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HomeMy WebLinkAbout2020.07.24.BPMC.ExecutedMinutesALASKA ENERGY AUTHORITY BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE (BPMC) REGULAR MEETING This meeting is via teleconference July 24, 2020 CALL TO ORDER Chair Izzo called the regular meeting of the Bradley Lake Hydroelectric Project Management Committee to order at 10:05 am. A quorum was established. 2. ROLL CALL FOR COMMITTEE MEMBERS Tony Izzo (Matanuska Electric Association [MEA]); John Burns (Golden Valley Electric Association [GVEA]); Anna Henderson (Municipal Light and Power [ML&P]); Lee Thibert (Chugach Electric Association [CEA]); Bradley Janorschke (Homer Electric Association [HEA]); Curtis Thayer (Alaska Energy Authority [AEA]); and William Earnhardt (City of Seward). 3. PUBLIC ROLL CALL Betty Caudle (Accu-Type Depositions); Amy Adler (AEA), Ryan Garner (AEA), Beazit Redzepi (AEA), Kirk Warren (AEA); Sherrie Siverson (AIDEA), Aimee Sudbeck (AIDEA); Bob Day (Bradley Lake - HEA); Matt Clarkson, Brian Hickey (CEA), Sherri Highers (CEA); Stefan Saldanha (Department of Law); Pete Sarauer, Ron Woolf (GVEA); Emily Hutchison, Larry Jorgenson, Andy Patrick (HEA); Kirk Gibson (McDowell Rackner Gibson, PC); David Pease (MEA), Matt Reisterer, Tony Zellers (MEA); and Bernie Smith (Public). 4. PUBLIC COMMENTS Bernie Smith expressed appreciation to Sherrie Siverson, AIDEA, for implementing the star-9 process in order to see who is on the line. 5. AGENDA APPROVAL MOTION: A motion was made by Vice -Chair Thibert to approve the agenda. Motion seconded by Mr. Burns. Ms. Henderson informed she was unable to access the resolution links through the agenda. She suggested a correction to the titling of Item 7D. to read, 'Resolution 20-03 Approval of Proposed Preliminary Transaction Financing." There was no objection to the correction. A roll call vote was taken, and the motion to approve the agenda as corrected passed unanimously. 6. APPROVAL OF PRIOR MINUTES - May 29, 2020 MOTION: A motion was made by Mr. Janorschke to approve the Minutes of May 29, 2020. Motion seconded by Mr. Thayer. 813 West Northern Lights Boulevard, Anchorage, Alaska 99503 T 907.771.3000 Toll Free 888.300.8534 F 907.771.3044 A roll call vote was taken, and the motion to approve the Minutes of May 29, 2020 passed unanimously. NEW BUSINESS A. Annual Elections Chair Izzo requested Kirk Gibson of McDowell Rackner Gibson to conduct the annual elections. Mr. Gibson informed the three positions are Chair, Vice -Chair, and Secretary/Treasurer. The AEA representative is the permanent Secretary/Treasurer. He opened the floor for nominations. Mr. Janorschke nominated the current slate of officers for reelection; Tony Izzo as Chair, Lee Thibert as Vice -Chair, and Curtis Thayer as Secretary/Treasurer. Mr. Burns seconded the nomination. There was no objection and no additional nominations. MOTION: A motion was made by Ms. Henderson to accept the current slate of officers for reelection; Tony Izzo as Chair, Lee Thibert as Vice -Chair, and Curtis Thayer as Secretary/Treasurer. Motion seconded by Mr. Thayer. A roll call was taken and the motion to approve the current slate of officers for reelection passed unanimously. Mr. Gibson expressed his congratulations to the elected officers B. Construction camp storage Chair Izzo requested Kirk Warren, AEA, provide information on the construction camp storage. Mr. Warren discussed the contractor for the Battle Creek construction project asked AEA if it was possible to leave their camp onsite until they are able to take a barge and retrieve the camp. The contractor would pay rent to AEA. The amount has not yet been negotiated. Mr. Warren indicated members of the O&D Committee may have additional information. Bob Day, Bradley Lake, reported discussion occurred regarding leaving the camp onsite. There were no issues. Bradley Lake would take no responsibility for care or maintenance. Chair Izzo inquired if there are any risks or liabilities related to the camp remaining onsite as described. Mr. Gibson noted there is more liability if the camp remains on the property compared to liability if the camp does not remain on the property. He does not have the information in front of him to discuss insurance coverage for this scenario. Mr. Gibson advised he would want to review the insurance coverage. Mr. Gibson inquired as to the reason for allowing the camp to remain compared to resolving the completion of the project. He noted discussion regarding the issue can be postponed until executive session and confidential matters related to the Battle Creek claims. Mr. Gibson deferred to AEA in reference to the desired outcome during this Committee meeting. Mr. Warren informed this agenda item was for informational purposes. He assumed the O&D Committee would review the issue. Mr. Warren stated AEA does not have any concerns from an insurance perspective. He does not believe this issue is controversial. Alaska Energy Authority Page 2 of 8 Chair Izzo indicated additional discussion may occur during executive session. There were no further questions nor comments. C. Resolution 20-02 Adoption of O&D Report Mr. Gibson discussed Resolution 20-02 relates to the adoption of the O&D Report. The Department of Law's opinion memorandum required the O&D Committee to review the proposed transaction and determine if it was consistent with national standards for the industry and if it is necessary to keep the project in good and efficient condition. The analysis will determine if the proposed transaction is required project work under the Power Sales Agreement. Mr. Gibson read the summary conclusion of the O&D Report, which supports the determination that the proposed transaction is fully consistent with both the letter and intent of the meaning of prudent utility practice and meets the defined national standards for the electric utility industry. Mr. Gibson explained after the BPMC adopts the O&D Report through Resolution 20-02, an independent engineering consultant will review the report and the resolution with the hopes of providing a certification which will satisfy the requirements in determining the proposed transaction is required project work. Mr. Gibson recommended the BPMC approve Resolution 20-02. Pete Sarauer, GVEA, and Mr. Thayer agreed with Mr. Gibson's assessment. Mr. Thayer informed AEA has an RFP open for an independent engineer to provide the third -party analysis. MOTION: A motion was made by Vice -Chair Thibert to approve Resolution 20-02. Motion seconded by Mr. Janorschke. Mr. Burns spoke in favor of approving Resolution 20-02 as written. Vice -Chair Thibert expressed support for approval of Resolution 20-02. He thanked the O&D Committee for their efforts. Ms. Henderson echoed Vice -Chair Thibert's comments. Mr. Earnhardt expressed support. Mr. Janorschke expressed support. A roll call was taken and the motion to approve Resolution 20-02 passed, with AEA abstaining. D. Resolution 20-03 Approval of Proposed Preliminary Transaction Financing Mr. Gibson explained the preliminary terms and conditions were developed by AEA and AIDEA. They were discussed at the Finance Committee, and the CFOs from CEA, MEA, and GVEA were in attendance. Mr. Gibson believes the Finance Committee, Chaired by Ron Woolf of GVEA, accepted and approved the preliminary terms and conditions. Mr. Gibson informed the Finance Committee did raise a separate issue directly with AEA regarding the compliance certificate. He Alaska Energy Authority Page 3 of 8 is working with AEA to resolve the matter. Mr. Gibson requested Mr. Woolf comment on the preliminary terms and conditions. Mr. Woolf agreed with Mr. Gibson and voiced concerns regarding the underlying onerous disclosure requirement terms that have been passed down from AEA. He encouraged additional comments from CEA and MEA. Mr. Janorschke requested an emailed copy of Resolution 20-03 be sent to himself and Ms. Henderson. Chair Izzo informed a copy will be emailed again to all Committee members. A brief at -ease was taken at 10:60 a.m. Chair Izzo reconvened the regular meeting at 11:00 a.m. Chair Izzo welcomed additional comments by the Finance Committee. Matt Reisterer of MEA discussed the term sheet reflects the redline version resulting from the negotiations with the CFOs, Mr. Gibson, and AEA. The Finance Committee believes it is important to include the future upgrades that were discussed. This suggestion was not included in the redline version. Mr. Reisterer believes the insurance language in the redline version is better and refers to the bond resolution. The Finance Committee would like to clarify with the decision -makers that it is not customary industry practice to insure conductor poles under the utility property schedule. Carrying liability insurance over this part of the project is normal. This suggestion was not included in the redline version. The compliance certificate issues discussed by Mr. Gibson are still being negotiated. Mr. Reisterer noted the Finance Committee sought to include language around the determination for the rights -of -way that would permit the contemplated upgrades. This suggestion was not included in the redline version. Mr. Janorschke and Mr. Burns requested additional information regarding the process to determine the suggestions discussed would not be included in the redline version. Mr. Gibson explained the suggestions were analyzed by AIDEA, AEA, and the CFOs. The decision not to move forward with the suggestions was made after discussions and analysis. Mr. Gibson reviewed reasons each suggestion was not plausible. Vice -Chair Thibert believed it was the Attorney General's opinion through analysis that both the purchase of the line and the upgrade would be considered required project work. Vice -Chair Thibert requested clarification from AEA. Mr. Thayer noted AEA does not mind having a reference to future upgrades, but this transaction does not include any upgrades. The $16 million financing is attached only to this transaction and does not including any financing for future upgrades. Additional analysis will have to be conducted when the upgrades occur. Therefore, he does not believe upgrades should be included in the terms and conditions of this transaction. MOTION: A motion was made by Mr. Janorschke to approve Resolution 20-03. Motion seconded by Vice -Chair Thibert. Chair Izzo clarified the proposed preliminary transaction financing will go before the Boards of AEA and AIDEA, and is subject to approval by the individual fiduciary Boards. He noted there is an open RFP for review of the determination that future upgrades would be considered required project work. Alaska Energy Authority Page 4 of 8 Vice -Chair Thibert agreed with Chair Izzo's comments. The discussions concerned the upgrade of this section of line to reduce the losses. He believes the O&D Committee acknowledged the benefit to the project. Vice -Chair Thibert requested additional information from AEA and AIDEA regarding the potential of a second tranche of approximately $50 million to execute the actual upgrade. He asked if either AEA or AIDEA is interested in providing the future financing for the required project work upgrades. Mr. Thayer commented AIDEA has the ability and is willing to provide the financing for the first tranche of $16 million to purchase the S/Q Line. Mr. Thayer believes the second tranche is $70 million and advised AIDEA does not have the internal capacity for that financing. He stated the BPMC, through AEA, can issue bonds for the upgrades. Mr. Thayer expressed support for the upgrades and informed the same analytical process and path will occur for the upgrade transaction. He explained the purchase and the upgrades are two separate transactions. Sherri Highers, CEA, referenced Mr. Thayer's comments and asked Vice -Chair Thibert if it is appropriate to strike from the term sheet the reference to the capital upgrades and that the borrower agrees that all capital upgrades to the line are to follow procurement guidelines, including competitive bids. Vice -Chair Thibert disagreed and noted CEA does not support removing the language. The language was included at the request of the CEA Board. Mr. Earnhardt agreed with Vice -Chair Thibert. He summarized the transaction pays $16 million for the line that the utilities already have the right to use. If there is no discussion of upgrading the line, there is no purpose for this transaction. Chair Izzo informed he anticipates a conditioned Board approval by his utility, as long as there is confirmation of an upgrade being required project work. Stefan Saldanha, Department of Law, agreed future upgrade work would be considered required project work and would follow the same process schedule as this transaction. Chair Izzo asked for the will of the Committee and the advice of counsel if this matter should be discussed further in executive session before a vote is taken. Mr. Gibson advised the executive session does include discussion regarding confidential matters with respect to the S/Q Line. MOTION: A motion was made by Mr. Burns to table the motion to approve Resolution 20- 03 until after Executive Session. Motion to table was seconded by Mr. Earnhardt. A roll call was taken and the motion to table passed unanimously, E. Motion - Power Sales Agreement - Excess Payments Mr. Thayer advised AEA has prepared and provided a June 2020 updated White Paper. AEA has calculated the excess payment obligation amount is approximately $12.5 million. Because of the complexity and the importance of the excess payment obligation calculation, AEA would like to engage the services of an independent financial advisor with experience in hydroelectric project financing, and if necessary, engage the services for a legal opinion regarding the assumptions used in the calculation. MOTION: A motion was made by Mr. Thayer that the BPMC direct AEA to obtain a determination of an amount due under the excess payment provisions of the Power Sales Alaska Energy Authority Page 5 of 8 Agreement by using a third -party financial advisor with experience in hydroelectric project financing, and if necessary, obtain legal opinion using a financial advisor and/or counsel currently under an existing AEA contract or similar arrangement. Motion seconded by Vice -Chair Thibert. A roll call was taken and the motion that the BPMC direct AEA to obtain a determination of an amount due under the excess payment provisions of the Power Sales Agreement by using a third -party financial advisor with experience in hydroelectric project financing, and if necessary, obtain legal opinion using a financial advisor and/or counsel currently under an existing AEA contract or similar arrangement passed unanimously. 8. OLD BUSINESS A. Battle Creek Project Update Chair Izzo introduced Bob Day, Bradley Lake, who discussed the progress on the Battle Creek Project. He showed a video of the spillway for those in the room and informed the video can be sent to members on the line, if requested. As of July 22nd, water was successfully put through the pipe after extensive testing and validation of the instruments. Approximately 569 acre-feet of water has flowed through the pipe in two days and that rate is expected to continue. Mr. Day calculated the return is about $56,000 for the investment, at approximately $100 per acre-foot of water. Mr. Day stated there are a number of issues that are actively being addressed and corrected. He is pleased water is flowing and is adding to the level of Bradley Lake. B. Operators Report Mr. Day reviewed the abbreviated Bradley Lake Operators Report. The current focus has been directed at the Battle Creek operations. The lake level has increased almost two inches since the report was written due to a rain storm. The availability numbers in June and July were excellent and systems are doing well. Bears have continued to be a nuisance at the site. C. O&D Report Chair Izzo introduced Pete Sarauer, GVEA, to present the O&D Report. Mr. Sarauer informed the O&D Committee met multiple times to prepare and review the report submitted on the S/Q Line proposed transaction. Mr. Sarauer noted presentations were given to the O&D Committee by Mr. Day, Mr. Carey, and Russ Thornton, CEA. The O&D Committee has resumed video- conferencing to minimize exposure to possible COVID-19 transmission. 9. COMMITTEE REPORTS - Budget to Actual Beazit Redzepi, AEA, delivered the Budget to Actual Expense Report through April 30th. Mr. Redzepi reviewed Operations and Maintenance expenses on Schedule B. The overall expenses to -date total $3,622,694. Mr. Redzepi discussed the capital projects funded by the R&C Fund, with expenses at $209,950. The Battle Creek capital purchases listed on Schedule E total $682,622. The Battle Creek administrative expenses outlined on Schedule F total $448,035. There were no questions. Alaska Energy Authority Page 6 of 8 MOTION: A motion was made by Vice -Chair Thibert to enter into Executive Session to discuss confidential matters related to Battle Creek Claims and the S/Q Line. Motion seconded by Mr. Janorschke. A roll call vote was taken and the motion to enter Executive Session passed unanimously. 10. EXECUTIVE SESSION: 11:41 am Discuss confidential matters related to Battle Creek Claims and S/Q Line The Committee reconvened its regular meeting at 1:02 p.m. Chair Izzo advised the BPMC did not take any formal actions on matters discussed while in executive session. Chair Izzo resumed discussion of the motion that was tabled prior to executive session Mr. Gibson described and reviewed the proposed amendments previously discussed. MOTION: Vice -Chair Thibert moved a friendly amendment to Resolution 20-03 to include, "Whereas the DOL issued a Memorandum of Opinion dated May 20, 2020, finding that the definition of required work set forth in the Power Sales Agreement could include the proposed transaction and upgrades." Motion seconded by Mr. Burns. A roll call vote was taken and the motion to amend Resolution 20-03 passed unanimously. Chair Izzo asked Mr. Gibson if the insurance language need to be addressed at this point. Mr. Gibson advised the insurance language is included in Resolution 20-03, as amended. Mr. Gibson informed he sent the amended Resolution 20-03 to the CFOs. Chair Izzo asked for comment regarding the amended Resolution 20-03 from any of the CFOs. Mr. Clarkson believes the amended Resolution 20-03 language is effective. An Unidentified Speaker agreed. Ms. Highers agreed. Emily Hutchison, HEA, agreed. Mr. Gibson requested Mr. Clarkson sign off on Attachment 2. Mr. Clarkson agreed. A roll call was taken and the motion to approve Resolution 20-03, as amended to include, "Whereas the DOL issued a Memorandum of Opinion dated May 20, 2020, finding that the definition of required work set forth in the Power Sales Agreement could include the proposed transaction and upgrades" passed unanimously. 11. COMMITTEE ASSIGNMENTS Chair Izzo suggested the O&D Committee consider the camp storage matter and provide feedback. 12. MEMBERS COMMENTS Mr. Burns expressed appreciation to the Finance Committee for their diligent efforts in providing financial clarifications. Alaska Energy Authority Page 7 of 8 Ms. Henderson expressed appreciation to AEA and staff for the work on the S/Q Line purchase. She thanked Chair Izzo and Vice -Chair Thibert for continuing their Committee leadership positions. Mr. Thayer thanked everyone for cooperation on the S/Q Line, especially Mr. Gibson for his intermediary role. He expressed congratulations on the officers' reelection. Vice -Chair Thibert expressed appreciation to the Finance Committee, and especially Mr. Thayer for his assistance in navigating the changes. Mr. Earnhardt thanked everyone for their patience while he learns this new conferencing system. He looks forward to working with the members. Mr. Janorschke echoed previous comments of appreciation. He brought attention to the diligent efforts of Mr. Day and Ron Rebenitsch, Energy Engineering, bringing Battle Creek online. He thanked Chair Izzo for facilitating this complicated teleconference meeting. Chair Izzo echoed all of the well -deserved thanks, and especially to Ms. Siverson and Aimee Sudbeck. He welcomed Mr. Earnhardt to the BPMC. 13. NEXT MEETING DATE - The next meeting date is Friday, September 25, 2020. 14. ADJOURNMENT There being no further business for the committee, the meeting adjourned at 1:19 pm. BY: Ton Atte Alaska Energy Authority, Secretary Alaska Energy Authority Page 8 of 8