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AEA Power Revenue Bonds 2nd Series Bradley 1990
NEW ISSUE FULL BOOK-ENTRY In the opinion of Bond Counsel,interest on the Second Series Bonds is excluded from gross income for federal income tax purposes under existingStatutes,regulations,court decisions and rulings,and such interest will not be treated as a preference item for purposes of determining alternativeminimumtaxableincomeforindividualsandcorporations;however,such interest is included in the adjusted net book income or the adjusted currentearningsofacorporationforpurposesofcomputingthealternativeminimumtaxableincomeofacorporationunderSection55oftheInternalRevenueCodeof1986andtheenvironmentaltaxoncorporationsunderSection59AoftheCode.See "Tax Exemption”herein. |$60,259,015.10>Alaska Energy Authority Power Revenue Bonds,Second Series (Bradley Lake Hydroelectric Project) Current Interest Bonds Dated:July 15,1990 Due:July 1,as shown below Capital Appreciation Bonds Dated:Date of Delivery The Second Series Bonds will be issued as fully registered bonds under a book-entry system,registered in the name of Cede &Co.,as nominee ofTheDepositoryTrustCompany.The Second Series Bonds consist of Current Interest Bonds and Capital Appreciation Bonds,as described below.Bond purchasers will not receive certificates representing their interest in the Second Series Bonds. The Current Interest Bonds are issuable in denominations of $5,000 or any integral multiple thereof,will bear interest from their date payable onJanuary1,1991 and semiannually thereafter on January 1 and July 1 of each year and are subject to optional redemption and mandatory sinking fundredemptionasdescribedherein.The Capital Appreciation Bonds are issuable in maturity amounts of $5,000 or any integral multiple thereof and bearinterestfromtheirdateaccruedandcompoundedsemiannuallyonJanuary1andJuly1ofeachyearcommencingJanuary1,1991,and payable atmaturity.The Capital Appreciation Bonds are not subject to redemption prior to maturity. The Second Series Bonds are issued for the purpose of permanently financing a portion of the construction cost of the Bradley Lake HydroelectricProjectbyrefundingthebalanceoutstandingoftheAuthority's Variable Rate Demand Bonds,which were issued in 1985 to finance costs ofconstructionoftheProject.The payment of the Second Series Bonds is secured under the Authority's Power Revenue Bond Resolution on a paritywiththeAuthority's outstanding First Series Bonds by a pledge of the revenues received by the Authority from the operation of the Bradley LakeHydroelectricProject,including payments to be made by the municipal utilities and electric cooperatives that have agreed to purchase all of the ProjectCapacityoftheProjectandtopaytheAnnualProjectCostsoftheProjectpursuanttothePowerSalesAgreementdescribedherein. Payment of the principal of and interest on the Second Series Bonds when due will be guaranteed by a financial guaranty insurance policy to beissuedsimultaneouslywiththedeliveryoftheSecondSeriesBondsby MABIA Municipal Bond Investors Assurance Corporation. The Second Series Bonds do not constitute an indebtedness or other liability of the State of Alaska,and the Second Series Bonds do not directly,indirectly or contingently obligate the State,or any political subdivision thereof,or the Power Purchasers to levy any form of taxation for the paymentoftheSecondSeriesBonds.The Authority has no taxing power.Neither the full faith and credit nor the taxing power of the State of Alaska,anypoliticalsubdivisionthereof,or the Power Purchasers is pledged for the payment of the Second Series Bonds. MATURITY SCHEDULE $56,925,000 Current Interest Bonds .Interest Yield or Interest Yield or Maturity Amount Rate Price Maturity Amount Rate Price 1992 $780,000 6.10%100%1999 $1,435,000 6.80%100% 1993 985,000 6.20 100 2000 1,535,000 6.90 100 1994 1,045,000 6.30 100 2001 1,635,000 6.95 100 1995 1,115,000 6.40 100 2002 1,750,000 7.00 100 1996 1,185,000 6.50 100 2003 1,875,000 7.05 100 1997 1,265,000 6.60 100 2004 2,005,000 7.10 100 1998 1,345,000 6.70 100 2005 2,150,000 7.15 100 $7,425,000 7.20%Term Bonds Due July 1,2013-Price 100% $29,395,000 714%Term Bonds Due July 1,2021-Price 99.375% (Accrued interest to be added) $3,334,015.10 Capital Appreciation Bonds Offering Price Offering PricePrincipalPer$5,000 Approximate Principal Per $5,000 ApproximateMaturityAmountMaturityAmountYieldMaturityAmountMaturityAmountYield 2006 $763,231.60 $1,655.60 7.10%2009 $617,757.00 $1,342.95 7.10% 2007 711,807.05 1,544.05 7.10 2010 577,379.45 1,252.45 7.102008663,840.00 1,440.00 7.10 The Second Series Bonds are offered when,as and if issued and received by the Underwriters,subject to the approving legal opinion of Wohlforth,Argetsinger,Johnson &Brecht,Anchorage,Alaska,Bond Counsel,and certain other conditions.Certain legal matters will be passed on for theUnderwritersbytheircounsel,Katten Muchin &Zavis (Borge and Pitt),Chicago,Illinois.It is expected that the Second Series Bonds will be available fordeliverythroughTheDepositoryTrustCompany,in New York,New York,on or about August 28,1990. John Nuveen &Co.Incorporated Goldman,Sachs &Co.Lehman Brothers Merrill Lynch Capital Markets PaineWebber Incorporated Dated:July 25,1990 4 ALASKA ENERGY AUTHORITY 701 East Tudor Road P.O.Box 190869 Anchorage,Alaska 99519 Phone:907/561-7877 DIRECTORS Robert Martin-Chairman Dr.Neil Davis-Vice Chairman Larry Merculieff-Commissioner of Commerce and Economic Development Maj.Gen.John Schaeffer-Commissioner of Military and Veterans Affairs Mary Halloran-Director of the Division of Policy of the Office of Management and Budget Mark Hickey -Commissioner of Transportation and Public Facilities Dr.Joyce Murphy-Member EXECUTIVE DIRECTOR Robert E.LeResche DIRECTOR OF AGENCY OPERATIONS Brent Petrie FINANCE MANAGER Marcey Rawitscher BOND COUNSEL FINANCIAL ADVISOR Wohlforth,Argetsinger,First Southwest Company Johnson &Brecht Dallas,Texas Anchorage,Alaska CONSULTING ENGINEER DESIGN ENGINEER R.W.Beck and Associates,Inc.Stone &Webster Seattle,Washington Engineering Corporation Denver,Colorado CONSTRUCTION MANAGER Bechtel Corporation San Francisco,California No dealer,salesman or any other person has been authorized by the Authority or the Underwriters to give any information or to make any representation other than as contained in this Official Statement,and if given or made,such other information or representation must not be relied upon as having been authorized by the foregoing.This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy,nor shall there be any sale of the Second Series Bonds by any person,in any jurisdiction in which it is unlawful for such person to make such offer,solicitation or sale.The information set forth herein has been obtained from the Authority,the Bond Insurer,the Power Purchasers,and other sources which are believed to be reliable,but is not guaranteed as to accuracy or completeness,and is not to be construed as a representation by the Underwriters.The information and expressions of opinion contained herein are subject to change without notice,and neither the delivery of this Official Statement nor any sale made hereunder shall,under any circumstances,create any implication that there has been no change in the affairs of the Authority,the Bond Insurer,or any Power Purchaser since the date hereof. TABLE OF CONTENTS Page Page SUMMARY STATEMENT ......2200000cecc000008 (ii)Project Management Committee ........22cccce0s 23 INTRODUCTION ...2..222cosccccccreccecessvces 1 Project Operation and Maintenance............---24 Plan of Finance......220c000cccccccv0ccc0cc0008 1 THE POWER PURCHASERS.....-ccscccsceccccces 24SourcesandUsesofFundsrececcceceececececcess3GeneralCharacteristicsoftheServiceArea........24SecurityforSecondSeriesBonds....-+-++-2>+++++3 Purchasers'Statistics ......00cceesccccccsssecees 26 DESCRIETION OF THE SECOND SERIES BONDS.i Rate Regulation ........02sccccceccvesescveseee 27 eneral .....cccccccscccscccecnscseccesccccses Accreted Value of Capital Appreciation Bonds .....5 HISTORICAL AND PROJECTED POWER AND Optional Redemption.......500ccccccs0cccc00008 6 ENERGY REQUIREMENTS .....-.-+++2+0s500¢28 Sinking Fund Redemption.........02cs0c0000000%6 PURCHASERS'PROJECTED REVENUE RE- Notice of Redemption ........c0.c0ce000s0c0000 6 QUIREMENTS ....-.---cece ees esececevcesvess 28 Book-Entry System ......0ccccccccccccceovccvc 7 ASSUMPTIONS AND CONCLUSIONS OF THE SECURITY AND SOURCES OF PAYMENT FOR CONSULTING ENGINEER ........000202000085 31 THE SECOND SERIES BONDS......22se000e008 8 Pledge Effected by the Bond Resolution ...........8 LITIGATION .......0000ccccccssccccvccresvvccecs 32 Power Sales Agreement ......22222ccccccoscessoe 9 CERTAIN LEGAL MATTERS.........---++22+055 33 Rate Covenant ......cceccersceeucovccvsecscces 10 UNDERWRITING .......20:ccccccccsccccrcccees 33 Capital Reserve Fund and Moral Obligation of the LEGALITY FOR INVESTMENT IN ALASKA .....33 State soc e cece os eesesecsceacccceccscvseeccons 11 SOURCES OF CERTAIN INFORMATION ......--33 Additional Bonds .......2..ccccccsecccccesseces 11 Pledge of the State .........00eeec0sc0cces08e0es 12 FINANCIAL STATEMENTS .....-+--++2+2+000005 34 THE MUNICIPAL BOND INVESTORS ASSUR-RATINGS ......220c0020ccccccceccesvcrcsccceess 34 ANCE CORPORATION INSURANCE POLICY ..12 TAX EXEMPTION ........0.cc00ececccevscccvvce 34 AN UALD EBT SERVICE REQUI REMENTS teeeee ,;Tax Treatment of Original Issue Discount..........35 THE ALASKA ENERGY AUTHORITY ...........14 MISCELLANEOUS....ceeeees sete eseeeenessaes 36 General .....0022ccccesccccscccccvscecesvccoee 14 APPENDIX A-Consulting Engineer's Report .......Al Board of Directors ......0.0200cuscee0cavccvasvs 16 APPENDIX B-Design Engineer's Report ..........B-1 Organization and Staff .......22cc0sccscccvecvees 17 APPENDIX C-Construction Manager's Report .....C1 THE BRADLEY LAKE HYDROELECTRIC PRO-APPENDIX D-Summaries of the Act and the Basic JECT 2...ccc ccccccccsccsccccccvcessccecccasaees 18 Documents .......002006 cece ccccooeseecccocoees D-1 General Description.........cccccecccccsccvccee 18 -The Alaska Energy Authority Act Permits and Licenses .......50ccc00cc00ccceocccs 18 -The Power Sales AgreementGeologicandSeismicConsiderations..........250.19 -The Bond ResolutionContractsandSchedule.......-.0220:cccccscessee 19 _ Estimated Financing Requirements .......0202c00%20 APPENDIX E-Form of Opinion of Bond Counsel...E-1 Power Production...........2020cecssesescevee8 22 APPENDIX F-Financial Statements of the Authority.F-1 Projected Annual Project Costs ........0ssccscce¢22 APPENDIX G-Specimen Financial Guaranty Insur- Transmission.........¢ccccccccccssesscsvceccce 23 ance Policy......cccccccceececscscsccecccceness G-1 IN CONNECTION WITH THIS OFFERING,THE UNDERWRITERS MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECOND SERIES BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET,SUCH STABILIZING,IF COMMENCED,MAY BE DISCONTINUED, AND IF DISCONTINUED THEN RECOMMENCED,AT ANY TIME. SUMMARY STATEMENT This Summary Statement is subject in all respects to more complete information contained in this Official Statement.The offering of the Second Series Bonds to potential investors is made only by means of this entire Official Statement,including the Appendices hereto.No person is authorized to detach this Summary from this Official Statement or otherwise to use it without this entire Official Statement,including the Appendices. The Authority The Authority is a public corporation of the State of Alaska organized and existing under the Alaska Energy Authority Act.The Authority owns four operating hydroelectric projects,various waste heat recovery systems and over 400 miles of transmission lines.The Authority is governed by a seven member Board of Directors,including the Director of the Division of Policy of the Office of Management and Budget and three members of the Governor's Cabinet. Bradley Lake Hydroelectric Project The Project is located in southcentral Alaska at the southern end of the Kenai Peninsula.The Project includes a 125 foot high concrete-faced,rock fill dam,a 3.5 mile power tunnel and steel lined penstock.The Project will have 90 megawatts of installed capacity,with an average annual output of 376 million kilowatt- hours.Two 20 mile,115 kilovolt transmission lines will connect the Project to a transmission line under construction on the Kenai Peninsula.The Project will provide electric power to the most populous areas of Alaska,including the Kenai Peninsula,the Municipality of Anchorage,the Matanuska-Susitna Borough and a substantial portion of the Fairbanks area. As of June 30,1990,construction of the dam is essentially complete;76%of the total Project was completed and,of a total estimated construction cost of $312.5 million,69%had been incurred.The Project is expected to begin commercial operation in September 1991. Use of Proceeds of Second Series Bonds The proceeds of the Second Series Bonds will be used to permanently finance a portion of the construction cost of the Project by refunding the balance outstanding of the Authority's Variable Rate Demand Bonds,which were issued in 1985 to finance that portion of the costs of construction of the Project not paid from State appropriations.The proceeds of the Second Series Bonds,together with moneys available under the 1985 Indenture securing the Variable Rate Demand Bonds,will also be used to capitalize a portion of the interest on the Second Series Bonds,to make deposits to the Capital Reserve Fund,the Renewal and Contingency Reserve Fund and the Operating Reserve Account and to pay certain costs of issuance of the Second Series Bonds. Security The Second Series Bonds are direct and general obligations of the Authority and the full faith and credit of the Authority are pledged to the payment of the principal of and interest on the Second Series Bonds.The payment of the Second Series Bonds is secured under the Authority's Bond Resolution on a parity with the outstanding First Series Bonds by a pledge of the Revenues received by the Authority from the operation of the Project,including payments to be made by the Power Purchasers pursuant to the provisions of the Power Sales Agreement.No other revenues of the Authority are pledged for the payment of the Second Series Bonds. Bond Insurance Payment of the principal of and interest on the Second Series Bonds when due will be guaranteed by a financial guaranty insurance policy to be issued simultaneously with the delivery of the Second Series Bonds by Municipal Bond Investors Assurance Corporation.The financial guaranty insurance policy extends for the term of the Second Series Bonds. Power Sales Agreement The Authority and the Power Purchasers have entered into a Power Sales Agreement under which the Authority has sold percentage shares of the Project Capacity of the Project to the Power Purchasers and the Power Purchasers have agreed to pay a like percentage of the Annual Project Costs of the Project,as follows: ii Power Purchaser Percentage Share Chugach Electric Association,Inc ............cccccceeecseeeees 30.4% Municipality of Anchorage .........cscs cece eeesesennes 25.9 Alaska Electric Generation &Transmission Cooperative,Inc ......25.8 (acting on behalf of Homer Electric Association,Inc.-12.0%and Matanuska Electric Association,Inc.-13.8%) Golden Valley Electric Association,Inc ............00ececeeeees 16.9 City of Seward 2...ccc ccc cece cece eee e tect e ee eneeenenenes 1.0 100.0% Under the provisions of the Power Sales Agreement,the Power Purchasers are obligated to make payments to the Authority in an aggregate amount sufficient to pay all Annual Project Costs,including costs resulting from the ownership,operation and maintenance of the Project,debt service on all Bonds and any amounts required to maintain the reserves established under the Bond Resolution. The obligation of the Power Purchasers to pay the Annual Project Costs does not commence until the Date of Commercial Operation of the Project.After the Date of Commercial Operation,the Power Purchasers will be unconditionally obligated to pay their percentage share of the Annual Project Costs notwithstanding any suspension or reduction in the amount of power supplied by the Project. If the Authority projects that the amounts to be deposited into the Revenue Fund will be insufficient to pay Annual Project Costs because of a payment default by a Power Purchaser,the Authority may increase each other Power Purchaser's Percentage Share of Annual Project Costs and Project Capacity pro rata to the extent,and for the period,necessary to compensate for such insufficiency;provided that no Power Purchaser's Percentage Share may be increased by more than 25%above the amount set forth in the Power Sales Agreement. By statute,Annual Project Costs incurred by a Power Purchaser pursuant to the Power Sales Agreement must be allowed by the Alaska Public Utilities Commission in the schedule of consumer rates and charges established by each Power Purchaser. Capital Reserve Fund Under the Bond Resolution,the Authority is required to establish and maintain the Capital Reserve Fund in an amount equal to the Capital Reserve Requirement.As of the date of issuance of the Second Series Bonds,the Capital Reserve Requirement will be $13,392,890,an amount equal to Maximum Aggregate Debt Service on the First Series Bonds and the Second Series Bonds. Moral Obligation of the State The Act and the Bond Resolution require that the Chairman of the Authority,at least annually,but not later than January 2 of each year and whenever the Trustee transfers funds from the Capital Reserve Fund to pay principal or interest on any Bonds,certify in writing to the Governor and the State Legislature the sum,if any,required to restore the Capital Reserve Fund to the Capital Reserve Requirement.The State Legislature may,but is not obligated to,appropriate to the Authority the sum certified by the Chairman of the Authority.The Authority is required to deposit in the Capital Reserve Fund any amounts so appropriated during the then current Fiscal Year by the State Legislature. Rate Covenant The Authority,acting in conjunction with the Project Management Committee,is required to determine Annual Project Costs in such amounts as shall be sufficient when collected from the Power Purchasers to provide Revenues in each Fiscal Year,together with available funds,for the payment of the sum of (a) iii Operating Expenses of the Project during such Fiscal Year,(b)the amount necessary to restore the Operating Reserve Account to the Operating Reserve Account Requirement,(c)Aggregate Debt Service due on all Bonds during such Fiscal Year,(d)the amount necessary to restore the Capital Reserve Fund to the Capital Reserve Requirement,(e)the amount to be paid during such Fiscal Year to the Renewal and Contingency Reserve Fund to restore the Fund,over a period of not greater than four years,to the Renewal and Contingency Reserve Fund Requirement or such larger amount determined by the Project Management Committee and (f)all other charges or liens whatsoever required to be paid out of Revenues during such Fiscal Year. Completion Bonds Under the terms of the Bond Resolution,the Authority is authorized to issue Completion Bonds on a parity with the First Series Bonds and the Second Series Bonds for the permanent financing of the Project. The Authority does not expect to issue Completion Bonds. Additional Bonds Additional Bonds may be issued under the Bond Resolution on a parity with the First Series Bonds,the Second Series Bonds and any Completion Bonds for the purpose of paying the Cost of Acquisition and Construction of any Capital Improvement (related to the Project)upon receipt by the Trustee of (i)evidence that the Project Management Committee has approved the Capital Improvement and (ii)a written opinion of the Consulting Engineer that neither the issuance of the Additional Bonds nor the payment of the Cost of Acquisition and Construction of the Capital Improvement will impair the ability of the Authority to pay Debt Service through the collection of revenues under the Power Sales Agreement.Additional Bonds may also be issued for the purpose of refunding outstanding Bonds. Report of Consulting Engineer The Authority has retained the services of R.W.Beck and Associates,Inc.,the Consulting Engineer,to provide a Consulting Engineer's Report associated with the issuance of the Second Series Bonds.As a part of its efforts,the Consulting Engineer has projected the annual costs of power from the Project and projected the revenue requirements for the Power Purchasers for the period 1990 through 1999.In addition,the Consulting Engineer has provided several opinions regarding the Project and the operation of the Power Purchasers'systems.See the section entitled "Assumptions and Conclusions of the Consulting Engineer”in this Official Statement and the Consulting Engineer's Report attached as Appendix A to this Official Statement for the assumptions,conclusions and results of studies and investigations of the Consulting Engineer. iv OFFICIAL STATEMENT $60,259,015.10 ALASKA ENERGY AUTHORITY Power Revenue Bonds,Second Series (Bradley Lake Hydroelectric Project) INTRODUCTION This Official Statement,including the cover page and Appendices hereto,provides certain information in connection with the issuance and sale by the Alaska Energy Authority (the "Authority”)of $60,259,015.10 aggregate principal amount of its Power Revenue Bonds,Second Series (Bradley Lake Hydroelectric Project) (the "Second Series Bonds').The Second Series Bonds are issued pursuant to the Alaska Energy Authority Act,constituting Chapter 83 of Title 44 of the Alaska Statutes (the "Act”)and the Power Revenue Bond Resolution,adopted by the Board of Directors of the Authority on September 7,1989,as amended and supplemented by the Second Series Resolution,adopted by said Board of Directors on July 25,1990 (collectively,the "Bond Resolution”or the "Resolution'').Under the Bond Resolution,Security Pacific Bank Washington,N.A.,in the City of Seattle,Washington (the "Trustee”),is designated as Trustee.Pursuant to an Executive Order of the Governor of Alaska,the name of the Authority was changed from the Alaska Power Authority to the Alaska Energy Authority.The change was effective July 1,1989. Plan of Finance The Second Series Bonds are being issued to permanently finance a portion of the construction cost of the Bradley Lake Hydroelectric Project (the ''Project”)a hydroelectric generating facility with a 90 megawatt installed capacity located in south-central Alaska at the southern end of the Kenai Peninsula.Construction of the Project began in 1986.As of June 30,1990,76%of the Project has been completed.The Project is expected to begin commercial operation in September 1991.The $312.5 million estimated construction cost of the Project is being funded by appropriations from the State of Alaska (the "State'')in the initial aggregate amount of $175 million and a portion of the proceeds of sale of the Authority's Variable Rate Demand Bonds (Bradley Lake Hydroelectric Project)(the "Variable Rate Demand Bonds”)issued in the aggregate principal amount of $267.5 million on November 20,1985 and secured under an Indenture of Trust (the "1985 Indenture”)from the Authority to The Bank of New York. The Second Series Bonds are issued on a parity with the Authority's $105,001,142 outstanding principal amount of Power Revenue Bonds,First Series (Bradley Lake Hydroelectric Project)(the "First Series Bonds”).The First Series Bonds were issued in October 1989 for the primary purpose of refunding a portion of the Variable Rate Demand Bonds. The proceeds of sale of the Second Series Bonds,together with moneys available under the 1985 Indenture,will be used to refund all of the $190.9 million principal amount of outstanding Variable Rate Demand Bonds;to capitalize a portion of the interest on the Second Series Bonds;to increase the amount in the Capital Reserve Fund to an amount equal to the Capital Reserve Requirement;to increase the amount in the Renewal and Contingency Reserve Fund to $5,000,000;to fund the Operating Reserve Account in the amount of $625,000 and to pay costs of issuance of the Second Series Bonds. Under the terms of the Bond Resolution,the Authority is authorized to issue Bonds for the permanent financing of the Project,subject to the limitation that the aggregate principal amount issued may not exceed $175 million without the consent of the Project Management Committee.Bonds issued to complete the Project ('Completion Bonds')may be issued without compliance with any additional bonds test contained in the Bond Resolution and,when issued,will be ratably and equally secured under the Bond Resolution on 1 a parity with the First Series Bonds and the Second Series Bonds.The Authority does not expect to issue additional Completion Bonds. Concurrently with the issuance of the Second Series Bonds,the remaining outstanding Variable Rate Demand Bonds will be retired from the proceeds of the Second Series Bonds and moneys available under the 1985 Indenture.Moneys held in the Construction Fund (the "Existing Construction Fund”)for the Project are maintained under the 1985 Indenture.After the retirement of all of the Variable Rate Demand Bonds and the payment of any amounts due the banks that issued letters of credit to secure the payment of the Variable Rate Demand Bonds,any balance remaining in the Existing Construction Fund will be transferred to Funds and Accounts established by the Bond Resolution. The following table shows the overall plan of finance for the Project including the derivation of all funds available to pay Project costs and the application of those funds. Plan of Finance Available Funds Original Principal Amount of Bonds..............-...--0006-$165,260,157 Variable Rate Demand Bonds ............c0cccecccccvceecs 267,500,000 State Appropriations .......0.00.ec e cee e teen ee eee nance 175,080,000 Interest Earnings .......0...cece cee cece eee e cee e ee teeens 28,375,379 Total...cece ccc cece cree c eee en ee tnceeseeeceees $636,215,536 Application of Funds Project Construction ........0.ccc cece ccc ees ee eeeceeeres $312,500,000 Retirement of Variable Rate Demand Bonds ............0008 267,500,000 Capitalized Interest ....0...cece cece e ect e ete ec eneeeecens 17,418,182 Capital Reserve Fund ..........ccc cece cece eee eeeeeneaes 13,392,890 Renewal and Contingency Fund .............0.cee ee cee ees 5,000,000 Bond Insurance Premiums ...........0cccccusceccucucecees 1,302,839 Bond Issuance Expenses ...........:cece cc cee eee eeeeeenees 3,339,175 Operating Reserve Account .......ceseeseseneeercecneesaes 625,000 Refund of State Appropriations ..........2.0 ee cece ee eees 11,474,843 Net Original Issue Discount............cece cee cee ec eeceeee 3,662,607 Total...ccc ccc ccc cece cence ene eee cere easceesenes $636,215,536 In the opinion of Bechtel Corporation,the Construction Manager for the Project,the $312.5 million construction cost estimate,and the projected September 1,1991 Date of Commercial Operation,for the Project are reasonable.See Appendix C,"Construction Manager's Report.”R.W.Beck and Associates,Inc., the Consulting Engineer,indicates that the amount to be deposited into the Construction Fund as of the date of issuance of the Second Series Bonds,together with expected investment earnings thereon,will be sufficient to pay the remaining construction costs of the Project as estimated by the Construction Manager.See, Appendix A,"'Consulting Engineer's Report.” Sources and Uses of Funds The table below shows the estimated sources and uses of funds in connection with the issuance of the First Series Bonds and the Second Series Bonds,and the implementation of the Plan of Finance. First Second Series Bonds Series Bonds Total Sources of Funds: Principal Amount of Bonds ...........0.cs eeeeeeeee $105,001,142 $60,259,015 $165,260,157 Existing Funds(1).......ccc ces cece sce e ec ee eevee 100,000 227,848,767 227,948,767 Total Sources of Funds ............0eeeceeceeee $105,101,142 $288,107,782 $393,208,924 Uses of Funds: Redemption of Variable Rate Demand Bonds .........$76,600,000 $190,900,000 $267,500,000 Deposit to Construction Fund ............cceeeeeees -82,300,919 82,300,919 Deposit to Interest Account (2)........cece eee eee ees 12,245,356 3,840,138 16,085,494 Deposit to Capital Reserve Fund............0eeeeees 8,423,148 4,969,742 13,392,890 Deposit to Renewal and Contingency Reserve Fund....1,524,466 3,475,534 5,000,000 Deposit to Operating Reserve Account...............-625,000 625,000 Bond Insurance Premiums ...........e0ceeeceeeeeee 798,839 504,000 1,302,839 Underwriting Discount and Costs of Issuance .........2,030,445 1,308,730 3,339,175 Net Original Issue Discount ...........0.ecceeeeeees 3,478,888 183,719 3,662,607 Total Uses of Funds ..........0ccceceececceees $105,101,142 $288,107,782 $393,208,924 (1)Includes Variable Rate Demand Bond proceeds,State appropriations and investment income. (2)Interest to accrue on First Series Bonds to September 1,1991 ($13,354,491)and on the Second Series Bonds to September 1,1991 ($4,063,692)is capitalized by the deposits to the Interest Account shown in the table and $1,332,689 of expected earnings from investment thereof. Security for Second Series Bonds The payment of the Second Series Bonds is secured on a parity with the First Series Bonds by a pledge of the Revenues of the Project,including all payments to be made by the Chugach Electric Association,Inc., the Golden Valley Electric Association,Inc.,the Alaska Electric Generation &Transmission Cooperative, Inc.(acting on behalf of Homer Electric Association,Inc.and Matanuska Electric Association,Inc.),the Municipality of Anchorage and the City of Seward,as Purchasers (collectively the "Power Purchasers”or the "Purchasers”)under the Agreement for the Sale and Purchase of Electric Power,dated and entered into on December 8,1987 (the '""Power Sales Agreement”')by and among the Power Purchasers and the Authority. The obligation of the Power Purchasers to pay Annual Project Costs does not commence until the Date of Commercial Operation of the Project.After the Date of Commercial Operation,the Power Purchasers will be obligated unconditionally to pay their percentage share of Annual Project Costs notwithstanding any suspension or reduction in the amount of power supplied by the Project. Under the terms of the Power Sales Agreement,"Date of Commercial Operation”means the date on which engineers retained for this purpose by the Authority have reasonably declared that the Project is fully available to be operated at not less than 90 megawatts,and its output can be scheduled on a commercial basis.The Construction Manager estimates that the Date of Commercial Operation of the Project will take place on or about September 1,1991.Interest to accrue on the Second Series Bonds to September 1,1991 will be capitalized from proceeds of the Second Series Bonds deposited for that purpose into the Interest Account in the Debt Service Fund. Proceeds of sale of the First Series Bonds and the Second Series Bonds held under the Bond Resolution and investment earnings thereon are the only certain source of payment of the principal of and interest on the Bonds prior to the Date of Commercial Operation of the Project.While capitalized interest and moneys deposited in the Capital Reserve Fund are sufficient to pay all principal of and interest on the First Series Bonds and the Second Series Bonds to and including July 1,1992,no assurance can be given that moneys held under the Bond Resolution,including amounts in the Capital Reserve Fund,will be sufficient to provide 3 for the prompt payment of the principal of and interest on Bonds due on and after January 1,1993,if the Date of Commercial Operation of the Project is delayed beyond July 1,1992.Under the Act and the Bond Resolution,after a withdrawal of moneys from the Capital Reserve Fund to pay debt service on Bonds,the Chairman of the Authority is obligated to certify to the Governor and the State Legislature the amount required to restore the Capital Reserve Fund to the Capital Reserve Requirement (see,"Security and Sources of Payment for the Second Series Bonds-Capital Reserve Fund and Moral Obligation of the State”'). The payment of the principal of and interest on the Second Series Bonds when due will be guaranteed by a financial guaranty insurance policy (the '"'Bond Insurance Policy')to be issued by Municipal Bond Investors Assurance Corporation ("MBIA”),as Bond Insurer for the Second Series Bonds.For a brief description of the Bond Insurance Policy,see "The Municipal Bond Investors Assurance Corporation Insurance Policy”and Appendix G,"Specimen Financial Guaranty Insurance Policy”.Under the terms of Bond Resolution,MBIA will at all times be deemed the exclusive owner of all Second Series Bonds for the purpose of all approvals,consents,waivers,the institution of any action and the direction of all remedies (see,"Rights of the Bond Insurers”and Appendix D,"Summaries of the Act and the Basic Documents” under the caption "The Bond Resolution-Special Provisions Relating to the Bond Insurer”'). Brief descriptions of the Authority and its financing program,the Second Series Bonds,the security for the Second Series Bonds,the Project,the Power Purchasers,the Power Sales Agreement,the Act and the Bond Resolution are included in this Official Statement.All summaries herein of documents and agreements are qualified in their entirety by reference to such documents and agreements,and references herein to the Second Series Bonds are qualified in their entirety by reference to the information included in the aforesaid documents and agreements,copies of which are available for inspection at the office of the Authority,701 East Tudor Road,Anchorage,Alaska 99519 and the principal offices of John Nuveen &Co.Incorporated, 333 West Wacker Drive,Chicago,Illinois 60606,or 140 Broadway,New York,New York 10005.Copies of the most recent audited financial statements of each Power Purchaser are available for inspection at the office of the Authority. Certain terms used in this Official Statement,and not otherwise defined herein,are defined in Appendix D,"Summaries of the Act and the Basic Documents”under the captions "The Power Sales Agreement- Definitions”and "The Bond Resolution-Definitions''.In this Official Statement,the term "Bonds”includes the First Series Bonds,the Second Series Bonds and all Completion Bonds and Additional Bonds issued under the Bond Resolution. DESCRIPTION OF THE SECOND SERIES BONDS General The Second Series Bonds are issuable only as fully registered bonds,registered in the name of Cede & Co.,as nominee for The Depository Trust Company,New York,New York ("DTC”),as securities depository for the Second Series Bonds.Principal,maturity amount,interest and redemption price,if any,on the Second Series Bonds are payable by Security Pacific Bank Washington,N.A.,in the City of Seattle,Washington,as Trustee,to DTC.See "Book-Entry System”,herein. The Second Series Bonds mature on the dates and bear interest at the rates set forth on the cover page of this Official Statement.The Second Series Bonds,other than the Second Series Bonds maturing in the years 2006 to 2010,inclusive (the "Capital Appreciation Bonds'),are issuable in denominations of $5,000 or any integral multiple thereof.The Capital Appreciation Bonds are issuable in maturity amounts of $5,000 or any integral multiple thereof. The Second Series Bonds,other than the Capital Appreciation Bonds,are dated July 15,1990,and bear interest from their date payable on January 1,1991 and semiannually thereafter on each January 1 and July 1.The Capital Appreciation Bonds are dated the date of original delivery of the Second Series Bonds,and bear interest from such date,compounded semiannually on each January 1 and July 1 commencing January 1,1991,and payable at maturity. So long as the Second Series Bonds are in book-entry form,the principal or maturity amount,as applicable,and interest on the Second Series Bonds are payable to DTC as registered owner thereof and will be redistributed by DTC and the DTC Participants as described under "Book-Entry System”herein. Accreted Value of Capital Appreciation Bonds The "Accreted Value”of a Capital Appreciation Bond is equal to the principal amount of such Capital Appreciation Bond plus interest accreted thereon to the date of calculation.Under the Bond Resolution the term "principal,”when used with respect to a Capital Appreciation Bond,means the then current Accreted Value of such Capital Appreciation Bond.The following table sets forth with respect to each $5,000 maturity amount of the Capital Appreciation Bonds,the Accreted Value thereof as of the expected date of issuance and as of each January 1 and July 1 thereafter.The Accreted Value of the Capital Appreciation Bonds on any other date will be calculated based on the assumption that such Accreted Value increases in equal daily amounts on the basis of a year of twelve 30 day months. TABLE OF COMPOUND ACCRETED VALUE Bonds Due BondsDue BondsDue BondsDue Bonds Due Date July 1,2006 July 1,2007 July 11,2008 July 1,2009 July 1,2010 August 28,1990 .......$1,655.60 $1,544.05 $1,440.00 $1,342.95 $1,252.45 January 1,1991........1,695.54 1,581.30 1,474.74 1,375.35 1,282.66July1,1991 ...........1,755.73 1,637.44 1,527.09 1,424.17 =1,328.20 January 1,1992........1,818.06 1,695.56 1,581.30 1,474.73 1,375.35 July 1,1992 ...........1,882.61 1,755.76 1,637.44 1,527.08 1,424.18 January 1,1993........1,949.44 1,818.09 1,695.57 1,581.30 1,474.73 July 1,1993 ...........2,018.65 1,882.63 1,755.76 1,637.43 1,527.09 January 1,1994........2,090.31 1,949.46 1,818.09 1,695.56 1,581.30 July 1,1994 ...........2,164.52 2,018.67 1,882.63 1,755.75 1,637.44 January 1,1995........2,241.36 2,090.33 1,949.47 1,818.08 1,695.57 July 1,1995 ...........2,320.93 2,164.54 2,018.67 1,882.63 1,755.76 January 1,1996........2,403.32 2,241.38 2,090.34 1,949.46 1,818.09 July 1,1996 ...........2,488.64 2,320.95 2,164.55 2,018.67 1,882.63 January 1,1997........2,576.99 2,403.35 2,241.39 2,090.33 1,949.46 July 1,1997 ...........2,668.47 2,488.66 2,320.96 2,164.54 2,018.67 January 1,1998........2,763.21 2,577.01 2,403.35 2,241.38 2,090.33 July 1,1998 ...........2,861.30 2,668.50 2,488.67 2,320.95 2,164.54 January 1,1999........2,962.88 2,763.23 2,577.02 2,403.34 2,241.38 July 1,1999 ...........3,068.07 2,861.32 2,668.50 2,488.66 2,320.95 January 1,2000........3,176.98 2,962.90 2,763.23 2,577.01 2,403.35 July 1,2000 ...........3,289.77 3,068.09 2,861.33 2,668.49 2,488.66 January 1,2001........3,406.56 3,177.00 2,962.91 2,763.23 2,577.01 July 1,2001 ...........3,527.49 3,289.79 3,068.09 2,861.32 2,668.50 January 1,2002........3,652.72 3,406.58 3,177.01 2,962.90 2,763.23 July 1,2002 ...........3,782.40 3,527.51 3,289.79 3,068.08 2,861.32 January 1,2003........3,916.67 3,652.74 3,406.58 3,177.00 2,962.90 July 1,2003 ...........4,055.72 3,782.41 3,527.51 3,289.79 3,068.09 January 1,2004........4,199.70 3,916.69 3,652.74 3,406.57 3,177.00 July 1,2004 ...........4,348.79 4,055.73 3,782.41 3,527.51 3,289.79 January 1,2005........4,503.18 4,199.71 3,916.69 3,652.74 3,406.58 July 1,2005 ...........4,663.04 4,348.80 4,055.73 3,782.41 3,527.51 January 1,2006........4,828.58 4,503.18 4,199.71 3,916.68 3,652.74 July 1,2006 ...........5,000.00 4,663.05 4,348.80 4,055.73 3,782.41 January 1,2007........4,828.58 4,503.18 4,199.71 3,916.69 July 1,2007 ...........5,000.00 4,663.05 4,348.80 4,055.73 January 1,2008........4,828.58 4,503.18 4,199.71 July 1,2008 ...........5,000.00 4,663.04 4,348.80 January 1,2009........4,828.58 4,503.18 July 1,2009 ...........5,000.00 4,663.05 January 1,2010........4,828.58 July 1,2010 ...........§,000.00 Optional Redemption The Second Series Bonds (other than the Capital Appreciation Bonds)maturing on or after July 1,2001, are subject to redemption prior to maturity at any time on and after July 1,2000,at the redemption prices (expressed as a percentage of the principal amount of Second Series Bonds to be redeemed)set forth below, plus accrued interest to the date of redemption. RedemptionRedemptionPeriodPrice July 1,2000 through June 30,2001...........cece eee ee eee 102% July 1,2001 through June 30,2002............eee eee cee eee 101 July 1,2002 and thereafter....2.2...cece eee eee ee eee eee 100 In the event of an optional redemption of Second Series Bonds,the Authority may direct the maturity or maturities and amounts thereof to be redeemed.If less than all of the Second Series Bonds of a single maturity are to be redeemed,the particular Second Series Bonds of such maturity to be redeemed shall be selected by lot as provided in the Bond Resolution. The Second Series Bonds are not subject to redemption prior to July 1,2000,from unexpended Second Series Bond proceeds or any other source. The Capital Appreciation Bonds are not subject to redemption prior to maturity. Sinking Fund Redemption The Second Series Bonds due July 1,2013 are subject to mandatory redemption in part by lot,on each July 1 on and after July 1,2011,at a redemption price of 100%of the principal amount thereof,from Sinking Fund payments,which are required to be made in amounts sufficient to redeem on July 1 of each of the years set forth in the following table,the principal amount of Second Series Bonds specified in each of such years: Principal |Year Amount_72.0)©$2,305,000 7 9 2,470,000 720)[ep 2,650,000* The Second Series Bonds due July 1,2021 are subject to mandatory redemption in part by lot,on each July 1 on and after July 1,2014,at a redemption price of 100%of the principal amount thereof,from Sinking Fund payments,which are required to be made in amounts sufficient to redeem on July 1 of each of the years set forth in the following table,the principal amount of Second Series Bonds specified in each of such years: Year Principal Amount Year Principal Amount 710)C.San $2,835,000 7.0)0.pa $3,760,000 71 0)Us pera 3,045,000 720)0 pr 4,030,000 920)[er 3,265,000 2020....ceeeeeeee 4,320,000 710)©3,505,000 2021...eee eee eee eee 4,635,000* *Final Maturity. Amounts accumulated in the Debt Service Fund with respect to any Sinking Fund Installment may be applied,prior to the due date of such Sinking Fund Installment,to purchase Second Series Bonds of the maturity for which such Sinking Fund Installment was established.See Appendix D,'Summaries of the Act and the Basic Documents”under the caption "The Bond Resolution-Debt Service Fund.” Notice of Redemption At least 30 days,but not more than 60 days,prior to the date upon which any Second Series Bonds are to be redeemed,the Trustee will mail a notice of redemption to the registered owner of any Second Series 6 Bond all or a portion of which is to be redeemed,at the owner's last address appearing on the registration books of the Authority kept by the Trustee. Book-Entry System The ownership of one fully registered Second Series Bond for each maturity,each in the aggregate principal amount of such maturity,will be registered in the name of Cede &Co.,as nominee for DTC.DTC is a limited-purpose trust company organized under the laws of the State of New York,a member of the Federal Reserve System,a "clearing corporation”within the meaning of the New York Uniform Commercial Code,and a "clearing agency”registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934,as amended.DTC was created to hold securities of its participants (the "DTC Participants”') and to facilitate the clearance and settlement of securities transactions among DTC Participants in such securities through electronic book-entry changes in accounts of the DTC Participants.DTC Participants include securities brokers and dealers,banks,trust companies,clearing corporations and certain other organizations,some of whom (and/or their representatives)own DTC.Access to the DTC system is also available to others such as banks,brokers,dealers and trust companies that clear through or maintain a custodial relationship with a DTC Participant,either directly or indirectly (the "Indirect Participants”). Purchases of Second Series Bonds under the book-entry system may be made through brokers and dealers who are,or act through,DTC Participants.The DTC Participants shall receive a credit balance in the records of DTC.The ownership interest of the actual owner of each Second Series Bond (the "Beneficial Owner”)will be recorded through the records of the DTC Participant or Indirect Participants.Beneficial Owners will receive a written confirmation of their purchase providing details of the Second Series Bonds acquired.Transfers of ownership interests in the Second Series Bonds will be accomplished by book entries made by DTC and by the DTC Participants,who act on behalf of the Indirect Participants and Beneficial Owners.Beneficial Owners will not receive Second Series Bonds representing their ownership interest in the Second Series Bonds.Interest and principal or maturity amount,as applicable,will be paid to DTC,or its nominee,and then paid by DTC to the DTC Participants and thereafter paid by the DTC Participants or Indirect Participants to the Beneficial Owners when due. Neither the Authority nor the Trustee will have any responsibility or obligation to such DTC Participants or the persons for whom they act as nominees with respect to the payments to,or the providing of notice for,the DTC Participants,the Indirect Participants or Beneficial Owners. Beneficial Owners of the Second Series Bonds will not receive or have the right to receive physical delivery of the Second Series Bonds and will not be or be considered to be owners thereof under the Bond Resolution.So long as Cede &Co.is the registered owner of the Second Series Bonds,as nominee of DTC, references in this Official Statement to the Bondholders,holders or registered owners of the Second Series Bonds shall mean Cede &Co.and shall not mean the Beneficial Owners of the Second Series Bonds. For every transfer and exchange of Second Series Bonds,the Beneficial Owner may be charged a sum sufficient to cover any tax,fee or other governmental charge that may be imposed in relation thereto. DTC may determine to discontinue providing its service with respect to the Second Series Bonds at any time by giving notice to the Authority and discharging its responsibilities with respect thereto under applicable law.Under such circumstances,Second Series Bonds are required to be delivered as described in the Bond Resolution.The Beneficial Owner,upon registration of Second Series Bonds held in the Beneficial Owner's name,will become the Bondholder. The Authority may determine that continuation of the system of book-entry transfers through DTC (or a successor securities depository)is not in the best interests of the Beneficial Owners.In such event,Second Series Bonds will be delivered as described in the Bond Resolution. When reference is made to any action which is required or permitted to be taken by the Beneficial Owners,such reference shall only relate to action by such Beneficial Owners or those permitted to act (by 7 statute,regulation or otherwise)on behalf of such Beneficial Owners for such purposes.When notices are given,they shall be sent by the Trustee to DTC only. Principal or maturity amount,as applicable,sinking fund,and interest payments on the Second Series Bonds will be made to DTC or its nominee,Cede &Co.,as registered owner of the Second Series Bonds. Upon receipt of moneys,DTC's current practice is to immediately credit the accounts of the DTC Participants in accordance with their respective holdings shown on the records of DTC.Payments by DTC Participants and Indirect Participants to Beneficial Owners will be governed by standing instructions and customary practices,as is now the case with municipal securities held for the accounts of customers in bearer form or registered in "street name,”and will be the responsibility of such DTC Participant or Indirect Participant and not of DTC,the Trustee or the Authority. The Trustee and the Authority,so long as a book-entry system is used for the Second Series Bonds,will send any notice of redemption or other notices to Bondholders only to DTC.Any failure of DTC to advise any DTC Participant,or of any DTC Participant or Indirect Participant to notify the Beneficial Owner,of any such notice and its content or effect will not affect the validity of the redemption of the Second Series Bonds called for redemption or of any other action premised on such notice. SECURITY AND SOURCES OF PAYMENT FOR THE SECOND SERIES BONDS The Second Series Bonds constitute direct and general obligations of the Authority,and the full faith and credit of the Authority are pledged to the payment of the principal of and interest on the Second Series Bonds.The Second Series Bonds do not constitute an indebtedness or liability of the State of Alaska,and the Second Series Bonds do not directly,indirectly or contingently obligate the State of Alaska or any political subdivision thereof or the Power Purchasers to apply moneys from or levy or pledge any form of taxation whatever to the payment of the Second Series Bonds.The Authority has no taxing power. In the event of a default under the Bond Resolution,the Trustee is authorized to proceed to protect and enforce its rights and the rights of the holders of the Bonds,including the right to apply for the judicial appointment of a receiver for the Project.However,neither the Trustee nor the Bondholders may declare all the Bonds due and payable or otherwise accelerate the payment of the Bonds (see,Appendix D,"Summaries of the Act and the Basic Documents”under the caption "The Bond Resolution”'). Pledge Effected by the Bond Resolution Pursuant to the Bond Resolution,all of the revenues derived by the Authority from the operation of the Project,including payments to be made by the Power Purchasers pursuant to the provisions of the Power Sales Agreement (the "Revenues'”')and all moneys,securities and funds (except the Excess Investment Earnings Fund)held or set aside under the Bond Resolution are pledged and assigned to secure the payment of the principal of,redemption premium,if any,and interest on the Bonds,subject only to the provision of the Bond Resolution permitting the application thereof for the payment of Operating Expenses of the Project and for other purposes specified in the Bond Resolution.No other revenues of the Authority are pledged as security for the payment of the Bonds. The Bond Resolution permits the issuance,on a parity with the First Series Bonds and the Second Series Bonds,of Completion Bonds to complete the Project and of Additional Bonds to finance the Cost of Acquisition and Construction of Capital Improvements and for the refunding of Bonds (see "Additional Bonds”herein).The Authority may also finance facilities that are not part of the Project by the issuance of other bonds,which are not secured by the pledge of Revenues provided for in the Bond Resolution. The Act provides that any pledge made in respect of the Bonds shall be valid and binding from the time when the pledge is made,that the moneys or property so pledged and thereafter received by the Authority shall immediately be subject to the lien of such pledge without any physical delivery or further act and that 8 the lien of any such pledge shall be valid and binding against all parties having any claims of any kind in tort,contract or otherwise against the Authority irrespective of whether the parties have notice. Power Sales Agreement Under the provisions of the Power Sales Agreement,the Authority has sold 100%of the Project Capacity (and associated energy)of the Project to the Power Purchasers in specified percentage shares and the Power Purchasers have agreed to pay a like percentage of the Annual Project Costs of the Project.The percentage share of each Power Purchaser is set forth in the following table: Power Purchaser Percentage Share Chugach Electric Association,Inc .......cc cce sec c ete ee eee eees 30.4% Municipality of Anchorage .......-....secs eeeee se ececeneeeees 25.9 Alaska Electric Generation &Transmission Cooperative,Inc (acting on behalf of Homer Electric Association,Inc.-12.0%share and Matanuska Electric Association,Inc.-13.8%share)...........25.8 Golden Valley Electric Association,Inc ...........sceeeeccoeees 16.9 City of Seward 0...ccc ccc cc ccc cece cece nec e ence seen eeeees 1.0 100.0% The Alaska Electric Generation &Transmission Cooperative,Inc.("AEG&T”)will purchase power under the Power Sales Agreement for use by the Homer Electric Association,Inc.and the Matanuska Electric Association,Inc.,both of which have also executed the Power Sales Agreement.If AEG&T at any time fails to meet its payment obligations under the Power Sales Agreement,then,to the extent of such failure by AEG&T and for so long as such failure continues,Homer Electric Association and Matanuska Electric Association are each obligated to meet directly their respective Percentage Shares of Annual Project Costs (12.0%for Homer Electric Association and 13.8%for Matanuska Electric Association). The Power Purchasers are obligated to make annual payments to the Authority in an aggregate amount sufficient (together with available funds held under the Bond Resolution)to pay all Annual Project Costs, including all Operating Expenses of the Project,Aggregate Debt Service on all Bonds and any amounts required to maintain the Operating Reserve Account,the Capital Reserve Fund and the Renewal and Contingency Reserve Fund (see,"Rate Covenant”herein). The Power Sales Agreement is in full force and effect and will terminate (i)50 years after the Date of Commercial Operation of the Project,or (ii)when no Bonds are outstanding under the Bond Resolution and all payment obligations under the Power Sales Agreement have been satisfied or provided for,whichever occurs later;provided that if the Date of Commercial Operation does not occur before January 1,1996,then the Power Sales Agreement will terminate on January I,1996. The obligation of the Power Purchasers to pay Annual Project Costs does not commence until the Date of Commercial Operation of the Project.After the Date of Commercial Operation,the Power Purchasers will be obligated unconditionally to pay their proportionate shares of the Annual Project Costs notwithstanding a suspension or reduction in the amount of power supplied by the Project. Under the terms of the Power Sales Agreement,"Date of Commercial Operation”means the date on which engineers retained for this purpose by the Authority have reasonably declared that the Project is fully available to be operated at not less than 90 megawatts,and its output can be scheduled on a commercial basis.The Construction Manager estimates that the Date of Commercial Operation of the Project will take place on or about September 1,1991.Interest to accrue on the First Series Bonds to September 1,1991 has been capitalized.Interest to accrue on the Second Series Bonds to September 1,1991 will be capitalized from proceeds of the Second Series Bonds deposited for that purpose into the Interest Account in the Debt Service Fund. All payments to be made pursuant to the Power Sales Agreement constitute Revenues of the Project and are pledged under the Bond Resolution.The right of the Authority to receive such payments and its right to enforce the payment obligations of the Power Purchasers under the Power Sales Agreement have been assigned to the Trustee pursuant to the Bond Resolution.Concurrently with the issuance of the Second Series Bonds,Bond Counsel will issue its opinion that the Power Sales Agreement is in full force and effect and constitutes a valid and binding agreement of the Authority and of the Power Purchasers authorized by the Act and enforceable in accordance with its terms.For additional information regarding the provisions of the Act authorizing the Power Sales Agreement and granting express authority to the Power Purchasers and the Authority to enter into power sales agreements of like kind and character as the Power Sales Agreement, see Appendix D,"Summaries of the Act and the Basic Documents”under the caption "The Alaska Energy Authority Act-Power Sales Contracts”.The full text of the opinion of Bond Counsel with respect to the Second Series Bonds and the Power Sales Agreement is set forth in Appendix E. The Authority has covenanted in the Bond Resolution to enforce the provisions of the Power Sales Agreement and to perform its covenants and agreements thereunder.The Authority has also covenanted that it will not consent or agree to permit any termination,rescission of or amendment to the Power Sales Agreement,which will reduce the payments required thereunder or materially impair or materially adversely affect the rights of the Authority thereunder or the security of the Bondholders under the Bond Resolution. The amounts payable under the Power Sales Agreement are operating expenses of each PowerPurchaser's system,and are valid and binding obligations of each Power Purchaser,payable only from the gross revenues of the Power Purchaser's system as a cost of purchased electric power,and are not payable from any taxes.The Authority has obtained opinions of counsel from each Power Purchaser with respect to the validity and enforceability of the Power Sales Agreement as to such Power Purchaser. The Authority is not subject to the jurisdiction of the Alaska Public Utilities Commission ("APUC”). The Power Sales Agreement is not subject to APUC jurisdiction until all Bonds are retired.Annual Project Costs incurred by a Power Purchaser pursuant to the Power Sales Agreement must be allowed by the APUC, by statute,in the schedule of consumer rates and charges established by each Power Purchaser.Some of the Power Purchasers are subject to APUC jurisdiction.See "The Power Purchasers-Rate Regulation.” If the Authority projects that the amounts to be deposited into the Revenue Fund will be insufficient to pay Annual Project Costs because of a payment default by a Power Purchaser,the Authority may increase every other Power Purchaser's Percentage Share of Annual Project Costs and Project Capacity pro rata to the extent,and for the period,necessary to compensate for such insufficiency;provided that no Power Purchaser's Percentage Share may be increased by more than 25%above the amount set forth in the Power Sales Agreement. The Power Sales Agreement establishes the Project Management Committee and contains other substantive provisions relating to the operation of the Project and the sale of power generated by the Project. The Project Management Committee has operation,maintenance,budgetary and other responsibilities under the Power Sales Agreement.Committee actions regarding operation and maintenance arrangements, sufficiency of the annual budget and power rates are subject to Authority approval.The Authority retains the right to take action necessary to meet its obligations under the Act and the Bond Resolution.For more information concerning the Power Sales Agreement,see Appendix D,"Summaries of the Act and the Basic Documents-The Power Sales Agreement.” Rate Covenant 'The Authority has covenanted in the Bond Resolution that it,at all times after the Date of Commercial Operation of the Project,shall charge and collect from each Power Purchaser that Power Purchaser's Percentage Share of Annual Project Costs.The Authority,acting in conjunction with the Project Management Committee,or separately to the extent necessary,shall determine Annual Project Costs in such amounts as shall be required to provide Revenues at least sufficient in each Fiscal Year,together with other available funds,for the payment of the sum of: 10 (a)Operating Expenses of the Project during such Fiscal Year; (b)the amount required to restore the Operating Reserve Account to the Operating Reserve Account Requirement (20%of the Operating Expenses component of the Annual Budget,or such other amount as may be determined pursuant to the Power Sales Agreement,currently $625,000); (c)an amount equal to the Aggregate Debt Service due on all outstanding Bonds during such Fiscal Year; (d)the amount,if any,to be paid during such Fiscal Year into the Capital Reserve Fund,which shall be the amount,if any,necessary to restore the Capital Reserve Fund to the Capital Reserve Requirement; (e)the amount to be paid during such Fiscal Year to the Renewal and Contingency Reserve Fund required to restore the Renewal and Contingency Reserve Fund,over a period of not greater than four years,to the Renewal and Contingency Reserve Fund Requirement (currently,$5 million)or such larger amount determined by the Project Management Committee;and (f)all other charges or liens payable out of Revenues during such Fiscal Year. Under the Bond Resolution,the Authority is not obligated to fund the Operating Reserve Account or the Renewal and Contingency Reserve Fund until the earlier of the Date of Commercial Operation of the Project or the date of retirement of all of the Variable Rate Demand Bonds. Capital Reserve Fund and Moral Obligation of the State Pursuant to the Bond Resolution,the Authority covenants and agrees to establish and maintain with the Trustee the Capital Reserve Fund in an amount at least equal to the Capital Reserve Requirement (an amount equal to the lesser of Maximum Aggregate Debt Service or ten percent of the proceeds of Bonds;or such lesser amount as is required in order to maintain the tax-exempt status of the Bonds).As of the date of issuance of the Second Series Bonds,the Capital Reserve Requirement will be $13,392,890,an amount equal to Maximum Aggregate Debt Service.The moneys on deposit in the Capital Reserve Fund shall be used for the payment of principal,redemption premium,if any,and interest on Bonds,but only when and to the extent that moneys are not available therefor in the Debt Service Fund. The Act and the Bond Resolution require that the Chairman of the Authority,at least annually,but no later than January 2 of each year and whenever the Trustee transfers funds from the Capital Reserve Fund to pay principal or interest on the Bonds,certify in writing to the Governor and the State Legislature the sum,if any,required to restore the Capital Reserve Fund to the Capital Reserve Requirement.The State Legislature may,but is not obligated to,appropriate to the Authority the sum certified by the Chairman of the Authority.The Authority is required to deposit in the Capital Reserve Fund any amounts so appropriated by the State Legislature during the then current Fiscal Year. Additional Bonds Additional Bonds may be issued under the Bond Resolution on a parity with the First Series Bonds,the Second Series Bonds and any Completion Bonds for the purpose of paying a Cost of Acquisition and Construction of any Capital Improvement (related to the Project)upon receipt by the Trustee of (i)evidence that the Project Management Committee has approved the Capital Improvement and (ii)a written opinion of the Consulting Engineer that neither the issuance of the Additional Bonds nor the payment of the Cost of Acquisition and Construction of the Capital Improvement will impair the ability of the Authority to pay Debt Service through the collection of Revenues under the Power Sales Agreement.Additional Bonds may also be issued for the purpose of refunding outstanding Bonds. Completion Bonds may be issued without regard to the foregoing Additional Bonds tests.See "Introduction-Plan of Finance.” It Pledge of the State Pursuant to the Act,the State has pledged and agreed with the holders of the Bonds that it will not limit or alter the rights or powers vested in the Authority by the Act to fulfill the terms of a contract (including the Bond Resolution)made by the Authority with such holders,or in any way impair the rights or remedies of such holders until the Bonds including the interest on them with interest on unpaid installments of interest,and all costs and expenses in connection with any act or proceeding by or on behalf of such holders,are fully met and discharged. THE MUNICIPAL BOND INVESTORS ASSURANCE CORPORATION INSURANCE POLICY The following information has been furnished by Municipal Bond Investors Assurance Corporation (the "Bond Insurer'')for use in this Official Statement.Reference is made to Appendix G for a specimen of the Bond Insurer's policy. The Bond Insurer's policy unconditionally and irrevocably guarantees the full and complete payment required to be made by or on behalf of the Authority to the Trustee,as Paying Agent for the Second Series Bonds or its successor of an amount equal to (i)the principal of (either at the stated maturity or by an advancement of maturity pursuant to a mandatory sinking fund payment)and interest on,the Second Series Bonds as such payments shall become due but shall not be so paid (except that in the event of any acceleration of the due date of such principal by reason of mandatory or optional redemption or acceleration resulting from default or otherwise,other than any advancement of maturity pursuant to a mandatory sinking fund payment,the payments guaranteed by the Bond Insurer's policy shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration);and (ii) the reimbursement of any such payment which is subsequently recovered from any owner of the Second Series Bonds pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such owner within the meaning of any applicable bankruptcy law (a "Preference''). The Bond Insurer's policy does not insure against loss of any prepayment premium which may at any time be payable with respect to any Second Series Bond.The Bond Insurer's policy does not,under any circumstance,insure against loss relating to:(i)optional or mandatory redemptions (other than mandatory sinking fund redemptions);(ii)any payments to be made on an accelerated basis;(iii)payments of the purchase price of Second Series Bonds upon tender by an owner thereof;or (iv)any Preference relating to (i) through (ii)above.The Bond Insurer's policy also does not insure against nonpayment of principal of or interest on the Second Series Bonds resulting from the insolvency,negligence or any other act or omission of the Trustee or any other paying agent for the Second Series Bonds. Upon receipt of telephonic or telegraphic notice,such notice subsequently confirmed in writing by registered or certified mail,or upon receipt of written notice by registered or certified mail,by the Bond Insurer from the Trustee or any owner of a Second Series Bond the payment of an insured amount for which is then due,that such required payment has not been made,the Bond Insurer on the due date of such payment or within one business day after receipt of notice of such nonpayment,whichever is later,will make a deposit of funds,in an account with Citibank,N.A.,in New York,New York,or its successor,sufficient for the payment of any such insured amounts which are then due.Upon presentment and surrender of such Second Series Bonds or presentment of such other proof of ownership of the Second Series Bonds,together with any appropriate instruments of assignment to evidence the assignment of the insured amounts due on the Second Series Bonds as are paid by the Bond Insurer,and appropriate instruments to effect the appointment of the Bond Insurer as agent for such owners of the Second Series Bonds in any legal proceeding related to payment of insured amounts on the Second Series Bonds,such instruments being in a form satisfactory to Citibank, N.A.,Citibank,N.A.shall disburse to such owners or the Trustee payment of the insured amounts due on such Second Series Bonds,less any amount held by the Trustee for the payment of such insured amounts and legally available therefor. 12 The Bond Insurer is the principal operating subsidiary of MBIA Inc.The principal shareholders of MBIA Inc.are AEtna Life and Casualty Company,Fireman's Fund Insurance Company,subsidiaries of CIGNA Corporation,and Credit Local de France,CAECL S.A.,and they own approximately 67%of the outstanding common stock of MBIA Inc.Neither MBIA Inc.nor its shareholders are obligated to pay the debts of or claims against the Bond Insurer.The Bond Insurer is a limited liability corporation rather than a several liability association.The Bond Insurer is domiciled in the State of New York and licensed to do business in all 50 states,the District of Columbia and the Commonwealth of Puerto Rico. Effective December 31,1989,MBIA Inc.acquired Bond Investors Group,Inc.On January 5,1990,the Bond Insurer acquired all of the outstanding stock of Bond Investors Group,Inc.,the parent of Bond Investors Guaranty Insurance Company ("BIG”).Through a reinsurance agreement,BIG has ceded all of its net insured risks,as well as its unearned premium and contingency reserves,to the Bond Insurer and the Bond Insurer has reinsured BIG's net outstanding exposure. As of December 31,1989 the Bond Insurer had admitted assets of $1.299 billion (audited),total liabilities of $907 million (audited),and total capital and surplus of $392 million (audited)prepared in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities.As of March 31, 1990,after giving effect to the acquisition of BIG,the Bond Insurer had admitted assets of $1.602 billion (unaudited),total liabilities of $1.114 billion (unaudited),and total capital and surplus of $488 million (unaudited)determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities.Copies of the Bond Insurer's year end financial statements prepared in accordance with statutory accounting practices are available from the Bond Insurer.The address of the Bond Insurer is 113 King Street,Armonk,New York 10504. Moody's Investors Service rates all bond issues insured by the Bond Insurer and BIG '"'Aaa”and short term loans "MIG 1,”both designated to be of the highest quality. Standard &Poor's Corporation rates all new issues insured by the Bond Insurer and BIG "AAA”Prime Grade. The Moody's Investors Service rating of the Bond Insurer should be evaluated independently of the Standard &Poor's Corporation rating of the Bond Insurer.No application has been made to any other rating agency in order to obtain additional ratings on the Second Series Bonds.The ratings reflect the respective rating agency's current assessment of the creditworthiness of the Bond Insurer and its ability to pay claims on its policies of insurance.Any further explanation as to the significance of the above ratings may be obtained only from the applicable rating agency. The above ratings are not recommendations to buy,sell or hold the Second Series Bonds,and such ratings may be subject to revision or withdrawal at any time by the rating agencies.Any downward revision or withdrawal of either or both ratings may have an adverse effect on the market price of the Second Series Bonds. RIGHTS OF BOND INSURERS Under the terms of the Bond Resolution,MBIA,as Bond Insurer of the Second Series Bonds will at all times be deemed the exclusive owner of all Second Series Bonds for the purpose of all approvals,consents, waivers,the institution of any action and the direction of all remedies (see,Appendix D,"Summaries of the Act and the Basic Documents”under the caption "The Bond Resolution-Special Provisions Relating to the Bond Insurer”).Payment of the principal of and interest on the First Series Bonds was insured by Bond Investors Guaranty Insurance Company,which was subsequently acquired by MBIA.The rights granted to MBIA as the Bond Insurer of the First Series Bonds are identical to the rights granted to MBIA as the Bond .Insurer of the Second Series Bonds. 13 ANNUAL DEBT SERVICE REQUIREMENTS Second Series Debt Service Bond Year First Series Principal and Interest Total (Ending July 1)Debt Service Sinking Fund Payments Payments Debt Service 1991 $7,008,188 $3,873,381 $10,881,569 1992 8,183,188 $780,000 4,030,108 12,993,295 1993 8,420,338 985,000 3,982,528 13,387,865 1994 8,421,783 1,045,000 3,921,458 13,388,240 1995 8,420,663 1,115,000 3,855,623 13,391,285 1996 8,421,463 1,185,000 3,784,263 13,390,725 1997 8,418,323 1,265,000 3,707,238 13,390,560 1998 8,420,688 1,345,000 3,623,748 13,389,435 1999 8,420,273 1,435,000 3,533,633 13,388,905 2000 .8,420,198 1,535,000 3,436,053 13,391,250 2001 8,422,448 1,635,000 3,330,138 13,387,585 2002 8,423,148 1,750,000 3,216,505 13,389,653 2003 8,418,933 1,875,000 3,094,005 13,387,938 2004 8,421,583 2,005,000 2,961,818 13,388,400 2005 8,419,678 2,150,000 2,819,463 13,389,140 2006 8,419,678 763,232 4,207,506 13,390,415 2007 8,419,678 711,807 4,258,930 13,390,415 2008 8,419,678 663,840 4,306,898 13,390,415 2009 8,422,603 617,757 4,347,981 13,388,340 2010 8,418,128 577,379 4,393,358 13,388,865 2011 8,420,528 2,305,000 2,665,738 13,391,265 2012 8,417,990 2,470,000 2,499,778 13,387,768 2013 8,419,428 2,650,000 2,321,938 13,391,365 2014 8,423,028 2,835,000 2,131,138 13,389,165 2015 8,421,978 3,045,000 1,925,600 13,392,578 2016 8,419,828 3,265,000 1,704,838 13,389,665 2017 8,419,765 3,505,000 1,468,125 13,392,890 2018 8,418,125 3,760,000 1,214,013 13,392,138 2019 8,420,313 4,030,000 941,413 13,391,725 2020 8,421,563 4,320,000 649,238 13,390,800 2021 8,420,313 4,635,000 336,038 13,391,350 TOTAL $259,383,505 $60,259,015 $92,542,481 $412,185,001 THE ALASKA ENERGY AUTHORITY General The Authority was created by the Alaska Legislature in 1976 under the provisions of the Act.The purpose of the Authority,as stated in the Act,is to promote,develop and advance the general prosperity and economic welfare of the people of the State of Alaska by providing a means of constructing,acquiring, financing and operating power projects and facilities that recover and use waste energy.The Authority seeks to provide the consumers of the State with dependable,least-cost electricity.For a further description of the provisions of the Act,see Appendix D,"Summaries of the Act and the Basic Documents.” At present,the Authority owns and operates four hydroelectric projects with a total generating capacity of 74 megawatts and owns in excess of 400 miles of transmission lines.Fixed assets of the the Authority are valued at $758 million.Generating capacity owned by the Authority consists of four hydroelectric projects included in the Energy Program for Alaska.These include Solomon Gulch (12 megawatts),Swan Lake (22 14 megawatts),Terror Lake (20 megawatts)and Tyee Lake (20 megawatts).These four facilities were financed with State grants totalling $290 million and a $183 million loan from the State.The loan is to be repaid over 45 years from power sales revenues,with power being sold to the utilities serving the communities of Valdez, Glennallen,Ketchikan,Kodiak,Wrangell and Petersburg. The four hydroelectric projects are operated under contracts with the local utilities benefitting from them.Overall project management is accomplished through the Four Dam Pool Project Management Committee.The Committee is comprised of representatives from the Authority and each power purchaser benefitting from a project. Transmission facilities include the Anchorage-Fairbanks intertie and four smaller transmission lines that interconnect communities in rural Alaska.The Anchorage-Fairbanks intertie is a 170 mile,345 kilovolt transmission line (presently operated at 138 kilovolts)that interconnects the power system of Anchorage with that of Fairbanks.The $125.4 million project was constructed with a State grant and was completed in October 1985.Approximately 186,000 megawatt hours of energy were transmitted over the line during Fiscal Year 1989.Dispatch is managed through contracts with Anchorage Municipal Light and Power (southern portion)and Golden Valley Electric Association (northern portion).Overall project management is accomplished through the Intertie Operating Committee.This Committee is comprised of representatives from the Authority and each of the utilities benefitting from the intertie (Anchorage Municipal Light and Power,Chugach Electric Association,Alaska Electric Generation &Transmission Cooperative,Inc.,Golden Valley Electric Association and the Fairbanks Municipal Utilities System). During 1988,an agreement was executed between the Authority and the Alaska Power Administration, a federal agency,for the purchase of the 77 megawatt Snettisham Hydroelectric Project,which serves Juneau. The Authority will purchase the Project following approval of the sale by the United States Congress.It is anticipated that the purchase will be financed by the issuance of revenue bonds secured by the credit of Alaska Electric Light and Power Company,the investor owned utility that serves Juneau. In addition to its large projects,the Authority is actively involved in bringing low cost electricity to rural Alaska.The Authority administers a variety of programs to assist rural communities in the maintenance,upgrade and construction of electrical power systems and waste heat systems to help reduce the cost of power and heat.Authority engineers develop least cost methods for generating and delivering electricity,assist in power emergencies and correct deficiencies and inefficiencies in existing systems. The Authority administers the Power Cost Equalization Program.This State grant program reduces electric rates paid by consumers in rural communities where diesel-fired generators provide most of the local electrical needs.The program aims to roughly equalize the power cost per kilowatt-hour Statewide.None of the Power Purchasers is eligible to participate in the Program and none receives any subsidy at this time. The programs outlined below,as well as the Authority's capital grants program,are designed to improve efficiencies in rural Alaska and to lower the cost of this subsidy. During 1989,the Authority assisted over 70 communities in response to a broad range of requests for assistance through the rural technical assistance and rural electrification programs.These programs provide grants for construction of transmission and distribution systems and of power production facilities of less than 1.5 megawatts and/or assistance in the management of locally funded projects.The Authority also served over 20 communities in the circuit rider preventative maintenance program and made grants to 20 communities for utility efficiency improvements. The Authority also administers three State funded loan programs.The Power Project Loan Fund provides financing to local utilities and government units for the development of new small-scale power production facilities,facilities for conservation,bulk fuel storage,transmission and distribution lines,or potable water supply projects.35 loans totalling approximately $39 million have been approved as of July 1, 1990.The Rural Electrification Revolving Loan Fund ("RERLF'')is a State funded loan program designed to assist local utilities in extending electrical service into previously unserved areas.Since its inception in 15 July 1982,13 RERLF loans totalling almost $5.3 million have been approved.The Bulk Fuel Revolving Loan Fund provides loans up to a maximum of $50,000 to rural communities to finance the purchase of annual fuel supplies.As of May 31,1990,there were 34 loans outstanding,totalling $599,189. Use of the State accounting system is required for all State funded activities.The Authority records all activities funded by State appropriations in the State accounting system,while project activities funded by external financing (including the Project),also are recorded in a separate computerized accounting system. The Authority's auditors state in recent management reports that the Authority does not have an adequate accounting system to consolidate the financial status of the numerous projects of the Authority. The auditors recommended that an integrated budgeting and accounting system be adopted by the Authority. The reports state that the Authority's activities funded by State appropriations are recorded in the State accounting system,while project activities funded by external financing,such as the Project,are recorded in a separate computerized accounting system.In 1989,the Authority's Board of Directors approved a change in its accounting format to an enterprise fund.This format change will eliminate substantially the accounting inefficiencies. The Authority and the auditors have determined that continued restriction of the Authority to the State accounting system would impede accounting for the Project.Accordingly,the Authority has created independent accounting systems for the Project and other operating projects. Board of Directors The powers of the Authority are vested in its seven member Board of Directors.The membership of the Board of Directors consists of three public directors appointed by the Governor and four ex-officio members. The ex-officio members are:the Director of the Division of Policy of the Office of Management and Budget and three Commissioners of principal executive departments appointed by the Governor.The current members of the Board of Directors of the Authority are: ROBERT MARTIN-(Chairman),received a degree in electronics technology from Haskell Institute in Lawrence,Kansas in 1962,and a degree in electrical engineering from the University of Alaska,Fairbanks in 1969.Mr.Martin is currently serving as General Manager and Chief Executive Officer of Tlingit Haida Regional Electric Authority.Mr.Martin worked for Sealaska Corporation from 1987 through 19839,first as Vice President of Administration,and then as Vice President of Corporate Development.Mr.Martin served as General Manager and Chief Executive Officer of Chugach Electric Association from 1984 through 1986 and as General Manager of Tlingit Haida Regional Electric Authority from 1978 through 1981. Dr.NEIL Davis-(Vice-Chairman),Professor Emeritus of Geophysics,University of Alaska, Fairbanks.Dr.Davis earned a bachelor of science degree (geophysics)from the University of Alaska, Fairbanks in 1955.He received his masters in Geophysics from the California Institute of Technology in 1957,and his Ph.D in Geophysics from the University of Alaska,Fairbanks in 1961.Dr.Davis has been associated with the University of Alaska,Fairbanks'Geophysical Institute since 1957,serving as a professor, as well as in numerous management positions,including Assistant Director,Deputy Director and Acting Director.Dr.Davis became Professor Emeritus in May of 1982.He continues to serve as a senior consultant to the Institute.While on leave from the University,Dr.Davis worked for NASA as a research associate (1962-1964)and as an aerospace technologist (1964-1965).He serves on numerous scientific boards and councils,including the American Association for the Advancement of Science,and has published many articles in science journals. LARRY MERCULIEFF-(Member),Commissioner,Department of Commerce and Economic Development.Commissioner Merculieff received a bachelor of arts degree from the University of Washington.He was appointed Commissioner in October 1988.Prior to his appointment,he worked for the 16 Alaska Department of Commerce and Economic Development from 1987 to 1988,serving as Director of the Division of Business Development and Director of the Office of Enterprise.From 1985 to 1986 he was a consultant to the St.Paul Island Trust,and from 1979 to 1985 he was President and Chief Executive Officer of the St.Paul Village Corporation. Maj.GEN.JOHN SCHAEFFER-(Member),Adjutant General,Department of Military and Veterans Affairs.Major General Schaeffer began his military career as a private in the Alaska Army National Guard. He graduated from Infantry Officers Candidate School at Fort Benning,Georgia in 1958,and graduated from the U.S.Army Command and General Staff College in 1969.He was elected Mayor of the Northwest Arctic Borough in 1986 and served as President of NANA Regional Corporation from 1972 through 1986.Gen. Schaeffer also served as a Regent for the University of Alaska from 1976 through 1978. Mary HALLORAN-(Member),Director,Division of Policy of the Office of Management and Budget. Ms.Halloran has received a bachelor of arts degree (1969),a master of arts degree (1971)and a master of philosophy (1973)from the University of Kansas.From 1980 through 1984,Ms.Halloran worked for the Alaska Department of Natural Resources,first as Special Assistant to the Commissioner (1980-1982),then as Deputy Director,Division of Management (1982-1983)and finally as Director,Division of Management (1983-1984).Ms.Halloran served as Special Assistant to the Speaker of the Alaska House of Representatives from 1984 to 1986. MARK HiIcKEY-(Member),Commissioner,Department of Transportation and Public Facilities.Mr. Hickey received a bachelor of science degree in foreign service from Georgetown University in 1976.He has worked for the Department of Transportation for over ten years.Positions in the Department included deputy commissioner for operations,special assistant for external affairs,special assistant,Alaska Railroad Transfer Team and transportation planner. Dr.Joyce MuRPHy-(Member).Dr.Murphy received a bachelors degree from Northeast Missouri State University,a Doctor of Veterinary Medicine degree from the University of Missouri and a masters of science degree from Colorado State University.She is a Board-certified veterinary ophthalmologist and a practicing veterinarian.Dr.Murphy currently serves as president of the Salvation Army's Booth Home Advisory Council.She previously served as President of the Chugach Electric Association Board of Directors (from 1981 through 1986)and served on the Governor's Energy Policy Task Force in 1988. Organization and Staff The Authority is under the direction of the Executive Director,who serves at the pleasure of the Board of Directors.The Authority has approximately 75 authorized staff positions.The following people are members of the Authority's management and staff whose positions are closely related to the Project. ROBERT E.LERESCHE-(Executive Director)received a bachelor of arts degree in English from Dartmouth College in 1964,a master of science degree in Wildlife Management from the University of Alaska in 1966 and a Ph.D in Pathobiology/Ecology from Johns Hopkins University in 1971.Dr.LeResche worked as a research biologist with the Alaska Department of Fish and Game.He served as an Adjunct Professor at the University of Alaska,and has worked for the State of Alaska in various positions described below:Chief, Habitat Protection,Department of Fish and Game;Director of Policy Development and Planning, Governor's Office;Commissioner of Natural Resources;and the Governor's Oil Spill Coordinator,dealing with the Exxon Valdez accident.As Commissioner of Natural Resources,Dr.LeResche was responsible for the regulation of construction and operation of the Transalaska Pipeline System,oil and gas development in the State as well as the State's land,agricultural,forestry and mineral resources.Dr.LeResche then served as Vice President for Corporate Development for Sealaska Corporation and was a self-employed investment banking and management consultant. 17 BRENT N.PETRIE-(Director of Agency Operations)received a bachelor of science degree in geography from the University of Denver in 1972 and a master of science degree in Water Resources Management from the University of Wisconsin,Madison in 1974.Mr.Petrie has worked with the Authority since 1980, beginning as a Project Manager,and then serving as Director of Power Systems Planning and Director of Rural Technical Support.He has held his current position since 1987.Prior to joining the Authority he worked in various management positions at the University of Wisconsin,Madison from 1974 to 1976,and at the Alaska Department of Natural Resources from 1977 through 1980. MARCEY RAWITSCHER-(Finance Manager)received a bachelor of arts degree in Spanish and American Literature from Middlebury College in 1979 and a masters degree in Public Policy from Harvard University in 1984.Prior to joining the Authority in 1988,she worked as Assistant Vice President,Public Finance at Rainier Bank Alaska from 1984 through 1988.In that role,Ms.Rawitscher managed a loan portfolio that ranged in size from $30 to $70 million,and was involved in transactions ranging from large letter of credit backed bond financings to smaller equipment loans throughout the State. DAvID R.EBERLE-(Project Manager for the Project)received a bachelor of science degree in Mechanical Engineering from the University of Wisconsin,Madison,in 1972.Shortly after moving to Alaska in 1973,he joined the Alaska District Corps of Engineers where he worked for approximately eight years in the Construction-Operations Division,the last five years of which were in a management capacity.In 1982 he joined the Authority as Project Manager for the design and construction of the $125.4 million Anchorage- Fairbanks 345 kilovolt transmission line intertie project.Upon completion of the intertie project,he was assigned as Project Manager to the Bradley Lake Hydroelectric Project.He has over 19 years of experience in construction related activities. THE BRADLEY LAKE HYDROELECTRIC PROJECT General Description The Project is a 90 megawatt generating facility located at the northeast end of Kachemak Bay about 27 miles from the City of Homer at the southern end of the Kenai Peninsula. The Project consists of a concrete-faced,rock fill dam,125 feet high and 610 feet long.A 13 foot diameter,concrete-lined power tunnel,18,610 feet in length,will transport water from the tunnel intake located at Bradley Lake at elevation 1,080 feet to a powerhouse at sea level.The powerhouse will contain two generators capable of providing in excess of 45 megawatts each,with provision for a third generator if needed in the future.Associated facilities at the Project site include a 2,400 foot airstrip,a barge dock,two small diversion structures to direct additional water to Bradley Lake and a diversion tunnel. The Project includes a 20 mile overhead transmission line,consisting of two parallel 115 kilovolt lines. The transmission line will connect with the Fritz Creek-Soldotna transmission line,which is under construction.(See "Transmission”herein). The Project will be the largest hydroelectric facility in the State and the fifth hydroplant to be constructed by the Authority.It will generate approximately 375,920,000 kilowatt-hours of electricity annually.Through interconnection with the existing transmission system,which extends north a distance of 450 miles,the Project will serve area customers from the Kenai Peninsula to Fairbanks,wherein over 72%of the State's population resides, Power from the Project will be used by the purchasing utilities primarily to meet existing energy requirements,thus offsetting a portion of the need for fossil fuel generation and deferring capacity upgrades and additions. Permits and Licenses The Project was originally authorized as a federal project under the Flood Control Act of 1962.The development of the site as a hydroelectric project was studied by the U.S.Army Corps of Engineers from 18 1962 through 1982.Although the Corps determined the Project to be economically feasible,federal funds were not available for design and construction.Because of the State's interest and ability to finance the Project,the United States Congress deauthorized Bradley Lake as a federal project in December 1982, clearing the way for development by the Authority. The Authority initiated the permitting and licensing process in April 1984,by filing application for a Federal Energy Regulatory Commission ("FERC”)license.The FERC license is the primary regulatory approval governing project development.The license application was accepted by FERC in June 1984,and a license to construct,operate and maintain the Project was issued to the Authority in December 1985.The FERC license expires on December 31,2035.Under the terms of the FERC license,the Authority must complete construction of the Project by January 1,1992. In addition to the FERC license,the Authority has applied for and received approximately 170 federal, State and local permits and licenses required to support construction and operations.Certain permits and approvals are subject to renewal at varying intervals.Presently all required permits for construction of the Project have been issued and remain current.A listing of the major active permits and pending renewals is contained in the Design Engineer's Report in Appendix B to this Official Statement. Geologic and Seismic Considerations A number of studies and investigations have been performed by the Design Engineer and others to ascertain the geologic and geotechnical conditions of the Project site and of the various Project structures. According to the Design Engineer,the investigatory work was performed in a manner consistent with levels of effort normally exercised by the geotechnical profession under similar geologic conditions. The southcentral coastal area of Alaska in which the Project is located has a history of seismic activity. In 1964,a major earthquake reported to have a magnitude of 8.5 on the Richter Scale occurred in Prince William Sound,with an epicenter approximately 145 miles northeast of the Bradley Lake site.As such,the "Maximum Credible Earthquake”event occurring on a regional basis and assumed for design purposes by the Design Engineer is an event of magnitude 8.5 on the Richter Scale.According to the Design Engineer an earthquake of this magnitude could cause some structural damage to the Project but all systems would be repairable if damaged.The "Design Basis Earthquake”,up to which level the Project would subsequently continue operation with minimal downtime,is an earthquake of magnitude 6.3. Considering the site geologic conditions,including the two fault zones which cross the tunnel,certain features have been incorporated into the Project design to mitigate damage from earthquake events.For example,to control rock fall within the tunnel,a concrete lining will be provided throughout the power tunnel with reinforcement as necessary.Other mitigating features include provisions for dewatering the power tunnel for repairs,specification of a rock fill dam to accommodate settling and shifting of the underlayment,and the foundation of major Project facilities,including the powerhouse,on or in bedrock.The Design Engineer believes the overall approach taken to address geologic and seismic conditions in the Project design is appropriate for the Project site.Seismic design considerations and the results of the site investigations were reviewed and found prudent for the Project by both the Project's Technical Review Board and the FERC Board of Consultants. Contracts and Schedule The first phase of Project construction,site preparation,consisted of construction of access roads,a landing strip,barge dock,permanent and temporary camp facilities,and diversion of the Bradley River.This work was initiated in July 1986 and completed in May 1987.The second phase of the Project involving the construction of all major Project features was initiated in June 1988,and will conclude upon commercial operation in September 1991.The third phase of the Project includes final site restoration and environmental mitigation work,which will be accomplished during the summer or fall of 1991,and the installation of transmission system electrical stability protection equipment,which will be installed in the transmission system grid in 1992,after commercial operation of the Project has begun. 19 As of June 30,1990,the overall Project was 76%complete.As of June 30,1990,the Authority had entered into contracts totalling in excess of $252 million and had incurred costs of $214.5 million.The construction contracts presently underway are:(1)the general civil contract for construction of the dam, spillway and power tunnel,(2)the powerhouse contract consisting of the construction of the powerhouse, installation of the Authority-furnished turbine/generation and supervisory control and data acquisition ("SCADA”)equipment,and supply and installation of all additional mechanical and electrical powerhouse and substation support equipment,(3)the Project transmission line contract,which involves the furnishing of all materials and the construction of two parallel 115 kilovolt transmission lines (see "Transmission” herein),and (4)the Middle Fork-Nuka diversions contract for construction of two river diversions. Construction of the dam is nearly complete.Concrete lining of the power tunnel is approaching completion and is approximately two months ahead of the original target schedule.However,present trends indicate that the work will be completed on schedule.Completion of the power tunnel and turnover to the powerhouse contractor for startup is currently expected to take place in late April 1991-in line with the contractor's target schedule.The spillway concrete is approximately 67%complete and the start of reservoir filling is now scheduled for early October 1990.The general civil construction contract is currently 73% complete against 66%scheduled. As of June 30,1990,powerhouse construction was 73%complete against 76%scheduled.The powerhouse substructure and superstructure are complete and installation of equipment is weil underway. Installation of the turbine-generators is on schedule and has the potential for early completion.Installation of other powerhouse equipment and mechanical-electrical systems is expected to be completed approximately six months ahead of the milestone date for startup. As of June 30,1990,progress on the transmission line contract is 67%complete against 57%scheduled. Tower foundations work is complete and tower erection is underway-approximately one month ahead of schedule.Due to the conservative scheduling of the balance of the work under this contract,completion is anticipated several months ahead of schedule. Work on the Middle Fork and Nuka diversions contract commenced in June 1990 and is scheduled for completion in September 1990. In addition to the construction contracts,two procurement contracts for the supply of Authority- furnished equipment have been issued.The largest of these is for the design,fabrication and delivery of the two turbine/generator units.The second contract is for the design and supply of the Project's SCADA control system.A third major procurement contract will be issued for equipment to protect against electrical fluctuations in the transmission system grid.All equipment furnished under the turbine-generators contract has been delivered to the site.Manufacture of the SCADA equipment is complete and the supplier is preparing the equipment for shipment to the site in accordance with the contract milestone date.The contract for equipment to protect against electrical fluctuations in the transmission system grid will be issued for bidding later this year.Studies are presently underway to finalize the size and type of equipment to be purchased.It is planned to install this equipment in 1992 after commercial operation of the Project. At the present time,construction schedule trends indicate that startup and testing of the units will begin in May 1991 and commercial operation will be attained by September 1991 in accordance with the Project's master schedule. Estimated Financing Requirements The total principal amount of Bonds required to finance the Project,based on the current Project construction budget,is estimated to be $165,260,157,and the bond financing requirements for the Project are shown in the following table.The Authority's current cash flow projections indicate that monies currently available,together with investment income thereon and the proceeds from the First Series Bonds and the Second Series Bonds,will be sufficient to meet all cash flow requirements of the Project. 20 Estimated Project Financing Required ($000) Construction (1) Site Preparation and Rehabilitation ........0.ccc cece eee cece ete cece teense eeneees $29,943 Dam,Power Tunnel and Diversions............ccc ccec cc ec cece cc eeecnceeecsceceees 92,003 Transmission Line (2).......cc ccc cece cence cece eee e eee ents een ed nese etneenseeees 23,981 Powerhouse .....0.ccc ccc cece cece rece weer e cnet eee eee e ee ee ee eee eeeeeteeesenes 34,944 Camp Catering and Support Services (3).........cece cece eet e rete tence wee eenneeees 17,160 Subtotal-Construction ........0.ccc cece cece cece eter eset en esteesecescees $198,031 Procurement (1) Turbine Generators...1...2.cece eee e nce een tence teense eevee eesseteceeuseaves $14,536 507590Cos tC.)pa 13,115 Subtotal-Procurement ........ccce cece cece tence e teens eneceesteveeusseeeees $27,651 Administration and Design (1) |S255 $39,500 Construction Management........cece c cece cet e cece e eee eect eee eee eeeeeeeeees 20,000 Authority's Costs (5)...ccc ccc ec cece cence eee n cece teense teen cent eeeseteeees 17,039 Power Purchaser's CostS ......cc ccc cece cee e eee e nee e eee eee eee eee essen eeeneees 1,655 Subtotal-Administration and Design ..............Denke cence eee ee eee eee enes $78,194 Other oo c ccc ccc ec eee e eee ee eee nett ee eee ete e teen ete eneeeeteeeeeees $975 Unallocated Contingency 2.0...0...ee cece cence cern een teen eee e beet eee eneneeeees $7,649 Total Construction Costs .......cc cece cece ete cece te tanec sense es reese eeeees $312,500 Operating Reserve Account (6)......ccc cece eee e cee e eect eee e erent e neste etseeeee $625 Renewal and Contingency Reserve Fund (6)...........2.cece eect teeter cece te eeeteneees 5,000 Capital Reserve Fund (7)......0.2 cece cece cece een e eee e eee e crete nee eee eeeneeentes 13,393 Bond Insurance Premiums.........cccccccccccccecececececetesseneteceneeneesseeases 1,303 Underwriting Discount and Financing CostS.........c cece cece eee e cence eee eeenneeeerenes 3,339 Net Capitalized Interest During Construction (8).......0...cece cece tcc r cece ene eereneeee 8,415 Total Project Cost......cc ccc ccc cece e eee eect e eee etree nee ee tees eeeeens $344,575 Less:Net Earnings on Variable Rate Demand Bonds..............cceeeececeeeeeeecceees (19,373) Net Project Cost ........cceeeeeeees eee eect cece ce ceeeennaeeaeeeerneeeeeeeers $325,202 Less:State Appropriations...0...cece eee cece een cence nee e eee etter seen essence eees (163,605) Total Bond Financing Requirement ..........0.cece cece eee cece eee eee e teenies $161,597. Plus:Net Original Issue Discount ..........0...cece eee ec eee tte e tte cette een teeees 3,663 Total Bond Principal Amount..........0.ccc cece eee e eet e nee te eeeteeeees $165,260 (1)All costs include assumed escalation to Project completion. (2)Includes costs of surveying,geotechnical investigations,clearing and construction. (3)Includes estimated costs of construction camp support services and air transportation services. (4)Estimated costs for SCADA and communications systems,permanent operating equipment and electrical system stability protection equipment. (5)Estimated administration costs of the Authority,including preliminary studies,and permitting and licensing fees. (6)Required by the Bond Resolution. (7)An amount equal to Maximum Aggregate Debt Service on the First Series Bonds and the Second Series Bonds as required by the Bond Resolution. (8)Computed as follows on the proceeds of the First Series Bonds and the Second Series Bonds: Gross Interest During Construction ........0.0.sec ee eee e eee eceeees..$17,418 Estimated Investment Income*..........0..see cece cect ereeeeeneees (9,003) Net Interest During Construction...........ccc ceeeee ee eeeeees $8,415 *Includes estimated future interest earnings on Bond Resolution funds to September 1,1991. 21 In addition to the unallocated contingency of $7,649,000 included in the cost estimate,allocated contingencies are included for each contract to accommodate quantity overruns,additional materials, allowances for construction claims and other increases normally encountered with large construction contracts.These allocated contingencies total $13,326,000.Amounts estimated for unallocated contingencies are reserved for unexpected changes in construction costs.Total allocated and unallocated contingencies included in the Project construction cost estimate are $20,975,000.These allocated contingency amounts differ from the amounts shown in the Construction Manager's Report,but reflect the latest information available to the Authority. Power Production The Project,although nominally rated at 90 megawatts,will be capable of exceeding this rating.The actual power output capacity of the generators will vary with the operating pool elevation of the reservoir. At the maximum pool elevation of 1,180 feet,the maximum output will be 119 megawatts,while at a minimum pool elevation of 1,080 feet,the maximum output will be 108 megawatts.The two generators being installed were sized with consideration for the future installation of a third turbine generator unit.The Authority currently has no plans to install the third turbine. Based upon a 1989 Design Engineer's evaluation,it is currently estimated that,with average water availability,the Project is capable of generating 375,920,000 kilowatt-hours of electricity annually and,after transmission losses,of delivering 372,200,000 kilowatt-hours annually to Bradley Junction,the delivery point for power sales under the Power Sales Agreement. Projected Annual Project Costs The Power Sales Agreement provides for the payment of all the Authority's Annual Project Costs associated with the ownership and operation of the Project.Estimated Annual Project Costs for the years 1992-1996 and 2001 are shown on the following table: Projected Annual Cost of Power from the Project ($000) Operating Year Ending June 30 1992(1)1993 1994 1995 1996 2001 Operation &Maintenance (2).............6.$1,005 $1,261 $1,317 $1,377 $1,564 $1,918 Administrative &General (2)............065 701 879 919 960 1,003 1,250 Insurance (2)0...csc cece cence eee eeenaees 590 739 773 808 844 1,052 Renewals and Replacements (3).............----374 466 Subtotal...0.0...cc eee ee cece ee eee $2,296 $2,879 $3,009 $3,145 $3,785 $4,686DebtService(4)........ee eee ee eee ee eee $11,154 $13,388 $13,388 $13,391 $13,391 $13,388Less:Investment Income (5).............5 (1,157)(1,388)(1,388)=(1,388) -s (1,388)(1,388) Total Cost of Power .........-.0-.e0ee $12,293 $14,879 $15,009 $15,148 $15,788 $16,686 Energy Delivered (MWh)(6)............065 310,200 372,200 372,200 372,200 372,200 372,200 Total Unit Cost of Power (cents/kWH)......3.96 4.00 4.03 4.07 4.24 4.48 (1)For the ten months beginning September 1,1991. (2)Estimated by the Authority.Includes assumed inflation at a rate of 4.5%per year. (3)Based on annual payments beginning in the fifth year of Project operation to the Scheduled Maintenance Fund in amounts estimated by the Project Management Committee to be sufficient to cover all costs for renewals and replacements as estimated by the Design Engineer. (4)Based on actual debt service on the First Series Bonds and the Second Series Bonds.Debt service for 1992 reflects two months of capitalized interest on the First Series Bonds and Second Series Bonds. (5)Projected interest earnings on funds in the Capital Reserve Fund,the Renewal and Contingency Reserve Fund and the Operating Reserve Account. (6)As estimated by the Authority for presumed operation levels under average water conditions less estimated transmission losses from the powerhouse to the Bradley Junction switching station. 22 Transmission The Project includes approximately 20 miles of two parallel,115-kilovolt transmission lines to connect the power plant to a switching station at Bradley Junction (the "Project Transmission Line”).The switching station will interconnect with the 59 mile,115-kilovolt Fritz Creek to Soldotna transmission line being built by the Homer Electric Association,Inc.,at a total estimated cost of $18 million.The Fritz Creek to Soldotna transmission line is not part of the Project,but is essential for transmission of Project power to the Purchasers' systems.Construction of 31 miles of the Fritz Creek to Soldotna transmission line is complete.Construction of the remaining 28 miles of this transmission line is scheduled to begin in November 1990 and is scheduled for completion prior to the Date of Commercial Operation of the Project. The Power Purchasers'payment obligations under the Power Sales Agreement begin on the Date of Commercial Operation of the Project notwithstanding the date of completion of the Fritz Creek to Soldotna transmission line. The Fritz Creek to Soldotna transmission line will provide two paths of power flow from Bradley Junction.One path presently interconnects with the existing transmission system of the Homer Electric Association and the other will interconnect with the existing transmission system of the Chugach Electric Association.Arrangements for transmission of Project power are provided for in an existing transmission agreement by and among the Power Purchasers. Project Management Committee Chugach Electric Association,Golden Valley Electric Association,the Municipality of Anchorage, Homer Electric Association,Matanuska Electric Association,the City of Seward and the Authority each have a designated representative and an alternate on the Project Management Committee.The Project Management Committee is responsible for the management,operations,maintenance and improvement of the Project,subject to the Authority's nondelegable rights,duties and responsibilities.Specifically,the Project Management Committee is charged with the following duties: 1.To oversee the operation and maintenance of the Project,and the scheduling,production and dispatch of Project power. 2.To establish procedures for the use of each purchasing utility's water allocation. 3.To adopt a budget of Annual Project Costs for each fiscal year. 4.To establish the estimated annual payment obligation of each Power Purchaser,and a schedule of monthly payments designed to cover that obligation. 5.To determine the actual Annual Project Costs at the conclusion of each fiscal year.From that determination to determine the actual annual payment obligation of each Power Purchaser and the amount of any additional payment to be made by the Power Purchasers,or the amount due to reimburse overpayments. 6.To evaluate alternative methods of carrying out and funding required project maintenance, repairs,renewals,replacements,improvements or betterments. 7.To adopt provisions to evaluate and approve optional maintenance,repairs,renewals, replacements,improvements or betterments. 8.To adopt procedures for conflict resolution. 23 9.To make an initial determination of the appropriate amount of,and to obtain,insurance for the Project. 10.To adopt maintenance schedules. 11.To adopt procedures relating to power reserves;and 12.To consider the need for and approve any additional amount of funds to be set aside in the Renewal and Contingency Reserve Fund above that required by the Bond Resolution. The Project Management Committee has been meeting on an as needed basis since 1988.They have been involved in all phases of the actual construction of the Project,through the technical coordinating subcommittee,which makes regular reports to the Project Management Committee. Project Operation and Maintenance In accordance with the provisions of the Act,the Authority will retain overall responsibility for maintenance and operation of the Project.The Authority will operate the Project for at least the first two years after the Date of Commercial Operation.After that time,the Authority may contract for the operation of the Project with an independent qualified operator.It is anticipated that the operator will be a Power Purchaser,provided that the Power Purchaser is found to meet reasonable standards of experience and capability.Scheduling and dispatching of Project generation is to be performed for all Power Purchasers by the Chugach Electric Association. THE POWER PURCHASERS General Characteristics of the Service Area The Power Purchasers in total provide the vast majority of the electricity needs in the Railbelt Region of Alaska,an area so named because of its proximity to the Alaska Railroad.The Alaska Railroad,completed in 1923,linked the coastal port city of Seward with Anchorage and Fairbanks in the interior of the State. The Railbelt is comprised of three distinct economic and geographic regions;the Kenai Peninsula,the greater Anchorage area and the Fairbanks area. Anchorage,the largest city in Alaska,dominates the Railbelt with a population of approximately 223,000 representing about 43%of the total State population.Anchorage is the trade,service and financial center for most of the State and,although not the capital of Alaska,serves as a major center for many State government functions.Other significant contributing factors to the Anchorage economy include a large federal government and military presence,tourism,air and rail transportation support,and headquarters support for the petroleum,mining and other basic industries located elsewhere in the State. Immediately northeast of Anchorage is the Matanuska-Susitna Borough,centered around the communities of Palmer and Wasilla.For many years a sparsely populated agricultural area,improvements in road transportation and growth in Anchorage have resulted in transformation of parts of the area into a suburb of Anchorage.Although agriculture,tourism,mining and forestry are factors in the economy,the _economic well-being of the Matanuska-Susitna Borough has become closely tied to that of Anchorage. Between 1980 and 1985,the greater Anchorage area experienced unprecedented economic and population growth stimulated by the rise in world oil prices.The petroleum industry greatly increased direct employment as exploration and development activities in the northern parts of the State expanded.State revenues increased from $825 million in 1979 to $4.1 billion in 1982,resulting in a tripling of State government spending.The population of Anchorage grew from 182,500 in 1980 to approximately 234,000 in 1985 representing a 5.1%average annual growth rate.The population in the neighboring Matanuska-Susitna Borough increased from 18,600 to 37,700 over the same period,an annual average growth of 15.2%.Most of the population growth to the greater Anchorage area during this time was the result of in-migration of young adult job seekers. 24 South of Anchorage is the Kenai Peninsula,not geographically far from Anchorage,but with an economy that is relatively unrelated to that of Anchorage.The most significant basic industry on the Kenai Peninsula is the production and processing of petroleum products from Cook Inlet.Other important basic industries include tourism and fish harvesting and processing.Much of the area's tourism is from Anchorage residents who visit the Kenai Peninsula because of its abundant nature-related recreational opportunities. Principal communities on the Kenai Peninsula are Homer,Seward,Kenai and Soldotna.Seward has experienced a significant expansion of its economy in recent years related to shipping,construction and staffing of a new State prison and of a sawmill there. Located in the interior of Alaska,an area corresponding to the central Yukon River drainage basin, Fairbanks is the center of activity for the northern part of the State.Fairbanks is about 250 air miles north of Anchorage and is Alaska's second largest city with a greater area population of approximately 79,000.Basic economic activities include federal government and military operations,the University of Alaska,tourism, State government activity and support of natural resource development in the interior and northern parts of the State.The Alaska Pipeline System,constructed in the mid-1970's,passes near Fairbanks on its route from Prudhoe Bay to Valdez. In the fourth quarter of 1985,a Statewide recession began that was precipitated by the contraction of the construction industry after its rapid expansion in the early 1980's and the over-extension of business in anticipation of continued rapid economic growth.During the first six months of 1986,the decline in world oil prices contributed to the severity of the recession through reductions in direct petroleum-related employment and significant cutbacks in State and local government spending,particularly capital spending. By 1987,annual State revenues had fallen to $1.8 billion.The Anchorage area was hit hardest by the recession because of the concentration of construction and support industries located there.The population inAnchoragehadfallenfrom248,000 to approximately 223,000 in 1988.The recession was not as severely felt in the Fairbanks area because of increasing United States military activity in Fairbanks at that time and a lesser dependence on State government spending. Despite the continuance of relatively low oil prices compared to the early to mid-1980's,the recession induced by falling oil prices came to an end during the last half of 1988.State revenues for Fiscal Year 1989 increased to $2.1 billion.During the nine months prior to the Valdez oil spill,July 1988 to March 1989, employment Statewide grew at an average annual rate of 2.7%.The oil spill clean-up effort then accelerated an economic recovery that was already well underway.Nearly 8,000 jobs were added in 1988 and another 10,000 were added during 1989.Seasonally adjusted employment has continued to grow during the first half of 1990. The growth rate experienced over the last two years was higher than anticipated and probably will not be sustained at the same level.This is because three of the primary contributors to that growth rate-oil spill related employment,state and local government spending and fishing and timber cannot continue to spur economic expansion. Additional factors in the recovery have been an increase in military employment,and growth in the trade and services sector due in part to the noted increases in basic employment and also due to higher spending and investment based on a perception that the recession is over. The petroleum industry,tourism,and mining are the basic sectors with the greatest potential for long- term growth.Although the main drivers of growth over the last two years are expected to cool off,these three sectors are expected to provide slower but more sustainable growth in the future.The most recent projections from the University of Alaska's Institute for Social and Economic Research suggest a long-term employment growth rate of 1.0%per year,down from the 3.0%per year experienced during the recent recovery. 25 The following table summarizes population and employment statistics for the three main areas of the Railbelt Region for the years 1980 to 1988. Purchasers'Service Area Historical Population and Employment Statistics (1) Anchorage Area (2)Fairbanks Area (3)Kenai Peninsula (4) Year Population Employment Population Employment Population Employment 1980...ieeececeeetteeneee 201,141 84,575 62,828 22,819 26,424 9,632 |9 208,435 92,715 .64,964 25,830 27,599 10,504 9)224,382 102,849 69,122 28,239 31,051 11,432 1983...cee eee cence een e eens 244,135.112,417 73,567 28,559 35,148 12,053 1984 Loo cece ec eee teetereee 259,747 118,060 76,594 31,249 38,275 13,052 1985 cece eee eee eee eee ees 271,540 120,752 79,074 32,152 40,645 13,760 1986 Lo.cece eee cece ee eee e eee 275,107 113,144 80,131 29,935 41,653 12,647 1987 oc.e eens 267,024 105,928 79,281 28,293 40,871 12,093 1988 Loc ccc ccc cece cece eee e ees 260,935 106,446 79,202 28,575 39,949 12,981 (1)Data Source:Alaska Department of Labor.Population statistics are for July 1 of each year.Employment statistics are third quarter averages of total industries employment. (2)Includes the Municipality of Anchorage and the Matanuska-Susitna Borough. (3)Includes Fairbanks North Star Borough and the southeast Fairbanks census district. (4)Includes Kenai Peninsula Borough. Purchasers'Statistics Chugach Electric Association,Homer Electric Association,Matanuska Electric Association and Golden Valley Electric Association are rural electric cooperatives.The Municipality of Anchorage and the City of Seward operate municipally owned electric utilities.The electric systems of the Purchasers are all interconnected through a transmission network owned in part by the Purchasers and in part by the Authority. The following table provides selected statistics for the Purchasers for 1989. Selected Statistics for Calendar Year 1989 Golden AnchoyYage Chugach Valley Homer Matanuska Seward(1) Average Number of Customers..........:29,015 60,900 26,259 17,578 28,385 1,932 Peak Load (KW).......ecceeceeeceeees 146,000 385,300 95,100 78,414 100,264 8,367 Energy Sales (MWh)(2)...............858,305 1,980,327 485,866 397,662 412,842 41,927 Operating Revenues ($000).............66,859 98,486 42,620 31,514 37,658 4,344 Gross Investment in Utility Plant ($000) 6)223,617 501,680 194,486 106,934 127,701 24,073 Net Investment in Utility Plant ($000)(3).143,166 373,149 134,945 85,344 101,362 18,315 Total Retained Earnings ($000)(3)......35,874 64,481 35,084 26,251 43,917 11,336 Average Cost of Power to Retail Customers (cents/kWh)(4)........cece eee eeees 8.5 6.9(5)8.9 77 8.8 10.0 (1)Statistics for Seward are for fiscal year ended June 30,1989. (2)Includes sales for resale. (3)At year end. (4)Excludes sales for resale. (5)Chugach's average cost of power to all customers in 1989,including its three wholesale customers,was 4.9 cents per kilowatt-hour. 26 Rate Regulation The Authority is not subject to the jurisdiction of the APUC.The Power Sales Agreement is not subject to APUC jurisdiction until all long-term debt issued to fund the Project is retired.Annual Project Costs (including debt service)incurred by a Purchaser pursuant to the Power Sales Agreement must be allowed under statute by the APUC in the rates charged by the Purchaser. With the exception of the City of Seward,all Purchasers are subject to rate regulation by the APUC and the regulated Purchasers'overall revenues to meet their financial obligations are directly affected by APUC decisions.All regulated Purchasers other than the Municipality of Anchorage could choose to becomederegulatedthroughamajorityvoteofthemembersvotinginanelection,although a minimum of 15%of the membership is required to vote in order for such an election to be valid.The Municipality of Anchorage has an application pending before the APUC for deregulation. In January 1987,the APUC adopted simplified rate filing procedures whereby an electric utility under APUC regulation may submit proposed rate changes accompanied by certain financial information to the APUC for approval without the necessity of undergoing a formal hearing process.The proposed rates must be approved by the utility's governing body before they will be accepted by the APUC for consideration.The purpose of this simplified filing process is to reduce regulatory lag for utilities seeking rate relief.At the present time,only Matanuska Electric Association and Chugach Electric Association participate in the simplified filing process.The remaining Purchasers have not indicated whether they also will seek APUC approval to utilize the simplified filing process. If a utility elects to be regulated under the simplified process,it is required to make either quarterly or semi-annual filings and propose rate changes (either increases or decreases)to maintain its Times Interest Earned Ratio ("TIER”)as required for electric cooperatives by the Rural Electrification Administration.The cooperative utility must reduce rates to achieve its target TIER if its earned TIER exceeds the target TIER by more than five percent.Rate increases under the simplified filing process are limited to eight percent in any one year,excluding changes resulting from fluctuations in fuel or purchased power costs,and 20%over any three year period.ee To obtain rate increases under the normal non-simplified process or in excess of the limits imposed by the simplified process,the utility must participate in a formal ratemaking process involving the filing of testimony and the holding of public hearings,and provide detailed revenue requirements,cost of service and rate design studies.Formal rate filings typically take nine months to one year from the time the tariff advice letter proposing a change in rates is submitted to the time when a final rate order is issued.However,it is within the APUC's authority to authorize rate changes on an interim,refundable basis,after a suspension period.Usually,this results in interim rates being approved for implementation approximately 45 days after the filing is made. 27 HISTORICAL AND PROJECTED POWER AND ENERGY REQUIREMENTS A summary of the historical and projected energy requirements and peak demand,as estimated by the Purchasers for their own respective systems,is provided in the following table: Purchasers'Power Requirements Total Energy Requirements (000 MWh)(1) Historical Projected 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 Anchorage ..............5.849 843 824 812 830 819 822 =828 838 849Chugach..................1,120 1,076 1,054 1,022 1,077 1,058 1,049 1,021 1,004 1,006 Golden Valley .............483 493 498 508 542 551 565 582 588 595 Homer ........cece ee eee 409 420 «©4415 «©4220 4200-4221 420 420 419 422 Matanuska ................462 444 431 434 441 439 =451 464 471 483Seward...........esse eee 34 37 37 42 45 50 50 51 52 53 Total ......cece eee eee 3,357 3,313 3,259 3,240 3,355 3,338 3,357 3,366 3,372 3,408 Non-Coincident Peak Demand (MW) Historical Projected 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 Anchorage ..............--152 141 141 137 146 143 143°«144 146 146 Chugach(2)................190 182 178 178 199 177 175 171 168 168 Golden Valley .............81 85 83 82 95 106 108 112 114 115 Homer ...............005-71 69 75 69 78 74 74 74 74 74 Matanuska .............04.89 91 93 85 100 94 96 98 100 103Seward...........eeceeees 6 6 7 8 8 10 12 13 13 14 Total .............0...5389 574 577 559 626 604 608 612 615 620 (1)Excludes sales for resale to other Purchasers.Includes energy losses and non-billed energy. (2)Total Chugach system peak less peak of Homer,Matanuska and Seward. PURCHASERS'PROJECTED REVENUE REQUIREMENTS The following tables illustrate the projected revenue requirements and operating results for each of the Power Purchasers for the years 1990 to 1993.and 1999. Municipality of Anchorage Municipal Light and Power Summary of Projected Operating Results ($000) 1990 1991 1992 1993 1999 Gross Revenues (1)........02.c cece eeeeneees $68,431 $70,308 $74,326 $78,142 $96,555OperatingExpenses(2).......2...ccc cece eeeues 39,557 41,996 45,155 47,264 62,258 Net Revenues excluding Depreciation and Am- Ortization ..2...eee ee eee eee eee $28,874 $28,312 §$29,171 $30,878 $34,297 Debt Service (3).........cc cece cence eee $18,046 $17,159 $17,160 $17,155 $17,148EnergySales(MWh)..........0eccceeesceeees 772,400 775,700 781,400 790,500 839,500 Unit Revenue from Energy Sales (cents/kWh)(4).8.2 8.5 8.9 9.3 11.0 (1)Includes revenues from sales of electricity,other operating revenues and other income less other deductions. (2)Projected operating expenses including Project costs. (3)Debt service on existing debt and assumed future debt. (4)Revenues from sales of electricity divided by energy sales. 28 Chugach Electric Association Summary of Projected Operating Results ($000) 1990 1991 1992 1993 1999 Gross Revenues (1).........02ceseeeees $101,382 $107,933 $117,581 $124,782 $168,850 Operating Expenses (2).........0eeee0es 54,167 58,463 66,062 71,707 =113,249 Net Revenues excluding Depreciation and Amortization ...........e00:$47,215 $49,470 $51,519 $53,075 $55,601 Debt Service (3)..........2.cee eee $33,158 $34,701 $36,044 $36,732 $41,410 Energy Sales (MWh)(4).........-.-006:1,813,800 1,804,000 1,763,600 1,755,700 1,907,400 Unit Revenue from Energy Sales (cents/kWh)(5).......cece cece eee 5.5 5.9 6.6 7.0 8.7 (1)Includes revenues from sales of electricity,other operating revenues and other income less other deductions. (2)Projected operating expenses including Project costs. (3)Debt service on existing debt and assumed future debt. (4)Projected total system sales including sales for resale to Homer Electric Association,Matanuska Electric Association and the City of Seward. (5)Revenues from sales of electricity divided by total system energy sales. Matanuska Electric Association Summary of Projected Operating Results ($000) 1990 1991 1992 1993 1999 Gross Revenues (1).......00...cee ce eee eens $38,120 $39,955 $43,881 $46,253 $60,632 Operating Expenses (2)........cceeececeeevees 26,512 28,860 32,905 35,411 50,724 Net Revenues excluding Depreciation and Am- OMtization ...6.eect eee e eee ee $11,608 $11,095 $10,976 $10,842 $9,908 Debt Service (3).......0.eee cere cece ecees $6447 $6,432 $6,383 $6,352 $6,086 Energy Sales (MWh)...........cceceeecceeees 415,100 426,800 438,400 445,000 507,700 Unit Revenue from Energy Sales (cents/kWh)(4).8.8 9.0 9.6 10.0 11.5 (1)Includes revenues from sales of electricity,other operating revenues and other income less other deductions. (2)Projected operating expenses including Project costs. (3)Debt service on existing debt and assumed future debt. (4)Revenues from sales of electricity divided by energy sales. 29 City of Seward Electric Utili ty Summary of Projected Operating Results 1991 1992 1993 1999 $5,352 $5,440 $5,569 $7,122 3,752 4,145 4,453 6,003 ($000) 1990 Gross Revenues (1)...........ccc ce cece cnet enecees $5,299 Operating Expenses (2).......ccc cece cece eee eeeee 3,493 Net Revenues excluding Depreciation and Amortiza- 1500)|$1,806 Debt Service (3)00.....cece cece cence ceeteeces $750 Energy Sales (MWh)........ccc ccc teens eee eeneenes 45,600 Unit Revenue from Energy Sales (cents/kWh)(4)......11.2 (1)Includes revenues from sales of electricity,other operating deductions. (2)Projected operating expenses including Project costs. (3)Debt service on existing debt and assumed future debt. (4)Revenues from sales of electricity divided by energy sales. $1,600 $1,295 $1,116 $1,119 $752 $745 $745 $745 46,000 46,700 47,700 50,700 11.2 11.2 11.2 13.4 revenues and other income less other Homer Electric Association Summary of Projected Operating Results 1991 1992 1993 1999 33,872 $36,781 $38,276 $47,172 23,664 25,944 27,383 35,130 ($000) 1990 Gross Revenues (1).....-.-.-ccececeeceeeeeees $32,020 $ Operating Expenses (2)........ces eeeseevees 22,269 Net Revenues excluding Depreciation and Am- OMtiZAtION .6...cececeeeeeeeeee $9,751 $ Debt Service (3).......cc cece eee ceeeeees $6,863 $ Energy Sales (MWh)..........ccc eee cee cence 397,300 3 Unit Revenue from Energy Sales (cents/kWh)(4).7.8 (1)Includes revenues from sales of electricity,other operating deductions. (2)Projected operating expenses including Project costs. (3)Debt service on existing debt and assumed future debt. (4)Revenues from sales of electricity divided by energy sales. 30 10,208 $10,837 $10,893 $12,042 6,953 $7,012 $7,041 $6,542 96,900 396,500 396,100 398,900 8.3 8.8 9.2 11.4 revenues and other income less other Golden Valley Electric Association Summary of Projected Operating Results ($000) 1990 1991 1992 1993 1999 Gross Revenues (1)........-0.cece eeeee rece ees $45,465 $47,444 $§51,212 $54,292 $71,387 Operating Expenses (2)......ccceeecscceeeeecs 28,594 30,691 33,598 35,423 47,755 Net Revenues excluding Depreciation and Am- OTTIZATION 6.6 cece eee eee eee eens $16,871 $16,753 $17,614 $18,869 $23,632 Debt Service (3)«0.02...ccc cceeeeeeeenes $10,771 $11,250 $12,159 $12,815 $15,429EnergySales(MWh).........ccc ccceeeeeeeeee 504,500 517,100 532,700 538,900 591,200 Unit Revenue from Energy Sales (cents/kWh)(4).8.6 8.7 9.1 9.6 11.4 (1)Includes revenues from sales of electricity,other operating revenues and other income less other deductions. (2)Projected operating expenses including Project costs. (3)Debt service on existing debt and assumed future debt. (4)Revenues from sales of electricity divided by energy sales. ASSUMPTIONS AND CONCLUSIONS OF THE CONSULTING ENGINEER In the preparation of its Report and the opinions that follow,the Consulting Engineer has made certain assumptions with respect to conditions which may occur in the future.In addition,it has used and relied upon certain information and assumptions provided to it by the Purchasers,the Authority and other sources which it believes to be reliable.The Consulting Engineer believes the use of such information and assumptions is reasonable for purposes of its Report.However,some assumptions will invariably not materialize as stated therein or may vary significantly due to unanticipated events and circumstances.Therefore,the actual results can be expected to vary from those forecast to the extent that actual future conditions differ from those assumed by the Consulting Engineer or provided to it by others.Reference should be made to the entire Consulting Engineer's Report set forth as Appendix A to this Official Statement.The principal considerations and assumptions made by the Consulting Engineer and the principal information and assumptions provided to it by others include the following: 1.Projections of the Purchasers'power and energy requirements were provided by each of the Purchasers for its respective system. 2.The Purchasers will adjust rates as necessary to produce revenues sufficient to allow each Purchaser to pay its revenue requirements,including the cost of power from the Project,as shown for each Purchaser in the Projected Operating Results Table presented in the Consulting Engineer's Report for each Purchaser. 3.The Project will be completed within the construction cost estimate and schedule provided by the Construction Manager,achieve commercial operation by September 1,1991,and be capable,upon completion,of generating approximately 375,920 megawatt-hours annually under average water conditions. 4.The Project will have a minimum net capability of 90 megawatts and will be able to operate at full capacity without adversely affecting the stability of the interconnected Railbelt electric system. 5.The Fritz Creek to Soldotna transmission line will be constructed and energized by September 1, 1991, 6.Inflation is projected to be 4.5%per year for the calendar years 1990 through 1999. 31 7.Monies in the Construction Fund,Operating Reserve Account,Renewal and Contingency Reserve Fund and Capital Reserve Fund are assumed to be invested at annual interest rates of 7.26%, 7.28%and 7.38%,depending on the source of the monies.Interest rate assumptions and total financing requirements were provided by the financial advisor and the underwriters. 8.The cost of oil,coal and natural gas to the Purchasers (except the Chugach Electric Association, Inc.)will escalate at an average rate of 4.0%,3.0%,and 4.5%,respectively,for the ten-year period 1990 through 1999.The cost of natural gas to the Chugach Electric Association,Inc.will increase according to contract provisions as estimated by Chugach through 1996 and will increase at approximately the assumed rate of inflation thereafter through 1999. 9.The Purchasers'projected annual capital improvement expenditures and the amounts thereof to be funded from future borrowings have been provided by each of the Purchasers for its respective electric system. The Consulting Engineer's Report has been based on the assumption that all contracts,agreements, statutes,rules and regulations which have been relied upon by the Consulting Engineer in preparing its Report will be fully enforceable in accordance with their terms and conditions.The Consulting Engineer makes no representations or warranties,and provides no opinion concerning the enforceability or legal interpretation of such contracts,agreements,statutes,rules and regulations. Based on its analyses and studies and the considerations and assumptions set forth in its Report,the Consulting Engineer is of the opinion that: 1.The Purchasers can utilize the power produced by the Project by displacing generation from existing fossil fuel power supply resources. 2.Power produced by the Project will allow the Purchasers to reduce their dependence on gas-fired generation. 3.The estimated cost of power from the Project is reasonable when compared with the cost of developing other long-term power supply resources. 4.Because the major part of the Project's annual cost is debt service on the First Series Bonds and the Second Series Bonds,which will not be subject to change,the Purchasers'power supply costs will be less susceptible to inflation and other cost factors beyond the Purchasers'control as a result of including the Project as a power supply resource. 5.Based upon the timely implementation of measures by the Purchasers to increase electric system revenues as projected in the Report,which projected increases related to the Project the Consulting Engineer believes to be reasonable,the Purchasers can expect to obtain sufficient revenues to be able to pay the annual cost of power from the Project during the period studied. 6.The revenues from the sales of electricity shown in the projections of Purchasers'operating results presented in the Report can reasonably be obtained by the Purchasers through increases in rates and other measures. 7.The Project's design is based upon proven technology and with normal maintenance the Project can be expected to have a useful life extending substantially beyond the term of the Second Series Bonds. LITIGATION There is no litigation pending or threatened against the Authority other than various legal proceedings arising out of the ordinary course of business of the Authority and having no material impact on the financial condition of the Authority.Upon the delivery of the Second Series Bonds,the Attorney General of the State will furnish a certificate to the effect that,among other things,there is no litigation pending in any court to 32 restrain or enjoin the issuance or delivery of the Second Series Bonds,or in any way contesting the validity or enforceability of the Second Series Bonds or the Power Sales Agreement. CERTAIN LEGAL MATTERS Legal matters incident to the authorization,issuance and sale by the Authority of the Second Series Bonds are subject to the approving legal opinion of Wohlforth,Argetsinger,Johnson &Brecht,Anchorage, Alaska,Bond Counsel.The proposed form of the opinion of Bond Counsel is included herein as Appendix E. Certain legal matters will be passed upon for the Underwriters by their counsel,Katten Muchin &Zavis (Borge and Pitt),Chicago,Illinois. UNDERWRITING John Nuveen &Co.Incorporated;Goldman,Sachs &Co.;Merrill Lynch Capital Markets;PaineWebber Incorporated and the Lehman Brothers Division of Shearson Lehman Hutton Inc.(the "Underwriters”)have agreed,jointly and severally,to purchase the Second Series Bonds subject to certain conditions,and have agreed to pay therefor a price of $59,258,184.11 (representing an underwriting discount of $817,112.24 and an original issue discount of $183,718.75)plus accrued interest.The Underwriters will be obligated to purchase all the Second Series Bonds,if any Second Series Bonds are purchased. The price and other terms respecting the offering and sale of the Second Series Bonds may be changed from time to time by the Underwriters after such Second Series Bonds are released for sale,and the Second Series Bonds may be offered and sold at prices other than the initial offering prices,including sales to dealers who may sell the Second Series Bonds into investment accounts.In connection with the offering of the Second Series Bonds,the Underwriters may over-allot or effect transactions which stabilize or maintain the market price of the Second Series Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing,if commenced,may be discontinued at any time. LEGALITY FOR INVESTMENT IN ALASKA The Second Series Bonds are securities in which all public officers and bodies of the State of Alaska and all municipalities and municipal subdivisions,all insurance companies and associations and other persons carrying on an insurance business,all banks,bankers,trust companies,savings banks,savings associations, including savings and loan associations and building loan associations,investment companies and other persons carrying on a banking business,all administrators,guardians,executors,trustees and other fiduciaries,and all other persons whatsoever who are now or may hereafter be authorized to invest in bonds or other obligations of the State,may properly and legally invest funds,including capital in their control or belonging to them.Notwithstanding any other provisions of law,the Second Series Bonds are also securities which may be deposited with and may be received by all public officers and bodies of the State and all municipalities and municipal subdivisions for any purpose for which the deposit of bonds or other obligations of the State is now or may hereafter be authorized. SOURCES OF CERTAIN INFORMATION Information in this Official Statement concerning the Power Purchasers and their electric systems has been prepared by the Authority and the Consulting Engineer based upon information furnished by the Power Purchasers. The Consulting Engineer's Report has been prepared by R.W.Beck and Associates,Inc.,the Authority's Consulting Engineer,and is attached hereto as Appendix A.As stated in the Consulting Engineer's Report, as of its date,the Consulting Engineer has made a number of assumptions in reaching the conclusions stated 33 in its Report and has utilized the services of,and information and assumptions provided by,others as described therein.While the Consulting Engineer believes that such sources of information are reliable,the Consulting Engineer has not verified the accuracy of such information. The Underwriters make no representation as to the accuracy of information in this Official Statement, other than the information under the caption "Underwriting”.The Authority makes no representation as to the accuracy of information in this Official Statement concerning the Power Purchasers.Concurrently with the issuance of the Second Series Bonds,the General Manager of each Power Purchaser will deliver a certificate with respect to the accuracy of the information in this Official Statement relating to such Power Purchaser. FINANCIAL STATEMENTS The financial statements of the Authority have been examined by Ernst &Young,Anchorage,Alaska, independent certified public accountants,to the extent and for the periods indicated in their report.Such financial statements have been appended to this Official Statement as Appendix F. RATINGS Moody's Investors Service has assigned the Second Series Bonds a rating of "Aaa”and Standard & Poor's Corporation has assigned the Second Series Bonds a rating of "AAA”.These ratings are conditioned upon the delivery by MBIA of its standard form of Financial Guaranty Insurance Policy.No application was made to any other rating agency for the purpose of obtaining an additional rating on the Second Series Bonds.A rating reflects only the views of the rating agency assigning such rating and an explanation of the significance of such rating may be obtained from such rating agency.The Authority has furnished to such rating agencies certain information and materials relating to the Second Series Bonds and the Authority, including certain information and materials which have not been included in this Official Statement. Generally,rating agencies base their ratings on such information and materials and investigations,studies and assumptions by the respective rating agency.There is no assurance that any rating will continue for any given period of time or that it will not be revised downward or withdrawn entirely by such rating agency if, in its judgement,circumstances so warrant.Any downward revision or withdrawal of any rating of the Second Series Bonds may have an adverse effect on the market price of the Second Series Bonds.The Authority and the Underwriters have assumed no responsibility either to bring to the attention of the owners of the Second Series Bonds any proposed change in or withdrawal of any rating or to contest any such revision or withdrawal.: TAX EXEMPTION In the opinion of Bond Counsel,interest on the Second Series Bonds is excluded from gross income for federal income tax purposes under existing statutes,regulations,court decisions,and rulings,except for any period during which a Second Series Bond is held by a "substantial user”of the Project or a "related person” within the meaning of Section 147(a)of the Internal Revenue Code of 1986 (the "Code''),and such interest will not be treated as a preference item for purposes of determining alternative minimum taxable income for individuals and corporations;however,such interest is included in adjusted net book income or adjusted current earnings for purposes of computing the alternative minimum taxable income of a corporation under Section 55 of the Code and the environmental tax on corporations under Section 59A of the Code.In rendering its opinion,Bond Counsel has assumed compliance by the Authority with all requirements of the Code that must be satisfied subsequent to the issuance of the Second Series Bonds in order that interest thereon be,or continue to be,excluded from gross income for federal income tax purposes.The Authority has covenanted to comply with each such requirement.Failure to comply with these requirements could cause the interest on the Second Series Bonds to be included in gross income retroactive to the date of issuance of the Second Series Bonds.The Second Series Bonds and the interest thereon are exempt from taxation by the 34 State except for transfer,estate,and inheritance taxes and except to the extent that inclusion of said interest in computing the corporate alternative minimum tax under Section 55 of the Code,as described above,may affect the corresponding provisions of the State corporate income tax. The Code contains other provisions that may result in federal income tax consequences to certain categories of owners of the Second Series Bonds,including the following.The Code denies a deduction for interest on indebtedness incurred to purchase or carry the Second Series Bonds,or,in the case of a financial institution,that portion of the owner's interest expense allocated to interest on the Second Series Bonds. Interest on the Second Series Bonds held by a foreign corporation may be subject to the branch profits tax imposed by the Code.For taxable years beginning after December 31,1986,the deduction for loss reserves for property and casualty insurance companies is reduced by 15%of the sum of certain items,including the interest received on tax-exempt obligations,such as the Second Series Bonds.Recipients of certain Social Security and certain Railroad Retirement benefits must take into account,in determining the taxability of such benefits,receipts or accruals of interest on the Second Series Bonds. The Code sets forth certain requirements that must be satisfied on a continuing basis in order to preserve the exemption from federal income taxes of interest on the Second Series Bonds.Among these requirements are the following: Restrictions on Change in Use-The Code requires that the Project continue to be used for a purpose for which a tax-exempt bond could be issued on the date of issuance of the Second Series Bonds. Investment Restrictions-Except during certain "temporary periods”,proceeds of the Second Series Bonds and investment earnings thereon (other than amounts held in a reasonably required reserve or replacement fund,if any,or as part of a "minor portion”)may not be invested in taxable investments having a yield that is "materially higher”(%of one percent)than the yield on the Second Series Bonds. Rebate of Arbitrage Profit-Earnings from the investment of the "gross proceeds”of the Second Series Bonds in excess of the earnings that would have been realized if such investments had been made at a yield equal to the yield on the Second Series Bonds are required to be paid to the United States of America at periodic intervals.For this purpose,the term "'gross proceeds”includes the original proceeds of the Second Series Bonds,amounts received as a result of investing such proceeds,and amounts to be used to pay debt service on the Second Series Bonds. Tax Treatment of Original Issue Discount The initial offering prices of all of the Capital Appreciation Bonds and the Current Interest Bonds maturing on July 1,2021 (collectively,the "Discount Bonds”)are less than the respective amounts payable at maturity.Under existing statutes,regulations,rulings and judicial decisions,the difference between the amount payable at maturity of each Discount Bond and the respective initial offering price at which a substantial amount of such Discount Bonds of the same maturity is sold to the public (the "Offering Price''), to the extent properly allocable to each registered owner of a Discount Bond,constitutes interest on such Discount Bond and is exempt from federal income taxes with respect to such registered owner assuming continuing compliance with the Code as described above.Any excess over such amount is treated as taxable gain upon the sale or exchange of such Discount Bond. Under Section 1288 of the Code,for purposes of determining the adjusted basis of an owner in a Discount Bond,interest on the Discount Bond is treated as compounding semiannually,on each January 1 and July 1, at a rate sufficient to produce the yield to maturity of the Discount Bond based on the Offering Price thereof, and on a daily,ratable basis for any day between such dates.The adjusted basis is used to determine taxable gain or loss upon disposition (including acceleration,redemption or payment at maturity). 35 Bond Counsel expresses no opinion with respect to the income tax treatment of the Second Series Bonds under the laws of any state except Alaska or with respect to the recognition of gain or loss by an owner of a Second Series Bond upon the disposition of such Second Series Bond under federal law or the laws of any state.Owners of the Second Series Bonds should consult their tax advisors with regard to such matters. MISCELLANEOUS The summaries or descriptions of provisions in the Act,the Bond Resolution and the Power Sales Agreement contained in this Official Statement,and all references to other materials not purporting to be quoted in full are only brief outlines of certain provisions thereof and do not constitute complete statements of such documents or provisions and reference is hereby made to the complete documents relating to such matters for further information,copies of which will be furnished by the Authority on request. Any statements made in this Official Statement indicated to involve matters of opinion or estimates are represented as opinions or estimates in good faith.No assurance can be given,however,that the facts will materialize as so opined or estimated. The Authority has authorized the distribution of this Official Statement.This Official Statement has been duly executed and delivered by the Executive Director of the Authority on behalf of the Authority. ALASKA ENERGY AUTHORITY /s/ROBERT E.LERESCHE Executive Director 36 APPENDIX A CONSULTING ENGINEER'S REPORT RW.BECK AND ASSOCIATES,INC. Fourth and Blanchard Building,Suite 600 m 2121 Fourth Avenue @ Seattle,Washington 98121-2317 Telephone (206)441-7500 m Fax (206)441-4962/441-4972 WS-1559-CB1-AB July 25,1990 Board of Directors Alaska Energy Authority P.O.Box 190869 Anchorage,Alaska 99519-0869 Consulting Engineer's Report Alaska Energy Authority Bradley Lake Hydroelectric Project Presented herein is a summary of our analyses and studies with respect to the proposal by the Alaska Energy Authority (the "Authority”)to issue $60,259,015 of Power Revenue Bonds,Second Series (Bradley Lake Hydroelectric Project)(the "Second Series Bonds”),to provide for the permanent financing of a portion of the construction costs of the Bradley Lake Hydroelectric Project (the "Project”)by refunding the outstanding Variable Rate Demand Bonds of the Authority (the "Variable Rate Bonds”).The Variable Rate Bonds were issued in November 1985 in the aggregate amount of $267,500,000 primarily to provide funds to design and construct the Project.The Second Series Bonds are issued on a parity with the Authority's $105,001,142 outstanding principal amount of Power Revenue Bonds,First Series (Bradley Lake Hydroelectric Project)(the "First Series Bonds”).The First Series Bonds were issued in October 1989 for the primary purpose of refunding a portion of the Variable Rate Bonds.The Second Series Bonds,when combined with proceeds from the First Series Bonds and funds provided by the State of Alaska (the "State''), remaining Variable Rate Bond proceeds and interest earnings are expected to be sufficient to complete the design and construction of the Project,to retire the Variable Rate Bonds,to fund the Capital Reserve Fund, to pay the costs of issuance and financing expenses associated with the sale of the Second Series Bonds and to establish a Renewal and Contingency Reserve Fund and an Operating Reserve Account.This Report summarizes our work to the date of the Report.Changed conditions occurring or becoming known after such date could affect the material presented in the Report. The following table shows the estimated application of the proceeds of the Second Series Bonds as provided by the underwriters: Table 1 Estimated Application of the Proceeds of the Second Series Bonds Redemption of Variable Rate Bonds ...........00.ceeeeeeneues $49,652,685 Net Capitalized Interest 2.0....cece eee eee n ence ect eeenenes 3,840,138 Deposit to Capital Reserve Fund............cece cece ereeeeeees 4,969,743 Underwriting Discount and Costs of Issuance ...........20eeeeeeee 1,108,730 Bond Insurance Premium...........cece cece cece nce ee ener eeees 504,000 Net Original Issue Discount...........ceccseeeeeentenceeeeecens 183,719 000)|Cpa $60,259,015 Austin,TX @ Boston,MA a Columbus,NE a Denver,CO @ Indianapolis,IN @ Minneapolis,MN Nashville,TN @ Orlando,FL @ Phoenix,AZ @ Sacramento,CA @ Seatde,WA A-l THE ALASKA ENERGY AUTHORITY The Authority was created by the State Legislature in 1976 under the provisions of the Alaska Energy Authority Act (the "Act'').The purpose of the Authority,as stated in the Act,is to promote,develop and advance the general prosperity and economic welfare of the people of the State of Alaska by providing a means of constructing,acquiring,financing and operating power generation projects and facilities that recover and use waste energy.The Authority is a public corporation of the State,administratively within the State Department of Commerce and Economic Development,but with separate and independent legal existence. The Authority's operating costs,to the extent not covered by power sales and other operating revenues,have been funded annually by appropriations by the State Legislature.A seven-member board of directors, comprised of three public directors appointed by the Governor of Alaska,three members of the Governor's cabinet,and the Director of the Office of Management and Budget,establishes policy and directs the Authority.Pursuant to an executive order of the Governor of Alaska effective July 1,1989,the name of the Authority was changed from the Alaska Power Authority to the Alaska Energy Authority. The Act states that the Authority is not subject to the jurisdiction of the Alaska Public Utilities Commission ("APUC”).For a further discussion of the Act,see the Official Statement to which this Report is attached (the "Official Statement'')and "Summaries of the Act and the Basic Documents”in Appendix D attached thereto., The Authority owns and operates four hydroelectric projects,a 345-kilovolt transmission line operating at 138 kilovolts connecting the electric load centers of the Anchorage and Fairbanks areas,and several smaller projects throughout the State.The following table shows the Authority's existing major hydroelectric and transmission projects. Table 2 Existing Hydroelectric and Transmission Projects of the Authority Nominal Generation Year of Capability Initial Project General Location (megawatts)Project Cost Operation Solomon Gulch Hydroelectric Project Valdez 12 $72,597,000 1982 Swan Lake Hydroelectric Project Ketchikan 22 96,110,000 1984 Lake Tyee Hydroelectric Project Petersburg/Wrangell 20 128,427,000 1984 Terror Lake Hydroelectric Project Kodiak 20 199,280,000 1985 Anchorage-Fairbanks Transmission Intertie Anchorage/Fairbanks -125,402,000 1985 Construction costs for existing projects of the Authority were funded entirely with a combination of State grants and State loans.State loans are being repaid from revenues received by the Authority from sales of power from the projects to which the loans were applied.Annual operating costs for the hydroelectric and transmission projects are paid from power sales revenues and other service charges.In addition to its large projects,the Authority administers a variety of programs to assist rural communities with the maintenance, upgrade and construction of electrical power systems and waste heat recovery systems to help reduce the cost of power and heat.The Authority also administers a utility loan fund program and power cost equalization program that subsidizes high power costs in rural communities,with both programs funded by the State. At the present time,the Authority has no major projects,other than the Project,under construction or development.The Authority has made an offer to the Alaska Power Administration (the "Administration”), a federal agency,to purchase the federally-owned,77-megawatt Snettisham hydroelectric project near Juneau, Alaska and has entered into a purchase agreement pending Congressional approval.It is anticipated that the purchase of the Snettisham project will be financed by the issuance of power revenue bonds secured by a A-2 power sales contract between the Authority and the electric utility serving the Juneau area.Other projects currently under investigation in the State by the Authority include various waste-heat recovery facilities, small transmission and distribution lines and small hydroelectric facilities. THE PROJECT Description The Project site is located on the south end of the Kenai Peninsula,approximately 105 miles south of Anchorage and 27 miles northeast of Homer,Alaska.Project development includes a 125-foot high concrete- faced,rock fill dam,spillway,diversion tunnel and outlet facility located at the outlet of Bradley Lake and designed to raise the existing level of the lake 100 feet.An 18,600 foot-long,13-foot diameter concrete-lined power tunnel and steel-lined penstock will connect the reservoir intake to the powerhouse located just above sea level on Kachemak Bay.The powerhouse will contain two vertical shaft Pelton turbines connected to two synchronous generators,each with a nominal output of 45 megawatts.Provision for adding a third 45- megawatt turbine generator at a later date is included in the Project design.Project transmission facilities include approximately 20 miles of two parallel,single circuit,115-kilovolt transmission lines to connect the power plant to a switching station at Bradley Junction.A new transmission line under construction will interconnect the Bradley Junction switching station with the existing regional transmission system. The Project is designed to be remotely operated but will require on-site maintenance personnel.A supervisory control and data acquisition ("SCADA”)system will be provided.In total,the Project will provide 90 megawatts of capacity and is estimated to produce 375,920 megawatt-hours of energy annually under average water conditions. The Project is being designed by Stone &Webster Engineering Corporation,Denver,Colorado (the "Design Engineer”)and construction is being managed by Bechtel Corporation,San Francisco,California (the "Construction Manager”). Pursuant to the Bradley Lake Hydroelectric Project Agreement for the Sale and Purchase of Electric Power,dated December 8,1987,(the "Power Sales Agreement”),the Authority has sold the Project capacity, together with associated energy,for 50 years to the electric utilities shown in the following table (the "Purchasers”'): Table 3 Purchasers'Shares of the Project Percentage Purchaser Share Alaska Electric Generation and Transmission Cooperative,Inc...........ccceeecceeeeeceaes 25.8% Chugach Electric Association,Inc.6...0.ccc cc cc ccc cere eee e eee eect eee teen ence ence 30.4% Golden Valley Electric Association,Inc.0.0.0...0c cee e cence ect e eee e este sete eeeeees 16.9% Municipality of Anchorage (Anchorage Municipal Light and Power)............0ceeeereens 25.9% City of Seward (Seward Electric System)........sees eee eee e eee e nee ence ence cence eens 1.0% 6 00)6:1 Cpa 100.0% The Alaska Electric Generation and Transmission Cooperative,Inc.("AEG&T”)will purchase power from the Project and subsequently sell it to Homer Electric Association,Inc.("Homer”)and Matanuska Electric Association,Inc.(""Matanuska'”),in the amounts of 12.0 percent and 13.8 percent of total Project capability,respectively.Homer and Matanuska are the only two members of AEG&T and purchase all of A-3 their respective power requirements from AEG&T,The obligation of AEG&T to pay its share of the annual costs of the Project is guaranteed by Homer and Matanuska and,therefore,the collective term "Purchasers” as used in this Report includes Homer and Matanuska.Under the provisions of the Power Sales Agreement, the Purchasers are entitled to their respective shares of Project capability and are obligated to make payments to the Authority,beginning on the date of commercial operation,in an aggregate amount sufficient to pay all annual costs of the Project,including debt service on the First Series Bonds and Second Series Bonds.For a further discussion of the Power Sales Agreement,see "Summaries of the Act and the Basic Documents”in Appendix D of the Official Statement.For further information regarding payment of debt service should commercial operation be delayed,see "Introduction-Security for Second Series Bonds”in the Official Statement. Status and Schedule The Construction Manager has developed the present schedule for the Project.As of June 30,1990, procurement of services and equipment for the Project was approximately 69 percent complete.The Authority had entered into design,management,procurement and construction contracts as of that date totaling $252,286,000.The following table indicates the status of contracts associated with the Project. Table 4 Status of Procurement of Services and Equipment as of June 30,1990 Contract Contract Contract Contractor Start Date Amount(1) Design Engineer Stone &Webster Engineering Corp.July 1985 $36,165,000 Construction Manager Bechtel Corporation January 1986 17,582,000 Site preparation Enserch Alaska Construction,Inc.June 1986 25,543,000 Transmission line centerline McLane &Associates October 1986 453,000 survey Transmission line geotechnical Swalling Const.,Inc./Underwater February 1987 319,000 survey Camp facilities/support services Brown &Root U:S.A.,Inc.May 1988 16,370,000 Transmission line clearing Zubeck,Inc.July 1988 2,667,000 General civil construction Enserch Constructors July 1988 85,087,000 Air transportation-fixed wing C&L Inc.September 1988 348,000 Air transportation-helicopter Maritime Helicopters,Inc.September 1988 488,000 Powerhouse construction H.C.Price Construction Company December 1988 31,264,000 Transmission line construction Newbery Alaska,Inc.June 1989 18,716,000 Middle Fork/Nuka diversions Wilder Construction Co.,Inc.April 1990 1,722,000 Site rehabilitation Unawarded April 1991(2)_ Turbines/generators Fuji Electric Co.April 1987 13,766,000 SCADA equipment Landis and Gyr July 1989 574,000 Communications equipment Various Suppliers Continuous 1,222,000 Permanent operating equipment Stability protection equipment Various Suppliers Unawarded February 1991(2) Total Awarded =$252,286,000 (1)Includes contract change orders and amendments through June 30,1990. (2)Scheduled contract start date. A-4 Construction of the Project began in July 1986 and as of June 30,1990 was approximately 76 percent complete.The Construction Manager indicates that construction is proceeding according to schedule which should allow for reservoir filling to begin by October 1990 and startup and testing of the first turbine generator unit in May 1991.Commercial operation of the Project is scheduled for September 1991.The following table lists the construction status and schedule of major activities for the Project as developed by the Construction Manager. Table 5 Schedule and Status of Major Project Activities Percent Scheduled Complete as of CompletionActivityJune30,1990 Date Site preparation 0.0......cece ccc cc cece eee e teen eect eee e eee e ee aseeees 100%May 1987* Transmission line clearing.........ccc cece cece rece eee een e tenets 100%April 1989* General civil construction (dam and waterways).........0seeeceesevees 73%August 1991 Transmission line COMStrUCTION....6.ccc cece cece eee e eee ener e ee eee nes 67%December 1990 Powerhouse construction (including electrical/mechanical installation)....73%August 1991 Turbine/generator fabrication 1.0.0...0.ccc cece e cece cee ee eet eeeeene 100%January 1990* *Actual completion date. The schedule assumes no delays in construction of the Project resulting from such matters as labor strikes or shortages or delays in receipt of equipment or materials.Except for a labor strike associated with workers fabricating the generator units in South Korea,there have been no delays in construction due to labor problems and all major contractors have Project labor agreements with labor unions.To the extent such delays do occur,the completion date of the Project may be delayed.Any such delay may result in increased Project costs. Permits,Licenses and Approvals As of June 30,1990,the Authority reported having obtained approximately 170 permits,authorizations and licenses from various federal,State and local governmental agencies related to construction and operation of the Project.Principal among these is the Federal Energy Regulatory Commission ("FERC”)license issued on December 31,1985.The FERC license ordered the Authority to commence construction of the Project by January 1,1987 and to complete construction on or before December 31,1989.Subsequently,FERC extended the construction completion deadline to January 1,1992.The current FERC license expires on December 31,2035. Certain permits and approvals require renewal at varying intervals by the appropriate regulating authorities.The Authority indicates that except for these future periodic renewals and extensions,all necessary authorizations to complete construction and begin operation of the Project have been obtained. Geologic and Seismic Considerations A number of studies and investigations have been performed by the Design Engineer and others to ascertain the geologic and geotechnical conditions of the Project site and of the various Project structures. The Design Engineer indicates that investigatory work done was performed in a manner consistent with levels of effort exercised by the geotechnical profession under similar geologic conditions. The southcentral coastal area of Alaska in which the Project is located has a history of seismic activity. In 1964,a major earthquake reported to have had a magnitude of 8.5 on the Richter Scale occurred in Prince William Sound,with an epicenter approximately 145 miles northeast of the Project site.As such,the "maximum credible earthquake”event occurring on a regional basis and assumed for design purposes by the Design Engineer is an event of magnitude 8.5 on the Richter Scale.According to the Design Engineer,an earthquake of this magnitude could potentially cause some structural damage to the Project but all systems should be repairable if damaged.The "design basis earthquake”,up to which level the Project would subsequently continue operation with minimal downtime,is an earthquake of magnitude 6.3. A-5 Considering the site geologic conditions,including the two fault zones which cross the power tunnel, certain features have been incorporated into the Project design to mitigate damage from earthquake events. For example,to control rock fall within the tunnel,a concrete lining will be provided throughout the power tunnel with reinforcement as necessary.Other mitigating features include provisions for dewatering the power tunnel for repairs,specifications of a rock fill dam to accommodate settling and shifting of the underlayment, and the foundation of major Project facilities,including the powerhouse,on or in bedrock. The Design Engineer believes the overall approach taken to address geologic and seismic conditions in the Project design is appropriate for the Project site.Seismic design considerations and the results of the site investigations were reviewed and found prudent for the Project by both the Project's Technical Review Board and the FERC Board of Consultants.For further information regarding geologic criteria incorporated in the Project design,see the "Design Engineer's Report”in Appendix B attached to the Official Statement. Estimated Construction Costs The following table summarizes the Project construction costs as estimated by the Construction Manager and the Authority and shows costs incurred as of June 30,1990. Table 6 Estimated Construction Costs and Costs Incurred as of June 30,1990 ($000) Estimated Costs Incurred Construction as of Costs(1)June 30,1990(2) Construction Site Preparation and Rehabilitation .............0.cece cece cee eeecees $29,943 $25,543 Dam,Power Tunnel and Diversions ........0cccceeceeeccsscveceeses 92,003 62,706 Transmission Line(3)20....cece cece cece eee e eee e enter e ec eneeeeees 23,981 16,761 Powerhouse........ccc cece cence nce e cece nee e es eee eecasenesveunves 34,944 23,151 Camp Catering and Support Services(4).........cceccsecccccscseees 17,160 12,053 Subtotal-Construction ........0.0.c cece eee c cnc eec ee ceteceeees $198,031 $140,214 Procurement Turbine Generators 2.0...0.cc ccc ccc ec ce cece eee e cesses eseeeesnees $14,536 $12,645 Other(S).0.ccc cc cece nee e renee eee tees eeeeeteeeensesees 13,115 1,349 Subtotal-Procurement ...........0.cece ecu c cece vce caececeees $27,651 $13,994 Administration and Design Design 0...0c cece cece cece cece e eee cree neces seen esse neeteeseees $39,500 $34,675 Construction Management ........ccc cece cece tenet eee eeeeesecerces 20,000 14,876 Authority's Costs(6)......cece cc ceccecccccececeeeveceveceeeeueeens 17,02 10,745PowerPurchaserCosts(7).......0cccccecceccecenceuccuceuceuseunes Ci655)1,400 Subtotal-Administration and Design .........000s cece cceeeeeees $78,194 $61,696 079511¢(-)pm $975 $0 Unallocated Contingency....0.0...cece cece cece eee eee tet eeeeeeerenes $7,649 $0 Total Construction Costs........ccceccecctcacccvenveceeseseces $312,500 $215,904 (1)All costs include assumed escalation to Project completion. (2)Costs shown are for obligations accrued through June 30,1990.Actual cash draws for construction costs on the Project Construction Fund totaled $206,865,086 as of June 30,1990. (3)Includes costs of surveying,geotechnical investigations,clearing and construction. A-6 (4)Includes estimated costs of construction camp support services and air transportation services. (5)Estimated costs for SCADA and communications systems,permanent operating equipment and electrical system stability protection equipment. (6)Estimated administration costs of the Authority including preliminary studies,and permitting and licensing fees. (7)Purchasers'Project related administrative costs pursuant to Section 31 of the Power Sales Agreement. (8)Boundary surveys and other miscellaneous costs. In addition to the unallocated contingency of $7,649,000 included in the cost estimate,allocated contingencies are included for each contract to accommodate quantity overruns,additional materials, construction claims and other increases normally encountered with large construction contracts.These allocated contingencies total $13,326,000.Amounts estimated for unallocated contingencies are reserved for unexpected changes in construction costs.Total allocated and unallocated contingencies included in the Project construction cost estimate are $20,975,000. Projected Financing Requirements The underwriters and the financial advisor have projected the long-term financing requirements for the Project.Pursuant to the Power Sales Agreement,the Authority and the Purchasers have agreed that the Authority may issue long-term bonds in an amount not exceeding the lesser of one-half of the Project's cost of financing and construction or $175,000,000.The Authority will fund the remaining Project costs with direct State appropriations.The State has appropriated $175,080,000 toward the costs of the Project. The Authority indicates that as of June 30,1990,funds in the Project Construction Fund totaled $226,358,058.Based on the Construction Manager's Project construction cost estimate and costs incurred as of June 30,1990,remaining Project construction costs total $105,634,914,all of which is to be funded with monies presently in the Project Construction Fund. The following table shows the projected capital and total long-term financing requirements for the Project. Table 7 Projected Capital Requirements ($000) Long-term Financing Requirements First Second Series Series Variable State Bonds Bonds Total Rate Bonds Appropriations Total Construction Costs .........0 0 O §$153,196 $159,304 $312,500 Variable Rate Demand Bond Redemption(1)...........$76,501 $49,653 $126,154 141,346 0 267,500 Operating Reserve Ac-COUNL(2).ceceeeeeens 0 0 0 0 625 625 Renewal and Contingency Re- serve Fund(3).........55.1,524 0 1,524 0 3,476 5,000 Capital Reserve Fund(4).....8,423 4,970 13,393 0 0 13,393 Bond Discount and Financing Costs(5)......-.eee e eee 2,030 1,109 3,139 0 200 3,339 Bond Insurance Premium....799 504 1,303 0 0 1,303 Net Original Issue Dis- count(6).........eeeeeees 3,479 183 3,662 0 0 3,662 Capitalized Interest During Construction(7)..........13,354 4,064 17,418 0 0 17,418 Less:Investment Earnings ...(1,109)(8)(224)(9)(1,333)(27,042)(10)0 (28,375) Subtotal...............$105,001 $60,259 $165,260 $267,500 $163,605(11)$596,365 Less:Refundings ...........0 0 0 (267,500)0 (267,500) Total .............008.$105,001 $60,259 $165,260 §0 $163,605 $328,865 (1)Amounts needed,when combined with existing funds,to redeem the outstanding $190,900,000 of Variable Rate Bonds. (2)An amount equal to the Operating Expense Component of the Annual Budget for the first full year of operation as defined in and required by the Bond Resolution. (3)An amount equal to the Renewal and Contingency Reserve Requirement as specified in the Bond Resolution. (4)Estimated maximum annual debt service as required by the Bond Resolution. (5)Estimated underwriters'discount and other financing expenses based on actual costs for the First Series Bonds and two percent of the principal amount of the Second Series Bonds. (6)Includes original issue discount of $3,658,422 less original issue premium of $179,534 on the First Series Bonds. (7)Amounts needed to pay interest expense on the First Series Bonds from October 5,1989 to September 1, 1991 and on the Second Series Bonds from August 28,1990 to September 1,1991. (8)Includes estimated investment income on monies invested in the Project funds at an assumed interest rate of 7.28 percent as provided by the underwriters and financial advisor. (9)Includes estimated investment income on monies invested in the Project funds at an assumed interest rate of 7.26 percent as provided by the underwriters and financial advisor. (10)Reflects estimated investment earnings on the Variable Rate Bonds net of interest expense and fees through August 28,1990. (11)State appropriations to the Project totaled $175,080,000 of which approximately $11,475,000 is expected to be made available for reappropriation by the State at the time of Project completion refunded to the State. A-8 Projected Annual Cost of Power The following table shows the projected costs of power from the Project to the Purchasers at the Bradley Junction switching station. Table8 Projected Annual Cost of Power from the Project ($000) Operating Year Ending June 30 1992(1)1993 1994 1995 1996 2001 Operation and Maintenance(2)_.......$1,005 $1,261 $1,317 $1,377 $1,564 $1,918 Administration and General(2)||...701 879 919 960 1,003 1,250 Insurance(2)oo.eeeeeeeeeee 590 739 773 808 844 1,052 Renewals and Replacements(3)_......0 0 0 0 374 466 Subtotal........0...cc cece cece eee $2,296 $2,879 $3,009 $3,145 $3,785 $4,686 Debt Service(4)2.2...cece eeeeenee $11,154 $§13,388 $§13,388 $13,391 $13,391 $13,388 Less:Investment Income(5)..........(1,157)=(1,388)(1,388)=(1,388)(1,388)(1,388) Total Cost of Power............5 $12,293 $14,879 $15,009 $15,148 $15,788 $16,686 Energy Delivered (Megawatt-hours)(6).310,200 372,200 372,200 372,200 372,200 372,200 Total Unit Cost of Power (cents/kilowatt-hour)...........66.3.96 4.00 4.03 4.07 4.24 4.48 (1)For the ten months beginning September 1,1991. (2)Estimated by the Authority.Includes assumed inflation at a rate of 4.5 percent per year. (3)Based on annual payments beginning in the fifth year of Project operation to the Scheduled Maintenance Fund in amounts estimated by the Project Management Committee to be sufficient to cover costs for renewals and replacements as estimated by the Design Engineer. (4)Based on actual debt service on the First Series Bonds and the Second Series Bonds.Debt service for 1992 reflects ten months of interest and principal. (5)Projected interest earnings on funds in the Capital Reserve Fund,the Renewal and Contingency Reserve Fund and the Operating Reserve Account. (6)As estimated by the Authority for presumed operation levels under average water conditions less estimated transmission losses from the powerhouse to the Bradley Junction switching station. Project Operation The Authority will retain overall responsibility for maintenance and operation of the Project pursuant to provisions of the Act.The Authority will operate the Project for at least the first two years after commercial operation.After that time,the Authority may contract for the operation of the Project with an independent qualified operator.It is anticipated that the independent operator will be a Purchaser,provided that the Purchaser is found to meet reasonable standards of experience and capability.Scheduling and dispatching of Project generation is to be performed for all Purchasers by Chugach Electric Association,Inc.("Chugach”) according to the Agreement for the Wheeling of Electric Power and for Related Services (the "Services Agreement”)entered into by the Purchasers. A-9 The Power Sales Agreement provides for the establishment of a Project Management Committee (the "Committee”')consisting of representatives of the Authority and each of the Purchasers.Responsibilities of the Committee include,among other things,arranging for operation and maintenance of the Project; scheduling production and dispatch of Project power;adoption of annual budgets sufficient to pay all Project annual costs;adoption of payment schedules for each Purchaser sufficient to recover Project annual costs in total;and establishment of Project maintenance schedules.The Committee has formed and has been meeting on a periodic basis since 1988. Transmission The Project includes approximately 20 miles of two parallel,115-kilovolt transmission lines to connect the power plant to a switching station at Bradley Junction.The switching station will interconnect with a 59- mile,115-kilovolt transmission line being constructed and to be owned by Homer (the "Fritz Creek-Soldotna transmission line”).This transmission line will run between Fritz Creek and Soldotna,two existing points in Homer's system.Construction is presently underway and is estimated to cost approximately $18,000,000 and is scheduled for completion prior to commercial operation of the Project.The Fritz Creek-Soldotna transmission line is not part of the Project,but is essential for transmission of Project power to Purchasers' systems. The Fritz Creek-Soldotna transmission line will provide two paths of power flow for Project power from the Bradley Junction switching station.One path,which is complete,is south through Fritz Creek where interconnection is made with Homer's existing transmission system.The other path,to be completed during the winter of 1990/1991,is north to Soldotna where interconnection will be made with Chugach's existing system.Project power will be transmitted under existing agreements over Homer-owned,Chugach-owned, Chugach-leased and Authority-owned transmission lines to the other Purchasers'systems. The Services Agreement provides for the transmission of Project power over Chugach-owned and leased transmission lines to the system of each of the other Purchasers.The Agreement for Sale of Transmission Capability (the "Homer Agreement”)dated March 7,1989,provides for the sale of transmission capability of the Soldotna to Bradley Junction segment of the Fritz Creek-Soldotna transmission line (the "Soldotna Segment”)to each of the Purchasers in an amount equal to its respective share of the Project.All of the Purchasers except Matanuska and the City of Seward ("Seward”)are parties to the Homer Agreement. Chugach is responsible for the transmission of Project power for Matanuska and Seward. Due to the current limitations of the existing transmission system from the Project to the Purchasers, power system studies conducted by the Authority and the Purchasers indicate that,under various circumstances,some Purchasers may not receive capacity from the Project at a level equal to their share of the Project's full generating capability.By adjusting the rates of power delivery to the individual Purchasers from time to time,however,all Purchasers will be able to receive their full share of the energy produced by the Project each year.The Authority and the Purchasers are studying improvements to the Purchasers' transmission systems that would mitigate such operational restrictions and the Authority has included approximately $9,310,000 in the estimated construction costs of the Project for electrical protection and control devices.These additions were identified as useful in a study conducted in early 1989 to protect the interconnected power system from electrical instability problems that might otherwise occur during various Project operations. THE PURCHASERS Introduction The Purchasers are six electric utilities located in southcentral Alaska serving nearly all of the electricity requirements for the area between the communities of Seward and Homer on the southern end of the Kenai Peninsula,through Anchorage and into Fairbanks in the interior of the State.This area is generally referred to as Alaska's Railbelt because it corresponds to the route of the Alaska Railroad,a major ground transportation link between the communities of Seward,Anchorage and Fairbanks.The Railbelt is divided economically and geographically into three distinct regions;the Kenai Peninsula,the Anchorage and A-10 Matanuska-Susitna area,and the Fairbanks area.The population of the Railbelt is presently estimated to be approximately 380,000,representing approximately 72 percent of the total State population.Anchorage,with a population of 223,000,is the largest city in Alaska followed by the greater Fairbanks area with a population of 72,300. Four of the Purchasers,Chugach,Homer,Matanuska and Golden Valley Electric Association,Inc. ("Golden Valley')are rural electric cooperatives.The remaining two Purchasers,the Municipality of Anchorage,Municipal Light and Power Department ("Anchorage ML&P”)and Seward are municipally owned electric utilities.The electric systems of the Purchasers are interconnected through a transmission system owned in part by the Purchasers and in part by the Authority.Table 9 provides selected statistics for the Purchasers for 1989.Revenues and expenses of the Purchasers'systems for 1985 through 1989 are summarized in Exhibit 1 attached hereto. Table 9 Selected Statistics for Calendar Year 1989 Anchorage Golden ML&P Chugach Valley Homer Matanuska Seward(1) Average Number of Customers..........29,015 60,900 26,259 17,578 28,385 1,932 Peak Load (kilowatts)...........-2006.146,000 385,300 95,100 78,414 100,264 8,367 Energy Sales (megawatt-hours)(2).......858,305 1,980,327 485,866 397,662 412,842 41,927 Operating Revenues ($000).............66,859 98,486 42,620 31,514 37,658 4,344 Gross Investment in Utility Plant ($O00)(3)oo cee ccc e cee reer e te eeee 223,617 501,680 194,486 106,934 127,701 24,073 Net Investment in Utility Plant ($000)(3).143,166 373,149 134,945 85,344 101,362 18,315 Total Retained Earnings ($000)(3).......35,874 64,481 35,084 26,251 43,917 11,336 Average Cost of Power to Retail Customers (cents/kilowatt-hour)(4)......-..e56.8.5 6.95)89 7.7 8.8 10.0 (1)Statistics for Seward are for the fiscal year ended June 30,1989. (2)Includes sales for resale. (3)At year end. (4)Excludes sales for resale. (5)Chugach's average cost of power to all customers in 1989,including its three wholesale customers,was 4.9 cents per kilowatt-hour. Rate Regulation The Authority is not subject to the jurisdiction of the APUC and the Power Sales Agreement is not subject to APUC jurisdiction until all long-term debt issued to fund the Project is retired.Annual Project costs (including debt service)incurred by a Purchaser pursuant to the Power Sales Agreement must be allowed under statute by the APUC in the rates charged by the Purchaser. With the exception of Seward,all Purchasers are subject to rate regulation by the APUC.To obtain rate increases under the normal non-simplified process,a utility must participate in a formal ratemaking process involving the filing of testimony and the holding of public hearings,and provide detailed revenue requirements,cost of service and rate design studies.Formal rate filings typically take nine months to one year from the time the tariff advice letter proposing a change in rates is submitted to the time a final rate order is issued.However,it is within the APUC's authority to authorize rate changes on an interim, refundable basis,after a suspension period.Usually,this results in interim rates being approved for implementation approximately 45 days after the filing is made. A-ll In January 1987,the APUC adopted simplified rate filing procedures whereby an electric utility under APUC regulation may submit proposed rate changes accompanied by certain financial information to the APUC for approval without the necessity of undergoing a formal hearing process.The proposed rates must be approved by the utility's governing body before they will be accepted by the APUC for consideration.The purpose of this simplified filing process is to reduce regulatory lag for utilities seeking rate relief.At the present time only Matanuska and Chugach participate in the simplified filing process.The remaining Purchasers have not indicated whether they also will seek APUC approval to utilize the simplified filing process. If a cooperative utility elects to be regulated under the simplified process,it is required to make either quarterly or semi-annual filings and propose rate changes (either increases or decreases)to maintain its Times Interest Earned Ratio ("TIER”)as required for electric cooperatives by the Rural Electrification Administration.The cooperative utility must reduce rates to achieve its target TIER if its earned TIER exceeds the target TIER by more than five percent.Rate increases under the simplified filing process are limited to eight percent in any one year,excluding changes resulting from fluctuations in fuel or purchased power costs,and 20 percent over any three year period.To obtain rate increases in excess of those allowed under the simplified process,the utility must participate in the normal ratemaking process. All regulated cooperative Purchasers could choose to become deregulated through a majority vote of the members voting in the election,although a minimum of 15 percent of the membership is required to vote in order for such an election to be valid.The Municipality of Anchorage is currently pursuing deregulation of Anchorage ML&P. Power Requirements During the period 1985 through 1989,the energy requirements of the Purchasers'systems in total have remained relatively constant.Since 1985,energy requirements in the Anchorage area have decreased an average 0.8 percent per year whereas energy requirements on the Kenai Peninsula have increased an average of 1.1 percent per year during the same period.Golden Valley experienced average growth in energy requirements of 2.9 percent per year from 1985 to 1989.Over this period of time,the estimated population of the Railbelt Region has decreased from 391,260 to 380,080 while enployment has decreased from 166,660 to 148,000 due to an economic recession in southcentral Alaska which began in late 1985. Over the five year period 1990 through 1994,the Purchasers project that,in total,energy requirements will increase 0.5 percent on an average annual basis.These load forecasts assume normal weather conditions, a slow recovery from the current economic recession,and annual increases in retail electric rates that average two percentage points above inflation.In comparison,a forecast prepared for the Authority by the Institute of Social and Economic Research at the University of Alaska ("ISER'')dated April 30,1989,projects that energy requirements for the Railbelt will be essentially flat between 1990 and 1994.The ISER forecast assumes stable population and employment in the Railbelt accompanied with decreasing electricity consumption resulting from projected increases in the cost of power.For a further discussion of economic conditions in the Railbelt,see the section entitled "The Power Purchasers”in the Official Statement. A-12 A summary of the historical and projected energy requirements and peak demands,as estimated by the Purchasers for their own respective systems,is provided in the following table: Table 10 Purchasers'Power Requirements Total Energy Requirements (000 Megawatt-hours)(1) Historical Projected 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 Anchorage ML&P..........849 =843 824 812 830 819 822 828 838 849 Chugach .........eee eens 1,120 1,076 1,054 1,022 1,077 1,058 1,049 1,021 1,004 1,006 Golden Valley .............483 493 498 508 542 551 565 582 588 595 Homer ..............-0065 409 420 415 422 420 =421 420 420 419 422 Matanuska ..............4..462 444 431 434 441 439 =451 464 471 483 Seward ............002005.3637 37 42 45 50 50 51 $2 53 Total .........cece eee 3,359 3,313 3,259 3,240 3,355 3,338 3,357 3,366 3,372 3,408 Non-Coincident Peak Demand (Megawatts) Historical Projected 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 Anchorage ML&P..........152...141 141 137 146 143 143 144 146 146 Chugach(2)............006-1990 182 178 8 178 199 177 175s 171 168 168 Golden Valley .............81 85 83 82 95 106 «6108 «6.1120 114115 Homer .........-.eeeeeeee 71 69 75 69 78 74 74 74 74 74 Matanuska ................89 91 93 85 100 94 96 98 100 103 Seward .........cece ee eee 6 6 7 8 8 10 12 13 13 14 Total .............666.589 574 577.559 626 604 608 #612 =615 620 (1)Excludes sales for resale to other Purchasers.Includes energy losses and non-billed energy. (2)Total Chugach system peak less peak of Homer,Matanuska and Seward. Generation Resources and Utilization of the Project The existing power supplies for the Purchasers consist of Purchaser-owned generation and purchases from the Alaska Power Administration.Matanuska and Homer purchase the majority of their power requirements from Chugach through AEG&T.Seward purchases its entire power supply from Chugach. Presently,the Purchasers own 1,070.3 megawatts of installed generation of which 17.2 megawatts is hydroelectric,25.0 megawatts is coal-fired steam turbines,862.1 megawatts is natural gas-fired combustion turbines and 166.0 megawatts is oil-fired combustion turbines.The Project will provide the Purchasers with a dependable source of power and an important diversification in their resource bases which are heavily dependent on natural gas as a fuel.The Purchasers will use the output of the Project to offset fossil-fuel generation and defer capacity upgrades and additions.The Purchasers presently have no firm plans for the development of new generating resources in the next ten years. The Alaska Industrial Development and Export Authority (""AIDEA”),a state agency,is currently investigating the development of a 50-megawatt advanced technology coal-fired generating station to be constructed near Healy,Alaska (the "Healy Coal Project”).Approximately 50 percent of the construction costs of the Healy Coal Project are to be funded from a United States Department of Energy ("DOE”)grant under the Clean Coal Technology IHfI Demonstration Program.In addition,the State of Alaska has appropriated $25,000,000 towards the costs of development and construction of the Healy Coal Project.If development continues,generation from the Healy Coal Project is to be sold to Golden Valley beginning in A-13 1996,the currently anticipated first year of Healy Coal Project operation.Golden Valley would use the generation from the Healy Coal Project primarily to reduce purchases of economy energy from Anchorage area utilities and to reduce more expensive generation produced by Golden Valley with its oil-fired combustion turbines.Development of the Healy Coal Project is not expected to affect the sale of power from the Project to the Purchasers. AIDEA is presently discussing the conditions of a Healy Coal Project power sales contract with Golden Valley and is working with Golden Valley to secure necessary regulatory approvals to proceed with Healy Coal Project development. The three Anchorage area utilities,Anchorage ML&P,Chugach and Matanuska,have made an offer to the Alaska Power Administration,a federal agency,to purchase the 30-megawatt Eklutna Hydroelectric Project near Anchorage.Presently,these utilities purchase the entire generation capability of the Eklutna project pursuant to power sales agreements with the Administration.It is anticipated that the purchase of the Eklutna project will be financed separately by each utility respective to its negotiated ownership interests. Purchase of the Eklutna project is expected to lower the cost of power realized by the purchasing utilities. Presently,the purchase is pending Congressional approval. Anchorage Municipal Light and Power Anchorage has owned and operated Anchorage ML&P since 1932.A seven-member commission appointed by the Mayor of Anchorage reviews electric service policies,practices,budgets and operations of Anchorage ML&P and,among other responsibilities,recommends to the Mayor adoption of electric rates, regulations and electric system expansions.Anchorage ML&P provides electric service to a large portion of the commercial and high-density residential areas within the Municipality of Anchorage.Chugach and Matanuska serve the remainder of the electricity requirements within the Municipality. In 1989,Anchorage ML&P sold 774,719 megawatt-hours of electric energy to its 29,015 retail customers.In addition,83,586 megawatt-hours of energy was sold to resale customers.Peak hourly demand for Anchorage ML&P in calendar year 1989 was 146 megawatts.Anchorage ML&P projects that the number of electric customers in its service area will increase an average of 0.7 percent per year between 1989 and 1994.Total energy sales to retail customers are projected to increase an average of 0.7 percent per year over the same period. Anchorage ML&P presently owns and operates seven natural gas-fired turbines and one waste heat recovery steam turbine for a total generation capacity of 328,000 kilowatts.A contract with the Alaska Power Administration provides Anchorage ML&P with 16,000 kilowatts of capacity and 81,600,000 kilowatt-hours of energy annually from the federally-owned Eklutna hydroelectric project. A-14 The following table summarizes Anchorage ML&P's historical and projected energy loads and resources used to meet its loads,including its share of Project capability: Table 11 Anchorage Municipal Light and Power Energy Loads and Resources (Megawatt-hours) Historical Calendar Year 1985 1986 1987 1988 1989 Sales to Customers.......cccceecceccccesceece 813,893 817,214 789,231 756,978 774,719 Sales for Resale(1)......0...ccc cece e eee e cece 166,887 170,095 176,476 62,770 83,586 Total Energy Sales................000.980,780 987,309 965,707 819,748 858,305 System Losses and Own Use ..........02c2e000-35,298 26,230 34,570 54,607 55,164 Total Energy Requirement .............1,016,078 1,013,539 1,000,277 874,355 913,469 Energy Resources: Own Resources ........0c cc ec cccccecvcves 934,374 938,614 917,593 778,340 817,080 Alaska Power Administration(2)............81,680 74,925 82,684 95,128 96,369 Other...cee ccc cece eee e reece eeeces 24 0 0 887 20 Total Energy Resources .............4:1,016,078 1,013,539 1,000,277 874,355 913,469 Projected Calendar Year 1990 1991 1992 1993 1994 1999 Sales to Customers........cecceecceeeceees 772,400 775,700 781,400 790,500 801,100 839,500 Sales for Resale(1)......0...cece cece cenes 0 0 0 0 0 0 Total Energy Sales................772,400 775,700 781,400 790,500 801,100 839,500 System Losses and Own Use ..........--5-46,300 46,500 46,800 47,300 48,000 50,300 Total Energy Requirement .........818,700 822,200 828,200 837,800 849,100 889,800 Energy Resources:: Own Resources ........cscccccececees 737,100 710,700 656,900 666,500 677,800 718,500 Alaska Power Administration(2)........81,600 81,600 81,600 81,600 81,600 81,600 Project Entitlement(3)...............6.-_-29,900 89,700 89,700 89,700 89,700 Total Energy Resources ...........818,700 822,200 828,200 837,800 849,100 889,800 (1) (2) (3) Sales to Golden Valley and Chugach.No firm sales for resale are projected after 1989. Purchases from the federally-owned Eklutna hydroelectric project.Projected amounts based on contract minimum and an assumed continuation of purchases after current contract expires in 1993. Less assumed transmission losses. Based on the projection of the costs of power from the Project and other information supplied by Anchorage ML&P and others,we have prepared a projection of operating results for Anchorage ML&P.In these projections,additional revenues are shown to be needed beginning in 1990.These additional revenues are assumed to be obtained from future rate increases or periodic fuel surcharge adjustments.Impacts from the payment of the costs of power of the Project will begin in 1991 and 1992. A-15 Table 12 Anchorage Municipal Light and Power Projected Operating Results ($000) Calendar Year 1990 1991 1992 1993 1994 1999 Gross Revenues: Revenues from Sales of Electricity- At Existing Rates(1)..............$63,112 $63,390 $63,851 $64,592 $65,454 $68,588 Additional Required Revenue(2)....534 2,490 6,027 9,082 12,873 23,358 Other Operating Revenues .............410 428 448 468 489 609 Other Income(3).............2.cee eee 4,375 4,000 4,000 4,000 4,000 4,000 Total Gross Revenues .........$68,431 $70,308 $74,326 $78,142 $82,816 $96,555 Operating Expenses: Cost of Power- .Project Costs(4).......-..22eeeeee $O $1,445 $4,372 $4,430 $4,489 §$4,942 Production(5)...........ecececues 23,967 24,330 23,901 25,262 26,746 34,902 Other(6).....sce c esse ese c eee eeee 1,550 1,550 1,550 1,550 1,550 1,550 Total Cost of Power ..........$25,517 $27,325 $29,823 $31,242 $32,785 $41,394 Other Operating Expenses(7)...........12,240 12,790 13,366 13,968 14,596 18,189 Taxes(8)20...cee cee cece cece eee eaes 1,800 1,881 1,966 2,054 2,147 2,675 Total Operating Expenses......$39,557 $41,996 $45,155 $47,264 $49,528 $62,258 Total Net Revenues Excluding Debt Service ..28,874 28,312 29,171 30,878 33,288 34,297 Debt Service(9)00....cc cece cece eee ees 18,046 17,159 17,160 17,155 17,155 17,148 Balance for Other Purposes(10).$10,828 $11,153 $12,011 $13,723 $16,133 $17,149 Energy Sales (Megawatt-hours).............772,400 775,700 781,400 790,500 801,100 839,500 Unit Revenue from Energy Sales (cents/kilowatt-hour).............cceees 8.2 8.5 8.9 9.3 9.8 11.0 Increase in Unit Revenue from Energy Sales Over Previous Year (percent)............5 0.9%3.1%5.3%4.2%4.9%2.9% (1)Based on average revenues for all power sold in calendar year 1989. (2)Additional revenues required to pay all operating costs,maintain desired debt service coverage and fund projected capital improvements.Assumed to be made available through future rate increases. (3)Interest income and other non-operating margins and income. (4)Projected costs of power from the Project to Anchorage ML&P based on a 25.9 percent share of total Project annual costs.Includes projected costs of transmitting Project power over transmission lines owned by other entities. (5)Includes operation and maintenance costs and fuel expenses associated with the operation of Anchorage ML&P-owned generation. (6)Projected costs of purchases from the federally-owned Eklutna hydroelectric project.Assumes continuation of present contractual arrangements. (7)Projected expenses for transmission and distribution operation and maintenance,customer accounts, customer service and administrative and general expenses.Includes assumed annual inflation of 4.5 percent. (8)Estimated payments made in lieu of taxes. (9)Debt service on existing debt at actual interest rates. (10)Balance available for funding capital improvements and other purposes. A-16 Chugach Electric Association,Inc. Chugach is Alaska's largest electric utility supplying power to over 60,000 member-customers in the Anchorage and upper Kenai Peninsula areas.In addition to its own retail sales,Chugach supplies nearly all of the power requirements of Matanuska,Homer and Seward.Chugach also sells non-firm energy to Golden Valley over the Anchorage-Fairbanks intertie.The Chugach board of directors,which establishes policy and directs the utility,consists of seven members elected from the Chugach membership on staggered three-year terms. In 1989,Chugach sold 911,766 megawatt-hours of electric energy to its retail customers and 907,909 megawatt-hours of electric energy to its wholesale customers excluding economy energy sales to Golden Valley.Revenue from the sale of electric energy to its retail customers in 1989 totaled $63,243,935 distributed as 56 percent residential,42 percent commercial and two percent street lighting.Revenue from sales for resale in 1989 totaled $33,697,424.Chugach's highest hourly peak demand on record of 385.3 megawatts for its entire system,including coincident peak demands of its wholesale customers,occurred in January 1989. Chugach owns and operates 395 miles of transmission lines and 495.6 megawatts and 17.2 megawatts of natural gas-fired combustion turbine and hydroelectric generation capacity,respectively.Chugach also purchases nine megawatts of capacity from the Alaska Power Administration's Eklutna hydroelectric project pursuant to an agreement expiring in 1993.Chugach projects that energy sales to its retail customers will decrease an average of 0.8 percent per year between 1990 and 1994 primarily due to assumed reduced electricity consumption per customer in response to increases in the cost of power to consumers.Energy sales between 1994 and 1999 are projected by Chugach to increase an average of 1.8 percent per year. The following table summarizes Chugach's historical and projected energy loads and resources used to meet its loads,including its share of Project capability: Table 13 Chugach Electric Association Energy Loads and Resources (Megawatt-hours) Historical Calendar Year 1985 1986 1987 1988 1989 Sales to Customers ........ccc ce eer eeececes 960,000 918,322 865,791 894,057 911,766 Sales for Resale(1)......0.cc cece eee e eee eees 913,950 907,547 922,731 896,343 907,909 Total Energy Sales.............1,873,950 1,825,869 1,788,522 1,790,400 1,819,675 System Losses and Own Use ................159,952 157,794 188,646 128,207 165,111 Total Energy Requirement......2,033,902 1,983,663 1,977,168 1,918,607 1,984,786 Energy Resources: Own Resources .........0cecceeceecece 1,859,253 1,779,950 1,876,168 1,821,242 1,873,087 Alaska Power Administration(2).........34,759 53,889 42,685 84,705 81,121 Other(3)2.0...ccc cece ee ener ween 139,890 149,824 58,315 12,660 30,578 Total Energy Resources ........2,033,902 1,983,663 1,977,168 1,918,607 1,984,786 A-17 Projected Calendar Year 1990 1991 1992 1993 1994 1999 Sales to Customers ..............904,200 897,400 873,800 858,200 859,400 937,500 Sales for Resale(1)...............909,600 906,600 889,800 897,500 910,700 969,900 Total Energy Sales...1,813,800 1,804,000 1,763,600 1,755,700 1,770,100 1,907,400 System Losses and Own Use ......155,900 155,100 151,800 151,100 152,300 164,100 Total Energy Require- ment .........4..1,969,700 1,959,100 1,915,400 1,906,800 1,922,400 2,071,500 Energy Resources:, Own Resources ..........45-1,897,700 1,834,900 1,687,000 1,678,400 1,694,000 1,843,100 Alaska Power |Administra- tion(2)....cece eee eee ae 72,000 72,000 72,000 72,000 72,000 72,000 Project Entitlement(4):, Chugach(5).............-35,100 105,200 105,200 105,200 105,200 Matanuska and Seward(6). Total Energy Re- SOUICES ..........1,969,700 1,959,100 1,915,400 1,906,800 1,922,400 2,071,500 17,100 51,200 51,200 51,200 51,200 (1)Sales to Matanuska,Homer and Seward.Excludes economy energy sales to Golden Valley after 1987. (2)Purchases from the Eklutna hydroelectric project.Projected amounts based on contract minimum amounts and include Matanuska's allocation which is "net-billed”by Chugach.Assumes continuation of purchases after current contract expires in 1993. (3)Energy purchases from Anchorage ML&P,AEG&T and other sources. (4)Less transmission losses,assumed to be 7 percent. (5)Chugach's 30.4 percent share of Project average energy capability. (6)Shares of Project energy capability of Matanuska and Seward which are to be "net billed”by Chugach. Chugach has enjoyed very favorable natural gas prices for a significant portion of its generation fuel supply as a result of long-term contracts originally executed with suppliers in the mid-1960's.Gas supplied under these long-term contracts is limited to a fixed quantity in total that Chugach projects will be exhausted in or around 1996.Chugach has recently renegotiated fuel contracts extending the supply period to between 2015 and 2025 depending upon supply options available under the contracts.Prices assessed to Chugach under the new contracts will be substantially higher than prices under the old contracts but will still be well below gas prices charged by other suppliers in the region.The new Chugach gas supply contracts are designed to adjust the gas prices upward over a five-year period beginning in 1990 as the old contract gas volumes are consumed.Chugach will realize lower long-term gas prices by accepting gradual price increases prior to exhaustion of the old contract gas volumes. Based on the projection of the costs of power from the Project and certain data supplied by Chugach and others,we have prepared a projection of operating results for Chugach.In these projections,additional revenues are shown to be needed beginning in 1990.These additional revenues are assumed to be obtained from future rate increases or periodic fuel surcharge adjustments as allowed by the APUC.Increases in revenue requirements due to payment of the costs of power from the Project do not begin until 1991.Between 1990 and 1994 revenue requirements are shown to increase primarily because of increases in fuel costs and other production expenses. A-18 Table 14 Chugach Electric Association,Inc. Gross Revenues: Revenues from Sales of Electric- ity- At Existing Rates(1)...... Additional Required Reve- nue(2)........eee eee Other Operating Revenues ..... Other Income(3)............. Total Gross Revenues . Operating Expenses: Cost of Power- Project Costs(4).......... Production(5)............ Other(6)..............-. Total Cost of Power .. Other Operating Expenses(7)... Taxes(8)0...ee cce eee e ec eeeee Total Operating Ex- penses ............ Total Net Revenues Excluding Depre- ciation and Amortization ........ Debt Service(9).........-eeeceeeee Balance for Other Pur- poses(10).......... Energy Sales (Megawatt-hours)(11).. Unit Revenue from Energy Sales (cents/kilowatt-hour)(12)........ Increase in Unit Revenue from Energy Sales Over Previous Year (Per- CEN)Lo.eee eee eee cence ees Projected Operating Results ($000) .Calendar Year 1990 1991 1992 1993 1994 1999 $93,731 $92,657 $90,401 $89,432 $89,914 $96,985 5,602 13,435 25,288 33,403 38,075 69,535 1,100 1,150 1,201 1,255 1,312 1,635 949 691 691 692 692 695 $101,382 $107,933 $117,581 $124,782 $129,993 $168,850 $O $2,328 $7,535 $7,830 $7,911 $8,561 23,975 24,511 25,671 29,563 31,588 59,930 1,297 1,297 1,297 1,297 1,297 1,297 $25,272 $28,136 $34,503 $38,690 $40,796 §$69,788 28,333 29,769 31,016 32,483 34,113 42,878 562 558 543 534 535 583 $54,167 $58,463 $66,062 $71,707 $75,444 $113,249 47,215 49,470 51,519 §3,075 54,549 55,601 33,158 34,701 36,044 36,732 38,293 41,410 $14,057 $14,769 $15,475 $16,343 $16,256 $14,191 1,813,800 1,804,000 1,763,600 1,755,700 1,770,100 1,907,400 '5.5 5.9 6.6 7.0 7.2 8.7 5.9%74%11.5%6.7%3.4%1.8% (1)Based on average revenues for all power,excluding economy sales to Golden Valley,sold in calendar year 1989. (2)Additional revenues required to pay all operating costs,maintain a minimum TIER of 1.20 in 1990 and 1.25 thereafter and fund projected capital improvements.Assumed to be made available through future rate increases or fuel surcharge adjustments. (3)Interest income and other non-operating margins and income less other deductions. (4)Projected costs of power from the Project to Chugach based on a 30.4 percent share of total Project annual costs.Includes shares of Project annual costs for Matanuska and Seward which are "net billed” by Chugach.Includes projected costs of transmitting Project power over transmission lines owned by other entities. A-19 (5)Includes operation and maintenance costs and fuel expenses associated with the operation of Chugach- owned generation.Based on assumed ramp-up of natural gas prices between 1990 and 1996 pursuant to Chugach's recently negotiated fuel supply contracts. (6)Projected costs of power from the federally-owned Eklutna hydroelectric project.Includes costs of Matanuska's allocation which is "'net-billed”by Chugach and assumes continuation of present contractual arrangements. (7)Projected expenses for transmission and distribution operation and maintenance,customer accounts, customer service and administrative and general expenses.Includes assumed annual inflation of 4.5 percent. (8)Estimated gross revenue taxes paid to local government agencies in lieu of property taxes. (9)Debt service on existing long-term debt at actual interest rates and on projected future borrowings at an assumed annual interest rate of 8 percent. (10)Balance available for funding capital improvements and other purposes. (11)See Table 13.Includes projected sales for resale to Homer (less Homer's allocation of Project capability),Matanuska and Seward. (12)Unit revenue requirement shown is an average for Chugach's total system including wholesale and retail., Golden Valley Electric Association,Inc. Golden Valley was incorporated in 1946 as a Rural Electrification Administration cooperative to provide electric service to rural areas in central Alaska near the City of Fairbanks.A seven-member board of directors elected from Golden Valley's membership sets policy and provides guidance to utility operation.Presently, Golden Valley serves over 26,000 electric member-customers in the Fairbanks,Delta,Nenana,Healy and Cantwell areas.The Golden Valley electric system is interconnected with the systems of the Fairbanks Municipal Utilities System ("FMUS”),the University of Alaska-Fairbanks and three United States military bases:Eielson Air Force Base,Fort Wainwright and Fort Greely.In 1985,the completion of the Anchorage- Fairbanks intertie by the Authority interconnected Golden Valley with the electric utility systems in the Anchorage area. Golden Valley sold 448,458 megawatt-hours of electric energy to its retail customers in 1989.An additional 37,408 megawatt-hours of energy was sold to FMUS,a sales for resale customer.Total revenue from the sale of electric energy in 1989 was $41,747,664 of which 48 percent and 48 percent was accounted for from residential and commercial sales,respectively.Maximum Golden Valley system hourly demand was 95.1 megawatts during 1989,the highest hourly demand on record.Golden Valley projects that electricity sales in its service area will increase an average of 2.2 percent per year between 1989 and 1994. Golden Valley owns and operates 191 megawatts of generation capacity of which 25 megawatts is a coal- fired steam turbine and 166 megawatts consists of four oil-fired combustion turbines.An agreement dated May 18,1988 between Golden Valley and Chugach provides for the purchase by Golden Valley of available non-firm energy from Chugach.Golden Valley is presently discussing with AIDEA the purchase of the generating capability of the proposed 50 megawatt Healy Coal Project.Preliminary analyses indicates that the power supply costs of Golden Valley would not be significantly impacted by this purchase.Commercial operation of the Healy Coal Project,if development continues,is estimated to begin in 1996. A-20 The following table summarizes Golden Valley's historical and projected energy loads and resources used to meet its loads,including its share of Project capability: Table 15 Golden Valley Electric Association Energy Loads and Resources (Megawatt-hours) Historical Calendar Year 1985 1986 1987 1988 1989 Sales to Customers .......cece ec ee esc ects eeteeces 388,484 411,795 413,301 425,342 448,458 Sales for Resale(1).......c ccc cece cece e eens ee eeeees 54,609 39,921 35,380 31,601 37,408 Total Energy Sales ........ccc cc eee eee eens 443,093 451,716 448,681 456,943 485,866 System Losses and Own Use ........cceeeeceeeencces 39,539 41,697 49,212 50,806 55,373 Total Energy Requirement ...........-..05.482,632 493,413 497,893 507,749 541,239 Energy Resources: Own Resources ......cece cece ec ec cen ceceecnene 408,026 420,609 294,222 310,516 302,002 Purchases(2)........cece cece crete eee es eeees 74,606 72,804 203,671 197,233 239,237 Total Energy Resources ............0.2000s 482,632 493,413 497,893 507,749 541,239 Projected Calendar Year 1990 1991 1992 1993 1994 1999 Sales to Customers.........sececeecseeeees 458,300 470,900 486,500 492,700 498,900 545,000 Sales for Resale(1)2.2...0...cece cence eee 46,200 46,200 46,200 46,200 46,200 46,200 Total Energy Sales................504,500 517,100 532,700 538,900 545,100 591,200 System Losses and Own Use ...........04..46,400 47,500 49,000 49,500 50,100 54,400 Total Energy Requirement .........550,900 564,600 581,700 588,400 595,200 645,600 Energy Resources: Own Resources ........0cccecececeees 300,000 300,000 300,000 300,000 300,000 300,000 Purchases(2)........sceecerecececcees 250,900 245,700 225,100 231,800 238,600 289,000 Project Entitlement(3)...............---_18,900 56,600 56,600 56,600 56,600 Total Energy Resources ...........550,900 564,600 581,700 588,400 595,200 645,600 (1)Sales primarily to FMUS. (2)Purchases primarily from Anchorage area utilities.Excludes purchases from the proposed Healy Coal Project. (3)Less transmission losses assumed to be 10 percent. Based on the projection of the costs of power from the Project and certain data supplied by Golden Valley and others,we have prepared a projection of operating results for Golden Valley.In these projections, additional revenues are shown to be needed beginning in 1991.These additional revenues are assumed to be obtained from future rate increases or periodic fuel surcharge adjustments as allowed by the APUC.Increases in revenue requirements as projected are due in part to payment of the costs of power from the Project beginning in 1991 and in part to increases in other operating expenses and desired operating margins. A-21 Table 16 Golden Valley Electric Association,Inc. Projected Operating Results ($000) Calendar Year 1990 1991 1992 1993 1994 1999 Gross Revenues: Revenues from Sales of Electricity- At Existing Rates(1)...........005.$43,167 $44,280 $45,696 $46,264 $46,839 $51,043 Additional Required Revenue(2).....0 741 2,883 5,250 7,029 16,076 Other Operating Revenues ..............997 1,047 1,099 1,154 1,212 1,547 Other Income(3)........cc cece eee eee ees 1,301 1,376 1,534 1,624 1,695 2,721 Total Gross Revenues ..........$45,465 $47,444 $51,212 $54,292 $56,775 $71,387 Operating Expenses: Cost of Power- Project Costs(4)........ccceeeeeeee $O $1,028 $3,122 $3,172 $3,223 $3,591Production(S)...........eeeeeeeeee 12,472 12,884 13,309 13,749 14,204 16,717Other(6)......eee eee cece ee eens 7,786 8,061 8,048 8,968 9,591 14,990 Total Cost of Power............$20,258 $21,973 $24,479 $25,889 $27,018 $35,298 Other Operating Expenses(7)............7,377 7,709 8,055 8,418 8,797 10,962 Taxes(8)....cceseeeecceceereeeteneres 959 1,009 1,064 1,116 1,170 1,495 Total Operating Expenses .......$28,594 $30,691 $33,598 $35,423 $36,985 $47,755 Total Net Revenues Excluding Depreciation andAmortization.......ccc cece cece teen eees $16,871 $16,753 $17,614 $18,869 $19,790 $23,632 Debt Service(9).0....ccc cece cence renee es 10,771 11,250 12,159 12,815 13,265 15,429 Balance for Other Purposes(10)..$6,100 $5,503 $5,455 $6,054 $6,525 $8,203 Energy Sales (Megawatt-hours)(11)...........504,500 517,100 532,700 538,900 545,100 591,200 Unit Revenue from Energy Sales (cents/kilowatt- HOUT)...eee ee eee eee eee beeeeeenoes 8.6 8.7 9.1 9.6 9.9 11.4 Increase in Unit Revenue from Energy Sales Over Previous Year (Percent)............0ee08:-0.6%1.8%4.7%4.8%3.4%1.4% (1)Based on average revenues for all power sold in calendar year 1989. (2)Additional revenues required to pay all operating costs,maintain a minimum 1.50 TIER and fund projected capital improvements.Assumed to be made available through future rate increases or fuel surcharge adjustments. (3)Interest income and other non-operating margins and income less other deductions. (4)Projected costs of power from the Project to Golden Valley based on a 16.9 percent share of total Project annual costs.Includes estimated costs of transmitting Project power over transmission lines owned by other entities. (5)Includes operation and maintenance costs and fuel expenses associated with the operation of Golden Valley-owned generation. (6)Projected costs of economy purchases primarily from Anchorage area utilities.Includes estimated transmission charges. (7)Projected expenses for transmission and distribution operation and maintenance,customer accounts, customer service and administrative and general expenses.Includes assumed annual inflation of 4.5 percent. (8)Estimated gross revenue taxes paid to local government agencies in lieu of property taxes. (9)Debt service on existing long-term debt at actual interest rates and on projected future borrowings from the federal Rural Electrification Administration at an assumed annual weighted average interest rate of 5.5 percent. (10)Balance available for funding capital improvements and other purposes. (11)See Table 15.Includes sales for resale to FMUS. A-22 Homer Electric Association,Inc. Homer serves the majority of the electricity needs on the Kenai Peninsula south of Anchorage. Incorporated in 1945,Homer has expanded its original service territory immediately in and around the City of Homer to include the communities of Seldovia,English Bay and Port Graham on the south side of Kachemak Bay and Soldotna and Kenai in the northwest corner of the Kenai Peninsula.Since 1971,Homer has operated and maintained the Kenai City Light electric system under a lease purchase agreement approved by the city's voters. In 1989 Homer sold 397,662 megawatt-hours of electric energy to 17,578 customers.Revenues from sales of electricity were $30,622,094 of which 45 percent and 55 percent were attributed to residential and commercial sales,respectively.Maximum hourly demand in 1989 was 78.4 megawatts,the all-time record peak for Homer.Homer projects that its electricity sales will remain relatively steady over the next five years, declining an average of 0.1 percent per year over the four-year period 1990 to 1994. Homer purchases all of its power supply from AEG&T which,in turn,purchases most of its power from Chugach to sell to Homer.AEG&T also owns and operates a 38.5-megawatt gas-fired combustion turbine located in Soldotna ("Soldotna #1”)to supply power to Homer.Homer is required to pay AEG&T for all of the costs associated with Soldotna #1 to the extent that power is not generated for sale to other utilities. Presently,Homer's power supply contract with AEG&T for power from Chugach provides Homer with a minimum of 73 megawatts from Chugach.Homer requirements exceeding 73 megawatts are supplied by Soldotna #1. , The following table summarizes Homer's historical and projected energy loads and resources to meet its loads,including its share of Project capability: Table 17 Homer Electric Association,Inc, Energy Loads and Resources (Megawatt-hours) Historical Calendar Year 1985 1986 1987 1988 1989 Total Energy Sales ......0.cece cece cece e sneer eneee 382,981 397,039 390,532 398,902 397,662 System Losses and Own Use ............cece eee ee 26,195 23,117 24,121 23,274 22,321 Total Energy Requirement ..............65-409,176 420,156 414,653 422,176 419,983 Energy Resources: Own Resources(1)..02...ccc e cece ec ceceeeecens 108 129 19 110 110 PurchaseS.........cece ccc e ec ee ett erences 409,068 420,027 414,634 422,066 419,873 Total Energy Resources ..........0.eeceeeee 409,176 420,156 414,653 422,176 419,983 A-23 Projected Calendar Year 1990 1991 1992 1993 1994 1999 Total Energy Sales...........0...cece eee 397,300 396,900 396,500 396,100 395,700 398,900 System Losses and Own Use ............0+-23,400 23,300 23,300 23,300 23,300 23,400 Total Energy Requirement .........420,700 420,200 419,800 419,400 419,000 422,300 Energy Resources: Own Resources(1)..........0--eee eee 100 100 100 100 100 100 Purchases(2)0.2...ccs e cece eee eeee 420,600 405,200 375,000 374,600 374,200 377,500 Project Entitlement(3)................._14,900 44,700 44,700 44,700 44,700 Total Energy Resources ...........420,700 420,200 419,800 419,400 419,000 422,300 (1)Generation supplied and projected to be supplied from Homer's Seldovia diesel plant used primarily for emergency purposes. (2)Purchases from Chugach and AEG&T not including Project entitlement. (3)Projected allocation of Project energy assuming no transmission losses. Based on the projection of the costs of power from the Project and certain data supplied by Homer and others,we have prepared a projection of operating results for Homer.In these projections,additional revenues are shown to be needed beginning in 1990.These additional revenues are assumed to be obtained from future rate increases or periodic wholesale power cost adjustments as allowed by the APUC. Increases in revenue requirements as projected are due in part to payment of the costs of power from the Project beginning in 1991 and in part to increases in other operating expenses and desired operating margins.Homer purchases the majority of its power supply from Chugach through AEG&T and,as such,is subject to increases in the cost of purchased power because of increases in production and operating costs that Chugach will incur over the next few years. A-24 Table 18 Homer Electric Association,Inc. Projected Operating Results ($000) Calendar Year 1990 1991 1992 1993 1994 1999 Gross Revenues: Revenues from Sales of Electricity- At Existing Rates(1)............$30,583 $30,555 $30,524 $30,491 $30,463 $30,713 Additional Required Revenue(2)..437 2,408 4,439 5,926 7,514 14,731 Other Operating Revenues(3).........800 700 1,600 1,631 1,631 1,431 Other Income(4).....0...ccc eee e eee 200 209 218 228 239 297 Total Gross Revenues .......$32,020 $33,872 $36,781 $38,276 $39,847 $47,172 Operating Expenses: Cost of Power- Project Costs(5)........e.eeeee-$0 $590 $1,778 $1,793 $1,809 $1,953 Production(6)...........eeeeeee 55 57 60 62 65 81 Other(7).......cece cece scenes 15,255 15,755 16,526 17,617 18,153 22,865 Total Cost of Power ........$15,310 $16,402 $18,364 $19,472 $20,027 $24,899 Other Operating Expenses(8).........6,749 7,052 7,370 7,701 8,048 10,029 Taxes(9).....cece eee cee eee eee eeee 210 210 210 210 210 202 Total Operating Expenses....$22,269 $23,664 $25,944 $27,383 $28,285 $35,130 Total Net Revenues Excluding Depreciation and Amortization .........ccceeseeees 9,751 10,208 10,837 10,893 11,562 12,042 Debt Service(10)........00.c cece eee eeee 6,863 6,953 7,012 7,041 7,107 6,542 Balance for Other Purposes C11)ccc cece cece een e eee $2,888 $3,255 $3,825 $3,852 $4,455 $5,500 Energy Sales (Megawatt-hours)...........397,300 396,900 396,500 396,100 395,700 398,900 Unit Revenue from Energy Sales (cents/ kilowatt-hour).........ccc eee ee ewes 7.8 8.3 8.8 9.2 9.6 11.4 Increase in Unit Revenue from Energy Sales Over Previous Year (Percent)...........1.4%6.4%6.2%4.2%44%1.8% (1)Based on average revenues for all power sold in calendar year 1989. (2)Additional revenues required to pay all operating costs,maintain a minimum TIER margin of 1.56 in 1990,increasing to 1.85 by 1995 and fund projected capital improvements.Assumed to be made available through future rate increases or fuel surcharge adjustments. (3)Projected other operating revenues including estimated payments to Homer from other Purchasers associated with the Fritz Creek-Soldotna transmission line. (4)Interest income and other non-operating margins and income less other deductions. (5)Projected costs of power from the Project to Homer based on Homer's 12 percent share (through AEG&T)of total Project annual costs. (6)Projected costs of operation and maintenance and fuel associated with operating Homer's Seldovia diesel plant for emergency purposes. (7)Projected costs of power purchases from AEG&T excluding costs of the Project. A-25 (8)Projected expenses for transmission and distribution operation and maintenance,customer accounts, customer service and administrative and general expenses.Includes assumed annual inflation of 4.5 percent. (9)Estimated gross revenue taxes paid to local government agencies in lieu of property taxes. (10)Debt service on existing long-term debt at actual interest rates and on projected future borrowings primarily from the federal Rural Electrification Administration. (11)Balance available for funding capital improvements and other purposes. Matanuska Electric Association,Inc, Incorporated in 1941,Matanuska is Alaska's oldest electric cooperative.Matanuska provides electric service to approximately 27,900 member-customers in its service territory which includes the northeast part of the Municipality of Anchorage and extends through the communities of Palmer,Wasilla,Willow and Talkeetna.The northern terminus of Matanuska's transmission system interconnects with the Authority's Anchorage-Fairbanks intertie.Matanuska is also interconnected directly with Chugach and indirectly with Anchorage ML&P through the Alaska Power Administration.Most of Matanuska's service is to residential areas northeast of Anchorage.Matanuska is governed by a seven-member board of directors elected from its membership. Matanuska sold 412,842 megawatt-hours of electric energy to its 28,385 customers and received revenues from electric sales totaling $36,478,943 in calendar year 1989.Residential customers provided 70 percent and commercial customers provided 30 percent of the revenues received from sales.The highest hourly peak demand on record of 100.2 megawatts occurred in January 1989.Matanuska's most recent load projection shows total energy sales in its service area increasing an average of 2.0 percent per year between 1989 and 1994. Except for an allocation of power from the federally-owned Eklutna hydroelectric project,Matanuska purchases all of its power supply from AEG&T which in turn purchases all of its power from Chugach to sell to Matanuska. The following table summarizes Matanuska's historical and projected energy loads and resources to meet its loads,including its share of Project capability: Table 19 Matanuska Electric Association Energy Loads and Resources (Megavwatt-hours) Historical Calendar Year 1985 1986 1987 1988 1989 Total Energy Sales ........cc cece ccc e cece eens ence 433,315 418,656 403,590 410,569 412,842 System Losses and Own Use ............ceeeeceevees 28,891 25,828 26,953 23,607 27,745 Total Energy Requirement .................462,206 444,484 430,543 434,176 440,587 Energy Resources: Purchases(l).0...cece ccc cece cece cere eee eeees 434,159 424,443 404,518 408,679 412,577 Alaska Power Administration(2).............-6.28,047 20,041 26,025 25,497 28,010 Total Energy Resources ............eeeseees 462,206 444,484 430,543 434,176 440,587 Projected Calendar Year 1990 1991 1992 1993 1994 1999 Total Energy Sales........cceeeeeeeeeeeees 415,100 426,800 438,400 445,000 456,700 507,700 System Losses and Own Use ...........0005 24,100 24,700 25,400 25,800 26,500 29,400 Total Energy Requirement .........439,200 451,500 463,800 470,800 483,200 537,100 Energy Resources: Purchases(1).......cceceeccerereeeees 413,700 410,100 390,500 397,500 409,900 463,800 Alaska Power Administration(2)........25,500 25,500 25,500 25,500 25,500 25,500 Project Entitlement(3).........--.-+66-_-15,900 47,800 47,800 47,800 47,800 Total Energy Resources ...........439,200 451,500 463,800 470,800 483,200 537,100 (1)Purchases from Chugach and AEG&T not including Project entitlement. (2)Purchases from the federally-owned Eklutna hydroelectric project. (3)Projected allocation of Project energy less transmission losses assumed to be 7 percent. Based on the projection of the costs of power from the Project and certain data supplied by Matanuska and others,we have prepared a projection of operating results for Matanuska.In these projections,additional revenues are shown to be needed beginning in 1991.These additional revenues are assumed to be obtained from future rate increases or periodic wholesale power cost adjustments as allowed by the APUC.Increases in revenue requirements as projected are due in part to payment of the costs of power from the Project beginning in 1991 and in part to increases in other operating expenses and desired operating margins. Matanuska purchases the majority of its power supply from Chugach through AEG&T and,as such,is subject to increases in the cost of purchased power because of increases in production and operating costs that Chugach will incur over the next few years. A-27 Table 20 Matanuska Electric Association,Inc. *Projected Operating Results ($000) Calendar Year 1990 1991 1992 1993 1994 1999 Gross Revenues: Revenues from Sales of Electricity- At Existing Rates(1)...............$36,679 $37,716 $38,730 $39,308 $40,360 $44,963 Additional Required Revenue(2)..:..0 629 3,442 5,179 5,892 13,645 Other Operating Revenues ..............1,102 1,108 1,141 1,176 1,211 1,404 Other Income(3)...........0c eee eceees 339 502 568 590 648 620 Total Gross Revenues ..........$38,120 $39,955 $43,881 $46,253 $48,111 $60,632 Operating Expenses: Cost of Power- Project Costs(4)............065 wee.$°O $777 §$2,574 $2,606 $2,640 $2,895 Other(5)oo.ccc cece eee e eens 17,553 18,762 +=20,133.22,201 +=23,724 34,401 Total Cost of Power..........--$17,553 $19,539 $22,707 $24,807 $26,364 $37,296 Other Operating Expenses(6)............8,395 8,725 9,569 9,942 10,330 12,518 Taxes(7)2...ccc cece cece cece neeceeees 564 596 629 662 699 910 Total Operating Expenses .......$26,512 $28,860 $32,905 $35,411 $37,393 $50,724 Total Net Revenues Excluding Depreciation and Amortization 2.0.0...0.ccc cece nsec ce eees 11,608 11,095 10,976 10,842 10,718 9,908 Debt Service(8).......00s cece cece cee eeeecs 6,447 6,432 6,383 6,352 6,311 6,086 Balance for Other Purposes(9)...$5,161 $4,663 $4,593 $4,490 $4,407 $3,822 Energy Sales (Megawatt-hours)..............415,100 426,800 438,400 445,000 456,700 507,700 Unit Revenue from Energy Sales (cents/kilowatt- 110)16 PP 8.8 9.0 9.6 10.0 10.1 11.5 Increase in Unit Revenue from Energy Sales Over Previous Year (Percent)..............0.0%1.7%7.1%3.9%1.3%0.9% (1)Based on average revenues for all power sold in calendar year 1989. (2)Additional revenues required to pay all operating costs,maintain a minimum 1.80 TIER from operations and fund projected capital improvements.Assumed to be made available through future rate increases. (3)Interest income and other non-operating margins and income less other deductions. (4)Projected costs of power from the Project to Matanuska based on Matanuska's 13.8 percent share (through AEG&T)of total Project annual costs.Includes projected costs of transmitting Project power over transmission lines owned by other entities. (5)Projected costs of power purchases from AEG&T excluding costs of the Project. (6)Projected expenses for transmission and distribution operation and maintenance,customer accounts, customer service and administrative and general expenses.Includes assumed annual inflation of 4.5 percent. (7)Estimated gross revenue taxes paid to local government agencies in lieu of property taxes. (8)Debt service on existing long-term debt.Assumes no additional long-term debt to be incurred during the projection period. (9)Balance available for funding capital improvements and other purposes. A-28 Seward Electric System The City of Seward,located on the Kenai Peninsula,owns and operates the Seward Electric System. Seward provides electric service to the City of Seward and to areas up to 25 miles north of the City of Seward adjacent to the Seward Highway.The northern terminus of the Seward transmission system interconnects with a Chugach transmission line at Dave's Creek Substation located 45 miles north of the City of Seward. Seward sold 41,927 megawatt-hours of electric energy to its approximately 1,932 customers in fiscal year 1989,Total revenues from electric sales during fiscal year 1989 were $4,201,103 of which 31 percent and 34 percent came from residential and commercial customers,respectively.Peak demand in 1989 was 8 megawatts.Electric loads in the Seward service area are projected to increase an average 1.7 percent per year between 1990 and 1994.The City of Seward is presently undergoing an industrial expansion and Seward anticipates increases in its industrial electric requirements. Seward purchases its entire power supply from Chugach.The following table summarizes Seward's historical and projected energy loads and resources to meets its loads,including its share of Project capability: Table 21 Seward Electric System Energy Loads and Resources (Megawatt-hours) Historical Calendar Year 1985 1986 1987 1988 1989 Total Energy Sales .......ccc cece cece eee e eee c ee eee renee 32,162 33,340 33,956 37,265 44,212 System Losses and Own Use .........ccceeeecceeeeeceeens 3,805 3,570 3,401 4,980 2,630 Total Energy Requirement ..bene e eee eee e eee ees 35,967 36,910 37,357 42,245 46,842 Energy Resources:; Own Resources(1)........:cece cece ec cece eee cenees 4,510 2,543 1,107 290 0 Chugach(2)......-ccs eec eee c cree eee e ser eeeseeeenee 31,457 34,367 36,250 41,955 46,842 Total Energy Resources......Sac ee eves ecececeees 35,967 36,910 37,357 42,245 46,842 Projected Calendar Year 1990 1991 1992 1993 1994 1999 Total Energy Sales.........cc cece cece nee e eee ees 45,600 46,000 46,700 47,700 48,800 50,700 System Losses and Own Use ..........-0.eeeeeees 4,100 4,200 4,200 4,300 4,300 4,500 Total Energy Requirement ...............49,700 50,200 50,900 52,000 53,100 55,200 Energy Resources:. Chugach(2)..........cece ete e eee eeeteeeeces 49,700 49,000 47,400 48,500 49,600 51,700 Project Entitlement(3)..............2eeeeee -_1,200 3,500 3,500 3,500 3,500 Total Energy Resources ..............-.-49,700 50,200 50,900 52,000 53,100 55,200 (1)Seward generates energy with its diesel generator units only in emergency situations. (2)Purchases from Chugach. (3)Projected allocation of Project energy less transmission losses assumed to be 7 percent. Based on the projection of costs of power from the Project and certain data supplied by Seward and others,we have prepared a projection of operating results for Seward.In this projection,additional revenues are shown to be needed beginning in 1993.These additional revenues are assumed to be obtained from future rate increases.Increases in revenue requirements as projected are due in part to payment of the costs of power from the Project beginning in 1991 and in part to increases in other operating expenses.Seward purchases its power supply from Chugach and,as such,is subject to increases in the cost of purchased power because of increases in production and operating costs that Chugach will incur over the next few years. A-29 Table 22 Seward Electric System Projected Operating Results ($000) :Calendar Year 1990 °1991 1992 -1993 1994 1999 Gross Revenues: Revenues from Sales of Electricity- At Existing Rates(1).....0...ceeeeeeens $5,091 $5,135 $5,213 $5,325 $5,448 $5,657 Additional Required Revenue(2)..........0 0 0 7 102 =-1,156 Other Operating Revenues ................00.208 217 227 237 248 309 Other Income(3)......0...cece ee cee eee eee 0 0 0 0 0 0 Total Gross Revenues ............055 $5,299 $5,352 $5,440 $5,569 $5,798 $7,122 Operating Expenses: Cost of Power- .Project Costs(4)0.0...cece cence eee enee $O $56 $183 $185 $187 $204Other(S)2.0.....cee eee ee eee eee "4,715 ==1,832 2,010 2,213 2,346 3,115 Total Cost of Power ............0005 $1,715 $1,888 $2,193 $2,398 $2,533 $3,319 Other Operating Expenses(6).............6005 1,425 1,490 1,557 1,627 1,700 2,118 Taxes(7)0...ccc cece c cece eee e eee enee 353 374 395 428 451 566 Total Operating Expenses............$3,493 $3,752 $4,145 $4,453 $4,684 $6,003 Total Net Revenues Excluding Depreciation and Am- 00)1 72-08(0)|1,806 1,600 1,295 1,116 1,114 1,119 Debt Service(8)2....cece cess ene e enter eee eenene 750 752 745 745 743 745 Balance for Other Purposes(9)........$1,056 $848 $550 $371 $371 $374 Energy Sales (Megawatt-hours)..........eeeeecere 45,600 46,000 46,700 47,700 48,800 50,700 Unit Revenue from Energy Sales (cents/kilowatt- NOUS)vee cece eee cece eee eee eee eee ee ne enes 11.2 11.2 11.2 11.2 11.4 13.4 Increase in Unit Revenue from Energy Sales Over Pre- vious Year (percent).........ccesseseenseeeenes 0.0%00%00%01%1.7%2.1% (1)Based on average revenues for all power sold in the fiscal year ending June 30,1989. (2)Additional revenues required to pay all operating costs,maintain a minimum 1.50 debt service coverage and fund projected capital improvements.Assumed to be made available through future rate increases. (3)Interest income and other non-operating margins and income less other deductions. (4)Projected costs of power from the Project based on Seward's 1.0 percent share of total Project annual costs.Includes projected costs of transmitting Project power over transmission lines owned by other entities. (5)Projected costs of power purchases from Chugach. (6)Projected expenses for transmission and distribution operation and maintenance,customer accounts, customer service and administrative and general expenses.Includes assumed annual inflation of 4.5 percent. (7)Projected in lieu of tax payments to the City of Seward. (8)Debt service on existing long-term debt.Assumes no additional debt to be incurred during the projection period. (9)Balance available for funding capital improvements and other purposes. A-30 PRINCIPAL CONSIDERATIONS AND ASSUMPTIONS In the preparation of this Report and the opinions that follow,we have made certain assumptions with respect to conditions which may occur in the future.In addition,we have used and relied upon certain information and assumptions provided to us by the Purchasers,the Authority and other sources which we believe to be reliable.We believe the use of such information and assumptions is reasonable for purposes of this Report.However,some assumptions will invariably not materialize as stated herein or may vary significantly due to unanticipated events and circumstances.Therefore,the actual results can be expected to vary from those forecast to the extent that actual future conditions differ from those assumed by us or provided to us by others.The principal considerations and assumptions made by us and the principal information and assumptions provided to us by others include the following: 1.Projections of the Purchasers'power and energy requirements were provided by each of the Purchasers for its respective system. 2.The Purchasers will adjust rates as necessary to produce revenues sufficient to allow each Purchaser to pay its revenue requirements,including the cost of power from the Project,as shown for each Purchaser in its Projected Operating Results Table. 3.The Project will be completed within the construction cost estimate and schedule provided by the Construction Manager,achieve commercial operation by September 1,1991,and be capable,upon completion,of generating approximately 375,920 megawatt-hours annually under average water conditions. 4.The Project will have a minimum net capability of 90 megawatts and will be able to operate at full capacity without adversely affecting the stability of the interconnected Railbelt electric system. 5.The Fritz Creek-Soldotna transmission line will be constructed and energized by September 1,1991. 6.Inflation is projected to be 4.5 percent per year for the calendar years 1990 through 1999. 7.Monies in the Construction Fund,Operating Reserve Account,Renewal and Contingency Reserve Fund and Capital Reserve Fund are assumed to be invested at annual interest rates of 7.26 percent 7.28 percent and 7.38 percent,depending on the source of the monies.Interest rate assumptions and total financing requirements were provided by the financial advisor and the underwriters. 8.The cost of oil,coal and natural gas to the Purchasers (except Chugach)will escalate at an average rate of 4.0 percent,3.0 percent,and 4.5 percent,respectively,for the ten-year period 1990 through 1999.The cost of natural gas to Chugach will increase according to contract provisions as estimated by Chugach through 1996 and will increase at approximately the assumed rate of inflation thereafter through 1999. 9.The Purchasers'projected annual capital improvement expenditures and the amounts thereof to be funded from future borrowings have been provided by each of the Purchasers for its respective electric system. This Report has been based on the assumption that all contracts,agreements,statutes,rules and regulations which have been relied upon by the Consulting Engineer in preparing the Report will be fully enforceable in accordance with their terms and conditions.The Consulting Engineer makes no representations or warranties,and provides no opinion concerning the enforceability or legal interpretation of such contracts, agreements,statutes,rules and regulations. A-31 OPINIONS Based on our analyses and studies and the considerations and assumptions set forth in this Report,we are of the opinion that: 1.The Purchasers can utilize the power produced by the Project by displacing generation from existingfossilfuelpowersupplyresources. Power produced by the Project will allow the Purchasers to reduce their dependence on gas-fired generation. The estimated cost of power from the Project is reasonable when compared with the cost of developing other long-term power supply resources. Because the major part of the Project's annual cost is debt service on the First Series Bonds and Second Series Bonds which will not be subject to change,the Purchasers'power supply costs will be less susceptible to inflation and other cost factors beyond the Purchasers'control as a result of including the Project as a power supply resource. Based upon the timely implementation of measures by the Purchasers to increase electric system revenues as projected herein,which projected increases relating to costs of the Project we believe to be reasonable,the Purchasers can expect to obtain sufficient revenues to be able to pay the annual cost of power from the Project during the period studied. The revenues from the sales of electricity shown in the projections of Purchasers'operating results presented herein can reasonably be obtained by the Purchasers through increases in rates and other measures. The Project's design is based upon proven technology and with normal maintenance the Project can be expected to have a useful life extending substantially beyond the term of the Second Series Bonds. We have furnished information under the caption "The Bradley Lake Hydroelectric Project-Projected Annual Project Costs”,and the captions "The Power Purchasers”,'Historical and Projected Power and Energy Requirements”,"Purchasers'Projected Revenue Requirements”,and "Assumptions and Conclusions of the Consulting Engineer”in the Official Statement.We have reviewed this information and,in our opinion, it is accurately presented. Respectfully submitted, R.W.BECK AND ASSOCIATES,INC. A-32 Exhibit 1 ANCHORAGE MUNICIPAL LIGHT AND POWER Summary of Historical Operating Results ($000) 1985 1986 1987 1988 1989 Gross Revenues: Revenues from Sales of Electricity .............4.$56,304 $63,606 $61,330 $63,846 $66,386 Other Operating Revenues...........seeeeeevees 275 280 264 350 472 Other Income and Deductions .................-4,838 4,306 4,395 .5,039 5,558 Total Gross Revenue ...........0.0000:$61,417 $68,192 $65,989 $69,235 $72,416 Operating Expenses: Cost of Power- Production.......ccc cceeceecccecceeusescs $21,846 $26,430 $22,628 $24,171 $26,101 Purchases........cceeceecceeccceseesseess 1,553 1,424 1,571 1,737 1,696 Total Cost of Power ...........c0ceeees $23,399 $27,854 $24,199 $25,908 $27,797 Transmission and Distribution Expense...........5,462 6,290 6,171 5,301 5,284 Customer AccountS .......cccescceccececcvcece 2,809 3,283 3,394 3,053 3,014 Customer Service ..........cccccceccuccccccece 189 161 238 144 96 Administrative and General ...........02.00000:2,831 2,995 3,658 3,281 3,319 TAaxeS ..cc ccc cece cece cane rete eeeeeeeceneeeres 870 1,025 1,480 1,786 2,754 Total Operating Expenses ..............$35,560 $41,608 $39,140 $39,473 $42,264 Total Net Revenues Excluding Debt Service Payments ..$25,857 $26,584 $26,849 $29,762 $30,152 Debt Service .......ccc cece esc eecesncceeeeaveeees 16,288 17,297 18,456 18,452 17,500 Balance Available for Other Purposes ......$9,569 $9,287 $8,393 $11,310 $12,652 Energy Sales (MWh)...........ceeeeeccceececeeees 980,780 987,309 965,707 819,748 858,305 Unit Revenue from Energy Sales per kWh (cents/kWh).5.74 6.44 6.35 7.79 7.73 Increase in Unit Revenue from Energy Sales over Previ- ous Year (percent).......cc ccc cect ccc esstenees (2.4%)12.2%(1.4%)226%(0.7%) Ex.1-1 CHUGACH ELECTRIC ASSOCIATION,INC. Summary of Historical Operating Results Exhibit 1 ($000) 1985 1986 1987 1988 1989 Gross Revenues: Revenues from Sales of Electricity........$96,303 $92,993 $92,364 $91,210)$94,100() Other Operating Revenues ..............749 474 1,170 1,882 1,545 Other Income and Deductions...........6,734 1,407 544 1,300 1,378 Total Gross Revenue......:....$103,786 $94,874 $94,078 $94,392 $97,023 Operating Expenses: Cost of Power- Production ........ceceeeceesceees $23,877 $16,975 $19,146 $20,249 $22,772 Purchases ........cceeecveeccvcees 7,105 9,945 4,369 3,986 3,133 Total Cost of Power ...........$30,982 $26,920 $23,515 $24,235 $25,905 Transmission and Distribution Expense ...9,386 8,238 9,144 9,444 10,765 Customer Accounts..........0ceeeeeee 4,732 4,559 3,982 4,339 4,479 Customer Service.........seeceeeteeees 238 293 225 216 277 Administrative and General.............8,557 9,745 11,718 10,035 9,859 00 570 574 551 555 582 Total Operating Expenses.......$54,465 $50,329 $49,135 $48,824 $51,867 Total Net Revenues Excluding Debt Service Payments ...........cc cece eee eee cece $49,321 $44,545 $44,943 $45,568 $45,156 Debt Service.......0.c cece cece enceseens 29,889 31,188 31,773 31,757 32,562 Balance Available for Other PUrpOSeS ....62.eee e eee eee $19,432 $13,357 $13,170 $13,811 $12,594 Energy Sales (MWh)............-.ee ee eens 1,873,950 1,825,869 1,788,522 1,790,400@ 1,819,675@ Unit Revenue from Energy Sales per kWh (cents/KWh)......cee cee cece ene eecees 5.14 5.09 5.16 5.09 5.23 Increase in Unit Revenue from Energy Sales over Previous Year (percent)..............2.8%(0.9%)1.4%(1.4%)2.8% (1)Excludes revenues from economy sales to Golden Valley. (2)Excludes economy energy sales to Golden Valley of 143,661 MWh in 1988 and 160,652 MWh in 1989. Ex.1-2 Exhibit 1 GOLDEN VALLEY ELECTRIC ASSOCIATION,INC, Summary of Historical Operating Results ($000) 1985 1986 1987 1988 1989 Gross Revenues: Revenues from Sales of Electricity ...............$41,726 $38,504 $38,138 $39,310 $41,748 Other Operating Revenues...............0eeeees 921 971 977 905 872 Other Income and Deductions ................05 620 849 798 822 1,711 Total Gross Revenue ...........eceeeee $43,267 $40,324 $39,913 $41,037 $44,331 Operating Expenses: Cost of Power- Production........ccsceeececeecs Lec eeeees $20,764 $16,157 $12,065 $12,818 $13,031 Purchases.....ccc cee cece cece ceecceecuees 1,908 2,073 5,511 5,828 7,411 Total Cost of Power ..........cceeceees $22,672 $18,230 $17,576 $18,646 $20,442 Transmission and Distribution Expense...........2,752 3,163 3,230 2,844 2,927 Customer AccountS ........ccceccecaecececeees 1,204 1,368 1,399 1,468 1,561 Customer Service ........ccceccececreecenceees 193 256 288 311 304 Administrative and General .............200000-2,260 2,388 2,365 2,439 2,491 TAax€S .occ cece cece cece esc eteenaecereeecnees 719 781 818 867 922 Total Operating Expenses ..............$29,800 $26,186 $25,676 $26,575 $28,647 Total Net Revenues Excluding Depreciation and AMOItization...0...cc cece cece eee n eee ceeeees $13,467 $14,138 $14,237 $14,462 $15,684 Debt Service ........cc cece eect eer en scents sceees 8,806 10,314 9,107 9,379 9,892 Balance Available for Other Purposes ....$4,661 $3,824 $5,130 $5,083 $5,792 Energy Sales (MWh).........-ccs e ccc ce eee eenees 443,093 451,716 448,681 456,943 485,866 Unit Revenue from Energy Sales per kWh (cents/kWh).9.42 8.52 8.50 8.60 8.59 Increase in Unit Revenue from Energy Sales over Previous Year (percent)........cece eee cee ceeenes (6.8%)(9.5%)(0.3%)12%(0.1%) Ex.1-3 Exhibit 1 HOMER ELECTRIC ASSOCIATION,INC, Summary of Historical Operating Results ($000) Gross Revenues: Revenues from Sales of Electricity ............... Other Operating Revenues...........cceseeeevee Other Income and Deductions ............00000- Total Gross Revenue ...........e0ceeee Operating Expenses: Cost of Power- Production ........0c c cece cere eeeeenaes PurchaseS.......0.csc esc e cee csceececceees TAaxeS ccc ccc nee c cece nee e eee eeeseeeceereene Total Operating Expenses .............. Total Net Revenues Excluding Depreciation and Amortization .......0...c cece cece eee e cece ences Debt Service 0.0...cc cece ec cect cece eect eeeeees Balance Available for Other Purposes .... Energy Sales (MWh)............cece cee eee eeeeeUnitRevenuefromEnergySalesperkWh(cents/kWh). Increase in Unit Revenue from Energy Sales over Previous Year (percent).......cece eee cece cece eee Ex,1-4 1985 1986 1987 1988 1989 $27,855 $30,147 $30,290 $30,096 $30,622 623 631 878 989 892 100 (143)(99)182 0 $28,578 $30,635 $31,069 $31,267 $31,514 $52 $40 $36 $52 $52 15,346 16,699 15,685 15,056 15,056 $15,398 $16,739 $15,721 $15,108 $15,108 2,026 2,353 2,103 2,810 2,419 1,211 1,324 =1,197.s:1,280 '1,175 70 91 95 122 117 2,372 2,863 2,801 3,416 2,746 191 199 196 202 197 $21,268 $23,569 $22,113 $22,908 $21,762 $7,310 $7,066 $8,956 $8,359 $9,752 4,147 4683 5,900 6,186 6,352 $3,163 $2,383 $3,056 $2,173 $3,400 382,981 397,039 390,533 398,902 397,662 727.«7597.76 -s«7.54--s«72.0 18%44%21%(2.7%)21% MATANUSKA ELECTRIC ASSOCIATION,INC. Summary of Historical Operating Results ($000) Gross Revenues: Revenues from Sales of Electricity ............... Other Operating Revenues..............00eeeeee Other Income and Deductions ...............005 Total Gross Revenue .........-2eeeeee Operating Expenses: Cost of Power .......cc ccc cece ete e cee eecneeece Transmission and Distribution .......cece eeeaees Customer Accounts ........detecteeneeeeeeees Customer Service ..........ccccccectecnecences TAxeS cc ccc ccc cece crete enters ee eeesteseenes Total Operating Expenses .............. Total Net Revenues Excluding Depreciation and AMrtization ....0...cc cece cere cence eee eer eevees Debt Service ...........ccc cece ceeeeeeees bese eres Balance Available for Other Purposes .... Energy Sales (MWh).........-.cc cece eee eee e eens Unit Revenue from Energy Sales per kWh (cents/kWh). Increase in Unit Revenue from Energy Sales over Previous Year (percent)........cccceeeeeeeeeeeeee Ex.1-5 Exhibit 1 1985 1986 1987 1988 1989 $36,278 $35,994 $36,162 $36,486 $36,479 1,106 1,048 1,021 1,143 1,179 201 494 227 (317)949 $37,585 $37,536 $37,410 $37,312 $38,607 $18,472 $17,146 $16,838 $16,250 $17,108 3,101 3,014 3,351 3,081 3,364 1,755 1,728 1,755 1,787 1,610 200 248 177 146 162 2,763 3,131 3,044 2,558 3,534 493 484 502 527 629 $26,784 $25,751 $25,667 $24,349 $26,407 $10,801 $11,785 $11,743 $12,963 $12,200 5,594 6,094 6,255 6,386 6,277 $5,207 $5,691 $5,488 $6,577 $5,923 433,315 418,656 403,590 410,569 412,842 8.37 8.60 8.96 8.89 8.84 6.7%2.7%4.2%(0.8%)(0.6%) CITY OF SEWARD ELECTRIC SYSTEM Summary of Historical Operating Results ($000) Gross Revenues: Revenues from Sales of Electricity .................-. Other Operating Revenues............cceeeeceeceees Other Income and Deductions ...............0eeeeee Total Gross Revenue ..........cccecececves Operating Expenses: Cost of Power .......cece cece see secre ener eeceeee Transmission and Distribution Expense............... Customer Accounts .........cece cece cece cece ceeace TaxeS wc.cc ccc cc ccc cee c ec ee nce cer enecevencecesaes Total Operating Expenses ...........--eeeee Total Net Revenues Excluding Debt Service Payments ...... Debt Service 00....cece eee cence cence eee eeneeeeees Balance Available for Other Purposes)....... Energy Sales (MWh)........ccc ccc c cece sec r esses eeees Unit Revenue from Energy Sales per kWh (cents/kWh)..... Increase in Unit Revenue from Energy Sales over Previous Year (percent)......csc esse eee c cree tees eteeesteesees ()Deficits shown have been covered by general resources of the City of Seward. Ex.1-6 1985 1986 Exhibit 1 1987 1988 1989 383 $3,583 350 160 $3,492 $3,541 $4,201 326 199 143 7%)__63)__@9) $4,093 $1,492 174 0 920 324 $3,811 $3,687 $4,315 $1,420 $1,498 $1,435 212 197 121 0 0 0 1,107 1,167 =1,183340332346 $2,910 $1,183 345 $3,079 $3,194 $3,085 $732 $493 $1,230 835 769 750 11.3% $838 34,095 10.51 22.0% $(103)$(276)$480 34,071 34,879 41,927 10.25 10.15 10.02 (2.5%)(1.0%)(1.3%) APPENDIX B DESIGN ENGINEER'S REPORT STONE &WEBSTER ENGINEERING CORPORATION 5500 SOUTH QUEBEC STREET vs)ENGLEWOOD,COLORADO 80111 -1914[D>ADDRESS ALL CORRESPONDENCE TO P.O.BOX 5406,DENVER,COLORADO 80217-5406 W.U.TWX:910 935-0105 TELEPHONE:303 741-7700 FAX:303-741-7670 W.U.TELEX:45-4401 RCA TELEX:289251 303-741-7671 NEW YORKCHATTANOOGAPORTLAND.ME CHERRY HILL.NJ.PORTLAND,OR CHICAGO RICHLAND.WA DALLAS RICHMOND.VA DENVER SAN FRANCISCO TAMPAOUTOMOALEWASHINGTON.D.C. Board of Directors July 3,1990 ALASKA ENERGY AUTHORITY J.Q.No.15800.55 P.O.Box 190869 Anchorage,Alaska 99519-0869 Dear Sirs: REPORT ON THE BRADLEY LAKE HYDROELECTRIC PROJECT (FERC PROJECT NO.8221) Presented herewith is our second report giving a summary of the engineering,design progress,and status of engineering-related efforts for the Bradley Lake Hydroelectric Project.Our first report was submitted on August 17,1989. BACKGROUND ON THE BRADLEY LAKE PROJECT The Bradley Lake Project is located on the Kenai Peninsula,about 105 miles southwest of Anchorage,and 27 miles northeast of Homer,Alaska. The development of the Bradley Lake drainage basin as a hydroelectric project had been studied by the U.S.Army Corps of Engineers (COE)from 1962 through 1982.The COE studies culminated with the issuance in February 1982 of its two-volume Design Memorandum No.2 entitled "General Design Memorandum"for the Bradley Lake Hydroelectric Project.In addition,the COE prepared a Final Environmental Impact Statement (FEIS). The COE issued its FEIS for review and comment on August 5,1982. State of Alaska interest in the project began in 1981.At this time,the State Legislature filed a request with the U.S.Congress to authorize the COE to design and construct the project using State funds and authorized $15,000,000 for this purpose.An additional $15,000,000 were authorized by the State in 1982,at which time the State assumed the project for development.Because of the direct State interest and lack of funds from the U.S.Government for project development,the U.S.Congress deauthorized the project as a Federal project in December 1982,thus bringing full responsibility for its development under the State of Alaska and its entity,the Alaska Energy Authority (formerly known as the Alaska Power Authority).It is the Alaska Energy Authority's goal to develop the Bradley Lake Project so as to fully utilize the hydroelectric potential of the water stored within the Bradley Lake reservoir. B-1 use -stof sree +1989 STONE &WEBSTER SUPPORT AND EXPERIENCE The Alaska Energy Authority selected Stone &Webster Engineering Corporation as the "Design Engineer",to provide the engineering,design and other services required for the development of the project.These services were provided to the Authority in phases and included:the review of project.feasibility;preparation of the Application for License underFederalEnergyRegulatoryCommission(FERC)guidelines and regulations; performance of engineering and design for the project;and providing engineering-design support during project construction. Stone &Webster Engineering Corporation has successfully completed over 65 separate hydroelectric projects and our experience in the engineering, design,construction and construction management for these types of facilities covers almost 100 years. Stone &Webster Engineering Corporation's experience within the last 30 years has included several major conventional and pumped storage hydroelectric projects such as the Rocky Reach and the Rock Island hydroelectric projects on the Columbia River for Public Utility District No.1 of Chelan County;the Gaston and Roanoke Rapids hydroelectric projects on the Roanoke River for Virginia Electric and Power Company;the Cabin Creek Pumped Storage Project for Public Service Company of Colorado; the Northfield Mountain Pumped Storage Project on the Connecticut River for Northeast Utilities Service Company;the Raystown Lake Hydroelectric Project for Allegheny Electric Co-op;and the Hydro-Kennebec Project for United American Hydro. DESIGN OF THE BRADLEY LAKE PROJECT Feasibility Studies In April 1983,the Alaska Energy Authority authorized Stone &Webster Engineering Corporation (the "Design Engineer')to investigate the technical,environmental,costs and economic feasibility for developing the Bradley Lake Project to make use of available flows for generating electrical power to support the energy needs of the Kenai Peninsula and Anchorage regions. In support of these efforts,an independent Technical Review Board was retained at the request of the Alaska Energy Authority to oversee the Design Engineer's technical efforts.This Board,consisting of consultants expert in the fields of geology,geotechnical areas,tunneling and dam design,has been retained throughout the engineering-design efforts to date and will be continued through project construction. After investigating many alternative powerhouse locations,various sizes, types,and numbers of generating units,different power conduit alignments and configurations,and different types of dams and Bradley Lake storage levels,it was concluded that the preferred development would involve construction of a new powerhouse at the eastern shore of.Kachemak Bay,and raising the level of Bradley Lake by 100 feet with the construction of a concrete-faced rockfill dam at the lake outlet. jo\ONNEBSTER <=1989 AlffoaB-2 1889»STON 8, The feasibility study was submitted to the Alaska Energy Authority in October 1983.The results and findings from this study became the basis for the preparation of the License Application to the FERC. FERC License Application In October 1983,the Alaska Energy Authority authorized Stone &Webster to prepare the FERC License Application for the Bradley Lake Project.The License Application was filed by the Alaska Energy Authority with the FERC on April 4,1984.Interested Federal,State,and local agencies reported favorably to the FERC on the application by the Alaska Energy Authority. The License Application was accepted by the FERC on June 27,1984. Following a successful license review process,the FERC issued an order to award the License on December 31,1985.The License is scheduled to expire on December 1,2035.The FERC's order authorized the Alaska Energy Authority (the Licensee)to construct,operate,and maintain the Bradley Lake Hydroelectric Project and its appurtenant facilities. In compliance with the FERC License Articles,the Alaska Energy Authority has retained a Board of Consultants to review,evaluate,and report on each of the major elements of the project relative to its engineering,design, constructibility,and safety aspects prior to initiation of construction of that project element.In addition,the Alaska Energy Authority has retained the services of Bechtel Corporation as its Construction Manager. The FERC further ordered the Alaska Energy Authority to commence construction by January 1,1987,and complete construction on or before January 1,1992. Prior to issuing the License,the FERC performed an independent evaluation of the project based on data filed with the Application.This evaluation considered,among others:design,costs,economic feasibility,efficient resource utilization,project financing,construction schedule and the application of good engineering practices for project development using proven commercial designs.In issuing its Final Supplemental Environmental Impact Statement,the FERC concluded that the Bradley Lake Project would be the preferred alternative for meeting the electrical energy requirements of the area. Description of the Bradley Lake Project Based on the designs and development concepts resulting from the Feasibility Study and presented in the FERC License Application,as well as subsequent design developments,the adopted Bradley Lake Project plan incorporates the following features. a.Construction and operation of project site facilities including access roads,barge dock,airstrip,warehouse,and permanent plant operator housing and maintenance facilities. b.Construction and operation of a powerhouse at the north shore of Kachemak Bay. TPN éWyB-3 1889 >STONE &WEBSTER ©/v89 A c.Construction and operation of a tunnel waterway that connects the turbine-generating units to the Bradley Lake reservoir,including an intake structure and a gate shaft with flow control appurtenances. d.Construction and operation of a concrete-faced rockfill dam near the outlet of Bradley Lake. e.Construction and operation of an ungated concrete gravity-type spillwayneartheoutletofBradleyLake. f.Construction of a diversion and low level flow release tunnel, including fish flow augmentation facilities and a gate shaft with flow control appurtenances. g.Construction and operation of facilities for diverting additional generating flows from the Middle Fork and Nuka Glacier drainage basins. h.Construction and operation of two separate and parallel,single circuit,115 kV transmission lines from the powerhouse to a new transmission line under construction by the Homer Electric Association, Inc. In addition,the Alaska Energy Authority and the power purchasing utilities have agreed to install stability protection equipment in order to further enhance the reliability of existing and planned transmission lines within the Kenai Peninsula and to increase the power export capability from the Kenai. A more detailed description of the most salient project features follows: a.Site Facilities Due to its remote location,access to the project is by water or air. To support the project construction and long term operational, Maintenance and logistical needs,the following facilities have been constructed. Water access to the project is from a large dock facility consisting of five (5)53 ft.diameter sheet pile cells placed out into the tidal flats of Kachemak Bay.A rockfill,gravel-surfaced causeway extending some 700 ft.from the shoreline connects the barge dock cells to the project access road at the bay shore. Ais access to the project has been provided with the construction of a 75 ft.wide,2,400 ft.long airstrip developed as an integral part of the project access road system.The airstrip is located near the barge dock area and extends northward towards the permanent camp facilitiesandpowerhouseareas. Separate permanent facilities have been provided near the powerhouse site to house plant operations and maintenance personnel and to support project limited storage needs. ye af iB-4 1889 »STONE &WEBSTER ©Iyxy A The permanent facilities include:two 32 ft.wide by 82 ft.long duplex housing units for plant operators;a 43 ft.wide by 50 ft.long office-residence facility for use by maintenance personnel;and,a 50 ft.wide by 160 ft.long shop/warehouse facility. About 10.8 miles of gravel surface access roads have been constructed and connect the powerhouse,permanent facilities,airstrip,dam site and other project areas. Powerhouse The powerhouse reinforced concrete substructure and steel superstructure are complete.The powerhouse is 80 ft.wide,92 ft. high and 160 ft.long.It will contain two Pelton-type turbines and associated generators,plus an erection bay and service area located at the south side of the structure.In addition,the powerhouse design allows for expansion to the south side for a future third unit. The output from the generators will be stepped up in voltage from 13.8 kV to 115 kV by the main power transformers and interconnected to the transmission system by a gas insulated substation,both located at the north end of the powerhouse. Two parallel and separate single circuit 115 kV transmission lines, each about 20 miles long,will connect to the substation at the powerhouse and carry the power generated to the Fritz Creek Soldotna 115 kV transmission line under construction by Homer Electric Association,Inc.The point of connection for these two lines is designated as the Bradley Junction. Sensing and control equipment supplied by several manufacturers and consisting of static var system,series capacitors,load bank resistors,power system stabilizers and digital system monitors will be installed at the Bradley Lake powerhouse and at substations adjacent to or owned by the power purchasing utilities.This will be done to enhance the stability and reliability of currently existing or planned transmission lines within the Kenai Peninsula and to increase their power export capability. The powerhouse electrical equipment will include generator circuit breakers and leads,station service transformers,emergency diesel power generator,station battery and D.C.system,and the usual control boards,relay panels,lighting systems and motor control equipment.Sufficient auxiliary equipment will be provided to permit both local and remote supervisory control of the generating units. Building service and facility equipment will provide for station and unit unwatering;station and unit service water;heating and ventilating of the enclosed structure;potable water and plumbing facilities including sanitary waste treatment;roof,floor,and equipment drainage;and the necessary fire protection systems.Also provided are equipment and systems to permit the depression of the water within the turbine discharge passages for unit operation under high tidal conditions. ONnyMYfyB-5 1889 +STONE &WEBSTER ©i9sy A Service equipment for the powerhouse includes steel gates for closing off the turbine discharge channels against tidal tailwater conditions for unit unwatering;a gate monorail hoisting system;and a station bridge crane for unit installation and long term maintenance. Each of the Pelton-type vertical axis units has six jets.The Pelton units are designed by the manufacturer to produce 82,500 hp at 1,085 ft.net head,with a unit discharge of about 750 cfs,and 63,500 hp at 920 ft.net head.For the present two unit plant installation and with both units operating,each turbine is designed to develop 74,850 hp at the minimum net head of 1,018 ft.,with a unit discharge of 719 cfs; and a turbine horsepower of 85,550 hp at the maximum net head of 1,113 ft.with a unit discharge of 753 cfs.The turbine units are suitable for operation at a synchronous speed of 300 rpm. Each turbine unit will be equipped with a steel spiral distributor, adjustable needle valves,guide bearing,jet deflectors,a water jet brake and all necessary auxiliaries and appurtenances.In addition,a spherical valve will be provided at the spiral distributor inlet to shut off the turbine flow,even under the most extreme operating conditions. Electronic type governors with hydraulic actuators are being provided for each turbine unit.The governing system will permit either manual operation from the main control board or actuator cabinet or automatic operation at the main control board or by the remote supervisory control. Two modified umbrella-type generators rated by the manufacturer at 63,000 kVA,0.95 powerfactor,13.8 kV,3 phase,60 Hz are being provided and will be directly driven by the two Pelton turbines.The generators will be equipped with voltage regulators,static excitation equipment,and other appurtenances,including a Halon fire protection system. Power Tunnel The power tunnel water conduit is now fully excavated and will connect and convey water stored at the Bradley Lake reservoir to the turbineunitsforpowergeneration. The power tunnel is about 18,610 ft.long.The tunnel will be constructed as designed and will consist of an 11 ft.upper tunnel section and vertical shaft;a 13 ft.finished diameter concrete lined section;and an 11 ft.finished diameter steel-lined section that is about 2,700 ft.long.Concrete lining for the upper tunnel section, its vertical shaft and a substantial length of the lower tunnel section is completed.Because of the geologic conditions found at portions of the lower horizontal tunnel section,a pressure grouting program is being instituted to seal known and suspect rock joints thereby reducing the potential for seapage from the concrete lined tunnel.A steel penstock-manifold section extends from the downstream end of the steel oo eediftPFWw B-6 1889 +STONE &WEBSTER =1989 us tunnel liner and branches to connect with each of the two units now under installation,and with the third future unit.This steel penstock manifold system was successfully pressure tested at 965 psig, which pressure represents a 50 %increase above the design pressure for this system. A vertical concrete-lined gate shaft has been constructed some 675 ft. downstream of the power tunnel intake.The shaft will contain two vertical,hydraulic operated,steel leaf intake gates.The gates are designed to operate under an emergency or for tunnel maintenance. Dam and Spillway The dam at the Bradley Lake outlet is now complete and consists of a 600 ft.long,125 ft.high concrete-faced rockfill structure.The reinforced concrete facing acts as the impervious structure and is 12 inches thick. An ungated,concrete gravity-type spillway is being constructed adjacent to the right abutment of the dam for flood flow releases.The spillway is sized to accommodate the flood flow resulting from routing the Probable Maximum Flood through the Bradley Lake reservoir, including flood flows contributed from the Middle Fork and Nuka Diversion schemes.Hydraulic model studies were conducted by an independent testing laboratory for the spillway and the downstream discharge channel. Diversion Facilities A tunnel located in the right abutment,between the spillway and rockfill dam,has been constructed to divert Bradley Lake flood flows during the development of the spillway,dam and power tunnel. Additional construction will be done to the diversion tunnel to include both a low level outlet for reservoir drawdown and those facilities required for fish water releases to the downstream Bradley River drainage.A vertical concrete-lined shaft containing two vertical, hydraulic operated,steel leaf gates are being constructed to control and regulate the flow releases for the low level outlet. A contract has been issued for the construction of two additional remote and permanent diversions,one at Middle Fork and the other at the terminus of the Nuka Glacier.The Middle Fork diversion will consist of a long unlined channel constructed to divert water from the Middle Fork drainage basin to Bradley Lake.The Nuka Diversion will regulate a pond existing at the terminus of the Nuka Glacier and divert runoff and glacier melt waters to the Bradley River drainage system, except for flows lower than 5 cfs which are to be diverted to the Nuka River drainage system. wet gt petSTNON B-7 fh ieee ab,7 1989 +STONE &WEBSTER ©/osy rN GEOTECHNICAL AND SEISMIC CONSIDERATIONS A number of studies and investigations have been performed by others in the last three decades to evaluate the technical and economic feasibility of hydroelectric development on the Bradley River drainage system.Most of these investigations dealt with geologic and geotechnical conditions of the area,amassing a comprehensive body of data over the years.The earliest studies were undertaken by the U.S.Geologic Survey (USGS)and the COE. In the General Design Memorandum phase the COE was assisted in their investigative efforts by several subcontractors. Subsequently,overall responsibility for the Bradley Lake Project was assumed by the State of Alaska through the Alaska Energy Authority (AEA). Stone &Webster Engineering Corporation was selected as the engineering and design consultant for the project.Additional licensing studies were carried out and a FERC License was granted in 1985.Since that time, additional design investigations were performed throughout the project area as engineering and design considerations were being developed. The Bradley Lake Project site is located in the McHugh Complex,which is composed of metaclastic and metavolcanic rocks of the Cretaceous Age and which consist primarily of a folded and faulted assemblage of graywacke, argillite,metatuff,greenstone,and chert.These lithologies were intermixed and greatly deformed as they were tectonically accreted onto the North American Plate,resulting in a mylonitic texture.The compressional and shear stresses responsible for the geologic structure found in the project area appear to be absent at this time.Though southern Alaska is considered a seismically active area,it has been reported that no displacements along faults have occurred in recent geologic time at or near the site and that the probability of displacements occurring on these local faults in the next 100 years is considered remote.The 1964 earthquake, reported to have a magnitude of 8.5 on the Richter Scale,constitutes the maximum magnitude event considered as the seismic design basis.Since all major project facilities are to be founded on or in bedrock,peak horizontal bedrock acceleration values have been formulated for the Maximum Credible Earthquake (0.75g)and the Design Basis Earthquake (0.35g).These acceleration values correspond to an 8.5 and 6.3 Richter Scale earthquake event,respectively. Although the geologic conditions within the Bradley Lake Hydroelectric Project area ar2 complex and variable,no subsurface characteristics were encountered during the final development of the project structures which required adjustments of the structures relative to their initial planned locations.Subsurface investigations consisting of core borings,seismic surveys,test pits,material testing and testing of rock properties and rock mechanics were made by others and by Stone &Webster in the areas of the various project structures,as appropriate.The work performed by Stone &Webster has been in a manner consistent with the level of skill ordinarily exercised by members of the geotechnical profession currently practicing under similar conditions.Investigations performed during the design provided their intended reasonable basis for project design rather TE pe MN AN B-8 89»STONE &@ WEBSTER +1980889+STONE&WEBSTER +f9s¢ than the fully definitive identification of precise conditions at each structure.The results from the investigations were presented and reviewed by members of both the Technical Review Board and the FERC Board of Consultants,and interpretations for use in design were jointly made by all parties involved.No warranty,expressed or implied,beyond exercise of reasonable care and professional diligence is made. The investigations showed the existence of alternating sequences of argillite and graywacke along the entire dam axis to be of generally good overall rock quality.The right abutment saddle area,where the ungated concrete spillway is to be located,showed evidence of talus and overburden overlying moderately jointed and fractured graywacke.The in situ rock visible at the surface in the dam area appears moderately hard and adequate to support the dam and spillway.Joints and fractures in the rock corings indicate the potential for leakage channels from the reservoir.A grout curtain has been developed beneath the spillway and the toe slab of the dam to control underseepage. Rock units mapped along the power tunnel alignment consist of argillite, graywacke,metatuff,chertXX,dacite,and greenstone.All rock types have been greatly deformed and intimately mixed.Lithology data along the power tunnel alignment identifies the dominant map units as graywacke,argillite and chertXX,each comprising almost one-third of the outcrops on the alignment.Geologic structures along the alignment include foliation, joints,fracture zones,shears and faults.The two largest faults, intersecting the tunnel alignment are the Bull Moose and Bradley Faults. Each of these features is existing along the tunnel length for several hundred feet.Because of this complexly mixed melange characteristics of the tunnel areas and the fault conditions,the design for the tunnel incorporates a concrete lining along the entire tunnel length,with reinforcement of the lining as may be necessary by conditions encountered. As a result of the reviews for subsurface conditions within the power tunnel water conduit,it was deemed prudent to implement a pressure grouting program intended to reduce potential seepage through open joint structures discovered within the rock mass at depth.Also,as previously Stated,some 2,700 ft.of the downstream section of the tunnel is steel-lined against the internal operating pressure of the water conduit system.Although we believe that reasonable and prudent designs have been implemented for the development of the tunnel,it should be recognized that,depending on the severity and magnitude of a localized earthquake event,it is possible that a displacement type failure may occur along sections of the tunnel.In recognition of this,provisions have been made to unwater the tunnel and access same for repairs. The powerhouse site rock formations are predominantly graywacke,argillite and dacite.Although the rock in the area of the powerhouse and adjacent substation is typically fractured and contains several shear zones,it is considered satisfactory as foundation material. WONoe,.t i ;:B-9 1889 »STONE &WEBSTER ©1959 nN STP As the site is in close proximity to a continually adjusting interface between the continental and oceanic crustal plates,seismic activity will most likely be experienced during the design lifetime of the project facility.Experience indicates that this seismic activity may potentially cause some damage to critical equipment and structures depending on severity.Design features have been incorporated which we believe will mitigate damage for the selected earthquake event. We have adopted structural design criteria which are more stringent than Uniform Building Code Zone 4 due to the earthquake hazard and frequency of earthquake occurrence predicted for the site.The types of structures selected are relatively low and whenever possible have been founded in or on bedrock.The selection of the main water containments,the spillway and dam,utilize gravity-type structures which include rock-fill for the dam and concrete for the spillway.These types of structures are stable but may sustain local damage which is repairable after a major earthquake event.We have incorporated a low level outlet and a permanent cofferdam to allow controlled unwatering of the reservoir for inspection and repairs, if required. The dam design incorporates flatter upstream and downstream slopes to further enhance its earthquake Stability.Special joint treatment of thereinforcedconcretemaindamfaceslabdesignhavebeenincorporatedtoallowforanticipatedmovements. In the unlikely event of a control system failure,gates that control reservoir flow will close under gravity and the plant will go to a redundant controlled automatic shutdown. The methodology,approach and criteria considered in mitigating for the seismic design considerations of equipment and structures,in recognition of the above seismic related situations and site characteristics are too complex to describe within this letter report but are summarized on Table A,attached.The seismic design considerations were reviewed and found prudent for use for the Bradley Lake Project by both the Technical Review Board and the FERC Board of Consultants. RESOURCE UTILIZATION The FERC License issued for the Bradley Lake Project stipulates certain operating requirements relative to reservoir storage,inflow diversions and diversions for fish habitat.These requirements,coupled with 29 years of updated flow records and the electrical system load characteristics for the participating utilities,formed the basis for computer simulation analyses of reservoir operation to calculate the resource utilization capability of the project.Turbine-generator and other power related equipment characteristics provided by the equipment manufacturers as well as the hydraulic characteristics of the water conduit system also were used in the analyses. Based on the above,the average annual total energy capability of the project is computed as 375,920 megawatt hours. oa a hr any'fi Phas :B-10 1889 +»STONE &WEBSTER =1989 A PROGRESS OF ENGINEERING AND DESIGN Engineering and Design As the Design Engineer for the Bradley Lake Hydroelectric Project,Stone & Webster Engineering Corporation performed the engineering,including the preparation of plans,specifications,construction and equipment procurement bid documents,design and engineering support of construction activities of the facilities,the preparation of the initial capital cost estimate,preparation of the application for FERC license,assisted the Alaska Energy Authority in the preparation of applications to the appropriate regulatory agencies,bid analyses and evaluations,the plant manual,plant startup and testing,engineering and design coordination with the Construction Manager,administration and shop inspections of owner-furnished equipment,and provided other services related to the Bradley Lake Project.Currently,Stone &Webster is continuing to provide engineering and design services in support of on-going Alaska Energy Authority construction contracts and activities. The Alaska Energy Authority has made a direct purchase of the turbine-generator equipment and appurtenant items in order to support the design of the powerhouse and to support the construction schedule.Primary concrete embedded items for this equipment have been delivered and are being installed as powerhouse construction progresses.All turbine equipment has been delivered to the site and is being installed.The current total firm contract price for the equipment is $13,766,011,and includes a five-year obligation for the equipment supplier to repair and replace faulty equipment or defective parts and the cost of a performance bond in the full amount of the contract price.With respect to each generating unit,such five-year period commences after the date of final acceptance by the Alaska Energy Authority of the generating equipment.The second equipment procurement contract involves the Supervisory Control and Data Acquisition System (SCADA).This equipment is scheduled for delivery to the project on July 16,1990. All other equipment and systems for the project have or are being procured by the appropriate construction contractors under contract with the Alaska Energy Authority. In providing our services during the construction phase,we have 1) prepared the various procedures needed by the construction contractors for the proper testing of their supplied equipment and systems;we are currently preparing the various procedures needed for startup and testing of the plant equipment and systems;2)we have established a limited field engineering office;3)we are providing limited construction management in selected areas of the project;and 4)are also supporting the project engineering design needs from our headquarters offices. otf B-11 1989 +STONE &WEBSTER ©i984 uN Qur support currently extends through December 1991.The construction Contract for the Middle Fork -Nuka Diversion was awarded and on site work began on June 9,1990.We began the preparation of specifications, drawings and other data,as would be needed to prepare the Construction Bid Documents for the yet to be issued Rehabilitation Construction Contract. Status of Permits,Approvals,and Environmental Studies The Alaska Energy Authority is obligated to obtain Federal,State and local permits and authorizations for the construction and operation of the hydroelectric generation station.The Alaska Energy Authority has advised that all permits and approvals required for construction and operation have been received,and that to the best of their knowledge the Bradley Lake Project,as presently designed,is in compliance with presently known statutes and regulations.Certain permits and approvals are subject to renewal at varying intervals by the appropriate regulating authorities and the Alaska Energy Authority will obtain these.The following is a listing of the major permits and authorizations which have been received by the Alaska Energy Authority. Federal FERC -Federal Energy Regulatory Commission COE -JU.S.Army Corps of Engineers DOI -U.S.Department of the Interior EPA -U.S.Environmental Protection Agency State ADEC -Alaska Department of Environmental Conservation ADFG -Alaska Department of Fish and Game ADGC -Alaska Division of Governmental Coordination ADNR -Alaska Department of Natural Resources ISSUED DESCRIPTION BY STATUS Federal Energy Regulatory Commission FERC License received License December 31,1985 Section 10/404 Permit (dredge and fill)COE Permit received Access Construction and Material COE Permit received Disposal Permit Agreement for Water Use (Nuka Glacier DOI Agreement dated Pool)June 16,1986 National Pollutant Discharge EPA Two permits Elimination System Permits received and (discharge of wastewater)applications made for two additional permits CP FIN FNleyVeeyyiifbef!}B-12 1839 +STONE @ WEBSTER siysy A ISSUED DESCRIPTION BY STATUS Landfill Waste Disposal Permits ADEC Permits received (construction waste) Wastewater Discharge Permits ADEC Permits received (discharge of wastewater) Certificate of Reasonable Assurance ADEC Certificate received Fish Stream Permits ADFG Permits received (anadromous and resident fish streams) Critical Habitat Area Permits ADFG Permits received (Kachemak Bay critical habitat area) Coastal Zone Consistency ADGC Determinations received Water Rights ADNR Permits received Land Use Permits and Leases ADNR Permits &leases (use of State lands)received Material Extraction Permits ADNR Permits received (gravel extraction) Right-of-Way Permits ADNR Letters of Entry received Water Use Permits ADNR Permits received (temporary &permanent water use) Other permits from Federal,State,and local authorities have been obtained,as required,for construction and operation of the hydroelectric generation station. CONSTRUCTION-RELATED ACTIVITIES The Alaska Energy Authority has elected to assign the construction-related responsibilities for the major project features to its selected Construction Manager.These responsibilities include,amongst others, Management of construction activities and construction contracts; monitoring and reporting on project costs;and monitoring and reporting on project construction schedules.A discussion on the status of these and other construction management-related responsibilities are separately addressed in the Construction Manager's Report. ary AS woNirfyff"if i.[if iffyB-13 1889 +stowel&WEXSTER +198Y rN CONCLUSION Based on the foregoing;our experience and involvement with the engineering-design aspects of the project;the information provided to us by the Alaska Energy Authority,its Construction Manager and the other experts retained as independent consultants for the project;the technical data being submitted by various vendors on project equipment and systems; the geologic and geotechnical findings to date;and,barring any unforeseen circumstances,delays or difficulties,it is our opinion that: 1.The Bradley Lake Project is designed to effectively utilize the water stored within the operating range of the Bradley Lake reservoir and to generate a minimum output of 90MW. 2.The project now under development and the designs currently adopted for its construction are suitable for the known site conditions. 3.The project now under development is feasible from an engineering and construction standpoint. 4.The turbine-generating equipment and other major equipment as specified and being supplied to the project are of commercial design which normally operate reliably. 5.Federal,State and local permits and approvals for the construction and operation of the project have been received or will be obtained by the Alaska Energy Authority. 6.The Bradley Lake Project,as currently designed,is in compliance with issued Federal,State and local permits and in compliance with present Federal and State laws,rules and regulations. 7.The project has been designed for earthquake events anticipated to occur within the lifetime of the project. Respectfully submitted, Theodore Critikos Project Manager TC/TRO TE AON LON B-14 Lore189+STONE &WEBSTER©vss GENERAL SEISMIC EVALUATION Horizontal Ground Acceleration Approximate Mean Annual Probability of Exceeding Specified Acceleration (based on 50 year project life) Anticipated Downtime ALLOWABLE DAMAGE LEVEL Proj r Dam Spillway Power Tunnel Powerhouse . Turbine/Generator/Governor Controls 2818r/0073r TABLE A METHODOLOGY AND APPROACH FOR SEISMIC DESIGN BRADLEY LAKE HYDROELECThIC PROJECT ALASKA ENERGY AUTHORITY Operational Basis Up to .1lg 0.1 -0.2 (t-2 chances in 10 of exceeding 0.19) Project resumes operation within hours Operationa}? No significant damage Operational No damage,requires integrity check to restart.Minor adjustments/reset controls/ spares replacements. Design Basis 0.1 g to .35 9 -007 (7 chances in 1000 of exceeding 0.359) Inspection and checkout 30 days.Repairs 1 to 6 months Operational Architectural damage.No Significant structural damage. Minor damage,possible replacement of components with spare parts. Limited damage,replacement of components with spares. xtreme Basis -35 g to .75 g -0004 (4 chances in 10,000 of exceeding 0.75g) Possibly greater than 6 months Limited structural damage,no structural collapse.Potential for functional damage. Structural damage (no structural collapse).Significant architec- tural damage. Possible major damage Possible major damage TABLE A METHODOLOGY AND APPROACH FOR SEISMIC DESIGN BRADLEY LAKE HYDROELECTRIC PROJECT ALASKA ENERGY AUTHORITY Operational Basis Design Basis SPECI EISMIC EVALUATION Spherical Valves and Operational Operational Operational Operators Power Tunnel and Diversion Operational Operational Operational Tunnel Stide Gates and Operators,Diversion Tunnel Powerhouse Emergency Generator Operational Operational Operational by manual start. Manual cable reconnection may be required. 15 kV Switchgear and Bus Operational Operational Minor damage Main Puwerhouse Transformers Operational Operational Minor damage Substation/Transmission Line Operational Potential interruption of Out of service,possible Emergency Lighting Operational,minor damage and light bulb service Operational,minor damage and light bulb replacement. major damage May require reconnection to emergency generator and replacement light bulb reptacement Fire Protection Operational Operational Possible damage Environmental Systems Operational Operational Possible damage Middle Fork and Functiona;Operational Operational Potential for damage. Nuka Diversions Permanent Camp Facilities Operational Operational Potential for architectural including Permanent Housing and structural damage. Barge Dock,Airstrip,Operational Soil failures possible.Major soil failures possible. Access Roads 2818r/0073r Will be repaired as needed.Will be repaired as needed. APPENDIX C CONSTRUCTION MANAGER'S REPORT Bechtel 1230 Ocean Drive Homer,Alaska 99603 Mailing address:P.O.Box 1869 BEC-L-AEA-968 Homer,Alaska 99603 July 5,1990 Board of Directors Alaska Energy Authority P.O.Box 190869 701 East Tudor Road Anchorage,Alaska 99519-0869 Subject:Bradley Lake Hydroelectric Project Contract No.0860268 CONSTRUCTION MANAGER'S REPORT ON THE BRADLEY LAKE HYDROELECTRIC PROJECT Gentlemen: We submit herewith a summary of our review,investigation and analysis in connection with our activities as the Alaska Energy Authority's Construction Manager for the Bradley Lake Hydro- electric Project (the ""Project").This report addresses certain construction aspects,the construction schedule and estimated construction costs as of the date hereof (the "Report"). The Alaska Energy Authority ("Authority")is a public corpora- tion of the State of Alaska organized and existing under the Alaska Power Authority Act and subsequent actions which formally changed the Alaska Power Authority to the Alaska Energy Authority on July 1,1989.The Authority owns four operating hydroelectric projects,various waste heat recovery systems,and the Anchorage-Fairbanks intertie transmission line.The Authority is governed by a seven (7)member Board of Directors,three (3)of whom are appointed from the Governor's Cabinet.On December 31,1985,the Federal Energy Regulatory Commission ("FERC")granted the Authority License No.8221 which permits the Authority to construct and operate a hydro- electric power facility consisting of adam and spillway at Bradley Lake anda three and a half (3.5)mile long power tunnel to connect the Bradley Lake reservoir to the powerhouse and switchyard located on Kachemak Bay.The license also covers the construction of approximately twenty (20)miles of transmission facilities from the powerhouse switchyard to connect the power plant to a new transmission line being built by Homer Electric Association,Inc.which will interconnect the Project to the existing transmission system. Pursuant to a Contract dated January 9,1986,the Authority retained Bechtel Civil &Minerals,Inc.(subsequently changed to Bechtel Civil,Inc.),as Construction Manager,as that term oy Bechtel Corporation C-1 is used in the "Official Statement"with respect to the Authority's Power Revenue Bonds,Second Series (Bradley Lake Hydroelectric Project).AS part of a general corporate reorganization,effective July 1,1989,Bechtel Civil,Inc.was changed to Bechtel Corporation ("Bechtel").The Authority retained R.W.Beck and Associates,Inc.as Consulting Engineer and Stone &Webster Engineering Corporation ("Stone &Webster") as Design Engineer as those terms are used in the Official Statement.For additional information regarding the Consulting Engineer and the Design Engineer and their role in the Project, please refer to Appendices A and B of the Official Statement. In preparing this Report and forming our opinions,we have been provided with certain information and we have made certain assumptions which are described in the section of this Report entitled "PRINCIPAL BASES AND ASSUMPTIONS".These principal bases and assumptions should be considered when reading thebalanceofthisReport. SCOPE OF ENGAGEMENT In performing its construction management services for the Project,Bechtel manages the various construction contractors and construction activities as .the Authority's representative and reports directly to the Authority.Bechtel's construction management services include the following:provision of assistanceto the Authority and Design Engineer for pre-construction planning,contract packaging,and constructability review;development and management of construction schedules to support the master Project schedule;establishment of budgets and monitoring and reporting of Project costs;admini- stration of construction contracts on behalf of the Authority, includingthe necessary liaison -with the Design Engineer; verification of quality related activities of contractors;and coordination of Project startup. THE PROJECT For a description of the Project,please refer to the discus- Sions in the Design Engineer's Report in Appendix B of the Official Statement.The structures and other Project compo- nents described herein are considered to be standard in the hydroelectric industry and require construction.methods and technology that are currently in common use in construction of facilities similar to the Project. FERC LICENSE AND OTHER PERMITS,LICENSES AND APPROVALS The Authority is responsible for obtaining all major permits, licenses and approvals which are required for construction andoperationoftheProject. The most significant regulatory approval,the FERC License,was issued on December 31,1985 and is effective for fifty (50) years until December 1,2035. The construction contractors are required to comply with the conditions of all permits,licenses and approvals furnished to the Authority as well as all applicable federal,state and local regulations. PROJECT COST AND SCHEDULE CONTROL Project cost control is being managed through the awarding of competitively-bid procurement and construction contracts which feature lump sum pay items where engineering is essentially complete and unit price pay items where engineering is not essentially complete.In addition,independent estimating is being performed for changed work;and contracts,changes,and claims are monitored and administered rigorously. Schedule control is being managed by providing in each contract for definite start,intermediate and completion dates and various damage provisions for late completion.In addition, Bechtel regularly monitors actual progress against the estab- lished construction schedules for the Project. In order to achieve these objectives,Bechtel is employing an integrated computer-based cost and schedule system.The cost control program is based on an earned value approach to cost management.The system is designed to track actual costs against budget,as well as schedule adherence.The system is designed to identify,in advance,potential cost or schedule problems.Early identification of such potential problems has been able to allow timely action to minimize cost and schedule impacts. CONSTRUCTION PROGRAM The construction of the Project commenced with award of the Phase I -Site Preparation Contract to Enserch Alaska Construction,Inc.on June 17,1986.All work under the Site Preparation Contract was completed in May 1987. The Authority Board of Directors passed a resolution in February 1987 to suspend further construction contract awards pending negotiation of satisfactory power sales agreements. Consequently,Project construction was placed on hold at the completion of the Site Preparation Contract in May 1987. Power sales agreements were formally signed in December 1987 and legislation was introduced in January 1988 to exempt the Bradley Lake power sales agreements from review by the Alaska Public Utilities Commission.The hold on Project construction C-3 was lifted March 11,1988 with signature by Governor Cowper of exemption legislation.Resumption of Project work (Phase ITI) commenced immediately with issuance of bid documents to bidders for the General Civil Construction Contract on March 12,1988 and other contracts shortly thereafter. The first contract to be awarded under Phase II was the Camp Catering Contract which was awarded to Brown &Root in May 1988.The Notices to Proceed to Enserch Constructors,J.V. for the General Civil Construction Contract and to Zubeck,Inc. for the Transmission Line Clearing Contract were issued June 23,1988.The Powerhouse Construction Contract was awarded to H.C.Price Construction Company December 19,1988. The Transmission Line Construction Contract was awarded to Newbery Alaska,Ine.June 22,1989 and the contract for construction of the Middle Fork and Nuka diversions was awarded to Wilder Construction Company,Inc.April 12,1990.As of June 30,1990,only minor construction contracts for site rehabilitation and floor protection in the powerhouse remain to be awarded. All clearing and disposal under the Transmission Line Clearing Contract (Zubeck)was completed in late March 1989,approxi- mately three (3)weeks ahead of schedule.Work on all other construction contracts is underway.As of June 30,1990,the status of these contracts was as follows: General Civil Construction Contract (Enserch) Progress is seventy-three percent (73%)against sixty-six percent (66%)scheduled.The contractor is currently ahead of schedule on power tunnel construction.This is on the Project critical path for plant startup.Present trends however, indicate that the Contractor will use the float that has been gained and complete the tunnel for turnover to the Powerhouse Contractor in accordance with the original schedule.The spillway concrete is sixty-seven percent (67%)complete and the final finishing work on the dam is underway.Start of reservoir fill is scheduled for early October 1990 -about one half month ahead of the contract milestone date. Powerhouse Construction Contract (Price) Progress is seventy-three percent (73%)against seventy-six percent (76%)scheduled.The powerhouse substructure and superstructure are complete and installation of equipment is well underway.Installation of the turbine-generators (the contract critical path)is on schedule and has the potential for completion ahead of schedule.Installation of other powerhouse equipment and mechanical electrical systems, although currently behind the contractor's early schedule,is expected to be complete approximately six months ahead of the milestone date for startup. Transmission Line Construction (Newbery) Progress is sixty-seven percent (67%)against fifty-seven percent (57%)scheduled.Tower foundations work is complete and towers erection is underway -approximately one month ahead of schedule.Due to the conservative scheduling of the balance of the work under this contract,completion is anticipated several months ahead of schedule. Diversion Contract (Wilder) Work on this minor contract commenced in June and is scheduled for completion in September 1990. The milestone date for initial turbine roll is May 1,1991 with commercial operation of both units by September 1,1991.At the present time,construction and procurement are meeting the schedule requirements.To -date,no labor shortages or stop- pages have been experienced and current construction progress trends continue to indicate completion of work and commercial operation on schedule.o Overall,the Project was seventy-six percent (76%)complete against seventy-three percent (73%)planned as of the end of June 1990.Costs through June 1990 represent sixty-nine (69%) percent of the estimated total project construction costs of $312.5 million. The following is a list of Project construction contracts with actual/scheduled dates of award and completion. 4 ;Start Compl. Contract Package Organization Date Date CONSTRUCTION CONTRACTS -Site Preparation ©.-Enserch Alaska 06/86A O5/87A Construction,Inc. -Transmission Line McLane &, .10/86A 12/86A Centerline Survey Associates -Transmission Line Swalling Constr.,02/87A 04/87A Geotechnical Survey Inc./Underwater Constr.,Inc. (a joint venture) -Transmission Line |Zubeck,Inc._07/88A 04/89A Clearing ,, -General Civil Construction Enserch 07/88A 08/915 (Dam and Waterways)Constructors,J.V. -Transmission Line Newbery Alaska,06/89A 12/9058 Construction Inc. -Powerhouse Construction H.C.Price .12/88A 09/915 (incl.elec./mech.Construction installation)Company -Middle Fork and Nuka Wilder 04/90A 09/908 -Diversions Construction Construction Company,Inc. -Site Rehabilitation (Unawarded)04/91S 11/918 -Camp Facilities,Catering Brown &Root 05/88A 10/915 and Support Services U.S.A.,Inc. A =Actual S =Scheduled All contractors,including suppliers of equipment,are required to furnish performance bonds in an amount of one hundred percent (100%)of the amount of their respective contracts. These are to protect the Authority against additional costs and damages in the event that a contractor or supplier fails to comply with the obligation of its contract. EQUIPMENT SUPPLY PROGRAM The turbines/generators (including spherical valves)and supervisory control and data acquisition system (SCADA)are being procured by the Authority for supply to the Powerhouse Construction Contractor for installation.Various items of communications equipment and permanent operating equipment are also being purchased .by the Authority for use during the operations phase after completion of construction.All other permanent plant equipment is being purchased by the construc- tion contractors in accordance with the equipment specifica- tions developed by the Design Engineer and contained in the respective construction contracts.All equipment under the turbine generator contract has been delivered to the site. Manufacture of the SCADA equipment is complete and the equip- ment is being prepared for shipment to the site in accordance with the contract milestone date.Another major contract for Authority-procured equipment to protect against electrical fluctuations in the transmission system grid will be issued for bidding later this year.Studies are presently underway to finalize the size and type of equipment to be purchased.It is planned to install this'equipment in 1992 after commercial operation of the plant. The following is alist of the supply contracts with the Authority: Start Compl. Date DateContractPackageOrganization PROCUREMENT CONTRACTS nwYTurbines/Generators Fuji Electric SCADA Equipment.Landis &Gyr Communications Equipment Various Suppliers Permanent Operating Various Suppliers Equipment Stability Protection (Unawarded) Actual Scheduled Final Delivery ESTIMATED COST OF CONSTRUCTION The estimated cost of the Project,by major ca follows: II. Authority -Administered Activities Authority costs Design Engineering (Stone &Webster) Construction Management (Bechtel) Communications Equipment (Various Suppliers) Permanent Operating Equipment (Various Suppliers) SUBTOTAL PART TI: Stone &Webster -Administered Contracts Turbine/Generators Procurement (Fuji) SCADA Procurement (Landis &Gyr) SUBTOTAL PART II: 04/87A *01/90A 07/89A 07/908 CONTINUOUS 02/91S 05/918 07/90S 12/928 tegories,is Estimated Cost as $17,039,000 39,500,000 20,000,000 1,529,000 1,635,000 (1) (2) (3) (1) (2) $79,703,000 $14,536,000 641,000 (2) (2) $15,177,000 III.Bechtel -Administered Contracts Site Preparation (Enserch Alaska »-§25,543,000 (3) Construction,Inc.) 'Transmission Line Centerline Survey 453,000 (3) (McLane &Associates).; Transmission Line Geotechnical 319,000 (3) Investigations (Swalling Constr.,Inc./ -Underwater Constr.,Ine.,a J.V.) Transmission Line Clearing (Zubeck,Inc.)2,667,000 (3) General Civil Construction {Enserch 89,941,000 (3) Constructors,J.V.) Transmission Line Construction (Newbery 20,542,000 (3) Alaska,Inc.)- Powerhouse Construction (H.C.Price 34,944,000 (3) Construction Company) Middle Fork/Nuka Diversions (Wilder)2,062,000 (2) Site Rehabilitation (Unawarded)4,400,000 (2) Camp Facilities,Catering and Support 16,060,000 (3) Services (Brown &Root U.S.A.,Inc.) Air Transportation -Fixed Wing |350,000 (3) -(C &L Incorporated) 'Air Transportation -Helicopter 550,000 (3) (Maritime Helicopters) SUBTOTAL PART III:$197,831,000 Iv.Other Stability Protection Equipment $9,310,000 (1) PSA Section 31 Expenses (4)1,400,000 (1) Other Miscellaneous Contracts 975,000 (2) SUBTOTAL PART IV:$11,685,000 Vv.Contingency S$8,104,000(1&3) TOTAL PROJECT CONSTRUCTION COSTS:$312,500,000 C-8 NOTES: (1)Cost estimate furnished by the Authority. {2)Cost estimate furnished by Stone &Webster. (3)Cost estimate furnished by Bechtel. (4)Power Purchaser's Administrative Costs. In calculating the estimated cost of construction,we have used and relied upon cost estimates and determinations made by the Authority and the Design Engineer (Stone &Webster)as noted above. The cost values of Bechtel-supplied estimates set forth above are based on actual bids received plus cost trends and reserves identified subsequent to their award. In addition to the unallocated contingency of $8,104,000 included in the cost estimate,allocated reserves are also included for each line item to accommodate quantity overruns, additional materials,allowances for construction claims and other increases normally encountered with large construction contracts.These allocated reserves as of June 30,1990 total $12,871,000.Amounts estimated for unallocated contingencies are reserved for unexpected changes in construction costs. Total allocated and unallocated contingencies included in the Project construction costs estimate as of June 30,1990 are $20,975,000. The current estimated cost of construction ($312,500,000)is $43,400,000 less than the riginal budget of $355,900,000 established for the Project. PRINCIPAL BASES AND ASSUMPTIONS In preparing this Report,we have been provided with informa- tion and data from the Authority,Stone &Webster and other sources.We believed that the information and assumptions provided to us.to be reliable,We believed the use of such information and assumptions is reasonable for purposes of this Report,although we have not independently verified all such information and assumptions.Bechtel has independently devel- oped certain information and data based in part on our'know- ledge of the hydroelectric power industry,our experience as Construction Manager to the Authority and our experience in designing and constructing hydroelectric power facilities Similar in certain respects to the Project.We have also considered the information and data from the sources cited above in formulating our assumptions,projections and opinions. In preparing this Report,we have assumed,among other things, that: Permits,licenses,and approvals necessary to complete the Project and place it in operation will,to the extent not already received,be processed,updated (extended)and received on a timely basis and will contain standard terms and conditions. The required contracts for equipment supply and the construction of the Project will be entered into in accordance with the projected schedules,will provide for performances in accordance with the projected schedules, will be valid,binding and enforceable,and all of the respective obligations of the parties thereto will be performed in accordance with the terms of such agreements. Those components of the Estimated Construction Cost which were determined by the Authority and Stone &Webster will reasonably reflect actual costs. Existing environmental law,regulations and enforcement policies will not change so as to adversely affect the construction costs or scheduled completion dates for construction. Actual levels of inflation to be experienced over the balance of the construction period will not exceed the allowances provided for in the cost estimates of existing construction contracts containing labor escalator clauses. No material delays or shutdowns will occur during the construction period. OPINIONS Based upon our experience and the information available to use, and subject to the assumptions,estimates,projections and qualifications made in this Report,and based on our analysis, we are of the opinion that: 1.As presently designed,the Project can be completed within the $312,500,000 construction cost estimate inclusive of the allowance for contingency stated herein. The Project construction schedule is reasonable and commercial operation of both generating units is attain- able by September 1591. To date,the construction program is on schedule and within the estimated costs. We have reviewed the Official Statement with respect to that information presented therein which is identified as taken from our Report or which is specifically attributed to us and confirm that such information is accurately presented. Respectfully Submitted, BECHTEL CORPORATION E.H.Elwin Project Manager c-11 APPENDIX D SUMMARIES OF THE ACT AND THE BASIC DOCUMENTS TABLE OF CONTENTS Purpose 2...ccc te ew ee eee ent neee POWErS 2.cc ee ew te eee et eens Power Sales Contracts .......0.cece cece ere enee Rate Covenant 2...cece ee tenes Capital Reserve Funds ..2...2...2c eee eee e ace Validity of Pledge 2.0...ce cece cee ee eee ee Nonliability on Bonds 2....6.ee eees Pledge of the State...ee eee eee Tax Exemption 0...0...eee wee reece nnee Energy Program ......2...c cee weer erent ereeeeOperationofPowerProject......cee cece nee eee THE POWER SALES AGREEMENT ...........-.+.-- Certain Definitions ........0...e eee neces Term of Agreement ..1...0.cee cece ee eee eee Electric Service...1...ee ee eee tee ees Electric Power Reserves for the Project ............. Obligations Under Bond Resolution;Completion of Project . Payment Obligation ..1...1...ec ee ee ee eee Obligations in the Event of Default .............-. Purchasers'Systems ..2.....0...cece eee eee ene Bond Resolution .......0...cee ee ee eee eee eeeProjectManagementCommittee.........2.002 ee eeEndofProject2...0.cc ceeeeeeeeee Covenants to Maintain Integrity of Agreement ......... 'Arrangements Regarding AEG&T ............206. THE BOND RESOLUTION .........-.0-2 eee eeeee Certain Definitions 2...0...ce ee eee eee eee Pledge of Revenues and Other Funds .............. Additional Bonds 2.1.......cee eee ee ee es Funds and Accounts ..0...2.cee ee ee ene Construction Fund ....2...eee eee eee eee Revenues and Revenue Fund ............020000+ Operating Fund 2.......cc eee ee ee ee eee Payments into Certain Funds .............22200. Debt Service Fund...2.......0202 eee ee ee eens Capital Reserve Fund 2.......eee cece eee eee Renewal and Contingency Reserve Fund ............ Excess Investment Earnings Fund ............-505 Scheduled Maintenance Fund ..........002.ee eee Deposits 2...6.ce ee ee ee eee ee ee ee eee eee Investment of Certain Funds............-.000eee Valuation of Investments ......0.2 eee eee een ee Payment of Bonds ...0...cc cece eee ee eee ens Power to Issue Bonds and Pledge Revenues and Other Funds Creation of Liens;Sale and Lease of Property ......... Annual Budget 2...0...ec ec ee eee ee eee Or Ce ) Ce ee Ce ee 2 Cr CY Ce Oe ee CY oY nr SY ) Ce Co ee eS Oe Oe SS Oe oe re Oe 2 ee ee Ce Ce ee D Limitation on Operating Expenses and Other Costs...0...cece eee ee eee teens Acquisition and Construction of Project and Its Operation and Maintenance 2...ee eee ee eee eee ee enter ee eee eee Rates,Fees and Charges 0...0.ccc cc eee eee ee ee ee ee eee eee tee eee Power Sales Agreement...0...pee cece ce wee te eee teeters Insurance Ce ee Maintenance of Capital Reserve Fund .........cece eer eee cree ene wenn e eres Accounts and Reports 2...cc cee ee ee eee meee e ee eee teenies Tax Covenants 2.....cece cree ence ee ee eee tee ee wee eee et eee een ees Payment of Taxes and Charges 2.....cee ccc eee eee rere eter eee tree e eee Special Provisions Relating to the Bond Insurer ..1...0...cee ee cc ee eee ee cee Events of Default 2....ccc ee ce eee ee ee ee eee ee eet eee ee eee eens Application of Revenues and Other Moneys After Default .........000 cee eee enone Proceedings Brought By Trustee 2.1...eee eee ee ee eee eee eee eens Restriction on Bondholder's Action 2.0.2.2.cece eee eee ee eee eee eee eee e eee Notice of Default 2.....ce cc cee eee eee eee ee eee teen eee Responsibilities of Trustee 2...0 occ te ee ee eee eee eee eee ees Supplemental Resolutions 2.......ce cee eee ee eee eee tee wee eee eee e eee Defeasance Cd D-ii Page D-28 D-28 D-28 D-29 D-29 D-30 D-30 D-30 D-31 D-31 D-31 D-31 D-32 D-32 D-33 D-33 D-33 D-33 D-34 THE ALASKA ENERGY AUTHORITY ACT The Alaska Energy Authority Act,constituting Chapter 83 of Title 44 of the Alaska Statutes,was originally enacted in 1976 as the Alaska Power Authority Act and has been amended several times in recent years.The Act creates the Authority as a public corporation of the State of Alaska in the Department of Commerce and Economic Development but with separate and independent legal existence.The following is a general summary of certain provisions of the Act.This summary is not to be considered a full statement of the terms of the Act and accordingly is qualified by reference thereto and is subject to the full text thereof.Capitalized terms not defined in this Official Statement have the meanings set forth in the Act.No assurance can be given that the Act will not be amended in the future,but the State has agreed that it will not limit or alter the rights or powers vested in the Authority by the Act to fulfill the terms of its contracts with Bondholders.Copies of the Act may be obtained from the Authority. Purpose The purpose of the Authority is to promote,develop and advance the general prosperity and economic welfare of the people of Alaska by providing a means of constructing,acquiring,financing and operating power projects and facilities that recover and use waste energy. Powers In furtherance of its corporate purposes,the Authority has the following powers in addition to its other powers: (1)to make rules and regulations governing the exercise of its corporate powers; (2)to acquire,whether by construction,purchase,gift or lease,and to improve,equip,operate,and maintain power projects; (3)to issue bonds to carry out any of its corporate purposes and powers,including the acquisition or construction of a project to be owned or leased,as lessor or lessee,by the Authority,or by another person,or the acquisition of any interest in a project or any right to capacity of a project,the establishment or increase of bond reserves,and the payment of all other costs or expenses of the Authority incident to and necessary or convenient to carry out its corporate purposes and powers; (4)to sell,lease as lessor or lessee,exchange,donate,convey orr encumber real or personal propertyownedbyit,or in which it has an interest; (5)to deposit or invest its funds,subject to agreements with bondholders; (6)to enter into contracts for the financing,construction,acquisition,operation and maintenance of a power project,either inside or outside the State,and for the sale or transmission of power from 4 project or any right to the capacity of it or for the security of any bonds of the Authority issued or to be issued for the project; (7)to enter into contracts for the purchase,sale,exchange,transmission,or use of power from a project,or any right to the capacity of it; (8)to apply for such permits,licenses,or approvals as may be necessary,and to construct,maintain and operate power projects in accordance with the licenses or permits,and to obtain,hold and use the licenses and permits; (9)to perform reconnaissance studies,feasibility studies,and engineering and design with respect to power projects;and (10)to exercise the power of eminent domain in accordance with State law. D-1 Power Sales Contracts The Authority is required to provide a method by which utilities,or other persons authorized by law to engage in the distribution of electricity,may secure a reasonable share of the power generated by a project,or any interest in a project,or for any right to the power and to sell the power or cause the power to be sold at the lowest reasonable prices,which cover the full cost of the electricity or services,including capital and operating costs,debt coverage as considered appropriate by the Authority,and other charges that may be authorized by the Act. The Authority and any municipality or public or private entity operating an electric utility,or a municipality or private entity and another municipality or private entity,may enter into a contract providing for or relating to the sale of electric power by the Authority to the municipality or entity,or by the municipality or entity to another municipality or entity.The contract may provide: (1)that the amounts payable under the contract are operating expenses of the utility and are valid and binding obligations of the municipality or other entity payable from the gross revenues of the utility; (2)for one or more appropriations of the amounts payable under the contract; (3)for the municipality or other entity to assume the obligations of another contracting party in the event of a default by that party; (4)that after completion of a project the municipality or other entity is obligated to make payments notwithstanding a suspension or reduction in the amount of the power supplied by the project;or (5)that payments under the contract are not subject to reduction by offset or otherwise. The Authority is not subject to the jurisdiction of the Alaska Public Utilities Commission.Nothing in the Act grants the Authority jurisdiction over the services or rates of any public utility or diminishes or otherwise alters the jurisdiction of the Alaska Public Utilities Commission with respect to any public utility,including the right the Commission may have to review and approve or disapprove contracts for the purchase of electricity by a public utility.However,the Power Sales Agreement for the Bradley Lake Hydroelectric Project is not subject to review or approval by the Alaska Public Utilities Commission until all Bonds issued for the Project are retired. Rate Covenant Any bond resolution or trust agreement constituting a contract with bondholders must contain a covenant by the Authority that it will at all times maintain rates,fees or charges sufficient to pay,and that a contract entered into by the Authority for the sale,transmission or distribution of power shall contain rates,fees or charges sufficient to pay the costs of operation and maintenance of the project,the principal of and interest on bonds as the same severally become due and payable,to provide for debt service coverage as considered necessary by the Authority for the marketing of its bonds and to provide for renewals,replacements and improvements of the project,and to maintain reserves required by the terms of such bond resolution or trust agreement. Capital Reserve Funds Capital reserve funds shall be established only if the Authority determines that the establishment would enhance the marketability of the bonds.Money held in a capital reserve fund shall be used as required,solely for (1)the payment of the principal of,and interest on,bonds or of the sinking fund payments with respect to those bonds,(2)the purchase or redemption of bonds,or (3)the payment of a redemption premium required to be paidwhenthosebondsareredeemedbeforematurity;however,money may not be withdrawn froma capital reserve fundatanytimeinanamountwhichwouldreducetheamountofthatfundtolessthanthecapitalreservefund requirement,except for the purpose of making,with respect to those bonds,payment,when due,of principal, interest,redemption premiums and the sinking fund payments for the payment of which other money of the Authority is not available. Bonds secured by such a capital reserve fund may not be issued if the amount in the capital reserve fund is less than the capital reserve fund requirement unless the Authority,at the time of issuance of the bonds,deposits in the capital reserve fund,an amount which,together with the amount then in the fund,will not be less than the capital reserve fund requirement. The Chairman of the Authority shall annually,no later than January 2,make and deliver to the Governor and the Legislature his certificate stating the sum,if any,required to restore any capital reserve fund to the capital reserve fund requirement.The Legislature may appropriate such a sum,and all sums appropriated during the then current fiscal year by the Legislature for such restoration shall be deposited by the Authority in the proper capital reserve fund.This does not create a debt or liability of the State. The State Commissioner of Revenue may lend surplus money in the State general fund to the Authority for deposit in a capital reserve fund in an amount equal to the capital reserve fund requirement. Validity of Pledge It is the intention of the Legislature that a pledge made in respect of bonds shall be valid and binding from the time the pledge is made;that the money or property so pledged and thereafter received by the Authority shall immediately be subject to the lien of the pledge without physical delivery or further act;and that the lien of the pledge shall be valid and binding as against all parties having claims of any kind in tort,contract or otherwise against the Authority irrespective of whether the parties have notice.Neither the bond resolution nor any other instrument by which a pledge is created need be recorded or filed under the provisions of the Uniform Commercial Code to be valid,binding or effective against the parties. Nonliability on Bonds Bonds issued by the Authority do not constitute an indebtedness or other liability of the State or of a political subdivision of the State,except the Authority,but shall be payable solely from the income and receipts or other funds or property of the Authority.The Authority may not pledge the faith or credit of the State or of a political subdivision of the State,except the Authority,to the payment of a bond and the issuance of a bond by the Authority does not directly or indirectly or contingently obligate the State or a political subdivision of the State to apply money from,or levy or pledge any form of taxation whatever to the payment of the bond. Pledge of the State The State pledges to and agrees with the holders of bonds issued under the Act that the State will not limit or alter the rights and powers vested in the Authority by the Act to fulfill the terms of a contract made by the Authority with the holders,or in any way impair the rights and remedies of the holders until the bonds,together with the interest on them with interest on unpaid installments of interest,and all costs and expenses in connection with an action or proceeding by or on behalf of the holders,are fully met and discharged. Tax Exemption All property of the Authority is public property and is exempt from all taxes of the State or a political subdivision of the State.All bonds issued under the Act are issued by a body corporate and public of the State and for an essential public and governmental purpose and the bonds and the interest and income on and from the bonds and all income of the Authority are exempt from taxation except for transfer,inheritance and estate taxes. Energy Program The Energy Program for Alaska is a program by which the Authority may acquire or construct power projects with money appropriated by the Legislature to the Power Development Fund established by the Act.A power project may be acquired or constructed as part of the Energy Program only if the project is submitted to and approved by the Legislature. D-3 The Fund may be used by the Authority to provide money for reconnaissance and feasibility studies and power project finance plans;the cost of a power project;the defeasance of bonds,or the payment of debt service on loans in connection with a power project;the cost of operating and maintaining power projects;and debt service on power projects. The Alaska Department of Revenue invests the money in the Power Development Fund and provides money in the Fund to the Authority only after costs have been incurred or amounts in the Fund have been otherwise obligated under contracts for the acquisition and construction of a project.Amounts that have been obligated,but for which costs have not yet been incurred,may be segregated by the Department of Revenue or transferred to the Authority only with the prior approval or agreement of the Commissioner of Revenue.Income received on money that is segregated or transferred must be deposited in the State general fund. Operation of Power Project A power project may be operated for the Authority under a contract or lease entered with a qualified utility. When the Authority permits a power project to be operated by a qualified utility,the Authority is required to review and approve the annual budget for the operation and maintenance of the power project;and to assure that the project is being operated efficiently and in a manner that is consistent with national standards for the industry and agreements with bondholders. D-4 THE POWER SALES AGREEMENT The following is a general summary of certain provisions of the Power Sales Agreement.This summary is not to be considered a full statement of the terms of the Power Sales Agreement and accordingly is qualified by reference thereto and is subject to the full text thereof.Certain capitalized terms not defined under the heading "Certain Definitions”are defined in this Official Statement or in the Summary of the Bond Resolution.Copies of the Power Sales Agreement may be obtained from the Authority. Certain Definitions "Annual Payment Obligation”means the total amount payable by a Purchaser in or for a Fiscal Year. "Annual Project Budget"means the budget for the Project as adopted or in effect for a particular Fiscal Year,as amended or supplemented from time to time. "Annual Project Costs”means all of the costs resulting from the ownership,operation,maintenance of and renewals and replacements to the Project,properly incurred or paid during each Fiscal Year,including: (i)Amounts required to be set aside by the Authority for the payment of Debt Service on Bonds issued to pay the Cost of Acquisition and Construction in an aggregate principal amount up to but notexceedingtheRecoverableConstructionCost; (ii)Amounts required to be set aside for the payment of Debt Service on other Bonds and debt service on other obligations approved in accordance with the Agreement; (iii)Amounts required to restore the funds established under the Bond Resolution to the levels required by the Bond Resolution to be maintained therein; (iv)Amounts which may be required to pay for Required Project Work,to the extent that such costs are not covered by insurance or Bond proceeds or by the Renewal and Contingency Reserve Fund; (v)Other amounts determined by the Committee to be necessary or appropriate to supplement andtobepaidintotheFundsestablishedundertheBondResolution; (vi)Excess Payment Amounts (applicable when Bonds are no longer outstanding); (vii)All other costs of producing and delivering Project power (excluding depreciation)not accounted for by the payments out of funds and reserves specified in the foregoing sections and properly chargeable to the Project under the Uniform System of Accounts,less any credits against said costs by reason of revenues from sources other than the direct sale of power to Purchasers,and also less any credits for interest earned during construction and available for Project purposes;provided,that income from interest earned on reserve funds shall be used at least annually to accumulate and maintain said reserve funds in the amounts required under the Bond Resolution or in such greater amounts as may be determined by the Committee,or to reduce Annual Project Costs. "Bonds"means bonds,notes or other evidences of indebtedness (including refunding bonds)issued pursuant to the Bond Resolution,the proceeds of which are used to pay or reimburse Costs of Acquisition and Construction and Required or Optional Project Work. "Committee"means the Project Management Committee established pursuant to the Agreement. "Consultant"means an independent individual or firm (i)of nationwide and favorable reputation,having demonstrated expertise in the field or the matter or the item referred to it under various specific provisions of the Agreement,and (ii)approved by the Authority and the Committee in accordance with mules of procedure to be adopted by the Committee to govern such approval. "Cooperative Purchasers"means Chugach Electric Association,Inc.,Golden Valley Electric Association, Inc.,and Alaska Electric Generation &Transmission Cooperative,Inc.The term "Cooperative Purchasers”includes Homer Electric Association,Inc.,and Matanuska Electric Association,Inc.,only to the extent specified in the Agreement. "Cost of Acquisition and Construction”means the Cost of Acquisition and Construction (as defined in the Bond Resolution)of the Project. "Date of Commercial Operation”means the date on which engineers retained for this purpose by the Authority have reasonably declared that the Project is fully available to be operated at not less than ninety megawatts (90MW),and its output can be scheduled on a commercial basis. "Debt Service”means amounts that the Authority is required to set aside for the payment of principal of, premium,if any,sinking fund payments,and interest on the Bonds,as the same are scheduled to become due and not by reason of any acceleration. "Fiscal Year"means that twelve-month period starting July 1 of a calendar year through and including June 30 of the succeeding calendar year.The initial Fiscal Year for purposes of the Agreement is that portion of the twelve-month period starting on the Date of Commercial Operation through and including the following June 30. If the portion of the period is shorter than 90 days the parties shall determine the initial Fiscal Year,which must end on a June 30 and may not be longer than 456 days. "Municipal Purchaser”means the Municipality of Anchorage d/b/a Municipal Light and Power,and the City of Seward d/b/a Seward Electrical System. "Optional Project Work"means Project repairs,renewals and replacements,improvements,betterments, additions,or expansions that do not constitute Required Work. "Percentage Share”means the fraction,expressed as a percent and set forth below for each Purchaser,as the same may be amended from time to time,used to compute the amount of each Purchaser's entitlement to Project Capacity and obligation to pay Annual Project Costs. Percentage Purchaser Share Alaska Electric Generation &Transmission Cooperative,Inc.2.0...cece eee eee 25.80% Chugach Electric Association,Inc.6...ee ee ee ten eee ee eee eens 30.40 Golden Valley Electric Association,Inc.2....ee cee eee et ce eee tee renee ees 16.90 Municipality of Anchorage,d/b/a Municipal Light and Power .......000eeseeevees 25.90 City of Seward,d/b/a Seward Electric System 2...ccc ce cee eee eens 1.00 TOTAL 2...ccc cc ee ee ee eee ee ee ee eee eee ee eee e tenes 100.00% "Project Capacity"means the amount of electric capacity capable of being produced by the Project (including capacity attributable to Required or Optional Project Work)at any and all times from the Date of Commercial Operation under the operating conditions that exist during such times,including periods when the Project may be not operating or inoperable or the operation thereof is suspended,interrupted,interfered with, reduced,or curtailed,in each case in whole or in part for any reason whatsoever,after corrections for station and Project use,and depletions required under any federal license for the Project. "Prudent Utility Practice"shall mean at a particular time any of the practices,methods and acts engaged in of approved by a significant portion of the electric utility industry at such time,or which,in the exercise of D4 reasonable judgment in light of facts known at such time,could have been expected to accomplish the desired results at the lowest reasonable cost consistent with good business practices,reliability,safety and reasonable expedition. Prudent Utility Practice is not required to be the optimum practice,method or act to the exclusion of all others,but rather to be a spectrum of possible practices,methods or acts which could have been expected to accomplish the desired result at the lowest reasonable cost consistent with reliability,safety and expedition.Prudent Utility Practice includes due regard for manufacturers'warranties and the requirements of governmental agencies of competent jurisdiction and shall apply not only to functional parts of a Project,but also to appropriate structures,landscaping, painting,signs,lighting and other facilities.In evaluating whether any matter conforms to Prudent Utility Practice, the parties shall take into account (i)the nature of the parties hereto under the laws of the State of Alaska and their statutory duties and responsibilities,and (ii)the objective of integrating Project Capacity with the generating resources of the Purchasers,including resources available under contract,to achieve optimum utilization of the resources and achieve efficient and economical operation of each Purchaser's System."National standards for the industry"means Prudent Utility Practice. "Purchaser"means,as of any particular time,such of the Municipality of Anchorage d/b/a Municipal Light and Power,Chugach Electric Association,Inc.,Golden Valley Electric Association,Inc.,the City of Seward as have executed the Agreement,and the Alaska Electric Generation &Transmission Cooperative,Inc.("AEG&T"). The term "Purchaser”includes Homer Electric Association,Inc.,and Matanuska Electric Association,Inc.,only to the extent specified in the Agreement. "Purchaser's System"means a Purchaser's electric utility system for the distribution,transmission,and generation of electrical power and which is owned and operated by the Purchaser.If Purchaser's electric utility system is combined with other utilities of the Purchaser,then "Purchaser's System”includes only those facilities, activities,and revenues properly allocable to Purchaser's electric utility service. *Purchaser's Water Allocation"means the number of acre feet of water from the Project allocated for generation purposes by the Committee to a Purchaser from time to time,based on that Purchaser's Percentage Share. "REA"means the Rural Electrification Administration,an agency of the United States Department of Agriculture. "Recoverable Construction Cost"means an amount equal to $175,000,000 less one half the amount,if any, by which $350,000,000 exceeds the Cost of Acquisition and Construction,plus the principal amount of additional Bonds (if any)issued pursuant to the Agreement. "Required Action"means an action that must be taken in order for the Authority to comply with federal or state law,the orders of licensing and regulatory agencies,the Bond Resolution,or the Agreement. "Required Project Work"means repairs,maintenance,renewals,replacements,improvements or betterments required by federal or state law,a licensing or regulatory agency with jurisdiction over the Project,or the Agreement,or otherwise necessary to keep the Project in good and efficient operating condition,consistent with (1)sound economics for the Project and the Purchasers,and (2)national standards for the industry. Term of Agreement The payment obligations of each Purchaser under the Agreement commence on the Date of Commercial Operation;provided,that the Purchasers shall be obligated to pay certain costs of the Committee regardless of whether the Date of Commercial Operation occurs. The Agreement shall terminate (i)50 years after the Date of Commercial Operation,or (ii)when no Bonds are Outstanding under the Bond Resolution and all payment obligations under the Agreement have been satisfied or provided for,whichever occurs later;provided,that if the Date of Commercial Operation does not occur before January 1,1996,then the Agreement shall terminate on January 1,1996.The parties may mutually agree to terminate or to renew the Agreement prior to termination,subject,however,to the written approval of the Administrator of REA if then required,and the terms and conditions of covenants and agreements between the D-7 Authority and holders of Bonds.Any Purchaser may renew the Agreement for successive additional terms (such terms to equal 40 years or,if shorter,the remaining useful life of the Project),upon written notice to the Authority by the Purchaser. Electric Service In accordance with the Agreement,the Authority sells,and each Purchaser purchases,that Purchaser's Percentage Share of Project Capacity (together with associated energy)from the Project. The Authority shall at all times,except when prevented by a cause or event not within its control,make power available to the Purchasers from the Project in an amount equal to the amount the Purchasers may schedule from the Project,within the limitations imposed by available Project capability,available water,and the scheduling procedures adopted by the Committee. The Authority shall make or cause to be made all Required Project Work,provided that funds are legally available to the Authority for this purpose.The costs of Required Project Work shall be included in Annual Project Costs.The Authority shall give reasonable notification to all Purchasers prior to making or causing to be made any Required Project Work.Alternative methods of carrying out and funding Required Project Work shall be subjecttoapprovalbytheCommittee. The Authority shall not make or cause to be made Optional Project Work unless such Optional Project Work is approved by the Committee.Any Optional Project Work shall be at the expense of the benefitted Purchaser(s),as determined in advance by the Committee,in proportion to the value of the benefit conferred upon each such Purchaser.If such Optional Project Work has an adverse impact upon the operations or finances of a Purchaser as determined by the Committee,the benefitted Purchaser(s)shall compensate the adversely affected Purchaser(s)for the increased costs and reduced benefits resulting from such impact. Electric Power Reserves for the Project The parties recognize that (i)electric power from the Project may be unavailable periodically because of generation and transmission outages,repairs,maintenance,inspections,testing,and similar events,and (ii)each Purchaser is responsible for maintaining (or contracting for the use of)generation reserves in amounts sufficient to protect its own loads in the event that Project power is unavailable. The Committee shall adopt and implement procedures under which,in as cost-effective a manner as possible: (i)the Authority shall have the right to require the operation of specific amounts of generating capacity owned by a Purchaser and made available to the Authority,and to use the power produced by such operation to provide reserves to requesting Purchasers for some or all Project power,to the extent such capacity would otherwise be idle or its output would otherwise not be needed by the owner of that capacity to enable that Purchaser to meet its own loads or to make power sales to other utilities; (ii)the additional costs incurred by any Purchaser in making such capacity available and in operating the same for the Authority shall be computed equitably and reimbursed promptly to such Purchaser;and (iii)the costs of so reimbursing any Purchaser shall be included in Annual Project Costs. Obligations Under Bond Resolution;Completion of Project Assignment or Payment to Trustee.The parties recognize and agree that (i)the Authority may assign its rights to receive payments under the Agreement as security for the payment of the Bonds to the Trustee under the Bond Resolution for the benefit of the holders of the Bonds,and (ii)the Authority may direct that amounts payable to it under the Agreement be paid directly to the Trustee. D-8 Project Funding.The Authority shall issue Bonds,or otherwise obtain funds (including appropriations), sufficient to pay or reimburse the Cost of Acquisition and Construction.Annual Project Costs shall include Debt Service on Bonds issued to pay the Cost of Acquisition and Construction in an aggregate principal amount up to but not exceeding the Recoverable Construction Cost.The Authority may estimate the Recoverable Construction Cost and issue Bonds at any time in amounts up to the amount of such estimate.As soon as practicable after the Date of Commercial Operation,the Authority shall adjust (and readjust when necessary)Annual Project Costs to reflect actual Recoverable Construction Cost. Other Projects.The Authority covenants that it will not cause rates for Project power to increase by reason of any bond resolution,covenant or agreement contained in any trust indenture or trust agreement entered into by the Authority in connection with a power project other than the Project,nor on account of any inadequacy in its actual or projected aggregate revenues,other than revenues from the Project,nor will the Authority include in Annual Project Costs debt service payable on debt incurred for any purpose except in respect of the Project. Project Completion and Operation.The Authority agrees to use its best efforts to complete the Project expeditiously and in accordance with sound engineering practice and with the provisions of the Bond Resolution. The Authority shall also use its best efforts consistent with Prudent Utility Practice to construct and complete,and to operate and maintain the Project (or to arrange for such operation and maintenance)to provide power at the lowest reasonable cost to the Purchasers in a manner that is compatible with the Purchasers'Systems and consistent with the Act,the Bond Resolution,and the Agreement. Best Efforts By Purchasers.To the extent that the cost of Project power is or may be affected by actions of the Committee,each Purchaser agrees to use its best efforts consistent with Prudent Utility Practice to assist in assuring that the Project provides power at the lowest reasonable cost to the Purchasers in a manner that is compatible with the Purchasers'Systems and consistent with the Act,the Bond Resolution,and the Agreement. Payment Obligation Each Purchaser agrees to pay its Percentage Share of Annual Project Costs for each Fiscal Year.The procedures for determining the amount of,and for making such payments,are set forth under the caption "Project Management Committee”herein. Each Purchaser shall make payments in the amounts and at the times required by the Agreement notwithstanding a suspension or reduction in the amount of power supplied by the Project.Such payments shall not be subject to any reduction,by offset or otherwise.The parties intend and interpret the foregoing two sentences to mean that the obligation to make such payments shall be absolute and unconditional and unaffected by any interruption,interference,or curtailment in whole or in part of power supplied by the Project.In the event that (i) the Project is no longer operable,or its operation is interrupted or curtailed for any reason whatsoever in whole or in part,and (ii)the Authority does not restore the Project to full operation within a reasonable time,then the Purchasers may upon reasonable notice to the Authority and at their own expense take such action as they deem necessary to so restore the Project.The taking of such action by the Purchasers shall not alter each Purchaser's obligation to pay its Percentage Share of Annual Project Costs. Obligations in the Event of Default Upon failure of a Purchaser to perform any obligation under the Agreement,the Authority may bring any suit,action or proceeding at law or in equity ("Suit"),including mandamus,injunction and action for specific performance,as may be necessary or appropriate to enforce any covenant,agreement or obligation of the Agreement against that Purchaser.The Authority may bring such Suit (i)thirty days after giving the Purchaser a written demand for performance,in the case of default by the Purchaser on any obligation other than a payment obligation, and (ii)immediately,in the case of default by the Purchaser on any payment obligation.Each Purchaser shall continue to make payments in the event of any dispute regarding performance of any obligation by any party under the Agreement or in the event of any dispute under the Bond Resolution,and this obligation of continued payment pending resolution of disputes shall be immediately enforceable by any party upon application to any court of competent jurisdiction. In addition,if a Purchaser has for any reason suspended or reduced,or has failed to make or has been prevented from making,payments required under the Agreement,the Authority may terminate or suspend the delivery of power to that nonpaying Purchaser if,after consulting with the other Purchasers,the Authority reasonably determines that such termination or suspension is more effective than other available alternatives in minimizing adverse impacts on such other Purchasers. If the Authority so terminates or suspends deliveries,the Authority shall: (A)offer to other Purchasers,on terms and conditions applicable to other power sold under the Agreement,any power not delivered to the nonpaying Purchaser,and if necessary allocate such power pro rata on the basis of Percentage Shares among Purchasers accepting such offer; (B)offer any power not sold under (A)to any qualified utility (including the other Purchasers)on terms and conditions deemed favorable by the Authority after consultation with the Committee;and (C)ifthe Authority projects that the amounts to be deposited into the Revenue Fund will nonetheless be insufficient to pay Annual Project Costs,increase every other Purchaser's Percentage Share of Annual Project Costs and Project Capacity pro rata to the extent and for the period necessary to compensate for such insufficiency;provided,that no Purchaser's Percentage Share shall be increased by more than 25 percent above the amount set forth in the Agreement without the written consent of that Purchaser. If the Authority determines that the process of offering power to others would delay exercise of the Authority's rights under (C),and that as a result the Authority will be unable to make deposits when required under the Bond Resolution,the Authority may exercise its rights under (C)immediately and take the actions required under (A)and (if necessary)under (B)as soon as practicable thereafter.No exercise by the Authority of any of its rights (or any failure by the Authority to exercise any of its rights)shall relieve any nonpaying Purchaser of any payment obligation or relieve such Purchaser of any liability for damages resulting from nonpayment. To the extent that the Authority uses Project reserve funds to permit it to make timely payments under the Bond Resolution following nonpayment by a Purchaser,the amount needed to replenish such reserve funds shall be added to the Annual Payment Obligation of the nonpaying Purchaser. If Purchasers'Percentage Shares are increased pursuant to (C),then the Authority shall,and any other Purchaser(s)may,immediately initiate and diligently pursue litigation in any court of competent jurisdiction to compel full and timely payment by the nonpaying Purchaser,to recover amounts needed to compensate Purchasers whose Percentage Shares have been increased,and to obtain such other relief as shall be fair and equitable.The same or similar litigation against any nonpaying Purchaser may also be initiated and pursued by the Authority and/or by any paying Purchaser if in response to any nonpayment the Authority takes action pursuant to (A)or (B). In the event of any default by the Authority with respect to a Purchaser,that Purchaser may,upon 30 days written notice to the Authority,bring any suit,action or proceeding,at law or in equity,including mandamus, injunction and action for specific performance,as may be necessary or appropriate to enforce any covenant, agreement or obligation against the Authority.No payment obligation of a Purchaser under the Agreement is subject to offset,however. Purchasers'Systems The amounts payable under the Agreement are operating expenses of each Purchaser's System,and are valid and binding obligations of each Purchaser,payable only from the gross revenues of said Purchaser's System as a cost of purchased electric power,and not payable from any taxes. Each Purchaser agrees that it will establish,charge and collect rates,fees,and charges with respect to that Purchaser's System in accordance with applicable law to provide revenues sufficient to meet its obligations under the Agreement and sufficient to pay,together with any other funds or monies available therefor,any and all other amounts payable from or which constitute or may constitute a charge and lien upon such revenues including,but not limited to,amounts sufficient to meet obligations to service debt incurred by the Purchaser to finance the Purchaser's System., Each Purchaser covenants and agrees that it will operate and maintain its System in good repair,working order and condition and in accordance with Prudent Utility Practice. Each Purchaser covenants and agrees not to enter voluntarily into any contract or agreement to take or to take or pay for power,other than the Agreement,payable from the revenues of the Purchaser's System on a parity with or superior to the payment of its obligations under the Agreement,except that a Purchaser may enter into such a contract or agreement of not to exceed two years'duration under which the Purchaser's payment obligation is on a parity with the payment of its obligations under the Agreement.These limitations shall not apply to contracts or agreements creating obligations on a parity with obligations under the Agreement if a written opinion from a Consultant is rendered that (i)the contract or agreement is reasonably expected to contribute to the conduct of the business of the Purchaser's System in an efficient and economical manner consistent with Prudent Utility Practice, and (ii)the contract or agreement will not impair the ability of the Purchaser to raise revenues sufficient to meet its obligations under the Agreement.The Letter Agreement between the parties dated November 7,1988 provides that this paragraph is not intended to provide any payment priority with respect to any existing contracts of the parties or the proposed tripartite power sales agreement among Alaska Electric Generation &Transmission Cooperative,Inc.,Homer Electric Association,Inc.and Matanuska Electric Association,Inc.,or any amendments thereto if such amendment does not substantially increase the obligation of the parties to such agreement. Bond Resolution Except as hereafter provided the Authority will not amend or supplement the Bond Resolution or adopt a new Bond Resolution in connection with the refunding of the Bonds,which would materially adversely affect the ability of a Purchaser to fulfill the terms of the Agreement or impose any increased burden or obligation,financial or otherwise,on a Purchaser,without the consent of the Purchaser,unless: (i)the Committee has approved the Authority's proposed action by an affirmative vote of members whose Percentage Shares equal or exceed 80 percent of Project Capacity and of Annual Project Costs;or (ii)the Committee by majority vote of the Purchasers requests that Required Project Work be paid for out of the proceeds of Bonds,and such Work is projected to cost in excess of the amount of money then available in the Renewal and Contingency Reserve Fund,plus available insurance proceeds,in which event,if such Bonds can then be legally issued and can be sold,the Authority shall issue such Bonds, payable from the Revenues of the Project (as defined in the Bond Resolution),to pay the portion of such costs which exceed insurance proceeds,if any,and to restore said Reserve Fund to its required level. The Purchasers consent to the adoption by the Authority of supplemental Bond Resolutions as necessary to comply with the Authority's obligation to finance and construct the Project and the Authority's obligation to use its best efforts to complete the Project expeditiously and in accordance with sound engineering practices and with the provisions of the Bond Resolution.Unless otherwise approved such supplemental Bond Resolutions shall:(a) provide that the total amounts required for the payment of Debt Service when due shall be,on an annual basis,as nearly equal as practicable;and (b)provide that the final maturity of Bonds issued pursuant to such supplemental Bond Resolutions shall not be earlier than 25 years from the date when the first of such Bonds is issued. Project Management Committee Composition of the Committee.AEG&T shall have no direct vote,but shall be represented by and through Homer Electric Association,Inc.,and Matanuska Electric Association,Inc.,each of which shall be entitled D-11 to vote as a Purchaser member for purposes of Committee procedure.The Committee shall meet not less than once each quarter.Costs of the Committee (other than costs incurred by the Authority)which are incurred prior to the Date of Commercial Operation shall be borne by the Purchasers in accordance with the Percentage Shares of each. Adoption of Rules of Procedure.The Committee shall adopt,by the affirmative vote of a majority of the Purchasers and the affirmative vote of the Authority,procedural rules governing the conduct of the Committee's affairs.Committee approval of operations and maintenance arrangements for the Project,the sufficiency of the annual!budget and wholesale power rates,and the undertaking of Optional Project Work shall require the affirmative vote of a majority of the Purchasers and the affirmative vote of the Authority. Committee Responsibilities;Approval By the Authority,As the legal owner and licensee of the Project, the issuer of Project debt,and the agency charged by statute with various duties affecting or affected by the Project, the Authority has certain nondelegable rights,duties,and responsibilities with respect to the Project.Subject to such nondelegable rights,duties,and responsibilities,the Committee shall be responsible for the management,operation, maintenance,and improvement of the Project. The Committee shall take the following actions,subject to the provisions of the Bond Resolution,federal and state law,the requirements of licensing and regulatory agencies,and the rights of the Authority and the Purchasers under other provisions of the Agreement: (A)Arrange for the operation and maintenance of the Project,and the scheduling,production,and dispatch of Project power; (B)Establish procedures for the use of each Purchaser's Water Allocation in a manner consistent with the needs and desires of other Purchasers and the capabilities of the Project; (C)Adopt in each Fiscal Year (and revise as necessary or prudent during such Fiscal Year)a budget of Annual Project Costs for that Fiscal Year,which budget shall be in an amount estimated by the Committee to be sufficient to pay all Annual Project Costs; (D)Establish for each Fiscal Year the estimated Annual Payment Obligation of each Purchaser, together with a schedule for each Purchaser of equal monthly payments that such Purchaser shall be _required to make during the Fiscal Year,which payment schedule shall be (i)designed to recover such estimated Annual Payment Obligation from that Purchaser during the Fiscal Year,and (ii)revised during such Fiscal Year to reflect any revisions to the budget of Annual Project Costs for that Fiscal Year; (E)Determine after the conclusion of each Fiscal Year the actual Annual Project Costs for that Fiscal - Year,the actual Annual Payment Obligation of each Purchaser for that Fiscal Year,and the amount of any additional payment required from (or the amount of any refund to be returned to)each Purchaser to ensure that the total of all payments received from each Purchaser for each Fiscal Year is equal to that Purchaser's actual Annual Payment Obligation for that Fiscal Year; (F)Evaluate and select among alternative methods of carrying out and funding Required Project Work; (G)Adopt provisions to evaluate and approve Optional Project Work,and to determine the compensation (if any)to be provided if the Committee approves any such Optional Project Work; (H)Adopt procedures consistent with the Agreement for the resolution of disputes that may arise between or among the Purchasers and the Authority concerning the interpretation of the Agreement,the obligations created by the Agreement,or the performance of such obligations; D-12 (1)Make an initial determination of "customary”insurance within the meaning of the insurance covenant in the Bond Resolution and determine the appropriate amount of,and obtain,insurance for or related to the Project,in addition to such insurance as may be required by the Bond Resolution; (J)Adopt maintenance schedules for the Project that do not interfere unreasonably with the operations of the Purchasers; (K)Adopt and implement procedures relating to electric power reserves for the Project in accordance with the Agreement;and (L)Consider the need for and approve any additional amount to be added to the Renewal and Contingency Reserve Fund over and above the Renewal and Contingency Reserve Requirement. Payment Obligation Unimpaired.Notwithstanding any Committee action or inaction,each Purchaser's obligation to make the monthly payments necessary to pay its Purchaser's Percentage Share of Debt Service,costs of operation and maintenance,and all other amounts to be paid by Purchasers shall be absolute and unimpaired. The Authority's ability to take Required Action.In the event the Committee fails to take any of the actions set forth in (C)through (E)above,in a timely fashion,or fails to take any other action which the Authority believes to be a Required Action,and as a result the Authority determines that it will be unable to meet any of its obligations imposed by statute,by the Bond Resolution,by the Agreement,or by any licensing or regulatory agency,then the Authority may (i)adopt a budget of Annual Project Costs,(ii)estimate the Annual Payment Obligation of each Purchaser,(iii)require each Purchaser to make payments on the basis of such estimated Annual Payment Obligation,and (iv)take such other action as the Authority deems necessary to meet such obligations. Failure of the Committee to adopt an Annual Project Budget by the 90th day prior to the beginning of a Fiscal Year shall permit the Authority to adopt an Annual Project Budget. Each Purchaser shall make payment as required by the Authority as a result of any action taken by the Authority under this paragraph,but such payment shall not constitute a waiver of any Purchaser's rights under the Agreement.Any Purchaser may seek review of such action in accordance with the dispute resolution procedures adopted by the Committee,or may seek to enforce the Agreement judicially in accordance with the Agreement if no applicable dispute resolution procedures have been adopted. End of Project The Authority shall declare the Project ended,and the Authority's obligations to make power available to the Purchasers and to operate and maintain the Project shall also end,if and when (i)the Project can no longer be operated in accordance with Prudent Utility Practice;or (ii)if all of the following conditions are met: (1)the Project cannot be operated at full capacity in a manner consistent with Prudent Utility Practice absent repairs,modifications,or additions ("Repairs")to the Project; (2)a Consultant retained by the Committee concludes that such Repairs are not cost-effective in comparison with other power supply alternatives then available to the Purchasers;and (3)Committee members who are Purchasers and whose Percentage Shares total 80%vote that such Repairs should not be undertaken. After the Authority has declared the Project ended,each Purchaser shall complete its payment obligation for Project Capacity and associated energy delivered to such Purchaser before the Project ended,and shall do so by paying its Percentage Share of Annual Project Costs until all Bonds have been paid or provision has been made for the payment of the Bonds in accordance with the Bond Resolution. D-13 Covenants To Maintain Integrity of Agreement Retail Rate Approval.Each Purchaser will affirmatively and promptly pursue all administrative and judicial remedies necessary to secure Alaska Public Utility Commission approval of retail rates required to meet the terms of the Agreement. Compliance With Law.Each Purchaser will take all necessary steps to comply with applicable federal and state laws and regulations,licenses and permits relating to the use and operation of the Purchaser's System. Sales,Mergers and Assignments.No Purchaser shall abandon,sell,mortgage,lease or otherwise dispose of the Purchaser's System or any assets of that System,or assign the Agreement or any interest thereunder to any assignee or successor in interest,unless:(1)such disposal or assignment accords with the terms of any of the Purchaser's covenants or agreements with the holders of the Purchaser's bonds,notes or other evidences of indebtedness;and (2)such disposal or assignment is:(A)consented to in writing by a majority of the Committee, including the Authority's representative;or (B)made to another utility that is already a Purchaser under the Agreement and is able to meet the obligations resulting from the disposal or assignment;or (C)limited to assets that the Purchaser determines to be surplus to the needs of that Purchaser's System,but the depreciated value of assets so disposed of or assigned in any given year shall not exceed five percent of the depreciated value of the assets of the Purchaser's System prior to the disposal or assignment;or (D)evaluated by a Consultant and that Consultant certifies that,taking into account the other obligations of the Purchaser or of the assignee or successor in interest,the Purchaser or the assignee or successor in interest will have (i)substantially the same or greater ability to produce sufficient revenues to meet its payment obligations as would the Purchaser absent the transaction,and (ii)the ability to perform all obligations under the Agreement. Any assignee of the Agreement must assume in writing all of the assigning Purchaser's obligations under the Agreement,must pay any amounts due and owing from the assigning Purchaser under the Agreement,and (unless the assignee is already a Purchaser)must provide the Authority and the Purchasers with an opinion of counsel that the Agreement is enforceable against the assignee. Status of Bonds.The parties will not take any action,including entry into power sales agreements,which would cause the interest on any Bond which is originally issued on a tax-exempt basis to become taxable under the Internal Revenue Code of 1986,as the same may be amended from time to time. Licenses and Permits.The parties will take all necessary steps within their control to comply with applicable federal and state laws and regulations,and to obtain and thereafter comply with all applicable licenses and permits relating to the use and operation of the Project,including without limitation,the Federal Energy Regulatory Commission license applicable to the Project.The Authority will take all necessary steps to cause the Federal Energy Regulatory Commission license to be renewed,if necessary,so that it is in effect during the term of the Agreement or any renewal hereof. Assignment.A Cooperative Purchaser shall have the right to assign its assets,including its rights under the Agreement for security purposes,to REA,or to a lender or guarantor in connection with loans to such Cooperative Purchaser where the proceeds of such loans are used to refinance obligations of such Cooperative Purchaser to REA or the Federal Financing Bank under Section 311 of the Rural Electrification Act or otherwise; provided,however,that (A)neither REA nor any secured lender or guarantor shall be entitled to exercise the rights of the Cooperative Purchaser under the Agreement unless the obligations of such Cooperative Purchaser shall have been performed,(B)no such assignment shall in any way relieve such Cooperative Purchaser of any obligations, and (C)no assignment shall be permitted if such assignment would adversely affect the tax exemption of interest on any Bonds. The Letter Agreement between the parties dated November 7,1988 provides that the foregoing provisions on sales,mergers and assignment shall not apply to any mortgage of a Cooperative Purchaser's electric utility system or any assets of that system given to secure loans made or guaranteed by REA or another lender for approved REA purposes. D-14 Arrangements Regarding AEG&T Homer Electric Association,Inc.("HEA")and Matanuska Electric Association,Inc.("MEA")have previously entered into contracts with the Alaska Electric Generation &Transmission Cooperative,Inc.("AEG&T") under which AEG&T is to sell and HEA and MEA are to buy electric power in amounts necessary to meet the full requirements of HEA and MEA.AEG&T is a Purchaser on behalf of HEA and MEA,and AEG&T's payment obligations are secured by HEA's and MEA's respective obligations to provide at all times the monies necessary for the performance of AEG&T's payment obligations. If AEG&T at any time fails to meet its payment obligations,then HEA and MEA shall each be obligated to meet directly its respective share of AEG&T's payment obligations in the same manner as if HEA and MEA were individual Purchasers.All rights and remedies available to the Authority and/or to the other Purchasers against AEG&T shall also be available against HEA and MEA to the extent of their respective individual share.For these purposes,HEA's share shall be a Percentage Share of Project Capacity equal to 12.0 percent,and MEA's share shall be a Percentage Share of Project Capacity equal to 13.8 percent. THE BOND RESOLUTION The following is a general summary of certain provisions of the Bond Resolution.This summary is not to be considered a full statement of the terms of the Bond Resolution and accordingly is qualified by reference thereto and is subject to the full text thereof.Certain terms not defined under the heading "Certain Definitions"are defined in this Official Statement or in the summary of the Power Sales Agreement.Copies of the Bond Resolution may be obtained from the Authority. Certain Definitions "Accountant's Certificate"shall mean a certificate signed by a firm of independent certified public accountants of recognized national standing,selected by the Authority,which may be the firm of accountants which regularly audits the books of the Authority. "Aggregate Debt Service”for any period shall mean the sum of the amounts of Debt Service for such period with respect to all Series. "Bond Insurer”shall mean Municipal Bond Investors Assurance Corporation and its successors. "Bond Year"shall mean each period of 12 calendar months ending on each July 1. "Capital Improvements”shall mean (a)repairs,maintenance,renewals,replacements,improvements or betterments required by federal or state law,a licensing or regulatory agency with jurisdiction over the Project,or the Power Sales Agreement,or otherwise necessary to keep the Project in good and efficient operating condition, consistent with (1)sound economics for the Project and the Purchasers and (2)national standards for the industry, which Capital Improvements constitute Required Project Work under the Power Sales Agreement;or (b)repairs, renewals and replacements,improvements,betterments,additions or expansions which Capital Improvements do not constitute Required Project Work,but which are approved by the Committee as Optional Project Work. "National standards for the industry”shall mean Prudent Utility Practice. "Capital Reserve Requirement”shall mean (i)an amount equal to the lesser of Maximum Aggregate Debt Service or ten per cent of the proceeds of Bonds;or (ii)such other lesser amount as is required in order to maintain the tax-exempt status of the Bonds. "Committee"shall mean the Project Management Committee established in the Power Sales Agreement. "Construction Engineer"means an independent engineer or engineering firm or corporation having a nationwide and favorable reputation and demonstrated experience in the field of construction engineering and construction management at the time retained by the Authority to perform the acts and carry out the duties provided for such Construction Engineer in the Resolution. "Consulting Engineer"means an independent engineer or engineering firm or corporation having a nationwide and favorable reputation and demonstrated experience in the field of consulting engineering for power systems at the time retained by the Authority to perform the acts and carry out the duties provided for such Consulting Engineer in the Resolution. "Cost of Acquisition and Construction”shall mean all costs and expenses of planning,designing,acquiring, constructing,installing and financing the Project or a Capital Improvement,placing the Project or a Capital Improvement in operation,and obtaining governmental approvals,certificates,permits and licenses with respect thereto,heretofore or hereafter paid or incurred by or on behalf of the Authority or by any Purchaser which has heretofore entered into a contract or contracts with the Authority with respect to construction or acquisition of the Project or a Capital Improvement.The Cost of Acquisition and Construction shall include,but shall not be limited to: (1)Costs of preliminary investigation and development,feasibility and planning studies,the securing of regulatory approvals,costs for land and land rights,water and water rights,engineering,contractors' fees,labor,materials,equipment,utility services and supplies,accounting,legal and financing fees and expenses; (2)Working capital and reserves as required during construction of the Project or a Capital Improvement and to place the Project or a Capital Improvement in operation and such additional amounts of working capital and reserves as are required by the Resolution; (3)Interest accruing on Bonds prior to and during construction and for such additional period as the Authority may reasonably determine to be necessary for the placing of the Project or a Capital Improvement or any facility thereof in operation; (4)Amounts required to be paid from the proceeds of Bonds issued to finance the Cost of Acquisition and Construction into any Funds or Accounts; (5)The payment of any bond anticipation note or evidence of indebtedness issued in anticipation of Bonds for the purpose of financing the Cost of Acquisition and Construction of the Project or a Capital Improvement,including the Variable Rate Demand Bonds; (6)Training and testing costs which are properly allocable to acquisition and construction; (7)All costs of insurance applicable to the period of construction; (8)The cost of restoring and repairing property damaged or destroyed in the construction of the Project or a Capital Improvement,or the amount required by law to be paid as adequate compensation for such damages,or amounts required to be paid with respect to the restoration,relocation,removal, reconstruction or duplication of property made necessary or caused by the construction and installation of the Project or a Capital Improvement to the extent not paid out of the proceeds of insurance; (9)Legally required or permitted Federal,state and local taxes and payments in lieu of taxes applicable to the period of construction; (10)All other costs incurred by or on behalf of the Authority and properly allocable to the acquisition and construction of the Project or a Capital Improvement;and (11)Costs of issuance of Bonds. "Counsel's Opinion"or "Opinion of Counsel”shall mean an opinion of counsel of nationwide recognized standing in the field of municipal bonds,selected by the Authority and not objected to by the Trustee. "Debt Service"for any period shall mean,as of any date of calculation and with respect to any Series,an amount equal to the sum of (i)interest accruing during such period on Bonds of such Series,except to the extent that such interest is to be paid from deposits in the Interest Account in the Debt Service Fund made from Bond proceeds and (ii)that portion of each Principal Installment for such Series which would accrue during such period if such Principal Installment were deemed to accrue daily in equal amounts from the next preceding Principal Installment due date for such Series (or,if there shall be no such preceding Principal Installment due date,from a date one year preceding the due date of such Principal Installment or from the date of issuance of the Bonds of such Series,whichever date is later).Interest and Principal Installments with respect to interest accreting on compound interest or zero coupon or like interest paying Bonds shall be deemed to accrue in the 12 months immediately prior to the final maturity of such Bonds;and the Authority may determine that interest will accrue on variable rate Bonds at a rate equal to the actual rate during a prior period. "Depositary"shall mean any bank or trust company organized under the laws of any state of the United States or any national banking association selected by the Authority and approved in writing by the Trustee. D-17 "Excess Investment Earnings”shall mean that amount determined by the Authority to be required to be rebated to the United States Government pursuant to the Code. "Federal Obligation”shall mean any direct obligation of,or any obligation the full and timely payment of principal of and interest on which is guaranteed by,the United States of America. "Fiduciary"or "Fiduciaries”shall mean the Trustee,the Bond Registrar,the Paying Agents,or any or all of them,as may be appropriate., "Fiscal Year”shall mean the twelve-month period commencing on July 1 of each year and including June 30 of the succeeding calendar year. "Insured Bonds”shall mean the Bonds insured by the Municipal Bond Insurance Policy. "Investment Securities”shall mean and include any of the following securities,if and to the extent the same are at the time legal for investment of the Authority's funds: (i)Federal Obligations; (ii)obligations of the Government National Mortgage Association,the Federal National Mortgage Association to the extent that such obligations are guaranteed by the Government National Mortgage Association,the Federal Financing Bank,the Federal Intermediate Credit Banks,Federal Banks for Cooperatives,Federal Land Banks,Federal Home Loan Banks,Farmers Home Administration and Federal Home Loan Mortgage Association; (iii)new housing authority bonds issued by public agencies or municipalities and fully secured as to the payment of both principal and interest by a pledge of annual contributions under an annual contributions contract or contracts with the United States of America;or project notes issued by public agencies or municipalities and fully secured as to the payment of both principal and interest by a requisition or payment agreement with the United States of America; (iv)direct and general obligations of any state of the United States of America,to the payment of the principal of and interest on which the full faith and credit of such state is pledged,provided that at the time of their purchase under the Resolution such obligations are rated not less than Aa or AA or their equivalents by Moody's Investors Service,Inc.and Standard &Poor's Corporation,or their successors; (v)certificates of deposit,whether negotiable or nonnegotiable,issued by any bank or trust company organized under the laws of any state of the United States of America or any national banking association (including any Fiduciary),provided that such certificates of deposit shall be purchased directly from such a bank,trust company or national banking association and shall be either (1)continuously and fully insured by the Federal Deposit Insurance Corporation,or (2)continuously and fully secured by Qualified Collateral,which shall have a market value (exclusive of accrued interest)at all times at least equal to 100%of the principal amount of such certificates of deposit and shall be lodged with the trust department of the Trustee or with a Federal Reserve Bank or branch,as custodian,by the bank,trust company or national banking association issuing each such certificate of deposit required to be so secured; (vi)repurchase agreements with banks which are members of the Federal Reserve System or with government bond dealers recognized as primary dealers by the Federal Reserve Bank of New York that are secured by Federal Obligations or the obligations referred to in paragraph (ii)(herein called "Other Obligations"),having a current market value at least equal to 100%of the amount of the repurchase agreement,marked to market weekly,and which Federal Obligations or Other Obligations shall have been deposited in trust by such bank or dealer with the trust department of the Trustee or with a Federal Reserve Bank or branch,or with another third party custodian approved by the Trustee,by such bank or dealer andbytheAuthority,as collateral security for such repurchase agreements; D-18 (vii)"commercial paper"rated either "A-1"or "P-1",or corporate bonds or notes,in each case issued by a United States corporation,rated in one of the two highest rating categories by Standard &Poor's Corporation and Moody's Investors Service Inc.; (viii)investment agreements with any corporation,including banking or financial institutions,the corporate debt of which is rated,at the time of investment,"Aa"or better by Moody's Investors Service, Inc.and "AA"or better by Standard &Poor's Corporation,or secured in the same manner as repurchase agreements in paragraph (vi); (ix)guaranteed investment contracts or similar funding agreements issued by insurance companies, the corporate debt of which,at the time of investment,is rated "Aa"or better by Moody's Investors Service,Inc.and "AA"or better by Standard &Poor's Corporation or Bests,and the contract is pari passu with senior debt,or the contract is rated in one of the two highest rating categories by Standard &Poor's Corporation and Moody's Investors Service,Inc.or Bests;and (x)units of a taxable government money market fund consisting of obligations guaranteed by the full faith and credit of the United States of America and repurchase agreements secured as provided in paragraph (vi). "Maximum Aggregate Debt Service”shall mean the greatest amount of Aggregate Debt Service payable in any unexpired Bond Year. "Municipal Bond Insurance Policy"shall mean any municipal bond insurance policy insuring the payment of the principal of and interest on Insured Bonds. "Operating Expenses"shall mean (i)the Authority's operation,maintenance,administrative and general expenses of the Project,and shall include,without limiting the generality of the foregoing,costs of investigations, insurance,ordinary repairs of the Project,fuel costs,rents,engineering expenses,legal and financial advisory expenses,Committee expenses,refunds for overpayments by Purchasers,salaries and required Project employee costs,any taxes or payments in lieu of taxes,(ii)any other current expenses or obligations required to be paid by the Authority,all to the extent properly allocable to the Project,or required to be incurred under the Power Sales Agreement,and (iii)the fees and expenses of the Fiduciaries. "Operating Reserve Account Requirement”shall mean zero until the earlier of the Date of Commercial Operation or the date of retirement of all of the Variable Rate Demand Bonds,and thereafter shall mean an amount equal to 20 percent of the Operating Expense component of the Annual Budget as calculated annually,or such other amount as may be determined pursuant to the Power Sales Agreement. "Principal Installment"shall mean,as of any date of calculation and with respect to any Series (i)the principal amount of Bonds of such Series due on a certain future date for which no Sinking Fund Installments have been established,or (ii)the unsatisfied balance of any Sinking Fund Installments due on a certain future date for Bonds of such Series,plus the amount of the sinking fund redemption premiums,if any,which would be applicable upon redemption of such Bonds on such future date in a principal amount equal to said unsatisfied balance of such Sinking Fund Installments,or (iii)if such future dates coincide as to different Bonds of such Series,the sum of such principal amount of Bonds and of such unsatisfied balance of Sinking Fund Installments due on such future date plus such applicable redemption premiums,if any. "Qualified Collateral"shall mean:(i)obligations described under items (i),(ii)and (iii)of the definition of Investment Securities;and (ii)direct and general obligations of any state of the United States of America which are rated not less than "AA”or "Aa”or their equivalents by Standard &Poor's Corporation and Moody's Investors Service,Inc.,or their successors. "Redemption Price”shall mean,with respect to any Bond,the principal amount thereof plus the applicable premium,if any,payable upon redemption thereof. D-19 "Renewal and Contingency Reserve Requirement"shall mean zero until the earlier of the Date of Commercial Operation or the date of retirement of all of the Variable Rate Demand Bonds,and thereafter shall mean an amount equal to $5,000,000. "Revenues"shall mean (i)all revenues,income,rents and receipts,derived or to be derived by the Authority from,or attributable to the ownership and operation of,the Project,including all revenues attributable to the Project or to payment of the costs thereof including,without limitation,all«revenues received or to be received by the Authority under the Power Sales Agreement or under any other contract for the sale of power, energy,transmission or other service from the Project or any part thereof or any contractual arrangement with respect to the use of the Project or any portion thereof or the services,output or capacity thereof,and (ii)interest received or to be received on any moneys or securities (other than in the Construction Fund or in the Excess Investment Earnings Fund)held pursuant to the Resolution and required to be paid into the Revenue Fund. "Series"shall mean all of the Bonds authenticated and delivered on original issuance and identified as a separate Series of Bonds. "Sinking Fund Installment"means,with respect to the outstanding Bonds of any Series,the amount required to be paid in any event by the Authority on a single future date for the retirement of Bonds of such Series which mature after said future date,but does not include any amount payable by the Authority by reason only of the maturity of a Bond. Resolution to Constitute Contract The Resolution shall constitute a contract between the Authority,the Trustee and the holders from time to time of the Bonds,a trust agreement under the Act and a security agreement under the Alaska Uniform Commercial Code.The pledge and assignment made in the Resolution and the covenants and agreements set forth in the Resolution to be performed on behalf of the Authority shall be for the equal benefit,protection and security of the holders of any and all of the Bonds,all of which shall be of equal rank without preference,priority or distinction of any of the Bonds over any other thereof except as expressly provided in or permitted by the Resolution. Pledge of Revenues and Other Funds A pledge of the Revenues,and of all moneys,securities and funds,except the Excess Investment Earnings Fund,held or set aside or to be held or set aside by the Authority or any Fiduciary under the Resolution,is made, and the same are pledged and assigned to secure the payment of the principal and Redemption Price of and interest on the Bonds and any Sinking Fund Installments for the retirement thereof,subject only to the provisions of the Resolution permitting the payment,setting apart or appropriation thereof for or to the purposes and on the terms, conditions,priorities and order set forth in the Resolution.This pledge shall be valid and binding from the time when it is made;the Revenues so pledged and then or thereafter received by the Authority shall immediately be subject to the lien of such pledge without any physical delivery or further act;and the lien of such pledge and the obligation to perform the contractual provisions made by the Resolution shall be valid and binding as against all parties having claims of any kindin tort,contract or otherwise against the Authority,irrespective of whether suchpartieshavenoticethereof. The Bonds shall be direct and general obligations of the Authority for the payment of which the full faith _.and credit of the Authority are pledged and neither the State of Alaska nor any political subdivision (other than the Authority)nor any Purchaser shall be obligated to pay the principal or Redemption Price thereof or interest thereon and neither the faith and credit nor the taxing power of the State of Alaska or any political subdivision thereof (other than the Authority)or of any Purchaser is pledged to the payment of the principal or Redemption Price of,or interest on,the Bonds. Nothing in the Resolution prevents the Authority from financing through the issuance of its bonds any facilities which do not constitute a part of the Project;provided that such bonds shall not be payable out of or secured by the Revenues or any Fund held under the Resolution and neither the cost of such facilities nor any D-20 expenditure in connection therewith or with the financing thereof shall be payable from the Revenues or from any such Fund. Additional Bonds Additional Bonds may be issued on a parity with any outstanding Bonds for the purpose of paying all or a portion of the Cost of Acquisition and Construction of any Capital Improvements,upon compliance with certain conditions including: -1.Such Capital Improvements have been approved by the Committee in accordance with the Power Sales Agreement. 2.The filing with the Trustee of an opinion of the Consulting Engineer that neither the issuance of the Additional Bonds nor the payment of the Cost of Acquisition and Construction of the Capital Improvements will impair the ability of the Authority to pay Debt Service through collection of revenues under the Power Sales Agreement. 3.The filing with the Trustee of a certificate of the Authority stating that the Authority is not in default in the performance of any of the covenants,conditions,agreements or conditions contained in the Resolution. 4.After application of the proceeds of sale of the Additional Bonds,the amount held in the Capital Reserve Fund equals the Capital Reserve Requirement and the amount held in the Renewal and Contingency Reserve Fund equals the Renewal and Contingency Reserve Requirement. 5.The filing with the Trustee of a certificate from the Committee (if required under the Power Sales Agreement)stating that the supplemental resolution authorizing the Additional Bonds has been adopted in accordance with the provisions of the Power Sales Agreement requiring the approval of the Committee prior to the authorization or issuance of Additional Bonds. Additional Bonds may be issued on a parity with any outstanding Bonds for the purpose of refunding outstanding Bonds upon satisfaction of certain terms and conditions including 4 and 5 above,and upon the application of the proceeds of such Additional Bonds to establish with the Trustee an irrevocable trust for the payment of the Bonds to be refunded. Funds and Accounts The Resolution establishes the following funds and accounts to be held by the Trustee: 1.Construction Fund, 2.Debt Service Fund,consisting of an Interest Account and a Principal Account, 3.Capital Reserve Fund, 4.Renewal and Contingency Reserve Fund, 5.Excess Investment Earnings Fund, 6.Revenue Fund,and 7.Operating Fund,which shall include therein an Operating Reserve Account. The Second Series Resolution establishes the Scheduled Maintenance Fund,to be held by the Trustee. D-21 Construction Fund Amounts in the Construction Fund shall be applied to the Cost of Acquisition and Construction,and until so applied are pledged for the security of and the payment to Bondholders of the principal or Redemption Price of and interest on the Bonds and shall at all times be subject to the lien of such pledge. There shall be established within the Construction Fund separate accounts for the Project and for each undertaking of Capital Improvements for which Bonds are authorized to be issued. The proceeds of insurance and any self-insurance fund maintained against physical loss of or damage to the Project or Capital Improvements,or of contractor's performance bonds or other assurances of completion with respect thereto,pertaining to the period of construction thereof,shall be paid into the appropriate separate account in the Construction Fund. Before any payments by the Trustee shall be made from the Construction Fund,the Authority shall file with the Trustee its requisition therefor and a certificate of the chief financial officer of the Authority stating that (1)the obligation to be paid from the Construction Fund has been properly incurred,is a proper Cost of Construction and Acquisition of the Project or Capital Improvements and has not been paid,(2)that such payment is not subject to any lien or attachment against the person named in such requisition or if any such lien or attachment has been filed or served against the Authority,that it has been released or discharged,and (3)that such requisition contains no item representing payment on account of any retained percentages which the Authority is at the date of such certificate entitled to retain. Any requisition for the payment of the cost and expense of the acquisition of any lands,easements,or rights or interest in lands must be accompanied a Counsel's Opinion as to the sufficiency,for the purposes of the Authority,of the title or lesser interest to be acquired by the Authority. When the Construction Engineer shall determine that (i)the Project or Capital Improvements conforms to the plans and specifications thereof and is ready for normal continuous operation;(ii)acquisition,construction and installation of the Project or Capital Improvements has been completed in every material respect;and (iii)costs (including contingencies),as estimated by the Construction Engineer,of all work remaining to be done in order to complete such acquisition,construction and installation will not exceed 2%of the Cost of Acquisition and Construction of the Project or Capital Improvements,the Construction Engineer shall file a report to that effect with the Authority and the Trustee. As soon as practicable after the date of the filing of such report or the Date of Commercial Operation of the Project or Capital Improvements,whichever is the later,the Construction Engineer will file with the Authority and the Trustee a report setting forth among other things,the amounts required to be reserved in the Construction Fund for the payment of Cost of Acquisition and Construction to be paid and for contractor claims against the Authority and other contingencies. Upon the filing of certificates of the Authority specifying the amount to be reserved in the Construction Fund (being not less than the amount specified in the report of the Construction Engineer)and a Counsel's Opinion with respect to title to property and outstanding liens,the balance in excess of the amount,if any,stated in such certificate shall be transferred to the Capital Reserve Fund,if and to the extent necessary to make the amount of such Fund equal to the Capital Reserve Requirement,and any balance shall be applied,if and to the extent a Counsel's Opinion states that such application is necessary to preserve the tax-exempt status of interest on the Bonds,to the retirement of Bonds by purchase or redemption.If the Cost of Acquisition and Construction of the Project exceeds $350,000,000,the balance in the Construction Fund for the Project shall be paid to the State of Alaska.If subsequently it shall be determined that any amounts specified as being required for the payment of any remaining part of the Cost of Acquisition and Construction are no longer so required,any amount no longer being required shall be transferred to the Capital Reserve Fund,if and to the extent necessary to make the amount of such Fund equal to the Capital Reserve Requirement,and any balance shall be applied to the extent stated in such Counsel's Opinion.If the Cost of Acquisition and Construction of the Project is less than $350,000,000,Bonds of the First Series Bonds and the Completion Bonds,as shall be determined by supplemental resolution,in the amount D-22 equal to one half of the difference between $350,000,000 and the Cost of Acquisition and Construction of the Project shall be retired by purchase or redemption from money in the Construction Fund or from other available sources,to the extent provided in the supplemental resolution authorizing a series of Bonds and the terms of such series of Bonds.The supplemental resolutions authorizing the First Series Bonds and the Second Series Bonds did not provide for such purchase or redemption. The Trustee shall,during the construction of the Project or Capital Improvements,pay from the appropriate separate account in the Construction Fund to the Authority,upon its requisitions therefor not more than $250,000, to be used as a revolving fund for the purpose of paying such items of the Cost of Acquisition and Construction thereof as cannot conveniently be paid from the Construction Fund.So long as the amount in such revolving fund shall at any time be less than $250,000,such revolving fund shall be reimbursed by the Trustee from time to time for such expenses so paid,by payments from the Construction Fund upon requisitions and certificates of the Authority. Revenues and Revenue Fund All Revenues shall be promptly deposited by the Authority and the Trustee,as the case may be,upon receipt thereof to the credit of the Revenue Fund. Operating Fund As soon as practicable after deposit of Revenues in the Revenue Fund and in any case no later than the last business day of each month after the deposit,the Authority shall withdraw from the Revenue Fund and pay to the Operating Fund a sum which,together with any amount therein not set aside in the Operating Reserve Account or as a reserve for working capital,is equal to one-twelfth (or such other fraction as may be appropriate if the period with respect to which such amount is withdrawn is other than monthly)of the total moneys appropriated for Operating Expenses in the Annual Budget for the then current Fiscal Year.The Operating Reserve Account shall be maintained at all times in an amount not less than the Operating Reserve Account Requirement.Amounts in the Operating Reserve Account may be expended for Operating Expenses to the extent other amounts in the Operating Fund are not available. Amounts in the Operating Fund shall be paid out from time to time by the Authority for reasonable and necessary Operating Expenses.Any amounts budgeted by the Committee in the Annual Budget for Annual Project Costs constituting costs of the Committee shall be paid out from time to time to the Committee by the Authority. Payments Into Certain Funds After the payment has been made to the Operating Fund,the Authority shall apply moneys from the Revenue Fund and deposit said amounts with the Trustee on the dates set forth below and the Trustee shall deposit said amounts in the following order in the amounts and in the Funds set forth below. 1.In the Debt Service Fund (i)semiannually on June 1 and December 1,for credit to the Interest Account,unless the sum on deposit therein equals or exceeds the interest due on all Bonds on the next succeeding interest payment date,an amount equal to the interest due on such interest payment date less the interest to be paid on such interest payment date from Bond proceeds held in said Account for such purpose:provided,however,that for the purposes of computing the amount on deposit in said Account, there shall be excluded the amount,if any,set aside in said Account for the payment of interest due after the next succeeding interest payment date;(ii)annually on December 1 for credit to the Principal Account, unless the sum on deposit therein equals or exceeds all Principal Installments due on the next succeeding July 1,an amount equal to one-half of such Principal Installments;and (iii)annually on June 1,for credit to the Principal Account,the amount,if any,necessary to cause the sum on deposit therein to equal all Principal Installments due on the next succeeding July 1;provided that the Authority may establish payments into the Debt Service Fund at different times and in different amounts as necessary for interest paid other than semiannually and in fixed amounts. D-23 2.In the Capital Reserve Fund,the amount,if any,required so that the balance in the Fund equals the Capital Reserve Requirement. 3.Semiannually on June 1 and December 1,in the Operating Reserve Account,the amount,if any, required so that the balance in the Account equals the Operating Reserve Account Requirement. _4,In the Renewal and Contingency Reserve Fund,the amount,if any,required so that the balance in the Fund,within a period no greater than four years from the initial deposit and thereafter from the most recent withdrawal therefrom,shall equal the Renewal and Contingency Reserve Requirement or such larger amount as may be determined by the Committee to be included in the calculation of Annual Project Costs. 5.Annually on a date or dates to be determined by a Supplemental Resolution,to the credit of the Excess Investment Earnings Fund,in such amount as is necessary to cause the amount on deposit in the Excess Investment Earnings Fund to be equal to estimated Excess Investment Earnings for the Bond Year, from amounts in the Revenue Fund or from moneys transferred from the Construction Fund. Debt Service Fund The Trustee shall pay out of the Debt Service Fund to the respective Paying Agents (i)out of the Interest Account,on or before each interest payment date for any of the Bonds the amount required for the interest payable on such date;(ii)out of the Principal Account,on or before each Principal Installment due date,the amount required for the Principal Installment payable on such due date;and (iii)out of the Interest Account,on or before any redemption date for the Bonds,the amount required for the payment of interest on the Bonds then to be redeemed.The Trustee shall also pay out of the Interest Account the accrued interest included in the purchase price of Bonds purchased for retirement. Amounts accumulated in the Principal Account with respect to any Sinking Fund Installment (together with amounts accumulated in the Interest Account with respect to interest on the Bonds for which such Sinking Fund Installment was established)may,and if so directed by the Authority,shall,be applied by the Trustee,on or prior to the 60th day preceding the due date of such Sinking Fund Installment,to (i)the purchase of the Bonds of the Series and maturity for which such Sinking Fund Installment was established,or (ii)the redemption at the applicable sinking fund Redemption Price of such Bonds.After the 60th day but on or prior to the 45th day preceding the due date of such Sinking Fund Installment,any amounts then on deposit in the Principal Account may,and if so directed by the Authority,shall,be applied by the Trustee to the purchase of Bonds of the Series and maturity for which such Sinking Fund Installment was established in an amount not exceeding that necessary to complete the retirement of the unsatisfied balance of such Sinking Fund Installment.All purchases of any such Bonds shall be made at prices not exceeding the applicable sinking fund Redemption Price of such Bonds plus accrued interest,and such purchases shall be made by the Trustee as directed by the Authority.As soon as practicable after the 45th day preceding the due date of any such Sinking Fund Installment,the Trustee shall proceed to call for redemption,on such due date Bonds of the Series and maturity for which such Sinking Fund Installment was established in such amount as shall be necessary to complete the retirement of the unsatisfied balance of such Sinking Fund Installment. Capital Reserve Fund If five business days prior to any date on which a Principal Installment or interestis due the amount in the Debt Service Fund shall be less than the amount required to be in such Fund to pay said Principal Installment or interest,the Trustee shall apply amounts from the Capital Reserve Fund to the extent necessary to make good the deficiency. Whenever the moneys on deposit in the Capital Reserve Fund shall exceed the Capital Reserve Requirement,until the Date of Commercial Operation of the Project,such excess shall be deposited in the Construction Fund and thereafter such excess shall,on the request of the Authority,be transferred to the Authority for deposit in the Revenue Fund at least annually. D-24 In the event of the refunding of Bonds,the Trustee shall,upon the direction of the Authority,withdraw from the Capital Reserve Fund amounts accumulated therein with respect to the Bonds being refunded and deposit such amounts with itself as Trustee to be held for the payment of the principal or Redemption Price,if applicable, and interest on the Bonds being refunded;provided that such withdrawal shall not be made unless (a)immediately thereafter the Bonds being refunded shall be deemed to have been paid and (b)the amount remaining in the Capital Reserve Fund after such withdrawal shall not be less than the Capital Reserve Requirement. Renewal and Contingency Reserve Fund Amounts in the Renewal and Contingency Reserve Fund shall be applied to the costs of Capital Improvements,the payment of extraordinary operation and maintenance costs,and contingencies,including payments with respect to the prevention or correction of any unusual loss or damage in connection with the Project or to prevent a loss of Revenues therefrom,all to the extent not provided for in the then current Annual Budget or by reserves in the Operating Fund or from the proceeds of Bonds. No payments shall be made from the Renewal and Contingency Reserve Fund if and to the extent that the proceeds of insurance,including the proceeds of any self-insurance fund,or other moneys recoverable as the result of damage,if any,are available to pay the costs otherwise payable from such Fund. Any balance of moneys and securities in the Renewal and Contingency Reserve Fund in excess of the Renewal and Contingency Reserve Requirement or such larger amount as may be determined from time to time by the Committee to be included in the calculation of Annual Project Costs shall be transferred to the Revenue Fund at least annually. Excess Investment Earnings Fund The Trustee shall establish within the Excess Investment Earnings Fund a separate account for each Series of Bonds.Within 30 days after the end of each Bond Year the Authority shall determine the Excess Investment Earnings with respect to each Series of Bonds for such Bond Year and the Trustee,at the direction of the Authority, shall transfer from the Construction Fund or the Revenue Fund such amount as shall be necessary to cause the amount held in such account to equal the Excess Investment Earnings for such Series of Bonds accrued as of the end of such Bond Year and not previously paid to the United States. Moneys in the Excess Investment Earnings Fund shall be applied by the Trustee to pay rebate amounts due the United States,as provided in Section 148(f)of the Code and the applicable Income Tax Regulations.All moneys in the Excess Investment Earnings Fund shall be held by the Trustee free and clear of the lien of the Resolution. If at any time,the amount held in any account in the Excess Investment Earnings Fund exceeds the accrued and unpaid Excess Investment Earnings attributable to the Series of Bonds for which such account is maintained;then the Trustee,at the direction of the Authority,shall transfer such excess to the Revenue Fund.If and to the extent necessary,the Authority shall take all action required to cause amounts to equal Excess Investment Earnings to be included as Operating Expenses and therefore as Annual Project Costs. Scheduled Maintenance Fund Amounts may be paid into the Scheduled Maintenance Fund out of amounts received for that purpose from the Purchasers.The Trustee shall make payments from the Scheduled Maintenance Fund to the payment of items of maintenance,renewal,repair and rehabilitation of the Project.All such payments shall be made upon requisition by the Committee. Deposits All Revenues and other moneys held by any Depositary may be placed on demand or time deposit,if and as directed by the Authority,provided that such deposits shall permit the moneys held to be available for use at the time when needed.All moneys held by any Fiduciary,as such,may be deposited by such Fiduciary in its banking department on demand or,if and to the extent directed by the Authority and acceptable to such Fiduciary,on time D-25 deposit,provided that such moneys on deposit be available for use at the time when needed.Such Fiduciary shall allow and credit on such moneys such interest,if any,as it customarily allows upon similar funds of similar size and under similar conditions or as required by law. All moneys held by the Trustee or any Depositary shall be (a)either (1)continuously and fully insured by the Federal Deposit Insurance Corporation,or (2)continuously and fully secured by lodging with the Trustee,any Federal Reserve Bank or branch,or another third party custodian approved by the Trustee and the Authority, Qualified Collateral having a market value (exclusive of accrued interest)not less than 100%of the amount of such moneys,and (b)held in such other manner as may then be required by applicable Federal or State of Alaska laws and regulations and applicable state laws and regulations of the state in which the Trustee or such Depositary (as the case may be)is located,regarding security for,or granting a preference in the case of,the deposit of trust funds; provided,however,that it shall not be necessary for the Fiduciaries to give security for the deposit of any moneys with them held in trust and set aside by them for the payment of the principal or Redemption Price of or interest on any Bonds,or for the Trustee or any Depositary to give security for any moneys which shall be represented by obligations or certificates of deposit purchased as an investment of such moneys. Investment of Certain Funds Moneys held in any Fund or Account shall be invested and reinvested by the Trustee (in accordance with instructions received from the Authority)to the fullest extent practicable in Investment Securities which mature not later than such times as shall be necessary to provide moneys when needed for payments to be made from such Funds and Accounts.Proceeds of sale of the First Series Bonds deposited in the Debt Service Fund shall be invested in Federal Obligations maturing at such times and in such amounts as are necessary to match the interest payments for which the amounts are expected to be expended. Any amount in any fund in excess of the amounts required to be on deposit therein shall be paid into the Revenue Fund,provided,however,that any such amount shall be paid into the Construction Fund to the extent the amount is realized prior to the Date of Commercial Operation of the Project.Interest earned on amounts in the Interest Account shall be heldin such Account for the purposes thereof. Valuation of Investments Obligations purchased as an investment of moneys in any Fund shall be deemed at all times to be part of such Fund and any profit realized from the liquidation of such investment shall be credited to such Fund and any loss resulting from the liquidation of such investment shall be charged to the respective Fund.In computing the amount in any Fund,obligations purchased as an investment of moneys therein shall be valued at the market value thereof exclusive of accrued interest,or otherwise as may then be required by the Code.Such computations shall be determined not less frequently than quarterly in each year. Payment of Bonds The Authority shall duly and punctually pay or cause to be paid,the principal or Redemption Price,if any, of every Bond and the interest thereon,at the dates and places and in the manner mentioned in the Bonds according to the true intent and meaning thereof. Power to Issue Bonds and Pledge Revenues and Other Funds The Authority is duly authorized under the Act and all other applicable laws to issue the Bonds and to adopt the Resolution and to pledge and assign the Revenues and other moneys,securities and funds purported to be subject to the lien of the Resolution in the manner and to the extent provided in the Resolution.Except to the extent otherwise provided in the Resolution,the Revenues,and other moneys,securities and funds so pledged are and will be free and clear of any pledge,lien,charge or encumbrance thereon or with respect thereto prior to,or of equal rank with,the pledge and assignment created by the Resolution,and all corporate or other action on the part of the Authority to that end has been and will be duly and validly taken.The Bonds and the provisions of the Resolution are and will be valid and legally enforceable obligations of the Authority in accordance with their terms D-26 and the terms of the Act and the Resolution.The Authority shall at all times,to the extent permitted by law,defend, preserve and protect the pledge and assignment of the Revenues and other moneys,securities and funds pledged under the Resolution and all the rights of the Bondholders under the Resolution against all claims and demands of all persons whomever. Creation of Liens;Sale and Lease of Property The Authority shall not issue any bonds,notes,or other evidences of indebtedness,other than the Bonds, secured by a pledge of or other lien or charge on the Revenues (including amounts which the Authority may thereafter be entitled to expend for Operating Expenses)and shall not create or cause to be created any lien or charge on such Revenues or on any amounts held by any Fiduciary under the Resolution;provided,however,that the Authority may issue bonds or notes or other obligations (i)payable out of,or secured by a pledge of,Revenues to be derived on and after such date as the pledge of the Revenues provided in the Resolution shall be discharged and satisfied,(ii)secured by a pledge of amounts which is in all respects subordinate to the lien and pledge created by the Resolution. No part of the Project shall be sold,leased,mortgaged or otherwise disposed of,except as follows: (a)The Authority may sell or exchange any property or facilities constituting part of the Project only in accordance with,and in a manner that will not impair the Authority's obligations under,the provisions of the Power Sales Agreement and if (i)it shall determine that such property or facilities are not useful in the operation of the Project,or (ii)the proceeds of such sale are less than 2%of the prior Bond Year's Debt Service,or it shall file with the Trustee an opinion of the Consulting Engineer stating that the fair market value of the property or facilities exchanged are less than 2%of the prior Bond Year's Debt Service or (iii)if such proceeds or fair market value exceeds 2%of the prior Bond Year's Debt Service it shall file with the Trustee an opinion of the Consulting Engineer stating that the sale or exchange of such property or facilities will not impair the ability of the Authority to comply during the current or any future Fiscal Year with the provisions of its rate covenant with Bondholders. (b)In addition to the Power Sales Agreement,the Authority may lease or make contracts or grant licenses for the operation of,or make arrangements for the use of,or grant easements or other rights with respect to,any part of the Project,provided that any such lease,contract,license,arrangement,easement or right (i)does not impede the operation of the Project and (ii)does not in any manner impair or adversely affect the rights or security of the Bondholders,and (iii)does not adversely affect the exemption from federal income taxation of the interest on the Bonds;and provided,further,that if the depreciated cost of the property to be covered by any such lease,contract,license,arrangement,easement or other right is in excess of 2%of the prior Bond Year's Debt Service the Authority shall first file with the Trustee an opinion of the Consulting Engineer that such action does not impair the ability of the Authority to comply during the current or any further Fiscal Year with the provisions of its rate covenant with Bondholders.Any payment received under or in connection with any such lease,contract,license, arrangement,easement or right shall constitute Revenues and shall be deposited in the Revenue Fund. Annual Budget The Authority,acting in conjunction with the Committee or separately in accordance with the Power Sales Agreement,shall adopt an Annual Budget each Fiscal Year and file a copy thereof with the Trustee.Each Annual Budget shall set forth in reasonable detail the estimated Revenues and Operating Expenses including Annual Project Costs for the Fiscal Year,and including provision for the estimated amount to be deposited during such Fiscal Year in each Fund and Account established under the Resolution and the requirements,if any,for the amounts estimated to be expended from each Fund and Account established under the Resolution,Such Annual Budget shall be revised as necessary or prudent during each Fiscal Year to reflect unanticipated changes in actual Revenues,Operating Expenses or other requirements,or if there are at any time during any such Fiscal Year extraordinary receipts or payments of unusual costs,and,if appropriate,there shall be filed with the Trustee an amended Annual Budget fortheremainderofthethencurrentFiscalYear. D-27 Limitations on Operating Expenses and Other Costs The Authority shall not incur Operating Expenses or other costs payable from the Renewal and Contingency Reserve Fund in any Fiscal Year in excess of the reasonable and necessary amount of such expenses or costs, respectively,and shall not expend any amount from the Operating Fund for Operating Expenses or from the Renewal and Contingency Reserve Fund for costs payable therefrom for such Fiscal Year in excess of the respective amounts provided therefor in the Annual Budget as then in effect. Acquisition and Construction of Project and Its Operation and Maintenance 'The Authority shall use its best efforts to acquire and construct the Project,or cause the same to be acquired and constructed with due diligence and in a sound and economical manner. The Authority shall at all times use its best efforts to operate or cause the Project to be operated properly and in an efficient and economical manner,consistent with the Power Sales Agreement and Prudent Utility Practice, and shall use its best efforts to maintain,preserve,reconstruct and keep the same or cause the same to be so maintained,preserved,reconstructed and kept,with the appurtenances and every part and parcel thereof,in good repair,working order and good condition,and shall from time to time make,or use its best efforts to cause to be made,all necessary and proper repairs,replacements and renewals so that at all times the operation of the Project may be properly and advantageously conducted. The Authority shall take all necessary steps to comply with applicable federal and state laws and regulations relating to the use and operation of the Project,including the terms of the Federal Energy Regulatory Commission license applicable to the Project. Rates,Fees and Charges The Authority,acting in conjunction with the Committee or separately under the Power Sales Agreement, shall at all times after the date of Commercial Operation charge and collect,as a wholesale power rate,from each Purchaser pursuant to the Power Sales Agreement that Purchaser's Percentage Share (as defined in the Power Sales Agreement)of Annual Project Costs.The Authority,acting in conjunction with the Committee or separately under the Power Sales Agreement,shall determine Annual Project Costs in such amounts as shall be required to provide Revenues at least sufficient in each Fiscal Year,together with other available funds,for the payment of the sum of: (a)Operating Expenses during such Fiscal Year; (b)The amount,if any,to be paid during such Fiscal Year into the Operating Reserve Account which shall be the amount,if any,necessary to restore the Operating Reserve Account to the Operating Reserve Account Requirement; (c)An amount equal to the Aggregate Debt Service during such Fiscal Year; (d)The amount,if any,to be paid during such Fiscal Year into the Capital Reserve Fund,which shall be the amount,if any,necessary to restore the Capital Reserve Fund to the Capital Reserve Requirement; (e)The amount to be paid during such Fiscal Year into the Renewal and Contingency Reserve Fund which shall be the amount,if any,necessary to restore the Renewal and Contingency Reserve Fund over a period no greater than four years to the Renewal and Contingency Reserve Requirement or such larger amount as may be determined from time to time by the Committee to be included in the calculation of Annual Project Costs;and (f)All other charges or liens whatsoever required to be paid out of Revenues during such Fiscal Year. D-28 Power Sales Agreement The Authority shall collect and forthwith deposit in the Revenue Fund all amounts payable to it pursuant to the Power Sales Agreement or payable to it pursuant to any other contracts for the use of the capability of the Project or the sale of the output,capacity or service of the Project or any part thereof.The Authority hereby pledges,assigns and transfers to the Trustee acting on behalf of the Bondholders all of its rights under the Power Sales Agreement or any other contracts for the use of the capability of the Project or the sale of the output,capacity or service of the Project or any part thereof and the Trustee shall enjoy and hold for the benefit of the Bondholders the rights and privileges so assigned,including,without limiting the foregoing,the rights of the Authority to receive payments thereunder.The Authority shall enforce the provisions of the Power Sales Agreement and duly perform its covenants and agreements thereunder.The Authority will not consent or agree to or permit any termination, rescission of or amendment to or otherwise take any action under or in connection with the Power Sales Agreement which will in any manner materially impair or materially adversely affect the rights or security of the Bondholders. Insurance The Authority shall keep and maintain the Project at all times insured against such risks and in such amounts,with such deductible provisions,or provide for a source of self-insurance,as is customary in connection with the operation of facilities of a type and size comparable to the Project and as may reasonably and economically be obtained or secured.The determination of what is "customary"and what may be "reasonably and economically obtained or secured"shall be made by an independent insurance consultant or by the State Division of Risk Management.If so required,the Authority shall carry and maintain,or cause to be carried and maintained,and pay or cause to be paid timely the premiums for,the following insurance with respect to the Project and the Authority: (a)insurance coverage for buildings,works,plants and facilities comprising the Project for all risks of direct physical loss,at all times in an amount not less than an amount necessary giving regard to co-insurance provisions to pay and retire and redeem all the outstanding Bonds; (b)general public liability insurance in minimum amounts per occurrence,for annual aggregate claims,and with a deductible amount,to the same extent that other entities comparable to the Authority and owning or operating facilities of the size and type comparable to the Project carry such insurance; (c)comprehensive automobile liability insurance; (d)workers'compensation insurance or self-insurance as required by the laws of the State of Alaska; Each insurance policy (i)shall be issued or written by a financially responsible insurer,or by an insurance fund established by the United States or State of Alaska or an agency or instrumentality thereof,(ii)shall be in such form and with such provisions (including loss payable clauses payable to the Trustee,waiver of subrogation clauses, provisions relieving the insurer of liability to the extent of minor claims and the designation of the named assureds) as are generally considered standard provisions for the type of insurance involved,and (iii)shall prohibit cancellation or substantial modification by the insurer without at least thirty days'prior written notice to the Trustee and the Authority. The Authority covenants to review each year the insurance carried with respect to the Authority and the Project and,to the extent feasible and economically prudent,it will carry insurance insuring against the risks and hazards specified above to the same extent that other entities comparable to the Authority and owning or operating facilities of the size and type comparable to the Project,and taking into account any special circumstances of the Project,carry such insurance.The Authority shall employ an independent insurance consultant or the State Division of Risk Management for the purpose of reviewing the insurance coverage of,and the insurance required for,the Authority and the Project and making recommendations respecting the types,amounts and provisions of insurance that should be carried with respect to the Authority and the Project and their operation,maintenance and administration. D-29 The Authority may establish a fund to provide self-insurance against the risks and hazards relating to the properties of the Project and the interests of the Authority and the Bondholders. Reconstruction If any useful portion of the Project shall be damaged or destroyed,the Authority shall,as expeditiously as possible,continuously and diligently prosecute or cause to be prosecuted the reconstruction or replacement thereof,unless the Authority declares the Project ended pursuant to the Power Sales Agreement,or unless the Consulting Engineer shall state that such reconstruction and replacement is not consistent with Prudent Utility Practice or is not in the interest of the Purchasers and the Bondholders. Maintenance of Capital Reserve Fund In order better to secure the Bonds and to make them more marketable and to maintain in the Capital Reserve Fund an amount equal to the Capital Reserve Requirement,the Authority shall,in compliance with the provisions of the Act,cause the Chairman annually,on or before the second day of January of each year and whenever the Trustee transfers funds from the Capital Reserve Fund to pay Principal Installments or interest on the Bonds,to make and deliver to the Governor of the State and the Chairmen of the House and Senate Finance Committees of the Alaska State Legislature his certificate stating the amount,if any,required to restore the Capital Reserve Fund to the Capital Reserve Requirement and requesting such amount.A copy of such certificate shall be promptly delivered to the Trustee.Any such moneys received by the Authority from the State in accordance with the provisions of the Act pursuant to any such certification shall be paid to the Trustee for deposit and credit to the Capital Reserve Fund. Accounts and Reports The Authority shall keep or cause to be kept proper books of records made of its transactions relating to the Project and each Fund and Account and relating to its costs and charges under the Power Sales Agreement and which,together with the Power Sales Agreement and all other books and papers of the Authority,including insurance policies,relating to the Project,shall at all times be subject to the inspection of the Trustee and the holders of an aggregate of not less than 5%in principal amount of the Bonds then outstanding or their representatives duly authorized in writing. The Authority shall annually,within 120 days after the close of each Fiscal Year (the first such report to be filed with respect to the Fiscal Year commencing July 1,1990),file with the Trustee,a copy of an annual report for such Fiscal Year,accompanied by an Accountant's Certificate.Such Accountant's Certificate shall state whether or not,to the knowledge of the signer,the Authority is in default with respect to any of the covenants,agreements or conditions on its part contained in the Resolution,and if so,the nature of such default. The Authority shall file with the Trustee (a)forthwith upon becoming aware of any Event of Default or default in the performance by the Authority of any covenant,agreement or condition contained in the Resolution, a certificate specifying such Event of Default or default and (b)within 120 days after the end of each Fiscal Year, commencing with the Fiscal Year ending June 30,1991,a certificate stating that there does not exist any default by the Authority or any Event of Default or other event which,with the lapse of time would become an Event of Default,or,if any such default or Event of Default or other event shall so exist,specifying the same and the nature and status thereof. With respect to the Project and each Capital Improvement for which a Construction Engineer is retained, the Authority shall cause such Construction Engineer to (A)prepare and submit to the Authority such drawings, designs,plans,specifications,surveys and reports as are necessary for the proper acquisition and construction of the Project or Capital Improvement,and approve and supervise any necessary modifications in the designs,plans and specifications thereof;(B)prepare and submit to the Authority quarterly reports of progress during the period of construction of the Project or Capital Improvement;(C)continuously supervise and inspect the acquisition and construction of the Project or Capital Improvement;and (D)upon completion and testing of the Project or Capital D-30 Improvement,certify to the Authority that the Project (or,with respect to a Capital Improvement,the Project with such Capital Improvement)is ready for normal continuous operation. Tax Covenants The Authority shall at all times do and perform all acts and things necessary or desirable including,but not limited to,compliance with provisions of a letter of instructions from Bond Counsel,as the same may be revised from time to time,in order to assure that interest paid on the Bonds shall,for the purposes of federal income taxation,be excludable from the gross income of the recipients thereof and exempt from such taxation,except in the event that such recipient is a "substantial user"or "related person"within the meaning of Section 147(a)of the Code. The Authority shall not permit at any time or times any of the proceeds of the Bonds,Revenues or any other funds of the Authority to be used directly or indirectly to acquire any securities or obligations the acquisition of which would cause any Bond to be an "arbitrage bond"as defined in Section 148(a)and (e)of the Code. Payment of Taxes and Charges The Authority will pay and discharge,or cause to be paid and discharged,all taxes,assessments and other governmental charges,or required payments in lieu thereof,lawfully imposed upon the properties of the Authority or upon the rights,Revenues,income,receipts,and other moneys,securities and funds of the Authority when the same shall become due,and all lawful claims for labor and material and supplies,except those taxes,assessments, charges or claims which the Authority shall in good faith contest by proper legal proceedings if the Authority shall in all such cases have set aside on its books reserves deemed adequate with respect thereto. Special Provisions Relating to the Bond Insurer The Bond Insurer shall at all times be deemed the exclusive owner of all Insured Bonds for the purpose of all approvals,consents,waivers,institution of any action,and the direction of all remedies.No Event of Default shall be waived without the Bond Insurer's consent.To the extent the Bond Insurer makes payment of the principal of and interest on Insured Bonds,it shall become the owner of such Insured Bonds or right to payment of such principal and interest and shall be fully subrogated to all of the registered owner's rights thereunder. Events of Default The following shall constitute Events of Default: (i)if default shall be made in the due and punctual payment of the principal of or Redemption Price, if any,when and as the same shall become due on or with respect to any Bond,whether at maturity or upon call for redemption or otherwise; (ii)if default shall be made in the due and punctual payment of any installment of interest on any Bond or the unsatisfied balance of any Sinking Fund Installment therefor,when and as such interest installment or Sinking Fund Installment shall become due and payable; (iii)if default shall be made by the Authority in the performance or observance of any other of the covenants,agreements or conditions on its part in the Resolution or in the Bonds contained,and such default shall continue for a period of 60 days after written notice thereof to the Authority by the Trustee or to the Authority and to the Trustee by the holders of not less than 25 %in principal amount of the Bonds outstanding; (iv)if there shall occur the dissolution or liquidation of the Authority or the filing by the Authority of a voluntary petition in bankruptcy,or the commission by the Authority of any act of bankruptcy,or adjudication of the Authority as a bankrupt,or assignment by the Authority for the benefit of its creditors, or the entry by the Authority into an agreement of composition with its creditors,or the approval by a D-31 court of competent jurisdiction of a petition applicable to the Authority in any proceeding for its reorganization instituted under the provisions of the federal bankruptcy act,as amended,or under any similar act in any jurisdiction which may now be in effect or hereafter enacted; (v)if an order or decree shall be entered,with the consent or acquiescence of the Authority appointing a receiver or receivers of the Project,or any part thereof,or of the rents,fees,charges,or other Revenues therefrom,or if such order or decree,having been entered without the consent or acquiescence of the Authority,shall not be vacated or discharged or stayed within 90 days after the entry thereof;and (vi)if judgment for the payment of money shall be rendered against the Authority as the result of the construction,improvement,ownership,control or operation of the Project,and any such judgment shall not be discharged within 90 days after the entry thereof,or an appeal shall not be taken therefrom or from the order,decree or process upon which or pursuant to which such judgment shall have been granted or entered,in such manner as to set aside or stay the execution of or levy under such judgment,or order, decree or process or the enforcement thereof. Application of Revenues and Other Moneys After Default If an Event of Default shall happen and shall not have been remedied,the Authority upon the demand of the Trustee,shall pay over or cause to be paid over to the Trustee (i)forthwith,all moneys,securities and funds then held by the Authority in any Fund or Account under the Resolution,and (ii)all Revenues as promptly as practicable after receipt thereof.During the continuance of an Event of Default,the Trustee shall apply all moneys, securities,funds and Revenues received by the Trustee as follows and in the following order: (i)Expenses of Fiduciaries -to the payment of the reasonable and proper fees,charges,expenses, including attorney's fees and expenses,and liabilities of the Fiduciaries; (ii)Operating Expenses -to the payment of the amounts required for reasonable and necessary Operating Expenses;and (iii)Principal or Redemption Price and Interest. First:Interest -To the payment of all installments of interest then due in the order of the maturity of such installments,together with accrued and unpaid interest on the Bonds theretofore called for redemption;and Second:Principal or Redemption Price -To the payment of the unpaid principal or Redemption Price of any Bonds which shall have become due,whether at maturity or by call for redemption,in the order of their due dates. Proceedings Brought by Trustee If an Event of Default shall happen and shall not have been remedied,then and in every such case,the Trustee may proceed,and upon written request of the holders of not less than 25 %in principal amount of the Bonds outstanding shall proceed,to protect and enforce its rights and the rights of the holders of the Bonds under the Resolution forthwith by a suit in equity or at law,whether for the specific performance of any covenant,or in aid of the execution of any power granted under the Resolution or any remedy granted under the Act or for an accounting against the Authority as if the Authority were the trustee of an express trust,or in the enforcement of any other legal or equitable right as the Trustee,being advised by counsel,shall deem most effectual to enforce any of its rights or to perform any of its duties under the Resolution. The holders of not less than a majority in principal amount of the Bonds at the time outstanding may direct the time,method and place of conducting any proceeding for any remedy available to the Trustee,or exercising any trust or power conferred upon the Trustee,provided that the Trustee shall have the right to decline to follow any such direction if the Trustee shall be advised by counsel that the action or proceeding so directed may not lawfully D-32 be taken,or if the Trustee in good faith shall determine that the action or proceeding so directed would involve the Trustee in personal liability or be unjustly prejudicial to the Bondholders not parties to such direction. The Trustee shall not take any action which will unreasonably interfere with the performance of the Power Sales Agreement.The Trustee shall have the right to apply in an appropriate proceeding for the appointment of a receiver of the Project., Restriction on Bondholder's Action No Bondholder shall have any right to institute any suit,action or proceeding for the enforcement of any provision or for any remedy under the Resolution,unless such holder shall have previously given to the Trustee written notice of the happening of an Event of Default,and the holders of at least 25%in principal amount of the Bonds then outstanding shall have filed a written request with the Trustee,and shall have offered it reasonable opportunity either to exercise the powers granted in the Resolution or by the Act or by the laws of the State of Alaska or to institute such action,suit or proceeding,and unless such holders shall have offered to the Trustee adequate security and indemnity against the costs,expenses and liabilities to be incurred,and the Trustee shall have refused to comply with such request for a period of 60 days after receipt of such notice,request and offer of indemnity.No Bondholder shall have any right to affect,disturb or prejudice the pledge created by the Resolution, or to enforce any right under the Resolution,except in the manner provided in the Resolution;and all proceedings to enforce any provision of the Resolution shall be for the equal benefit of all Bondholders. Notice of Default The Trustee shall promptly mail written notice of the occurrence of any Event of Default of which it has actual knowledge to each registered owner of Bonds then outstanding at his address,if any,appearing upon the registry books of the Authority,and to each Purchaser. Responsibilities of Trustee The Trustee,prior to the occurrence of any Event of Default and after the curing of all Events of Default which may have occurred,undertakes to perform such duties and only such duties as are specifically set forth in the Resolution.In case an Event of Default has occurred (which has not been cured)the Trustee shall exercise such of the rights and powers vested in it by the Resolution,and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. Supplemental Resolutions A supplemental resolution may be adopted at any time and shall be fully effective with the consent of the Committee,but without the consent of the Trustee or Bondholders for the following purposes:to limit the issuance of Bonds or other indebtedness;to add limitations and restrictions to be observed by the Authority;or to authorize a Series of Bonds;to confirm,as further assurance,the pledge of the Resolution;and to modify any of the provisions of the Resolution,but only if such modification shall be effective only after all Bonds outstanding at the date of the adoption of such supplemental resolution shall cease to be outstanding. A supplemental resolution may be adopted at any time and shall be fully effective upon the consent of the Trustee and the Committee for the following purposes;to cure any ambiguity,supply any omission,or cure or correct any defect or inconsistent provision in the Resolution;to add provisions clarifying matters or to make changes which do not materially and adversely affect the rights of the Bondholders.The Trustee,in determining whether any amendments or supplements to the Resolution may be made without the consent of Bondowners and in determining whether any action should be taken,shall consider the effect of such amendment,supplement or action on the rights of Bondowners as if the Municipal Bond Insurance Policy were not in effect. Any modification or amendment of the Resolution and of the rights and obligations of the Authority and of the holders of the Bonds may be made with the consent of the Committee and,if required by the terms of a written commitment for Bond insurance,the consent of the Bond Insurer,and with the written consent given as D-33 provided in the Resolution of the holders of at least a majority in principal amount of the Bonds outstanding at the time such consent is given,and (ii)in case less than all of the several Series of Bonds then outstanding are affected by the modification or amendment,of the holders of at least a majority in principal amount of the Bonds of each Series so affected and outstanding at the time such consent is given,and (iii)in case the modification or amendment changes the terms of any Sinking Fund Installment,of the holders of at least a majority in principal amount of the Bonds of the particular Series and maturity entitled to such Sinking Fund Installment and outstanding at the time such consent is given;provided,however,that if such modification or amendment will not take effect so long as any Bonds of any specified like Series and maturity remain outstanding the consent of the holders of such Bonds shall not be required.No such modification or amendment shall permit a change in the terms of redemption or maturity of the principal of any outstanding Bond or any installment of interest thereon or a reduction in the principal amount or the Redemption Price thereof or in the rate of interest thereon without the consent of the holder of such Bond,or shall reduce the percentages or otherwise affect the classes of Bonds the consent of the holders of which is required to effect any such modification or amendment,or shall change or modify any of the rights or obligations of any Fiduciary without its written assent thereto. Defeasance If there shall be paid to the holders of all Bonds the principal or Redemption Price,if applicable,and interest due or to become due thereon,at the time and in the manner stipulated in the Bonds in the Resolution,then the pledge and assignment of any Revenues,and other moneys and securities pledged under the Resolution and all covenants,agreements and other obligations of the Authority to the Bondholders,shall thereupon cease,terminate and become void and be discharged and satisfied.If there shall be paid to the holders of all outstanding Bonds of a particular Series,or of a particular maturity within a Series,the principal or Redemption Price,if applicable,and interest due or to become due thereon,at the times and in the manner stipulated in such Bonds and in the Resolution,such Bonds shall cease to be entitled to any lien,benefit or security under the Resolution,and all covenants,agreements and obligations of the Authority to the holders of such Bonds shall thereupon cease,terminate and become void and be discharged and satisfied. Bonds or interest installments for the payment or redemption of which moneys shall have been set aside and shall be held in trust by the Paying Agents at the maturity or redemption date thereof shall be deemed to have been paid if (a)in case any of said Bonds are to be redeemed on any date prior to their maturity,the Authority shall have given to the Trustee irrevocable instructions to mail notice of redemption of such Bonds on said date,(b)there shall have been deposited with the Trustee either moneys in an amount which shall be sufficient,or Federal Obligations (not subject to redemption other than at the option of the holder)the principal of and the interest on which when due will provide moneys which,together with the moneys,if any,deposited with the Trustee at the same time,shall be sufficient to pay when due the principal or Redemption Price,if applicable,and interest due and to become due on said Bonds on or prior to the redemption date or maturity date thereof,as the case may be, and (c)the Authority shall have given the Trustee irrevocable instructions to mail a notice to the holders of such Bonds that the deposit required by (b)above has been made and that said Bonds are deemed to have been paid and stating such maturity or redemption date upon which moneys are to be available for the payment of said Bonds.The form and substance of any escrow deposit agreement used in connection with the defeasance of Bonds must be acceptable to the Bond Insurer. D-34 APPENDIX E FORM OF OPINION OF BOND COUNSEL [Letterhead of Wohlforth,Argetsinger,Johnson &Brecht] August 28,1990 Board of Directors Alaska Energy Authority 701 East Tudor Road Anchorage,Alaska 95519 John Nuveen &Co.Incorporated 333 West Wacker Drive Chicago,Illinois 60606 Municipal Bond Investors Assurance Corporation 113 King Street Armonk,New York 10504 Security Pacific Bank Washington N.A. Corporate Trust Department T15-1 1301 Fifth Avenue Seattle,Washington 98124 Ladies and Gentlemen: We have acted as Bond Counsel in connection with the issuance by the Alaska Energy Authority (the "Authority")of $60,259,015.10 principal amount of Power Revenue Bonds,Second Series (Bradley Lake Hydroelectric Project)(the "Bonds").We have examined the law and a record of proceedings related to the authorization by the Authority of the Bonds and the Agreement for the Sale and Purchase of Electric Power among the Authority,Chugach Electric Association,Inc.,Golden Valley Electric Association,Inc.,the Municipality of Anchorage d/b/a Municipal Light and Power,the City of Seward d/b/a Seward Electric System,Alaska Electric Generation &Transmission Cooperative,Inc.,Matanuska Electric Association,Inc.,and Homer Electric Association,Inc.dated December 8,1987 (the "Power Sales Agreement"). E-1 The Bonds are issued under the Alaska Energy Authority Act,Chapter 83 of Title 44 of the Alaska Statutes,as amended (the "Act"),a Power Revenue Bond Resolution (the "Bond Resolution")adopted September 7,1989,and a Series Resolution adopted July 25,1990 (together,the "Resolutions"). The Bonds are registered in form,and consist of $56,925,000 principal amount of Current Interest Bonds and $3,334,015.10 initial principal amount of Capital Appreciation Bonds.The Current Interest Bonds are dated July 15,1990,and bear interest at the rates per annum,and mature July 1,in each of the years in the respective principal amounts as follows: Maturity Principal Amount Interest Rate 1992 $780,000 6.10% 1993 985,000 6.20 1994 1,045,000 6.30 1995 1,115,000 6.40 1996 1,185,000 6.50 1997 1,265,000 6.60 1998 1,345,000 6.70 1999 1,435,000 6.80 2000 1,535,000 6.90 2001 1,635,000 6.95 2002 1,750,000 7.00 2003 1,875,000 7.05 2004 2,005,000 7.10 2005 2,150,000 7.15 2013 7,425,000 7.20 2021 29,395,000 7.25 Interest on the Current Interest Bonds is payable on January 1 and July 1 of each year commencing January 1,1991.The Current Interest Bonds are subject to redemption prior to maturity as provided in the Resolutions. The Capital Appreciation Bonds are dated August 28,1990.The Capital Appreciation Bonds accrue interest from their date,compounded semiannually on January 1 and July 1 of each year commencing January 1, 1991 and payable at maturity.The Capital Appreciation Bonds are issued in the Initial Principal Amount,accrue interest at the rates per annum,and mature July 1 in each of the years as follows: Initial Principal Maturity Amount Interest Rate (to two places after the decimal) 2006 $763,231.60 7.10% 2007 711,807.05 7.10 2008 663,840.00 7.10 2009 .617,757.00 7.10 2010 .577,379.45 7.10 The Capital Appreciation Bonds are not subject to redemption prior to maturity. E-2 We have not been engaged nor have we undertaken to review the accuracy,completeness or sufficiency of the Official Statement or other offering material relating to the Bonds (except to the extent,if any,stated in the Official Statement),and we express no opinion relating thereto. As to questions of fact material to our opinion,we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigation. Based upon the foregoing,we are of the opinion that,under existing law: 1.The Authority is duly created and validly exists as a body corporate and politic and public instrumentality of the State with the corporate power to authorize the Power Sales Agreement,adopt the Resolutions, perform the agreements on its part contained therein and issue the Bonds. 2.The Power Sales Agreement is in full force and effect and constitutes a valid and binding agreement of the parties thereto authorized by the Act and enforceable in accordance with its terms,except as the enforcement thereof may be limited by bankruptcy,insolvency,reorganization,moratorium or other laws affecting the enforcement of creditors'rights generally,or general principles of equity.As to the validity and binding effect of the Agreement with respect to the parties thereto other than the Authority,we have relied upon opinions of counsel to the other parties. 3.All necessary approvals and consents for the valid authorization by the Authority of the Power Sales Agreement have been obtained. 4.Neither the execution and delivery of the Power Sales Agreement by the Authority nor the performance of the Power Sales Agreement by the Authority (i)will conflict with the Act or the regulations of the Authority, (ii)will violate any law or published rule or regulation applicable to the Authority,or (iii)will result in a breach of,or default under,any resolution or other agreement or instrument known to us and to which the Authority is a party or is bound. 5.The Resolutions have been duly adopted by the Authority and are in full force and effect and constitute valid and binding obligations of the Authority enforceable upon the Authority in accordance with their terms. 6.Pursuant to the Act,the Resolutions create a valid lien on the revenues and funds pledged by the Resolutions for the security of the Bonds on a parity with other bonds issued and any further bonds to be issued under the Bond Resolution,subject to no prior lien granted under the Act. 7.The Bonds have been duly authorized,executed and delivered by the Authority and are valid and binding general obligations of the Authority.The Bonds do not constitute an indebtedness or other liability of the State of Alaska or any political subdivision thereof other than the Authority. 8.Interest on the Bonds is excluded from gross income subject to federal income taxation pursuant to Section 103 of the Internal Revenue Code of 1986,as amended (the "Code")except for any period during which a Bond is held by a "substantial user"of the facilities financed by the Bonds or a "related person”within the meaning of Section 147(a)of the Code.Interest on the Bonds is not an item of tax preference for purposes of determining alternative minimum taxable income for individuals or corporations under the Code.However,interest on the Bonds is taken into account in the computation of adjusted current earnings for purpose of the corporate alternative minimum tax under Section 55 of the Code and in the computation of the environmental tax on corporations under Section 59A of the Code. The opinions set forth in the preceding paragraph are subject to the condition that the Authority comply with all requirements of the Code and the regulations applicable thereto that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be,or continue to be,excluded from gross income for federal E-3 income tax purposes.The Authority has covenanted to comply with each such requirement.Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds.We express no other opinion regarding any other federal tax consequences arising with respect to ownership of the Bonds. 9.Interest on the Bonds is excluded from taxation by the State of Alaska except to the extent that inclusion of said interest in computing the corporate alternative minimum tax under Section 55 of the Code,as described above,may affect the corresponding provisions of the State of Alaska corporate income tax. We have examined a copy,identified to our satisfaction,of one of the authenticated Bonds of this issue and have found the same to have been executed in the manner required by law. Very truly yours, WOHLFORTH,ARGETSINGER, JOHNSON &BRECHT By: Eric E.Wohlforth E-4 APPENDIX F FINANCIAL STATEMENTS OF THE AUTHORITY Audited Financial Statements and Other Financial Information Alaska Power Authority June 30,1989 Audited Financial Statements and Other Financial Information ALASKA POWER AUTHORITY June 30,1989 Report of Independent Auditors ...1...»-+ee«eeeee Combined Financial Statements: EXHIBIT I Combined Balance Sheet...2..6 ee «6 se eee Combined Statement of Revenues,Expenditures II and Changes in Fund Balance .....eo see Notes to Combined Financial Statements...... Other Financial Information: SCHEDULE Special Revenue Funds: 1 Combining Balance Sheet ..2.2.6 «ee eee 2 Combining Statement of Revenues,Expenditures and Changes in Fund Balance ..2.2.«2 «©« 3 Schedule of Unexpended Appropriations--Projects 4 Schedule of Unexpended Appropriations--Grants . Capital Projects Funds: 5 Combining Balance Sheet ....1.»«es ee ©» 6 Combining Statement of Revenues,Expenditures and Changes in Fund Balance ......«2 «« 7 Schedule of Unexpended Appropriations and Total Project Costs ..1...2s se ee es ee ew General Fixed Assets Account Group: 8 Schedule of Changes in General Fixed Assets .. 9 Schedule of Loans Receivable.....«««»«« 02 4 6 20 21 22 23 24 25 26 27 28 REPORT OF INDEPENDENT AUDITORS The Board of Directors Alaska Power (Energy)Authority We have audited the accompanying combined financial statements of the Alaska Power Authority,as of June 30,1989 and for the year then ended, as listed in the table of contents.These combined financial statements are the responsibility of the Alaska Power Authority's management.Our responsibility is to express an opinion on these combined financial statements based on our audit.The combined financial statements of the Alaska Power Authority for the year ended June 30,1988,were audited by other auditors whose report dated October 13,1988 expressed an unqualified opinion on those statements. We conducted our audit in accordance with generally accepted auditing standards.Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement.An audit includes examining,on a test basis,evidence supporting the amounts and disclosures in the combined financial statements.An audit also includes assessing the accounting principles used and significant estimates made by management,as well as evaluating the overall combined financial statement presentation.We believe that our audit provides a reasonable basis for our opinion. In our opinion,the combined financial statements referred to above present fairly,in all material respects,the financial position of the Alaska Power Authority,as of June 30,1989,and the results of its operations for the year then ended in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the combined financial statements taken as a whole.The combining and individual fund and account group financial statements and schedules listed in the table of contents are presented for purposes of additional analysis and are not a required part of the combined financial statements of the Alaska Power Authority.Such information has been subjected to the auditing procedures applied in the audit of the combined financial statements and,in our opinion,is fairly presented in all material respects in relation to the combined financial statements taken as a whole. Canet ungOctober6,1989 COMBINED BALANCE SHEET ALASKA POWER AUTHORITY June 30,1989 Fund Types Special Capital Operating Revenue Projects -_Fund funds _Funds_ ASSETS Cash and investments $-$-$338,654,982 Due from State of Alaska 12,502 3,825,926 237,998 Due from other funds -1,416,173 - Receivables: Operating fees -7,676,813 - Power project loans -29,636,011 - Rural electrification revolving loans -4,488,378 - Accrued interest -671,318 2,414,823 Other -178,184 - General fixed assets --- Amount to be provided for retirement of general long-term debt--Note E === TOTAL ASSETS $12,502 $47,892,803 $341,307,803 LIABILITIES AND FUND EQUITY LIABILITIES Accounts payable $12,502 $4,018,150 $8,254,540 Retainage payable --2,665,993 Due to State of Alaska: Power project loans -29,636,011 - Rural electrification revolving loans -4,488,378 - Accrued interest -8,379,331 - Other -14,128 - Due to other funds --1,416,173 Accrued interest --1,774,605 Deferred revenue -60,958 53,400,069 Note and bonds payable === TOTAL LIABILITIES 12,502 46,596,956 67,511,380 FUND EQUITY Investment in general fixed assets --- Reserve for encumbrances 291 2,198,560 124,945,350 Designated project fund balances (deficit)_(291)___(902,713)_148,851,073 TOTAL FUND EQUITY =1.225.847 -273,796,423 TOTAL LIABILITIES AND FUND EQUITY $12,502 $47,892,803 $341,307,803 Account Groups General Fixed Assets Long-termDebt Totals (memorandum only) General $-§$- =$452,624,514 $757.792,061 $452,624,514 $-$- =452,624,514 -452,624,514 137,792,061 = June 30 1989 1988 $338,654,982 $380,048,297 4,076,426 3,735,756 1,416,173 13,309 7,676,813 6,980,292 29,636,011 26,447,391 4,488,378 4,314,130 3,086,141 2,278,488 178,184 36,563 757,792,061 709,449,379 -452,624,514_453,604,130 $1.599.629.683 $1,586,907.735 $12,285,192 2,665,993 29,636,011 4,488,378 8,379,331 14,128 1,416,173 1,774,605 53,461,027 4 4.514 566,745,352 757,792,061 127,144,201 147,948 069 1.032.884,331 $757,792,061 $452.624,.514 $1,599,629,683 See notes to combined financial statements. -3- $8,479,095 513,132 26,447,391 4,314,130 7,391,938 560,373 13,309 1,108,378 104,268,451 -453,604 .130606,700,327 709,449,379 139,583,423 131,174,606 --280,207.408 $1,586 .907,.735 COMBINED STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCE ALASKA POWER AUTHORITY Year Ended June 30,1989 Special Operating Fund Revenue Funds REVENUES: State of Alaska appropriations $791,627 $22,876,436 Operating fees -10,647,252 Interest -1,787,259 Federal grant -64,234 Other __=__294 627 791,627 35,669,808 EXPENDITURES: General and administrative 791,627 138,012 Power cost equalization -17,472,269 Projects -3,195,589 Operating plants -2,959,059 Debt payments to State of Alaska: Interest -9,561,746 Principal - 122,362 Other == 291,627 35,873,961 EXCESS (DEFICIENCY)OF REVENUES OVER EXPENDITURES -(204,153) OTHER FINANCING SOURCES: Proceeds from borrowed funds =1,500,000 EXCESS OF REVENUES AND OTHER SOURCES OVER EXPENDITURES -1,295,847 Fund equity at July 1 -= FUND EQUITY AT JUNE 30 $-$1.295.847 _Iotals (memorandum only)Capital June 30 Project Funds 1989 1988 $51,939,262 $75,607,325 $39,373,611 -10,647,252 10,198,628 65,052 1,852,311 1,842,185 -64,234 58,000 -294.627 122,195 52,004,314 88,465,749 51,594,619 -929,639 809,821 46,608,520 49,804,109 18,927,820 -2,959,059 3,271,684 9,561,746 8,508,332 =-207,620 -48,965.920 _85,631,508 _50,258,674 3,038,394 2,834,241 1,335,945 -1,500,000 - 3,038,394 4,334,241 1,335,945 270,758,029 _270,758,029 _269,422,084 $273,796.423 $275,092.270 $270,758,029 See notes to combined financial statements. NOTES TO COMBINED FINANCIAL STATEMENTS ALASKA POWER AUTHORITY June 30,1989 NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES :The accompanying financial statements include all the activities of the Alaska Power Authority (Power Authority).The Alaska Power Authority was created in 1976 by an act of the State of Alaska Legislature (Legislature),Alaska Statute 44.83.010.The Power Authority was established to promote,finance,develop and operate power production facilities in Alaska.Such facilities may operate on fossil fuels,waste energy and renewable energy resources,including hydroelectric power, wind,biomass,geothermal,tidal and solar. The Power Authority is authorized to issue its own bonds and other obligations in such principal amounts as,in the opinion of the Power Authority,will be necessary to provide for sufficient financing for carrying out its purpose.Obligations issued are not deemed to constitute a debt of the State of Alaska unless authorized by the Legislature. Financing for the operations of the Power Authority is dependent upon annual appropriations from the Legislature. Executive Order,No.75,effective July 1,1989 changed the Alaska Power Authority's name to the Alaska Energy Authority.See Note I for further discussions of Executive Order No.75. --:The accounts of the Power Authority are organized on the basis of funds and account groups,each of which is considered a separate accounting entity.The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets,liabilities,fund balance,revenue and expenditures.The Power Authority's resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and are summarized by type in the combined financial statements.The following fund types and account groups are used by the Power Authority: Fund Types: Operating Fund:The Operating Fund accounts for all appropriations from the state which are to be expended by the Power Authority for administrative and operating costs.It is used to account for all financial resources except those required to be accounted for in another fund. NOTES TO COMBINED FINANCIAL STATEMENTS--Continued ALASKA POWER AUTHORITY NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES---Continued Special Revenue Funds:The Special Revenue Funds account for specific revenue sources (other than major capital projects)which are legally restricted to specific purposes.Revenue sources accounted for include certain state appropriations and operating fees from operating plants. Capital Projects Funds:The Capital Projects Funds account for financial resources,including certain state appropriations,to be used for the acquisition or construction of major capital facilities. Account Groups GeneralFixedAssets:This group of accounts is established to account for all fixed assets of the Power Authority. General Long-term Debt Account Group:This group of accounts is established to account for all long-term debt of the Power Authority. BasisofAccounting:The financial activities of the Power Authority are recorded using the modified accrual basis of accoumting whereby revenues are recorded when they become both measurable and available and expenditures are recorded when the related fund liability is incurred. Principal and interest on general long-term debt are recorded as fund liabilities when due or when amounts have been accumulated for payments to be made early in the following years. StateAppropriations:Appropriations are made by the Legislature to the Power Authority in the state general fund and or the following statestatutoryfunds: PowerDevelopmentFund(AS 44,83,382):The Power Development Fundaccountsforappropriationsfortheenergyprogramforthestateto be expended by the Power Authority for reconnaissance and feasibility studies,power project finance plans,power project construction,debtserviceandpowerprojectoperatingcosts. Power Project Fund (AS 44,83,170):The Power Project Fund accountsforappropriationswhicharetobeexpendedbythePowerAuthority intheformofloansforfeasibilitystudiesorloansforthedesignand construction of power or potable water supply projects consistent with the Power Authority's mandate. NOTES TO COMBINED FINANCIAL STATEMENTS--Continued ALASKA POWER AUTHORITY NOTE A- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued Power CostEqualizationFund(AS 44,83,162):The Power CostEqualizationFundaccountsforappropriationstobeexpended by the Power Authority for the purpose of providing power cost assistance to electric utilities to reduce the cost of electric energy to the consumer. RuralElectrificationRevolvingLoanFund(AS 44,83.361):The RuralElectrificationRevolvingLoanFundaccountsforappropriationstobe used by the Power Authority to make loans to electric utilities for the purpose of extending new electric services into an area of the state that an electric utility may serve under a certificate of public convenience and necessity issued by the Alaska Public Utilities Commission. :The Power Authority is subject to accounting requirements of the Federal Energy Regulatory Commission (FERC)on certain hydroelectric projects licensed by FERC.Such requirements do not differ materially from generally accepted accounting principles,the standards upon which the accompanying combined financial statements are presented. Genera]Fixed Assets:Fixed assets acquired are capitalized at cost in the General Fixed Assets Account Group and are recorded as expenditures in the Fund Types.No depreciation has been provided for general fixed assets.For hydroelectric plants financed through restricted tax-exempt borrowings,interest cost on the borrowings,less any interest earned on the related interest-bearing investments acquired with proceeds of the borrowings from the date of the borrowing until the plant is substantially complete,has been capitalized. Investments:Investments are recorded at cost or amortized costs which approximates market. Income Taxes:The Internal Revenue Code provides that gross income for tax purposes does not include income accruing to a state or territory or any political subdivision thereof which is derived from the exercise of any essential governmental function or from any public utility.According to Alaska statutes,the Power Authority constitutes a political subdivision of Alaska and is therefore exempt from state and federal taxes. Encumbrances:Encumbrance accounting,under which purchase orders, contracts and other commitments for the expenditure of monies are récorded in order to reserve that portion of the applicable appropriation,is employed as an extension of formal budgetary integration in the Operating Fund,Special Revenue Funds and Capital Projects Funds.Encumbrances outstanding at year end are reported as reservations of fund balances since they do not constitute expenditures or liabilities. -8 NOTES TO COMBINED FINANCIAL STATEMENTS---Continued ALASKA POWER AUTHORITY NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued ComparativeTotalData:Comparative total data for the prior year have been presented in the accompanying combined financial statements in order to provide an understanding of changes in the Power Authority's financial position and operations.However,comparative data (i.e.,presentation of prior year totals by fund types)have not been presented in each of the statements,since their inclusion would make the statements unduly complex and difficult to read. The total data are the aggregate of the fund types and account groups.No consolidating or other eliminations were made in arriving at the totals, thus they do not present consolidated information. NOTE B--CASH AND INVESTMENTS Pursuant to various loans and acquisition agreements relating to either Bradley Lake or the Four Dam Pool,the Power Authority has established funds to account for assets restricted to construction and financing activities.In the financial statements these funds are classified as cash and investments.The components of this classification are as follows: Demand and time deposits $791,915 Investments 337,863,067 $338 654,982 Demand and TimeDeposits:As of June 30,1989,the Authority has a carrying value for demand deposits of $141,915 and time deposits of$650,000 held in accounts of the City of Ketchikan as trustee for the Swan Lake Hydroelectric project.The bank balances of these accounts are covered by FDIC insurance or collateral held by the City of Ketchikan's agent in the name of the City. Investments:Statutes authorize the Authority to esrablish trust funds for the investment and deposit of bond proceeds.Statutes and applicable trust agreements authorize the Authority to invest in federal obligations, obligations of States or political subdivisions,interest bearing accounts or certificates of deposit,agency obligations,repurchase agreements, public housing bonds,commercial paper and bankers acceptances. NOTES TO COMBINED FINANCIAL STATEMENTS--Continued ALASKA POWER AUTHORITY NOTE B--CASH AND INVESTMENTS--Continued Investments--Continued: The Power Authority's investments are categorized below to give an indication of risk assumed by the Authority at year end.Category 1 includes investments that are insured,registered or collateralized with securities held by the Authority or its agents in the Authority's name. Category 2 includes uninsured and unregistered investments or collaterialized investments,with securities held by pledging financial institutions trust department in the Power Authority's name.Category 3 includes uninsured,unregistered and uncollateralized investments,with securities held by the pledging financial institution or by its trust department but not in the Authority's name. Categor Category Category Carryingi433___Amount«-Market Value Repurchase agreements $$268,717,467 $-$268,717,467 $268,978 ,967 U.S.Government securities 5.919,677 63,225,923 -_.69,145,600 _68,341,388 $5,919,677 $331.943.390 $= $337,963.067 $337,323,355 Pursuant to the Bradley Lake Variable Rate Demand Bonds (Bonds)Indenture, through June 30,1989,the State of Alaska has deposited with the bond trustee $166,000,000 restricted to construction activities of the Bradley Lake hydroelectric project.The remaining balance of $63,225,923 at June 30,1989 is included in the Bradley Lake investment funds.However, interest earnings and realized gains and losses on these monies are paid by the trustee directly to the State of Alaska and are not included in the accompanying financial statements. In accordance with an opinion of the State of Alaska,Attorney General's Office (Attorney General),interest earnings from investment of the proceeds from the note payable to the State of Alaska,Power Development Revolving Loan Fund (PDRLF)held by the Power Authority for the Four Dam Pool Project,are paid to the State of Alaska. NOTE C--FIXED ASSETS A summary of changes in general fixed assets follows: Balance at .Balance atAdditionsTransfers.Deletions June30,1989 Buildings and equipment $3,993,290 §$-$239,958 $698,633 $3,534,615 Plant in service 625,864,657 (5,793,497)3,648,691 927,000 622,792,851 Construction in progress-Bradley Lake hydroelectric project 65,295,737 52,972,651 --118,268,388Continuingprojects14,295,694 2.970.798 _(3,888,649)181,636 13,196,207 $709.449,378 $50,149,952 S$=$1,807,269 $757,792,061 -10- NOTES TO COMBINED FINANCIAL STATEMENTS----Continued ALASKA POWER AUTHORITY NOTE D--LONG-TERM DEBT The following is a summary of changes in long-term debt for the year ended June 30,1989: Balance at Balance at Additions Reductions Note payable to the State ofAlaskaPowerDevelopment Revolving Loan Fund (a)$186,104,130 $1,500,000 $2,479,616 $185,124,514 Bradley Lake variable ratedemandbonds(b)267.500.000 =-_267,500.000 $453,.604.130 $1,500,000 $2,479,616 $452,624.514 (a)The note payable to the State of Alaska (note)at June 30,1989 is subject to the terms and conditions of a loan agreement effective October 28,1985.This note is administered by the Department of Commerce and Economic Development,(Department).The loan proceeds are restricted to financing hydroelectric projects under the State of Alaska energy program.The note is due October 28, 2030 and provides for interest-only repayments for the first fifteen years in an amount not less than the debt service component of the proceeds from the sale of power generated from the Solomon Gulch,Swan Lake,Terror Lake and Lake Tyee hydroelectric facilities (Four Dam Pool Project).For the remaining term,the loan provides for payments in equal annual installments at an interest rate of 8%,subject to the reopener of the debt service component of the wholesale power rate in the fifteenth and thirtieth anniversaries of the loan agreement. Additional revenues received from Interruptible Power Sales of the Four Dam Pool are submitted to the Departmentfor deposit into thePowerDevelopmentRevolvingLoanFund.Effective in fiscal year 1989,the Department and the Power Authority have agreed to apply the receipts as 1)additional interest for amounts received through December 31,1988,and 2)repayment of principal for the amounts received from January 1 through June 30,19&9. All of the assets of the Four Dam Pool Project and the rights under agreements and revenues derived From use of capacity and sale of output of the Four Dam Pool Project have been pledged as security under the loan agreement. -ll- NOTES TO COMBINED FINANCIAL STATEMENTS--Continued ALASKA POWER AUTHORITY NOTE D---LONG-TERM DEBT---Continued (b)The Bradley Lake variable rate demand bonds are general obligations of the Power Authority.The bonds were issued in November 1985.The proceeds of the bonds will be used to a)fund design and construction costs of the Bradley Lake Hydroelectric Project,b)fund a Capital Reserve Fund,c)capitalize a portion of the interest on the bonds and d)pay costs of issuance of the bonds.The redemption schedule for these bonds is included in the scheduled maturity section of this note. The bonds bear interest at a variable or fixed interest rate as established from time to time in accordance with the indenture. The maximum interest rate borne by the bond shall not exceed 12% as long as a letter of credit is outstanding and shall not exceed 18%otherwise.At June 30,1989,a weekly adjusted variable interest rate was in effect.As provided for in the indenture, the bonds are subject to optional redemption during variable interest rate periods and subject to mandatory redemption subject to certain exceptions,as of the date the Power Authority elects to have the bonds bear interest at a fixed rate.The bonds are subject to mandatory sinking fund redemption beginning in 1994. The Power Authority is required to establish a Capital Reserve Fund with the bond trustee in an amount as outlined in the indenture and to certify annually to the State of Alaska,in accordance with AS 44.83.110,the amount on deposit and the amount,if any,required to restore the Capital Reserve Fund to the capital reserve requirement per the indenture.The bond indenture also contains limitations and restrictions on the maintenance and flow of monies through various restricted accounts.The Power Authority is in compliance with all such limitations and restrictions. The bonds are subject to purchase on the demand of the holder at a price equal to principal plus accrued interest on seven days' notice and delivery to the Authority's remarketing agents,John Nuveen and Co.and the First Boston Corporation.The remarketing agents are authorized to use their best efforts to sell the repurchased bonds at a price of not less than the principal amount plus accrued interest. -12- NOTES TO COMBINED FINANCIAL STATEMENTS--Continued ALASKA POWER AUTHORITY NOTE D--LONG-TERM DEBT--Continued The bonds are secured by an irrevocable direct pay letter of credit wherein,the administrative bank for this letter of credit is the Mitsubishi Bank Limited.The amount of this letter of credit is $273,216,441 (the par value of the bonds plus sixty-five days interest at 12%).As of June 30,1989,no disbursements had been made under the letter of credit which expires October 11, 1991.The Power Authority may,but is not required to,maintain the initial letter of credit or provide for an alternative letter of credit after the initial letter of credit expires.The bonds are subject to mandatory redemption except as provided for in the indenture if the initial letter of credit is not extended. If the remarketing agent is unable to resell any bonds that are "tendered"within the notice period then the Authority has through the termination date of the letter of credit to repay the bank.- The letter of credit carries a variable interest rate which increases over time from the Federal Funds Rate plus 1/2%for 30 day tender advances to the institution's prime lending rate plus 2%for longer term advances., The Authority is required to pay to the administrative bank,an annual commitment fee for the letter of credit of 1/2 of 1 percent per annum of the outstanding principal amount of the bonds,plus 65 days of interest at an interest rate of 12 percent.In addition,the remarketing agent receives an annual fee of one-eighth of 1 percent of the outstanding principal amount of the bonds. Scheduled maturities of long-term debt as of June 30,1989,and prior to the subsequent partial refinancing of the Bradley Lake Variable Rate Demand Bonds are as follows: Notes Payable Bradley Lake Year Ending Power Development Variable Rate Principal -June 30 Revolving Loan Fund Demand Bonds -Amount _ 1990 $1,500,000 $-$1,500,000 1994-2000 -8,800,000 8,800,000 2001-2010 23,481,835 34,000,000 57,481,835 2011-2020 50,695,521 105,800,000 156,495,521 2021-2030 109,447,158 118,900,000 _228,347,158 $185,124,514 $267,500,000 $452.624,514 -13- NOTES TO COMBINED FINANCIAL STATEMENTS--Continued ALASKA POWER AUTHORITY NOTE D--LONG-TERM DEBT--Continued In September of 1989,the Authority issued approximately $105,000,000 variable term fixed rate tax exempt bonds.The proceeds of this issue will be used to retire outstanding variable rate demand bonds. Interest expense on borrowings totaled $24,501,607 and $19,891,206 in 1989 and 1988,respectively.Interest expense of $16,727,120 and interest income of $23,676,652 for 1989 and interest expense of $13,135,319 and interest income of $18,164,277 for 1988 related to tax exempt borrowings have been capitalized on the Bradley Lake Project. In 1982,the Power Authority assumed $44,858,858 of 5%mortgage notes payable which provide for quarterly principal and interest payments to the Rural Electrification Association (REA)in connection with the Solomon Gulch Hydroelectric Project.At June 30,1989,the unpaid principal balance is $40,880,404.Concurrent with the assumption,the Power Authority deposited with a trustee an amount sufficient to satisfy and provide for timely repayment of all principal and interest due on the assumed REA loans.Accordingly,the loans and related trust assets are not included in the combined financial statements of the Power Authority. As of June 30,1989 the assets in this trust had a carrying value of $20,932,343. NOTE E--PROJECT OPERATIONS Four Dam PoolProject:Effective October 28,1985,the Authority entered into a long-term power sales agreement (agreement)with utilities purchasing electricity from the Four Dam Pool Project.Pursuant to the agreement,a project management committee (PMC)was formed and the participating utilities make monthly payments to the PMC,net of each utility's facility operating costs,for the utility's share of total estimated costs (including system operating costs,Authority and PMC costs,and a Renewal and Replacement Fund contribution)at a set price per kilowatt hour used each month,with an annual settlement to adjust the payments to actual costs.Debt service payments by the participating utilities to the PMC are at a rate per kilowatt hour used each month as outlined in the agreement.The PMC makes monthly payments to the Power Authority for the Power Authority's share of the estimated costs and an annual payment for the debt service. The agreement terminates October 28,2030 and the utilities may renew the agreement on the same terms and conditions for any term not to exceed the remaining useful life of the system as determined by the Power Authority. -14- NOTES TO COMBINED FINANCIAL STATEMENTS---Continued ALASKA POWER AUTHORITY NOTE E--PROJECT OPERATIONS--Continued . A summary of the Power Authority's operating results of the Four Dam Pool Project for the year ended June 30,1989 follows: OPERATING FEE REVENUES: Operating administrations $1,385,362 Debt service: Annual debt service 7,671,450 Interruptible power 220,897 Other 4,503 TOTAL OPERATING FEE REVENUES 9,282,212 OPERATING EXPENDITURES: Operating administration _1,385,363 Debt service: Interest 7,774,487 Principal __122,362 TOTAL OPERATING EXPENDITURES _9,282,212 EXCESS OF OPERATING FEE REVENUES OVER OPERATING EXPENDITURES §$-0- KILOWATT HOURS SOLD 232,289.36] Anchorage-Fairbanks Intertie:Effective May 1,1986,the Power Authority entered into an agreement with the utilities using the Anchorage-Fairbanks Intertie for electrical power and energy transmissions.Pursuant to the agreement,the Power Authority is reimbursed for operation and maintenance costs.The agreement may be terminated by the Authority if the Authority determines that such action is required to improve power systems servicing the Alaska Railbelt Utilities or may be terminated by the mutual agreement of the participants. A summary of the Power Authority's operating results of the Anchorage- Fairbanks Intertie for the year ended June 30,1989 follows: OPERATING FEE REVENUES $1,322,907 OPERATING EXPENDITURES 1,322,907 EXCESS OF OPERATING FEE REVENUES OVER OPERATING EXPENDITURES $ -0- KILOWATT HOURS WHEELED 186,511,000 -15- NOTES TO COMBINED FINANCIAL STATEMENTS--Continued ALASKA POWER AUTHORITY NOTE E--PROJECT OPERATIONS--Continued Klaw :During fiscal years 1989 and 1988,the Power Authority entered into maintenance and inspection agreements with those electric utility consumers benefiting from the use of the Waste Heat Recovery facilities and the Craig-Klawock Transmission Line.Consumers are billed for waste heat purchased from the facilities and the transmission line usage.The revenue received from the billings is to be used for maintenance and inspection of the facilities.During the year,the Power Authority received $46,635 under the agreements. Self-Insurance:In fiscal year 1989,the Authority established a self-insurance fund.In the current fiscal year,loan proceeds of $1,500,000 were received from the Power Development Revolving Loan Fund. Funds in the amount of $204,153 have been expended in fiscal year 1989 for necessary repair and replacement of the Solomon Gulch Transmission Line resulting from the December 16,1988 Thompson Pass avalanche. NOTE F---PRINCIPAL AND INTEREST REPAYMENTS TO THE STATE OF ALASKA Pursuant to AS 44.83.170 and AS 44.83.361,the Authority is required to reimburse the State of Alaska General Fund for the interest and principal payments received related to the power project loan program,and the interest payments received related to the Rural Electrification loan program. Components of principal and interest repayments to the State of Alaska for the year ended June 30,1989 consist of the following: Rural electrification revolving loans $87,962 Power project loans: Principal 2,273,640 Interest 1,699,297 $4,060,899 16- NOTES TO COMBINED FINANCIAL STATEMENTS--Continued ALASKA POWER AUTHORITY NOTE G--UNEXPENDED APPROPRIATIONS A summary of unexpended appropriations by fund as of June 30,1989 follows: Special Revenue Funds: Power Cost Equalization -$5,715,154 Power Project Loans 2,085 ,564 Rural Electrification Revolving Loans 601,122 Projects 1,965,647 Grants 1,418,349 Capital Project Funds: Bradley Lake 53,255,616 Anchorage-Fairbanks Intertie 3,123,787 Four Dam Pool Project 3,821,450 Craig-Klawock Transmission Line 265 $71,986 954 The above balances do not reflect loan commitments or encumbrances at June 30,1989. NOTE H--PENSION PLAN All full-time employees of the Authority participate in the State of Alaska Public Employees Retirement System (PERS),a multiple employer public retirement system.The Authority is a part of the State of Alaska and detail pension information is not generated for the Authority.Total salaries for Authority employees covered by PERS for the year ended June30,1989 amounted to $2,882,990. Authority employees are required to contribute 6.75%of their annual salaries to PERS.The Authority contributes the remaining amounts necessary to fund the actuarially determined contribution for the year. For the fiscal year ended June 30,1989 the Authority's contribution was 9.65%of covered payroll. Benefits vest after five years of credited service.Employees hired prior to July 1,1986 with five or more years of credited service are entitled to annual pension benefits beginning at normal retirement age 55 or early retirement age 50.For employees hired after June 30,1986 the normal and early retirement ages are 60 and 55,respectively.The normal annual pension benefit is equal to 2 -2-1/2 percent of the member's highest three-year average monthly compensation. -l7- NOTES TO COMBINED FINANCIAL STATEMENTS--Continued ALASKA POWER AUTHORITY NOTE H--PENSION PLAN--Continued The pension benefit obligation was computed as part of an actuarial valuation as of June 30,1988.Significant actuarial assumptions used in the valuation include a)a rate of return on the investment of present and future assets of 9 percent per year compounded annually,b)projected salary increases of 6.5 percent a year for the first five years of employment and 5.5 percent per year thereafter. Total unfunded pension benefit obligation applicable to the State of Alaska's employees was $162,842,000 at June 30,1988,as follows (in thousands): Amount Pension benefit obligation $753,833 Net assets available -_590,991 ASSETS IN EXCESS OF (UNFUNDED) PENSION BENEFIT OBLIGATION $(162,842) ASSETS AS A PERCENT OF PENSION BENEFIT OBLIGATION _78% NOTE I--CONSTRUCTION LITIGATION SETTLEMENTS During the current year,the Authority received litigation settlements of $6,000,000 on the Tyee Hydroelectric Project and $3,061,094 on the Anchorage-Fairbanks Intertie.All the proceeds from the settlements were recorded as expenditure abatements.A portion of the Tyee settlement,in the amount of $2,357,400,was used to reduce the note payable to the State of Alaska. NOTE J--COMMITMENTS AND CONTINGENCIES The Power Authority,in the normal course of the business of its activities,is involved in various claims and pending litigation.The State of Alaska,Department of Law manages all pending litigation of the Power Authority,and any liability arising from the settlement of pending claims is a State of Alaska liability for which the Department of Law or the Power Authority requests an appropriation from the Legislature to satisfy judgment.In the opinion of management,the disposition of- current claims and pending litigation is not presently expected to have a material adverse effect on the Power Authority's combined financial statements. -18- NOTES TO COMBINED FINANCIAL STATEMENTS--Continued ALASKA POWER AUTHORITY NOTE J--COMMITMENTS AND CONTINGENCIES--Continued The Power Authority,in the normal course of providing loans through the Rural Electrification Revolving Loan Fund and the Power Project Loan Fund, incurs commitments for future loans which are not reflected in the accompanying combined financial statements.As of June 30,1989,the Power Authority has commitments as follows:. Rural Electrification Revolving Loan Fund i $517,790 Power Project Loan Fund DO 2,031,438 $2,549,228 NOTE K--SUBSEQUENT EVENTS Effective July 1,1989,Executive Order No.75 dated January 9,1989, changed the Alaska Power Authority name to the Alaska Energy Authority to reflect the increased diversified responsibilities assigned by the Order to the agency.The Order also transferred the management of two of the state's energy loan programs from the Department of Commerce and Economic Development to the Energy Authority.These programs are a)the Bulk Fuel Revolving Loan Fund which is to provide low interest loans to rural communities for bulk purchases of fuel,and b)the Power Development Revolving Loan Fund,which is to provide loan funds to Alaska Energy Authority projects developed under the Energy Program for Alaska. Effective July 1,1989,the Energy Authority established a self-insuranceprogrambyestablishinga$10,000,000 line-of-credit secured by a capitalreservefundof$6,500,000 for the Four Dam Pool.For the Anchorage-Fairbanks Intertie,the program consisted of a $1,000,000 line-of-credit. On September 7,1989,The Energy Authority issued approximately $105,000,000 variable term fixed rate tax-exempt bonds for long term financing of the Bradley Lake Hydroelectric Project.The proceeds from the bond issue will be used to retire outstanding variable rate demand bonds which provided the interim financing for construction of the Bradley Hydroelectric Project. -19- -0%-COMBINING BALANCE SHEET-SPECIAL REVENUE FUNDS ALASKA POWER AUTHORITY June 30,1989 Power Rural Project ElectrificationRevolvingLoansASSETS Due from State of Alaska $-$- Due from other funds -- Receivables: Operating fees -- Power project loans 29,636,011 - Rural electrification revolvingloans -4,488,378 Accrued interest 626,434 44,884Other=- $20.262.445 $4,533,262 LIABILITIES AND FUNO EQUITY LIABILITIES Accounts payable $-$- Due to State of Alaska: Power project loans 29,636,011 - Rural electrification revolvingJoans -4,488,378 Accrued interest 626,434 44, Other -- Oeferred revenue == TOTAL LIABILITIES 30,262,445 4,533,262 FUND EQUITY Reserved for encumbrances -- Designated project fund balances == $30,262,445 Operating-Plants $182,803 1,416,173 7,676,813 -178.184 42..453.,973 $427,406 7,708,013 14,128----8.5798,158,126 1,350,738 (44.871) -L.225..847 Power Cost Projects _Grants $3,476,630 $119,375 $47,118 $3..476.6930 £119,375 £47,118 $3,476,630 $75,917 $38,197 =43,458 3,476,630 119,375 47,118 17,165 463,029 367 ,648 )_{463.029)) Schedule1 Totals June 30 1989 1988 $3,825,926 $3,604,879 1,416,173 13,309 7,676,813 6,980,292 29,636,013 26,447 ,391 4,488,378 4,314,130 671,318 636,051 £47,.892.803 $42,032,615 $4,018,150 $3,792,656 29,636,011 26 ,447,391 4,488,378 4,314,130 8,379,331 7,391,938 14,128 55,016 --_60.958 __31.484 46,596,956 42,032,615 2,198,560 1,566,450--(902..713))-1,295,847 ,ny -1%-COMBINING STATEMENT OF REVENUES,EXPENDITURES,AND CHANGES IN FUNO BALANCE--SPECIAL REVENUE FUNDS ALASKA POWER AUTHORITY Year Ended June 30,1989 REVENUES: State of Alaska appropriationsOperatingfeesInterest Federal grantOther TOTAL REVENUES EXPENDITURES: General and administrative Power Cost Equalization ProjectsGrants Operating plantsDeptpaymentsto State of Alaska: Interest Principal TOTAL EXPENDITURES EXCESS (DEFICIENCY)OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES; Proceeds from borrowed other funds EXCESS OF REVENUE AND OTHER SOURCES OVER EXPENDITURES Fund balance at beginning of year FUND BALANCE AT ENO OF YEAR Achedule2 Power Rural Totals Project Electrification Operating Power Cost June 30RevolvingLoans_Plants i Projects.Grants 1989 1988 $2,812 $6,302 $-$17,601,167 $3,095,955 $2,170,200 $22,876,436 $21,747,901 --10,647,252 ---10,647,252 10,198,6281,699,297 87,962 ----1,787,259 1,752,445 ---=-64,234 -64,234 58,000 ==-408 CL 254.724 294.627 ___122.,1951,702,109 94,264 10,651,755 17,601,167 3,195,589 2,424,924 35,669,808 33,879,169 2,812 6,302 -128,898 --138,012 42,430 ---17,472,269 --147,472,269 17,642,895 ---- 3,195,589 -3,195,589 3,315,706 -----2,424,924 2,424,924 890 ,502 --2,959,059 ---2,959,059 3,271,684 1,699,297 87 ,962 7,774,487 --9,561,746 8,715,952 --122.362 ---- -L.202,109 94,264 -10.855.908 _17,601,167 _3.195.589 2.424.924 35,873.96]_33.879.169 --(204,153)---(204,153)- -____-==1.500.000 ===1.500.000 = --1,295,847 ---1,295,847 - i =$=125.97&=i =3 =$1295.87 f= SadAtAaaSCHEDULE OF UNEXPENDED APPROPRIATIONS-PROJECTS-SPECIAL REVENUE FUNOS ALASKA POWER AUTHORITY Year Ended June 30,1989 PROJECTS: Continuing: Bethel--Oscarville Intertie Bethe]Region Biomass Energy ProgramEnergyPolicyTaskForceKotzebue-Nome Coal StudyManagementInformationSystemsPowerStatistics Railbelt Energy AlternativeRegionalFeasibilityprogramRuralCommunityFeasibilityProgramRuralElectrification Rural Energy Reconnaissance Program Snettisham Transfer Southeast Intertie Waste Heat Program Yakutat Waste Heat Terminated: Anchorage-Kenai IntertieChineseTradeCommunication Kake-Petersburg IntertieManokatok-Dillingham IntertieRailbeltIntertieUpgradeSusitnaFeasibilit Unalaska Geotherma Less: Projects Funded By Program Receipts:Biomass Energy ProgramPowerstatistics Appropriations Expenditures Inception through Year ended StateofAlaska June 30.1988 June30,1989 Total TOTAL CONTINUING TOTAL TERMINATED TOTAL PROJECTS PROJECTS FUNOED BY STATE $102,55) 1,254,800 358,815 200,000 150,000 505,000 70,800 2,091,500 505,000 2,982,453 3,106,000 250,000 74,178 799,000 6,831,000 19,317,097 151,000 135,182,7765.777.406 141.278.9629 4161096066 $304,470 -___35,,.400 --_-339.,870 £160..756.196 $82,551 1,253,331 265,958 174,163 442,985 772,854 486 ,515 2,589,686 1,956,619 167,874 24,178 565,822 5,611,764 14,395,026 135,174,9595.584.252 -141.532..804 £155..234,830 $231,713 -23L213 £155.703,117 $1,040 287,436 --3.098 2,970,797 $83,591 1,253,369 342,583 200,000 28,694 504,609 53,076 1,988,219 502,090 2,720,923 2,803,412 227,340 46 ,046 678,849 $,899,200 17,365,823 148,270 2,787 605,000 25,465 25,000 135,180,668 -5.272.,.406 141.764.5296 4152..130.412 $295,937 --39..400 -3iLiiz 4158..799.082 Unexpended appropriations $18,960 1,431 16,234 121,306 391 17,724 103,281 2,910 261,530 302,588 22,660 28,132 120,151 931,800 --_4.]76 1,951,274 2,730 9,535 2,108 -£7-SCHEDULE OF UNEXPENOED APPROPRIATIONS--GRANTS- SPECIAL REVENUE FUNOS-Continued ALASKA POWER AUTHORITY Year Ended June 30,1989 GRANTS: Black Bear Brevig Mission System UpgradeBuckland Chalkyitsik ElectrificationChesterLakeHydroChignikLakePower Coffman Cove Power Plant UpgradeCordovaHydroProjectEagleVillageElfinCove Emergency Services Disasters ResponseHopeElectricalLineExtension Metering InstallationsLarsenBayHydro Napaski ak Power Plant UpgradeNikolaiElectricalSystemOscarville-Napaskiak IntertieOuzinkieHydroelectric Port Alsworth Quinhagak Electric ProjectRedDevilElectrification Rural Energy Construction Assistance Rural Systems Efficiency ImprovementRuralTechnicalAssistance Streamgaging ProjectsUnalaskaGeneratorUpgradeTatitlekElectrification Venetie Village CouncilWhiteMountainPowerSystem Upgrade Appropriations froa $3,247,053 144,900 75,000 51,300 4,031,700 399,000 100,000 2,196,304 145,000 10,000 254,400 150,000 100,000 280,000 100,000 250,000 175,000 260,000 15,535 182,000 125,000 71,000,000 300,000 617,973 63,700 50,000 100,000 120,963 TOTAL GRANTS $14,389,825 Less: Grants Funded by Program Receipts:Buckland Elfin Cove' Emergency Services/OisastersRuralEnergyConstructionAssistanceStreamgagingVenetieVillageCouncil $75,000 10,000 254,400 1,000,000 43,700 --120,963-1.504.063 GRANTS FUNOED BY STATE $12,885,765 ExpendituresInceptionthroughYearended ---lotal $3,227,816 $5,755 $3,233,571 -107,158 107,158 -71,032 71,032 -217,88)21,881 3,948,970 63,395 4,012,365 508 198,008 198,516 -100,000 300,000 2,183,096 204 2,183,300 -86,572 86,572 9,500 -9,500 21,190 212,966 234,156 -50,693 50 ,693 -99,641 99,641 216,808 14,975 231,783 -400,000 100,000 164,938 1,822 166,760 -44,594 44,594 151,255 108,745 260,000 -14,818 14,818 11,299 125,599 136 ,898 98,585 9,335 107,920 107,222 233,526 340,748 -236,800 236,800 280 ,431 312,318 $92,749 20,075 16,282 36,357 -50,000 50,000 282 99,468 99,750 104,580 317 104,897 =39.020 --39,020 S10.546.555 $2,424,924 412.971.4979 -$71,032 $71,032 9,500 -9,500 21,190 212,966 234,156 407 ,222 233,526 340,748 17,375 13,725 31,100 --)04,580 -__A16 --104,896 -__259,867 -531.565 --191,432 210,286,685 $1,993.352 $12,180,047 Unexpended appropriations $13,482 37,742 3,968 29,419 19,335 484 83,240 130,406 717 15,102 17,080 659,252 63,200 25,224 27,343 250 16,066 $3,968 COMBINING BALANCE SHEET--CAPITAL PROJECTS FUNDS ALASKA POWER AUTHORITY June 30,1989 ASSETS Cash and investments Due from State of Alaska Accrued interest receivable LIABILITIES AND FUND EQUITY LIABILITIES Accounts payable Retainage payabletateofAlaska Due to other funds Accrued interest Deferred revenue Bue to FUND EQUITY Reserved for encumbrances Designated project fund balances *The Four Dam Poo)Project*consists of the following hydroelectric plants: Solomon Gulch Swan Lake Terror Lake Lake Tyee TOTAL LIABILITIES Bradley Lake $331 943,391 237,130 £234.525,.344 $8,081,572 2,665,993 1,397,962 65,545,596 124,853,034 269,049,748 433.4.595..344 Anchorage-Four Fairbanks Dam Pool $-$6,711,591 -868 A=$6,212,499 -$172,968 :1,416,173 -376,643 $-1,965,784 35,816 "$6,500 4,690,178 =4.746.675 aww«=38..712.459 Schedule5 Craig-Kl awock Totals Transmission June 30 Line 1988 $-$338,654,982 $380,048,297 -237 ,998 59,757 is 4341..307,803 $381,750.49) $ -$8,254,540 $4,615,319 -2,665,993 513,132 --505,357 -1,416,173 13,309 -1,774,605 1,108,378 =67,511,380 110,992,462 -124,945,350 138,005,038 -=148.851.9073 _132.752.991 -_Z - 2223..796.4523 _220.758.029 i;4341.307,.803 $381.750,49) -$t COMBINING STATEMENT OF REVENUES,EXPENOITURES AND CHANGES IN FUNO BALANCES-CAPITAL PROJECTS FUNDS ALASKA POWER AUTHORITY Year Ended June 30,1989 Anchorage Fairbanks Bradley Lake REVENUES; fepropriations from State of Alaska $$8,004,064 $(2,810,782) nterest == TOTAL REVENUE $8,004,064 (2,810,782) EXPENOITURES; Projects $2,972,651 (2,810,782)Repayment of Power DevelopmentRevolvingLoanFund =- EXCESS (DEFICIENCY)OF REVENUES OVER EXPENDITURES 5,031,413 - Fund balance at beginning of year 264,018,335 = Four Dam Pool $(3.255,481) (3,190,429) (3,554,810) -2.352,400 (3,993,019) 4.732.694 FUND BALANCEATENDOFVEAR $269.049.749 £3.=£4.746.672 Schedule6 Craig-Kl awock Totals Transmission June 30Line1989 1988 $1,461 $53,939,262 $16,858,319 1,461 52,004,314 16,948,059 1,461 46,608,520 35,612,114 -=-2.352.400 = -3,038,394 1,335,945 --220..758.029 _269.422.084 i=$273..796.423 270.758.0229 -97-SCHEDULE OF UNEXPENOED APPROPRIATIONS ANO TOTAL PROJECT COSTS -CAPITAL PROJECTS FUNDS ALASKA POWER AUTHORITY Year Ended June 30,1989 Bradley Lake Anchorage-Fairbanks IntertieFourDamPoolProject:Solomon Gulch Swan Lake Terror Lake Lake TyeeCraig-Klawock Transmission Line Appropriationsfrom $175,080 ,000 128,463,119 71,181,774 73,078,477 89,333,812 85,000,000 --250..000 Unexpended AppropriationsatJune30.1959 $53,255,616 3,123,787 129,215 9,244 43,200 3,639,791 --ExpendituresfromAppropriations _ Year Ended Prior years $63,820,320 $58,004,064 $121,824,384 128,150,114 (2,810,782)125,339,332 70,765,016 287 ,543 713,052,559 73,035,229 31,004 73,066,233 89,272,936 17,676 89,290,612 84,951,913 (3,591,704)81,360,209-__L441 W-749.735 Expendituresfrom Proceeds fron $(3,555,997) 765,138 22,295,818 109,772,278 45,808,612 $622,884,382 $60,201,118 4510.743.802 251.939.262 $562.683.064 £175.085.849 Total $118,268,387125,339,332 71,817,697 95,362,051 199,062,890 127,168,821 -_--142.735 §232.768,.213 t <) " 4 SCHEDULE OF CHANGES IN GENERAL FIXED ASSETS ALASKA POWER AUTHORITY Year Ended June 30,1989 BUILDINGS AND EQUIPMENT: Camp buildingsMachineryand equipment Furniture and equipmentTOTAL BUILDINGS ANO EQUIPMENT PLANT IN SERVICE; Anchorage-Fairbanks IntertieSolomonGulchhydroelectric plant Swan Lake hydroelectric plantLakeTyeehydroelectricplantTerrorLakehydroelectricplantBethel-Napaskiak IntertieBethel-Oscarville Intertie Craig-Klawock Transmission Line Waste Heat System TOTAL PLANT IN SERVICE CONSTRUCTION IN PROGRESS: Bradley Lake hydroelectric project Continuing projects :Total Balance at Special Capital --Iotal__ $1,063,109 -$-$- 2,068,846 --- 3,993,290 --- 128,150,133 -(2,810,782)(2,810,782) 71,079,413 -738,284 738,284 95,315,324 -46,729 46,729 132,141,810 176 ,687 (4,972,990)(4,796,303) 198,429,723 -33,167 633,167 -195,000 -195,000 -198 ,947 -198,947 748,274 -1,461 1,461 625,864,657 570,634 (6,364,131)(5,793,497) 65,295,737 -52,972,651 52,972,651 Transfers to Capital 71,143 239,958 113,663 3,648,691 Deletions Terminated $653,967 41,288 698,633 927 ,00 0 0927,00 Balance at $409,142 2,098,701 3,534,615 124,412,331 71,817,697 95,362,053 127,345,507 199,062,890 195,000 198,947 863,398 1.535.028 622,792,851 118,268,388 -13..196.207 4752.792.061 -87-SCHEDULE OF LOANS RECEIVABLE ALASKA POWER AUTHORITY Year Ended June 30,1989 __-Dateofloan.____-Power Project Fund boans =s-s--s"s«éRRateofInterest _Principal Interest Tota] Alaska Electric Light and Power: April 1978 Improvement 6.50%$211,000 $2,857 $213,857 October 1980 Improvement 8.60 826,459 826,459 March 1984 Lower Salmon Creek 9.95 490 ,527 20 ,336 510,863 March 198)Upper Salmon Creek 7.00 153,718 -153,718 August 1983 Lower Salmon Creek 9.95 975,595 24,268 999,863 March 1984 Lower Salmon Creek 9.95 1,962,106 81,346 2,043,452 August 1983 Transmission and distribution 9.29 1,748,335 40,605 1,788,940 March 1984 Transmission and distribution 9.29 1,803,905 69,826 1,873,731 August 1981 Bethel Cogeneration Utility 5.00 to 113.00 613,784 30,689 644,473 May 1988 Bettles Light and Power 7.33 28,341 -28,341 August 1980 City of King Cove 7.00 150,055 -150,055 August 1986 City of King Cove 7.95 111,580 -111,580 August 1982 City of Sitka 4.00 13,658,594 273,172 13,931,766 September 1985 G &K,Inc.(Cold Bay).9.80 1,249,539 -1,249,539 October 1980 Tliamna-Newhalen-Nondalton Electric Coop,Inc.8.60 335,421 14,423 349,844 August 1985 Levelock Electric Cooperative,Inc.8.90 22,303 992 23,295 November 1985 Middle Kuskokwim Electric Coop,Inc.5.00 187,890 14,092 201,982 August 1985 Tanana Power Company 9.55 119,233 -119,233 September 1985 Chitina Electric,Inc.7.65 97,792 3,773 101,565 September 1986 City of Clarks Point 7.50 147 ,683 §,538 153,221 August 1987 City of Ouzinkie 7.34 48,053 1,764 49,817 June 1987 Coffman Cove Utilities 6.86 64,928 -64,928 April 1987 Cordova Electric Coop 5.00 1,300,000 17,794 1,317,794 September 1986 G&K,Inc.(Cold Bay)8.11 400 ,000 -400 ,000 May 1988 McGrath Light and Power Co.7.33 265,946 9,747 275,693 August 1987 Middle Kuskokwim 7.56 125 ,872 14,274 140,146June1988NenanaPortAuthority7.97 226,143 -226,143 July 1987 City of Galena 7.71 986 ,927 527 987,454 July 1987 City of Galena 6.86 245,000 187 245,187 August 1988 City of Larsen Bay 7.65 437 ,978 -437 ,978 1988 Eagle Power Company 6.71 32.000 __224 _32.224 TOTAL POWER PROJECT FUND LOANS (ALASKA STATUTE 44.83.1 29,026,707 626,434 29,653,141 Other Loans August 1984 G &K,Inc. November 1985 Far North Utilities 6.00 419,470 -419,470 9.05 __._189,834 =-_189,834 TOTAL OTHER LOANS $22,636,011 $626,434 $30,262,445 SCHEDULE OF LOANS RECEIVABLE-Continued Schedule 9--Continued ALASKA POWER AUTHORITY Year Ended June 30,1989 Date of 1 Rural Electrification Revolving |Fund |Rate of Int t Principal I Total June 1988 Alaska Power and Telephone 2.00 $202,080 $2,021 $204,103January1983AndreanofElectric2.00 143,828 1,438 145,266 July 1985 «City of St.Paul 2.00 278,830 2,788 281,618 October 1983 Egegik Light and Power 2.00 83,830 838 84,668 July 1984 Egegik Light and Power 2.00 130,000 1,300 131,300 July 1982 =Iliamna-Newhalen-Nondolton Electric Coop,Inc.2.00 1,276,214 12,762 1,288,976 July 1983 I liamma-Newhalen-Nondolton Electric Coop,Inc.2.00 210,942 2,110 213,052 December 1983 City of Unalaska 2.00 250,000 2,500 252,500 November 1983 City of Unalaska 2.00 1,560,486 15,605 1,576,091 November 1983 Yakutat Power Co.2.00 35,000 350 35,350September1986=City of Clarks Point 2.00 227,168 2,272 229,440 June 1987 Golden Valley Electric 2.00 900 90,900 TOTAL RURAL ELECTRIFICATION REVOLVING LOAN FUND LOANS (ALASKA STATUTE 44.83.361)$.4.488.378 $44,884 $4.533.262 APPENDIX G SPECIMEN FINANCIAL GUARANTY INSURANCE POLICY JMIBIA FINANCIAL GUARANTY INSURANCE POLICY Municipal Bond Investors Assurance Corporation Armonk,New York 10504 Policy No.XXXXXX Municipal Bond Investors Assurance Corporation (the "Insurer"),in consideration of the payment of the premium and subject to the terms of thispolicy,hereby unconditionally and irrevocably guarantees to any owner,as hereinafter defined,of the following described obligations,the full andcompletepaymentrequiredtobemadebyoronbehalfoftheIssuerto[INSERT NAME OF PAYING AGENT]or its successor (the "PayingAgent")of an amount equal to (i)the principal of (either at the stated maturity or by any advancement of maturity pursuant to a mandatory sinkingfundpayment)and interest on,the Obligations (as that term is defined below)as such payments shall become due but shall not be so paid (exceptthatintheeventofanyaccelerationoftheduedateofsuchprincipalbyreasonofmandatoryoroptionalredemptionoraccelerationresultingfromdefaultorotherwise,other than any advancement of maturity pursuant to a mandatory sinking fund payment,the payments guaranteed herebyshallbemadeinsuchamountsandatsuchtimesassuchpaymentsofprincipalwouldhavebeenduehadtherenotbeenanysuchacceleration):and (ii)the reimbursement of any such payment which is subsequently recovered from any owner pursuant to a final judgment by a court ofcompetentjurisdictionthatsuchpaymentconstitutesanavoidablepreferencetosuchownerwithinthemeaningofanyapplicablebankruptcylaw.The amounts referred to in clauses (i)and (ii)of the preceding sentence shall be referred to herein collectively as the "Insured Amounts.”"Obligations”shall mean: [PAR AMOUNT] [LEGAL TITLE OF OBLIGATIONS] Upon receipt of telephonic or telegraphic notice,such notice subsequently confirmed in writing by registered or certified mail,or upon receipt ofwrittennoticebyregisteredorcertifiedmail,by the Insurer from the Paying Agent or any owner of an Obligation the payment of an InsuredAmountforwhichisthendue,that such required payment has not been made,the Insurer on the due date of such payment or within one businessdayafterreceiptofnoticeofsuchnonpayment,whichever is later,will make a deposit of funds,in an account with Citibank,N.A.,in New York,New York,or its successor,sufficient for the payment of any such Insured Amounts which are then due.Upon presentment and surrender of suchObligationsorpresentmentofsuchotherproofofownershipoftheObligations,together with any appropriate instruments of assignment toevidencetheassignmentoftheInsuredAmountsdueontheObligationsasarepaidbytheInsurer,and appropriate instruments to effect theintmentoftheInsurerssagentforsuchownersoftheObligationsinanylegalproceedingrelatedtopaymentofInsuredAmountsontheChligations,such instruments being in a form satisfactory to Citi N.A.,Citibank,N.A.shall disburse to such owners,or the Paying AgentpaymentoftheInsuredAmountsdueonsuchObligations,less any amount held by the Paying Agent for the payment of such Insured Amountsandlegallyavailabletherefor.This policy does not insure against loss of any prepayment premium which may at any time be payable withrespecttoanyObligation. As used herein,the term "owner”shall mean the registered owner of any Obligation as indicated in the books maintained by the Paying Agent,theIssuer,or any designee of the Issuer for such purpose.The term owner shall not include the Issuer or any party whose agreement with the IssuerconstitutestheunderlyingsecurityfortheObligations. Any service of process on the Insurer may be made to the Insurer at its offices located at 113 King Street,Armonk,New York 10504 and suchserviceofprocessshallbevalidandbinding. This policy is non-canceflable for any reason.The premium on this policy is not refundable for any reason including the payment prior tomaturityoftheObligations. IN WITNESS WHEREOF,the Insurer has caused this policy to be executed in facsimile on its behalf by its duly authorized officers,this [DAY]day of [MONTH AND YEAR]. MUNICIPAL BOND INVESTORS ASSURANCE CORPORATION Attest: Assistant Secretary STD-R-4 _AIRBANKS | eae enSOLDOTNA/ GULF OF ALASKA SEE PROJECT VICINITY 0 50 100 SCALE IN MILES PURCHASERS'SERVICE AREAS NASDELTA\\JUNCTIO |SFVALDEZ pce tr tt ow EXISTING TRANSMISSION LINE a)meme TRANSMISSION LINE UNDER CONSTRUCTION SE»@KODIAK SERVICE SCALE IN MILES LOCATION MAP LEGEND GOLDEN VALLEY ELECTRIC ASSOCIATION <vav?|MATANUSKA ELECTRIC ASSOCIATION Vo ee CHUGACH ELECTRIC ASSOCIATION HOMER ELECTRIC ASSOCIATION ANCHORAGE MUNICIPAL LIGHT AND POWER SEWARD ELECTRIC SYSTEM E PURCHASERS® AREAS EXISTING TRANSMISSION LINE(HOMER ELECTRIC ASSOCIATION)-» eT TCHIKANKEAN,J, vse?HR TO SOLDOTNA- ' FRITZ CREEK -SOLDOTNA: TRANSMISSION LINE FRITZ CREEK SUBSTATION PRINCE RUPERT aS BRADLEY 7a. ¥ "STATION : PROJECT VICINITY Alaska Energy Authority BRADLEY LAKE _ HYDROELECTRIC PROJECT 2 CARIBOU LAKE e@2enrn 'me ea ty JUNCTION SWITCHING *s-PROJECT«TRANSMISSIONLINE -BRADLEY AKE 5 lo SCALE IN MILES ie} RWBECK AND ASSOCTATES,INC. Le