0 0 2,988 3,122 9,229 12,591 0 0 815 815 8,414 11,776 (2,861)(4,004) 6,369 8,587 equity2 20-Jan-93 15349:24 2014 815 12,306 (4,184) 8,938 Annual Energy Usage: Investment Required After-Tax IRR 10.9% (4,871)(5,098) 75,000 Mwh Calendar Year 2015 2016 REVENUES Fluid Fee 20,255 17,889 Energy Act Payments Total Revenues 20,255 17,889 EXPENSES Field -Operating Expenses 3,410 3,563 Field -Well Rehab Expenses 3,160 0 Grant Repayment 0 Total Operating Costs 6,570 3,563 PRE-TAX CASH 13,685 14,326 CASH ON CASH RETURN: Investment Required Cash On Cash IRR 12.8% TAX COMPUTATION *Pre-tax Cash 13,685 14,326 Less: Intangible Drilling Costs 0 0 15 &20 Year MACRS Depr.408 0 Taxable Income 13,277 14,326 Tax Benefit/(Liability)@ 34%(4,514) Energy Tax Credit AFTER-TAX RETURN 9,171 9,455 2017 14,995 14,995 9,897 ALASKA ENERGY AUTHORITY UNALASKA GEOTHERMAL PROJECT Equity Return Analysis (Dollars in Thousands) 2018 2019 2020 2021 2022 19,586 20,493 21,440 22,380 23,414 19,586 20,493 21,440 22,380 23,414 3,891 4,065 4,249 4,440 4,640 0 0 0 0 0 3,891 4,066 4,249 4,440 4,640 15,695 16,426 17,191 17,939 18,774 15,695 16,426 17,191 17,939 18,774 0 0 0 0 0 0 0 0 0 0 15,695 16,426 17,191 17,939 18,776 (5,336)(5,585)(5,845)(6,099)(6,383) 10,359 10,841 11,346 11,840 12,391 2023 19,646 19,646 (6,680) 12,966 equity2 20-Jan-93 15:49:24 2024 21,557 21,557 (7,329) 14,228 ALASKA ENERGY AUTHORITY UNALASKA GEOTHERMAL PROJECT Annual Energy Usage:Annual Costs of Power 75,000 MWh (Dollars in Thousands) Calendar Year 1996 1995 1996 1997 1998 1999 2000 2001 REVENUES Revenues from Sales 4,547 9,504 9,932 10,379 10,846 11,334 11,844 Interest Earnings: DSR 120 240 240 240 240 240 240 WC Fund 17 45 45 45 45 45 45 Total Revenues 4,684 9,789 10,216 10,663 11,130 11,618 12,128 EXPENSES Annual Debt Service .865 3,460 3,460 4,521 5,582 5,582 5,582 Operations and Maintenance:888 1,856 1,940 2,027 2,119 2,214 2,313 Wellffield Operations ; Wellfield Maintenance 183 382 399 417 436 456 476 Property Taxes 71 147 154 161 168 176 184 Insurance 78 164 171 179 187 195 204 Wellfield Insurance 16 33 34 36 37 39 41 Royalty 180 376 393 410 429 576 602 Total Operating Costs 2,280 6,418 6,551 7,752 8,958 9,238 9,403 Other Costs: Deposit to R &C Fund 0 0 0 0 0 50 50 Deposit to Well Reserve 125 250 250 250 250 250 300 Total Project Costs w/o Equity 2,405 6,668 6,801 8,002 9,208 9,538 9,753 Equity Payment (Fluid Fee):2,279 3,120 3,415 2,662 -1,922 2,080 2,376 Total Project Costs w/Equity 4,684 9,789 10,216 10,663 11,130 11,618 12,128 Revenues from Sales (cnts/kWh) ; 12.1 12.7 13.2 13.8 14.5 15.1 15.8 City Costs 1.6 1.6 1.7 1.8 1.9 2.0 2.0 Delivered Costs Nominal Dollars 13.7 14.3 15.0 15.6 16.3 17.1 17.8 1992 Price Levels 12.0 12.0 12.0 12.0 12.0 12.0 12.0 . average Bond Debt Service Coverage 1.8 3.6 1.9 2.0 1.6 1.3 1.4 1.4 2002 12,377 240 45 12,661 5,582 2,418 498 192 213 43 629 9,574 50 300 9,924 2,737 12,661 16.5 2.1 18.6 12.0 1.5 equity2 20-Jan-93 15349:24 2004 13,516 240 45 13,800 5,582 2,640 544 210 233 47 687 9,942 75 300 "10,317 3,484 13,800 18.0 2.3 20.4 12.0 1.6 Annual Energy Usage: 75,000 MWh Calendar Year 2005 2006 REVENUES Revenues from Sales 14,124 14,760 Interest Earnings: DSR 240 240 WC Fund 45 45 Total Revenues 14,409 15,044 EXPENSES Annual Debt Service 5,582 5,582 Operations and Maintenance:2,759 2,883 Well field Operations Wellfield Maintenance 568 594 Property Taxes 219 229 Insurance 243 254 Wellfield Insurance 49 51 Royalty 1,116 1,167 Total Operating Costs 10,537 10,760 Other Costs: Deposit to R &C Fund 73 100 Deposit to Well Reserve 300 300 Total Project Costs w/o Equity 10,912 11,160 Equity Payment (Fluid Fee):3,497 3,884 Total Project Costs w/Equity 14,409 15,044 Revenues from Sales (cnts/kwWh)18.8 19.7 City Costs 2.4 2.5 Delivered Costs Nominal Dollars 21.3 22.2 1992 Price Levels 12.0 12.0 Bond Debt Service Coverage 1.6 1.7 2007 15,424 240 45 15,708 5,582 3,013 620 239 266 53 1,219 10,993 100 300 11,393 4,316 15,708 20.6 2.7 23.2 12.0 1.8 ALASKA ENERGY AUTHORITY UNALASKA GEOTHERMAL PROJECT Annual Costs of Power (Dollars in Thousands) 2008 2009 2010 2011 16,118 16,863 17,601 18,393 240 240 240 240 45 45 45 45 16,402 17,128 17,886 18,678 5,582 5,582 5,58 5,582 3,148 3,290 3,438 3,593 648 677 708 740 250 261 273 285 278 290 303 317 56 58 61 63 1,274 1,331 1,391 1,454 11,236 11,491 11,756 12,034 100 100 200 200 350 350 350 350 11,686 11,961 12,306 12,584 4,716 5,187 5,579 6,093 16,402 17,128 17,886 18,678 21.5 22.5 23.5 26.5 2.8 2.9 3.0 3.2 24.3 25.4 26.5 27.7 12.0 12.0 12.0 12.0 1.8 1.9 2.0 2.1 2012 19,221 2,838 45 22,104 12,875 9,229 22,104 25.6 3.3 28.9 12.0 2.7 2013 20,086 2,847 45 22,978 2,791 3,923 808 312 346 69 1,588 9,837 200 350 10,387 12,591 22,978 26.8 3.5 30.2 12.0 5.5 equity2 20-Jan-93 15:49:24 Annual Energy Usage: 75,000 MWh Calendar Year 2015 2016 REVENUES Revenues from Sales 21,934 22,921 Interest Earnings: DSR 0 (0) WC Fund 45 45 Total Revenues 21,979 22,966 EXPENSES Annual Debt Service 0 0 Operations and Maintenance:4,284 4,477 Wellfield Operations Wellfield Maintenance 882 922 Property Taxes 340 356 Insurance 378 395 Well field Insurance 76 79 Royalty 1,734 1,812 Total Operating Costs 7,694 8,040 Other Costs: ; Deposit to R &C Fund 250 250 Deposit to Well Reserve 350 350 Total Project Costs w/o Equity 8,294 8,640 Equity Payment (Fluid Fee):13,685 14,326 Total Project Costs w/Equity 21,979 22,966 Revenues from Sales (cnts/kWh)29.2 30.6 City Costs :3.8 4.0 Delivered Costs Nominal Dollars 33.0 34.5 1992 Price Levels 12.0 12.0 Bond Debt Service Coverage N/A N/A 2017 23,953 (0) 45 23,998 ALASKA ENERGY AUTHORITY UNALASKA GEOTHERMAL PROJECT Annual Costs of Power (Dollars in Thousands) 2018 25,031 (0) 45 25,076 9,380 15,695 25,076 33.4 4.3 37.7 12.0 N/A 2019 26,157 (0) 45 26,202 0 5,109 1,052 406 451 90 2,068 9,176 250 350 9,776 16,426 26,202 34.9 4.5 39.4 12.0 N/A 2020 27,334 (0) 45 27,379 0 5,339 1,099 424 471 9% 2,161 9,588 250 350 10,188 17,191 27,379 36.4 4.7 41.2 12.0 N/A 2021 28,564 (0) 45 28,609 0 5,579 1,149 443 492 98 2,258 10,020 300 350 10,670 17,939 28,609 38.1 4.9 43.0 12.0 N/A 2022 29,849 (0) 45 29,894 0 5,830 1,200 463 514 103 2,360 10,471 300 350 11,121 18,774 29,894 2023 31,193 (0) 45 31,238 0 6,093 1,254 484 538 108 2,466 10,942 300 350 11,592 19,646 31,238 41.6 5.4 47.0 12.0 N/A equity2 20-Jan-93 15:49:24 2024 32,596 (0) 1,045 33,641 ALASKA ENERGY AUTHORITY equity2 UNALASKA GEOTHERMAL PROJECT 20-Jan-93 Annual Energy Usage:Equity Return Analysis 15:25:27 86,500 MWh (Dollars in Thousands) Calendar Year 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 200: REVENUES Fluid Fee 3,503 5,679 6,089 5,456 4,843 5,260 7,405 6,209 6,718 7,276 Energy Act Payments 649 1,298 1,298 1,298 1,298 1,298 1,298 1,298 1,298 1,298 Total Revenues 4,152 6,977 7,387 6,754 6,140 6,558 8,703 7,507 8,015 8,573 EXPENSES Field -Operating Expenses 555 1,159 1,212 1,266 1,323 1,530 1,599 1,671 1,746 1,825 Field -Well Rehab Expenses 0 0 0 0 0 0 1,707 0 0 0 Grant Repayment 295 590 590 590 590 590 590 590 590 590 Total Operating Costs 850 1,750 1,802 1,856 1,913 2,120 3,896 2,261 2,336 2,415 PRE-TAX CASH 3,302 5,227 5,585 4,897 4,227 4,437 4,807 5,246 5,679 6,158 CASH ON CASH RETURN: Investment Required 26,912 12,664 Cash On Cash IRR 15.4% TAX COMPUTATION Pre-tax Cash .0 3,302 5,227 5,585 4,897 4,227 4,437 4,807 5,246 5,679 6,158 Less: Intangible Drilling Costs 5,948 2,799 0 0 0 0 0 0 0 0 0 15 &20 Year MACRS Depr.966 2,488 2,272 2,076 1,897 1,732 1,619 1,552 1,541 1,541 Taxable Income (5,948)(463)2,739 3,313 2,821 2,330 2,705 3,188 3,693 4,138 4,617 Tax Benefit/(Liability)2 34%2,022 157 (931)¢1,126)(959)(792)(920)¢1,084)¢1,256)(1,407)(1,570) Energy Tax Credit 0 AFTER-TAX RETURN 2,022 3,459 4,296 4,459 3,938 3,435 3,518 3,723 3,990 4,272 4,588 Investment Required 26,912 12,664 After-Tax IRR 13.1% Annual Energy Usage: 86,500 MWh Calendar Year 2005 2006 REVENUES Fluid Fee 7,858 8,442 Energy Act Payments 649 Total Revenues 8,507 8,442 EXPENSES Field -Operating Expenses 2,367 2,473 Field -Well Rehab Expenses 0 0 Grant Repayment 590 590 Total Operating Costs 2,957 3,064 PRE-TAX CASH 5,550 5,379 CASH ON CASH RETURN: Investment Required Cash On Cash IRR 15.4% TAX COMPUTATION Pre-tax Cash 5,550 5,379 Less: Intangible Drilling Costs Oo 0 15 &20 Year MACRS Depr.1,541 1,541 Taxable Income 4,009 3,837 Tax Benefit/(Liability)@ 34%(1,363) Energy Tax Credit AFTER-TAX RETURN 4,187 Investment Required After-Tax IRR 13.1% (1,305)(1,483) 4,074 2007 5,904 0 1,541 4,362 4,420 ALASKA ENERGY AUTHORITY UNALASKA GEOTHERMAL PROJECT Equity Return Analysis (Dollars in Thousands) 2008 12,016 12,016 2,701 2,322 590 5,614 6,402 6,402 0 1,541 4,861 (1,653)(1,848)(2,141)(2,477)(3,583) 4,749 2009 10,388 10,388 6,975 0 1,541 5,436 5,128 2010 2011 2012 2013 11,014 11,773 15,165 18,793 11,014 11,773 15,165 18,793 2,950 3,082 3,221 3,366 0 0 0 0 590 590 590 590 3,540 3,672 3,811 3,956 7,475 8,101 11,354 14,837 7,475 8,101 11,354 14,837 0 0 .0 0 1,178 815 815 815 6,296 7,285 10,538 14,022 (4,767) 5,334 5,624 7,771 =10,070 equity2 20-Jan-93 15:25:27 2014 815 14,680 (4,991) 10,504 Annual Energy Usage: 86,500 MWh Catendar Year 2015 2016 REVENUES Fluid Fee 23,618 21,404 Energy Act Payments Total Revenues 23,618 21,404 EXPENSES Field -Operating Expenses 3,676 3,841 Field -Well Rehab Expenses 3,160 0 Grant Repayment 295 Total Operating Costs 7,131 3,841 PRE-TAX CASH 16,487 17,563 CASH ON CASH RETURN: Investment Required Cash On Cash IRR 15.4% TAX COMPUTATION Pre-tax Cash 16,487 17,563 Less: Intangible Drilling Costs 0 0 15 &20 Year MACRS Depr.408 0 Taxable Income 16,080 17,563 Tax Benefit/(Liability)234%(5,467)(5,971) Energy Tax Credit AFTER-TAX RETURN 11,020 11,591 Investment Required After-Tax IRR 13.1% 2017 22,392 22,392 4,014 0 4,014 18,378 18,378 0 0 18,378 (6,248)(6,538)(6,841)(7,157)(7,471)(7,816) 12,129 ALASKA ENERGY AUTHORITY UNALASKA GEOTHERMAL PROJECT Equity Return Analysis (Dollars in Thousands) 2018 2019 2020 2021 23,424 24,503 25,631 26,759 23,424 24,503 25,631 26,759 4,195 4,383 4,581 4,787 0 0 0 0 4,195 4,383 4,581 4,787 19,230 20,120 21,051 21,973 19,230 20,120 21,051 21,973 0 0 0 0 0 0 0 0 19,230 20,120 21,051 21,973 12,692 13,279 13,893 14,502 2022 5,002 22,989 22,989 0 0 22,989 15,173 2023 24,050 24,050 (8,177) 15,873 equity2 20-Jan-93 15:25:27 2024 26,160 26,160 (8,894) 17,266 Annual Energy Usage: 86,500 MWh Calendar Year 2015 2016 REVENUES Revenues from Sales 25,297 26,436 EXPENSES Operations and Maintenance 4,284 4,477 Wellfield Operating Costs 2,957 3,090 Property Taxes 340 356 Insurance 378 395 Renewals &Capital Expend.758 0 Well Rehab.3,160 0 Total Operating Costs 11,878 8,318 PRE-TAX CASH 13,419 18,118 CASH ON CASH RETURN: Investment Required Cash on Cash IRR 12.80% TAX COMPUTATION Pre-tax Cash Add back: Renewals &Cap.Ex. Less: 5 Year MACRS Depreciation 15 &20 Year MACRS Depr. Intangible Drilling Cost Taxable Income Tax Benefit/(Liability)a 34% Energy Tax Credit AFTER-TAX RETURN Investment Required After-Tax IRR:1t.7% 13,419 758 493 347 13,338 (4,535)(6,106) 8,884 159 17,959 12,012 2017 27,625 8,693 18,933 18,933 92 18,841 (6,406) 12,527 ALASKA ENERGY AUTHORITY UNALASKA GEOTHERMAL PROJECT Equity Return Analysis (Dollars in Thousands) 2018 2019 28,869 30,168 4,889 5,109 3,375 3,527 388 406 431 451 878 0 0 0 9,962 9,493 18,907 20,675 18,907 20,675 878 0 570 184 0 0 19,214 20,491 (6,533)(6,967)(7,310) 12,374 13,708 2020 31,525 9,920 21,606 21,606 106 21,499 14,296 5,579 5,8 3,851 4,0. 443 & 492 5 1,016 0 21,562 23,5¢ 21,918 23,381 24,533 25,093 (7,452)(7,949)(8,341)=(8,532) 14,110 15,6¢ Annual Energy Usage: 86,500 MWh Calendar Year REVENUES Revenues from Sales EXPENSES Operations and Maintenance Well field Operating Costs Property Taxes Insurance Renewals &Capital Expend. Well Rehab. Total Operating Costs PRE-TAX CASH CASH ON CASH RETURN: Investment Required Cash on Cash IRR 12.80% TAX COMPUTATION Pre-tax Cash Add back: Renewals &Cap.Ex. Less: 5 Year MACRS Depreciation 15 &20 Year MACRS Depr. Intangible Drilling Cost Taxable Income Tax Benefit/(Liability)@ 34% Energy Tax Credit AFTER-TAX RETURN Investment Required After-Tax IRR:11.7% 2015 25,297 4,284 2,957 340 378 758 3,160 11,878 13,419 13,419 758 493 347 13,338 (4,535). 8,884 2016 26,436 8,318 18,118 159 17,959 (6,106) 12,012 2017 27,625 8,693 18,933 18,933 92 18,841 (6,406) 12,527 ALASKA ENERGY AUTHORITY UNALASKA GEOTHERMAL PROJECT Equity Return Analysis (Dollars in Thousands) 2018 28,869 4,889 3,375 9,962 18,907 18,907 878 19,214 (6,533)(6,967) 12,374 2019 30,168 9,493 20,675 20,675 184 20,491 13,708 2020 2021 31,525 32,944 5,339 5,579 3,685 3,851 424 443 471 492 0 1,016 0 0 9,920 11,382 21,606 21,562 21,606 21,562 0 4,016 106 660 0 0 21,499 21,918 (7,310)(7,452) 14,296 14,110 2022 34,426 10,833 23,594 213 23,381 (7,949) 15,644 2023 35,976 11,320 26,655 24,655 24,533 (8,341) 16,314 equi ty3 21-Jan-93 09:52:09 25,240 *25,093 (8,532) 16,708 GEOlectric-l TEL NO.702-849-0653 Dec 31,92 17:06 P.01 I 4 Fa)Mle:Unalzcko Ceotnermal GEOLECTRIC POWER COMPANY MEMORANDUM TO:Mike Hubbard John Olson-- Glenn Reed Jack Wood RE:Draft Memorandum and Financing Analysis of Decembcr 30,1992 1 have:forwarded the Financing Analysis Pro-forma spread sheets by priority mail to you today.However,there is a labcling error in the equity return analysis.Specifically the third Jine from the top is labeled "Welltield Operating Contract." This line inadvertently combined the debt service,the wellfiecld maintenance and the royalty payment, These items will be separated and relabeled in the corrected analysis, The overall analysis is correct and the rates of return and all other items are unchanged. DNS GEOlectric Power Company JAN -4 1853 Memorandum At 'rey még ent te ™Poon indusinal DovelsomenDecember30,1992 end Exner Autheriyeeaver TO:Distribution FROM:Dan Schochet GEOlectric Power Company SUBJECT:Summary of Financing Scenarios for the Unalaska Geothermal Project REF:Preliminary Analysis by Michael D.Hubbard of R.W. Beck,Anchorage,Alaska as reported in Draft Report dated October 15,1992 I.ASSUMPTIONS This memorandum describes two financing scenarios for the Unalaska Geothermal project,both of which are based on the following assumptions: 1.Capital Costs The capital cost of the project will be the "high"estimate from the referenced R.W.Beck preliminary analysis, including the add on for inflationary cost escalation and project contingencies. 2.Plant Capacity The power plant capacity will be 12 MW nominal with an average winter-summer capacity of 10,400 KW.At 95% capacity factor the plant can produce an annual energy output of 86,500,000 KWHRS.At 82%capacity factor the plant will produce 75,000,000 KWHRS annually. 3.Power Consumption The base case for geothermal power distribution by the Unalaska City Utility will be 75,000,000 KWHRS annually. This is a conservative case since R.W.Beck predicted in the Loads and Resources analysis of December 18,1991 that the geothermal plant would supply 78,219,000 KWHRS/year to the then projected Unalaska Island Power Supply demand. 4.Electricity Power Rates The total proice charged for electricity to the industrialuserwillbe12¢/KWHR (without time of use differential) in 1992 dollars.Annual escalation will be 4.5%which is approximately the average general U.S.inflation rate. The project operations and maintenance costs will be as in the reference R.W.Beck preliminary analysis. 5.Operating Expenses II.Proposed Financing Scenarios 1.Case 1:AEA Plant and Field Ownership-No Equity Ownership This scenarion is as listed in the October 15,1992 R.W. Beck report as Case 14 -Table 3 and has the following financing profile: Total construction and development cost,including City Distribution System and Project (change of scope) Reserves.$84,908,000 Bond funding,including all transaction and soft costs. $119,605,000 Bond Amortization period 20 years Bond rate 6.5% This scenario assumes that there is no private invested equity in actual project ownership.With 75,000,000 KWHRS/YRingeothermalproductiona"Power Cost Equalization" fund would be required.This fund,which would have a net present value of $15,700,000 in 1992 would be utilized from 1996 (the first full year of operation)through 2007, in annual increments ranging from $170,000 to $3,193,000 to maintain the project debt coverage rated at 1 to 1 over this 12 year period.Over the full 30 year life of the project the fund would be repaid with a net rate of return of 9.3%on a cash basis. It is assumed that this "fund"would most probably be provided by a state agency such as AIDEA or the AEA.Since this fund would be paid back with a modest (9.3%)return it can fit both AIDEA's investment profile and the AEA's participation profile under it proposed financial restructuring. For this scenario it will be necessary to have the bonds backed by a credit support such as a Bond Insurance Policy or a stand by Letter of Credit.This type of credit support will probably require the moral obligation of the State of Alaska and very firm Power Sales Agreements from the industrial power users. The required committment from the power users,in the absence of a true ownership equity investment,will be the "take-or-pay"Power Purchase Agreements for the amount of average baseload power consumed by the particular user. The variations in the take-or-pay arrangements proposed by several bond underwriters included: (a)Take or pay at the full user baseload requirement with the ability to terminate (or perhaps modify)the agreement if the power use is reduced or eliminated for one full year. (b)A committment to take the average baseload power at a contract level with a committment to pay in advance for a minimum amount (50 to 65%of the contract level) for a 5 year period.This would allow the contract levels to be reset every 5 years. There may be other variations of the ""take-or-pay" requirement and these will be explored in January 1992 prior to the proposed meeting with the industrial users. 2.Case 2:Private Power Plant Equity Ownership-AEA Ownership of Geothermal Field and Project Support Infrastructure In order to utilize the geothermal energy tax credit (10%) and other tax benefits it is necessary for the equity investors to own the power generation facilities. Transmission lines,roads,docks,and infrastructure facilities do not qualify for either tax credits or accelerated depreciation.This scenario which is similar to Case 12 Table 3 of the R.W.Beck October 15, 1992 report is based on equity ownership of the power plant "within the plant fence lines."The AEA would then own the geothermal field,including fluid piping,the transmission line,the roads and docks and other project support infrastructure. The financial structure and the pro forma revenue projections along with the case 1 scenario,are to be provided separately.The structure and results of the financial analysis are summarized below: (a)Project equity investment including capital cost of power plant plus portion of capital equipment renewal reserves and $250,000 of equity soft costs $33,865,000 (b)Total bond debt funding including transaction costs, debt service reserves and other reserves but excluding City Distribution System ($1,750,000)and Project (change)Reserves ($5,950,000) $59,375,000 (c)Project (changes )Reserves and City Distribution System Costs,to be funded as subordinated loan from the AEA. $7,700,000 Total project cost $100,940,000 The equity based structure outlined above assumes'the following: (a)The equity investment is available to fund power plant construction,which would begin in 1994.The equity return is based on the proposed funding date and the anticipated annual revenues after the project is in operation. (b)The Project (changes)Reserves and the City Distri- bution System upgrade costs ($7,700,000)will be funded by a separate AEA (or AIDEA)loan which will be repaid at 4.5%nominal interest from revenues derived from annual energy sales above the 75,000,000 KWHR base case. (c)The bond funding will have the basic structure as in the October 15,1992 R.W.Beck report with the following parameters: Bond Amortization Period 20 years Bond Rate 6.5% Interest Only Period First 54 years Principal and Interest Repayment Period 144 years Total Bond Amount $59,375,000 Iii. The results of the investment structure as above,is as follows: (a)Equity Return,Pre Tax 12.2% After Tax 12.5% (b)Debt Coverage Ratio min 1.3 max 6.0 ave 2.0 (c)Equity Pay Back Period 10 Years (d)Average Annual Energy Sales for 1:1 Debt Coverage 55,600,000 KWHRS We also should assume that for energy sales above 75,000,000 KWHRS per year the revenues would be used first to repay the AEA $7.7M loan and then to enhance the equity returns. If the energy sales are at 86,500,000 KWHRS/YR -95% capacity factor -the $7.7M AEA loan is repaid in full with 4.5%interest (actually an inflation adjustment to what is essentially an interest free loan)and the equity return increases to 15.5%after tax. For this scenario he equity ownership would be by a partnership of industrial power users.'Institutional investors who invest in energy projects would not normally assume the fishing industry risks which the fish processors already have assumed.In this case the Power Sales Agreements could be of the requirements type since the debt coverage ratios are large enough to allow for a high comfort level by the bond insurers,underwriters,and rating agencies.Under a requirements agreement the users would agree to purchase their contractual baseload requirements from the City Utility before they utilize their self generation.In addition the power users as investors would strive to keep the project viable. Conclusions Since Case 2 above is a viable investment scenario,with AEA/AIDEA support,we recommend that the proposals to the industrial users be limited to Case 1 and Case 2 above. If we offer these in advance the industrial users may have other suggestions which we can examine prior to the scheduled meeting in late January.In addition both cases examined herein will be analyzed with an increase in energy production:based on incrementally increasing the power plant capacity without increasing the cost of developing the project support infrastructure. -5- CAPITAL COST DATA/PARAMETERS Plant Construction Cost infrastructure Construction Cost Drilling,Field Development,etc. Total Development Costs (w/o financing costs) Less: Equity Participation Bond Financed Amount OPERATING COST DATA O&M Wellfield Maintenance Admin &General Insurance Wellfield Insurance Well Reserve Fund Deposit Steamfield Royalty Years 1-5 Years 6-11 Years 12-therez Annual Energy Usage Energy Losses: Busbarto Load Additional City Costs AEA/AIDEA UNALASKA GEOTHERMAL PROJECT Bond Sizing Analysis (Dollars inThousands) 32,865 24,141 Bond Issue Date (EOM) 20,264 Cost of Capital Reinvestment Rate Cost of Issuance Other Costs Initial Studies Bond Insurance R&C Fund Requirement Working Capital Bond Funded DSR Debt Amortization Period (5 yrs interest only) 77,270 32,865 44,405 1,700 350 Base Year of 135 Operating Costs 150 30 Annual Escalation Factors: Input General 3.5%of busbar cost 4.5%of busbar cost 7.0%of busbar cost 75,000 MWh 0.00% 1.5 cents/kWh Jun-93 6.50% 4.50% 2.50%of bonds 0 200 1.25%of debt svc 1,000 1,000 9.08%of bonds 20.0 years 1994 4.50% SOURCES: USES: SOURCES AND USES OF FUNDS Bonds Grant Equity Interest Earnings Grant Bond Funds Total Sources Construction: Plant Field Infrastructure Cost of Issuance Bond Insurance Initial Studies Capitalized Interest DSR Working Capital Fund R&C Fund Rounding Total Uses AEA Budget Estimates (Oct 7,92) Breakout by Workscope Budget Pro-Rata Plant In-structure Field (High)(Equity)(Bond)(Bond) Budget Catagory |.Plant &Infrastructure 1.Plant (direct)20,780 20,780 2.Fluid gathering 3,444 3,444 3.Trans\substation 7,879 7,879 4.Distribution 1,750 0 5.Roads &dock 8,353 8,353 6.Construct support 4,750 4,750 2,529 1,858 364 7.Start-up &test 705 705 8.O&M supplies 1,562 1,562 9.a.Design-plant 909 909 9.b,c,d,e Design-other 1,365 1,365 9.f.g Permit &misc 300 300 160 117 23 10.Const.Management 2,079 2,079 1,107 813 159 11.Administration 1,086 1,086 578 425 83 Subtotal 54,962 8,215 28,330 20,810 4,073 ll.Field Development 1.Purchase rights 1,500 1,500 2.Field design 1,000 1,000 3.Drilling &mat'ls 8,238 8,238 4.Test &evaluate 1,289 1,289 5.Admin,CM,insur.842 842 Subtotal 12,869 0 0 0 12,869 Budget Summary,Escalation &Contingency 1.Plant &Infrastructure Direct cost 54,962 8,215 28,330 20,810 4,073 Escalation 2,748 2,748 1,463 1,075 210 Contract Contingency 5,771 5,771 3,072 2,257 442 Subtotal 63,481 16,734 32,865 24,141 4,725 Il.Field Development Direct cost 12,869 0 0 0 12,869 Escalation 643 643 Contract Contingency 2,027 2,027 Subtotal 15,539 0 0 0 15,539 lll.Project Reserves 5,927 0 Grand Total 84,947 0 32,865 24,141 20,264 Date Jan-93 Feb-93 Mar-93 Apr-93 May-93 Jun-93 Jul-93 Aug-93 Sep-93 Oct-93 Nov--93 Dec-93 Jan-94 Feb-94 Mar-94 Apr-94 May-94 Jun-94 Jul-94 Aug 94 Sep-94 Oct-94 Nov-94 Dec 94 Jan-95 Feb-95 Mar--95 Apr-95 May-95 Jun 95 Jul-95 Aug-95 Sep-95 Plant (%)SRARRARARAZAAIZARAFFARARRRZ8%PRESInfra & Field (%) 100% Design,Engineering,Construction,Drilling CASH FLOW Equity Funding Bond Fund ($000)eoocoo0oococo0oo0cood00o0ocoeod33,865 ($000) 44,405 Capitalized Interest ($000) 1,930 1,930 1,930 1,930 8,684 CONSTRUCTION PERIOD SUMMARY Grant Fund ecoccooocooeooocococoocoooc0ocoooceBond Const Fund eoo0o]041,163 40,039 38,911 36,444 34,413 92,374 31,662 30,496 29,769 29,041 28,309 26,685 24,165 23,408 21,758 19,212 16,657 14,537 19,744 12,051 10,796 8,202 5,599 2,985 (83) (56) (28) q) END-OF -PERIOD BALANCESCapInt Fund OSR §,389 5,389 5,389 5,389 §,389 §,389 §,389 WC 1,000 1,000 1,000 Interest Earnings Grant ecca0o00qc00cgeo00coceooocooc0coo0ocooo°Bonds 29-Dec-92 ALASKA ENERGY AUTHORITY 16:22:45 UNALASKA GEOTHERMAL PROJECT Annual Costs of Power (Dollars in Thousands) Calendar Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 REVENUES Revenues from Sales 4,547 9,504 9,932 10,379 10,846 11,334 11,844 12,377 12,934 13,516 14,124 Interest Earnings: DSA 121 242 2462 242 242 242 242 242 242 242 242 WC Fund ; 34 45 45 45 45 45 45 45 45 45 45 Total Revenues 4,669 9,747 10,174 10,621 11,088 11,576 12,086 12,619 13,176 13,7538 14,367 EXPENSES Annual Debt Service 965 3,659 3,859 3,859 3,859 4,969 6,079 6,079 6,079 6,079 6,079 Operations and Maintenance:888 1,856 1,940 2,027 2,119 2,214 2,313 2,418 2,526 2,640 2,759 Wellfield Operations Welffield Maintenance ,183 382 399 a7 436 456 476 498 520 $44 568 Property Taxes :71 147 154 161 168 176 184 192 201 210 21Insurance7816417117918719520421322323324 Wellfield Insurance . 16 33 34 36 37 39 41 43 45 47 4.Royalty 180 376 393 410 429 576 602 629 657 687 1,116 Total Operating Costs (w/Debt Service)2,380 6,818 6,951 7,090 7,235 8,625 9,899 10,071 10,251 10,438 11,033OtherCosts: Deposit to R &C Fund (°}QO (°)(°)(°]50 50 50 75 75 75 Deposit to Well Reserve 125 250 250 250 250 250 300 300 300 300 300 Total Project Costs w/o Equity 2,505 7,068 7,201 7,340 7,485 8,925 10,249 10,421 10,626 10,813 11,408 Equity Payment:2,197 2,724 3,019 3,326 3,648 2,697 1,682 2,243 2,596 2,990 3,003 Total Project Costs w/Equity,4,702 9,792 10,219 10,666 11,133 11,621 12,131 12,664 13,221 13,803 14,412 Revenues from Sales (cents/kWh)12.1 12.7 13.2 13.8 14.5 15.1 15.8 16.5 17.2 18.0 18.8 City Costs 1.6 1.6 1.7 1.8 1.9 2.0 2.0 24 2.2 2.3 2.4 Delivered Costs Nominal Dollars 13.7 14.3 15.0 15.6 16.3 17.1 17.8 18.6 19.5 20.4 21.3 1992 Price Levels 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 average Bond Debt Service Coverage 2.0 3.3 1.7 1.8 1.9 1.9 1.5 1.3 1.4 1.4 1.5 1.5 29 -Dec-92 16:22:45 REVENUES Revenues from Sales Interest Earnings: DSR WC Fund Total Revenues EXPENSES Annual Debt Service Operations and Maintenance: Wellfield Operations Welltfield Maintenance Property Taxes Insurance Wellfield Insurance Royalty Total Operating Costs (w/Debt Service) Other Costs: Deposit to R &C Fund Deposit to Well Reserve Total Project Costs w/o Equity Equity Payment:a Total Project Costs w/Equity Revenues from Sales (cents/kWh) City Costs Delivered Costs Nominal Dolias 1992 Price Levels Bond Debt Service Coverage average 2.0 2006 14,760 242 45 15,002 6,079 2,883 594 229 254 51 1,167 11,256 100 300 11,656 3,391 15,047 19.7 2.5 22.2 12.0 16 2007 15,424 242 45 15,666 6,079 3,013 620 239 266 53 1,219 11,489 100 300 11,889 3,822 15,711 20.6 27 23.2 12.0 16 2008 16,118 242 45 16,360 6,079 3,148 648 250 278 56 1,274 11,733 100 350 12,183 4,223 16,405 21.5 2.8 24.3 12.0 17 2009 16,843 242 45 17,086 6,079 3,290 677 261 290 58 1,331 11,987 100 350 12,437 4,694 17,131 22.5 2.9 25.4 12.0 1.8 2010 17,601 242 45 17,844 6,079 3,438 708 273 303 61 1,391 12,253 200 350 12,803 5,086 17,889 23.5 3.0 26.5 12.0 1.8 2011 18,393 242 45 18,636 6,079 3,593 740 285 317 63 1,454 12,531 200 350 13,081 5,600 18,681 24.5 3.2 27.7 12.0 1.9 2012 19,221 242 45 19,463 6,137 19,508 25.6 3.3 28.9 12.0 2.0 2013 20,086 242 45 20,328 2014 20,990 242 45 21,232 13,992 7,286 21,277 28.0 3.6 31.6 12.0 2.2 2015° 21,934 2,694 45 24,629 6,079 4,284 882 34¢ 378 76 1,734 13,773 250 350 14,373 °29--Dec-92 16:22:45 REVENUES Revenues from Sales Interest Earnings: DSR WC Fund Total Revenues EXPENSES Annual Debt Service Operations and Maintenance: Wellfield Operations Wellfield Maintenance - Property Taxes Insurance Weilfield Insurance Royalty Total Operating Costs (w/Debt Service) Other Costs: Deposit to R &C Fund Deposit to Weill Reserve Total Project Costs w/o Equity Equity Payment: Total Project Costs w/Equity Revenues from Sales (cents/kWh) City Costs Delivered Costs Nominal Dollars 1992 Price Levels Bond Debt Service Coverage average 2.0 2016 22,921 11,080 250 350 11,680 14,355 26,035 30.6 4.0 34.5 12.0 5.7 45 23,953 0 4,679 963 372 413 83 1,893 8,402 250 350 9,002 14,995 23,998 31.9 41 36.1 12.0 N/A 45 25,031 9,380 15,695 25,076 33.4 43 37.7 12.0 N/A 45 26,157 9,176 250 350 9,776 16,426 26,202 34.9 45 39.4 12.0 N/A 9,588 250 350 10,188 17,191 27,379 2021 28,564 0 45 28,564 10,670 17,939 28,609 38.1 49 43.0 12.0 N/A 2022 29,849 0 45 29,849 0 5,830 1,200 463 514 103 2,360 10,471 300 350 11,121 18,774 29,894 39.8 5.1 44.9 12.0 N/A 2023 31,193 0 45 31,193 0 6,093 1,254 484 538 108 2,466 10,942 300 350 11,592 19,646 31,238 41.6 5.4 47.0 12.0 N/A °ALASKA ENERGY AUTHORITY UNALASKA GEOTHERMAL PROJECT Equity Return Analysis (Dollars in Thousands) Calendar Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005, REVENUES Revenues from Sales 4,547 9,504 9,932 10,379 10,846 11,334 11,844 12,377 12,934 13,516 14,124 EXPENSESOperationsand Maintenance .888 1,856 1,940 2,027 2,119 2,214 2,313 2,418 2,526 .2,640 2,759 Welfield Operating Contract 1,313 4,612 4,648 4,685 4,724 6,002 7,210 7,261 7,313 7,368 7,824 Property Taxes 71 147 154 161 168 176 184 192 201 210 219 Insurance 78 164 171 179 187 195 204 213 223 233 243 R &C Fund Deposits 0 0 0 0 0 50 50 50 75 75 75 Total Operating Costs 2,350 6,780 6913.7,052 7,198 8,637 9,961 10,133 10,338 10,526 11,121 PRE-TAX CASH 2,197 2,724 3,019 3,326 3,648 2,697 1,882 2,243 2,596 2,990 3,0¢ Add back:° R &C Fund Deposits (°)[')(*)0 (¢)50 50 50 75 75 75 Less: 5 Year MACRS Depreciation 6,244 9,991 6,184 3,647 3,627 2,036 77 44 274 89 51 20 Year S/L Depreciation 41 82 82 82 82 82 82 82 82 82 82 Taxable Income (4,088)(7,349)(3,247)(403)(61)629 1,774 2,167 2,314 2,894 2,045 Tax Benefit/(Liabiiity)@ 34%1,390 2,499 1,104 137 21 (214)(603)(737)(787)(984)(1,001) Energy Tax Credit 3,287 AFTER--TAX RETURN 6,874 5,223 4,123 3,463 3,669 2,483 1,279 1,507 1,809 2,006 2,002 INVESTMENT REQUIRED:16,433 17,433 EQUITY IRR:12.4% CUMULATIVE AFTER-TAX RETURN 33,865 6,874 12,096 16,219 19,682 23,351 25,834 27,113 28,620 30,429 32,435 34,437 REVENUES Revenues from Sales EXPENSES Operations and Maintenance Wellfield Operating Contract Property Taxes Insurance R &C Fund Deposits Total Operating Costs PRE- TAX CASH Add back: R &C Fund Deposits Less: 5 Year MACRS Depreciation 20 Year S/L Depreciation Taxable Income Tax Benefit/(Liabilty)@ 34% Energy Tax Credit AFTER-TAX RETURN INVESTMENT REQUIRED: EQUITY IRR: CUMULATIVE AFTER-TAX RETURN 2006 14,760 2,883 7,902 229 254 100 11,369 3,391 100 318 82 3,091 (1,051) 2,340 16,433 12.4% 33,865 36,777 2007 15,424 3,013 7,984 239 266 100 11,602 3,822 100 103 82 3,737 (1,271) 2,551 39,328 2008 16,118 3,148 8,119 250 278 100 11,895 4,223 100 59 82 4,182 (1,422) 2,801 42,129 2009 16,843 3,290 8,208 261 290 100 12,150 4,694 100 368 82 4,344 (1,477) 3,217 45,346 2010 17,601 3,438 8,301 273 303 200 12,515 5,086 200 119 82 5,085 (1,729) 3,357 48,703 2011 18,393 3,593 8,398 285 317 200 12,793 5,600 200 68 82 5,649 (1,921) 3,679 52,382 2012 19,221 3,754 8,500 298 331 200 13,084 6,137 200 4,155 56,537 2013 20,086 3,923 8,606 312 346 200 13,387 6,699 200 (2,271) 4,428 60,965 2014 20,990 4,100 8,717 326 362 200 13,704 7,286 200 4,795 65,760 6,895 72,655 REVENUES Revenues from Sales EXPENSES Operations and Maintenance Wellfield Operating Contract Property Taxes Insurance R &C Fund Deposits Total Operating Costs PRE TAX CASH Add back: R &C Fund Deposits Less: 5 Year MACRS Depreciation 20 Year S/L Depreciation Taxable Income Tax Benefit/(Liability)@ 34% Energy Tax Credit AFTER-TAX RETURN INVESTMENT REQUIRED: EQUITY IRR: CUMULATIVE AFTER-TAX RETURN 2016 22,921 4,477 3,088 356 395 250 8,566 14,355 250 159 14,446 (4,912) 9,444 16,433 12.4% 33,865 82,099 . 2017 23,953 4,679 3,244 372 413 250 8,957 14,995 250 92 15,154 (5,152) 9,843 91,942 2018 25,031 4,889 3,377 388 431 250 9,335 15,695 250 570 15,375 (5,227) 10,468 102,410 2019 26,157 5,109 3,515 406 451 250 9,731 16,426 250 184 16,492 (5,607) 10,819 113,229 2020 27,334 5,339 3,659 424 471 250 10,143 17,191 250 106 17,335 (5,894) 11,297 124,526 2021 28,564 5,579 3,810 443 492 300 10,625 17,939 300 660 17,579 (5.977) 11,962 136,488 2022 29,849 5,830 3,968 463 514 300 11,076 18,774 300 213 18,861 (6,413) 12,361 148,849 2023 31,193 6,093 4,133 484 538 300 11,547 19,646 300 123 19,823 (6,740) 12,906 161,755 2024 32,596 6,367 3,305 506 562 672 21,185 (7,203) 14,354 176,109 CAPITAL COST DATA/PARAMETERS Plant Construction Cost Infrastructure Construction Cost Drilling,Field Development,etc. Total Development Costs (w/o financing costs) Less: Equity Participation Bond Financed Amount OPERATING COST DATA O&M Wellfield Maintenance Admin &General Insurance Wellfield Insurance Well Reserve Fund Deposit Steamfield Royalty Years 1-5 Years 6-11 Years 12--therei Annual Energy Usage Energy Losses: Busbarto Load Additional City Costs AEA/AIDEA UNALASKA GEOTHERMAL PROJECT Bond Sizing Analysis (Dollars inThousands) 32,865 24,141 Bond Issue Date (EOQM) 20,264 Cost of Capital Reinvestment Rate Cost of Issuance Other Costs Initial Studies Bond Insurance R&C Fund Requirement Working Capital Bond Funded DSR Debt Amortization Period (5 yrs interest only) 77,270 32,865 44,405 1,700 350 Base Year of 135 Operating Costs 150 30 Annual Escalation Factors: Input General 3.5%of busbar cost 4.5%of busbar cost 7.0%of busbar cost 86,500 MWh 0.00% 1.5 cents/kWh Jun-93 6.50% 4.50% 2.50%of bonds 0 200 1.25%of debt sve 1,000 1,000 9.08%of bonds 20.0 years 1994 4.50% SOURCES: USES: SOURCES AND USES OF FUNDS Bonds Grant Equity Interest Earnings Grant Bond Funds Total Sources Construction: Plant Field Infrastructure Cost of Issuance Bond Insurance Initial Studies Capitalized Interest DSR Working Capital Fund R &C Fund Rounding Total Uses AEA Budget Estimates (Oct 7,92) Breakout by Workscope Budget Pro-Rata Plant In-structure Field (High)(Equity)(Bond)(Bond) Budget Catagory 1.Plant &Infrastructure 1.Plant (direct)20,780 20,780 2.Fluid gathering 3,444 3,444 3.Trans\substation 7,879 7,879 4,Distribution 1,750 0 5.Roads &dock 8,353 8,353 6.Construct support 4,750 4,750 2,529 1,858 364 7.Start-up &test 705 705 8,O&M supplies 1,562 1,562 9.a.Design-plant 909 909 9.b,c,d,e Design-other 1,365 1,365 9.f,g Permit &misc 300 300 160 117 23 10.Const.Management 2,079 2,079 1,107 813 159 11,Administration 1,086 1,086 578 425 83 Subtotal 54,962 8,215 28,330 20,810 4,073 ll.Field Development 1.Purchase rights 1,500 1,500 2.Field design 1,000 1,000 3.Drilling &mat'ls 8,238 8,238 4.Test &evaluate 1,289 1,289 5.Admin,CM,insur.842 842 Subtotal 12,869 0 0 0 12,869 I.Plant &Infrastructure Direct cost 54,962 8,215 28,330 20,810 4,073 Escalation 2,748 2,748 1,463 1,075 210 Contract Contingency 5,771 5.771 3,072 2,257 442 Subtotal 63,481 16,734 32,865 24,141 4,725 li,Field Development Direct cost 12,869 0 0 0 12,869 Escalation 643 643 Contract Contingency 2,027 2,027 Subtotal 15,539 0 ie)0 15,539 Ill.Project Reserves 5,927 0 Grand Total 84,947 0 32,865 24,141 20,264 LPERARRRRFFRAAAAARA100% Infra & Field (%) 100% Design,Engineering,Construction,Drilling CASH FLOW Equity Funding Bond Fund ($000)egoo0o00000co0c0000o°oNN©@SHS)nA33,865 ($000) 44,405 Capitalized Interest ($000) 1,930 1,930 1,930 965 8,684 CONSTRUCTION PERIOD SUMMARY Grant Fund aoo000000000c000q0qo0Cc0COCcece0C0Qe0C0coBond Const Fund END-OF-PERIOD BALANCES Cap Int Fund DSR we toeoooeaoeSESREEREREERESRESRER.o6-Interest Earnings Grant oo0o0o00a00co0o0qoo0o0q0qoqco0o0co0q0o0q00q0o000000000°oBonds 29 Dec-§$2 ALASKA ENERGY AUTHORITY 16:25:13 UNALASKA GEOTHERMAL PROJECT Annual Costs of Power (Dollars in Thousands) Calendar Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 REVENUES Revenues from Sales 5,245 10,961 11,455 11,970 12,509 13,072 13,660 14,275 14,917 15,588 Interest Earnings: OSR 121 242 242 242 242 242 242 242 242 242 WC Fund 34 45 45 45 45 45 45 45 45 45 Total Revenues 5,366 11,204 11,697 12,213 12,751 13,314 13,902 14,517 15,159 15,831 EXPENSES Annual Debt Service 965 3,859 3,859 3,859 3,859 4,969 6,079 6,079 6,079 6,079 Operations and Maintenance:888 1,856 1,940 2,027 2,119 2,214 2,313 2,418 2,526 2,640 Wellfield Operations Wellffield Maintenance 183 382 399 417 436 456 476 498 520 $44 Property Taxes 71 147 154 161 168 176 184 192 201 210 Insurance 78 164 171 179 187 195 204 213 223 233 Wellffield Insurance 16 33 34 36 37 39 41 43 45 47 Royalty 207 433 453 473 494 664 694 725 758 792 Total Operating Costs (w/Debt Service)2,408 6,875 7,011 7,153 7,301 6,713 9,991 10,167 10,351 10,544 Other Costs: Deposit to R &C Fund 0 0 0 (}[e)50 50 50 75 75 Deposit to Well Reserve 125 250 250 250 250 250 300 300 300 300 Total Project Costs w/o Equity 2,533 7,125 7,261 7,403 7,551 9,013 10,341 10,517 10,726 10,019 Equity Payment:2,867 4,124 4,481 4,855 §,245 4,346 3,606 4,045 4,478 4,957 Total Project Costs w/Equity,5,400 11,249 11,742 12,258 12,796 13,359 13,947 14,562 15,204 15,876 Revenues from Sales (cents/kWh)12.1 12.7 13.2 13.8 14.5 15.1 15.8 16.5 17.2 18.0 City Costs 1.6 1.6 17 1.8 1.9 2.0 2.0 21 2.2 2.3 Delivered Costs Nominal Dollars 13.7 14.3 15.0 15.6 16.3 17.1 17.8 18.6 19.5 20.4 1992 Price Levels 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 average Bond Debt Service Coverage 2.4 4.0 2.1 2.2 23 2.4 1.9 1.6 1.7 1.7 1.8 -29-Dec-92 16:25:13 REVENUES Revenues from Sales Interest Earnings: DSR WC Fund Total Revenues EXPENSES Annual Debt Service Operations and Maintenance: Wellfield Operations Wellfield Maintenance Property Taxes Insurance Wellfield Insurance Royalty Total Operating Costs (w/Debt Service) Other Costs: Deposit to R &C Fund Deposit to Well Reserve Total Project Costs w/o Equity Equity Payment:, Total Project Costs w/Equity Revenues from Sales (cents/kWh) City Costs Delivered Costs Nominal Dollars 1992 Price Levels Bond Debt Service Coverage average 2.4 2006 17,023 242 45 17,265 11,435 100 300 11,835 5,475 17,310 19.7 2.5 22.2 12.0 1.9 2007 17,789 242 45 18,031 12,076 6,000 18,076 20.6 27 23.2 12.0 2.0 2008 18,589 242 45 18,832 6,079 3,148 648 250 278 56 1,469 11,928 100 350 12,378 6,499 18,877 21.6 2.8 24.3 12.0 21 2009 19,426 242 45 19,668 12,191 100 350 12,641 7,072 19,713 22.5 2.9 25.4 12.0 2.2 2010 20,300 242 45 20,542 2011 21,213 242 45 21,456 6,079 3,593 740 285 317 63 1,677 12,754 200 350 13,304 8,197 21,501 24.5 3.2 27.7 12.0 23 2012 22,168 242 45 22,411 6,079 3,754 773 298 331 66 1,752 13,054 200 350 13,604 2013 23,166 242 45 23,408 6,079 3,923 808 312 346 69 1,831 13,368 200 350 13,918 9,535 23,453 26.8 3.5 30.2 12.0 2.6 2014 24,208 242 45 24,451 6,079 4,100 844 326 362 72 1,914 13,696 200 350 14,246 10,250 24,496 28.0 3.6 31.6 12.0 2.7 14,039 250 350 14,639 13,398 28,037 29.2 3.8 33.0 12.0 3.2 *29-Dec -92 16:25:13 REVENUES Revenues from Sales Interest Earnings: DSR WC Fund Total Revenues EXPENSES Annual Debt Service . Operations and Maintenance:' Wellfield Operations Wellfield Maintenance° Property Taxes Insurance Wellfield Insurance Royalty Total Operating Costs (w/Debt Service) Other Costs: Deposit to R &C Fund Deposit to Well Reserve Total Project Costs w/o Equity Equity Payment: Total Project Costs w/Equity Revenues from Sales (cents/kWh) City Costs Delivered Costs Nominal Dollars 1992 Price Levels Bond Debt Service Coverage 2016 26,436 3,069 45 29,505 3,039 4,477 922 356 395 79 2,080 11,358 250 350 11,958 17,592 29,550 30.6 4.0 34.5 12.0 average 2.4 6.8 45 27,625 0 4,679 963 372 413 83 2,184 8,693 250 350 9,293 18,378 27,670 31.9 41 36.1 12.0 N/A 250 350 9,684 19,230 28,914 33.4 4.3 37.7 12.0 N/A 2019 30,168 0 45 30,168 0 5,109 1,052 406 451 90 2,385 9,493 250 350 10,093 20,120 30,213 34.9 45 39.4 12.0 N/A 2020 31,525 0 45 5,339 1,099 424 471 94 2,492 9,920 250 350 10,520 21,051 31,570 36.4 47 41.2 12.0 N/A 2021 32,944 0 45 5,579 1,149 443 492 98 2,604 10,366 300 350 11,016 21,973 32,989 38.1 4.9 43.0 12.0 N/A 5,830 1,200 463 514 103 2,721 10,833 300 350 11,483 22,989 34,471 2023 35,976 ie) 45 6,093 1,254 484 538 108 2,844 11,320 300 350 11,970 24,050 2024 37,594 0 1,045 37,594 ALASKA ENERGY AUTHORITY UNALASKA GEOTHERMAL PROJECT Equity Return Analysis (Dollars in Thousands) Calendar Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005¢ REVENUES Revenues from Sales §,245 10,961 11,455 11,970 12,509 13,072 13,660 14,275 14,917 18,588 16,290 EXPENSES : Operetions and Maintenance 888 1,856 1,940 2,027 2,119 2,214 2,313 2,418 2,526 2,640 2,759 Wellfield Opereting Contract 1,341 4,670 4,708 4,748 4,790 6,091 7,302 7,357 7,414 7,473 7,996 Property Taxes 71 147 154 161 168 176 184 192 201 210 219 Insurance 78 164 171 179 187 195 204 213 223 233 243 R &C Fund Deposits (°](°)0 (°](°)50 50 50 75 75 75 Repay Grart (w\4.5%interest); 590 590 590 §90 §90 590 590 §90 §90 590 590 Total Operating Costs oo,2,968 7,428 7,564 7,705 7,854 9,316 10,644 10,820 11,029 11,221 11,682 PRE-TAX CASH ;2,277 3,533 3,891 4,265 4,655 3,756 3,016 3,455 3,688 4,367 4,4¢ Add beck: R &C Fund Deposits °(e)(*)(s]0 50 50 50 75 75 75 Less: 5 Year MACRS Depreciation 6,244 9,991 6,184 3,647 3,627 2,036 77 44 274 89 51 20 Year S/L Depreciation 41 82 82 62 82 62 82 82 62 82 82 Taxable Income (4,009)(6,540)(2,375)535 946 1,688 2,907 3,378 3,607 4,271 4,349 Tax Beneft/(Liability)@ 34%1,363 2,223 807 (182)(322)(574)(988)(1,149)(1,226)(1,482)(1,479) Energy Tax Credit 3,287 + AFTER-TAX RETURN 6,926 5,757 4,698 4,083 4,334 3,162 2,028 2,306 2,662 2,915 2,929 INVESTMENT REQUIRED:16,433 17,433 EQUITY IRA:14.9% CUMULATIVE AFTER-TAX RETURN 33,865 6,926 12,683 17,382 21,464 25,798 28,960 31,007 33,313 35,975 38,890 41,819 2006 REVENUES Revenues from Sales 17,023 EXPENSES ' Operations and Maintenance 2,883 Wellfield Operating Contract 8,081 Property Taxes 229 Insurance 254 R &C Fund Deposits ; 100 Repay Grant (w\4.5%interest)'590 Total Operating Costs 12,138 PRE-TAX CASH 4,885 Add back: R &C Fund Deposits 100 Less: 5 Year MACRS Depreciation 318 20 Year S/L Depreciation 82 Taxable income 4,585 Tax Benefit/(Liabilty)@ 34%(1,559) qv Energy Tax Credit AFTER-TAX RETURN 3,326 INVESTMENT REQUIRED:16,433 EQUITY IRR:14.9% CUMULATIVE AFTER-TAX RETURN 33,865 45,145 2007 3,599 48,744 2008 18,589 3,148 8,314 250 278 100 590 12,681 5,909 100 3,914 52,658 2009 19,426 3,290 8,412 261 290 100 590 12,944 6,482 100 368 82 6,132 (2,085) 4,397 57,055 2010 20,300 3,438 8,514 273 303 200 590 13,319 6,981 200 119 82 6,980 (2,373) 4,608 61,663 2011 21,213 3,593 8,621 285 317 200 590 13,606 7,607 200 68 82 7,657 (2,603) 5,004 66,666 2012 22,168 3,754 8,733 298 331 200 590 13,907 8,261 200 426 82 7,954 (2,704) 5,557 72,224 2013 23,166 3,923 8,849 312 346 200 590 14,221 8,945 200 5,010 78,134 2014 24,208 4,100 8,971 326 362 200 590 14,549 9,659 200 6,362 84,496 2015 * 25,297 4,284 6,647 340 378 250 11,899 13,398 250 493 41 13,114 (4,459) 8,939 93,435 REVENUES Revenues from Sales EXPENSES Operations and Maintenance Welifield Operating Contract Property Taxes Insurance R &C Fund Deposits Repay Grant (w\4.5%interest) Total Operating Costs PRE-TAX CASH Add back: R &C Fund Deposits Less: 5 Year MACRS Depreciation 20 Year S/L Depreciation Taxable Income Tax Benefit/(Liability)@ 34% Energy Tax Credit AFTER-TAX RETURN INVESTMENT REQUIRED: EQUITY IRR: CUMULATIVE AFTER-TAX RETURN 16,433 14.9% 33,865 2016 26,436 4,477 3,366 356 395 250 8,844 17,592 250 159 17,683 (6,012) 11,580 105,015 2017 27,625 4,679 3,535 372 413 250 9,248 18,378 250 92 18,536 (6,302) 12,076 117,091 2018 28,869 4,889 3,680 388 431 250 9,639 19,230 250 570 18,909 (6,429) 12,801 129,891 2019 30,168 5,109 3,832 406 451 250 10,048 20,120 250 184 20,186 (6,863) 13,257 143,148 2020 31,525 5,339 3,990 424 471 250 10,475 21,051 250 106 21,194 (7,206) 13,844 156,993 2021 32,944 5,579 4,156 443 492 300 10,971 21,973 300 660 21,613 (7,348) 14,624 171,617 2022 34,426 5,830 4,330 463 514 300 11,438 22,989 300 213 23,076 (7,846) 15,143 186,760 2023 35,976 6,093 4,511 484 538 300 11,925 24,050 300 123 24,228 (8.237) 15,813 202,573 s ° e 2024 37,594 6,367 3,700 506 562 30¢ 11,434 26,160 300 672 25,788 (8.768) 17,392 219,965 Uuarrasicr Geortscunae feosey Nev 20,199 27_ RAMUS |OLGAWEATI OW Pitors tf Fax . SuI-S440 Sou Qo A 0EA (G67)$b/-S050 SPI V+H?Qeuns Roswsen Cry of Unarsns SP)-12S5) S$8\ 2187 BoeSFr ceisis \.SBSl-\veZeoial,a AlpsA 56/-S60'Hye et.OES Powe 5O3-697-/JAS DAs Searccusr BD.Pour (od C4t-o4s3prinCLopefiefore.G.WE-2CF-0628(63 -384(Y Grent KEE DCO 6 S5-2SC 561-8584 Tove Feats DEA S6)-7877 'Ros CornzZinl!A-EA-Ae/-7233L63 -384/faut Fuchs fe lDCED YO5 -2S5O2 aSole E,Weep BIDWU 5O/-FOS5O ts ar be combifo preeb@ a Vycel ou -|bow.-a,PE ESS tht an 2 appealoan termiyeted i*AIDEA*e "l |uc edt+6 O bituor Ub tie padlao an AEA LieALDEA2 Rak (ob) Yeon iNew «ogster KOan -Gow 4teroseaghe mae AAaSden ¢OSSTF Coab actinp)cule |ye Vajau St Dex4ano eberty WNIg2 she2bin ooiecomerperaneM0hrva?- syninarevune ly Coreo 4 Irip pls.|=u abeapevols,3D.|ceepial lore € Get. At sheen.caballobreMtasomy Hig)osteevoresa SosLo 4iesieone we ASA Apa_REinvPond,Paya dat@epee”2 15,620 _Cprcbrapoh as >622!et oo2"-Tyan F593opAbb9enudaela:AQ OQ.+Agee=helbeea 55SEoCCIE 2tiesDD _hechon wolinn to:>prafel ie2 Wd,Ct"Nous other Cab rrch OrludelOrs OATEakpee eeren Qube;*ob thasBostObtt-Oh oN fe7aooaonisie'Sr ne Uk,Aner é livre I3.th Np Tear estfeioat»iaaesSeow(2bbg Ml oth lstee iaicdomeato tJ Fee AY, pe Arve Opti babs RS.;ration 4 Preeole(psLoree.ff;MNayesawk LomayobPLrmweneZ.oo eee we ntee si eunniviny weeaIPoclJoma. AY|ape.a [56,006 ASBg open _835%.458°sgababecob:_FSO aeaMilkbk,bi(NMys)sowie |_oduct7Gviviel-opens bgarlicgeOeWr:¢G EO?&Mew COV |cawdbiy"geyDJe.Ou fowe.Grouse"ihma,MeHOR es Bbeelebes Le Opt1a Or.nap hangeuliAahtoleagli&iM,2urd bo. Bonk pith. S Goh 77 "bloat,of i), i J Zamp2 dul turned)Five!ATI Diet Stay aaOO, WY ve J A G@eclolteshTmtAywbes ,DoJLio lab ES"FOK *Boel Lano:lesb Lax*Bblibh Svcs ocefinl inky Q)Sul VL. Bu ¥ognto fon ieee [5AyeVE tsysGIPugL Piecetd celaOobeESApapee7|::Sire Cenk nbedFUSeBsgepatirsapescoeeFrkiamiGi©L lpr broteoeweetKsALeyL-(45; an Lv, 5 pe |Poel Tali Wiel yer Aanbetstory [eect (5korlTorclane"st ORR mie pF»Wb Sito 42m Mnl-Pgtintons waddle 7ion+Live Sy "4 fa Dio -SOURGal(2!bf IZamb Qn Blah Vous.(1992) .ArabiElbejerAanlpo Delle :|-a diy,ber i LaePeae,)aHnvireeri[REO ADT #56 %ta 2)GroleitHeoer(MLM IATYS:sone sau OQ.VoraeeD Cie eeacresyore(#/4-#2)9 . _O&,f,Ip ¢sb ob de Fpad Dole -ppl>oo Chsb ahdesreiyarapop pelPale _(OP.Leib Bo.Lebuests-3AL (HIP 3A AQ ae ge ene(a fengabd le,Co Ou (ach ibs sergel.a 7 pylts >cacheHSchow et Gabdprie)Shion&hab jon i plete fideCeesv)sAefrom drebeQikwelftayQoihe'&fe!frayie Eabr bon(EE kla)_5 [2nto)yL aL ,;splisiory.rareameAtvinTervLei/é5werd est-Soebubs crosbucis deny ons=Helmet kab ,we SLAiilow Geoli"ts SrBoybast MYthoy ail BE@Sieel|scttion scool om bur tabinebaahheeyee , |-Qarmo a2 |Lb Daf cepa ®.Subp aeWanebares,7 ;nin LeeoOo+fee 4 Oo Pa geeRe ears|:Sa)i”nnnhoo 4 Sannaa2 3 buh Nef,lowed cooks -tees,Someaa 44 bud.ROL.7a?Bo an eo d bo beenbapa pebe hl eb atamet a aa ealwo ab bb Dea AAS Sef . edge te ate Qeal,dame Lubf,Fed anaklang de an ZTacs13 =Some22 bee ipew©Meordb.eeEatsseh ae Uh.chinefa D Ln cis Jes pbitscarl coal bh 'io7wiehitpeicrabofMieLyLiteroperaeapckyLTtBoxa'/hd ae Bite!Lege°Y .a =yt,a ee bccayytuesealwo xacwen"y,29.i Lun HeLael!Tiley CL fosyy L lbs %5,LAI»nspeLeIDlawl¢{.vu»obbdinns be (Crapyareth(pene:ad -_on who Ef - ban .brvtMeeMOK,PDI Oo UBL .XQ 3)wey . : Waa y a aBDKetoneccleub15°2x peur ||lawn cbs Aprons rl RisfioeByavlpbbweb,Bo ng -f T.,wdlebpn.NF 1.ce ay YO.»fon "im LN or bite 7 ys U car,PD Quy by agua,elyougbvy ef dp S|ja a,XE 2h cbipenl ball mat,4yy£73wT |a Qo.yyptt.Te dee bhp AP a wo oe ; THLE 7 -a iia ---rune Lad,a __:I /Une J Zof)|.oo Are ne ub oth soyefe)-f'"ELLEOiwb Sywy, *©a ;@ ALASKA INDUSTRIAL DEVELOPMENTAANDEXPORTAUTHORITY 480 WEST TUDOR «ANCHORAGE,ALASKA 99503-6690 «(907)561-8050 *FAX (907)561-8998 July 8,1992 Mr.Jack Wood Sent via telefax 916-269-0828 Dear Mr.Wood: The purpose of this letter is to provide you with information on the Alaska Industrial Development and Export Authority (AIDEA)which will allow you to assess if and how AIDEA could be helpful in financing the proposed Unalaska Geothermal Electric Project. AIDEA is a public corporation with the ability to diversify Alaska's economy and provide jobs for Alaskans through its variety of programs. The enabling legislation creating the Authority speaks to specificreasonsforitsestablishment.These reasons include encouraging growth in the economy in the manufacturing,industrial and export industries through small business assistance and through developingthenaturalresourcesoftheState.AIDEA accomplishes its mission byprovidingfinancingassistanceprogramsforbusinesses,developing orexpandingAlaskaneconomicdevelopmentprojectsthroughbank originated loan participation and guarantee programs and through its owner/operator Development Finance program. More specifically,AIDEA has a variety of financing assistance programsrangingfrombusinessassistanceloanguaranteesunder$75,000 to AIDEA owned industrial development projects valued at over $100 million.Excluding AIDEA's Development Finance program,all AIDEAprogramsrequirealoanbeoriginatedbyafinancialinstitution.AIDEAdoesnothavetheabilitytoprovidedirectloanstocommunities, business enterprises or individuals.AIDEA either buys participation inaloanwiththefinancialinstitutionretainingaminimumof20%of the loan,or AIDEA guarantees up to 80%or 90%of the loan under the Business and Export Assistance programs respectively. The attached copy of our brochure will provide a more detailed description of AIDEA programs and the Authority's abilities.Legislation passed by the Alaska State Legislature this year (SB 226)makes changes to the Umbrella Bond Program allowing AIDEA toparticipateinbankoriginatedloansupto$10 million in a loan of any size.Also,the "streamlined"business assistance guarantee program now allows a guarantee on an unsecured loan of $75,000 or less (originally was $50,000).AIDEA legislation also provides us with the "U fe) Fe.youd Fb -UF-w2eRonSchachef702-944.O65 % Unekska Geatietmra/Elecinic.ft wee ,;S)f \| ke ICES Avor bowen'Ae -LOS -23%0 ability to own and operate infrastructure for tourism destination facilities under the Development Finance program. In order to qualify under AIDEA's development finance program (under which the Unalaska Dock,Skagway Ore Terminal and the DeLong Mountain Transportation System was developed)the following are necessary requirements or considerations: °Project Eligibility Detailed information regarding the scope and characteristics of the project are submitted for review to the Authority.Staff and legal counsel must determine whether or not the project is eligible and satisfies the development criteria for AIDEA participation and if the project can meet tax-exempt financing status under the U.S.Treasury Code.For the purpose of our negotiations,following are the most relevant deal points for obtaining the Authority's participation in the project: 1.The project and its development under AS 44.88 must prove to be economically advantageous to the state and to the general public welfare and must contribute to the economic growth of the state; 2.The project applicant is financially responsible; 3.The project is economically and financially feasible and able to produce revenue adequate to repay the bonds or loans with which it is financed; 4.Increased demand on public facilities that might result from the project will be provided for; 5.The project will provide or retain employment reasonably related to the amount of the financing by the Authority, considering the amount of investment per employee for comparable facilities,and other relevant factors; 6.The scope of the project is sufficient to provide a reasonableexpectationofthebenefittotheeconomyofthestate; 7 The project is in compliance with applicable law;and 8.Issuance of the bonds is not expected to affect adversely theabilityofthestateoranypoliticalsubdivisionofthestateto market other bonds. °Project Financing Plan and Features The Authority will undertake and develop through a third party itsowneconomicanalysisandfinancingplanfortheproject.This includes not only development cost estimates,but also maintenance and operation costs projections,market analysis and a table detailingsourcesandusesoffunds. The third party economic analysis and financing plan must include an estimate of the total cost of the project and a description of thesourcesofmoneythatwillbeusedtofinancetheproject.The finance plan must also include an estimate of the operational costs of the completed project,as well as a description of the source of the money that is to be used to pay the operational and maintenance costs. In addition to these requirements,it has been the guidance of theAuthority's Board of Directors that staff give preference to projects that do not require financial assistance above and beyond the collective benefits that the project is capable of producing. Various components that might be included in this type of benefit calculation include: eAnnual taxes paid to state and local government; eValue added from in-state construction -Construction employment -Alaska Fabricated Components; eAnnual operating payroll *Consequential benefits -Other related payroll -Other in-state goods and services While the components listed are not intended to be all inclusive,they are intended to illustrate the types of benefit calculations that staff will perform when negotiating its return on investment.There is a floor, of course,below which we cannot go:our cost of money plus aminimumfeefortheuseofourcreditrating,capital reserve funds and financing ability. e Land and Title Interest of Facility The Authority would require the project sponsor to provide AIDEA with clear title or lease to the portion of land on which AIDEA's portion of the project would be developed.This would be a condition of the agreement so long as debt was outstanding.Once the debt is retired,title could revert back to the project sponsor at fair market value,unless reversion is prohibited by the financing mechanism used --this is an issue our bond counsel will evaluate. The project sponsor should be prepared to provide information on land ownership,acquisition costs,if any,and environmental baselininginformationavailable. °Development and Construction Contract Issues The project sponsor should provide the Authority with a written engineering report outlining the current status of design and permitting activities. In addition,a detailed milestone chart or CPM schedule outlining thedevelopmentsequenceofevents(up to the in-service date)should be provided along with any preliminary engineering drawings and adefinitivecostestimate. The parties will need to determine the roles and assignment of design and construction responsibilities best suited for undertaking a jointapproachforprojectdevelopment.Decisions resulting from these discussions will determine what contracting and procurement methods will be employed.It could well be that the Authority's only active role in the project would be financing,leaving all other development responsibilities to the project sponsors. In all likelihood the project,if developed under the Authority's Development Finance Program,would be classified as a "public works project"thereby requiring that Davis-Bacon Wages be paid during the construction phase. °Maintenance and Operations Responsibilities Under any scenario to be considered by the Authority,it would be our intention to assign maintenance and operating responsibilities back to the project sponsor. °Umbrella Bond Program Projects can also be financed under AIDEA's Umbrella Bond program. In this case,the applicant submits his/her proposal to a financial institution requesting financing.Should the bank decide to give theapplicantaloanfortheproject,the bank may come to AIDEA andrequestAIDEA's participation ($10 million or up to 80%of the loan) in the loan.The loan,in effect,receives underwriting standards of both the bank and AIDEA.The applicant must be credit-worthy,asdoestheproject;and the loan must have the required security. e Guarantee Programs While under-used,AIDEA also has business assistance and export guarantee programs.To utilize these programs the applicant submitshis/her proposal to a financial institution requesting financing.If the bank agrees to provide a loan,AIDEA can guarantee the loan up to 80% or 90%(business assistance and export program respectively)up to$1 million.Again the loan receives the underwriting scrutiny of both the bank and AIDEA. Thank you for your interest in AIDEA and our financing programs.I've provided very little information on the Umbrella Bond and GuaranteeprogramsasitwasmyunderstandingyouaremoreinterestedintheDevelopmentFinanceprogramwhichcanprovidefinancingfor projects such as ports and docks.If we can provide additional information,please do not hesitate to call. Sincerely,:aH 2 i/Mi a D4 17 William R.Snell Acting Executive Director attachment cc:Mr.Ron Schachet bec:Paul Fuhs,Commissioner DCED Ron Garzini,Acting Director AEA .vg laskn Geo thienl! LETTERof INTENT -sv@stTanTimeyae-DRAFT PLEAUN GNDFo in,|;/This Letter of Intent is between the Alaska Industrial Development and Export Authority t (AIDEA),an Alaskan Public Corportation and GEOlectric Power Company (GEOlectric),a Nevada Corporation. GEOlectric has submitted a Joint Venture Proposal (attached hereto),for the development of the Unalaska Geothermal Electrical Generation Project (Project)to AIDEA on September 11,1992.AIDEA has reviewed this Proposal.Under the terms and authority of AIDEA Resolution NO.A92-11,GEOlectric and AIDEA desire to enter into this Letter of Intent (Letter). Therefore the Parties to this Letter agree to implement the following items and to use their best efforts to complete the activities listed below: 1.AIDEA and GEOlectricwill negotiate in good faith with OES!Power Corporation (OESI)with the goal of intering into a Letter of Intent with OESI to acquire all of OESI's rights,titles and interests in the Project.This is to be accoumplished by September 30,1992. 2.The Parties will work with the Alaska Energy Authority (AEA)to support the Governor's office sponsorin of a meeting of all the Project participants, including the Unalaska fish processor companies and the representatives of the City of Unalaska,to reach a consensus that the necessary level of power purchase commitment exists to move forward with the Project.This meeting will be scheduled for the week of October 19,1992,or at such time as the necessary financial information is available to AEA,AIDEA and GEOlectric as to the proposed cost of electrical energy to the Unalaska users. 3.Based on the resonable due diligence regarding,the Project economics, costs,feasibility,budgets and Project rights,are to be completed with 30 days AIDEA/GEOlectric Letter of Intent Page 1 of 2 of the date of this Letter.The Parties will use their best efforts to negotiate and enter the the following agreements: a.The Joint Venture Agreement between AIDEA and GEO/lectric. b.The Purchase Agreement between the AIDEA/GEOlectric Joint Venture and OESI. c.The development agreement and fuel (fluid fee)sales agreement between the AIDEA/GEO/ectricJoint Ventrue and AEA. The agreement,and the closing of the acquistion of OESI rights to the Project are to be accomplished,with best efforts,by October 30,1992. 4.The Parties will then also use their best efforts to move forward with engineering,planning,permitting and financing activities so as to target the closing of the financing and the construction of the project in the shortest possible time friame consistent with a target of having the Project in Commerical Operation by December 31,1994. Agree and Accepted by the Parties this_--s-s§«day of September 1992. For GEOlectric For AIDEA By:By: Its:Its: AIDEA/GEOlectric Letter of Intent Page 2 of 2 LETTER OF INTENT This Letter of Intent is between the Alaska Industrial Development and Export Authority (AIDEA),The Alaska Energy Authority (AEA),both Alaskan public Corporations,and GEOlectric Power Company (GEOlectric)a Nevada Corporation. GEOlectric has submitted a Joint Venture Proposal (attached hereto),for the development of the Unalaska Geothermal Electrical Generation Project (Project)to AIDEA on September 11,1992.both AIDEA and AEA have reviewed this Proposal!of September 11,1992 and desire to move forward with the development of the Project within the framework of the structure and on the terms substantially as outlined in the Proposal. Therefore the Parties to this Letter of Intent (LETTER)agree to implement the following program and to use their best efforts to complete the activities listed below: 1.AIDEA and GEOlectric will negotiate in good faith with OES!Power Corporation (OESI)with the goal of entering into a Letter of Intent with OESI to acquire all of OES!I's rights,titles and interests in the Project.This is to be accomplished by September 25,1992. 2.The AEA will request that the Governor's office sponsor a meeting of all the Project participants,including the Unalaska fish processor companies and the representatives of the City of Unalaska,to reach a consensus that the necessary level of commitment exists to move forward with the Project.This meeting should to be scheduled for the week of October 19,1992,in Anchorage or Juneau,Alaska,or other acceptable location. 3.Based on a reasonable due diligence,regarding the Project economics, feasibility,budgets and the status of the Project rights,to be completed within 30 days of the date of this LETTER.The Parties will use their best efforts to negotiate and enter into the following agreements. Letter of Intent Page 1 of 2 a.The Joint Venture Agreement between AIDEA and GEOlectric. b.The Purchase Agreement between the AIDEA/GEOlectric Joint Venture and OESI. c.The development agreement and fuel (fluid)sales agreement between the AIDEA/GEOlectric Joint Venture and the AEA. These agreements,and the closing of the acquisition of the OESI rights to the Project are to be accomplished by October 30,1992. 4.The Parties will then use their best efforts to move forward with engineering, planning,permitting and financing activities so as to target the closing of the financing and the construction of the project in the shortest possible time frame consistent with target of having the project in Commercial Operation by December 31,1994 | Agreed and accepted by the Parties this day of September 1992. For GEOlectric.For AIDEA: By:By: Its:Its: For AEA By: Its: Letter of Intent Page 2 of 2 State of Alaska Walter J.Hickel,Governor Pred to Gaceni 9-28-43 Alaska Energy Authority A Public Corporation September 22,1992 Mr.Riley Snell Executive Director Alaska Industrial Development and Export Authority 480 West Tudor Road Anchorage,AK 99503-6690 Subject:Unalaska Geothermal Project Dear Mr.Snell: The Alaska Energy Authority is pleased to assist the Alaska Industrial Development and Export Authority (AIDEA)in reviewing the feasibility of a Geothermal Electrical Generation Project at Unalaska.We believe that this project offers considerable potential and under the proper financial arrangement could provide a viable,competitively priced and clean alternative to the diesel generation currently being utilized. Based upon our previous involvement in this project we would recommend that AIDEA's feasibility assessment be pursued in the following sequence: 1.Review previous construction cost estimates and develop a high/low project budget. Based upon the budget,develop a variety of financing scenarios to determine the cost of power and its sensitivity to interest rates,bond size and payback period. 2.Meet with the fish processors and the City of Unalaska to review the various financing and ownership alternatives for project development.Assuming a preferred plan is identified and the cost of power is acceptable,confirm the various parties interest by signing appropriate "letters of intent." 3.Undertake an independent review of the project design and prepare an independent cost estimate to confirm the project budget.Review construction schedules,permit requirements and other potential constraints affecting the budget or schedule. 4.Prepare a detailed project development plan and initiate negotiations of required power sales agreements,etc.to secure project financing. It is our understanding that your Board of Directors under Resolution No.A92-11 has authorized the expenditure of up to $100,000 for the feasibility review,contingent upon the execution of an agreement which would provide for AIDEA's eventual reimbursement.Although we understand [}PO.Box 110809 Juneau,Alaska 99811-0809 (907)465-3575APO.Box 190869 701 East Tudor Road Anchorage,Alaska 99519-0869 (907)561-7877 92Q3\NK3623(1)Page If of2 s@ . Letter to Mr.Riley SneuSubject:Unalaska Geothermal Project September 22,1992 the desire for such an agreement,in the interest of time,we recommend that Task 1 be initiated immediately.The results of this preliminary financial assessment may provide the basis for the desired agreement. We currently have an active contract with R.W.Beck which can be used to pursue the development of the scenarios outlined in Task 1.The anticipated cost for the this task,including our in-house review of the construction costs,is less than $10,000.The work could be completed in approximately three weeks. Accordingly,we request AIDEA's approval to proceed with Task 1 at a cost not to exceed $10,000. Sincerely, Ronald A.Garzini Executive Director DE:RAG:nk Approved to proceed with Task 1 at a Not to Exceed cost of $10,000. hn!B.Olson cting Deputy Director (pevelopment) 92Q3\NK3623(2)Page 2 of2 et RW,BECKeeelANDASSOCIATES,INC. be 2522 Arctic Boulevard,Suite 210 m Anchorage,Alaska 99503-2516 m USA Telephone (907)272-6225 @ Fax (907)276-1751 WS-1559-AA1-AD October 15,1992 Mr.David Eberle Alaska Energy Authority Post Office Box 190869 Anchorage,Alaska 99519 Dear Dave: Enclosed is a draft report of our preliminary analysis of the Unalaska Geothermal Project. The analysis incorporates the construction costs developed by the Energy Authority and updated financial parameters.Several financing concepts were investigated,and these were tested for their sensitivity to various factors.Please note that a particular financing plan cannot be recommended at this time,because the parameters that the Project users might agree to are not known with certainty.It is fairly likely that the parameters the users will agree to will require some other source of financing in addition to bonds. Therefore,the willingness of an equity/loan participant must also be addressed before the best.financing plan can be chosen. I enjoyed working with you in putting together this report together and look forward to finalizing it.If you have any questions,please do not hesitate to call me at 272-6225. Very truly yours, R.W.BECK AND ASSOCIATES,INC. Rt.bliLMichaelD.Hubbard Director,Alaska Operations c:John Olson -AIDEA Austin,TX @ Boston,MA #Columbus,NE Denver,CO m Indianapolis,IN #Irvine,CA #Minneapolis,MN Nashville,TN #Orlando,FL =Phoenix,AZ #Sacramento,CA a San Jose,CA m Seattle,WA By TEA Reessdad Paper Pes duet DRAN I.INTRODUCTION PROJECT DESCRIPTION The Unalaska Geothermal Project (the "Project")is a 14-megawatt electric generating plant located on the Makushin Volcano,approximately 12 miles west of the City of Unalaska.Steam to drive the electric turbines is to be derived from geothermal fluid located in an underground reservoir located near the Project.The fluid will be drawn from the reservoir with wells,piped through a heat exchanger,and then reinjected into the reservoir through a reinjection well.The Project facilities and wells will be located at a site to allow the fluid to be drawn from a fracture zone located 1,950 feet below the surface and connected to the underground reservoir.This fracture zone is in a more accessible area than the reservoir which reduces construction problems. The potential users of the Project output include the City ofUnalaska (the "City"),which is the local utility,and several fish processors located in Unalaska/Dutch Harbor.These processors currently meet their energy requirements with their own generators as well as emergency purchases from the City.All of the installed generation is diesel fired at this time,and some waste heat is utilized for space heating and fish processing purposes. Because the potential users are located approximately 12 miles from the Project site,a 13.5-mile transmission line is also part of the overall development.Due to terrain limitations,3.5 miles of the transmission line will be an underwater crossing.Additionally, construction of a dock facility and approximately 12.5 miles of road to the Project site are required as part of the Project.A site map is provided in Figure 1 on the following page. BACKGROUND Early Studies.During the early 1980's,the Project's technical and economic feasibilities were reviewed.In 1988,the Alaska Energy Authority ("AEA")had a report prepared which summarized the resource and technical analyses performed thus far and provided an updated economic analysis.It was found that the geothermal resource was adequate to provide sufficient geothermal fluid for well past the life of any project constructed. Furthermore,the project being investigated at the time showed net economic benefits over its expected 30-year life. YIZ6/ST/OIefolgfeuLraypooreyseyeUl)Za8edx ASTITTMAKUSHINVOLCANOfwwww Figure 1 PROJECT LOCATION MAP "ISTSEN ees UNALASKA ISLAND "ZTST MAKUSHIN BAYS Sd Nad @®Temperature Gradient _weOoGeothermalExploratoryWell(ST-1)Approximate Site Location -SCALE 1:250 000 0 6 10 15 20 MILESSS=-r SSS s 0 5 10 15 20 KILOMETERS Subsequent to this report,in April 1988,the financial feasibility was investigated by AEA. This investigation found that while the benefit/cost ratio of the project was greater than 1.0,the inclusion of the project into the City's system would cause rates to significantly increase during the early years of operation.This was based on bond financing the entire amount,as no state grants or other sources of equity could be identified as being available at the time.Therefore,the project was put on hold until some other source of financing was available or events occurred which were significantly different from those assumed in the analysis. QESI Development Proposal.In 1991,OESI Power Corporation proposed to AEA that a project be built using a flash/binary modular system based on the use of OEST's proprietary technology.OESI had acquired the development rights to the steam field from the Battle Mountain Gold,Ltd.,in exchange for royalty payments from future steam sales.The plant was proposed to be built in modules,depending on the peak and energy requirements of the users,and four-and five-module concepts providing 15 and 17.5 megawatts of capacity were reviewed.The financing package advanced by OESI took advantage of tax credits available to private developers as well as the tax-exempt financing available to AEA.In general terms,OESI's proposal called for:1.)OESI to construct the project at a fixed price;2.)AEA to issue tax-exempt bonds to fund the construction of the project and certain up-front payments to OESI;and 3.)the geothermal field to be developed and paid for by OESI who in turn would receive payments for fluid delivered to the project. AEA,througha letter agreement with OESI,began a new investigation of the project,and R.W.Beck and Associates,Inc.,and GeothermEx,Inc.,were retained in late 1991 to assist with this investigation.Part of the project analysis included the update of the electric loads in the area,and itsoon became apparent that without the processor loads the financial feasibility of the project was in question.Accordingly,the processors that currently have their own installed generation were contacted at their offices in Seattle. Because bond financing required certain commitments to take power over the life of the bonds (expected to be a minimum of 15 years plus the construction period),there was a reluctance on the processors part to commit to the project. During the spring of 1992,OESI began to have financial difficulties on projects they were developing elsewhere,and their ability to develop the project was becoming questionable. Because of these difficulties and the reluctance of the processors to commit to long-term power sales agreements,the project analysis was put on hold. Current Joint Venture Proposal.Recently,the GEOlectric Corporation was formed by certain principals of OESI and acquired certain rights of steam field development from OESI.GEOlectric,on September 11,1992,made a joint venture proposal to the Alaska Industrial Development and Export Authority ("AIDEA")where AEA would develop the Unalaska Geothermal Project -10/15/92 Draft Page 3 generating portion of the Project,AIDEA would develop the steam field,andGEOlectric wouldprovide the interface between the two as well asprovide certain expertise in field and project development.Based on GEOlectric's proposal,the AIDEA Board of Directors felt that there was sufficient merit to the concept to warrant further analysis by staff.Because of AEA's and R.W.Beck's previous involvement in the Project,AEA was requested by AIDEA to assist in the preliminary financial assessment of the GEOlectric development concept. PURPOSE OF REPORT The Project development proposed by GEOlectric essentially transfers cost overrun risks in development back to th f Alaska.Furthermore since OESI equity is no longer available,the anticipated plan of finance has changed significantly. The purpose of this report is to provide an updated order-of-magnitude estimate of the construction costs under this new plan of development and to provide estimates of the cost of power under various financing scenarios. Unalaska Geothermal Project -10/15/92 Draft Page 4 Il.COST ESTIMATES CONSTRUCTION COSTS AEA developed revised construction cost estimates for the Project to be used in determining the cost of power.The AEA estimates are based primarily on cost information previously developed by OESI combined with two additional factors: 1.The Project construction schedule has slipped by at least one year,and 2.The risk of cost overruns has been transferred to the State,and higher contingency factors were deemed prudent. Two budget estimates were developed for the Project.AEA's low estimate represents the anticipated direct construction cost plus the minimum level of contingencies and Project reserves believed necessary by AEA for construction of a State-sponsored project.The high estimate incorporates a more conservative level of contingencies and reserves which may be appropriate at this early stage of Project development. Summarized below in Table 1 is a comparison of the AEA budget estimates to the OESI estimate of December 20,1991.The AEA estimates are shown in greater detail in Appendix A to this report.. Table 1 Unalaska Geothermal Project Construction Costs (Thousands) AEA AEA OESI Low High 2/20/91) Power Plant $55,836 $63,481 $53,195 Reservoir Development 13,800 15,500 9,504 Project Reserves 5.221 5.927 -_0)Total Development $74,857 $84,908 $62,699 (1)Not provided as a separate line-item. Unalaska Geothermal Project -10/15/92 Draft Page 5 OPERATING COSTS Operating costs were based on estimates provided in 1991 by OESI.However certain operating costs were not included as line-item expenses by OESI since they expected to recover such costs through a fluid fee.We have made estimates of these expenses by using OESI's documents provided in support of the fluid fees. At this time,the royalty agreement between Battle Mountain and OES]has not been made available to AEA or AIDEA.It is AEA's understanding that these royalties are a percentage of the Project's annual energy revenues (costs per kilowatt-hour delivered to the City substation)as shown in Table 2 below,but these have not been verified. Included with the operating costs is an additional amount to cover the City's expenses of transmitting power over their system to the processors.This estimate was provided to us by the City. Table 2 Unalaska Geothermal Project Annual Operating Costs(Thousands) Plant Operations and Maintenance $1,700 Wellfield Maintenance 350 Administrative and General 135 Plant Insurance 150 Wellfield Insurance 30 General Price Escalation 4.5%per year Royalties: Years 1-5 3.5%of busbar costs Years 6-10 4.5%of busbar costs Years 11 and thereafter 7.5%of busbar costs Additional City Costs (1994 dollars)1.5 cents/kWh During the life of the Project,certain periodic repairs and well rehabilitations must be made.These costs are assumed to be funded from special accounts established for these purposes.For purposes of our analysis,the source of funds for these accounts includes both bond proceeds and annual deposits from Project revenues.The annual deposits are set at $250,000 duringthe initialI years of Project operation andincrease over several yearstoamaximumof$650,000 peryeear.This ramping of deposits help keep costs lowerduringtheearlyyearsofoperati Unalaska Geothermal Project -10/15/92 Draft Page 6 Il.TYPES AND SOURCES OF FINANCING There are several possible sources and types of funds available to finance the construction of the Project,each with its own set of advantages and disadvantages.The following discussion identifies these sources,discusses their applicability,and sets forth the assumptions used for each source in determining the cost of power. BONDS Bonds are one of the major sources of financing available for the development of the Project and offer several advantages over others.Although certain conditions must be met,Project bonds could be tax-exempt if issued by either AEA or AIDEA.Therefore, the interest rate may be lower than the cost of capital of private equity participants. Additionally,bonds offer the opportunity to save available cash for other projects that may be difficult to bond finance. One of the primary disadvantages of bonds is that the debt service is relatively constant over the amortization period.In many cases,this causes delivered power costs of a particular project to be higher than the cost of alternatives during the initial years of operation.After a period of time,the alternative costs become more expensive due to inflationary effects on variable costs and other factors.If this cost differential in the early years is significant or the length of time until the alternative costs are higher is too long, then the ability to afford the project in the short-term is put in jeopardy.One method to help offset the early-year impacts is to ramp bond debt service.However,ramping debt service increases the overall cost of capital for two reasons.These include: e The average length of maturity lengthens.Since cost of capital generally increases the longer term it has,this increase in maturity would raise the average interest rate. e Ramping debt service signifies to the bondholders that the economics of a project may be more dependent than normal on load growth,inflationary effects on alternative costs,and/or other factors.Thus,a risk premium will be assigned which raises the interest rate. Unalaska Geothermal Project -10/15/92 Draft Page 7 Conversations with AEA's bond underwriter,John Nuveen &Company,have indicated that the following assumptions are warranted to be used in current financial markets. e Interest Rate:6.5 -7.0% e Amortization Period:15 -20 years e Bond Insurance Cost:1.25%of total debt service e Debt Service Reserve Fund:Maximum annual debt service EQUITY/LOANS Equity and loans are treated in the analysis the same since their characteristics in estimating the cost of power are similar.Equity typically includes an ownership share by the participant,and repayment can be subordinate to bonds and loans.Because of this subordination,the risk is higher to the participant;and the desired return on investment might be higher than with a loan. As part of our analysis,several repayment structures were considered with equity and loans.These include: Level payback -Since the effective interest rate would probably be higher than the interest rate incurred on tax-exempt debt,this type of payback does not offer any advantages over bonds.Therefore,it has not been used in any of the financing scenarios. Deferred payback -This type of financing,when combined with bonds,could offer significant advantages in keeping the cost of power at acceptable levels during the early years of operation.However,the overall acceptability will be dependent on the effective interest rate and the structure of repayment the equity participant or note holder is willing to have. No payback -The effects of a grant on the cost of power would be the same as an equivalent deferred payback loan during the early years of Project operation.The main benefit of a grant would not be realized until the debt service on the bonds had been retired,at which time the cost of power would drop dramatically. Consequently a grant,per se,was not investigated. Sources of equity and/or loans include State appropriations,AIDEA,the fish processors, the City of Unalaska,or other private third-party developers.AEA has no pool of capital to draw from and would require a specific State appropriation. Private developers typically seek relatively high rates of return,and the cost of capital would invariably be higher than interest rates found with tax-exempt bonds.This is Unalaska Geothermal Project -10/15/92 Draft Page 8 tempered somewhat by certain forms of tax credits which private developers may take advantage of,thereby lowering their cost of capital. COMBINATION Since certain advantages and disadvantages exist for both bonds and equity,the best financing plan may be a combination of the two.The best combination and repayment structure will depend on Project costs,usable energy,desired return on investment,and other related factors.The next section investigates these factors by analyzing the delivered cost of power under various financing structures. Unalaska Geothermal Project -10/15/92 Draft Page 9 IV.COST OF POWER MAJOR ASSUMPTIONS The cost of power delivered to the City and processors has been estimated under several different financing scenarios using the high and low development costs described earlier. The cost of power calculations are based on the following assumptions common to ail financing scenarios. Development Period -June 1993 through June 1995 Bond interest capitalized through September 1995 Bond interest only payments September 1995 -June 1996 General inflation -4.5 percent per year Bond interest -6.5% Amortization Period -15/20 years Bond Insurance -1.25%total debt of total debt service Debt Service Reserve Fund -Maximum annual debt service of bonds Length of Power Sales -30 years Earlier conversations with the fish processors indicated that a delivered cost of 12 cents per kilowatt-hour (at 1992 price levels)might be acceptable to them.This price was used as a target level in estimating the general acceptability of the various financing scenarios. ANALYSIS Several different financing scenarios were developed and investigated.These are described in greater detail in the case descriptions that follow;but in general,they include the following categories. A.Bond financing the entire project B.Bond financing the power plant only and equity/loan on the remaining portion with a ramped payback over 30 years C.Equity/loan for part of the Project with deferred payback so that the delivered cost of power is equal to or less than 12 cents per kilowatt-hour (1992 dollars) D.Equity/loan for part of the Project with ramped payback such that the delivered cost of power is always equal to 12 cents per kilowatt-hour (1992 dollars) Unalaska Geothermal Project -10/15/92 Draft Page 10 E.Bond financing the entire Project with bonds and establishing a rate stabilization fund to hold delivered costs to 12 cents per kilowatt-hour (1992 dollars). Where a particular scenario showed promise,its sensitivity to various external factors were tested.These factors include: e Development cost e Bond amortization period e Usable energy e Target rate of return e Acceptable delivered cost of power A total of 15 different cases were run and are described below.Table 3,at the end of this section,provides a summary of the results of these cases,and the estimated cost of power for the first six years of operation are shown in Tables 4 and 5.Table 4 represents the costs on a 1992 dollar basis while Table 5 is on a nominal dollar basis. A.Bond Finance Entire Project Case 1 -All development costs of the Project are financed with tax-exempt bonds.Costs are based on AEA's low estimate of project development. Bonds are amortized for 20 years after June 1996,and a total energy usage of 75 million kilowatt-hours is assumed. Case 2 -This case is the same as Case 1 but uses AEA's higher development cost estimate.The resulting higher annual debt service on the bonds accentuates the problem seen in Case 1. B.Equity/Loan With Ramped Payback and Bonds Case 3 -Two sources of financing are utilized in Cases 3 -5.Bonds are used to fund the power facilities of the Project while the steam field is developed with equity.It is assumed that the equity participant or note holder gains its return by charging some amount per kilowatt hour produced from the Project.In Case 3,the low estimate of Project development costs are used and the target rate of return is 10 percent. Case 4 -This case is the same as Case 3 but uses AEA's higher development costs.The target rate of return is held the same at 10 percent. Unalaska Geothermal Project -10/15/92 Draft Page 11 Case 5 -Case 5 is the same as the previous case using the high development cost estimate but investigates the effect of a lower target rate of return. Here,the return is held to 7 percent. C.Equity/Loan With Deferred Payback and Bonds Case 6 -Cases 6 -11 represent runs performed where the delivered cost of power is limited to no more than 12 cents per kilowatt-hour in 1992 dollars.The cost of power is allowed to fluctuate below that amount but never go above it. In these cases,the 12-cent figure limits the amount of bonds that can be issued.The remaining development costs are assumed to be funded from some other source of equity.No repayment on the equity/loan is made until the bonds are paid off,at which time annual debt service is continued through year 30 and paid to the equity participant or note holder.This concept is similar to that found with Bradley Lake. Case 6 is based on AEA's low development cost estimate and a 20-year bond amortization period. Case 7 -This case is the same as Case 6 but has AEA's higher development cost. Case 8 -This is the same as Case 6 with AEA's low development cost estimate but has a 15-year bond amortization period.The bond size is decreased significantly because of the higher debt service associated with the shorter amortization period. Case 9 -Case 9 is the same as the previous case with the exception of using AEA's higher development cost. Case 10 -One of the major risks of the Project is the amount of energy that can be used from the Project.Although it may be capable of producing more,the amount that can fit into the users'loads will be limited by daily load patterns.This case investigates the effect of 65 million kilowatt-hours of usable energy instead of 75 million. Case 11 -This is the same as Case 10 but uses 85 million kilowatt-hours of usable energy. Unalaska Geothermal Project -10/15/92 Draft Page 12 D.Equity/Loan With Bonds -Constant Delivered Cost of Power (1992$) Case 12 -Whereas in Cases 6 -11 the per unit cost of power was allowed to fluctuate below 12 cents per kilowatt-hour (1992 dollars),Case 12 holds the real cost at that amount throughout the Project life.As the costs begin to decline in real terms,the difference between the 12-cent level and the actual cost of power is assumed to be paid to the equity participant and/or note holder as their return on investment. It should be noted that no large rehabilitation costs have been included that might be expected approximately mid way through the Project's life.The inclusion of such costs could decrease the expected rate of return by some amount for Cases 12-15. Case 13 -This is the same as Case 12 but holds the cost of power to 11 cents per kilowatt-hour (1992 dollars). E.Rate Stabilization Fund Case 14 -For this case,the entire development costs are funded from bonds and a separate rate stabilization fund is established.At the time of bond issue,an amount of money is set aside for a rate stabilization fund to be used to hold Project costs at 12 cents per kilowatt-hour (1992 dollars). The source of this rate stabilization fund is something other than bonds (i.e.,equity/loan or grant).Similar to the previous cases,once the Project costs are less than 12 cents,then the source of the rate stabilization funds is paid back from the difference between the actual cost and 12 cents.In Case 14,the amortization period of the bonds is increased back to 20 years. Case 15 -This is the same as the previous case using a rate stabilization fund, but the amortization period is reduced to 15 years. Several of the most promising cases are provided in graphs on Figures 2 and 3.Figure 2 represents the delivered cost of power on a real basis (1992 dollars),and Figure 3 provides the same data on a nominal basis. Unalaska Geothermal Project -10/15/92 Draft Page 13 YeICZ6/ST/OL-WeforgeuUayoenHexsereul)yp]odegTable 3 Unalaska Geothermal Project Summary of Reaults Dev Bond =Bond Amon Equity/Loan Usable Power Case Cos Finance Interest Period Amount Retum Energy Cost (SMil)(%)(Ys)(SMil)(®%)(GWh)(c&Wh) 1 Low All 6.5%20 ----75 Delivered costs higher than thought to be acceptable. 2 High All 65%20 --">15 2 Same as Case 1 but delivered costs even higher. 3 Low PP 6.5%20 14.8 10.0%75 F Retum on loan/equity adds 1.5 cent/cWh +inflation.Slightly better than Case }but still higher than acceptable. 4 High PP 65%20 16.7 10.0%15 >Rewm on loan/equity adds 1.68 cents/kWh+inflation.Slightly higher than Case 2 but still higher than acceptable. 5 High PP 6.5%20 16.7 10%75 Lower effective interest rate lowers retum on loan/equity to 1.16 cents Wh.Still higher than that acceptable. 6 Low Partial 6.5%20 16.5 4.9%75 Approximately $6.5 million of loan/equity required with expected return on investment equal to 4.9%. 7 High Partial 6.5%20 25.6 3.2%75 Higher construction costs increases loan/equity required to $25.6 million and reduces expected retum to 3.2%. 8 Low Partial §86.5%15 24.6 5.7%75 Shorter bond amortization period than in Case 6 increases loan/equity to $24.6 million.Retum increases to 5.7%duc to shorter bond amortization period and increased years of loan/equity repayment. 9 High Partial 6.5%15 34.2 4.2%75 E Loan/equity increased to $34.2 million from that in Case 7.Expected retum increases to 4.2%. 10 High Partial 65%15 43.2 2.3%63 g Lower usable energy increases loan/equity to $43.2 million from that in Case 9,and expected retum decreases to 2.3%. tl High Partial 6.5%15 25.3 6.3%85 Higher usable energy decreases loan/equity to $25.3 million and increases expected retum to 6.3%. 12 High Partial 65%15 34.2 9.2%15 12 Same equity /loan as in Case 9 but fixed 12-cent/kWh rate increases retum to 9.2% 13 High Partial 6.5%15 414 15%715 il Reducing target delivered cost to 11 cents/kWh increses loan/equity to $41.4 million and reduces expected return to 7.5%. 14 High All 6.5%20 21.1 9.3%75 12 Equity loan =present value of rate stabilization payments.Repayments occur when costs<12 cents/kWh (1992$). 15 High All 6.5%15 45.3 19%75 12 Decreased bond amortization period increases rate stabilization required and decreases expected retum. Notes: Bond Finance All -All of project costs are financedthroughrevenuebonds. PP -Power plant only is financedwithrevenuebonds. Partial -Project costs above that of grant are financed with revenue bonds. Equity/Loan Percent retum based on power sales throughyear30. Power Cost Variable-Power cost variable. 12-cent maximum -Power cost held to 12 cents/kWh or less (19925). 12/11 cents -Power cost held at constant level in 1992 dollars. YeIqZ6/ST/OI-eforgFeuspjoeneyseyeup,GIo8egTable 4 Unalaska Geothermal Project Delivered Cost of Power -1992 Dollars Bond Delivered Rate -1992 Dollars Dev Bond Issue Bond Amor Equity/Loan Usable Power (cente/&k Wh) Case Cost Finance Size Interest Period Amount Retum Energy Cost 1995 1996 1997 1998 1999 2000 ,($Mil)($M)(®)(Ym)(SMi!)(®)(GWh)=(ch) 1 Low All 100.3 6.5%20 ----18 8.1 13.2 14.2 13.8 13.4 13.2 2 High All 113.4 6.5%20 ----15 8.5 143 15.5 15.0 14.5 14.3 3 Low PP 81.0 65%20 14.8 10.0%15 4 8.8 12.9 13.7 13.4 13.1 12.9 4 High PP 97 6.5%20 16.7 10.0%75 >9.3 14.0 14.9 14.5 14.2 14.0 5 High PP 91.7 6.5%20 16.7 1.0%15 8.8 13.5 14.4 14.1 13.7 13.5 6 Low Partial 71.2 6.5%20 16.5 4.9%15 13 11.2 12.0 11.7 14 11.2 7 High Partial 77.2 6.5%20 25.6 3.2%75 13 11.2 12.0 11.7 114 11.2 8 Low Partial 65.7 6.5%15 24.6 5.7%15 6.9 10.8 12.0 11.7 14 11.2 9 High _--Partial 65.7 63%15 34.2 4.2%15 6.9 10.8 12.0 11.7 11.4 11.2 10 High Partial 53.1 6.5%15 43.2 2.3%65 Rs 12 10.9 12.0 11.7 41.4 11.3 i High =Pastial 78.2 6.5%15 25.3 6.3%85 6.6 10.7 12.0 11.7 11.3 Wl 12 High Partial 65.7 6.5%15 34.2 9.2%75 12 12.0 12.0 12.0 12.0 12.0 12.0 13 High Partial 36.3 65%13 41.4 1.5%78 ll 11.0 11.0 11.0 11.0 11.0 11.0 14 High All 113.4 6.5%20 21.1 9.3%75 12 12.0 12.0 12.0 12.0 12.0 12.0 13 High All 114.3 6.5%15 45.3 1.9%18 12 12.0 12.0 12.0 12.0 12.0 12.0 Bond Finance All -All of project costs are financed through revenue bonds. PP -Power plant only is financed with revenue bonds. Partial -Project costs above that of grant are financed with revenue bonds. Case 1 Bond financeentireproject.Low constructioncostestimate. 2 Same as Case 1 but high construction cost estimate. 3 Equity financing of steam field.Assumes equity participant receives retum by charging stated additional cost per kWh. 4 Same as Case 3 but high constructioncostestimate. 5 Same as Case 4 but lower rate of retum to equity participant. 6 Bonds are sized such that the cost of power in 1997 is 12.0 centsWh in (1992$).Grant/equity financing provides the remaining construction funds.Retum to equity/grant is provided forby continuing debt service after bonds paid off. 7 Same as Case 6 but with high constructioncostestimate. 8 Same as Case 6 but with 15-year amortization period of bonds. 9 Same as Case 8 but with high construction cost estimate. 10 Same as Case 9 but with lower usable energy.Bond issue is lower to have the rate equal to 12 cents/k Wh,therefore grant/equity higher. 11 Same as Case 9 but with higher usable energy. 12 Hold annual cost of power at 12 centsAWh in 1992 dollars.Difference between actual costs and 12 cents is retumed to equity/grant. 13.SameasCase 12 but heldto 11 cents/kWhin 1992 dollars. 14 Bond finance entire project and set aside money in 1993 to fund rate stabilization fund used to hold rates at 12 cents/kWh.In later years when power costs less than 12 cents,difference is reuumed to grant/equity. Note:NO costs are included for major rehabilitation to project. YIZ6/ST/OL-eforgFeuapooHeysereuy)QIa3egCase =oCRONAWAWN&=-_-==wUewwTable 5 Unalaska Geothermal Project Delivered Cost of Power -Nominal Dollars Bond Delivered Rate -Nominal Dollars Dev Bond Issue Bond Amon Equity/Loan Usable Power (cents/k Wh) Cost Finance Size Interest Period Amount Retum Energy Cost 1995 1996 1997 1998 1999 2000 (SMil)($M)(®)(Yn)(SMil)(%)(GWh)(c&Wh) Low All 100.3 6.5%20 *---15 9.2 15.7 17.7 18.0 18.2 18.7 High All 113.4 6.5%20 ----15 2 9.7 17.0 19.3 19.5 19.8 20.3 Low PP 81.0 6.5%20 14.8 10.0%715 3 10.0 15.4 17.1 17.4 17.8 18.3 High PP 91.7 6.5%20 16.7 10.0%75 >10.6 16.6 +18.6 18.9 19.3 19.9 High PP 91.7 6.5%20 _167 1.0%715 10.1 16.1 18.0 18.3 18.6 19.2 Low Partial 71.2 6.5%20 16.5 49%15 8.3 '13.4 15.0 15.2 15.5 15.9 High Partial 71.2 6.5%20 25.6 3.2%15 8.3 13.4 15.0 15.2 15.5 15.9 Low Partial 65.7 6.5%15 24.6 5.7%75 7.8 12.8 15.0 15.2 15.5 15.9 High Partial 65.7 6.5%1s 34.2 4.2%75 7.8 12.8 15.0 15.2 15.5 15.9 High Partial $3.1 6.5%1S 43.2 2.3%65 a 8.2 12.9 14.9 15.2 15.5 16.0 High Partial 78.2 6.5%15 25.3 6.3%85 15 12.8 15.0 15.2 15.4 15.9 High Partial 65.7 6.5%15 34.2 9.2%15 12 13.7 14.3 15.0 15.6 16.3 171 High Partial 56.3 6.5%15 41.4 715%75 ll 12.6 13.1 13.7 14.3 15.0 15.6 High All 113.4 6.5%20 21.1 9.3%15 12 13.7 14.3 15.0 15.6 16.3 17.1 High All 114.3 6.5%15 45.3 1.9%18 12 13.7 14.3 15.0 15.6 16.3 17.1 Bond Finance All-All of projectcostsare financed through revenue bonds. PP -Power plant only is financed with revenue bonds. Partial -Project costs above that of grant are financed with revenue bonds. Bond finance entire project.Low construction cost estimate. SameasCase 1 but high constructioncostestimate. Equity financing of steam field.Assumes equity participant receives retum by charging stated additional cost per kWh. Same as Case 3 but high constructioncostestimate. Same as Case 4 but lower rate of retum to equity participant. Bonds are sized such that the cost of power in 1997 is 12.0 cents/kWh in (1992$).Grant/equity financing provides the remaining construction funds.Retum to equity/grant is provided for by continuing debt service after bonds paid off. Same as Case 6 but with high construction cost estimate. Same as Case 6 but with 15-year amortization period of bonds. Same as Case &but with high construction cost estimate. Same as Case 9 but with lower usable energy.Bond issue is lower to have the rate equal to 12 cents/k Wh,therefore grant/equity higher. Same as Case 9 but with higher usable energy. Hold annual cost of power at 12 cents/kWh in 1992 dollars.Difference between actual costs and 12 cents is retumed to equity/grant. SameasCase 12 but heidto 11 cents/kWhin 1992 dollars. Bond finance entire project and set aside money in 1993 to fund rate stabilization fund used to hold rates at 12 cents/kWh.In later years when power cosis less than 12 cents,difference is retumed to grant/equity. Note:NO costs are included for major rehabilitation to project. yeiqZ6/ST/OI-eforgfeuspIoeyeysefeup,DeliveredCost(cents/kWh)LIo8egFigure 2 Delivered Cost of Power -1992 Dollars 16.0 + o ar7 .oS ™++Case 2:All Bonds (High Cost)14.0 --ly s.meme,af "=msea7.see %e "es q Pad wee "ee bd cotta, oe .wee,eek ti Tee 12 cents Wh (1992S):Cases 12,14,1512.0 TT rt Pere Pe ae Toe7se...OESI*i991 "Stn. 100 +]te,i meee ,;Cases 6-9:Delayed Payback Wormer A oooS| st'4ii6.0 ++Case5Ramped PaybackwithBonds_ 2.0 +od- _ba>= +-_---i \it i0.0 v q T qT UJ U UJ U |U J T g 3 S g &a a YerZ6/ST/OLefoigTeuLoyIOeHeysejeupSIaseg50.0 45.0 40.0 wblSo30.0 DeliveredCost(cents/kWh)4°20.0 15.0 10.0 Figure 3 Delivered Cost of Power -Nominal Dollars -_ 12 centsWh (1992$):Cases 12,14,15 Cases 6-9:Delayed Payback -*a” oa -_am” OESI-1991 20097 °%.- «Pal aoon”Ww Paton”"\- 4 oo"\Case 5:Ramped Payback siti Bondsae' ”.e \oo _*Vue""oc”'-™.” 4 \oe Case2:All Bonds (High Cost)ay l I 1 1 if ]|a |!]|1 1 |1 1 !|J J |}q qT T Ul LJ q q q t 1]q 1]q q q qT q q q LI T )| °3 S s 8-ra] V.OBSERVATIONS/RECOMMENDATIONS Based on the investigation of the various financing scenarios and their sensitivity to various external factors,the following observations and recommendations can be made. The list should not be considered as all-inclusive,and others may be prudent depending on risk tolerance,availability of funds,and other factors. 1.In order for the delivered costs of the Project to be at acceptable levels in the early years,some sort of equity/loan financing in addition to bonds will be required.Bond financing the entire Project causes delivered costs to be significantly higher than 12 cents per kilowatt-hour during the first several years of Project operation. 2.The cost of power and equity requirements are directly related to the usable Project energy.The City's current energy requirements are approximately 20 million kilowatt-hours,only a fraction of the 75 million kilowatt-hours used in determining the cost of power.Therefore,the fish processors are an integral part of this Project,and steps should be taken immediately to determine their interest in and commitment to the Project. 3.The bond amortization period has been assumed to be either 15 or 20 years after the first year of Project operation,and the total length of power sales has been assumed to be 30 years.The bond interest rate,the risk to investors,and the actual return on investment will be dependent on the duration of the power sales agreement,the strength of its terms and conditions,and other related factors. 4.The Project construction cost is a key variable in determining the financing requirements and cost of power.Construction costs should be verified by an independent source. 5.The preferred financing scenario cannot be determined until discussions are held with the City,fish processors,and equity/loan sources.Information that must be obtained includes,but is not limited to,the following: Unalaska Geothermal Project -10/15/92 Draft Page 19 City and Fish Processors e The highest acceptable cost of power e Whether or not the highest cost can be exceeded for some duration of time e Whether or not a constant price in real dollars is acceptable e The length of time they are willing to commit to purchase power e The amount of power that they will commit to purchase Equity/Loan Sources e Effective interest rates sought e Whether the repayment should be level,ramped,or deferred e The acceptable risk with regard to length of power sales The needs and desires of these two entities are directly interrelated in that what one party is willing to do or accept will affect the requirements of the other.The information presented in this report can be used as an introduction of discussions between all the parties involved.Once these discussions take place and boundaries of acceptance set,a more definitive finance plan can be established to determine if it is feasible for the Project to proceed.It is therefore recommended that these discussions be held as soon as possible. Unalaska Geothermal Project -10/15/92 Draft Page 20 APPENDIX A Construction Cost Estimates UNALASKA GEOTHERMAL PROJECT AEA Budget Estimate 10/7/92 FEATURE LOW HIGH NOTES* ($1,000)($1,000) |.PLANT (Direct costs) 1.Generation Facility a.Site preparation 1,775 1,775 b.Bidg's &structures 555 750 high:addti bid'g allowance c.Mechanical 3,157 3,157 d.Electrical 1,534 1,534 e.Scada /controls 564 564 f.Modular plant 12,448 13,000 high:addti wind protection subtotal $20,033 $20,780 2.Fluid gathering (all work)$2,745 $3,444 low 9/23,high 12/20 3.Transmission /substations a.Buried T/L 3611 4197 low:mixed quotes,high:pierrii b.Submarine cable 2363 2950 low:mixed quotes,high:pierrii c,Substations 732 732 subtotal $6,706 $7,879 4.Distribution a.City improvements 1500 1500 b.Dispatch center 8)250 high:add dispatch subtotal $1,500 $1,750 5.Roads &dock a.Road const.7460 7460 b.Dock const.415 415 c.ROW acquistion 0 250 high:add ROW cost d.Borrow mati's 90 228 low:9/23,high:228000 CY @$1 subtotal $7,965 $8,353 *except as noted,all costs based on OES!9/23/92 estimate Page 1 UNALASKA GEOTHERMAL PROJECT 6.Construction support a.Camp &catering 1200 1500 low:9/23,high:ext.schedule b.Transportation 1243 1500 low:9/23,high:ext.schedule c.Temp.utilities,etc.1611 1750 low:9/23,high:ext.schedule subtotal $4,054 $4,750 7.Start-up &testing (all work)$705 $705 8.O &M supplies a.Equipment 622 622 from 12/20 est. b.Spares 940 940 from 9/23 est. subtotal $1,562 $1,562 Total (direct const.)$45,270 $49,223 9.Design a.Generation plant 880 909 low/high:7.5%+2.5%modules b.Fluid gathering 137 258 low:5%,high:7.5% c.T/L &subs 350 350 low/high:9/23 est. d.Distribution 113 131 low/high:7.5% e.Road &dock 400 626 low:5%,high:7.5% f.Permitting 120 200 low/high:adatt allowance g.Misc.100 100 low/high:addtt allowance subtotal $2,100 $2,574 10.Const.management (all work)$1,584 $2,079 low:5%(no module cost) high:7.5%+2.5%modules 11.Administration (all work)$988 $1,086 low/high:2%all items Total (admin,design,CM)$4,672 $5,739 TOTAL PLANT (Direct)$49,942 $54,962 Page 2 UNALASKA GEOTHERMAL PROJECT ll,FIELD DEVELOPMENT 1.Purchase rights 1500 1500 low/high:JV est. 2.Field design 618 1000 low:7.5%drilling,high:JV est. 3.Drilling &matils 8238 8238 low/high:9/23 est. 4.Testing &evaluation 1289 1289 low/high:9/23 est. 5.Admin,CM,insurance 400 842)low:12/06,high:CM 5%admin 2% TOTAL FIELD (Direct)$12,045 $12,869 BUDGET SUMMARY (with escal.&contingency) 1,PLANT Direct cost 49942 54962 Escalation 1998 2748 low:4%,high:5% Contract contingency 3896 5771 low:7.5%,high:10% TOTAL PLANT $55,836 $63,481 il,FIELO DEVELOPMENT Direct cost 12045 12869 Escalation 481 643 low:4%,high:5% Contract contingency 1253 2027 low:10%,high:15% TOTAL FIELD $13,779 $15,539 lil,PROJECT RESERVES $5,221 $5,927 low/high:7.5%all costs GRAND TOTAL $74,836 $84,947 Page 3 APPENDIX B Cost of Power 8.5 14.3 15.5 15.0 14.5 14.3 13.9 13.5 13.1 12.7 12.6 12.3 12.0 11.7 11.4 M11 10.8 10.9 10.6 10.3 10.1 13 4.7 4.7 4.7 4.7 4.7 4.7 4.7 4.7 Unalaska Geothermal Project Projected Cost of Power 1992 Dollars 5 6 7 8.8 13 73 13.5 11.2 11.2 14.4 12.0 12.0 14.1 11.7 11.7 13.7 11.4 11.4 13.5 11.2 11.2 13.2 11.0 11.0 12.9 10.7 10.7 12.6 10.4 10.4 12.3 10.2 10.2 12.2 10.1 10.1 11.9 9.9 9.9 11.7 9.7 9.7 11.4 9.5 9.5 11.2 9.2 9.2 11.0 9.1 9.1 10.8 8.9 8.9 10.8 8.9 8.9 10.6 8.7 8.7 10.3 8.5 8.5 10.2 8.4 8.4 79 8.2 8.2 5.8 8.1 8.1 5.8 19 19 5.8 7.8 718 5.8 76 7.6 5.8 1.5 1.5 5.8 7.4 7.4 5.8 7.2 72 3.8 7A TA 6.9 10.8 12.0 117 11.4 11.2 11.0 10.7 10.4 10.2 10.1 9.9 9.7 9.5 9.2 9.1 8.9 8.9 8.7 8.5 8.4 8.2 8.0 19 V7 16 15 14 7.2 TA 6.9 10.8 12.0 117 11.4 11.2 11.0 10.7 10.4 10.2 10.1 9.9 9.7 9.5 9.2 9.1 8.9 8.9 8.7 8.5 8.4 8.2 8.0 19 17 71.6 15 1.4 72 1 7.2 10.9 12.0 11.7 11.4 11.3 11.0 10.8 10.5 10.3 10.3 10.1 9.8 9.7 9.5 9.3 9.1 9.1 9.0 8.8 8.7 8.5 8.3 8.2 8.1 19 78 17 16 1.5 11 6.6 10.7 12.0 11.7 11.3 ill 10.9 10.6 10.3 10.1 10.0 9.8 9.5 9.3 9.1 8.9 8.7 8.7 8.5 8.3 8.2 8.0 7.8 7.7 15 7.4 7.2 71 7.0 6.8 12 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 13 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 14 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 15 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 14.2 14.8 15.4 16.1 16.9 17.6 18.3 19.1 Unalaska Geothermal Project Projected Cost of Power Nominal Dollars 5 6 7 10.1 8.3 8.3 16.1 13.4 13.4 18.0 15.0 15.0 18.3 15.2 15.2 18.6 15.5 15.5 19.2 15.9 15.9 19.6 16.3 16.3 20.0 16.6 16.6 20.4 16.9 16.9 20.8 17.2 17.2 21.7 17.9 17.9 22.1 18.3 18.3 22.6 18.7 18.7 23.1 19.1 19.1 23.6 19.5 19.5 24.3 20.1 20.1 24.9 20.5 20.5 26.0 21.5 21.5 26.6 22.0 22.0 27.2 22.5 22.5 28.0 23.1 23.1 22.7 23.6 23.6 17.5 24.2 24.2 18.2 24.8 24.8 19.0 25.4 25.4 19.8 26.1 26.1 20.8 26.9 26.9 21.7 27.6 27.6 22.6 28.3 28.3 23.6 29.1 29.1 7.8 12.8 15.0 15.2 15.5 15.9 16.3 16.6 16.9 17.2 17.9 18.3 18.7 19.1 19.5 20.1 20.5 21.5 22.0 22.5 23.1 23.6 24.2 24.8 25.4 26.1 26.8 27.6 28.3 29.1 78 12.8 15.0 13.2 15.5 15.9 16.3 16.6 16.9 17.2 17.9 18.3 18.7 19.1 19.5 20.1 20.5 21.5 22.0 22.5 23.1 23.6 24.2 24.8 25.4 26.1 26.8 27.6 28.3 29.1 8.2 12.9 14.9 15.2 15.5 16.0 16.4 16.7 17.1 17.5 18.2 18.6 19.0 19.5 20.0 20.6 21.1 22.1 22.6 23.1 23.8 24.4 25.1 25.7 26.4 27.2 28.0 28.8 29.6 30.5 11 1.5 12.8 15.0 15.2 15.4 15.9 16.2 16.4 16.7 17.0 17.7 18.1 18.4 18.8 19.2 19.7 20.1 21.0 21.4 21.9 22.5 23.0 23.5 24.1 24.6 25.2 25.9 26.6 27.3 28.0 12 13.7 14.3 15.0 15.6 16.3 17.1 17.8 18.6 19.5 20.4 21.3 22.2 23.2 24.3 25.4 26.5 27.7 28.9 30.2 31.6 33.0 34.5 36.1 37.7 39.4 41.2 43.0 44.9 47.0 49.1 13 12.6 13.1 13.7 14.3 15.0 15.6 16.3 17.1 17.9 18.7 19.5 20.4 21.3 22.2 23.2 24.3 25.4 26.5 27.7 29.0 30.3 31.6 33.1 34.5 36.1 37.7 39.4 41.2 43.1 45.0 14 13.7 14.3 15.0 15.6 16.3 17.1 17.8 18.6 19.5 20.4 21.3 22.2 23.2 24.3 25.4 26.5 27.7 28.9 30.2 31.6 33.0 34.5 36.1 37.7 39.4 41.2 43.0 44.9 47.0 49.1 15 13.7 14.3 15.0 15.6 16.3 17.1 17.8 18.6 19.5 20.4 21.3 22.2 23.2 24.3 25.4 26.5 27.7 28.9 30.2 31.6 33.0 34.5 36.1 37.7 39.4 41.2 43.0 44.9 47.0 49.1 ™ natashahee therma%°Prefer &O RWBECK AND ASSOCIATES,INC. | 2522 Arctic Boulevard,Suite 210 m Anchorage,Alaska 99503-2516 m USA Telephone (907)272-6225 mw Fax (907)276-1751 WS-1559-AA1-AD October 21,1992 Mr.David Eberle Alaska Energy Authority Post Office Box 190869 Anchorage,Alaska 99519 Dear Dave: Enclosed are revised Tables 3-5 for the October 15,1992,draft report on the Unalaska Geothermal Project.The tables include the following changes: Case 14b has been added at the request of Dan Schochet.This case represents the rate stabilization fund as in whatis now referred to as Case 14a.However,the new case includes the lower construction cost estimate. The numbers shown in the tables included the wrong equity/loan amounts for Cases 14 and 15.The numbers shown were the nominal amounts of rate stabilization required without any interest earnings accruing to the fund.However,the text describes the fund as being set aside in 1993 with interest earnings accruing to it.Therefore,a smaller amount than that eventually required can be set aside;and the revised numbers reflect this lower amount.The expected returns do not change,because they were calculated using these lower amounts. I apologize for any confusion this causes.If you have any questions,please call me at 272-6225. Very truly yours, R.W.BECK AND ASSOCIATES,INC. Doh.Moth O Michael D.Hubbard,P.E. Director,Alaska Operations c:John Olson Enclosures -Tables 3-5 Austin,TX =Boston,MA @ Columbus,NE m Denver,co =Indianapolis,IN m Irvine,CA m Minneapolis,MN Nashville,TN =Orlando,FL a Phoenix,AZ a Sacramento,CA m San Jose,CA m Seattle,WA ne A Recycled Paper Product Table 3 Unalaska Geothermal Project Summary of Results Dev Bond Bond Amort Equity/Loan Usable Power Case Cost Finance Interest Period Amount Retum Energy Cost ($Mil)(%)(Yrs)($Mil)(%)(GWh)(c/kWh) 1 Low All 6.5%20 ----75 Delivered costs higher than thought to be acceptable. 2 High All 6.5%20 ----75 2 Same as Case |but delivered costs even higher. 3 Low PP 6.5%20 14.8 10.0%75 Retum on loan/equity adds 1.5 cent/kWh +inflation.Slightly better than Case 1 but still higher than acceptable. 4 High PP 6.5%20 16.7 10.0%75 >Retum on loan/equity adds 1.68 cents/kWh+inflation.Slightly higher than Case 2 but still higher than acceptable. 5 High PP 6.5%20 16.7 7.0%75 Lower effective interest rate lowers retum on loan/equity to 1.16 cents/kWh.Still higher than that acceptable. 6 Low Partial 6.5%20 16.5 4.9%75 Approximately $6.5 million of loan/equity required with expected retum on investment equal to 4.9%. 7 High Partial 6.5%20 25.6 3.2%75 g Higher construction costs increases loan/equity required to $25.6 million and reduces expected retum to 3.2%. 8 Low Partial 6.5%15 24.6 5.7%75 &Shorter bond amortization period than in Case 6 increases loan/equity to $24.6 million.Retum increases to 5.7%due toéshorterbondamortizationperiodandincreasedyearsofloan/equity repayment. 9 High Partial 6.5%15 34.2 4.2%715 8 Loan/equity increased to $34.2 million from that in Case 7.Expected retum increases to 4.2%. 10 High Partial 6.5%15 43.2 2.3%65 3 Lower usable energy increases loan/equity to $43.2 million from that in Case 9,and expected retum decreases to 2.3%. 11 High Partial 6.5%15 25.3 6.3%85 Higher usable energy decreases loan/equity to $25.3 million and increases expected return to 6.3%. 12 High Partial 6.5%15 34.2 9.2%75 12 Same equity/loan as in Case 9 but fixed 12-cent/kWh rate increases retum to 9.2% 13 High Partial 6.5%15 41.4 7.5%75 11 Reducing target delivered cost to 11 cents/kWh increses loan/equity to $41.4 million and reduces expected retum to 7.5%. l4a High All 6.5%20 15.7 9.3%75 12 Equity loan =present value of rate stabilization payments.Repayments occur when costs<12 cents/kWh (19923). 14b Low All 6.5%20 7.4 13.5%75 12 Lower construction costs requires less rate stabilization and increases expected return. 15 High All 6.5%15 31.8 71.9%75 12 Decreased bond amortization period increases rate stabilization required and decreases expected retum. Notes: Bond Finance All -All of project costs are financed through revenue bonds. PP -Power plant only is financed with revenue bonds. Partial -Project costs above that of grant are financed with revenue bonds. Equity/Loan Percent return based on power sales through year 30. Power Cost Variable -Power cost variable. 12-cent maximum -Power cost held to 12 cents/kWh or less (19925). 12/11 cents -Power cost held at constant level in 1992 dollars. wsCase ZTSoMONANRWHYaiiilesdwwNl4a 14b 15 15 Table 5 Unalaska Geothermal Project Delivered Cost of Power -Nominal Dollars Bond Delivered Rate -Nominal Dollars Dev Bond Issue Bond Amort Equity/Loan Usable Power (cents/k Wh) Cost Finance Size Interest Period Amount Retum Energy Cost 1995 1996 1997 1998 1999 2000 ($Mil)($MIl)(%)(Yrs)(SMil)(%)(GWh)(chkWh) Low All 100.3 6.5%20 ----75 9.2 15.7 17.7 18.0 18.2 18.7 High All 113.4 6.5%20 --=:75 2 9.7 17.0 19.3 19.5 19.8 20.3 Low PP 81.0 6.5%20 14.8 10.0%75 -10.0 15.4 17.1 17.4 17.8 18.3 High PP 91.7 6.5%20 16.7 10.0%75 >10.6 16.6 18.6 18.9 19.3 19.9 High PP 91.7 6.5%20 16.7 7.0%75 10.1 16.1 18.0 18.3 18.6 19.2 Low Partial 77.2 6.5%20 16.5 4.9%75 8.3 13.4 15.0 15.2 15.5 15.9 High Partial 77.2 6.5%20 25.6 3.2%715 5 8.3 13.4 15.0 15.2 15.5 15.9 Low Partial 65.7 6.5%15 24.6 5.7%75 £7.8 12.8 15.0 15.2 15.5 15.9 High Partial 65.7 6.5%15 34.2 4.2%715 a 78 12.8 15.0 15.2 15.5 15.9 High Partial 53.1 6.5%15 43.2 2.3%65 a 8.2 12.9 14.9 15.2 15.5 16.0 High Partial 78.2 6.5%15 25.3 6.3%85 15 12.8 15.0 15.2 15.4 15.9 High Partial 65.7 6.5%15 34.2 9.2%15 12 13.7 14.3 15.0 15.6 16.3 17.1 High Partial 56.3 6.5%15 41.4 7.5%75 11 12.6 13.1 13.7 14.3 15.0 15.6 High All 113.4 6.5%20 15.7 9.3%75 12 13.7 14.3 15.0 15.6 16.3 17.1 Low All 100.3 6.5%20 7.4 13.5%75 12 13.7 14.3 15.0 15.6 16.3 17.1 High All 114.3 6.5%15 31.8 71.9%75 12 13.7 14.3 15.0 15.6 16.3 17.1 Bond Finance All -All of project costs are financed through revenue bonds. PP -Power plant only is financed with revenue bonds. Partial -Project costs above that of grant are financed with revenue bonds. Bond finance entire project.Low construction cost estimate. Same as Case 1 but high construction cost estimate. Equity financing of steam field.Assumes equity participant receives retum by charging stated additional cost per kWh. Same as Case 3 but high construction cost estimate. Same as Case 4 but lower rate of retum to equity participant. Bonds are sized such that the cost of power in 1997 is 12.0 cents/kWh in (19923).Grant/equity financing provides the remaining construction funds.Retum to equity/grant is provided for by continuing debt service after bonds paid off. Same as Case 6 but with high construction cost estimate. Same as Case 6 but with 15-year amortization period of bonds. Same as Case 8 but with high construction cost estimate. Same as Case 9 but with lower usable energy.Bond issue is lower to have the rate equal to 12 cents/kWh,therefore grant/equity higher. Same as Case 9 but with higher usable energy. Hold annual cost of power at 12 cents/kWh in 1992 dollars.Difference between actual costs and 12 cents is retumed to equity/grant. Same as Case 12 but held to 11 cents/kWh in 1992 dollars. Bond finance entire project and set aside money in 1993 to fund rate stabilization fund used to hold rates at 12 cents/kWh.In later years when power costs less than 12 cents,difference is retumed to grant/equity. Same as Case 14 but with 15-year bond amortization period. Note:NO costs are included for major rehabilitation to project. Case moPoerntawstWN-wods14a 14b 15 ADAaA&WN=15 Table 4 Unalaska Geothermal Project Delivered Cost of Power -1992 Dollars Bond Delivered Rate -1992 Dollars Dev Bond Issue Bond Amort Equity/Loan Usable Power (cents/k Wh) Cost Finance Size Interest Period Amount Retum Energy Cost 1995 1996 1997 1998 1999 2000 ($Mil)($MII)(%)(Yrs)($Mil)(%)(GWh)(chkWh) Low All 100.3 6.5%20 ----75 8.1 13.2 14.2 13.8 13.4 13.2 High All 113.4 6.5%20 ----75 2 8.5 14.3 15.5 15.0 14.5 14.3 Low PP 81.0 6.5%20 14.8 10.0%715 -8.8 12.9 13.7 13.4 13.1 12.9 High PP 91.7 6.5%20 16.7 10.0%75 >9.3 14.0 14.9 14.5 14.2 14.0 High PP 91.7 6.5%20 16.7 7.0%715 8.8 13.5 14.4 14.1 13.7 13.5 Low Partial 712 6.5%20 16.5 4.9%715 73 11.2 12.0 11.7 11.4 11.2 High Partial 77.2 6.5%20 25.6 3.2%715 §713 11.2 12.0 11.7 11.4 11.2 Low Partial 65.7 6.5%15 24.6 5.7%75 4 6.9 10.8 12.0 11.7 11.4 11.2 High Partial 65.7 6.5%15 34.2 4.2%75 &6.9 10.8 12.0 11.7 11.4 11.2 High Partial 53.1 6.5%15 43.2 2.3%65 a 7.2 10.9 12.0 11.7 11.4 11.3 High Partial 78.2 6.5%15 25.3 6.3%85 6.6 10.7 12.0 11.7 11.3 IL. High Partial 65.7 6.5%15 34.2 9.2%715 12 12.0 12.0 12.0 12.0 12.0 12.0 High Partial 56.3 6.5%15 41.4 7.5%715 11 11.0 11.0 11.0 11.0 11.0 11.0 High All 113.4 6.5%20 15.7 9.3%75 12 12.0 12.0 12.0 12.0 12.0 12.0 Low All 100.3 6.5%20 7.4 13.5%715 12 12.0 12.0 12.0 12.0 12.0 12.0 High All 114.3 6.5%15 31.8 7.9%75 12 12.0 12.0 12.0 12.0 12.0 12.0 Bond Finance All -All of project costs are financed through revenue bonds. PP -Power plant only is financed with revenue bonds. Partial -Project costs above that of grant are financed with revenue bonds. Bond finance entire project.Low construction cost estimate. Same as Case 1 but high construction cost estimate. Equity financing of steam field.Assumes equity participant receives retum by charging stated additional cost per kWh. Same as Case 3 but high construction cost estimate. Same as Case 4 but lower rate of retum to equity participant. Bonds are sized such that the cost of power in 1997 is 12.0 cents/kWh in (1992$).Grant/equity financing provides the remaining construction funds.Retum to equity/grant is provided for by continuing debt service after bonds paid off. Same as Case 6 but with high construction cost estimate. Same as Case 6 but with 15-year amortization period of bonds. Same as Case 8 but with high construction cost estimate. Same as Case 9 but with lower usable energy.Bond issue is lower to have the rate equal to 12 cents/kWh,therefore grant/equity higher. Same as Case 9 but with higher usable energy. Hold annual cost of power at 12 cents/kWh in 1992 dollars.Difference between actual costs and 12 cents is retumed to equity/grant. Same as Case 12 but held to 11 cents/kWh in 1992 dollars. Bond finance entire project and set aside money in 1993 to fund rate stabilization fund used to hold rates at 12 cents/kWh.In later years when power costs less than 12 cents,difference is retumed to grant/equity. Same as Case 14 but with 15-year bond amortization period. Note:NO costs are included for major rehabilitation to project. 4s Meeting of AEA/AIDEA/GEOlectric -Nov.12,1992 I Project Structure 1.Project ownership structure 2.Financing -sources &uses 3.Electricity pricing &structure 4,Project Development (a)Organization Roles of AEA/AIDEA/GEOlectric/Unalaska City/Others (b)Budgets (c)Schedule II AIDEA 1.AIDEA's areas of responsibility 2.GEOlectric's areas of responsibility 3.GEOlectric''s compensation 4.Risk/reward sharing III OESI Buy out Transaction (Meeting 11/13/92) 1.Price and timing elements (a)Initial cash payments (ob)Payments to third parties (c)Payments at closing z2.Other terms and conditions IV Power Sales Agreements 1.Meeting with Unalaska based industries and businesses 2. (a)Date {b)Agenda Preparation for Meeting (a)Officials to attend (b)Parties invited (c)Preparation Assignments (d)Draft agreements to review Draft Agenda Page 1 of 1 Mod-0 beUlectric brassValley IEL!:1-Y¥1l6-269-U828 Nov 10,92 9:15 No.002 P.O1 ;FAX GEOlectric Power Company Past Office Box 10181 ene,Nevada O9S11 Se 916-269-0828 TO:W.RILEY SNELL John Olson BUSINESS:AIDEA State of Alaska FAX PHONE?#:907-561-8998 FROM:Jack S.Wood PAGES SENT (INCL.COVER):2 NOTES:November 10,1992 Good morning gentlemen: A per Dan Schochet's conversation yesterday,we have prepared a draft agenda for the Thursday,November 12,1992 meeting In Anchorage. We plan to arrive in Anchorage late Wednesday evening and will be available through Saturday. |understand that Jim Porter (OES!CEO)will be arriving in Anchorage Thursday afternoon. Please review and let me know of any changes or additions which you feel are needed. Besy/regards, Page 1 of 2