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Unalaska Geothermal Preliminary Project Report 1991
RW.BECK AND ASSOCIATES,INC. Yo / Fourth and Blanchard Building,Suite 600 #2101 Fourth Avenue @ Seattle,Washington 98121-2375 #USA Telephone (206)441-7500 m Fax (206)441-4962 WS-1559-AA1-AA August 4,1992 RECEIVED Mr.Brent Petrie Director of Operations AUG 11 1992 Alaska Energy Authority ALASKA ENERGY AUTHORITYP.O.Box 190869 Anchorage,AK 99519-0869 Dear Mr.Petrie: Consulting Engineer's Contract Project Report Unalaska Geothermal Project This letter of transmittal and the accompanying enclosures constitute our report on the project work to date and provides the Alaska Energy Authority with a summary of the main work elements performed by R.W.Beck and Associates on the Unalaska Geothermal Project. In October of 1991,R.W.Beck began serving the Alaska Energy Authority (the "Authority")as Consulting Engineer on the Unalasaka Geothermal Project.A key task was to prepare an independent report regarding the economics and feasibility of the project.R.W.Beck also provided ongoing analytical support to the project finance team. This letter describes the salient information developed and prepared over the course of the contract work.Key project work elements included: 1.Preliminary Project Report -November 1991 The purpose of this report was to:provide baseline information about the project to the City of Unalaska (the "City")and to potential power purchasers.This report brought together in one document relevant project information from previous . work and studies completed by the project developer and the Authority.The report provided a project description,discussed reliability factors,cost of power,avoided processor costs and outlined key project agreements that would be necessary for securing revenue bond financing.A copy of'the report was provided to the City of Unalaska and the three largest fish processing firms. Austin,TX #Boston,MA #Columbus,NE =Denver,CO @ Indianapolis,IN m Minneapolis,MN Nashville,TN @ Orlando,FL @ Phoenix,AZ #Sacramento,CA @ Seattle,Washington ae N Roose Pocus Produat” Mr.Brent Petrie -2-August 4,1992 2.Working Draft of Independent Engineer's Report -November 1991 The purpose of this document was to provide the finance team with a working draft of an Independent Engineer's Report.It was contemplated that,as the analytical work progressed,the working draft would be continuously developed and refined to incorporate more detailed information about the project.Therefore,a working draft Independent Engineer's Report was completed for review by the finance team during December 1992 meetings.Information from the preliminary project report and other available sources was provided wherever possible.Incomplete sections were noted for later completion as more detailed information was developed. 3.Makushin Geothermal Project Report for Processors and City -January 1992 The purpose of this report was to provide concise and focused project information to support ongoing discussions and negotiations with the City and other potential power purchasers (three major fish processors).Important project information,including the most current cost of power projections and key contract issues,was presented. 4.Processor and City System Loads and Resources -Several drafts were completed from December 1991 through January 1992 as more detailed information from the City and processors was developed and analyzed. Loads and resources for the City were modeled using an hourly dispatch model (ProSym).The model determined how existing diesel power generation resources,in combination with the proposed Geothermal Project,could meet projected loads.The loads and resources were analyzed for both City loads and potential contract customer loads.Project team members visited the City to obtain system information and to discuss existing and planned future generating capacity.Historical and prospective loads for both the City system and the processors were completed. 5.Annual Cost of Power Project Forecasts -Various scenarios were analyzed from November 1991 through January 1992. Working with the Authority and the project developer,we completed a number of analyses that considered a wide range of project financing scenarios.Financing scenarios ranged from 100%debt financing to various combinations of debt/equity participation by fish processors and other users. The analysis brought into sharp focus that the ultimate cost of delivered project power would be driven by a number of important variables,including actual construction cost,interest rates,the amount of third-party equity participation and the expected rate of return,and the structure of the fluid fee payment. Mr.Brent Petrie -3-August 4,1992 6.Finance Team Meetings &Power Sales Contract Issues From October through the end of December 1991,R.W.Beck personnel supported the finance team by attending five meetings held in Anchorage and Seattle.The Power Sales Contract went through a number of revisions during the course of these meetings. The analytical results developed in the Cost of Power and Loads and Resources work were presented,reviewed and discussed by the finance team. 7.Presentations to City of Unalaska and Processors R.W.Beck personnel supported the Authority by attending several key meetings with the City and potential power purchasers.Meetings were held in Unalaska, Anchorage,and Seattle. Work on the project was halted in late December of 1991.At the time work was halted,power purchase arrangements between the processors and the City had not been agreed to,and therefore critical elements of the project were unsettled.Consequently, as of this date we have not reached conclusions about the economics and feasibility of the project. If you have any questions,or if we can be of further assistance,please do not hesitate to call me at 206-727-4407. Very truly yours, R.W.BECK AND ASSOCIATES,INC. DTH:awh enclosures Preliminary Project Report November 1991 v "4 aL RW,BECK AND ASSOCIATES,INC. | 2522 Arctic Boulevard,Suite 210 m Anchorage,Alaska 99503-2516 @ USA Telephone (907)272-6225 m Fax (907)276-1751 WS-1559-AA1-AA November 13,1991 Mr.Richard Emerman Mr.Dick Pace Alaska Energy Authority UniSea,Inc. 701 East Tudor Road Post Office Box 97019 Anchorage,AK 99503 Redmond,WA 98073-9719 Mr.Win Brindl Mr.Greg Baker Alyeska Seafoods,Inc.Westward Seafoods Post Office Box 31359 1111 Third Avenue,Suite 2250 Seattle,WA 98103 Seattle,WA 98101 Preliminary ReportUnalaskaGeothermalProject This preliminary report has been prepared by R.W.Beck and Associates,Inc.underthedirectionoftheAlaskaEnergyAuthority. The purpose of this preliminary report is to provide potential Project Power Purchasers with relevant information about the Project prior to the scheduled meeting to be held in Anchorage on November 20. We appreciate the assistance and cooperation our staff received from the personnel of the City of Unalaska's Electric System,Alyeska,UniSea and Westwardin providinginformationforthisreport. Very truly yours, R.W.BECK ise INC.WinstonATT Vice President WHP:awh enclosure _Austin,TX a B MA a Columbus,NE o Denver,CO a Indianapolis,IN a Irvine,CA m Minneapolis,MNNashville,TN =Orlando,FL =Ph »AZ a Sacer CA @ San Jose,CA m Seattle,WA éie A Recycled Paaper Product TABLE OF CONTENTS Section INTRODUCTION I Purpose of Report ........ec cee cere cere e renee eter e eee eeees I-1 Project Owner -Alaska Energy Authority ............ceeeeeeeceees I-1 Project Developer -OESI Power Corporation ...........200s-eeeeee-I-2 Power Purchaser -City of Unalaska ...2...2...eee e eee cece enes I-3 Independent Consulting Engineer -R.W.Beck and Associates .........I-3 Independent Geothermal Consultant -GeothermEx,Inc..............-I-4 PROJECT HISTORY IITheGeothermalResource-Authority's Exploratory Drilling Program....II-1OwnershipofGeothermalField-History and Status...6.22...eee eee II-2ProjectDescription..0.6...ccc cee eee tee eee erect eee e eens II-2PlantDescription....0.0...cece cee eee cree eee eee enees II-2GeothermalFieldDescription..........0.e eee cece eee eeee II-3TransmissionLineandRouteDescription............2c eceeeeeeeee II-4PlannedUpgradeoftheCity's Electric System ..........0.eee eens II-4 RELIABILITY FACTORS Ill COST OF POWER IV Introduction 2.2...6c ccceeeeeeteeneeeeennes IV-1 System Loads...1...cece eee eee tent e eee ene ee eeees IV-1 Capital Costs 2.0.0...ccc cc ccc eee ee eee e eee ene eneees IV-3Operations..1.1...cccceceeeeeeeeeeeeeeeeeee IV-4CityCosts2.0...cece ccc cee ence eee e tence eeeeeee IV-6TotalDeliveredCostofProjectPower........--.ccc e eee eeeeccees V-7 AVOIDED PROCESSOR COSTS Vv Diesel Fuel Costs 0...0...ccc ccc ee cee eee eee eee e eee eees V-1 Maintenance Costs ©...2...cece eee eee eee renee eee eeees V-1 Air Quality Investments ...2...0...ee eee eee eee eee eee ene eeee V-1 Other Considerations ..1...0....ccc ccc cee eee eee eee ees V-1 PROJECT AGREEMENTS VI City of Unalaska -Seafood Processor Power Sales Agreement .........VI-1 Alaska Energy Authority -City of Unalaska Power Sales Agreement ...VI-2 Section I INTRODUCTION The Alaska Energy Authority (the "Authority")and OESI power Corporation ("OESI") are together considering construction of a geothermal power project at Unalaska.As presently envisioned,the Authority would contract with OESI for construction and operation of the power plant,and finance its construction with the issuance of tax-exempt bonds.The geothermal wellfield itself would also be developed by OESI,but would be financed separately with OESI equity.The Authority would own the completed project, and would sell the output to the City of Unalaska electric utility,which in turn would resell the power to existing City electric customers and to local seafood processors and other industrial concerns that currently rely on self-generation.Because the power demand of the local processors substantially exceeds the demand of existing City customers,the success of the geothermal project depends on agreement by the processors to purchase significant blocks of project power. é Purpose of Report The purpose of this report is to present preliminary information about the Project at the earliest possible time to the City and to potential power purchasers. Much of the information in this Report is based on information developed in earlier Project studies.Information relevant to the estimated Project capital costs,operating costs, and fluid fees has been provided by the Project's developer OESI,and should be regarded as preliminary.Detailed Project design and engineering efforts are currently under way.. No Project agreements have been signed.Neither R.W.Beck nor the Authority have reviewed this information to the extent required by a full official statement or a Consulting Engineer's Report.R.W.Beck is not providing an opinion at this time as to the reasonableness of this information. Project Owner -Alaska Energy Authority The Alaska Energy Authority is a public corporation of the State of Alaska led by a seven member Board of Directors appointed by the Governor.Created by the Alaska Legislature in 1976,the Authority's purpose is to promote,develop and advance the general prosperity and economic welfare of the people of Alaska by constructing,acquiring, financing,and operating power projects and facilities that recover and use waste energy. The Authority works in partnership with local governments,public utilities,and the private sector to achieve its goals.Most construction work and the day-to-day operation Section I -Introduction Draft -11/13/91 I-1 and maintenance of the Authority's facilities are contracted to private companies or utilities,thus stimulating the state's economy and creating private sector jobs. Among the Authority's $1.1 billion in assets are five operating hydroelectric projects,more than 400 miles of transmission line,including a major intertie connecting Anchorage and Fairbanks,and a number of smaller projects,including ten waste heat systems. Project Developer -OESI Power Corporation OESI Power Corporation was incorporated in Delaware in 1986.The company acquires, develops,operates,and sells interests in geothermal power projects.Currently,OESI's activities are focused in the states of California,Nevada,Hawaii,and Alaska.Eight of the facilities developed by the company are in commercial operation in the states of California and Nevada.These power projects have an aggregate capacity of 65.6 MW of electric power production.OESI has retained an interest as a lessee,resource supplier or plant owner in seven of these facilities with an aggregate capacity of 63.9 MW.Five facilities,with a combined capacity of 49.9 MW,are operated and maintained by the company under five-year contracts. OESI is constructing three additional facilities with an aggregate planned capacity of 29.5 MW.In addition,OESI is at various stages of project development of five additional facilities with an aggregate planned capacity of 102 MW.The company and its affiliates hold leasehold interests in approximately 70,000 acres of geothermal resource areas located in California,Nevada,Hawaii,and Alaska.OESI also owns and operates 27 geothermal production wells and 33 injection wells,including six spare production wells. The company derives its revenues from the development and sale of geothermal power projects and from operation of commercial facilities.In 1990,project development activities accounted for approximately 69%of the Company's consolidated revenues. Project development revenues are earned from the sale of projects or interests therein (90%)and development fees (10%).The remaining 31%of OESI's revenues were derived from project operations.Revenues from these activities included payments from the sale of electricity (48%),operation and maintenance fees (33%),royalty and fluid supply fees (18%),and other (1%). OESI has exclusive rights in the United States to market proprietary equipment that generates electricity from a wide range of geothermal resources.This power production equipment,known as the Ormat Energy Converters ("OECs"),is designed and manufactured as standard,self-contained modular units.The basic design of the OECs and the major component parts can be modified to accommodate different geothermal resource characteristics,including variations in temperature,pressure,vapor-to-liquid ratio,and chemical composition. Section I -Introduction Draft -11/13/91 I-2 Power Purchaser -City of Unalaska The City of Unalaska (the "City")is located on Unalaska Island in the Aleutian Islands approximately 800 miles southwest of Anchorage,Alaska.The Island is located between the Bering Sea and the Pacific Ocean.The City's industrial base is built on fish processing, fleet support facilities,and marine cargos.The sheltered deep water port of Dutch Harbor is located close to the major east-west shipping lanes connecting the United States and Japan. The City supports one of the largest fishing and fish processing industries in the world. The on-shore infrastructure of the City includes modern fish processing plants, maintenance and repair facilities for the large trawler and crabbing fleets,as well as growing volumes of marine cargos.Primary catches are pollock,cod,various species of crab,and halibut.The largest percentage of catch is pollock. Since 1980,pollock processing has rapidly expanded.Major investments,estimated at $225 million,have been made by large fish processing companies in modern processing plants and fleet support facilities. Electricity is currently generated using diesel engines at four large power plants and numerous smaller ones.The City's electric utility maintains a power plant providing power to approximately 3,000 residents and a number of commercial businesses.The three major fish processing companies-Alyeska Seafoods;UniSea,and Westward Seafoods-generate their own power.Two container shipping companies,American President Lines and Sea-Land,also self-generate. Independent Consulting Engineer -R.W.Beck and Associates R.W.Beck and Associates ("R.W.Beck")was retained by the Authority to serve as Consulting Engineer to prepare an independent written report (the "Consulting Engineer's Report"or "Report")supporting opinions regarding the economics and feasibility of the Unalaska Geothermal Project (the "Project").These opinions relate to the following topics: .The technical feasibility of the Project; e The estimated direct construction cost; .The construction schedule and estimated operation and maintenance costs; e The ability of the City's electric system to utilize the Project's power by marketing power to City residents,commercial firms,and to other principal industrial users;and .The review of all Project agreements. Section I -Introduction Draft -11/13/91 I-3 R.W.Beck ranks in the top three percent of U.S.engineering firms serving owners and developers of electrical facilities.The firm has extensive experience in the preparation of financial feasibility studies and consulting engineer's reports for inclusion in official statements for the issuance of revenue bonds.The firm has prepared such reports in official statements for revenue bonds totaling in excess of $60 billion since 1985. Independent Geothermal Consultant -GeothermEx,Inc. GeothermEx,a specialized consulting firm concentrating on geothermal resource evaluation,was retained by the Authority to prepare an independent opinion on the quality and longevity of the geothermal resource which OESI proposes to develop. GeothermEx provides similar services to lenders and public power agencies involved with financing geothermal projects.The GeothermEx opinion would be available as part of the official statement prepared for the issuance of bonds.GeothermEx has conducted due diligence and verified resource adequacy for financial institutions in nearly all geothermal projects in the U.S.financed by bank loans or bonds,the total financed to date being U.S.$4 billion. Section I -Introduction Draft -11/13/91 I-4 Section II PROJECT HISTORY The Geothermal Resource -Authority's Exploratory Drilling Program Geothermal energy in the form of naturally occurring underground steam and hot waterisnowbeingusedthroughoutmuchoftheworldtocommerciallyproduceelectricity. The Aleutian Archipelago contains 46 active volcanos and has been recognized to have the potential to produce geothermal power.One such volcano,Makushin,is located on Unalaska Island some 14 miles from the City. The State of Alaska established the Authority in 1976 to encourage long-term economic growth through the development of power projects.Based on a number of geologic investigations indicating potential for significant geothermal resources on Makushin,the State decided to undertake a program of geothermal exploration in the area in 1980.In 1981,the State appropriated $5 million to fund this program. The exploration program was developed in three phases.Phase I addressed environmental,geological,geochemical,technical planning,and the drilling of three temperature gradient holes.Phase II included the drilling of a deep exploratory well. Phase III activities centered on further testing of the geothermal resource and drilling a fourth temperature gradient hole,and a survey to delineate the extent of the geothermal reservoir. The exploration program confirmed the existence of a highly productive geothermal reservoir at a depth of 1,949 feet,approximately 13 miles west of the City.The water- dominated resource has a bottomhole temperature of 382 degrees Fahrenheit and pressure of 497 psi.Flow tests,reservoir analyses,and wellbore modeling indicate that acommercial-size production well at the site would be capable of producing from 7 to 12MWofelectricpower. The Authority pursued further studies,including an engineering investigation by the Alaska Division of Geological and Geophysical Surveys,and environmental analysis conducted by the Alaska Department of Fish and Game,and a load forecast and power market analysis for the City.In order to integrate all Project data,including the exploration program results and additional studies,a detailed engineering,environmental, and economic feasibility study of the geothermal power resource and electric power markets was completed by Dames &Moore in June 1987.This was followed by a secondprojectreviewissuedbyPowerEngineers,Inc.in December 1987,and a financialfeasibilityanalysiscompletedbytheAuthorityinApril1988. Section I -Project History Draft -11/13/91 'II-1 Ownership of Geothermal Field -History and Status In 1985,the resource lands on Unalaska Island were conveyed to the Aleut CorporationbytheU.S.Government.In 1986,the Authority executed a conditional land and resource development agreement with the Aleut Corporation and a conditional right-of-way agreement with the Ounalaska Corporation.These agreements were contingent upon a determination of project feasibility,and a decision by the Authority to pursue project development by a date certain. Upon completion of the project feasibility studies in 1988,and a decision by the Authority not to pursue project development at that time,the Authority relinquished to the Aleut Corporation its rights under the conditional land and resource development agreement. The Authority also relinquished its conditional right-of-way agreement to the Ounalaska Corporation.In 1988,the Aleut Corporation sold the resource lands in fee,along with the geothermal resource rights,to the Battle Mountain Gold Company.On January 1,1991, OESI executed a geothermal lease with Battle Mountain Gold Company. Project Description OESI proposes to develop the Makushin Geothermal Field.OESI will construct a power plant and other facilities with 12,000 kW of capacity.Project energy will be delivered at the City's utility bus.The Project will encompass development of the geothermal field,including the resource reservoir,well and wellhead equipment,power plant,roads,a transmission line,and upgrading of the City's electric system. The electricity generated by the geothermal power plant will be sold by the Authority to the City under a Power Purchase Agreement.The City will,in turn,enter into power sales agreements with industrial users to supply the baseload power as well as a portion of their peak requirements.The City's existing distribution system will be upgraded to support an interconnected grid to all power users.The Project is expected to have a useful life in excess of thirty years.. Plant Description OESI will develop and construct the power plant and facilities under a fixed price,date certain,contract with the Authority.An access road to the power plant will be constructed up the Makushin Valley from Nateekin Bay,with the transmission line following this routing.The possible use of Driftwood Bay as the access for the construction road is also being considered.It is estimated that up to four production wells and three injection wells,including one spare well for each type,would be drilled,tested,... and interconnected to the power plant.The net capacity at the City utility bus will be 12,000 kW after deducting internal plant usage and transmission line losses. The power plant will utilize five modular flash/binary proprietary OEC units,each incorporating a 3,500-kW generator with a total nameplate rating of 17,500 kW and an Section II -Project History Draft -11/13/91 IT-2 overall site specific average gross generating capacity of 15,000 kW.The OEC units are self-contained and fully automatic,producing grid compatible power.The Ormat energy conversion system is based on the Organic Rankine Power cycle,using an organic working fluid selected to optimize the power output from a given geothermal temperature and flow.In the binary power plant,the geothermal fluid flows through the vaporizer where its heat vaporizes the organic fluid.The expansion of the vapor causes the turbine to rotate.The turbine in turn drives the generator.The exhaust vapor is subsequentlycondensedinaaircooler,and is recycled to the vaporizer by the motive fluid cycle pump.The cooled geothermal fluid stream is reinjected into the ground. The design of the power plant will allow for 3.5-MW incremental additions in future years. Geothermal Field Description The Authority conducted geothermal field work during the summer of 1982 in the Makushin Volcano area.Asa result of this work,23 thermal areas were delineated.A series of exploration surveys was conducted,including the drilling of three 1,500-feet deep holes in order to determine the most promising area for the drilling of a deeper exploration well. A 1,949-foot deep well was drilled during the summer of 1983.A 325 degrees Fahrenheit shallow steam zone overlying a liquid-dominated geothermal reservoir with a temperature of 380 degrees was discovered.Preliminary tests were performed with the indication that the reservoir was potentially commercial. During 1984,a long-term,34-day flow test of the well was conducted,and the resultswereconfirmed.A sustained flow of 63,000 lbs/hr was achieved througha three-inch- diameter wellbore with less than 2 psi of pressure drawdown from the initial reservoir pressure of 497 psi.This indicates a very large permeability-thickness value of the reservoir.The well productivity index obtained during this test was approximately 300,000 Ibs/hr/psi.Reservoir size calculations indicate that the reserve found is sufficient to meet the electricity needs of the Island for several hundred years. The Project will utilize two active production wells plus one spare well.These are to be either 9-5/8"or 13-3/8"inside diameter cased wells approximately 2,000 to 3,000 feet in depth.Each well has a wellhead assembly incorporating both manual and automatic remotely cperated valves,as well as pressure,temperature,and flow measuring transducers.Actual parameter and well conditions will be monitored from the central control station.. Geothermal fluid from the resource flows artesian and will be piped through insulated steel pipelines to the plant.Injection pumps will pump the cooled geothermal fluid to injection wells.The number of injections wells is still being determined,but it is assumed that there will be two active injection wells plus one spare.) Section IT -Project History Draft -11/13/91 IT -3 Transmission Line and Route Description A transmission line will interconnect the geothermal power plant and the City's distribution system.The planned electric power transmission system is comprised of a step-up transformer overhead line from the plant site to the Makushin Valley where it is then to be undergrounded until it reaches the shore of Nateekin Bay.From the shore of Nateekin Bay the line will be laid under water to Amaknak Island following the path south of Hog Island in water depths in excess of ten fathoms.The transmission line will be connected to the existing Unalaska/Dutch Harbor transmission line on Amaknak Island. Foundation conditions in the lower Makushin River Valley are poor.The soft muck underlying the marsh vegetation mat is incapable of supporting loads associated with transmission line structures.Therefore,underground cables will be installed adjacent to the operational access road from Nateekin Bay for approximately three miles up the Makushin Valley.From this point to the power plant,it has not yet been determined whether the transmission line would go overhead or underground.This section of the line would generally follow the proposed road.A four single-conductor cable submarinecrossingisplannedtoDutchHarbor.A three single-cable underground land installationadjacenttotheaccessroadwasrecommendedinearlierstudies.A submarine cable would be laid across Unalaska Bay and above ground to the bus of the City's distribution system. An access road to the power plant will be constructed up the Makushin Valley from Nateekin Bay.This access road could be used for transmission line construction,for underground cable installation and access of personnel during construction and operation of the power plant.Equipment landed at Nateekin Bay would be unloaded by cranes or off-loaded over ramps carried on barges,directly onto the beach or onto trucks and trailers on the beach. Marine terminal facilities would be constructed at Nateekin Bay.A dock with a small crane will be required at the end of the power plant access road. Planned Upgrade of the City's Electric System All Project studies to date have assumed that power would be delivered to the City's bus bar on Amaknak Island.The Project will provide funding to upgrade the City's system to create a power grid for interconnection and cooperative generation where practical. The City will need to substantially upgrade its system to allow distribution of Project power to major power purchasers who are not now connected.Approximately $1.3 million has been included in the Project's cost estimate to complete this work. Section II -Project History Draft -11/13/91 Ir -4 Section III RELIABILITY FACTORS Utilization of geothermal resources has proven to be an economic and reliable source of electric power in many parts of the world.Worldwide,over 3,000 megawatts of geothermal generating capacity have been installed. The exploration program conducted for the Authority between 1981 and 1985 confirmed the existence of a highly productive geothermal reservoir.A reservoir analysis performed during that time frame indicated that the resource can support the size of the planned Project over an extended period of time.The techniques utilized in this type of reservoir modeling are based on petroleum engineering and geological experience,and are generally accepted by institutional and commercial lenders as basis for approving project debt with a high degree of comfort that the risk has been mitigated. Prior to financing,the Independent Geothermal Consultant will analyze all available data in a computerized model to confirm the results of the previous modeling and analysis. Ormat's OEC units have been operationally proven in a number of geothermal power applications.OEC units are modular,allowing for maintenance to take place on individual OEC units,with the remaining OEC units continuing to supply power.The use of air cooled systems eliminates the need for cooling towers and water cooling systems,thus reducing downtime for maintenance and eliminating the possibility of freezing in winter months.The use of single-flash technology with the artesian flowing wells eliminates the need for downhole pumps which are the least reliable geothermal system components.The use of binary technology allows for simple turbine design so that all repairs may be performed at the on-site workshop by plant technicians.Spare wells will be drilled for production and injection thus assuring adequate redundancy of supply/reinjection.The plant will be manned 24 hours per day by two operators per 12- hour shift. The Consulting Engineer will review the feasibility of the facilities equipment design. In addition,OESI will provide a guaranty that the power plant will meet the conditions outlined in the Commercial Operation Criteria. The transmission line will be designed to minimize risks attributable to environmental conditions.There is ample engineering and construction experience with transmission lines in other remote areas of Alaska to provide for engineering and design of reliable underground and overhead transmission lines. Section III -Reliability Factors Draft -11/13/91 TI-1 Section IV COST OF POWER Introduction Due to the large amount of installed capacity already existing in the area,the Project's |benefits are at this time derived primarily from displaced energy.Other benefits mayexist,including avoided capital investment in air quality enhancements,delinking energycostfrompetroleumprices,and the postponement or avoidance of replacement and/or expansion of diesel generation in the future.(The latter being uncertain due to enforcement of EPA air quality regulations.)These will be described in greater detail in the next chapter.However,since at this time a substantial portion of the benefits comefromoffsettingthevariablecostsofdieselgeneration,the estimated annual costs of Project power will be shown on a per-kWh basis with all costs allocated to energy. The cost of power is made up of several components.These include the annual debt service on the capital borrowed to finance construction,annual operating costs,the pricepaidforgeothermalsteam,administrative costs,and other costs.These are described in greater detail later in this section. System Loads The electrical requirements of the Unalaska area include not only loads on the City generators but also loads of entities providing their own self-generation.The majorityofself-generated load is served by the power plants of three major seafood processors:Alyeska Seafoods,UniSea and Westward Seafoods.Other self-generated load includes American President Line,Sea-Land,Offshore Systems,and Icicle Seafoods. For purposes of this preliminary Report,we have obtained and analyzed historical load data for the City,as well as the for the three major fish processing facilities of AlyeskaSeafoods,UniSea,and Westward Seafoods.We traveled to Unalaska to gather data on loads and resources,observe power plant facilities,and interview those responsible for power plant operations and planning.We have also estimated loads for existing self- generators other than the three major fish processors.Based on the data we gathered and our preliminary analyses,Table 4-1 presents annual load information for the Unalaska area assuming no load growth:OO Section IV -Cost of Power Draft -11/13/91 IV -1 Table 4-1 Unalaska Geothermal Project Annual Load for Unalaska Annual Peak Average LowkWhkWkWkW City Load 20,346,820 4,110 2,323 1,470 Major Fish Processor Load 56,389,420 11,138 .6,437 3,029 Other Self-generated Load 11,800,000 3,633 1347 520 Area Load 88,536,240 18,881 10,107 5,019 Peak kW in the above table is the highest average daily load in the period.Average kW is the annual kWh divided by 8,760 hours.Low kW is the lowest daily average load for the period.The peak load occurred in the month of February,while the low load occurred in the month of September.Diversity between the City load and other loads was assumed to be zero for purposes of this preliminary analysis. The above figures are based on historical data for the 12 months ended September 1991. Actual data for the City was used for that 12-month period.With respect to the major fish processor load,actual data was used for Alyeska Seafoods.For Westward Seafoods, the new plant began operations in March and data showing monthly kWh for the Westward Seafoods power plant was available only for the months of May through September.With respect to UniSea,the new power plant and new surimi plant became operational in January 1991.Monthly kWh data was available for UniSea for the period January through September.In order to have representative annual data for all processors,kWh data was calculated for Westward Seafoods for the months of October 1990 through April 1991,and for UniSea for the months of October 1990 through December 1990,based on the usage pattern of Alyeska Seafoods.Complete peak kW and low KW data were available for Alyeska Seafoods,while minimal peak kW and low KW data were available for Westward Seafoods and UniSea.Therefore,peak kW and low kW figures were determined for Westward Seafoods and UniSea based on the load pattern of Alyeska Seafoods. Other self-generated load includes estimated loads for American President Lines,Sea- Land,Offshore Systems,and Icicle Seafoods. Appendix IV-A,at the end of this section,shows monthly load data for the City,the three major seafood processors,and the other self-generated load.The monthly load dataisshownintabularandgraphicalform. Section IV -Cost of Power Draft -11/13/91 Iv -2 eoCapital Costs Construction Costs OESI has provided the Authority with an outline of a construction agreement.The terms of this agreement propose that OESI will construct the Project for a fixed price of $57.4 million.Payments are to be made to OESI as they are incurred,with a 10%retainage by the Authority until the Project is commercially operable. The fixed price is based on OESI's estimate of the construction costs of the Project and the geothermal field development (see Table 4-__,Project Construction Cost).Several of these cost components are extrapolated from an earlier report prepared for the Authority by Power Engineers,Inc.,and Dames and Moore in 1987. Financing Costs At this time,the Authority plans to issue tax-exempt revenue bonds to fund its payment obligations to OESI during the construction period.Therefore,certain financing and other related costs will be incurred by the Authority which are not included in the $57.4 million amount.Estimates of such financing costs and interest during construction have been provided to us by OESI.However,for purposes of this report,we have developed our own estimates of these costs.These estimates are based in part on various financial parameters provided to us by the Authority's financial underwriter,as well as a preliminary assumption on the monthly construction cash flow.Key assumptions utilized in the analysis include the following: Construction Period:April 1992 -December 1993 Cost of Capital:7.97% Debt Amortization Period:30 years Reinvestment Rate:5.0% Cost of Issuance:2.5%of the Bonds Interest capitalized through:March 1994 The sum of $400,000 has also been included as an additional amount to be repaid to the Authority and OESI at the time of bond closing for their respective costs incurred to date. In OESI's estimates of annual revenue requirements for the Project,provisions have been made for an annual payment to a renewal and replacement fund.This amount is shown to be $500,000 in the first year of operation,and $100,000 per year for the next nine years. The annual payment increases with time such as there are sufficient funds in the account to pay for renewal and replacements,which have been estimated by OESI to occur every three years,at a cost of approximately $300,000 per occurrence (at 1993 price levels). Given the relatively low cost of borrowing found in the current tax-exempt bond markets, an alternative approach may be to include in the borrowing requirements an amount that can be used as the initial deposit into the renewal and replacement fund.While the Section IV -Cost of Power Draft -11/13/91 IV -3 rsannual debt payment would increase accordingly,this increased revenue requirement would not be as great as the amount presently shown during the early years of Project operation.For purposes of our analysis,we have included in the borrowing requirements $500,000 for an initial deposit into the renewal and replacement fund. Based on the assumptions described above,we have made an estimate of the total borrowing required for the Project.To the extent that cash.flows,interest rates, construction costs,and other parameters differ from those assumed,the total debt requirements would change accordingly.Details of this estimate are provided at the end of this section. Table 4-2 Unalaska Geothermal Project Sources and Uses of Funds (thousands of dollars) Sources: Revenue Bonds ...........000ceee $67,000 OESI Equity(1).............-2006-9,599 Interest Earnings(2).............6--3,216 Total Sources .........00eeeeee $79,815 Uses: Project Construction ............06.$57,400 Site Development(1)...............9,599 Cost of Issuance ...........200eee 1,675 Initial Studies ...............000..400 Capitalized Interest...............-10,050 Renewal and Replacement Fund.......500 Rounding .........cece eee ee ees 191 Total Uses ..........02.0ceeeee $79,815 (1)Assumes OESI equity funds site development. (2)Earnings accrued on available funds during the construction period. Operations Operating Expenses OESI has prepared and submitted to the Authority an outline of an operations and maintenance agreement for the Project.The proposed agreement stipulates that Alaska Geothermal Power Systems ("GPS"),an OESI affiliate,will operate the Project,perform all maintenance on the Project facilities,and perform routine maintenance of the Section IV -Cost of Power Draft -11/13/91 Iv -4 geothermal field.The terms of the agreement are proposed to be for the initial three years of Project operation,with the option to renew for successive three-year periods by mutual agreement. OESI proposes that GPS be paid a fixed monthly fee which would represent full compensation for operating and maintaining the Project.Certain items,however,would not be included in this fee,including well maintenance,annual deposits into a well reserve account,property taxes,insurance,operator's extra expenses,royalties,and fluid fees. OESI has prepared an estimate of the annual operating costs which are shown in the table below: Table 4-3 Unalaska Geothermal Project Annual Operating Costs (thousands of dollars) Fee(1)§ Additional(2) Operators ww eeeeeeeeees $1,090Overtime-sw ww eeeeeeeeeeeee 100 Spares and Consumables ..............100 Shipping and Transportation ...........70 Transmission Line and Road Maintenance .100 OEC Maintenance and Subcontracts ......120 Operating Overhead .............56.4.-.120 Wellfield Maintenance ................$450 Property Tax 1.2.2...eee cece eens 100 Insurance -ww ee ee eee ee ee eee 32 60 Wellfield Insurance .............--06-30 Well Reserve Fund Deposit ............250 General and Administrative ............135 _45 Total ---_cc eee ec eee ee ee eee $1,867 $935 (1)Those costs which would be reimbursed to GPS with a fixed fee of $1,867,000 per year escalated annually at a rate equal to the Gross National Product Deflator.. (2)Costs to be paid by the Project users to GPS in addition to the fixed fee. The operations and maintenance agreement will set forth what costs are reimbursed through the fixed-fee component and what costs are considered additional.Further,the fixed fee should be representative of the actual cost of operating and maintaining the Project.Should the fee be too low,GPS may not elect to renew the agreement at the end of three years,and the new operator would presumably be paid the correct amount.In Section IV -Cost of Power Draft -11/13/91 IV-5 such a case,the cost of power could increase significantly from one year to the next.Should the fee be too high,the cost of power from the Project would be higher than itshouldbe. OESI has assumed that drilling a replacement well will be required every seven years. It further assumes that a reserve account with an annual deposit of $250,000 per year willbesufficienttofundsuchadrillingprogram.No review of the replacement scheduleorfundingrequirementshasbeenmadeatthistime. Fluid Fees In addition to the operating and administrative costs described above,OESI has proposed a royalty and fluid fee schedule as follows: Base Variable Fluid Fee =$0.033/kilowatt-hour for the first 50 million kWh delivered to the City.If OESI or an affiliate does not operate the Project,the annual fluid fee would be based on a minimum of 50 million kWh.This component of the fee is to be fixed with no escalation. Incremental Variable Fluid Fee =$0.023/kWh for all energy greater than 50 million kWh delivered to the City.This component of the fee would increase at the Gross National Product Deflator. A royalty payment is specified in an agreement with the area landowners to compensate landowners for use of the resource.The royalty would be calculated as follows: Royalty =PxF where, P=percentage royalty16%in years 1-5 after Date of Commercial Operation 24%in years 6-1140%in years 12 and thereafter F =Sum of Base +Incremental Variable Fluid Fees City Costs In addition to the costs associated directly with the Project,the delivered costs of power to the end-users will also include certain costs of the City.These costs typically include the costs of transmission and distribution from the source of power to the loads,other generation costs that are incurred in providing power to the loads,properly allocated administrative costs,and others.For purposes of this Report,we have assumed that these costs will be approximately 2¢/kWh in 1994 and will escalate at the same rate of inflation thereafter. Section IV -Cost of Power Draft -11/13/91 IV -6 Total Delivered Cost of Project Power Based on the foregoing assumptions and the elements contained in the outlines of the operations and maintenance,fluid sales,and construction agreements,we have estimated the cost of power that would be incurred by the City and its large customers for the first ten years of Project operation.These are shown on Tables 4-4 and 4-5.Costs incurred by the City would be the Project busbar costs (plus provisions for transmission losses and expenses)while the large customers'cost contains an additional 2¢/kWh (at 1994 price levels). At this time,the total electric requirements of both the City and the area's self-generators have not been projected for 1994 and beyond.Further,the Project does not have sufficient capacity to serve the entire peak load of the area,and therefore diesel generation of the City and/or the processors will have to be operated to meet peak loads.Thus,the Project will not serve all of the energy requirements of the area. For purposes of this preliminary Report,we have determined the generating costs at assumed load levels ranging from 60 million to 88 million kWh per year.Costs during the first year of operations include only nine months of debt service as interest is capitalized through March 1994. Section IV -Cost of Power Draft -11/13/91 IV-7 weTABLE 4-4 ALASKA ENERGY AUTHORITY UNALASKA GEOTHERMAL PROJECT Bond Sizing Analysis (Dollars inThousands) CAPITAL COST DATA/PARAMETERS Construction Cost 57,400 Cost of Capital 7.50% Dniling,Field Development,etc.9,599 Reinvestment Rate 5.00% Other Costs 0 Cost of Issuance 2.50%of bonds Other Costs (¢) Total Development Costs Initial Studies 400 (w/o financing costs)66,999 :R&C Fund Requirement 500 Working Capital 0 OESI Equity 9.599 DSR Fund 0%of bonds AEA Loan Debt Amortization Period 30 years Financed Amount 57,400 AEA Loan: Princiapal Amount 11,000 Interest Rate 6.00% Reinvestment Rate 6.00% OPERATING COST DATA O&M Fee 1,867 Base Year of : Wellfield Maintenance 450 Operating Costs 1994 Property Taxes 100 Insumace 60 Annual Escalation Factors: Wellfield Insurance 30 General 4.50% Well Reserve Fund Deposit 250 Administrative (non-fee)45 Fluid Fee: Base (<SO GWh)0.033 (Wh Variable 0.023 Wh Royalty Percentage: Years 1-5 16% Years 6-11 24% Years 12 and thereafter 40% Energy Losses: Busbar to Load 4.00% Additional City Costs 2.0 cents/k Wh. Section IV -Cost of Power Draft -11/13/91 IvV-8 16/€L/II-yeaq6-AIIIMOJJO3SOD-A]UORIaSBees fee ot, Annual Debt Service Interest Esmings on DSR Net Dets Service Operations and Maintenance: Fixed Fee Wellfield Maintenance Propeny Taxes Insumace Wellfield Insurance Administrative (non-fee) Fluid Fee: Fixed Variable @ 60 million kWh) Royalty Totst Operating Costs (w/Debt Service) Other Costs: Deposit R &R Pund Net Sinking Fund Payment Well Reserve Fund Deposit TOTAL PROJECT COSTS (@ 60 million kWh/year) (Dollars) (cents/Wh) City Costs (cents/Wh) Delivered Cost of Power (cents/k Wh) 60 million kWhiyear 75 million kWh/year 88 million kWh/year 1,650 301 3.988 9,258 15.4 2.00 18.2 13.4 13.8 TABLE 4-5 ALASKA ENERGY AUTHORITY UNALASKA GEOTHERMAL PROJECT Annual Costs of Power 1995 $.673 Q 5,673 10,813 18.0 2.09 20.9 17.7 18.8 (Dollars In Thousands) 1996 1997 1998 5,673 5.673 5.673 Q Q 9 5.673 5.673 3,673 2.039 2030 2.226 49 314 337 109 we 419 66 68 72 x3 34 36 49 51 54 1,650 1.650 1,650 25k 262 274 304 306 308 10,665 10,804 10,948 50 50 50 250 250 250 10,965 14,104 11248 18.3 18.3 18.7 2.18 2.28 2.39 213 21.7 22.0 18.0 18.3 18.7 16.1 16.4 16.7 11,605 22.7 17,3 11,764 19.6 2.60 23.1 19.7 17.6 11,930 19.9 2.72 23.5 20.1 18.0 12,104 20.2 2.84 24.0 20.3 18.4 1,650 478 11,935 25.0 2b 19.2 1,650 12.647 13,047 21.7 3.25 26.0 22.3 20.1 13,257 22.1 3.39 26.5 22.8 20.5 13,476 22.5 3.54 271 23.3 21.0 13,545 200 250 13,995 23.3 3.87 28.3 24.4 22.1 14,245 23.7 40 23.9 25.0 22.6 OCT90 CITY KWH 1,693,740 PEAK KW 2,770 AVE KW 2,277 LOW KW 1,387 PROCESSORS KWH 5,474,499 PEAK KW 10,607 AVE KW 7,358 LOW KW 3,654 OTHER KWH 1,102,285 PEAK KW 2,795 AVE KW 1,482 LOW KW 741 TOTAL KWH 8,270,524 PEAK KW 16,172 AVE KW 11,116 LOW KW 5,782 NOTES: NOV90 1,822,260 3,559 2,531 1,817 3,381,353 9,592 4,696 2,871 800,178 2,097 1,111 556 6,003,791 15,248 8,339 §,243 DEC90 1,762,040 3,409 2,368 1,888 2,780,674 4,884 3,737 3,000 698,549 1,772 939 469 5,241,263 10,064 7,045 5,358 JAN91 2,126,140 3,804 2,858 1 5659 5,942,090 9,410 7,987 4,705 1,240,680 3,146 1,668 834 9,308,910 16,361 12,512 7,198 FEB91 2,088,840 4,110 3,108 2,372 6,325,290 11,138 9,413 6,077 1,293,870 3,633 1,925 963 9,708,000 18,881 14,446 9,412 CITY OF UNALASKA AREA LOADS MAR91 APR91 1,894,460 2,025,340 3,591 3,177 2,546 2,813 1,625 1,516 3,724,531 3,543,892 5,920 §,426 5,006 4,922 3,898 4,370 864,052 856,400 2,191 2,244 1,161 1,189 581 595 6,483,043 6,425,632 11,702 10,847 8,714 8,924 6,103 6,480 MAY91 1,548,239 3,310 2,081 1,631 3,425,045 6,025 4,604 3,099 764,759 1,939 1,028 514 5,738,043 11,274 7,712 §,244 JUN91 1,370,461 2,653 1,903 1,457 5,590,255 10,785 7,764 4,337 1,070,374 2,805 1,487 743 8,031,090 16,243 11,154 6,537 JUL91 1,432,320 2,502 1,925 1,410 6,072,202 11,120 8,162 4,182 1,153,997 2,927 1,551 776 8,658,519 16,549 11,638 6,368 1,Peak KW is the highest daily average KW,Low KW is the lowest daily average KW.Average KW is KWH divided by hours in the month.2.Diversity between City load,Processor loads and Other loads Is assumed to be zero. 3.The months of Oct90 through Dec90 include calculated loads for UniSea as if the new plant facilities were in operation. 4.The months of Oct90 through Apr91 include calculated loads for Westward as if the plant was in operation.5.Other loads are estimated. AUG91 1,396,160 3,029 1,877 1,353 6,447,733 10,451 8,666 3,932 1,206,183 3,059 1,621 811 9,050,076 16,538 12,164 6,095 SEP91 1,186,820 2,560 1,648 1,470 3,681,856 7,504 5,114 3,029 748,673 1,962 1,040 520 5,617,349 12,026 7,802 5,018 TOTAL 20,346,820 3,206 2,323 1,632 56,389,420 8,572 6,437 3,929 11,800,000 2,548 1,347 675 88,536,240 14,325 10,107 6,237 ave. ave. ave. ave. ave. ave. ave. ave. ave. ave. ave. ave. Unalaska City Load Load KW (Thousands) 5 Oct Nov Dec Jan Feb Mar Apr May Jun Jul 90 |94 -&-Peak KW +Month Ave.KW -*-Low KW Aug Unalaska Processor Load Load KW (Thousands) 12 1 Oct Nov Dec Jan Feb Mar Apr May Jun Jul 90 |91 -2-Peak KW 7 Month Ave.KW --Low KW Unalaska Area Load Load KW (Thousands) J !!J !J i !!J0 oF Nov Dec |Jan Feb Mar Apr May Jun Jul Aug sep9091 -8-Peak KW -t-Month Ave.KW -o--Low KW Section V AVOIDED PROCESSOR COSTS The availability of an alternative source for power to the processors would allow the processors to avoid certain costs.While the processors would maintain their existinggenerationforstandbyandpeakingpurposes,processors could avoid or reduce costs, including diesel fuel costs,maintenance costs,and air quality investments.These areas are discussed below. Diesel Fuel Costs The most significant item of avoided costs is diesel fuel costs.Diesel fuel costs would only be incurred for power generation when the diesel generators of the processors are being run for peaking purposes,or backup or reserve purposes.Diesel fuel costs are currently about 90¢per gallon.Assuming generation efficiency of about 13 to 14 kWh/gallons of diesel fuel (estimates supplied by several large self-generators),the cost of fuel for generation is approximately 6.4 to 6.9¢/kWh. Maintenance Costs Maintenance costs will be reduced because the machines will be operated for substantiallyfewerhours.Because the machines will be run for fewer hours,reductions will be expected in the cost of lube oil,the cost of periodic and ongoing maintenance of the engines,and periodic overhaul of the engines. Air Quality Investments There is the potential for reduction or elimination of investments for meeting air quality standards.We have not made an analysis or reviewed investment requirements for the diesel generators to meet air quality requirements.However,it is possible that the requirement for significant investment necessary to meet air quality requirements could be reduced or eliminated if the engines were to be operated only for purposes of backup and peaking. Other Considerations During our review of the operations of the power plants of the processors,we identified two other factors which could affect the processors'avoided costs.These factors are (1) the use of waste heat from the diesel engines and (2)the use of fish oil as a fuel for the diesel generators.While we have not taken these factors into account in our preliminary Section V -Avoided Processor Costs Draft -11/13/91 V-1 analysis,they could affect the avoided cost of the processors.These factors are discussedbelow. All three processors use waste heat from diesel engines to some extent.The waste heat is used principally for space heating and domestic water heating purposes.All three processors have boiler systems to provide space heating and domestic water heating,and the waste heat from the diesel generation is used to supplement the heat produced by the boiler systems and to reduce fuel costs for the boilers.The boilers are capable of providing all of the necessary heating requirements when the engines are not running or not running at high enough levels to produce sufficient heat.The boilers are fueled by both diesel oil and fish oil.If the diesel engines were only used for peaking and standby purposes,the availability of waste heat from the engines would be limited. All three processors produce fish oil in their operations.The processors differ,however, in the way they use or dispose of the fish oil.Alyeska burns most of its fish oil as fuel for the diesel generators.This produces about 60%of the fuel requirements for the generators.The boilers at Alyeska can be fueled by either fish oil or diesel oil.UniSea burns its fish oil in the boilers.UniSea is not currently burning fish oil in the diesel generators,but is investigating the possibility of doing so.Westward is selling most of its fish oil and is only burning fish oil in its boilers when it runs short of storage space for fish oil.At Westward,the boilers can be fueled by either diesel oil or fish oil.If diesel generators were only used for peaking and backup,most fish oil would either have tobeburnedintheboilersorsold. Section V -Avoided Processor Costs Draft -11/13/91 V-2 Section VI PROJECT AGREEMENTS City of Unalaska -Seafood Processor Power Sales Agreement It is presently anticipated that development of the geothermal field itself would be accomplished by OESI and would be financed by OESI equity.The power plant,access road,and transmission line to the City utility would be owned by the Authority,but developed by OESI on contract to the Authority and financed by Authority tax-exempt revenue bonds.The revenue bonds would be secured by a power sales agreement with the City utility and by the moral obligation of the State.The City utility would enter into power sales agreements with industrial customers in order to market the full output of the Project. Key features of the proposed power sales agreement between the City and the seafood processors are presented below: Electric Service 1.City agrees to provide up to the "base amount"(to be specified). 2.Processor has priority right to energy up to the "base amount". 3.City agrees to sell available energy to processors in excess of "base amount"as interruptible energy. Connecting Equipment City will install connecting equipment at City's expense.Correct equipment will allow power plant to provide power to the City grid,and thereby improve reliability. Payment Obligation 1.Processor is obligated each month to make payment for "base amount", whether or not it is used,at the City's rate for service under this Agreement. 2.Processor will pay each month for any interruptible energy furnished by the City. Section VI -Project Agreements Draft -11/13/91 VI -1 Term of Agreement 1.Thirty-year term. 2.Processor can terminate upon 90 days'notice if processor's facility has been permanently closed for at least one year. Alaska Energy Authority -City of Unalaska Power Sales Agreement Key features of the proposed Agreement are presented below: Project Capability City will purchase 100%of Project capability.- Payment Obligation 1.Cityis obligated to make Payments sufficient to pay all Annual ProjectCosts,including: .Debt service .Operation and maintenance. .Amounts required to maintain reserve funds. 2.Obligation will commence on Date of Commercial Operation. 3.City will be obligated to pay the Annual Project Cost,notwithstanding suspension or reduction in the amount of power supplied by the Project.However,in the event of a decline in power sales,the City's obligation to incur increased payments per kWh will be limited. Term of Agreement 1.Thirty-year term. 2.Term begins on Date of Commercial Operation. Capital Reserve Fund The Authority will establish and maintain a Capital Reserve Fund in an amount equal to two times the annual debt service. Section VI -Project Agreements Draft -11/13/91 VI -2 "Moral"Obligation of State Though not legally bound,the State Legislature may appropriate to the Authority funds required to restore the Capital Reserve Fund in the event that it is drawn down to make payments to bond holders. Security of Bonds Bonds will be secured by a pledge of revenues from the City's electric utility. Section VI -Project Agreements Draft -11/13/91 VI-3 ge Melos CRTpet 'eiWoaerateBETTY.[peeksaET MN ae MN OO Set OAL oy Spek IE SaiWhitARDTFCaeapeEwne, ea FEae1Pieageeoyerieeet+isdn oe wae WT oh ga ol hamematyo Roagealgn oynatesee eee. Lig ha Ne Pa * LY, +Ser,ny4-4, ty REPORT ortAlaskaEnergyAuth 1990 ANNUAL er a Corporation Common Stock Of the 2,250,000 shares of Common Stock offered hereby,2,200,000 shares are being sold by OESI Power Corporation (the "Company”)and 50,000 shares are being sold by the Selling Stockholder named under "Principal and Selling Stockholders.”The Company will not receive any of the proceeds from the sale of shares by the Selling Stockholder. Prior to this offering,there has been no public market for the Common Stock of the Company.See "Underwriting”for the factors to be considered in determining the initial public offering price. Ownership of the Common Stock by certain electric utilities or electric utility holding companies, including affiliates of either,is prohibited.See "Description of Capital Stock -Special Voting Require-ments;Certain Restrictions.” The Common Stock has been approved for quotation on the NASDAQ National Market System underthesymbol"OESI”upon notice ofissuance. See "Certain Investment Considerations”for a discussion of certain factors that should be considered by prospective purchasers of the Common Stock offered hereby. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE © SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.- Proceeds toPublic__|'Discommaiy |Company)|_Stockhoiier Per Share ..........ceccccccccccccccncscees $14.00 $0.98 $13.02 $13.02 Total (3).....cccccccnccccccacccccsscaceces $31,500,000 |$2,205,000 |$28,644,000 |$651,000 (1)The Company and the Selling Stockholder have agreed to indemnify the Underwriters against certain liabilities,including liabilities under the Securities Act of 1933,as amended.See "Underwriting.”(2)Before deducting estimated expenses of $850,000 payable by the Company. (3)The Company has granted the Underwriters a 30-day option to purchase up to 330,000 additional shares of Common Stock on the same terms and conditions as set forth above,solely to cover any over-allotments.If the option is exercised in full,the total price to the public will be $36,120,000,the totalunderwritingdiscountwillbe$2,528,400,and the total proceeds to the Company will be $32,940,600. See "Underwriting.” The shares of Common Stock are offered by the several Underwriters named herein,subject to receipt and acceptance by them and to their right to reject any order in whole or in part.It is expected that delivery of such shares will be made on or about May 17,1991.; Kidder,Peabody &Co.Incorporated The date of this Prospectus is May 10,1991. Working Draft of Independent Engineer's Report November 1991 Wd -1559 -AAIAA DEKE APPENDIX Independent Engineer's Report Alaska Energy Authority Unalaska Geothermal Project November 1991 Table of Contents PROJECT PARTICIPANTS Alaska Energy Authority -Project Owner OESI Power Corporation -Project Developer Makushin Geothermal Partnership -Geothermal Lessee LFC Power Systems -Construction Manager Construction Agreement Alaska Geothermal Power Systems -Operator GPS-AEA Operations and Maintenance Agreement STEAM SUPPLY The Geothermal Resource Makushin Geothermal Steam Field Leases Fluid Fee Agreement POWER SUPPLY ARRANGEMENTS AEA and the City of Unalaska -Power Sales Agreement The City of Unalaska and Principal Industrial Users - Power Sales Agreements THE PROJECT Project Status Description Plant Description Transmission Line Points of Delivery Upgrade of the City System Review of Technology Permits,Licenses and Approvals Construction Management Construction Schedule Project Operations Operator Operating Agreements PROJECT FINANCING Project Construction Costs Financing for the Project PROJECT COSTS OF POWER Project Operations Project Output Cost of Power Project Annual Cost at Point of Delivery SALES OF PROJECT CAPABILITY Purchaser Delivery of Project Output from Point of Delivery Principal Industrial Purchasers Projected Peak Demand and Energy Requirements POWER SUPPLY City of Unalaska Industrial Purchasers ASSUMPTIONS AND CONSIDERATIONS *'CONCLUSIONS Appendix A - Appendix B -Independent Engineer's Report,Unalaska Geothermal Project November 19,1991 OUTLINE OF PROJECT FINANCING CONSULTING ENGINEER'S REPORT FOR THE UNALASKA GEOTHERMAL PROJECT LETTER Board of Divectors Alaska Energy Authority P.O.Box 190869 Anchorage,Alaska 99519-0869 Consulting Engineer's Report Alaska Energy Authority Unalaska Geothermal 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 $of Power Revenue Bonds,(Unalaska Geothermal Project),to provide for the permanent financing of a portion of the construction cost of the Unalaska Geothermal Project (the "Project") by issuing revenue bonds. This Report summarized 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. PROJECT PARTICIPANTS Alaska Energy Authority ("Authority")-Project Owner The Authority was created by the State Legislature in 1976 under the provisions of theAlaskaEnergyAuthorityAct(the Act").The purpose of the Authority,as stated in theAct,is to promote,develop and advance the general prosperity and economic welfareofthepeopleoftheStateofAlaskabyprovidingameansofconstructing,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 withintheStateDepartmentofCommerceandEconomicDevelopment,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 fromtheAlaskaPowerAuthoritytotheAlaskaEnergyAuthority. 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 five 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 Existing Hydroelectric and Transmission Projects of the Authority Nominal Generation Year of :Capability Initial Project General Location (megawatts)Project Cost Operation Bradley Lake Hydroelectric Project Kenai Peninsula 45 $252,286,000 1990 *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 Tranmission 'Anchorage/Fairbanks -125,402,000 1985 Intertie 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 revennes received by the Authority from sales of power from the projects for which the loanswereapplied.Annual operating costs for the hydroelectric and transmission projects ere paid from power sales revenues and otherservicecharges.In addition to its large projects,the Authority administers a variety of progrems to assist rural commumities withthemaintenance,upgrade and construction of electrical power systems and waste heat recovery systems to help reduce the costofpowerandhest.The Authority also administers a utility loan fund program and power cost equalization program thatsubsidizeshighpowercostsinruralcommunities,with both programs funded by the State. At the present time,the Authority has no major projects,other than the Project,under constructionordevelopment.The Authority has made an offer to the Alaska Power Administration,a federal agency,topurchasethefederally-owned,77-megawatt Snettisham hydroelectric project near Juneau,Alaska and has entered into a purchaseagreementpendingcongressionalapproval.It is anticipated that the purchase of the Snettisham project will be financed by theissuanceofpowerrevenuebondssecuredwithapowersalescontractbetweentheAuthorityandtheelectricutilityservingtheJuneauarea.Other projects currently under investigation in the State by the Authority include various waste-heat recoveryfacilities,small transmission and distribution lines and small hydroelectric facilities. OESI Power Corporation ("OESI")-Project Developer OESI Power Corporation was incorporated in Delaware in 1986.The company acquires,develops,operates,and sells interests in geothermal power projects.Currently,OESI's activities are focused in the states of California,Nevada,Hawaii,and Alaska. Eight of the facilities developed by the company are in commercial operation in the states of California and Nevada.These power projects have an aggregate capacity of 65.6 MW of electric power production.OESI has retained an interest as a lessee,resource supplier or plant owner in seven of these facilities with an aggregate capacity of 63.9 MW.Five facilities,with a combined capacity of 49.9 MW,are operated and maintained by the company under five-year contracts. OESI is constructing three additional facilities with an aggregate planned capacity of 29.5 MW.In addition,OESI is at various stages of project development of five additional facilities with an aggregate planned capacity of 102 MW.The company and its affiliates hold leasehold interests in approximately 70,000 acres of geothermal resource areas located in California,Nevada, Hawaii,and Alaska.OESI also owns and operates 27 geothermal production wells and 33 injection wells,including six spare production wells. The company derives its revenues from the development and sale of geothermal power projects and from operation of commercial facilities.In 1990,project development activities accounted for approximately 69%of the Company's consolidated revenues. Project development revenues are eamed from the sale of projects or interests therein (90%)and development fees (10%).The remaining 31%of OESI's revenues were derived from project operations.Revenues from these activities included payments from the sale of electricity (48%),operation and maintenance fees (33%),royalty and fluid supply fees (18%),and other (1%). OESI has exclusive rights in the United States to market proprietary equipment that generates electricity from a wide range of geothermal resources.This power production equipment,known as the Ormat Energy Converters ("OECs"),is designed and manufactured as standard,self-containedmodularunits.The basic design of the OECs and the major componentpartscanbe modified to accommodate different geothermal resource characteristics,including variations in temperature,pressure,vapor-to- liquid ratio,and chemical composition. Makushin Geothermal Partnership ("Makushin")-Geothermal Lessee Makushin is a general partnership of AMOR25 and AMOR 26,both of which are Delaware registered subsidiaries of OESI.AMOR 25 and AMOR 26 and Makushin are authorized to conduct business in Alaska.Makushinisthelesseeunderthe Geothermal Lease.Battle Mountain Gold Company of Houston,Texas is the lessor on the Geothermal Lease. Makushin will drill,test and complete wells as required for the power plant to produce enough power to supply 12,000kWnetattheCitybustosupportAcceptanceTestingandCommercialOperationoftheFacilities. Makushin and the Authority have entered into a Fluid Fee Agreement with a term of 30 years.SpecificdetailsregardingthisagreementareprovidedinthesectiontitledMakushinGeothermalSteamFieldLeases.Under the terms of the Fluid FeeAgreement,the Authority will purchase all of the geothermal energy from fluid produced from the Geothermal Lease fromMakushin. LFC Power Systems ("LFC")-Construction Manager LFC Power Systems is a subsidiary of OESI Power Corporation.LFC and the Authority have entered into an agreement for theconstructionoftheProject.This agreement will provide for the construction of the power plant and facilities under a fixed price,date certain contract. Construction Agreement. (To Come]The Authority and LPC have entered into a Construction Agreement for the construction of the Project.The Agreement providesthatLPCwillobtainallrequiredpermits,licenses,and approvals to undertake construction of the Project.LFC will perform alldesign,procurement and construction of the Project Facilities.LPC will be responsible for start up and commissioning of thePreteUynuonnaielycompletingtheAcciptmneTere Alaska Geothermal Power Systems ("GPS")-Operator (fo Come] GPS and the Authority have entered into an Operations and Maintenance Agreement for operating the Project. GPS-Authority Operations and Maintenance Agreement {To Come] STEAM SUPPLY The Geothermal Resource Geothermal energy in the form of naturally occurring underground steam and hot water is now being used throughout much of the world to commercially produce electricity.The Aleutian Archipelago contains 46 active volcanos and has been recognized to have the potential to produce geothermal power.One such volcano,Makushin,is located on Unalaska Island some 14 miles from the City. The State of Alaska established the Authority in 1976 to encourage long-term economic growth through the development of power projects.Based on a number of geologic investigations indicating potential for significant geothermal resources of Makushin, 'the State decided to undertake a program of geothermal exploration in the area in 1980.In 1981,the State appropriated$5 million to fund this program. The exploration program was developed in three phases.Phase I addressed environmental,geological,geochemical,technical planning,and the drilling of three temperature gradient holes.Phase II included the drilling of a deep exploratory well. Phase ILI activities centered on further testing of the geothermal resource and drilling a fourth temperature gradient hole,and a survey to delineate the extent of the geothermal reservoir. The exploration program confirmed the existence of a highly productive geothermal reservoir at a depth of 1,949 feet, approximately 13 miles west of the City.The water-dominated resource has a bottomhole temperature of 382 degrees Fahrenheit and pressure of 497 psi.Flow tests,reservoir analyses,and wellbore modeling indicate that a commercial-size production well at the site would be capable of producing from 7 to 12 MW ofelectricpower. The Authority pursued further studies,including an engineering investigation by the Alaska Division of Geological andGeophysicalSurveys,and environmental analysis conducted by the Alaska Department of Fish and Game,and a load forecastandpowermarketanalysisfortheCity.In order to integrate all Project data,including the explorationprogramresultsandadditionalstudies,a detailed engineering,environmental,and economic feasibility study of the geothermal power resource andelectricpowermarketswascompletedbyDames&Moore in June 1987.This was followed by 2 second project review issuedbyPowerEngineers,Inc.in December 1987,and a financial feasibility analysis completed by the Authority in April 1988. Makushin GeothermalSteamFieldLeases In 1985,the resource lands on Unalaska Island were conveyed to the Aleut Corporation by the U.S.Government.In 1986,theAuthorityexecutedaconditionallandandresourcedevelopmentagreementwiththeAleutCorporationandaconditionalright-of-way agreement with the Ounalaska Corporation,These agreements were contingent upon «determination of project feasibility,and a decision by the Authority to pursue project development by a date certain. Upon completion-of the project feasibility studies in 1988,and a decision by the Authority not to pursue project developmentatthattime,the Authority relinquished to the Aleut Corporation its rights under the conditional land and resource developmentagreement.The Authority also relinquished its conditional right-of-way agreement to the Ounalaska Corporation.In 1988,theAleutCorporationsoldtheresourcelendsinfee,along with the geothermal resource rights,to the Battle Mountain Gold_Company.On January 1,1991,OESI executedageothermalleasewith Battle Mountain Gold Company. Fluid Fee Agreement (fo Come] The Authority and Makushin Geothermal Partnership ("Makushin")have entered into an agreement wherein Makushin will sell to the Authority geothermal energy from geothermal resources produced under the Geothermal]Lease.Makushin is the geothermal lessee holding the Geothermal Lease.The Authority will develop and construct the geothermal power plant which will use geothermal POWER SUPPLY ARRANGEMENTS Authority and the City of Unalaska -Power Sales Agreement The City of Unalaska and Principal Industrial Users -Power Sales Agreements THE PROJECT Project Status (To Come) Description OESI proposes to develop the Makushin Geothermal Field.OESI will construct a power plant and other facilities with 12,000 kWofcapacity.Project energy will be delivered at the City's utility bus.The Project will encompass development of the geothermalfield,including the resource reservoir,well and wellhead equipment,power plant,roads,a transmission line,and upgrading of the City's electric system.; 'The electricity generated by the geothermal power plant will be sold by the Authority to the City under a Power PurchaseAgreement.The City will,in tum,enter into power sales agreements with industrial users to supply the baseload power as wellasaportionoftheirpeakrequirements.The City's existing distribution system will be upgraded to support an intercomectedgridtoallpowerusers.The Project is expected to have a useful life in excess of thirty years. Plant Description OESI will develop and construct the power plant and facilities under a fixed price,date certain,contract with the Authority.AnaccessroadtothepowerplantwillbeconstructeduptheMakushinValleyfromNateckinBay,with the transmission linefollowingthisrouting.The possible use of Driftwood Bay as the access for the construction road is also being considered.Itisestimatedthatuptofourproductionwellsandthreeinjectionwells,including one spare well for each type,would be drilled,tested,and interconnected to the power plant.The net capacity at the City utility bus will be 12,000 kW after deducting intemalplantusageandtransmissionlinelosses. The power plant will utilize five modular flash/binary proprietary OEC units,each incorporating a 3,500-kW generator with atotalnameplateratingof17,500 kW and an overall site specific average gross generating capacity of 15,000 kW.The OEC unitsareself-contained and fully automatic,producing grid compatible power.The Onmat energy conversion system is based on theOrganicRankinePowercycle,using an organic working fluid selected to optimize the power output from a given geothermaltemperatureandflow.In the binary power plant,the geothermal fluid flows through the vaporizer where its heat vaporizes theorganicfluid.The expansion of the vapor causes the turbine to rotate.The turbine in tum drives the generator.The exhaustvaporissubsequentlycondensedinaaircoolez,and is recycled to the vaporizer by the motive fluid cycle pump.The cooled geothermal fluid stream is reinjected into the ground. The design of the power plant will allow for 3.5-MW incremental additions in future years. Transmission Line A transmission line will interconnect the geothermal power plant and the City's distribution system.The planned electric power transmission system is comprised of a step-up transformer overhead line from the plant site to the Makushin Valley where it is then to be undergrounded until it reaches the shore of Nateekin Bay.From the shore of Nateekin Bay the line will be laid under water to Amaknak Island following the path south of Hog Island in water depths in excess of ten fathoms.The transmission line will be connected to the existing Unalaska/Dutch Harbor transmission line on Amaknak Island. Foundation conditions in the lower Makushin River Valley are poor.The soft muck underlying the marsh vegetation mat is incapable of supporting loads associated with transmission line structures.Therefore,underground cables will be installed adjacent to the operational access road from Nateekin Bay for approximately three miles up the Makushin Valley.From this point to the power plant,it has not yet been determined whether the transmission line would go overhead or underground.This section of the line would generally follow the proposed road.A four single-conductor cable submarine crossing is planned to Dutch Harbor.A three single-cable underground land installation adjacent to the access road was recommended in earlier studies.A submarine cable would be laid across Unalaska Bay and above ground to the bus of the City's distribution system. An access road to the power plant will be constructed up the Makushin Valley from Nateekin Bay.This access road could be used for transmission line construction,for underground cable installation and access of personnel during construction and operation of the power plant.Equipment landed at Nateekin Bay would be unloaded by cranes or off-loaded over ramps carried on barges,directly onto the beach or onto trucks and trailers on the beach. Marine terminal facilities would be constructed at Nateekin Bay.A dock with a small crane will be required at the end of the power plant access road., Points of Delivery (To Come] Upgrade of City System - All Project studies to date have assumed that power would be delivered to the City's bus bar on Amaknak Island.The ProjectwillprovidefundingtoupgradetheCity's system to create a power grid for interconnectionandcooperative generation wherepractical.The City will need to substantially upgrade its system to allow distribution of Project power to major power purchaserswhoarenotnowconnected.Approximately $1.3 million has been included in the Project's cost estimate to complete this work. Review of Technology (To Come]. Ormat's OEC units have been operationally proven in a number of geothermal power applications.OEC units are modular, allowing for maintenance to take place on individual OEC units,with the remaining OEC units continuing to supply power.The use of air cooled systems eliminates the need for cooling towers and water cooling systems,thus reducing downtime for maintenance and eliminating the possibility of freezing in winter months.The use of single-flash technology with the artesian flowing wells eliminates the need for downhole pumps which are the least reliable geothermal system components.The use of binary technology allows for simple turbine design so that all repairs may be performed at the on-site workshop by planttechnicians.Spare wells will be drilled for production and injection thus assuring adequate redundancy ofsupply/reinjection.Theplantwillbemanned24hoursperdaybytwooperatorsper12-hour shift. OESI will provide a guaranty that the power plant will meet the conditions outlined in the Commercial Operation Criteria. Permits,Licenses and Approvals AMOR 10 will be responsible for obtaining all permits necessary to construct the facilities and to operate the Project. {To Come] Construction Management [To Come] Construction Schedule {To Come] Project Operations -- {To Come] Operator (To Come] Operating Agreements ' [To Come] PROJECT FINANCING Project Construction Costs OESI has provided the Authority with an outline of a construction agreement.Thetermsofthis agreement propose that OESIwillconstructtheProjectforafixedpriceof$57.4 million.Payments are to be made to OESI as they are incurred,with a 10%Tetainage by the Authority until the Project is commercially operable. The fixed price is based on OESI's estimate of the construction costs of the Project and the geothermal field development (see Table ___,Project Construction Cost).: Financing for the Project At this time,the Authority plans to issue tax-exempt revenue bonds to fund its payment obligations to OESI during the construction period,Therefore,certain financing and other related costs will be incurred by the Authority which are not included in the $57.4 million amount.Estimates of such financing costs and interest during construction have been provided to us by OESI.However,for purposes of this report,we have developed our own estimates of these costs.These estimates are based in part on various financial parameters provided to us by the Authority's financial underwriter,as well as a preliminary assumption on the monthly construction cash flow.Key assumptions utilized in the analysis include the following: Construction Period:April 1992 -December 1993 Cost of Capital:7.9% Debt Amortization Period:30 years Reinvestment Rate:5.0% Cost of Issuance:2.5%of the Bonds Interest capitalized through:March 1994 The sum of $400,000 has also been included as an additional amount to be repaid to theAuthorityandOESIatthetimeofbondclosingfortheirrespectivecostsincurredtodate. In OESI's estimates of annual revenue requirements for the Project,provisions have been made for an annual payment to a renewal and replacement fund.This amount is shown to be $500,000 in the first year of operation,and $100,000 per year for the next nine years.The annual payment increases with time such as there are sufficient funds in theaccounttopayforrenewalandreplacements,which have been estimated by OESI tooccureverythreeyears,at a cost of approximately $300,000 per occurrence (at 1993 pricelevels). Given the relatively low cost of borrowing found in the current tax-exempt bond markets,an alternative approach may be to include in the borrowing requirements an amount that can be used as the initial deposit into the renewal and replacement fund. While the annual debt payment would increase accordingly,this increased revenue requirement would not be as great as the amount presently shown during the earlyyearsofProjectoperation.For purposes of our analysis,we have included in theborrowingrequirements$500,000 for an initial deposit into the renewal and replacement fund. Based on the assumptions described above,we have made an estimate of the total borrowing required for the Project.To the extent that cash flows,interest rates, construction costs,and other parameters differ from those assumed,the total debtrequirementswouldchangeaccordingly.Details of this estimate are provided at the endofthissection.Estimated Financing RequirementsTable Unalaska Geothermal Project Sources and Uses of Funds (thousands of dollars) Sources: Revenue Bonds ...............cece $67,000OESIEquity(1)......0.00 cece eeees 9,599 Interest Earnings(2)...-.......2e0e-3,216 Total Sources ......-...-eeeeeee $79,815 Uses: Project Construction .............-.$57,400 Site Development(1)...............9,599 Cost of Issuance ...........eee eeee 1,675 Initial Studies ...2....0...cee eee 400 Capitalized Interest ................10,050 Renewal and Replacement Fund......500 Rounding .......-22222eecceeeees 191 Total Uses ..........cee eee ees $79,815 (1)Assumes OESI equity funds site development. (2)Earnings accrued on available funds during the construction period. PROJECT COSTS OF POWER Project Operations OESI has prepared and submitted to the Authority an outline of an operations and maintenance agreement for the Project.The proposed agreement stipulates that Alaska Geothermal Power Systems ("GPS"),an OESI affiliate,will operate the Project,perform all maintenance on the Project facilities,and perform routine maintenance of the geothermal field.The terms of the agreement are proposed to be for the initial threeyearsofProjectoperation,with the option to renew for successive three-year periods by mutual agreement. OESI proposes that GPS be paid a fixed monthly fee which would represent fullcompensationforoperatingandmaintainingtheProject.Certain items,however,wouldnotbeincludedin,this fee,including well maintenance,annual deposits into a well reserve account,property taxes,insurance,operator's extra expenses,royalties,and fluid fees.OESI has prepared an estimate of the annual operating costs which are shown in the table below:. Table 4-3 Unalaska Geothermal Project Annual Operating Costs (thousands of dollars) Fee(1)Additional(2) Operators ww ec ee eee eens $1,090 Overtime weeeeeeens 100 Spares and Consumables ...........46-100 Shipping and Transportation ...........70 Transmission Line and Road Maintenance .100 OEC Maintenance and Subcontracts ......120 Operating Overhead ............222005 120 Wellfield Maintenance ..............--$450 Property Tax 2.20...ee cece cece eee nee 100 Insurance ww ee eee eee ee eee 32 60 Wellfield Insurance ................24.30 Well Reserve Fund Deposit ............250 General and Administrative ............135 __45 Total ---_nee eee cece ee eee eens $1,867 $935 (1)Those costs which would be reimbursed to GPS with a fixed fee of '$1,867,000 per year escalated annually at a rate equal to the Gross National Product Deflator.(2)Costs to be paid by the Project users to GPS iin addition to the fixed fee. 'The operations and maintenance agreement will set forth what costs are reimbursed through the fixed-fee component and what costs are considered additional.Further,the fixed fee should be representative of the actual cost of operating and maintaining the Project.Should the fee be too low,GPS may not elect to renew the agreement at the end of three years,and the new operator would presumably be paid the correct amount.Insuchacase,the cost of power could increase significantly from one year to the next.Should the fee be too high,the cost of power from the Project would be higher than itshouldbe. OESI has assumed that drilling a replacement well will be required every seven years. It further assumes that a reserve account with an annual deposit of $250,000 per year will be sufficient to fund such a drilling program.No review of the replacement schedule or funding requirements has been made at this time. Fluid Fees © In addition to the operating and administrative costs described above,OESI hasproposedaroyaltyandfluidfeescheduleasfollows: Base Variable Fluid Fee =$0.033/kilowatt-hour for the first 50 million kWh delivered to the City.If OESI or an affiliate does not operate the Project,the annual fluid fee would be based on a minimum of 50 million kWh.This component of the fee is to be fixed with no escalation. Incremental Variable Fluid Fee=$0.023/kWh for all energy greater than50millionkWhdeliveredtotheCity.This component of the fee would increase at the Gross National Product Deflator. A royalty payment is specified in an agreement with the area landowners to compensate landowners for use of the resource.The royalty would be calculatedasfollows: Royalty =Px F where, P =percentage royalty 16%in years 1-5 after Date of Commercial Operation 24%in years 6-11 40%in years 12 and thereafter F =Sum of Base +Incremental Variable Fluid Fees Project Output At Acceptance the Project will be capable of providing 12,000 kW of capacity and 88,000,000 kWh per year at the point of interconnection with the electrical system of the City of Unalaska. Estimated Net Project Output Table Cost of Power The cost of power is made up of several components.These include the annual debt service on the capital borrowed to finance construction,annual operating costs,the price paid for geothermal steam,administrative costs,and other costs.- Based on the foregoing assumptions and the elements containedin the outlines of theoperationsandmaintenance,fluid sales,and construction agreements,we have estimated the cost of power that would be incurred by the City and its large customers for the first ten years of Project operation.These are shown on Tables 4-4 and 4-5.Costs incurred by the City would be the Project busbar costs (plus provisions for transmission losses and expenses)while the large customers'cost contains an additional 2¢/kWh (at 1994 price levels). At this time,the total electric requirements of both the City and the area's self-generators oe ee,. have not been projected for 1994 and beyond.Further,the Project does not have sufficient capacity to serve the entire peak load of the area,and therefore diesel generation of the City and/or the processors will have to be operated to meet peak loads.Thus,the Project will not serve all of the energy requirements of the area. For purposes of this preliminary Report,we have determined the generating costs at assumed load levels ranging from 60 million to 88 million kWh per year.Costs during the first year of operations include only nine months of debt service as interest is capitalized through March 1994. Project Annual Cost at Point of Delivery In addition to the costs associated directly with the Project,the delivered costs of power to the end-users will also include certain costs of the City.These costs typically include the costs of transmission and distribution from the source of power to the loads,other generation costs that are incurred in providing power to the loads,properly allocated administrative costs,and others.For purposes of this Report,we have assumed that these costs will be approximately 2¢/kWh in 1994 and will escalate at the same rate of inflation thereafter. (To Come] SALE OF PROJECT CAPABILITY Power Purchaser -City of Unalaska The City of Unalaska (the "City")is located on Unalaska Island in the Aleutian Islands approximately 800 miles southwest of Anchorage,Alaska.The Island is located between the Bering Sea and the Pacific Ocean.The City's industrial base is built on fish processing,fleet support facilities,and marine cargos.The sheltered deep water port of Dutch Harbor is located close to the major east-west shipping lanes connecting the United States and Japan. The City supports one of the largest fishing and fish processing industries in the world. -The on-shore infrastructure of the City includes modern fish processing plants, maintenance and repair facilities for the large trawler and crabbing fleets,as well as growing volumes of marine cargos.Primary catches are pollock,cod,various species . of crab,and halibut.The largest percentage of catch is pollock. Since 1980,pollock processing has rapidly expanded.Major investments,estimated at$225 million,have been made by large fish processing companies in modern processingplantsandfleetsupportfacilities. Electricity is currently generated using diesel engines at four large power plants and numerous smaller ones.The City's electric utility maintains a power plant providing power to approximately 3,000 residents and a number of commercial businesses.The three major fish processing companies-Alyeska Seafoods;UniSea,and Westward Seafoods-generate their own power.Two container shipping companies,American President Lines and Sea-Land,also self-generate. System Loads The electrical requirements of the Unalaska area include not only loads on the City generators but also loads of entities providing their own self-generation.The majority of self-generated load is served by the power plants of three major seafood processors: Alyeska Seafoods,UniSea and Westward Seafoods.Other self-generated load includes American President Line,Sea-Land,Offshore Systems,and Icicle Seafoods. Deliver of Project Output from Point of Delivery [To Come] Principal Industrial Purchasers Historical Peak Demand and Energy Requirements [To Come] We have estimated loads for existing self-generators other than the three major fishprocessors.Based on the data we gathered and our preliminary analyses,Table 4-1presentsannualloadinformationfortheUnalaskaareaassumingnoloadgrowth: .Historical Power Requirement of the City [To Come] Table 4-1 -Unalaska Geothermal Project Annual Load for Unalaska Annual...eee ee ee ee Peak Average Low kWh ew eee ee ee eee kW kW kW City Load 20,346,820 4,110 2,323 1,470 Major Fish Processor Load 56,389,420 11,138 6,437 3,029 Other Self-generated Load 11,800,000 3,633 1347 520 Area Load 88,536,240 18,881 10,107 5,019 Peak kW in the above table is the highest average daily load in the period.Average kW is the annual kWh divided by 8,760 hours.Low kW is the lowest daily average load for the period.The peak load occurred in the month of February,while the low load occurred in the month of September.Diversity between the City load and other loads was assumed to be zero for purposes of this preliminary analysis. The above figures are based on historical data for the 12 months ended September 1991. Actual data for the City was used for that 12-month period.With respect to the major fish processor load,actual data was used for Alyeska Seafoods.For Westward Seafoods, the new plant began operations in March and data showing monthly kWh for the Westward Seafoods power plant was available only for the months of May through September.With respect to UniSea,the new power plant and new surimi plant became operational in January 1991.Monthly kWh data was available for UniSea for the period January through September.In order to have representative annual data for all processors,kWh data was calculated for Westward Seafoods for the months of October 1990 through April 1991,and for UniSea for the months of October 1990 through December 1990,based on the usage pattern of Alyeska Seafoods.Complete peak kW _and low kW data were available for Alyeska Seafoods,while minimal peak kW and low KW data were available for Westward Seafoods and UniSea.Therefore,peak kW and low kW figures were determined for Westward Seafoods and UniSea based on the load pattern of Alyeska Seafoods. Other self-generated load includes estimated loads for American President Lines,Sea-Land,Offshore Systems,and Icicle Seafoods. Appendix IV-A,at the end of this section,shows monthly load data for the City,the three major seafood processors,and the other self-generated load.The monthly load data is shown in tabular and graphical form. Projected Peak Demand and Energy Requirements Projected Peak Demand and Energy Requirements Table -te {To Come] POWER SUPPLY City of Unalaska [To Come] Industrial Purchasers {To Come] ASSUMPTIONS AND CONSIDERATIONS [To Come] CONCLUSIONS [To Come] Makushin Geothermal Project Report For Processors and City of Unalaska January 1992 -MAKUSHIN GEOTHERMAL PROJECT-UNALASKA,ALASKA Z ALASKA ENERGY AUTHORITY - _cIry OF UNALASKA .(OES!POWER CORPORATION oe+Manuary 1992.5 ek)SH-bSSheSO. BACKGROUND @ Since the 1970's Unalaska/Dutch Harbor has developed into a major North American fish processing and support center. e After a downturn in crab in the early 1980's,processing facilities diversified and the community now hosts significant bottom fish processing plants and support facilities for the Bering Sea fleet. @ In addition to private investment,the City and State have made investments in: @ ==Airfield and terminal improvements Public schools Water supply systems Electrical generation and distribution systems Major dock facilities In response to oil price shocks in the early 1980's,the then Alaska Power Authority was funded to develop more stable priced energy supplies for Alaskan communities. Construction began on several major hydroelectric and electrical transmission facilities primarily in Southeast and Southcentral Alaska. In Unalaska in 1981 the Power Authority financed a successful waste heat project at the City power plant which heated the City school.That facility worked well until the City diesel plant was destroyed by fire and subsequently relocated. @ Based on the significance of Unalaska as a seafood processing,transportation,and employment center,the Alaska Legislature funded the Authority to find an alternate energy supply for Unalaska to reduce its dependence on fuel oil,which fluctuated greatly in price. @ Consultants to the City and Authority screened possibilities: ©=Hydroelectric ©Wind @ Conservation ©Waste heat @ Geothermal Local sites were technically feasible but very small. Not reliable. Little impact due to size of load. No interties existed to allow sharing of savings in the system (a 34.5-kV backbone system was later built). Practical where users are close by. Local knowledge and geological reconnaissance indicated great potential for warm water at Summer Bay and high temperature fluid at Makushin Volcano. @ From 1982 to 1987 the Alaska Energy Authority conducted a phased exploration and feasibility program at Makushin. Exploratory wells proved a highly productive,380°F liquid dominated resource at less than 2000 feet deep in the upper Makushin Valley,about 12 miles from Unalaska. @ In 1987 the Energy Authority deferred further development work on the project to await increases in electrical loads or increases in diesel fuel prices. @ Due to rapid economic growth resulting primarily from on- shore fish processing,1991 electrical energy usage in Unalaska is now nearly double the high load forecast made by AEA and its consultants in 1986 and 1987. In 1990,OES!Power Corporation,a private company experienced in geothermal power generation,secured development rights to the Makushin resource and conducted its own feasibility analysis. Based on its own analysis of the field investigations and 1991 electrical loads,OESI believes a project of 10,000 to 12,000 kW average capacity is technically and economically feasible. In 1991 OESI,AEA,and the City of Unalaska structured a project proposal that would provide for AEA ownership of the power plant with tax exempt bond financing to be supported by the power sales agreements and the moral obligation of the State. In 1991 OESI and AEA signed a letter of commitment to make their best efforts to develop this project.One of the first stages of this process is to develop power sales agreements with the City and major industrial users. 5 l.PROJECT PROFILE @ Well field and power plant (see map Exhibit 7) Located on South Canyon Plateau in upper Makushin Valley approximately 11.5 miles west of Amaknak Island. 3.5-mile crossing of Unalaska Bay to Nateekin Bay. Permanent dock in Nateekin Bay with road from Nateekin Bay to Makushin Valley to South Plateau. Temporary landing for heavy equipment and initial mobilization is proposed at Broad Bay. 34.5-kV underground transmission line buried along the road to Broad Bay with a 3.5-mile undersea cable crossing to the City of Unalaska's distribution bus on Amaknak Island.(See map Exhibit 2.) @ Well field @ Two or three production wells (including standby capability) producing up to 1,200,000 Ibs per hour of geothermal fluid at 380°F @ One or two injection wells (including standby)to provide for 100%reinjection of the cooled geothermal fluid Power plant ©Power plant comprised of four modular power generation units based on the proprietary Ormat Energy Converter ("OEC") technology @ Combined gross generating capacity of 14,000 kW (3,500 kW each) @ Each OEC module includes: turbine generator heat exchangers switchgear valves computerized load controller @ Each module can act as an independent power generation system @ If one module is out of service for maintenance,the remaining three modules continue to operate @ Other power plant facilities include: Central control operations and maintenance building Ancillary plant and support systems including fire detection and suppression,compressed air,SCADA,communications and utilities Plant substation and high voltage switchgear Transmission line Access roads and dock Geothermal fluid pipelines including instrumentation and controls @ Power plant cycle Flash/binary hybrid based on organic Rankine cycle technology Hot geothermal fluid or steam flows through the tubes of a heat exchanger (vaporizer) The geothermal heat is transferred to an organic motive fluid Motive fluid is vaporized and the vapors drive a turbine which drives its generator : Exhaust vapor is condensed in an air cooler and the liquid is pumped back into the vaporizer System maintains the geothermal fluid in a closed loop with 100 percent reinjection Motive fluid is also in a closed loop and there are minimal emissions under normal operation 10 @ The power plant operates automatically @®Will be continuously staffed @ All operations monitored and maintenance performed by the project staff who are based at the plant 11 PLANT CAPACITY Gross Power Output (Nameplate capacity) Net Power (Capacity at City Bus) Maximum at lowest temperature Average Minimum at highest temperature CAPACITY 4 MODULES _(proposed)_ 14,000 kW 11,275 kW 10,400 kW 9,025 kW 12 CAPACITY 5 MODULES _(expanded)_ 17,500 kW 13,000 kW 12,000 kW 10,400 kw CAPACITY FACTOR ANNUAL PRODUCTION CAPACITY (Assumed)Four Modules Five Modules 86%78,350 MWh 90,400 MWh 91%82,900 MWh 95,700 MWh See Exhibits 3 and 4 for projected monthly performance of the plant. 13 PROJECT PERMITTING e Currently underway for OESI by a consulting firm @ Road and transmission rights-of-way acquisition by AEA @ Asummary of permitting activities follows 14 SUMMARY OF ENVIRONMENTAL PERMITS AND OTHER APPROVALS gency-Permit' laska artment of Governmental Coordination (DGC) Coastal Consistency Determination Permit assessment complete.5/7192 rm f Engin E Section 404 Permit Wetlands delineation survey completed.5/7/92 Section 10 Permit Construction details completed.05/7/92 Alask artment of Fish and Gam (DF&G) Anadromous Fish Stream Crossing Permit Fish inventory completed.05/7/92 band Wildlife Service (USFWS Section 7 Consultation 04/15/92 oast Guar Aid Navigation &Fuel Transfer 03/1/92 lask rtment of Environmental DEC permits and authorizations to be Conservation (DEC)prepared and submitted as part of the Coastal Consistency Process Consisting of: Air Quality Control 05/01/92 Solid Waste Disposal 05/01/92 Sewage Treatment System 05/01/92 Waste Water Disposal 05/01/92 Certificate of Reasonable Insurance 05/01/92 15 7.lask artment of Natural Resour (DNR) Water Rights 03/15/92 Geothermal Production Well Permits Drilling program design completed.03/07/92 Geothermal Injection Well Permits Drilling program design completed.03/07/92 Tidelands Lease 04/15/92 8.Environmental Protect!ney (EPA Underground Injection Control Inventory To be submitted after completion of injection 12/01/92 wells. 9.City of Unalaska Building Permits To be submitted throughout construction. 10.tat hal Plan Review To be submitted throughout construction. II.Rights of Way Pipeline and Road System To be granted by OESI to AEA 03/15/92 Road and Transmission Line To be granted by OC to AEA ,03/15/92 12.Site License To be granted by OESI to AEA 03/15/92 16 Construction Schedule Estimated 20 to 24 months from close of financing to completion of acceptance testing See Exhibit 5 for detailed schedule In process ©Power sales negotiations ©Equipment specification ©Subcontractor selection ©Permitting Upon close of financing (estimated May or June 1992) ©Detailed engineering @ Procurement ©Subcontractor mobilization Substantially complete by late 1993 Testing and commercial operati in early 1994 17 ll.OWNERSHIP/ORGANIZATION AEA Ownership and Management @ AEA will own the power plant,road,transmission line,and ancillary facilities. @ AEA and City of Unalaska will enter into a "take or pay"power sales agreement (PSA)necessary to secure financing. @ AEA will issue tax exempt revenue bonds to finance construction. @ Upon satisfactory completion of acceptance testing AEA will declare plant commercially operable. | @ AEAwill initially contract with an OESI subsidiary for daily plant operations and maintenance. @ AEAwill prepare annual project budgets in consultation with the City of Unalaska electric utility. @ AEAwill place project insurance and manage special funds established for working capital and renewals and replacements. @ AEAwill deliver wholesale power to the City bus on Amaknak Island. 18 B.City of Unalaska Purchase and Distribution City will enter into power purchase contracts with major industrial users to further secure the bond financing. City will make certain improvements to its distribution system to allow pooling and dispatch of both geothermal and diesel resources.These improvements are estimated at $1.5 million and would be funded by the revenue bond issue. To serve the electrical power needs of the community,City will dispatch power from the geothermal plant,its own diesels,andtotheextentnegotiated,from other diesel resources on the island. 19 _C.Construction of Facilities by OESI OESI,through its construction subsidiaries,will construct the power plant and other facilities (road,transmission line, pipeline,and dock)for the AEA under a fixed price date certain construction agreement.OESI has constructed similar power plants and will utilize Alaskan experienced subcontractors for this project. The total construction agreement price plus the cost of upgrading of the City of Unalaska's distribution system is $55,400,000.| The well field development is expected to total $9,600,000 consisting primarily of the drilling,casing,completion and testing of the geothermal wells. OESI is assuming the construction cost risk based on its experience and the support of its subcontractors with Alaskan construction experience.This project construction structure thus provides for the minimum construction cost risk to the AEA and the electricity consumers. | 20 D.Sale of Fluid from the Well Field Fuel for the power plant is the geothermal energy which is extracted from the geothermal fluid flow. AEA will pay a fluid fee,based on kilowatt-hours of actual energy sold from the plant,to OESI for the fuel. _OESI feels that its long-term involvement in the project,as an equity investor,Field Operator,and Field Owner should provide the assurance that the performance of the geothermal resources will be optimized over the life of the project. 21 @ The fluid fee is paid only if energy is produced. @ The fluid fee contains the following components: Field operations and maintenance expenses Taxes and Insurance Royalties to the Fee Landowner (Battle Mountain Gold Company of Houston,Texas) A contribution to a well repair and replacement reserve fund A return to OESI on its equity investment @ To minimize the energy cost to the project,OESI and the AEA are currently considering a pre-purchase by the AEA ofa portion of the future fluid (fuel)requirement of the plant ata discounted rate. 22 Operations and Maintenance The power plant,which operates automatically,will be continuously staffed by at least two operators. Total staff,including maintenance,supervisory and administrative personnel of up to 13 is anticipated. All operations and routine plant,facility and well field maintenance will be performed by this staff. Staff will be based at the plant in the central station building which will also house the plant,road and transmission line spares,the maintenance vehicles and equipment,as well as the snow removal equipment. The on-site spares will include a spare turbine,a generator, numerous electrical,electronic and mechanical spares to insure continuous operation and high project availability. The total annual operations and maintenance budget for the project,including the project operations cost and fees,is estimated to be $2,300,000 for the first year. 23 Ill.LOADS AND RESOURCES Loads and resources for Unalaska were modeled using an hourly dispatch model. The model determines how existing diesel power generation resources in combination with the proposed geothermal project could meet projected loads. Loads and resources were analyzed for both the City loads (excluding potential contract customers)and potential contract customers. Potential contract customers include UniSea,Alyeska | Seafoods,Westward Seafoods,American President Lines (APL),SeaLand,and Icicle Seafoods. 24 @ Contract customers'energy requirements for 1994 are forecasted to total 72,874,420 kWh,of which 62,049,000 kWh would be purchased from the City, while the remaining 10,825,420 kWh would be met by self-generation. @ Total energy requirements served by the City are forecasted as follows: Energy-kWh City 23,553,479 Contract Customers 62,049,000 Total 85,602,479 25 @ Energy requirements would be met by City resources as follows: Energy-kWh Geothermal 78,291,000 Diesel -City 7,383,479 Total 85,602,479 e@ City loads were projected for each month of 1994,the first year of operation of the project.City peak demand is projected at 4,758 kW.City resources in 1994 include the existing City diesel generation of 6,200 kW and the proposed geothermal project.The geothermal project's available capacity varies month-by-month in the range of 9,025 kW to 11,275 kW. 26 Contract sales are limited by available capacity of the geothermal project and the City's diesel generators. Capacity is available to meet a peak load of 9,898 kW for contract customers and a peak load of the City's remaining customers of 4,758 kW (14,656 kW total). City generating capacity to meet peak load in 1994 is estimated as follows: Geothermal 11,275 kW Diesel 6,200 kW Less :Reserves (2,819)kW Net Capacity 14,656 kW See table and graphs of Unalaska loads and resources which follow. 27 JAN FEB LOADS PEAK DEMAND-KW: City 4,404 4,758 Contract 9,679 9,898 Total 14,082 14,656 ENERGY-KWH: City 2,461,220 2,418,041 Contract 6,133,096 5,745,481 Total 8,594,316 8,163,522 RESOURCES CAPACITY-KW: Geothermal 11,150 11,275 Dlesel-clty 6,200 6,200 Total 17,350 17,475 Less 2,788 2,819 Reserves Net 14,563 14,656 ENERGY-KWH: Geothermal 7,613,000 7,175,000 Dlesel-clty 981,316 988,522 Total 8,594,316 8,163,522 CONTRACT CUSTOMERS ENERGY-KWH: Clty Purch.6,133,096 5,745,481 Diesel-self 1,517,840 2,216,540 MAR 4,187 8,799 12,956 2,193,027 5,081,260 7,274,287 10,850 6,200 17,050 2,713 14,338 6,829,000 445,287 7,274,287 5,081,260 46,531 APR 3,678 8,529 12,207 2,344,534 5,025,087 7,389,621 10,400 6,200 16,600 2,600 14,000 6,504,000 865,621 7,369,621 5,025,087 2,500 MAY 3,832 8,147 11,979 1,792,241 4,539,169 6,331,430 10,000 6,200 16,200 2,500 13,700 6,206,000 125,430 6,331,430 4,539,189 192,250 ry CITY OF UNALASKA LOADS AND RESOURCES-1994 JUN 3,071 8,842 11,913 1,586,446 5,385,699 6,972,145 9,625 6,200 15,825 2,406 13,419 6,230,000 742,145 6,972,145 5,385,699 1,448,755 28 JUL 2,896 8,861 11,758 1,658,054 5,630,229 7,288,283 9,025 6,200 15,225 2,256 12,969 6,290,000 998,283 7,288,283 5,630,229 1,732,702 AUG 3,506 8,819 12,325 1,616,195 5,744,214 7,360,408 9,325 6,200 15,525 2,331 13,194 6,478,000 882,408 7,360,408 5,744,214 2,024,233 SEP 2,963 6,491 11,454 1,373,863 4,517,126 5,890,989 10,100 6,200 16,300 2,525 13,775 5,870,000 20,989 5,890,989 4,517,126 174,106 OCT 3,207 9,169 12,376 1,960,673 5,513,705 7,474,379. 10,975 6,200 17,175 2,744 14,431 6,741,000 733,379 7,474,379 5,513,705 1,376,999 NOV 4,120 9,392 13,512 2,109,448 4,643,291 6,752,740 11,150 6,200 17,350 2,788 14,563 6,291,000 461,740 6,752,740 4,643,291 104,603 DEC 3,946 7,618 11,564 2,039,738 4,090,623 6,130,360 11,150 6,200 17,350 2,788 14,563 5,992,000 138,360 6,130,360 4,090,623 0 TOTAL 23,553,479 62,049,000 85,602,479 78,219,000 7,383,479 85,602,479 62,049,000 10,825,420 oN xa<jong<=aLui=<oo] <==x IV.COSTS e Total Direct Development Costs $72,200,000 @ =Fixed price construction agreement $55,400,000 @ Well field costs $9,600,000 @ Prepaid fluid (fuel)fees $7,200,000 @ AEA would finance initial project costs of $62,700,000 with tax exempt revenue bonds totaling approximately $77,800,000 secured by a power sales agreement with the City of Unalaska and agreements between the City and contract purchasers. @ AEA would also capitalize other items in the bond issue such as: ©Working capital fund ©Renewal and contingency fund ©Interest during construction e Financing costs - 31 The bond issue does not include a debt service reserve fund which is proposed to be provided by a State loan of $13.5 million. Annual power costs to contract customers consist of: Annual debt service on the bonds O&M expenses by AEA and plant operator Fluid fees Administrative and maintenance expense incurred by the City electric utility Delivered cost of power dependent upon: Interest rate on the 30-year bonds -7.5%assumed Level of project usage 32 -@ The following table displays the expected costs at different usage levels in 1991 dollars and in future dollars assuming a 4.5%inflation rate. 33 Delivered Cost of Energy (cents/kWh) 1994 1995 1996 1997 1998 1999 2000 70 million kWh/year Nominal 13.4 14.8 16.6 16.4 16.6 19.1 19.4 1991 Price Levels(1)11.7 12.4 13.4 12.6 12.2 13.4 13.1 75 million kWh/year Nominal 12.7 14.1 15.8 15.6 15.8 18.3 18.5 1991 Price Levels(1)11.1 11.8 12.7 12.0 11.6 12.8 12.5 80 million kWh/year Nominal 12.1 13.4 15.0 14.8 15.0 17.5 17.8 1991 Price Levels(1)10.6 11.3 12.1 11.4 11.1 12.3 12.0 (1)Based on an assumed annual inflation rate of 4.5%. 34 V. A.Benefits BENEFITS AND RISKS @ Provides long-term protection from increases in fuel costs Does not increase as a function of oil price. Only operations element of cost is to change by inflation. Exhibits 6,7,8,and 9 illustrate project energy costs in relation to possible oil price changes. @®No air emissions Provides a new source of generation probably not subject to EPA emission limitations. May be the only way new generation can be added without significant investment in air pollution control equipment on existing diesel plants. 35 @®Upgraded distribution system The project would upgrade the island grid system to provide full interconnection for all major industrial customers to the City system. Would provide maximum assurance against loss of power during processing periods. May extend useful lives of existing self-generation equipment by scheduling periods of generation and purchase. May create opportunities to market surplus power over the City distribution system. @ Flexibility for plant additions The plant is sized to produce base load requirements at an efficient but conservative 85 percent plant factor. Plant can be incrementally expanded in increments of 2,500 kW and 3,500 kW. 36 @ =Financial considerations @ Interest rates are ata 15-year low and bonds issued at this time should enable attractive financing of a significant infrastructure addition to Unalaska/Dutch Harbor. @ The State of Alaska,through the Alaska Energy Authority,will provide its "moral obligation"in support of the bond financing. o.The AEA anticipates additional State support in the form of a loan to fund the debt service reserve required by bond holders. ©Industrial purchasers who contract for long-term power will have purchased firm capacity at rates that could prove to be even more economical if the total load in Unalaska grows. 37 @ Economic considerations @ The support of the State in the form of the moral obligation and the proposed debt service reserve loan requested in the amount of $13.5 million further demonstrates the State's commitment to support on- shore fish processing. B.Risks @®Construction risks ©The City of Unalaska and its contract customers are protected from construction risks by the project agreements.The obligation to pay for project power does not commence until the project is certified as commercially operable. @ Operation and maintenance costs @ May be greater than anticipated.Mitigated by experience record of OESI,AEA,and City and the review and opinions of independent consultants. 38 Resource risk @ The resource may become less productive in the future and plant production may decline. @®Mitigated by exploration work already complete to define the reservoir and consensus opinion among geothermal experts that the reservoir exceeds long-term requirements of the project. @ Project will maintain reserve funds to drill additional wells in the future if required. Loss of load ©Price of project energy could increase if consumption of electrical energy decreased. However: @ Prospects are positive for continued on- shore processing. 39 @ =International shipping through Dutch Harbor is expected to increase in the near term. @ AEA-City agreement will include an annual cap on amounts that the price of project energy may change. Outages due to equipment failure @ There are risks of short-term outages due to transmission system or equipment failures @ Mitigated through use of underground transmission line,redundant equipment, stocking of spares,and high level of on-site repair capability 40 VI.CONTRACT PROPOSALS SUMMARY OF AEA/CITY POWER SALES AGREEMENT Agreement governs sales of power from the Project by the Alaska Energy Authority to the City of Unalaska. Proposed term of Agreement is 30 years from Date of Commercial Operation of the Project. The City agrees to take or pay for the capabilityof the Project,commencing on the Date of Commercial Operation. The City will pay all costs of the ownership,maintenance,and renewals and replacements of the Project,including debt service on bonds issued to pay the cost of constructing the Project and all other costs of producing Project power. In the event of the loss of revenues from contract customers,the cost of power per kilowatt hour in that fiscal year will not increase more than a specified percentage. The City covenants to charge and collect rates for sales of power to its customers,including its contract customers,that will provide revenues sufficient to meet its payment obligations under the Agreement. 41 SUMMARY OF INDUSTRIAL/COMMERCIAL CUSTOMER POWER SALES AGREEMENT Agreement governs sales of power from the City of Unalaska electric system to an industrial/commercial Purchaser. Term of Agreement is proposed to be 30 years from Date of Commercial Operation of the Project,subject to earlier termination by Purchaser on 90 days notice if Purchaser's Facility ceases to operate for not less than 365 consecutive days. The Purchaser agrees to take or pay for electric energy from the City in an amount not less than the Base Amount each year. In addition to the Base Amount of electric energy,the Purchaser may purchase interruptible power from the City. The Purchaser shall pay the City monthly (i)1/12 of the Base Amount multiplied by the contract rate,plus (ii)the amount of interruptible power delivered to the Purchaser during the month (reduced by a credit for unused Base Amount,if any,from the prior months in the Fiscal Year),multiplied by the interruptible rate. The Purchaser shall sell non-firm electric energy from the Purchaser's Facility to the City in such amounts as the City may request from time to time at the rate for such purchases in the City's electric utility tariff. 42 bHqIUxXyTs mee zoho MEDS VAROVTLIOpv-MMOLDS "SEEEE-CHSVIDIV7 Say Y ZS .lisheMW yowyre A [OIG, (pezy vie)COT K cor'}tt]gy a=aye ek ' ,GA om (SUE LTRSieBEKELE .: la pepe RageARCS 7A goRK mtyrENS:ENSEKSfaes<aaNBS»WNq:efSARS$Ww.ieere...*llc4SY,'i.EN2,orLP(4oa,:ae\x8SNeeeSoe)>SSSW°SSSSSSIE/EpetofRNASwmBAS.SBSESAEwey*ae=id>S98),pallinPApes,SBRez";Aeetay.vsoeSNene!7SSENN.SSFERwe==SANSPENSENYSINS0\Ym=a.a*>MAPLINOp)FIT wiraaiweP?=- - -7°cwr- FV]warmas OFFA Or OVOY BRIDIV DIS OPO aS "-S OMAP?a7 wens on} al 7 WRODSE/! /PETRO f)Ww icicleALASKASHIPSUPPLY/fj sms,U f: Q fy KR -wane j \A 1 ji \)Q. sa (¥ Ss.VjSXOo ISLAND i POWER HOUSE yoANDSUBSTATIONnGi, $.0.H.SUB STATION x Via ++ sNeMARGARETBAY<.SUB STATION N é f \JUNK CARS We SCHOOL,,j er eean.te Gay my"7,"Se,TOWN SeSUBSTATION<"A.pa ro p . °°= Cx eg \Sh,7,"ey Bry we=i a WILLIWAY*Cee SS KN \\N\oe| :{ a,\= ome 34,5 KV tommmmen 12.470 KV @eocesedo 4.169 KV NOTE) THIS MAP WAS DIGITIZED FROM U.S.G,.S. BUTCH HARBOR PROVISIONAL MAP,DATED 1990,SCALE 1125000, ALY 1 =Nee ek CeCRIpaneraREISSLAGMETIS. CITY OF UNALASKA CRONFFROLCE ELECTRIC DISTRIBUTION MAIN LINES Exhibit 2 Power(khw)UNALASKA GEOTHERMAL PROJECT 11600- 11400- 112004 11000 4 : 10800- 10600+ 10400 10200- 100004 98004 96004 9400+ 92004 9000+ 8800 Net Capacity at City Bus on a Monthly Basis Legend FOUR UNITS111501127511150.111501097510400Average 10400 Ledo eed BoSoe Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Deg.F 30 28 34 38 42 46 52 49 41 33 30 30 12/10/94 Exhibit < Power kw)UNALASKA GEOTHERMAL PROJECT 07 ;,1400 Net Capacity at City Bus on a Monthly Basis 18500;4 &°Legend S &B 3%g FIVE UNITS 13000}gm 8 Vor r : a a a 42500 4 3 e N 42000 8 iB Average 12000 =- 11500 -Ba 8 11000 -me 10500]He be Be Be Be ew Be 10000 9500 se ao a sa oe Se Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 12/10/91 Deg,F 30 28 34 38 42 46 52 49 41 33 30 30 | Fyhibit 4 | Powerw)UNALASKA GEOTHERMAL PROJECT 14000 :']Net Capacity at City Bus on a Monthly Basis 1350074 &°Legend &2 a g e261 FIVE UNITS13000;gm S aoe r ' a ™voce' 125004 : 42000 B 2 Average 12000 == 11500 1 oe 8 oe 11000 +ss 10500 - 10000 - g 5 0 0 Bes poe Seesees fs a I meeseees aH Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 12/10/91 Deg.F 30 28 3 38 42 46 52 49 41 33 30 30 | Fyhibit 4 | &eats Bw elasene ca PARE)an -_-_]! {Denne PERIOD | {Goan [Dock CoMsTRUCTION F100 |rugetes JorOPoxy=' \iv[nowosae {Cros oe tens oN wiTEtion _ |O OCLC O O--73PPreg'' RoAD/0OCK DE SIEN 4 eka \|ono ung \we emed 4CONSTRUCTIONFERHITS|we teoo \aan reer 4 \at ee <>en Co =|I |foouns Mawe (unexfrevutue]i 1SoevevornentFan[CowTRacTs |ceausare.2e3008C €_\ i 1 . '-sae \eels CaSvaxawweSeeeererreccedhots«':Vw 4 J rN coN "m\|Ce!j Hae.*Foner Sev)ag :bose"Came .fees tne a.CorsTEUcTnoy OPNON)- aee -<--fet Aer Soerte ness _.mee w==CE Rot Lk¢far -ane )----mex?aa wedasioe Gar)"4 escarmed PeaniTrie>Comere Sect.#4 e MN XL,oa Ves *t Ee rr aN e On”7 Ce SO wertral ac-{\Le,>"=- Ones |Sy"1 r¢ OACaKE ' Coutreuct Access Goan ox , a ao 7 ' ry '{ .AQuseTYConstruction2100 =.<ee ee ' ud a Sexe re See }-------------od wee ee ee Commenlea off eaTion) Lee Fare)uf - { t q STALL LESOUMCE AATECTION AP IeiGe { Crue,Reser rocucengsr KRIOD .-'foe Casteuct Powee Last tQO{ '4 '!{---.;Vives Anetipceiien Hero ww eee eH ee ee J vexRGSSrcn(,iio . a t ''é Test L).'Cees {TRAISHISSION Luc PROCUeE HERT FROOD 430 \.CONSTRUCT ANSSTALL TRASSHSSON Lt 1 . ¢- - r toe 1 '. i °eeaiy 2-<°9 OfsyLFc UNALASKA GEOTHERMAL PROJECT PRELINART KEY MILE STONE /CONSTRUCTION NET WORK Exhibit5 ¢/kwh Exhibit 6:Unalaska Power Rates --Nominal Dollars,2%Real Diesel Inflation 19941995+1996-+-1997+1998+1999+2000+20012002+2003 +-2004+2005+2006---2007+2008--mei--=Makushin -i>Industrial-Diesel " "*""™Diesel 2009+2010+ Exhibit 7:Unalaska Power Rates --1991 Dollars,2%Real Diesel Inflation i i |it J ]i ]|j |it j !|{] 1 |T T {y }T !!}!|i U | vt Ww ©i eo n (o)-N o wt w ©[oe]o Oo oO o (op)o o on Oo oO OQ oO oO (o>)Oo oO oO fo)ba op)n Oo op]o fo>)oO Oo lo)Oo [o)[o)[o)oO [o)oO [o) r -r N N N N N N N N N N N -----=Makushin -tr-Industrial-Diesel *"--City-Diesel Exhibit 8:Unalaska Power Rates --Nominal Dollars,0%Diesel Inflation,1999-50%Oil Price Shock ¢/kwh 19941995+1996+1997+1998+1999--2000+2001-2002-2003+2004+2005--2006+2007--2008---2009+2010+--i--Makushin ,=O"Industrial-Diesel """"*""-Diesel etae e/kwh Exhibit 9:Unalaska Power Rates --1991 Dollars,0%Diesel Inflation,1999-50%Oil Price Shock ]{1 ||j i |it |j {j j l T T !q l i L I J I |I T l | vt u")©eo for)oO boas N oO wt w)o a foe)oO fon) o o [op]mo [o>]mH oO Oo o So Oo [o)oO Oo oO to)top)o>)o o op)oO la)[o)oO fo)[o)Oo.[o)oO oO oO oO wr r r baad r N N N N N N N N N N N ---et---=Makushin ---r--=Industrial-Diesel - *=""-City-Diesel Processor and City System Loads and Resources January 1992 ALYESKA kWh Peak kW Ave.kW Low kw UNISEA kWh Peak kW Ave.kW Low kW WESTWARD kWh Peak kw Ave.kW Low kW TOTAL kWh Peak kw Ave.kW Low kW NOTES: ocTs0 1,279,499 2,479 1,720 854 2,969,000 §,752 3,991 1,982 1,226,000 2,375 1,648 818 5,474,499 10,607 7,358 3,654 NOVS0 790,353 2,242 1,098 671 1,834,000 5,203 2,547 1,557 757,000 2,147 1,051 643 3,381,353 9,592 4,696 2,871 DEC90 649,674 1,141 873 701 1,508,000 2,648 2,027 1,627 623,000 © 1,094 837 672 2,780,674 4,884 3,737 3,000 JAN91 1,552,090 2,458 2,086 1,229 2,903,000 - 4,597 3,902 2,299 1,487,000 2,355 1,999 1,177 5,942,090 9,410 7,987 4,705 FEB91 1,332,290 2,346 1,983 1,280 3,716,000 6,543 5,530 3,570 1,277,000 2,249 1,900 1,227 6,325,290 11,138 9,413 6,077 CITY OF UNALASKA PROCESSOR LOADS MAR91 APR91 784,531 828,892 1,247 1,269 1,054 1,151 821 1,022 2,188,000 1,921,000 3,478 2,941 2,941 2,668 2,290 2,369 752,000 794,000 1,195 1,216 1,011 1,103 787 979 3,724,531 3,543,892 §,920 §,426 5,006 4,922 3,898 4,370 MAY91 768,045 1,351 1,032 695 1,572,000 2,765 2,113 1,422 1,085,000 1,909 1,458 982 3,425,045 6,025 4,604 3,099 JUN91 1,321,255 2,549 1,835 1,025 3,051,000 5,886 4,238 2,367 1,218,000 2,350 1,692 945 §,590,255 10,785 7,764 4,337 JUL91 1,324,202 2,425 1,780 912 3,474,000 6,362 4,669 2,393 1,274,000 2,333 1,712 877 6,072,202 11,120 8,162 4,182 1.Peak KW is the highest daily average KW,Low KW Is the lowest daily average KW.Average KW is KWH divided by hours in the month. 2.Westward actual data available is KWH for May91 through Sep91.KWH data for Westward for Oct90 through Apr90 was calculated based on Alyeska data. 3.Peak KW and Low KW data was unavailable for Unisea and Westward.Data shown was estimated based on Alyeska load pattern. AUG91 1,567,733 2,541 2,107 956 3,410,000 5,527 4,583 2,079 1,470,000 2,383 1,976 896 6,447,733 10,451 8,666 3,932 SEP91 979,856 1,997 1,361 806 2,037,000 4,152 2,829 1,676 665,000 1,355 924 547 3,681,856 7,504 §,114 3,029 TOTAL 13,178,420 2,004 1,504 914 30,583,000 4,655 3,491 2,136 12,628,000 1,913 1,442 879 56,389,420 8,572 6,437 3,929 ave. ave. ave. ave. ave. ave. ave. ave. ave. ave. ave. ave. OCTSO CITY KWH 1,693,740 PEAK KW 2,770 AVE KW 2,277 LOW KW 1,387 PROCESSORS KWH 5,474,499 PEAK KW 10,607 AVE KW 7,358 LOW KW 3,654 OTHER KWH 1,102,285 PEAK KW 2,795 AVE KW 1,482 LOW KW 741 TOTAL KWH 8,270,524 PEAK KW 16,172 AVE KW 11,116 LOW KW 5,782 NOTES: NOV90 1,822,260 3,559 2,531 1,817 3,381,353 9,592 4,696 2,871 800,178 2,097 1,111 556 6,003,791 15,248 8,339 §,243 DECSO 1,762,040 3,409 2,368 1,888 2,780,674 4,884 3,737 3,000 698,549 1,772 939 469 5,241,263 10,064 7,045 5,358 JAN91 2,126,140 3,804 2,858 1,659 5,942,090 9,410 7,987 4,705 1,240,680 3,146 1,668 834 9,308,910 16,361 12,512 7,198 FEB91 2,088,840 4,110 3,108 2,372 6,325,290 11,138 9,413 6,077 1,293,870 3,633 1,925 963 9,708,000 18,881 14,446 9,412 CITY OF UNALASKA AREA LOADS MAR91 -APR91 1,894,460 2,025,340 3,591 3,177 2,546 2,813 1,625 1,516 3,724,531 3,543,892 5,920 §,426 5,006 4,922 3,898 4,370 864,052 856,400 2,191 2,244 1,161 1,189 581 595 6,483,043 6,425,632 11,702 10,847 8,714 8,924 6,103 6,480 MAY91 1,548,239 3,310 2,081 1,631 3,425,045 6,025 4,604 3,099 764,759 1,939 1,028 514 5,738,043 11,274 7,712 5,244 JUNS1 1,370,461 2,653 1,903 1,457 §,590,255 10,785 7,764 4,337 1,070,374 2,805 1,487 743 8,031,090 16,243 11,154 6,537 JUL91 1,432,320 2,502 1,925 1,410 6,072,202 11,120 8,162 4,182 1,153,997 2,927 1,551 776 8,658,519 16,549 11,638 6,368 1.Peak KW Is the highest dally average KW,Low KW Is the lowest daily average KW.Average KW is KWH divided by hours in the month. 2.Diversity between City load,Processor loads and Other loads Is assumed to be zero. 3.The months of Oct90 through DecS0 Include calculated loads for UniSea as If the new plant facilities were in operation. 4.The months of Oct90 through Apr91 include calculated loads for Westward as If the plant was In operation. 5.Other loads are estimated. AUG91 1,396,160 3,029 1,877 1,353 6,447,733 10,451 8,666 3,932 1,206,183 3,059 1,621 811 9,050,076 16,538 12,164 6,095 SEP91 1,186,820 2,560 1,648 1,470 3,681,856 7,504 5,114 3,029 748,673 1,962 1,040 520 5,617,349 12,026 7,802 5,018 TOTAL 20,346,820 3,206 2,323 1,632 56,389,420 8,572 6,437 3,929 11,800,000 2,548 1,347 675 88,536,240 14,325 10,107 6,237 ave. ave. ave. ave. ave. ave, ave. ave. ave, ave. ave. ave. 5 Unalaska City Load Load KW (Thousands) Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 90 |91 | -8--Peak KW --Month Ave.KW --Low KW 12 10 ft Unalaska Processor Load Load KW (Thousands) Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 90 |91 | -]-Peak KW - Month Ave.KW -*Low KW Unalaska Area Load Load KW (Thousdnds) |J !!it !|J J J0 Oct Nov'Dec |Jan Feb Mar Apr May Jun Jul Aug see9091 --Peak KW -t-Month Ave.KW -o-Low KW eee CITY OF UNA KA AREA LOADS 4 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC CITY-EXISTING KWH 2,461,220 2,418,041 2,193,027 2,344,534 1,792,241 1,586,446 1,658,054 1,616,195 1,373,863 1,960,673 2,109,448 2,039,738 PEAK KW 4,404 4,758 4,157 3,678 3,832 3,071 2,896 3,506 2,963 3,207 4,120 3,946 AVE KW 3,308 3,598 2,948 3,256 2,409 2,203 2,229 2,172 1,908 2,635 2,930 2,742 LOAD FCTR 75.1%75.6%70.9%88.5%62.9%71.7%76.9%62.0%64.4%82.2%71.1%69.5% PROSPECTIVE KWH 2,330,237 2,289,357 2,076,317 2,219,761 1,696,861 1,502,018 1,569,815 1,530,183 1,300,748 1,856,329 1,997,187 1,931,186 PEAK KW 4,698 5,110 4,186 4,625 3,421 3,129 3,165 3,085 2,710 3,743 4,161 3,894 AVE KW 3,132 3,407 2,791 3,083 2,281 2,086 2,110 2,057 1,807 2,495 2,774 2,596 LOAD FCTR 66.7%66.7%66.7%66.7%66.7%66.7%66.7%66.7%66.7%66.7%66.7%66.7% CITY-TOTAL KWH 4,791,457 4,707,398 4,269,344 4,564,295 3,489,103 3,088,463 3,227,868 3,146,378 2,674,611 3,817,003 4,106,635 3,970,923 PEAK KW 9,102 9,868 8,343 8,302 7,253 6,200 6,061 6,591 5,673 6,949 8,281 7,840 AVE KW 6,440 7,005 5,738 6,339 4,690 4,290 4,339 4,229 3,715 5,130 5,704 §,337 LOAD FCTR 70.8%71.0%68.8%76.4%64.7%69.2%71.6%64.2%65.5%73.8%68.9%68.1% PROCESSORS KWH 6,313,840 6,644,540 3,912,531 3,742,392 3,696,295 5,894,755 6,390,702 6,815,233 3,848,106 5,780,999 3,570,603 2,936,424 PEAK KW 9,999 11,700 6,219 §,729 6,502 11,372 11,703 11,046 7,843 11,201 10,129 5,157 AVE KW 8,486 9,888 5,259 §,198 4,968 8,187 8,590 9,160 5,345 7,770 4,959 3,947 LOAD FCTR 84.9%84.5%84.6%90.7%76.4%72.0%73.4%82.9%68.1%69.4%49.0%76.5% TOTAL KWH 11,105,297 11,351,938 8,181,875 8,306,687 7,185,398 8,983,218 9,618,570 9,961,611 6,522,717 9,598,002 7,677,238 6,907,347 PEAK KW 19,101 21,568 14,562 14,032 13,755 17,573 17,765 17,638 13,516 18,150 18,409 12,997 AVE KW 14,926 16,893 10,997 11,537 9,658 12,477 12,928 13,389 9,059 12,901 10,663 9,284 LOAD FCTR 78.1%78.3%75.5%82.2%70.2%71.0%72.8%75.9%67.0%71.1%57.9%71.4% TOTAL 23,553,479 3,711 ave. 2,689 ave. 72.4% 22,300,000 3,827 ave. 2,546 ave. 66.5% 45,853,479 7,539 ave. §,234 ave. 69.4% 59,546,420 9,050 ave. 6,798 ave. 75.1% 105,399,899 16,589 ave. 12,032 ave. 72.5% ALYESKA KWH PEAK KW AVE KW LOAD FCTR UNISEA KWH PEAK KW AVE KW LOAD FCTR WESTWARD KWH PEAK KW AVE KW LOAD FCTR TOTAL KWH PEAK KW AVE KW LOAD FCTR CITY OF UN/KA PROCESSOh vuADS-1994 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 1,552,090 1,332,290 784,531 828,892 768,045 1,321,255 1,324,202 1,567,733 979,856 1,279,499 790,353 649,674 2,458 2,346 1,247 1,269 1,351 2,549 2,425 2,541 1,997 2,479 2,242 1,141 2,086 1,983 1,054 1,151 1,032 1,835 1,780 2,107 1,361 1,720 1,098 873 84.9%84.5%84.6%90.7%76.4%72.0%73.4%82.9%68.1%69.4%49.0%76.5% 2,903,000 3,716,000 2,188,000 1,921,000 1,572,000 3,051,000 3,474,000 3,410,000 2,037,000 2,969,000 1,834,000 1,508,000 4,597 6,543 3,478 2,941 2,765 5,886 6,362 5,527 4,152 5,752 5,203 2,648 3,902 5,530 2,941 2,668 2,113 4,238 4,669 4,583 2,829 3,991 2,547 2,027 84.9%84.5%84.6%90.7%76.4%72.0%73.4%82.9%68.1%69.4%49.0%76.5% 1,858,750 1,596,250 940,000 992,500 1,356,250 1,522,500 1,592,500 1,837,500 831,250 1,532,500 946,250 778,750 2,944 2,811 1,494 1,519 2,386 2,937 2,916 2,978 1,694 2,969 2,684 1,368 2,498 2,375 1,263 1,378 1,823 2,115 2,140 2,470 1,155 2,060 1,314 1,047 84.9%84.5%84.6%90.7%76.4%72.0%73.4%82.9%68.1%69.4%49.0%76.5% 6,313,840 6,644,540 3,912,531 3,742,392 3,696,295 5,894,755 6,390,702 6,815,233 3,848,106 5,780,999 £,570,603 2,936,424 9,999 11,700 6,219 5,729 6,502 11,372 11,703 11,046 7,843 11,201 10,129 §,157 8,486 9,888 5,259 5,198 4,968 8,187 8,590 9,160 5,345 7,770 4,959 3,947 84.9%84.5%84.6%90.7%76.4%72.0%73.4%82.9%68.1%69.4%49.0%76.5% TOTAL 13,178,420 2,004 ave. 1,504 ave. 75.1% 30,583,000 4,655 ave. 3,491 ave. 75.0% 15,785,000 2,392 ave. 1,802 ave. 75.3% 59,546,420 9,050 ave. 6,798 ave. 75.1% JAN APL KWH 365,732 PEAK KW 819 AVE KW 492 LOAD FCTR 60.0% osl KWH 114,944 PEAK KW 257 AVE KW 154 LOAD FCTR 60.0% SEALAND KWH 344,833 PEAK KW 772 AVE KW 463 LOAD FCTR 60.0% ICICLE KWH 407,530 PEAK KW 913 AVE KW 548 LOAD FCTR 60.0% MARGARET BAY KWH 1,097,197 PEAK KW 2,458 AVE KW 1,475 LOAD FCTR 60.0% TOTAL KWH 2,330,237 PEAK KW 4,698 AVE KW 3,132 LOAD FCTR 66.7% FEB 359,316 891 §35 60.0% 112,928 280 168 60.0% 338,784 840 504 60.0% 400,381 993 596 60.0% 1,077,948 2,673 1,604 60.0% 2,289,357 5,110 3,407 66.7% MAR 325,879 730 438 60.0% 102,419 229 138 60.0% 307,258 688 413 60.0% 363,123 813 488 60.0% 977,638 2,190 1,314 60.0% 2,076,317 4,186 2,791 66.7% APR 348,393 806 484 60.0% 109,495 253 152 60.0% 328,485 760 456 60.0% 388,209 899 539 60.0% 1,045,179 2,419 1,452 60.0% 2,219,761 4,625 3,083 66.7% MAY 266,324 597 358 60.0% 83,702 188 113 60.0% 251,105 563 338 60.0% 296,760 665 399 60.0% 798,971 1,790 1,074 60.0% 1,696,861 3,421 2,281 66.7% JUN 235,743 546 327 60.0% 74,091 172 103 60.0% 222,272 $15 309 60.0% 262,685 608 365 60.0% 707,228 1,637 982 60.0% 1,502,018 3,129 2,086 66.7% CITY OF UNAI A PROSPECTIVL __ADS-1994 JUL 246,383 552 331 60.0% 77,435 173 104 60.0% 232,304 520 312 60.0% 274,542 615 369 60.0% 739,150 1,656 993 60.0% 1,569,815 3,165 2,110 66.7% AUG 240,163 538 323 60.0% 75,480 169 101 60.0% 226,440 507 304 60.0% 267,611 599 360 60.0% 720,490 1,614 968 60.0% 1,530,183 3,085 2,057 66.7% SEP 204,153 473 284 60.0% 64,162 149 89 60.0% 192,487 446 267 60.0% 227,485 527 316 60.0% 612,460 1,418 851 60.0% 1,300,748 2,710 1,807 66.7% OcT 291,352 653 392 .60.0% 91,568 205 123 60.0% 274,703 615 369 60.0% 324,650 727 436 60.0% 874,056 1,958 1,175 60.0% 1,856,329 3,743 2,495 66.7% NOV 313,460 726 435 60.0% 98,516 228 137 60.0% 295,548 684 410 60.0% 349,284 809 485 60.0% 940,379 2,177 1,306 60.0% 1,997,187 4,161 2,774 66.7% DEC 303,101 679 407 60.0% 95,260 213 128 60.0% 285,781 640 384 60.0% 337,741 757 454 60.0% 909,303 2,037 1,222 60.0% 1,931,186 3,894 2,596 66.7% TOTAL 3,500,000 667 ave. 400 ave. §9.9% 1,100,000 210 ave. 126 ave. 59.9% 3,300,000 629 ave. 377 ave. 59.9% 3,900,000 744 ave. 445 ave. 59.9% 10,500,000 2,002 ave. 1,199 ave. 59.9% 22,300,000 3,827 ave. 2,546 ave. 66.5% CITY OF UNAI A AREA LOADS..-.} JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC CITY-EXISTING KWH 2,461,220 2,418,041 2,193,027 2,344,534 1,792,241 1,586,446 1,658,054 1,616,195 1,373,863 1,960,673 2,109,448 2,039,738 PEAK KW 4,404 4,758 4,157 3,678 3,832 3,071 2,896 3,506 2,963 3,207 4,120 3,946 AVE KW 3,308 3,598 2,948 3,256 2,409 2,203 2,229 2,172 1,908 2,635 2,930 2,742 LOAD FCTR 75.1%75.6%70.9%88.5%62.9%71.7%76.9%62.0%64.4%82.2%71.1%69.5% PROSPECTIVE KWH 1,118,096 1,098,481 996,260 1,065,087 814,189 720,699 753,229 734,214 624,126 890,705 958,291 926,623 PEAK KW 2,254 2,452 2,009 2,219 1,642 1,501 1,519 1,480 1,300 1,796 1,996 1,868 AVE KW 1,503 1,635 1,339 1,479 1,094 1,001 1,012 987 867 1,197 1,331 1,245 LOAD FCTR 66.7%66.7%66.7%66.7%66.7%66.7%66.7%66.7%66.7%66.7%66.7%66.7% CITY-TOTAL KWH 3,579,316 3,516,522 3,189,287 3,409,621 2,606,430 2,307,145 2,411,283 2,350,408 1,997,989 2,851,379 3,067,740 2,966,360 PEAK KW 6,658 7,210 6,166 5,897 5,473 4,573 4,415 -4,987 4,264 5,002 6,116 5,814 AVE KW 4,811 §,233 4,287 4,736 3,503 3,204 3,241 3,159 2,775 3,832 4,261 3,987 LOAD FCTR 72.3%72.6%69.5%80.3%64.0%70.1%73.4%63.4%65.1%76.6%69.7%68.6% PROCESSORS KWH 6,532,840 6,863,540 4,131,531 3,961,392 3,915,295 6,113,755 6,609,702 7,034,233 4,067,106 5,999,999 3,789,603 3,155,424 PEAK KW 10,346 12,086 6,567 6,065 6,887 11,795 12,104 11,401 8,289 11,625 10,750 5,542 AVE KW 8,781 10,214 §,553 §,502 §,262 8,491 8,884 9,455 5,649 8,065 5,263 4,241 LOAD FCTR 84.9%84.5%84.6%90.7%76.4%72.0%73.4%82.9%68.1%69.4%49.0%76.5% TOTAL KWH 10,112,156 10,380,062 7,320,818 7,371,013 6,521,725 8,420,900 9,020,985 9,384,641 6,065,095 8,851,378 6,857,343 6,121,784 PEAK KW 17,004 19,296 12,733 11,961 12,360 16,367 16,519 16,388 12,553 16,627 16,866 11,356 AVE KW 13,592 15,447 9,840 10,238 8,766 11,696 12,125 12,614 8,424 11,897 9,524 8,228 LOAD FCTR 79.9%80.1%77.3%85.6%70.9%71.5%73.4%77.0%67.1%71.6%56.5%72.5% TOTAL 23,553,479 3,711 ave. 2,689 ave. 72.4% 10,700,000 1,836 ave. 1,221 ave. 66.5% 34,253,479 5,548 ave. 3,910 ave. 70.5% 62,174,420 9,455 ave. 7,098 ave. 75.1% 96,427,899 15,003 ave. 11,008 ave. 73.4% ALYESKA KWH PEAK KW AVE KW LOAD FCTR UNISEA KWH PEAK KW AVE KW LOAD FCTR WESTWARD KWH "PEAK KW AVE KW LOAD FCTR TOTAL KWH PEAK KW AVE KW LOAD FCTR CITY OF UN iKA PROCESSOH LUADS-1994 FEBJAN MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 1,552,090 1,332,290 784,531 828,892 768,045 1,321,255 1,324,202 .1,567,733 979,856 1,279,499 790,353 649,674 2,458 2,346 1,247 1,269 1,351 2,549 2,425 2,541 1,997 2,479 2,242 1,141 2,086 1,983 1,054 1,151 1,032 1,835 1,780 2,107 1,361 1,720 1,098 873 84.9%84.5%84.6%90.7%76.4%72.0%73.4%82.9%68.1%69.4%49.0%76.5% 3,122,000 3,935,000 2,407,000 2,140,000 1,791,000 3,270,000 3,693,000 3,629,000 2,256,000 3,188,000 2,053,000 1,727,000 4,944 6,929 3,826 3,276 3,150 6,309 6,763 -5,882 4,598 6,177 §,824 3,033 4,196 5,856 3,235 2,972 2,407 4,542 4,964 4,878 3,133 4,285 2,851 2,321 84.9%84.5%84.6%90.7%76.4%72.0%73.4%82.9%68.1%69.4%49.0%76.5% 1,858,750 1,596,250 940,000 992,500 1,356,250 1,522,500 1,592,500 1,837,500 831,250 1,532,500 946,250 778,750 2,944 2,811 1,494 1,519 2,386 2,937 2,916 2,978 1,694 2,969 2,684 1,368 2,498 2,375 1,263 1,378 1,823 2,115 2,140 2,470 1,155 2,060 1,314 1,047 84.9%84.5%84.6%90.7%76.4%72.0%73.4%82.9%68.1%69.4%49.0%76.5% 6,532,840 6,863,540 4,131,531 3,961,392 3,915,295 6,113,755 6,609,702 7,034,233 4,067,106 5,999,999 3,789,603 3,155,424 10,346 12,086 6,567 6,065 6,887 11,795 12,104 11,401 8,289 11,625 10,750 5,542 8,781 10,214 5,553 5,502 5,262 8,491 8,884 9,455 5,649 8,065 5,263 4,241 84.9%84.5%84.6%90.7%76.4%72.0%73.4%82.9%68.1%69.4%49.0%76.5% TOTAL 13,178,420 2,004 ave. 1,504 ave. 75.1% 33,211,000 5,059 ave. 3,791 ave. 74.9% 15,785,000 2,392 ave. 1,802 ave. 75.3% 62,174,420 9,455 ave. 7,098 ave. 75.1% Annual Cost of Power Project Forecasts January 1992 Total Revenues Expenses Operations and Maintenance: Insurance Administrative and General Property Taxes Fluid Fee Fluid Fee Credit Total Expenses Net Operating Funds Other Income: DSR Interest Earnings Oper.Reserve Interest Income R&R Fund Interest Earnings Prior Year's Surplus Revenues Total Funds Available for Debt Service Annual Debt Service Funds Available for Other Costs Other Costs: Deposit to Operating Reserve Fund Deposit to R &R Fund DSR Loan Payment - Surplus Revenues Revenues from Sales (cents/kWh) City Costs Delivered Costs:(cents/kWh) Nominal 1991 Price Levels Debt Service Coverage Ratio Energy Sales at Delivery Point Ratio Check 70 GWh -Nominal 70 GWh -1991$ 75 GWh +Nominal 75 GWh -1991$ 80 GWh +Nominal 80 GWh -1991§ 1994 8,519 1,700 150 135 0 3,840 (2.134) 3,691 4,827 569 146 147 1994 Nominal 1991$ 13.4 7 12.7 na 12.1 10.6 ALASKA ENERGY AUTHORITY UNALASKA GEOTHERMAL PROJECT Annual Costs of Power (Dollars in Thousands) 1995 1996 1997 1998 9,496 10,716 10,507 10,607 1,777 1,856 1,940 2,027 157 164 171 179 141 147 154 161 0 0 0 0 3,840 3,840 3,840 3,840 (2.134)(2,134)(2.134)(2.134) 3,781 3,874 3,972 4,074 5,716 6,842 6,535 6,533 159 159 759 7159 195 195 195 195 197 189 180 182 n2 262 1.282 1.282 7,586 8,951 8,951 8,951 S835 6.885 6885 6,885 1,751 2,066 2,066 2,066 0 0 0 0 25 25 25 25 12 252 152 252 967 1,282 1,282 1,282 119 13.4 13.1 13.3 Lé 16 12 18 13.4 15.0 14.8 15.0 113 12.1 11.4 it 1.30 1.30 1.30 1.30 80,000 80,000 80,000 80,000 1.30 1.30 1.30 1.30 1995 14.8 16.6 16.4 16.6 12.4 13.4 12.6 12.2 141 15.8 15.6 15.8 11.8 12.7 12.0 11.6 13.4 15.0 14.8 15.0 11.3 12.1 11.4 Wl 1999 12,510 2,119 187 168 0 4,560 1.066) 5,967 6,543 759 195 172 1,257 15.6 12 17.5 12.3 1.30 19.1 13.4 18.3 12.8 17.5 12.3 2000 12,655 2,214 195 176 0 4,560 (1.066) 6,079 1,257 15.8 19.4 1,257 16.0 2.2 18.0 11.6 80,000 1.30 19.7 12.7 18.8 12.4 18.0 11.6 1,232 17.8 1.30 2007 16,846 3,013 266 239 0 6,696 Q 10,214 6,632 759 195 133 1232 8,951 1.30 25.5 12.6 24.6 12.1 23.7 117 2008 17,018 3,148 278 250 0 6,696 Q 10,372 6,646 759 195 120 1.232 8,951 80,000 2009 17,196 3,290 290 261 0 6,696 2 10,538 6,658 759 195 107 1.232 8,951 6.885 2,066 0 100 1.30 26.3 11.9 25.3 11.4 24.4 11.0 2010 17,387 3,438 303 273 0 6,696 Q 10,710 6,677 759 195 113 1.202 8,951 CAPITAL COST DATA/PARAMETERS Construction Cost Drilling,Field Development,etc. Fluid Fee Advancement Total Development Costs (w/o financing costs) OESI Equity AEA Loan Financed Amount OPERATING COST DATA O&MFee General and Administrative Property Taxes Insurnace Well Reserve Fund Deposit Fluid Fee: Years 1-5 Years 6-11 Years 12 and thereafter Fluid Fee Credit: Years 1-5 Years 6-11 Years 12 and thereafter Energy Losses: Busbar to Load Additional City Costs 0.00% ALASKA ENERGY AUTHORITY UNALASKA GEOTHERMAL PROJECT Bond Sizing Analysis (Wollars inThousands) 55,400 Cost of Capital 9,599 Reinvestment Rate 7,200 Cost of Issuance Other Costs Initial Studies 72,199 R&C Fund Requirement Working Capital 9,599 Bond Funded DSR 62,600 1.5 cents/kWh Debt Amortization Period AEA Loan: Princiapal Amount Interest Rate Reinvestment Rate Base Year of Operating Costs Annual Escalation Factors: General 7.50% 6.50% 2.50%of bonds 1994 4.50%per CONSTRUCTION PERIOD SUMMARY CASH FLOW END-OF-PERIOD BALANCES Project Construction Capitalized Construction Cap Int Interest Year Month (excluding field development)Interest Fund Fund DSR WC/RC Earnings (%)($000) 1992 Jan 0%0 Feb 0%0 Mar 0%0 57,785 11,670 0 6,000 Apr 3%1,662 56,495 11,670 0 6,000 372 May 3%1,662 55,197 11,670 0 6,000 365 Jun 6%3,324 1,459 52,227 10,211 0 6,000 353 Jul 6%3,324 49,232 10,211 0 6,000 329 Aug 7%3,878 45,665 10,211 0 6,000 311 Sep 7%3,878 42,079 10,211 0 6,000 292 Oct 3%1,662 40,696 10,211 0 6,000 279 Nov 2%1,108 39,861 10,211 0 6,000 273 Dec 2%13108 2,918 39,021 7,294 0 6,000 268 1993 Jan 2%1,108 38,161 7,294 0 6,000 248 Feb 4%2,216 36,185 7,294 0 6,000 240 Mar 6%3,324 33,088 7,294 0 6,000 227 Apr 3%1,662 31,640 7,294 0 6,000 214 May 4%2,216 29,629 7,294 0 6,000 205 Jun 1%3,878 2,918 25,940 4,376 0 6,000 189 Jul 8%4,432 21,661 4,376 0 6,000 152 Aug 8%4,432 17,358 4,376 0 6,000 129 Sep 5%2,770 14,698 -4,376 0 6,000 110 Oct 5%2,770 12,024 4,376 0 6,000 96 Nov 4%2,216 9,891 4,376 0 6,000 83 Dec 5%2,770 2,918 7,190 1,459 0 6,000 70 1994 Jan 0%7,200 18 1,459 0 6,000 27 Feb 0%0 26 1,459 0 6,000 8 Mar 0%0 1,459 34 0 0 6,000 8 100%62,600 11,670 4,849 SOURCES: USES: SOURCES AND USES OF FUNDS Bonds OESI Equity Interest Earnings Total Sources Construction: Project Site Development Advanced Fluid Fee Cost of Issuance Initial Studies Capitalized Interest DSR R&C/WC Funds Rounding Total Uses 77,800 9,599 4,849 92,248 92,248 Beginning of Period Balance Annual Deposit Interest Earnings Annual Withdrawal End of Period Balance Beginning of Period Balance Annual Deposit Interest Earnings Annual Withdrawal End of Period Balance Beginning of Period Balance Annual Deposit Renewal Interest Earnings Annual Withdrawal End of Period Balance Beginning of Period Balance Annual Deposit Well Rehab Interest Earnings Annual Withdrawal End of Period Balance 1994 3,000 25 147 (147) 3,025 ALASKA ENERGY AUTHORITY UNALASKA GEOTHERMAL PROJECT 1995 3,025 25 197 (197) 3,050 256 250 16 523 Reserve Fund Interest Earnings (Dollars in Thousands) 1996 1997 1998 Operating Reserve Fund 3,000 3,000 3,000 0 0 0 195 195 195 (195)(195)(195) 3,000 3,000 3,000 Debt Service Reserve Fund 11,670 11,670 11,670 0 0 0 759 759 759 (759)(759)(759) 11,670 11,670 11,670 3,050 2,760 25 25 G15) 189 180 (189)(180) 2,760 2,785 Well Reserve Fund 523 798 250 250 25 34 798 1,082 * Renewal and Replacement Fund 2,785 25 182 (182) 2,810 1,082 250 43 1,375 1999 11,670 0 759 (759) 11,670 2,810 50 (365) 172 (172) 2,495 1,375 250 53 1,678 2060 11,670 0 759 (759) 11,670 2,495 50 164 (164) 2,545 2001 759 (759) 11,670 2,545 50 167 (167) 2,595 356 300 21 677 2002 2,595 50 (422) 157 (157) 2,223 677 300 32 1,009 2003 2,223 50 146 (146) 2,273 1,009 300 43 1,352 2004 11,670 0 759 (759) 11,670 2,273 15 150 (150) 2,348 1,352 300 354 1,705 2005 2,348 15 (489) 139 (139) 1,934 1,705 300 65 2,070 2006 1,934 75 128 (128) 2,009 2,070 300 77 2,447 2007 11,670 0 759 (759) 11,670 2,009 15 133 (133) 2,084 2008 2,084 15 (566) 120 (120) 1,593 542 300 27 870 2009 11,670 0 759 (759) 11,670 1,593 100 107 (107) 1,693 870 300 38 1,208 2010 11,670 0 759 (759) 11,670 1,693 100 113 (113) 1,793 1,208 300 49 1,557 2011 1,793 100 (655) 99 (99) 1,238 1,557 300 60 1,917 2012 1,238 100 84 (84) 1,338 1,917 300 72 2,289 2013 1,338 100 90 (90) 1,438 2,289 300 84 2,673 2014 1,438 150 (758) 74 (74) 830 2,673 300 (3,024) (2) *(53) 2015 830 150 59 (59) 980 2016 980 150 69 (69) 1,130 255 300 18 373 2017 1,130 150 (878) 50 (50) 402 573 300 28 902 2018 402 150 31 G1) 552 902 300 39 1,241 2019 552 150 41 (41) 702 1,241 300 50 1,591 2020 702 300 (1,016) 22 (22) (14) 1,591 300 61 1,952 2021 1,952 300 73 2,325 2022 286 300 28 (28) 586 2,325 300 85 2,711 2023 586 300 (1,176) 10 (10) (290) 2,711 300 98 3,109 30 25 20 15 10 UNALASKA GEOTHERMAL PROJECT Delivered Cost of Energy-_-.(Cents/k Wh) Nominal Dollars on ou ee T=1991 Price Levelsoorse"7 TS ee - TT Se__"Se een ie ee [Based on 70 million a |]i }i]I |||i]|{} v q |q q T t U t q q i T i )1 1994 1995 2000 2005 2010 UNALASKA GEOTHERMAL PROJECT Delivered Cost of Energy 30.0 --(Cents/k Wh) Nominal Dollars 25.0 -- 20.0 -- 15.0 + 1991 Price Levelson"io ”=eeeoeaeTSae TT eeom-_-es2 =am ee . 10.0 + 5.0 + [Based on 75 million Z" !!!!||I !0.0 1 |;T 1 1 T 1 t 1 t t 1994 1995 2000 oo 2005 2010 30.0 -25.0 20.0 15.0 10.0 5.0 0.0 UNALASKA GEOTHERMAL PROJECT Delivered Cost of Energy -(Cents/k Wh) T Nominal Dollars etme pommel oe TT 188!Price Levelseo"at Tem eee Le ee ee ne mem, Based on 80 million kWh/year' wat,as on Jat ||{i $||if it ||{J it |t q T J y q q l q q |T I t T 1 1994 1995 2000 2005 2010