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HomeMy WebLinkAboutBradley Lake Audited Finaicial Statements 1997 and 1998ile ed AUDITED FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE OPERATING AND REVENUE FUNDS JUNE 30,1998 AND 1997 A Professional Corporation cc.ZlaweVout File lene taccstiel DevoioomeniAleckainu AUDITED FINANCIAL STATEMENTS ord Eyocrt Avihority AND OTHER FINANCIAL INFORMATION BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE OPERATING AND REVENUE FUNDS JUNE 30,1998 AND 1997 Audited Financial Statements BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE OPERATING AND REVENUE FUNDS Anchorage,Alaska Page Independent Auditor's Report 1 Balance Sheets 2 Statements of Revenue,Expenses and Changes in Surplus 3 Statements of Cash Flows 4 Notes to Financial Statements 5-8 Independent Auditor's Report on Additional Information 9 Statements of Expenses 10-11 A Professional Corporation Certified Public Accountants 3301 C Street,Suite 520 Anchorage,Alaska 99503 Tel.(907)563-4547 FAX (907)561-7683 Independent Auditor's Report Bradley Lake Project Management Committee Anchorage,Alaska We have audited the accompanying balance sheets as of June 30,1998 and 1997,and the related statements of revenues,expenses and changes in surplus and of cash flows for the years then ended,of the Bradley Lake Project Management Committee Operating and Revenue Funds (a project management committee).These special purpose financial statements are the responsibility of the Bradley Lake Project Management Committee.Our responsibilityis to express an opiniononthesespecialpurposefinancialstatementsbasedonouraudits. We conducted our audits in accordance with generally accepted auditing standards.Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements.An audit also includes assessing the accounting principles used and significant estimates made by management,as well as evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basis for our opinion. The accompanying special purpose financial statements were prepared to present revenue and expenses on an accrual basis with the exception of interest income and fixed asset replacements, which have been presented on a cash basis in order to conform to the fiscal year operations and maintenance budget. In our opinion,the financial statements referred to above present fairly,in all material respects, the assets,liabilities and surplus of the Bradley Lake Project Management Committee as of June 30,1998 and 1997 and its revenue,expenses and changes in surplus and cash flows for the years then ended,in conformity with generally accepted accounting principles. This report is intended for the information and use of the Bradley Lake Project Management Committee and should not be used for any other purpose, Parisena,Stromberg &Company,APC Anchorage,Alaska October 2,1998 f7 Pe BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE OPERATING AND REVENUE FUNDS BALANCE SHEETS June 30,1998 and 1997 ASSETS Current assets: Investments (Note B) Total Assets LIABILITIES AND SURPLUS Current liabilities: Due to AIDEA Accounts payable Total Liabilities Surplus: Unreserved Total surplus Total liabilities and surplus See accompanying notes to the financial statements. 1998 997 777,428 952.610 717,428 952,010 16,176 125,256 240,634 252,342 256,810 377,598 520,618 575,012 520,618 575,012 777,428 952,610 BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE OPERATING AND REVENUE FUNDS STATEMENTS OF REVENUE,EXPENSES AND CHANGES IN SURPLUS YEARS ENDED June 30,1998 and 1997 1998 1997 Budget Actual Variance Actual Revenue: Utility contributions $13,210,680 $13,210,675 §$(5)$12,984,191 Interest receipts 1,799,998 1,845,862 45,864 1,891,604 Transfer from operating reserve 117,560 -(117,560)- Additional utility contribution 148,385 -(148,385)- Miscellaneous income -1,477 1.477 5,328 Total revenue 15,276,623 15,058,014 (218,609)14,881,123 Expenses,fixed asset replacements and debt service: Operations and maintenance 2,087,200 1,776,667 (310,533)2,080,658 Debt service 13,389,435 13,017,785 (371,650)13,390,560 Bond refunding costs (Note E)350,000 294,124 (55,876)- Fixed asset replacements 25.000 23,832 (1,168)- Total expenses,fixed asset replacements and debt service 15,851,635 15,112,408 (739,227)15,471,218 Excess (deficiency)of revenue over expenses,fixed asset replacements and debt service (575,012)(54,394)(520,618)(590,095) Surplus,beginning of year ___575,012 __1,165,107 Surplus,end of year $__520,618 $___575,012 See accompanying notes to the financial statements. 3 BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE OPERATING AND REVENUE FUNDS STATEMENTS OF CASH FLOWS YEARS ENDED June 30,1998 and 1997 Cash flows from operating activities: Excess (deficiency)of revenues over expenses,fixed asset replacements and debt service Adjustments to reconcile excess of revenues over expenses,fixed asset replacements and debt service to net cash provided by operating activities: Decrease in accounts payable Increase (decrease)in amounts due to AIDEA Net cash provided by operating activities Available cash and cash equivalents at beginning of year Available cash and cash equivalents at end of year Supplemental disclosure of cash flows information: Interest paid See accompanying notes to the financial statements. 4 $(54,394)$(590,095) (11,708)(35,881) (109,080)17.829 (175,182)(608,147) 952.610 1,560,757 $777,428 $$952,610 $_9,637,785 $10,220,560 BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE OPERATING AND REVENUE FUNDS NOTES TO FINANCIAL STATEMENTS June 30,1998 and 1997 NOTE A:SIGNIFICANT ACCOUNTING POLICIES Description of Business:The Bradley Lake Project Management Committee (the Committee) was established pursuant to Section 13 of the Agreement for the Sale and Purchase of Electric Power (Power Sales Agreement)dated December 8,1987.The purpose of the Committee is to arrange for the operation and maintenance of the Bradley Lake Hydroelectric Project,which became operational in September 1991,and the scheduling,production and dispatch of power. The members of the Committee include the Alaska Energy Authority (AEA)and the five purchasers under the Power Sales Agreement -Chugach Electric Association,Inc.;Golden Valley Electric Association,Inc.;the Municipality of Anchorage (Municipal Light &Power);the City of Seward (Seward Electric System);and the Alaska Electric Generation &Transmission Cooperative,Inc.(AEG&T).The Homer Electric Association,Inc.(HEA)and the Matanuska Electric Association,Inc.(MEA)are additional parties to the Power Sales Agreement but are included as power purchasers for purposes of representation while AEG&T has no direct vote as a consequence of the individual representation of HEA and MEA. Section 13 of the Power Sales Agreement delineates other Committee responsibilities,including: establishing procedures for each party's water allocation,budgeting for annual Project costs and calculating each party's required contribution to fund annual project costs.Committee approval of operations and maintenance arrangements for the Project,sufficiency of the annual budgets and wholesale power rates and the undertaking of optional Project work requires a majority affirmative vote and the affirmative vote of AEA. The Power Sales Agreement extends until the later of:1)50 years after commencement of commercial operation or 2)the complete retirement of bonds outstanding under the AEA Power Revenue Bond Resolution along with the satisfaction of all other payment obligations under the Power Sales Agreement.Renewal options for additional terms exist. Establishment of Trust Funds:Article V,Section 502 of the Alaska Energy Authority's Power Revenue Bond Resolution established a Revenue Fund and an Operating Fund,including an Operating Reserve account,to be held by AEA.In actuality these funds,along with the Debt Service,Excess Investment Earnings (arbitrage),and various construction funds related to the Bradley Lake Hydroelectric Project are all held by the Corporate Trust Department of US Bank in Seattle,Washington. BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE OPERATING AND REVENUE FUNDS NOTES TO FINANCIAL STATEMENTS (Continued) June 30,1998 and 1997 NOTE A:SIGNIFICANT ACCOUNTING POLICIES (Continued) All deposits,including utility contributions and interest earnings,are made into the Revenue Fund, which transfers amounts approximately equal to one-twelfth of the annual operating and maintenance budget into the Operating Fund on a monthly basis.Additional transfers are made from the Revenue Fund to the Debt Service Fund in order to satisfy semiannual interest payments and annual principal payments on the Project's outstanding bonds payable. Interest earnings available for operations and maintenance are derived from the following funds: Debt Service Fund;Operating Reserve Fund;Operating Fund;Revenue Fund;Capital ReserveFund;and the Renewal &Contingency Fund. Estimates:The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expense during the reporting period.Actual results could differ from those estimates. Revenue and Expense Recognition:Utility contributions are recognized as revenue when due to be received under the terms of the Power Sales Agreement.Transfers from other funds are recognized when the transfer is made and interest earnings are recognized when received. Operating and maintenance expenses are recognized when incurred,while interest and principal payments on bonds are recognized when paid.Purchases of fixed asset replacements are expensed when purchased. Income Taxes:The Bradley Lake Project Management Committee is exempt from income taxation under Section 501 (a)of the Internal Revenue Code. NOTE B:INVESTMENTS Substantially all of the balances in the following funds are invested in collateralized investment agreements through the trust department of US Bank.The specified interest rate for monies from the Operating and Revenue Funds invested in the agreements is 7.38%.Balances at June 30,1998 and 1997 are as follows: 1998 1997 Operating Fund $296,292 $778,486 Revenue Fund 481,136 174,124 Total investments $177,428 $___952,610 BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE OPERATING AND REVENUE FUNDS NOTES TO FINANCIAL STATEMENTS (Continued) June 30,1998 and 1997 NOTE B:INVESTMENTS (Continued) Investments are sold as needed to cover operating requisitions submitted to the trustee and are therefore considered to be short-term and available for sale.Investments are presented at aggregate cost,which approximates market value. For purposes of the cash flow statements,management considers the full amount of the investment balance to be cash available for operations. NOTE C:MAJOR CONTRACTS AND AGREEMENTS During May 1994,the Alaska Energy Authority entered into the Master Maintenance and Operating agreement with the Committee.The purpose of the agreement is to establish contract administration and budgeting procedures for maintenance and operation contracts of the Bradley Lake Hydroelectric Project and to provide for the lease or other use of facilities and equipment in a manner consistent with the requirements of the Power Sales Agreement.The term of the Master Agreement is indefinite,remaining in effect until termination of the Power Sales Agreement or until AEA no longer legally exists.This agreement authorizes AEA to enter into any contracts necessary to perform operating or maintenance-type services to the Project,subject to the approval of the Committee. On behalf of the Committee,the Alaska Energy Authority entered into an agreement with Chugach Electric Association,Inc.(CEA)in August,1996,for the provision of all services necessary to dispatch the Bradley Project's electric power output.The dispatch agreement runs concurrently with the wheeling and related services contract entered into by and among the parties to the Power Sales Agreement in December 1987 and remains in effect for the term of the wheeling agreement unless CEA ceases to be the output dispatcher. In August 1996,the Alaska Energy Authority entered into an agreement with Chugach Electric Association,Inc.on behalf of the Committee for the provision of maintenance services for the Daves Creek and Soldotna SVC Substations. BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE OPERATING AND REVENUE FUNDS NOTES TO FINANCIAL STATEMENTS (Continued) June 30,1998 and 1997 NOTE C:MAJOR CONTRACTS AND AGREEMENTS (Continued) An operation and maintenance agreement dated February 11,1994,was executed between Homer Electric Association and the Alaska Energy Authority.This agreement provides for the operation and maintenance of the Bradley Lake Hydroelectric Project by Homer Electric Association for an initial term of five years,commencing February 11,1994.The agreement continues from year to year thereafter,except upon written notice to terminate by either party.Notice of termination must be given one year in advance of the termination date.HEA is to be reimbursed for costs associated with the operation,maintenance and repair of the Project as determined in advance through the submission of an annual budget based upon prudent estimates and anticipated operation and maintenance costs.In August,1996,the agreement was amended to separate the maintenance of the transmission facilities from the hydroelectric project.The transmission agreement continues from year to year,except upon written notice to terminate by either party. Notice of termination must be given six months in advance of termination dates. NOTE D:RELATED PARTY TRANSACTIONS During the years ended June 30,1998 and 1997 the Committee paid the following amounts to related parties for costs incurred under the various contracts described in Note D: 1998 1997 Homer Electric Association -operation and maintenance $697,735 $703,701 Chugach Electric Association -substation service maintenance $29,727 $146,694 For the years ended June 30,1998 and 1997,Chugach Electric Association provided dispatch services to the Committee for no charge. NOTE E:COMMITMENTS AND CONTINGENCIES Forward Delivery Bond Purchase Agreement:In December,1997,Bradley Lake Project Management Committee entered into a forward delivery bond purchase agreement providing for the issuance of two series of Power Revenue Refunding Bonds in April of 1999 and 2000.The costs associated with the refunding have been expensed in the current year but will be repaid by funds provided by the bonds. A Professional Corporation Certified Public Accountants3301CStreet,Suite 520 Anchorage,Alaska 99503 Tel.(907)563-4547 FAX (907)561-7683 INDEPENDENT AUDITOR'S REPORT ON ADDITIONAL INFORMATION Bradley Lake Project Management Committee Operating and Revenue Funds Anchorage,Alaska Our report on our audits of the special purpose financial statements of the Bradley Lake Project Management Committee Operating and Revenue Funds for June 30,1998 and 1997,appears on the page preceding the balance sheets.Those audits were made for the purpose of forming an opinion on the special purpose financial statements taken as a whole.The supplemental Statements of Expenses are presented for purposes of additional analysis and are not a required part of the basic financial statements.Such information has been subjected to the auditing procedures applied in the audits of the special purpose financial statements and,in our opinion, is fairly stated in all material respects in relation to the special purpose financial statements taken as a whole. GBGree,Mow d onComyemre,,Pe Parisena,Stromberg &Company,APC Anchorage,Alaska October 2,1998 BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE OPERATING AND REVENUE FUNDS STATEMENTS OF EXPENSES June 30,1998 and 1997 1998 Variance Favorable 1997 Budget Actual (Unfavorable)Actual Expenses: Generation expense: Operation supervision and engineering: Contractual $120,500 $76,936 $43,564 99,821 Hydraulic operation: Contractual 20,000 5,585 14.415 8.916 Electric plant operation: Contractual 154.100 130,686 23.414 147,310 Hydraulic power generation operation: Contractual 297,400 227.663 69.737 238,115 Rents: Contractual 61,000 72,661 (11,661)55,532 Structure maintenance: Contractual 15,000 20.856 (5,856)1,195 Reservoir,dam,and waterway maintenance: Contractual 8,000 271 7.729 - Electric plant maintenance: Contractual 261,000 244,357 16.643 221,081 Hydraulic plant maintenance: Contractual 99.000 77,603 21,397 75,876 System control and load dispatching: Contractual 240,500 238.382 2,118 230,589 Substation operation and maintenance: Contractual 37,500 29.727 7.773 146.461 Overhead line maintenance: Contractual 22,000 19.157 2,843 14,260 Continued 10 BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE OPERATING AND REVENUE FUNDS STATEMENTS OF EXPENSES (Continued) June 30,1998 and 1997 1998 Variance Favorable 1997 Budget Actual (Unfavorable)Actual Administrative,general and regulatory expense: Insurance $329,700 $299,593 §$30,107 $315,485 AEA administrative fee 200,000 200,000 -212,079 PMC costs 67,000 44,924 22,076 93,442 Arbitrage expense -27,976 (27,976)13,821 Regulatory commission: Five-year inspection ---28,900 FERC administrative fees 126,000 43,938 82,062 160,680 FERC licensing 28,500 16,352 12,148 11,893 Inspection follow-up :-:5,202 Total administrative,general and regulatory expense 751,200 632.783 118,417 841,502 Total operating and maintenance expenses $2,087,200 $1,776,667 $310,533 42,080,658 11