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Reynolds Creek Hydroelectric Project 2011
Reynold's Creek Hydroelectric Project Table of Contents Construction Cost Estimate A FERC Finance Plan -B AEA Finance Plan -C Power Sales Agreement = D O&M Agreement E Correspondence -F A ire en Hee Coat wad oi :y Bae aeGCGaresmieaedfueieae May 17,2011 Mr.James S.Strandberg,P.E. .Project Manager Alaska Energy Authority 813 West Northern Lights Boulevard Anchorage,AK 99503-2495 | Subject:Reynolds Creek Hydroelectric Project .Engineer's Cost Estimate Report Dear Mr.Strandberg; Please find attached our Cost Estimate Report for the Reynolds Creek Hydroelectric Project.This estimateis identical to.the draft estimate that was transmitted to you onApril8,2011,via e-mail. .Please call if you have questions or would like additional information. Respectfully, INC. James.C.Peterson,P.E.,PMP -<=wa _Michael V.Stimac,PE.HDR Lead Design Engineer _gs*'OF ALB 'HDR Project Manager .Sate”:ren Spat :;£s fo aZFFounpe) heay,JAMESC.PETERSON4S"a 5967 Ped%"p,D>a Noe AS FdAW:ire TatWeresnePROFESSIONetYearmece™Attachment:Engineer's Cost Estimate Report cc:Alvin Edenshaw,President -Haida Energy Bob Grimm,Vice President -Haida EnergyCorryHildenbrand,Construction Manager HDR Engineering,Inc.. , 500 108th Avenue NE Phone:(425)450-6200 ::Suite 1200 Fax:(425)453-7107 Bellevue,WA 98004-5549 waww.ndrine.com May 17,2011 Reynolds Creek Hydroelectric Project Opinion of Probable Cost Report HR 1.0 Background This opinion of probable cost report has been prepared in response to Condition 2 of the October 12,2010,Alaska Energy Authority (AEA)letter and the November 19,2010,AEA Compliance Register.The primary elements of Condition 2 and the Compliance Register that are addressed in this report are: e An.updated opinion of probable costs,reflecting the current status of design and uncertainties going forward with design.The estimate includes an assessment of program office costs (developed in consideration of the Project Management Agreement requirements),an allocation for full time quality contro!,and assessments of costs .associated with bonding,the construction camp,and logistics. e Management and allocation of risk. e Construction approach and schedule. 2.0 Opinion of Probable Costs 2.1 Cost Basis The basis of the Opinion of Probable Costs (OPC)started with HDR's independent cost estimate that was carried forward as the design progressed.This HDR estimate was then updated,supplemented,and verified using a construction cost estimate provided by Alaska Power and Telephone (AP&T). HDR calculated quantities utilizing the design drawings,obtained manufacturer quotations,and developed unit prices from estimating guidance and other project experience.Because of the specialized nature of construction of hydroelectric projects in remote SE Alaska,the AP&T estimate was highly valued and used to compare with and adjust the HDR estimate.AP&T relied on its experience constructing the Black Bear Lake and South Fork projects on Prince of Wales Island and most recently,the Kasidaya project near Skagway. An initial OPC was completed and submitted to the AEA in early November 2010.The AEA then requested an independent cost review by Mr.Corry Hildenbrand,who was assisted by Mr. Tracy Moore.Their comments were reviewed by the team and discussed during a meeting with Mr.Hildenbrand,Mr.Moore,AP&T,and Haida Energy at HDR on February 4,2011.Agreed upon changes in the costs and cost items were incorporated into this revised estimate. The November 2010 estimate was based on contracting the Reynolds Creek construction with a single partnering SE Alaska-based and experienced hydroelectric construction firm,like AP&T. The costs assumed that the construction contractor would have ready local access to marine transport vehicles,construction camp facilities,and specialized equipment (e.g.,a portable concrete batch plant,and highline system).It was assumed that the construction would be completed in two construction seasons.The cost estimate also included the quotation for a Turgo impulse turbine-generator equipment package from Gilkes. The assumptions used in the February 10,2011,estimate (attached)are different in the following areas: e Mobilization and logistics for multiple contractors rather than one. HDR Engineering,inc.500 108th Ave NE,Suite 1200 Phone (425)450-6200 Page 1 of 6 Bellevue,WA 98004-5549 Fax (425)453-7107 www.hdrinc.com May 17,2011 AR e Preparation of competitive bid packages rather than cooperative "design-build”level documents. e Extension of the schedule from two to three construction seasons (three years). e Additional overhead and administration associated with managing multiple contractors over a longer construction period. The February 10,2011 update includes additional cost items and revisions to costs that were made in response to review comments provided by Mr.Hildenbrand and Mr.Moore. Incorporating these new items and cost revisions increased the estimated probable project construction cost from $16.64 million to $19.87 million,and the administration and professionalservicescostsfrom$1.53 million to $2.88 million.Adding these two amounts results in a total probable project cost increase from $18.17 million to $22.75 million. Approximately $1 million of the cost increase is related to the additional mobilization costs, coordination,camp costs,and administration of multiple construction contracts,including the development of competitive bidding documents.Lengthening the construction schedule from two to three years (three nine-month construction seasons)also added to contract overhead and administration costs.The largest construction cost estimate increases were associated with the diversion,penstock,and electric transmission line.Due to continued project uncertainties, the unaccounted-for costs/contingency was increased from 10 to 12.5 percent of the construction cost. Based on a change in the proposed method of project delivery,additional administrative costs, and responses to review comments,when compared to the November 2,2010,estimate,the most significant cost increases are categorized as follows: e 330.2 Mobilization and Logistics:for multiple contractors rather than just one and an increase in camp costs and logistics:$992,000 e 332 Reservoirs,Dams,and Waterways:$967,000 e 355 Transmission Line:$460,000 e Unaccounted-for Costs/Contingency:from 10 to 12.5 percent:$695,000 e Other Professional Services/Administration Costs:$1,354,000 HDR's Opinion of Probable Costs is made on the basis of the information provided to HDR and on the basis of our experience and qualifications.It represents our best judgment as an experienced and qualified professional engineering company.This cost opinion is classified as an Association for the Advancement of Cost Engineering (AACE)Class 3 Estimate with a typical accuracy range of from minus 10 to 20 percent to plus 10 to 30 percent (actual costs compared to the estimate). HDR has no control over the cost of labor,materials,equipment,or services furnished by others,or over contractors'methods of determining prices,or over competitive bidding or market conditions.Therefore,HDR cannot and does not guarantee that proposals,bids,or actual costs will not vary from this Opinion of Probable Costs. The HDR tabulated "skeleton”estimate summary and the underlying detailed AP&T estimate are attached.Further,the overall OPC is divided into costs as they might be incurred by two contractors -a civil contractor and by an electrical contractor (presumed to be AP&T).Some of the combined item costs in the estimate were divided between the two contract estimates. 2.2 Construction Contingency At the current level of design,the recommended amount for a "construction contingency”or "unaccounted-for costs”is 12.5 percent (increased from 10 percent in the November 2010 HDR Engineering,Inc.500 108th Ave NE,Suite 1200 Phone (425)450-6200 Page 2 of 6 Bellevue,WA 98004-5549 Fax (425)453-7107 www.hdrinc.com May 17,2011 AR estimate)of the cost estimate -including overhead and profit.Although the costs for some of the items are more certain (e.g.,the Gilkes turbine-generator package),the 12.5 percent contingency is applied to the entire construction cost subtotal to provide a slightly higher overall contingency percentage on the more uncertain items.This 12.5 percent contingency is included in the revised Opinion of Probable Costs. 2.3 Program Office Costs The program office costs were increased from the November 2010 estimate.After the February 4,2011,meeting,the following Haida Energy administrative and project management costs were included in the estimate: e Project office rent and expenses:$60,000 e Haida Energy administration,CPA,grants administration,legal and insurance:$350,000 2.4 Project Management and Quality Control Inspection The revised cost estimate includes $360,000 in salary and travel allowance for the project manager,Mr.Hildenbrand,and $310,000 for on-site inspection and testing led by Mr.Moore. 2.5 Bonding Haida Energy obtained a quote of $77,250 for a $9 million bond from an Alaska construction bonding specialist.This presumes that one entity would bond the entire $9 million.However,if the bonding were split into multiple contracts,the bond rate could vary depending on the size of the bond and the qualifications of the contractor(s).The quotation used the following rates: $25 per thousand for the first $100,000 $15 per thousand for the next $400,000 $10 per thousand for the next $2 million $7.50 per thousand for the last $6.5 million The quotation also states that a contractor could potentially qualify for lower rates than quoted (e.g.,$10 per thousand for the first $2.5 million and $7 per thousand for the balance). Based upon the quoted bond price,an allowance of $80,000 is included in the cost estimate. Actual bonding costs could be less or could exceed that amount depending on the number and sizes of contracts requiring bonding as well as the total amount of bonding obtained. Acopy of the bonding quotation is attached. 3.0 Management and Allocation of Risk 3.1 Contract Terms and Conditions Contract risk will be managed and allocated based on the construction schedule of values (bid form)and terms and conditions of the construction contract(s). Project construction items that are well defined in the drawings and specifications (e.g.,the pre- engineered metal building for the powerhouse)could be bid on a lump sum price basis where the bidding contractor is completely responsible for assessing the site conditions and the contract documents prior to providing a firm,not-to-exceed price for that item.Measurement and payment would be based on complete provision and installation of that item. HDR Engineering,Inc.500 108th Ave NE,Suite 1200 Phone (425)450-6200 Page 3 of 6 Bellevue,WA 98004-5549 Fax (425)453-7107 www.hdrinc.com ah May 17,2011 AR Other construction items that are less well defined or have uncertain quantities could be bidbaseduponaunitpriceforanestimatedquantity(e.g.,a price per cubic yard for reinforcedconcrete).Measurement and payment for these items would be based upon the bid unit price and the actual quantity of these items. Construction in project locations with current designs that are based upon preliminary geotechnical information (e.g.,the dam cutoff wall foundation and the penstock support foundations)inherently has more associated cost risks than in areas where more complete information is available.A variety of different contracting methods and contract language could be used to equitably share these risks between the owner and contractor. Construction in areas with incomplete geotechnical information could be contracted using an alternative delivery design-build contract where the construction contractor is responsible for obtaining the additional geotechnical information and delivering a "turn-key”designed and constructed facility to Haida Energy (Owner).However,with the contractor accepting the risk with this kind of agreement,the initial cost for this delivery method would likely be higher than a conventional design-bid-build contract.The probable cost of this alternative delivery method can be compared with the cost of the Owner paying for obtaining additional geotechnical information and for preparing more detailed designs based upon that information prior to requesting contractor construction bids.Additional geotechnical work is currently planned including clearing and grubbing,preliminary shaping,and geotechnical investigations so that final design drawings and specifications can be completed either by the Owner (for conventional!design-bid-build)or by a construction contractor (design-build). The construction contract terms and conditions will specify provisions regarding responsibilities between the Owner and contractor(s).The contract terms and conditions typically use and reference Engineers Joint Contract Documents Committee (EJCDC)standards,which are used widely within the construction industry. In addition to the bonding requirements,these contract provisions,terms,and conditions are contained within the Bid Form,Construction Agreement,and General Conditions,all of which become part of the Contract Documents. Some example risk sharing provisions for conventional contracts are contained within Bidder Acknowledgments in the Bid Form;contract times,liquidated damages stipulations,progress payment/retainage provisions,and Contractor representations in the Construction Agreement; and provisions for differing conditions,price and time adjustments,definitions of costs,and delays in the General Conditions. Draft bid items schedule of values for potential civil and electrical contracts as well as excerpts from the standard EJCDC documents are attached.For those items with lump sum prices,the onus and risk is on the contractor to provide that item for the designated price.Those items with approximate quantities and unit prices place more of the risk on the owner who may pay a higher price if actual quantities are higher than the estimate. 3.2 Additional Geotechnical Information Due to the limited ability to access the project diversion site,penstock route,and powerhouse location,it has always been planned to complete additional geotechnical exploration and screening after the access roads have been improved;the diversion and powerhouse sites and penstock alignment have been cleared;and locations of the facilities have been staked by surveyors.Taking these steps first will allow any additional geotechnical exploration to be based on geotechnical engineer observations of the specific facilities'foundations sites. HDR Engineering,Inc.500 108th Ave NE,Suite 1200 Phone (425)450-6200 Page 4 of 6 Bellevue,WA 98004-5549 Fax (425)453-7107 www.hdrinc.com May 17,2011 AR Specific areas for additional geotechnical exploration are at the diversion dam (particularly the depth to rock for the north abutment);the foundations (bedrock,soil,or combination)for each penstock support;and the powerhouse foundation,now that it is known that the powerhouse configuration and location will be for a Turgo impulse turbine. It is proposed that early field work on the project be focused toward completing investigations that will allow the cost estimate and design drawings to be updated for the better-known site conditions.As such,the depths to subgrade rock surfaces at the dam cutoff wall could be more firmly established;and clearing,grubbing,and shaping of the penstock corridor could be completed prior to issuing one or more primary construction contract(s)for contractor bids for these items.Having this additional geotechnical information available -along with an updated design reflecting this information would be expected to help reduce the actual or perceived risk to the contractor(s)as they prepare their bid(s). It is also planned to have the geotechnical consultant (Shannon and Wilson)in the field during foundation construction operations to make recommendations regarding the final configuration and/or design modifications of the foundations based on the actual field conditions. Those construction contract items that are impacted by the current uncertainty regarding the actual geotechnical conditions have been listed in the bid form as estimated quantities with unit prices.For example,there are estimated quantities for excavation,and cement grout for the diversion dam.The completed contract bid form would contain the proposed contractor price per cubic yard for each of these items along with the total based on the estimated quantity.The final payment to the contractor would be based on the actual (as measured by an inspector in the field)rather than the estimated volumes.These uncertainties should be covered within the unaccounted-for construction costs (contingency)added to the budget. Approximately $450,000 has been included in the cost estimate to cover additional design modifications,and additional geotechnical exploration and consulting during construction. 4.0 Construction Approach and Schedule The initial anticipated approach for this project was that Haida Energy would negotiate a fair and equitable general construction contract with an experienced SE Alaska hydropower construction firm -that was expected to be AP&T.In that regard,AP&T provided HDR with a detailed construction cost estimate,much of which was used in the preparation of the HDR estimate. Subsequently,it was discovered that AP&T could not or would not bond the project and that another contractor would be required to provide the bonding and accept the corresponding responsibility for oversight of the project -with perhaps AP&T acting a subcontractor with the prime and one or more other subcontractors. In that regard,the project could be bid as one contract with one prime contractor responsible and using qualified subcontractors,as appropriate.The advantage of having one prime contractor for the project is that the prime contractor is responsible for all of the scheduling and interfaces on the project between its own personnel and the personnel of any subcontractors. There is also a savings in engineering and administrative overhead in dealing with only one bid process and one prime contractor. If a multiple contract approach is selected,the project could be divided into the following construction contracts: e Transmission line e Site clearing,marine access,and roadway improvements e Temporary cofferdam and permanent diversion dam,screen,and valve vault HDR Engineering,Inc.500 108th Ave NE,Suite 1200 Phone (425)450-6200 Page 5 of 6 Bellevue,WA 98004-5549 Fax (425)453-7107 www.hdrine.com May 17,2011 juDte e Penstock e Powerhouse (foundation,building structural) e Turbine-generator/switchgear and control systems installation,startup,and testing The current plan is to divide the contract into two contracts:site civil (contractor to be determined),and electrical/mechanical (AP&T). The original two-year project schedule was revised by the Haida Energy Construction Project Manager,Mr.Hildenbrand;AP&T;and others into a three-year schedule.A copy of that schedule is attached for reference. HDR Engineering,Inc.500 108th Ave NE,Suite 1200 Phone (425)450-6200 Page 6 of 6 Bellevue,WA 98004-5549 Fax (425)453-7107 www.hdrinc.com REYNOLDS CREEK HYDROELECTRIC PROJECT Opinion of Pr Construction Cost -February 10,2011,Update FERC 2044 2011 Amount Comments Ace No Description Quantity |Unit Price (3)Quantity/Cost_330,aA LAND AND LAND RIGHTS(Haida)1 |SeaAlaska Land Lease 1]Ls $40,000 $40,000 ]!n/ormation pravided by Haida Energy on 10/22/2010 Subtotal -Acc No.330.1 -Land and Land Rights $40,000) 3300 2 MOBILIZATION AND LOGISTICS (aan)A Mobilization and demob (electrical contractor}1]Ls $650,000 $650,000/Moore -Costs adjusted at Feb 4 meeting with AP&T eae ager.ew(Gv Cont}«=.2--|:Moblization and demob (civil contractor)1]LS $600,000 $600,000|Moore -Costs adjusted at Feb 4 meeting with AP&T APaT/CvL|3 Camp facilites purchase and operate (less $150k salvage)1 LS $800,000 $800,000)$950k-$150k salvage §.7\-:'*.4 |Highline rental/purchase/mobilization (less purchase salvage)1(LS $100,000 $100,000|Moore est. ..5 |Project vehicle crew cabs (purchase less salvage)diesel 21 EACH $30,000 $60,000|Moore w/shipping -$30 k salvage .6 |Project ATV'S (purchase less salvage)diesel 2 |EACH $8,000 $16,000]Moore wishipping -$10k salvage 7 Project crew boat at Hydaburg (lease AP&T boat)1 |EACH $9,000!$9,000/Est.placehoider cost .8 |Project landing craft lease w/operator ($500/trip)200 |TRIP $500.$100,000/Total est.w/lease &operations §by AP&T -9 |Crew boat operation 900 |TRIP $150 $135,000]Est.with operator -10 |Fuel/delivery/storage 1 LS $850,000 $850,000|Adjusted from AP&T Est.for Fuel -11.|Travel for non camp personnel (camp overtiow)1,200}MD $50 $60,000|Moore est. 12 |Contractor Permits/insurance 17 Us $135,000 $135,000]AP&T estimate 13 |Erosion and Sediment Control,Gaging,Turbidity Monitoring 1]is $120,000 $120,000|Moore est. .14 |Erosion and Sediment contro!plan and adminstration 1!LS $50.000 $50,000|Moore est. Subtotal -Ace No.330.2 -Mobilization and Logistics $3,685,000 331 STRUCTURES AND IMPROVEMENTS a Powerhouse and Bypass Vault-1 |Site Clearing &Grubbing 2|ACRE $8,000)$16,000]Area trom drawings unit price trom AP&T y 2 Powerhouse Excavation 1,860]CY $23.00 $41 ,400|Quantity from drawings unit price HDR/AP&T Avg"3 |Powerhouse Site Excavation 3,200}CY $20.00 $64,000]Quantity from drawings unit price HDPYAP&T Avg 2b Powerhouse Backiill (1 inch minus)200{CY $37.00 $7,400{Quantity from drawings unit price HDR/AP&T Avg+5 |Site Work and Drainage 1{LS $15,000 $15,000|Adjusted APAT Estimate 16 |Reinforced Concrete 400|CY $780}oa 000 a ean nn Unit Pace assuming .7_|Pre-Engineered Metal Building (including erection)1,840 |SF $100.00 $18 000 te cetingnon based upon APAT comments &B Fumishings and Fixtures 1 LS $14,000 $14,000|Allowance 3 Heating,Ventilating,Plumbing,and Conduit 1 Ls $19,000 $19,000/HDR and APaT 10 |Grounding Grid 1 LS $5,000 $5,Q00/AP4T Est. ee,+11 [15 Ton Bridge Crane (load tested)1|EA $60,000 $60,000/AP8T Est. Subtotal -Acc No.331 -Structures and Improvements $737,800 332 RESERVOIRS,DAMS,AND WATERWAYS 1 Temporary Diversion pews"4 |Structure Excavation (Blast/Excavate)3,300 |CY $23.00 $75,900|HDR Quantity compared to AP&T Est. Pegs .2 160”Culvert Pipe 3201 FT $190.00 $60,800|Based upon HDR Quantity and AP&T unit costs poe -3 |Temporary Diversion Pumping 1 Ls $20,000.00 $20,000|Moore est.with Feb4 reduction"Hi «*4 |Crushed Rock Backfill 4,000}CY $32.00 $32,000/HDR .+|Temporary Cofferdam 2,000]CY $20.00 $40,000/AP&T Est. bo ft 4G |Sedimentation Pond 1/LS $3,000)$3,000/APaT Est. es.;7 |Lake Mellen Channel Excavaion goo |CY $25.00 $20,O00/AP&T Est. Subtotal Temporary Diversion $251,700, 2 Grouted Rock Dam "A Clearing (inctuding access roads,diversion conduit,etc.)1.5 |ACRE $9,000 -$13,500/HDR est. 2 Excavation 600]CY $23.00 $13,800/HDA quantity AP&T unit price 3 Reintorced Concrete Wall 1151 CY $900 $103,500|HOR quantity AP&T unit price .4 4 |Ungrouted Rock Fill 420}CY $24.00 $10,080}HDR quantity AP&T unit price »Grouted Rock Fill 370|CY $92.00 $34,040/HDR quantity AP&T unit price n:)Pressure Grouting Holes 300]LF $50.00.$15,000/HDR est. Vccviwe.+?|Pressure Grouting 90}CY $600 $54,000]Moore est. Subtotal -Grouted Rock Dam $243,920) Intake Retractable Fish Screen System Intake Screen Inc.Fish Screen System +/LS $650,000 $650,CO0}HDR mig.budget quote plus S&H and markup Screen System installation Labor 1;LS $9,000 $9,000jAP&T Est. Concrete (reinforced,tootings)8t CY $800)$6,400]HDR quantity AP&T unit price Grouted Steel Pipe Supports 1 LS $10,000)$10,000/HOR Est. Subtotal -Fish Screen System $675,400 Cc is/Electrical Building Pre-Eng'd Building (8'x8%x8',insulation,4'wide door,heating)64|SF $100.00 $6,400 |™more with Feb 4 reduction based upon APAT Stab Foundation 10]CY $750 $7,500|HOR quantity AP&T unit price Contro!Building Electrical,Contols,and Instrumentation i}ts $45,000!$45,O00/AP&T Est. Subtotal -Mechanical Building $58,900 REYNOLDS CREEK HYDROELECTRIC PROJECT Opinion of Pr Construction Cost -February 10,2011,Update 2011 20114 Amount CommentsDescriptionQuantity|Unit Price (S$)Quantity/Cost References Vaive Vault A Excavation 270|CY $23.00)$6,210/HDR quantity AP&T unit price2Bedding/Backfill s0]CY $40.00)$2,000|Moore increase unit price 3 Rock Anchors 14]EA $600 $8,400/AP&T Est.4 |Concrete 90]CY $1,450 $130,500|HDR quantity AP&T unit price 5 Hatches and Metals 1 LS $5,000 $5,O000|APAT Est. 6 42°Butterfly Valve and Actuator 1 LS $95,000 $95,000)AP&T Est. 7 Valve Vautt Piping/Mechanical 1 ts $62,000 $62,000/AP&T Est.8 |Valve Vault Electrical 1 LS $22,000 $22,000/AP&T Est. Subtotal -Valve Vault $331,110 Penstock Clearing &Grubbing (40°wide along route)3.2 |ACRE $9,000)$28,800 Earthwork .1|Route Shaping &Contouring 1}LS $50,000 $50,000/Moore est. oo .2|Excavation 6,500}CY $23.00 $149,500j/HDA quantity AP&T unit price ot .3)Structure Excavation for Supports/Biocks 400]CY $125)$50,000/Moore est. woe .4|Bedding 500]CY $30,$15,000|Moore est. eee aus 5)Backfill 1,000]CY $10 $10,000}Moore est.3 |Steel Pipe<1}42"diameter x 0.25"thick wail 265]LF.$230)$60,950/HDR Est.from quotation .2|42*diameter x 0.375"thick wall 2,865]LF.$350 $1,002,750|HDR Est.from quotation -3}42"diameter x 0.5"thick wall 370|LF.$450 $166,500/HDR Est.from quotation .4|Pipe Fabrications/Expansion Joints i LS $170,000 $170,O00/AP&T Est. .5)Access Manways 7)EA $5,000 $35,000/HDR Est.AP&T unit price .6|Vent Pipe 1/ts $5,000 $5,000/Moore est. -7|Shipping and Handling from Seattle 1 LS $150,000 $150,000|Hildenbrand est. "Penstock Supports -1|Fabricated Steel Pipe Supports 110,000 |LBS $2.50 $275,000 |Moore increase unit price .2|Concrete Encasement 120|CY $500 $60,000}Moore increase unit price -3|Saddles,Thrust Blocks 1,100 |CY $950)$1,045,000}Moore increase unit price .4[Type 1 Rock Anchors 34]EA $650)$22,100}HDR quantity AP&T unit price .5|Type 2 Rock Anchors 1,000;EA $200)$200,000/HDR Est. .6|No.11 Grouted Epoxy Rebar Anchors 43)EA $250)$10,750|HDR quantity AP&T unit prica Air Release Valves 3)EA $5,500 $16,500]HDR quantity AP&T unit price A Penstock Installation 1!Highline Setup/Operation 1 LS $150,000 $150,000/AP&T Est. .2|Penstock Installation 3,500}LF $86 $301,000)Install -NOT including welding <3]Penstock Welding 1 LS $120,000)$120,000|Hildenbrand Nat Weiding .4|_Penstock Coating Repair 1 LS $90,000 $90,000/Hildenbrand American Pipeline Coating Subtotal Penstock $4,183,850 Powerhouse Bypass Bypass Piping 1]Ls $90,000 $90,Q000|HDR Est. Bypass Valve 18"isolation Valve 1]EA $52,000 $52,000/AP&T Est. Bypass Sleeve Valve i|EA $250,000 $250,000/AP&T Est. Subtotal Powerhouse Bypass $392,000: Tailrace Tailrace Pipe Excavation 1,500;CY $20.00 $30,000/HDR Est. Backfill 500]CY $10.00)$5,000/Moore est. Bedding 200]CY $40.00)$8,000/Moore est. 54°Tailrace Pipe 380|LF $190)$72,200}HOR Est. Pipe Installation and supports 380]LF $240 $91,200/APaT Est. Outtall Plunge Pool &Rip Rap 1 LS $20,000 $20,000|Moore est. Subtotal Tailrace $226,400 Subtotal -Acc No.332 -Reservoir,Dams,&Waterways $6,363 280) 333 TURBINES AND GENERATORS 3 2.1 5 MW Gilkes Turgo Turbine,Gen,Piping,Vaives,HPU,Spare Parts 1 Ls $1,390,000;$1,390,000|Gilkes quotation plus shipping -owner purchase 2 Turbine/G or Package Acc i 1;LS $25,000}$25,000/AP&T Est. 3 Control Panel and Switchgear 1]LS $370,000)$370,000/AP&T Est. A Battery and Charger 1]LS $5,700 $5,700/APaT Est. 5 Instrumentation 1]/ts $3,000 $3,000/AP&T Est. &MCC -Transformers,Breakers,Panels 1}ls $30,000 $30,000j)AP&T Est. 7 SCADA (including labor)1 Ls $78,000 $78,000}AP&T Est. 8 Turbine/Generator Installation 1;Ls $90,000 $90,000/APaT Est. 9 Control Panel and Switchgear installation 1]LS $45,000 $45,000/AP&T Est.w/HDR adj. 10 Station Battery and Charger installation 1 LS $11,000 $11,000]AP&T Est.w/HDR adj. WM MCC-Transformers,Breakers,Panels installation 1)LS $20,000 $20,000/AP&T Est. 12 Field Testing Commision,Startup,and Acceptance Test 1 LS $90,000 $90,OOOIAP&T Est. Subtotal -Acc No,333 -Turbines and Generators $2,157,700 334 ACCESSORY ELECTRICAL EQUIPMENT 1 |Powerhouse/intake Communications (penstock conduit/wiring)4}LS $40,000 $40,000}Added cost for conduit Subtotal -Acc No.334 -Accessory Electrical Equipment $40,000 ROADS A Powerhouse Access Road 440}LF $200 $88,000/AP&7 Est. -2 |Dam and Highline Access Road 1,480{LF $190)$281,200|AP&T Est. .3 |Deer Bay Road Improvements (7 miles)1]LS $30,000 $30,000/AP&T Est. .4 |Copper Harbor Road Improvements (4 miles)1]tS $45,000 $45,000/AP&T Est. 5 Drainage and intets 1 ts $20,000 $20,000|Moore est. .6 |Lake Mellen Road improvements (2.9 miles)1;LS $40,000 $40,000}AP&T Est. -7 |Bridge (65 feet-long)1]LS $150,000 $150,000}Moore est. 8 |Bridge foundation &removal of diversion 1]tS $25,000 $25,000 Suntotal -Roads $679,200 MARINE ACCESS P|Copper Harbor Marine Access (with dock)1}Ls $200,000 $200,000|HDAYMoore est. 2 |Deer Bay Marine Access i]Ls $50,000 $50,000/AP&T Est. Subtotal -Marine Access $250,000 Subtotal -Acc No.336 Roads and Marine Access $929,200 REYNOLDS CREEK HYDROELECTRIC PROJECT Opinion of Probable Construction Cost -February 10,2011,Update FERC 2011 2011 Amount Comments Acc No Description Quantity |Unit Price ($)Quantity/Cost References 353 SUBSTATION EQUIPMENT AND STRUCTURES 1 Reynolds Creek Switchyard A Foundation and Grounding Grid 1/LS $36,000)$36,000/AP&T Est.w/HDR adj. 2 Structures 1 LS $22,000 $22,000/AP&T Est.w/HDR adj.3 Fencing 250,LF $85.00 $21,250/AP&T Est. 4 Conduits,and Drainage (cil/water separator)1 LS $32,000 $32,000/AP&T Est. 5 Instrument Transformer and Wire 1)LS $22,000 $22,000/AP&T Est. 6 Transformer,6,500 kVA (4.16kV/34.5kV)1)Ls $130,000 $130,000]HDR Est.7 Switches 1;Ls $80,000 $80,000/APAT Est. 8 Miscellaneous (wire,arrestors,connectors)1 Ls $15,000 $15,QO0/APaT Est.Subtotal -Acc No.353 -Substation Equipment $358,250 AP&T Est. 355 TRANSMISSION LINE A Reynolds Creek Powerhouse to Hydaburg 34.5 kV 12|MILE $190,000 $2,280,000/AP&T Est.2 Jumbo Island Crossing 1 Ls $800,000 $800,000/HOR Est.+Moore adj. 3 Communications Cabie (fiber)12]MILE $15,000 $180,000/HOR Est. A Power (along penstock)to Diversion/Intake 1 Ls $90,000 $90,000 AP&T Est.w/HDR adj.Subtotal -Acc No.355 -Tran Line $3,350,000 COST SUMMARY 3301 LAND AND LAND RIGHTS $40,000 330__-2 MOBILIZATION AND LOGISTICS $3,685,000 331 STRUCTURES AND IMPROVEMENTS $737,800 332 RESERVOIRS,DAMS,AND WATERWAYS $6,363,280)333 TURBINES AND GENERATORS $2,157,700)334 ACCESSORY ELECTRICAL EQUIPMENT $40,000 336 ROADS AND MARINE ACCESS $929,200353SUBSTATIONEQUIPMENTANDSTRUCTURES$358,250 355 TRANSMISSION LINE $3,350,000 SUBTOTAL ACCOUNTED FOR CONSTRUCTION COSTS $17,661,230 increased from 10%to cover unknown siteUNACCOUNTEDFORCONSTRUCTIONCOSTS12.5%$2,207,654,conditions,unaccounted tor items,and contingency[SUBTOTAL CONSTRUCTION COSTS +UNACCOUNTED COSTS (rounded)$19,869,000 OTHER PROFESSIONAL SERVICES/ADMIN COSTS Project constr.bonding ($9 million bond per Haida Energy)$80,000 }Haida Energy Quote Hydaburg project management office (rent,supplies,utilities)$60,000}Rent @ $1000/mo Haida Energy administration $100,000|Haida Energy Quote? Project CPA $90,000|Hildenbrand Grant/Adminstration/Reporting/Haida Energy Board $100,000]Hildenbrand Legal,RCA $50,000|Hildenbrand Owner's Insurance (oftice/vehicles/iabiliity/boat/camp/ect)$20,000|t Project Manager salary (80 hrs/mo,9 mo/yr,3 yrs)$280,800]Hildenbrand PM travel allowance ($1500 x 2 trips/mo x 27 mos)$81,000/HDR est. Power study $20,000{Hiidenbrand Geotech test holes with excavator (w/contr.mobilized equip.)$25,000}Moore w/adj. Geotechnical site field exploration and testing (S&W)$200,000}HOR est. Penstack and powerhouse final design (not incid electrical/l&C)$150,000}HDR est. Msc.final design and preparation of contractor bid packages $180,000/HOR est. Final electrical/l&C design (AP&T)$50,000|HDR placeholder est. Field construction surveying $150,000/Moore est. Environmental Compliance Monitoring $120,000!Moore part time ECM Record surveys and maps w/control tidelands lease $15,000}Moore Record drawings,manuals,FERC close-out etc.$60,000 |Hildenbrand Saftey consultant &supplies $34,800 |Hildenbrand On-site constr.inspect/testing (15 days/mo for 27 mo +$50k)$309,200|Moore est. License compliance/permitting (HDR)$150,000}FERC License Compliance Allowance Engineering services during const.(submittals,RFis,site visits)$300,000}HDR est. Penstock welding special inspection and testing $30,000|Hildenbrand Geotechnical consulting during construction (S&W)$50,000]HDR est. Fish and Game tund per ADF&G permit $50,000/Moore est. Reynolds Cr.hydrology studies during const.per ADF&G permit $75,000)ay.costs adj for partial studies (not for screen Fisheries studies during construction per ADF&G permit $50,000|Moore est. SUBTOTAL OTHER COSTS)$2,880,800; TOTAL PROJECT COSTS (Round $22,750,000 REYNOLDS CREEK HYDROELECTRIC PROJECT Owner Budget -Opinion of F le Construction Cost -February 10,2011,Update FERC =2011 2011 Amount CommentsceNocriptionQuantity|Unit Price $)Quantity/Cost References 330 1 LAND AND LAND RIGHTS f tant Cost SeaAlaska Land Lease 1|us $40,000 $40,000};n/ormation provided by Haida Energy on 10/22/2010 Subtotal -Acc No.330.1 -Land and Land Rights $40,000 333 TURBINES AND GENERATORS ere |5 MW Gilkes Turgo Turbine,Gen,Piping,Valves,HPU,Spare Parts 1]Ls $1,390,000!$1,390,000/Gilkes plus shipping -owner purchase Subtotal -Acc No.333 -Turbines and Generators $1,390,000 COST SUMMARY 330.1 LAND AND LAND RIGHTS $40,000333TURBINESANDGENERATORS$1,390,000 SUBTOTAL ACCOUNTED FOR CONSTRUCTION COSTS $1,430,000! UNACCOUNTED FOR CONSTRUCTION COSTS 12.5%$2,207,654|Haida Energy owned contingency SUBTOTAL CONSTRUCTION COSTS +UNACCOUNTED COSTS (rounded)$3,638,000) OTHER PROFESSIONAL SERVICES/ADMIN COSTS Hydaburg project management oftice (rent,supplies,uttlities)$60,000}Rent @ $1000/mo Haida Energy administration $100,000}Haida Energy Quote? Project CPA $90,000]|Hildenbrand Grant/Adminstration/Reporting/Haida Energy Board $100,000]Hildenbrand Legal,RCA $50,000|Hildenbrand Owner's Insurance (office/vehicles/iability/boat/camp/ect)$20,000}Hildenbrand Project Manager saiary (80 hrs/mo,9 mo/yr,3 yrs)$280,800]Hildendrand PM travel allowance ($1500 x 2 trips/mo x 27 mos)$81,000}HDR placeholder est. Power study $20,006|Hildenbrand Geotech test holes with excavator (w/contr.mobilized equip.)$25,000}Moore w/adj. Geotechnical site field exploration and testing (S&W)$200,000]HDR est. Penstock and powerhouse final design (not incid electrical/l&C)$150,000/HDR est. Msc.final design and preparation of contractor bid packages $180,000/HOR est. Environmental Compliance Monitoring $120,000!Moore part time ECM Record surveys and maps w/control tidelands lease $15,000}Moore Record drawings,manuals,FERC close-out etc.$60,000}Hildenbrand Saftey consultant &supplies $34,800|Hildenbrand On-site constr.inspect/testing (15 days/mo for 27 mo +$50k)$309,200|Moore est. License compliance/permitting (HDR)$150,000|FERC License Compliance Allowance Engineering services during const.(submittals,RF is,site visits)$300,000/HDR est. Penstock welding special inspection and testing $30,000}Hildenbrand Geotechnical consulting during construction (S&W)$50,000/HOR est. Fish and Game fund per ADF&G permit $50,000|Moore est. Moore est.costs adj for partial studies (not for screen TOTAL PROJECT COSTS (Rounded) Reynolds Cr.hydrology studies during const.per ADF&G permit $75,000 removal)Fisheries studies during construction per ADF&G permit $50,000|Moore est. SUBTOTAL OTHER COSTS)$2,600,800 $6,239,000) REYNOLDS CREEK HYDROELECTRIC PROJECT Civil Ci Opinion of P:Construction Cost -February 10,2011,Update FERC 2011 2011 Amount Comments Acc No Description Quantity [|Unit Price ($)Quantity/Cost References 330 2 MOBILIZATION AND LOGISTICS 2 Mobilization and demob (civil contractor)1]us $600,000 $600,000|Moore -Costs adjusted at Feb 4 meeting with APAT 3 Camp facilites purchase and operate (less $150k salvage)1 LS $500,000;$500,000|$950k-$150k salvage .:.4 |Highline rental/purchase/mobilization (less purchase salvage}17 =LS $100,000 $100,000/Moore est.5 |Project vehicle crew cabs (purchase tess salvage)diesel 1 |EACH $30,000)$30,000|Moore w/shipping -$30 k salvage 6 Project ATV'S (purchase less salvage)diesel 1]EACH $8,000 $8,000/Moore w/shipping -$10k salvage-10 |FuelVdelivery/storage 1 ts $650,000 $650,000)Adjusted from AP&T Est.for Fuel-11 |Travel for non camp personne!(camp overflow)800]MD $50 $40,000|Moore est.12 |Contractor Permits/Insurance 1]Ls $100,000)$100,000|AP&T estimate-13 |Erosion and Sediment Control,Gaging,Turbidity Monitoring 1)Ls $90,000 $90,000]Moore est.-14 |Erosion and Sediment control plan and adminstration 1]LS $40.000 $40.000|Moore est. Subtotal -Acc No.330.2 -Mobilization and Logistics $2,158,000 331 STRUCTURES AND IMPROVEMENTS J Powerhouse and Bypass Vauit"=4 |Site Clearing &Grubbing 2)ACRE $8,000 $16,000]Area trom drawings unit price trom AP&T7.2 |Powerhouse Excavation 1,800]CY $23.00 $41 ,400|Quantity from drawings unit price HDP/AP&T Avg 3 Powerhouse Site Excavation 3,200]CY $20.00 $64,000|Quantity from drawings unit price HDR/AP&T Avg on .4 |Powerhouse Backfill (1 inch minus)200|CY $37.00)$7,400|Quantity from drawings unit price HDR/AP&T Avg ,5 {|Site Work and Drainage 1]is $15,000 $15,000/Adjusted AP&T Estimate 6 |Reinforced Concrete 400|CY $780 $312,000 a ee each tame P&T welt rice assuming7|Pre-Engineered Metal Building (including erection)1,840|SF $100.00 $184,000)Moore neem based upon AP&T comments .8 |Fumishings and Fixtures 1]LS $14,000 $14,000)Allowance9|Heating,Ventilating,Plumbing,and Conduit 1;=LS $19,000)$19,000}HDR and AP&T|iwilianas,«11 |15 Ton Bridge Crane (load tested)1]EA $60,000 $60,000/AP&T Est. Subtotal -Acc No.331 -Structures and Improvements $732,800) 332 RESERVOIRS,DAMS,AND WATERWAYS "1 'Temporary Diversion a 1 |Structure Excavation (Bias/Excavate)3,300 |CY $23.00 $75,300|HDR Quantity compared to AP&T Est. .2 160°Culvert Pipe 320]FT $190.00 $60,800|Based upon HOR Quantity and AP&T unit costs -3 |Temporary Diversion Pumping a/ts $20,000.00:$20,000!Moore est.with Feb 4 reduction 4 |Crushed Rock Backfill 1,000]CY $32.00)$32,000}HOR 5 |Temporary Cofterdam 2,000|CY $20.00 $40,000|AP&T Est. -6 |Sedimentation Pond 1)Ls $3,000 $3,000/APaT Est. =.7 |Lake Mellen Channel Excavaion 800|CY $25.00 $20,000/AP&T Est. Subtotal Temporary Diversion $251,700 Grouted Rock Dam |Clearing (including access roads,diversion conduit,etc.)1.5 |ACRE $9,000)$13,500|HDR est. 2 Excavation 600]CY $23.00 $13,800{HDR quantity AP&T unit price ".3 |Reinforced Concrete Wall 115]CY $900 $103,500}HDR quantity AP&T unit price 4 Ungrouted Rock Fill 420]CY $24.00 $10,080]HOR quantity AP&T unit price 5 Grouted Rock Fill 370)CY $92.00 $34,040|HDR quantity AP&T unit price 6 Pressure Grouting Holes 300|LF $50.00 $15,000]HDR est. -7 |_Pressure Grouting 90}CY $600)$54,000|Moore est. Subtotal -Grouted Rock Dam $243,920 Intake nertm™4 IR ble Fish Screen Sy 2 Intake Screen Inc.Fish Screen System 1}Ls $650,000;$650,000/HDR mfg.budget quote plus S&H and markup 3 Screen System Installation Labor 1]Ls $9,000 $9,000}AP&T Est. 4 Concrete (reinforced,footings)8|CY $800)$6,400|HDR quantity AP&T unit pricebswiitece.+2 |Grouted Steel Pipe Supports 1 Ls $10,000 $10,O00}HOR Est. Subtotal -Fish Screen System $675,400 Controis/Electrical Building Pre-Eng'd Building (8x8'x6',insulation,4°wide door,heating)64|SF $100.00 $6,400)!"R00"®with Fab 4 reduction based upon AP&T Stab Foundation 10]CY $750 $7,500/HDR quantity AP&T unit price Subtotal -Mechanical Building $13,900 5 Vaive Vault "Ee "S.wt |Excavation 270|CY $23.00)$6,210|HOR quantity AP&T unit price °.2 |Bedding/Backfill 501 CY $40.00 $2,000/Moore increase unit price on .3 |Rock Anchors 14]EA $600 $8,400)AP&T Est. -4 |Concrete 90}CY $1,450 $130,500/HDR quantity AP&T unit price5|Hatches and Metals i]LS $5,000 $5,000|AP&T Est. .&|42°Butterfly Valve and Actuator 1 LS $95,000 $95,000/AP4T Est. .7 |Valve Vautt Piping/Mechanical 1 LS $62,000 $62,Q000/AP4T Est. Subtotal -Vaive Vault $309,110 Penstock Clearing &Grubbing (40°wide along route)3.2 |ACRE $9,000 $28,800) Earthwork .1)Route Shaping &Contouring 1;LS $50,000 $50,000|Moore est. 2)Excavation 6,500]CY $23.00 $149,500]/HDR quantity AP&T unit price .3|Structure Excavation for Supports/Blocks 400}CY $125 $50,000|Moore est. 4|Bedding 500]CY $30 $15,000/Moore est. 5]Backfill 1,000}CY $10)$10,000)/Moore est. 3 |Steel Pipe71}42"diameter x 0.25"thick wall 265 |LF.$230 $60,950}HDR Est.from quotation ..2|42”diameter x 0.375”thick wall 2,865)L.F.$350)$1,002,750}HOR Est.from quotationpes.3|427 diameter x 0.5"thick wail 370)LF.$450)$166,500}HOR Est.trom quotation fies .4|Pipe Fabrications/Expansion Joints 1 Ls $170,000 $170,000/AP&T Est. we .5|Access Manways 7)EA $5,000)$35,000|HDR Est.AP&T unit price Ba 6]Vent Pipe 1]LS $5,000)$5,000|Moore est. een .7|Shipping and Handling from Seattle 1]LS $150,000 $150,000|Hildenbrand est. A Penstock Supports -1|Fabricated Steel Pipe Supports 110,000 |LBS $2.50 $275,000|Moore increase unit price .2|Concrete Encasement 120]CY $500)$60,000}Moore increase unit price .3|Saddles,Thrust Blocks 1,100]CY $950)$1,045,000)Moore increase unit price .4|Type 1 Rock Anchors 34)EA $650)$22,100}HOR quantity AP&T unit price an -5|Type 2 Rock Anchors 1,000}EA $200)$200,000]HDR Est. .se .6|No.11 Grouted Epoxy Rebar Anchors 43|EA $250:$10,750|HDR quantity AP&T unit price ai REYNOLDS CREEK HYDROELECTRIC PROJECT Civil C Opinion of P Construction Cost -February 10,2011,Update FERC 2011 2011 Amount Comments Acc No Description Quantity |Unit Price )Quantity/Cost F cee 5 Air Release Valves 3{EA $5,500 $16,500|/HDA quantity AP&T unit pnce &Penstock Installation s 1|Highline Setup/Operation 1]LS $150,000 $150,000jAPAT Est. .2}Penstock Installation 3,500)LF $86 $301,000]tnstall -NOT including welding .3|Penstock Welding 1]ts $120,000 $120,000|Hildenbrand Nat Welding 4|__Penstock Coating Repair 1]LS $90,000 $90,000]Hildenbrand American Pipeline Coating Subtotal Penstock $4,183,850 a |Powerhouse Bypassxo"4 |Bypass Piping 1}LS $90,000 $90,000]/HDR Est.ae .2 |Bypass Valve 18”Isolation Valve at EA $52,000 $52,000|/AP&T Est.7 ..+3 |Bypass Sleeve Valve 1]EA $250,000!$250,000/AP&T Est. Subtotal Powerhouse Bypass $392,000 8 Tailrace "™<<4 |Taitrace Pipe Excavation 1,500}CY $20.00 $30,000]/HOR Est. :2 Backfill 500 |CY $10.00)$5,000}Moore est. 3 Bedding 200)CY $40.00}$8,000}Moore est. :.2 |54”Tailrace Pipe 380|LF $7190)$72,200jHOR Est. 3 Pipe tnstallation and supports 380|LF $240)$91 ,200}AP4T Est. 4 Outtall Plunge Pool &Rip Rap 1 LS $20,000 $20,000}Moore est. Subtotal Taiirace $226.400 Subtotal -Acc No.332-Reservoir,Dams,&Waterways $6,296,280 336 t ROADS cars|Powerhouse Access Road 440|LF $200 $88,000|AP&T Est.-2.|Dam and Highline Access Road 1,480]LF $190 $281 ,200}/AP&T Est. w 3 Deer Bay Road Improvements (7 miles)1 Ls $30,000)$30,000/AP&T Est. sel:44 |Copper Harbor Road Improvements (4 miles)1)US $45,000]$45,000jAP&T Est. 7: .5 |Drainage and Inlets t/LS $20,000 $20,000|Moore est. -6 Lake Mellen Road improvements (2.9 miles)1 LS $40,000)$40,000)APaT Est. :%(7 |Bridge (65 feet-long)1}LS $150,000)$150,000|Moore est. ee)Bridge foundation &removal of diversion 1 Ls $25,000 $25,000 Subtotal -Roads $679,200 336 2 MARINE ACCESS as |Copper Harbor Marine Access (with dock)1]&s $200,000 $200,000/HDR/Moore est. 2 |Deer Bay Marine Access 1]ts $50,000 $50,000/APAT Est. Subtotal -Marine Access $250,000 Subtotal -Acc No.336 Roads and Marine Access $929,200] COST SUMMARY 330__.2 MOBILIZATION AND LOGISTICS $2,158,000) 331 STRUCTURES AND IMPROVEMENTS $732,800 332 RESERVOIRS,DAMS,AND WATERWAYS $6,296,280 336 ROADS AND MARINE ACCESS $929,200 SUBTOTAL ACCOUNTED FOR CONSTRUCTION COSTS $10,116,280 OTHER PROFESSIONAL SERVICES/ADMIN COSTS |Project constr.bonding ($9 million bond per Haida Energy) Field construction surveying SUBTOTAL OTHER COSTS $186,000 $80,000]Haida Energy Quote $100,000|Moore est. TOTAL PROJECT COSTS (Rounded)$10,296,000 REYNOLDS CREEK HYDROELECTRIC PROJECT Electrica!C Opinion of Probable Construction Cost -February 10,2011,Update FERC 2011 2011 Amount Comments Acc No Description Quantity |Unit Price {$)Quantity/Cost R3302MOBILIZATIONANDLOGISTICS aA Mobilization and demob (electrical contractor}1 Ls $650,000 $650,000/Moore -Costs adjusted at Feb 4 meeting with AP&T .3 |Camp facilites purchase and operate (less $150k salvage)1 Ls $300,000 $300,000)$950k-$150k salvage 5 Project vehicle crew cabs (purchase less salvage)diesel 1 |EACH $30,000 $30,000jMoore wishipping -$30 k salvage 6 Project ATV'S (purchase less salvage)diesel 1 |EACH $8,000)$8,000}Moore wishipping -$10k salvage.7 |Project crew boat at Hydaburg (lease AP&T boat)1|EACH $9,000!$9,Q00/Est.placeholder cost.8 |Project landing craft lease w/operator ($500/rip)200 |TRIP $500 $100,000}Total est.w/lease &operations $by AP&T9|Crew boat operation 900 |TRIP $150 $135,000|Est.with operator-10 |Fuetdelivery/storage 1 Ls $200,000 $200,000}Adjusted from AP&T Est.for Fuel11|Travel for non camp personnel (camp overflow)400;MD $50 $20,000|Moore est.-12 |Contractor Permits/Insurance 1;LS $35,000 $35,000/AP&T estimate-13.|Erosion and Sediment Control,Gaging,Turbidity Monitoring t!LS $30,000 $30,000|Moore est. -14 |_Erosion and Sediment control plan and adminstration 1}LS $10,000)$10.000|Moore est. Subtotal -Acc No.330.2 -Mobilization and Logistics $1,527,000 331 STRUCTURES AND IMPROVEMENTS a Powerhouse and Bypass Vault -10 |Grounding Grid ij LS $5,000 $5 OOOJAP&T Est. Subtotal -Acc No.331 -Structures and Improvements $5,000 332 RESERVOIRS,DAMS,AND WATERWAYS 4 Controls/Electrical Building 3 Control Building Electrical,Contols,and Instrumentation 1 Ls $45,000 $45,OOO|AP&T Est.Subtotal -Mechanica!Buiiding $45,000 5 Valve Vault .||8 |_Valve Vault Electrical 1,LS $22,000 22.000|AP&T Est. Subtotal -Valve Vault 22,000 Subtotal -Acc No.332 -Reservoir,Dams,&Waterways $67,000 333 TURBINES AND GENERATORS 2 Turbine/Generator Package Accessories 1]LS $25,000:$25,000/AP&T Est. 3 Control Panel and Switchgear tT]Ls $370,000 $370,000|AP&T Est. 4 Battery and Charger 1/LS $5,700 $5,700|AP&T Est. 5 Instrumentation 1/Ls $3,000 $3,000}AP&T Est. &MCC -Transtormers,Breakers,Panels 1]Ls $30,000 $30,000/AP&T Est. 7 SCADA (including labor)1]LS $78,000!$78,000|AP&T Est. 8 Turbine/Generator Installation 1)Ls $90,000 $90,000)AP&T Est. 9 Control Panel and Switchgear Installation 1 Ls $45,000 $45,Q00}AP&T Est.w/HOR adj. 10 Station Battery and Charger Installation 1 Ls $11,000 $11,O00/AP&T Est.w/HDR adj. 11 MCC -Transformers,Breakers,Panels installation 11 Ls $20,000 $20,000/APaT Est. 42 Field Testing,Commision,Startup.and Acceptance Test 1 Ls $90,000:$90,000/APAT Est. Subtotal -Acc No.333 -Turbines and Generators $767,700 334 ACCESSORY ELECTRICAL EQUIPMENT 1 Powerhouse/intake Communications (penstock conduitAwiring)1/LS $40,000 $40,000/Added cost for condutt Subtotal -Acc No.334 -Accessory Electrical Equipment $40,000 353 SUBSTATION EQUIPMENT AND STRUCTURES a Reynolds Creek Switchyard 4 Foundation and Grounding Grid 1 Ls $36,000 $36,000|AP&T Est.w/HDR adj. 2 Structures 1]LS $22,000 $22,000/AP&T Est.w/HDR adj. 3 Fencing 250)LF $85.00 $21 ,250]AP&T Est. 4 Conduits,and Drainage (oil/water separator}1 LS $32,000)$32,000/AP&T Est. 5 Instrument Transformer and Wire 1 LS $22,000 $22,000|AP&T Est. 6 Transtormer,6,500 KVA (4.16kV/34.5kV)17 LS $130,000)$130,000/HDR Est.7 Switches 1]Ls $80,000 $80,000/AP&T Est. 8 Miscellaneous (wire,arrestors,connectors)1 ts $15,000)$15.000/AP&T Est. Subtotal -Acc No.353 -Substation Equipment $358,250/AP&T Est. 355 TRANSMISSION LINE A Reynolds Creek Powerhouse to Hydaburg 34.5 kV 12]MILE $190,000!$2,280,000/AP&T Est. 2 Jumbo Island Crossing |LS $800,000)$800,000/HDR Est.+Moore adj. 3 Communications Cable (fiber)12)MILE $15,000 $180,000/HDR Est. 4 Power (along penstock)to Diversion/Intake if Ls $90,000 $90,000/AP&T Est.w/HOR adj. Subtotal -Ace No.355 -Transmission Line $3,350,000 COST SUMMARY 330.2 MOBILIZATION AND LOGISTICS $1,527,000! 331 STRUCTURES AND IMPROVEMENTS $5,000 332 RESERVOIRS,DAMS,AND WATERWAYS $67,000333TURBINESANDGENERATORS$767,700 334 ACCESSORY ELECTRICAL EQUIPMENT.$40,000 353 SUBSTATION EQUIPMENT AND STRUCTURES $358,250 355 TRANSMISSION LINE $3,350,000 SUBTOTAL ACCOUNTED FOR CONSTRUCTION COSTS $6,114,950 OTHER PROFESSIONAL SERVICES/ADMIN COSTS Final electrical/l&C design(AP&T)$50,000{HDR placeholder est. Field construction surveying $50,000}Moore est. SUBTOTAL OTHER COSTS)$100,000 TOTAL PROJECT COSTS (Rounded)|:$6,215,000! REYNOLDS CREEK CONSTRUCTION COST ESTIMATE |[ALASKA POWER &TELEPHONE CO 10/25/2010 WORKORDER COST SUMMARY wo LJ |||Materials Equip Contract |Llabormbr [Labor$w/perdiem [Total Kasidaya __|South Fork RC0914 [MOBILIZATION |||1,690,620 |$_28,855 |§161,000 16269|$831,500 §2,711,975 $2,085,815]$189,836 RCO923 {ENVIRONMENTAL COMPLIANCE EQUIPMT &LABOR 30,050 1,075 100,000 623 49,370 $180,495 $145,382|$28,935 RCOS04 [CONSTRUCTION MANAGEMENT/ADMIN 1,000 |$13,500 .4040)$138,000 $152,500 C0903 [ENGINEERING AND DESIGN 1,000 800 -200 15,500 $17,300 RCO902 [MARINE ACCESS FACILITIES 168,374 1,090 35,000 327 20,130 $224,594 $79,092 RCO911 [ROADS AND ROW 496,850 3,294 :699 41,620 $41,764 $1,522,754}$288,398 RCOSO1 {TRANSMISSION LINE 1,309,490 |$728,031 556,810 8851 454,310 3,048,641 $52,708 RCO900 {DIVERSION STRUCTURE 1,237,140 63,902 :5036)289,019 1,590,061 $847,525,$753,034 RCOS906 |PENSTOCK |2,178,385 91,136 53,000 12599 711,364 3,033,885 $1,819,153}$585,666 RCO90S (POWERHOUSE BUILDING 421,150 14,484 39,500 2512 156,886 632,014 $$67,614]$464,484 RCO907 (POWERHOUSE EQUIPMENT 2,077,169 10,517 8,000 2351 188,150 2,283,836 $1,407,185 |$1,027,292 RCO909 |SUBSTATION AND SWITCHING 238,905 8,221 -1188 82,214 329,340 $_69,918|$38,116 RC0908 |TAILRACE [106,140 7,531 1,000 1143 65,309 179,980 $161,809]$127,711 RC0910 [COMMUNICATIONS :5,700 1,126 :160 11,260 18,086 $49,602 |$618 RCO912 [PERMITTING [+z :100 9,600 9,600 START-UP and TESTING 1,250 4,640 |$:490 46,400 52,290 DEMOBILIZATION 27,850 3,425 |$:600 34250 65,525 SALVAGE $9,991,073 57288 $3,144,876 $15,071,887 $$4.99 |$/hr Labor mn-hr Profit 10%$1,507,189 Kasidaya _[Reynolds ést. Total $16,579,076 58287]57188] WORK ORDER ESTIMATE DETAIL [Task cost MATERIALS Man-hours including travel TOTAL {EQUIPMENT [VEHICLE _|CONTRACT TOTAL MOBILIZATION (WO RCD914}Quentity |Unit Ynit cost rele iC dent |Engineer Trades OT}Laborer LabOT __|Total Man-hr|_per-diem [Labor cost Speciat Light Dollars loadedRates [||Concrete walls so0|/cy B 96 50 Ss 30 45 50 10% vehicles Concrete flat 300)/cy ews |Repower Nektzer 1 port eng $10,500 $1,000 $11,500 10)80)30)4750)475)$16,725 Fitting Out Neitzer i tot $3,000 $3,000 20 5 25 1750 $4,750 Delivery Neitzer 1 trip $2,500 $2,500 40]20 40 20 120 10|6100 500}$9,100 crew boat[[Fitting Out Neitzer 3]lot $2,000 $2,000 10)5 15)1000}100 $3,100 Joetivery Neitzer 1 trip $1,500 $1,500 40 20 60 5 3750 375 500]$6,125 Standby crew boat Neitzer 1]boat $30,000 $30,000 $30,000 Excavators] ]300 class used 1[machine $80,000 $5,000 $25,000 40 49}3000}$88,000t)0)Damp truck 1 tek 1,000 1,000 2,000 10 10)750 = Concrete truck 1]tek 1,000 1,000 12,000 10 10]750)2,750 Mixer truck 3 tek 1,000 1,000 2,000 10 10 750 2,750 Truck Neitzer |tek $15,000 1,000 $26,000 8 4 12 800]$16,800 Fuel truck]1]trk $1,500 $500 $2,000 Oj $2,000 Pickups |Netzer 1]6pk trk $30,000 $1,000 $31,000 20 20]1s00 $32,500 [416 Backhoe $2,500 10 10 750]$750 ATVs (2 used)Neitzer 2 4x4 $3,500 $300 $7,600 16 16 1200)$8,800 Rental Q| [Crane or other equip Neltzer 1 $30,000 $1,000 $32,000.16 16)2200)$32,200 |Rock Driti,Rock Truck,Cat?77?1 125000]20 20 1500]$1,500]$260,600 |VehidesWehicle[Netzer 1 $3,500 $3,500 280 280]15 14750]1475|$19,725 Fue!and lubricants 9 [vehicles Neitzer 1 $21,500 $21,500 40 40|3 2400]$23,900 [Boats Neitzer 1 $35,000 $35,000 80 2400]2480 150[133500]$168,500}$212,125 [Fuel&Maint [Screen plant d $o 10 10 750}$750 T_[rask Cost MATERIALS |Man-hours including travel TOTAL -_FEQUIPMENT VEHICLE |CONTRACT |TOTAL (WO RC0914)Estimator ant!cos ?ater 1s]|Superintendent |Engineer Tradesman Trades OT|Laborer LabOT [Total Man-hr]per-diem |tabor cost Special Light Dollars crusher |rental?$0 40 40]3000]10000}$13,000 Batch plant purchased $0 20 20)1500}$1,500 Welders |3|weider $5,000 1,000 $18,000 20 20]1500}$19,500 Heaters (HN &Rad)1 2,000 $2,000 10 19]750 $2,750Lightsu1,000 $1,000 20 20)1500 $2,500 16"pumps $0 Q|q $0 Tools misc Neitzer 1 $2,000 $2,000 20 20)1500]$3,500 Highline system $500 Yarder Rent locally?1 $240,000 $240,000 80 80)6000}$246,000 Towers design/bulld (2}1 $60,000 $5,000 $65,000 300 300}22500}$87,500basket1$10,000 $15,000 $25,000 120 120]9000 $34,000]$411,000 Neitzer Fl $200,000 $1,500 $101,500 4,000 4000 200000]$301,500Fuel/Oll Neitzer Fl $416,000 $10,000 $426,000 1,300 1300}39000/$465,000 $766,500 |Fuel&MaintStructures||Storage Neltzer 2 $1,500 $3,000 8 f)36 1 1050]$4,050 Powder magazine $0 i 0}$otent1$1,000 $1,000 120 120}9000)$10,000 Welding shed $0 20 20 1509)$1,500 Ternperary equipmt shelter Neltzer 1 $1,000 $1,000 2 24 26 3 1500}$2,500 office Te y $500 $500 20 29 1500]$2,000Jsetupy$1,000 $2,000 $3,000 20 20)1500 $4,500 Jobsite VHF or UHF Radios Neitzer 4 $300 $20 $1,920 20 20)1 1550)$3,470Fuelstorage| [rank]y]$5,000 B00 $5,800 10 10]750)$6,550[ined basin 1 $2,000 200 $2,200 10 10]750)2,950TravelTrailer|Neitzer 5)500 $500 10 B 15 1 1050)1,550 $21,020 [Buildings $0 [Housing FLOATING CAMP OPTION Ifcamp $95,000 '$95,000 16 8 4 1600]160 20000f $116,760 Building repairs repair $5,000 $so0 $5,500 16 16 1200]120}5000]$21,820 Water ja 1 $500 $500 $1,000 20 29 1500)150]$2,650[Supply ¥#20 $100 $500 $60,000 so 500]550|28750)$88,750Sewage|[disposal out $200 $500 $70,000 so S00]550]28750)$98,750 Power I 1 $35,000 $800 $35,800 20 40 60 3500)39,300[Fuei/oil/maint 100|wkly service $60 $10 $7,000 10 300]310 15750)22,750HeatingfuelI[Est 6000 gal $25,000 $800 $25,800 20 20 40 2500]28,300Foodandhousingsupplies1$200,000 $2,000 $202,000 o 5,200 5200]260000}26000;$488,000 $897,080 |Camp OperationConstructioninsuranceSatherye$0 $0 8 a 600]125000]$125,600[$125,600 COMPLIANCE EQI &ABOR (WO RCO913)Fuel/MaintErasionandsedimentcontrotHousing/Foodculverts|Neitzer I]1 lot 2,000 2,000 4,000 10 19}20 4 20]4 68 7 4140 $8,140sittfence|Neitzer Ii lot 8,000 1,000 9,000 20 10 200)50 280 28]19900 $28,900StrawbalebarriersNeitzer3[1 lot $4,000 2,000 36,000 10 20 30 3 1500]7,500SedimentpondsNetzerafitot$500 $200 $700 10 5|30]10 35 Gj 3780 4,480e/Neitzer 1]lot 2,000 $200 2,200 10 100]20 130 13]$300]7,500Streameage|Neitzer 21 lot $4,000 50 >4,050 10 10)1 800}4,850takegage||Neitzer 1/1 fot 2,000 50 2,050 20 20}z 1606]3,650TurbidityNetzer1[tiot 2,000 50 2,050 20 20 z 1600}3,650 plisnce monitor Neitzer 1]1 lot $0 10 10)200]10750 1075]100000,$111,825]$180,495 Compl] ICONSTRUCTION MANAGEMENT/ADMIN (WO ACOS04} On-site staf |I Ic $e C)t)q|$0{Assistant |$0 4000)4000)300)135000)13500 $148,500Prstaf||Neltzer 1 $1,000 $2,000 40 40 3000 $4,000|$152,500 |CMCcsurveying$0 0 Q 0] 'AND DESIGN (WO RCO903} Astaff Skagway _[Neitzer $0 O 0 a $0Kiawock[|Neitzer 1 $500 $500 100 100]10]8000]800 $9,300PortTownsendNeitzer1$500 $500 100 100)7500]$8,000 $17,300 [Contr[As-butlts Neltzer 0]| IMARINE ACCESS FACILITIES (WO RCOS02) [Deer Bay marine access L_]task [Tcost MATERIALS |Man-hours including travel Total fequipmentvenicie jcontract [TOTAL MOBILIZATION [wo Rco314}_|[Estimator Quantity Jolt [Wnitcost |Freight MaterialsCost Engineer Trades OT]Laborer LabOT [Total Man-hr]_per-diem |Labor cost Special Lght Dollars Site clearing and grading Neltzer $000!sq ft 8 10}10]28]1400]140 $1,540 Boat ramp]Neltzer $0 [Grading,rcok and geofabric Netzer 4000]5q ft $1 $4 $6,000 5 10 2 s 22 1175)118)$7,293 [Precast block ramp 20 x 160 Neitzer 80|planks 2x 20"$300 $100 $32,000 20 15|6 15]6 62|3420)342|$35,762 $44,595 [Deer Bay Marine Copper Harbor marine access [Clearing and grading Netzer 20000]sq ft 0 16 40]40}96 10)4500]490]$5,390 Shore Power on float Neitzer q 0 9 ty)$0 Boat ramp]]|0 $0 Grading rock geofabric Neitzer 4000}sq ft $1 $1 $6,000 5 10)2 5 22 4 1275)$7,275 [Armotech Armorflex 28'x122'Neitzer 222)ptanks 2'x 14°$250 $1 $30,622 20 5]15]6 45 i}87 7 4250]$34,872 9 steel driven piles Netzer 9)$500 $100 $5,400 10 10 20 20 2710]35000)$43,110 Dock Float 8'x 38°[Neltzer 304]sq ft $104 $1 $31,920 s EY 5 625;$32,545 Floating walk ramp 8°x 122 Neltzer 976)sq ft $56 $1 $55,632 A S|375 $56,007 Abutment and hinged transition Relzer 40|sq fe $20 $800 )9 $800 $179,999 |Copper Harbor ROADS AND ROW (WO RCOS11) Deer Bay Road (7 mites)[Oridge/cutvert repalrs Slea $200 $1,000 10.16 16 42 4 2230;223 $3,453 {Rd prism repairs $0 9 oj o|$0 Surface repalrs SOO}cy $40 $20,000 i0 16]a 34 4 1990)199)$22,189 Slope $0 C)0 Oo]$0 Repairs and extention to Deer Bay Port $0 $20]5)30,3 1900;190)$2,090 Pioneer Extention for Jumbo Island crossing 3ftet $500 $100 '$600 5 20)25)3 1525]153 $2,278 $30,010 |Deer Bay to fumbo Ad jumbo Crossing to Copper Harbor {4m Inspect Bridges/culverts Alot $0 10 10]20)1710]tl $1,881 Replace 15 Culverts?15})24"culverts $500 $400 $13,500 5 40)5 40)5]95)10)4675)468)$18,643 Re prism repalrs 2 $0 5 20)25)2 1475)148)$1,623 Surface repalrs SO0|cy $40 $20,000 10 16|EJ 34 3 1940}194 $22,134 $44,280 [jumbo to Copper H. access road 450°AS5Olft $175 $78,750 10 10)20)3 1860]186)$80,796 $80,796 Access Lake Mellon road 2.9 ml |2 Inspect bridges and culverts Alot $o 1c 10]20)1710)171)$1,881 Replace 10 culverts?15/24"culverts $500 $400 $13,500 5 40|5 49)3]95)10]4675)468)$18,643 Rd prism repairs 2|$0 5 20)25 2 1475)148 $1,623 Surface repalrs soley $40 $20,000 10 i6|E 34 3 1940)194 $22,134 New extention to diversion 800'800]ft $175 $140,000 20 5 25)3 2130;213)$142,343 Hightine tower rd extention 650"650/ft $150 $97,500 is 5 20)ry 1705)Wi $99,376 $285,999 |Lake Melton Rd [i ;i S0lft $1,000 $150 $92,000 30 5 50)10 SO 10;155)15)8680)$100,680 $100,680 [BridgeI0] LINE (WO RCOS01)0] Phase 1 Poles 19 to 27 iy Survey/stake line hels ijmile $0 LY $-LY}1000}$1,000 Clear ROW]hel:i|mke $0 0)$:15000)0]$25,000 Poles,and Wire h Almile $100,000 $100,006 0 26000}54000)2600)25050)$207,650 Qi to Deer Bay remaind Michelson 16mie $620,000 $620,000 3360)$156,000]$202,500 15600 $295,300 $1,189,400 | pee se oie 1crossing $100,000 $100,000 900]$_37,125|$65,000 3713|$232,500 $438,338 L'} Jumbo Island to Copper Harbor Michelson 14.4 mile $440,000 $440,000 3696)300]$179,400/$341,100 17940}$102,960 $2,081,400 Q| FO cable splicing Netzer 18/OPGW splice $200 $5 $3,690 20 20)360)90)430}36]29970)5000 7997]$41,657|$2,974,445 [T-lne 0; Tolntake || Ci &supports 1 $2 $1 $30,000 45 50]30 sa 30 478 18)9625)963 $40,588 cote i}Neitzer ag00|ft $3 $1 $15,800 40 40|120 30|230]221 16190)1619]$33,609 $74,197 [intake Power OFVERSION STRUCTURE {WO RCOS00) Intake Spec and[intake vatve w/48vdc operator Beste $69,000 $1,000 $70,000 6 24 10 4 10)4 58)|4334 433|$74,767 $74,767 intake Valve [Fish screen Coupe Ljassembly $600,000 $2,500 $602,500 10 20]10 10 50 2 3570)357,$606,427 $606,427 |Fish Screen Construction surveying Allot 10 40 50]4590)459)$5,049 $5,049 |Surveying ]Temporary diversion f:tock Neitzer 4800/cy $5 $1 26,400 20 300)100]100]30)$50]S6|31150]28000)3115)88,665 Culvert 300'x60"+bands Neltzer 320)ft $100 $50 48,000 10 60)20)60)20 170)18;8850}885.57,735 Backfill w/crushed Neltzer SD0)cy $20 12,000 8 20)10)40!20)98 10}4950}495;47,445 iCofferdam|,[Materials Neitzer 2000/cy $15 $30,000 0]0}0]$30,000{Construction Neitzer 100}ft $25 $s $3,000 10 20]4 20 4 58]6 3130 313 $6,443 sed pond Neitzer 1 b $1,000 100}$1,100 5 10 2 10 2 29!3]4565]457]$2,822 L”[task Cost MATERIALS |Man-hours including travel TOTAL [EQUIPMENT |VEHICLE |CONTRACT TOTAL MOBILIZATION (WO RCO924}Estimator |Quantity Ynlcost|Freight MaterlalsCost |Superintendent |Engineer Tradesman [Trades OT]_Laborer labOT __|TotalMan-hr|per-dlem |taborcost_|Special Light Dollars Bridge Soft |Neltzer abridge $55,000 $5,000 $60,000 10 40)a 40 a 106 10 5410)$41 $65,951 Excavate Lake Melien outlet 900|cy $25 $1 $23,400 10 10 30 10 60}6 4260}426]$28,086 |__$231,196 [Temp Diversion -Brig, 800 cy rock Neltzer a00|cy $5 Bi $4,800 20 Ei)20)50 15]165]17]9025]3000]903)17,728 6"Grout holes I 12}hole $200 $20 $2,640 20 20 20 4 20 4 a8 9 5950)2000)595}12,185 ci ion grouting Neltzer Slcy $3,000 $1,000 $20,000 5 20 20 4 20 4 73 7 475]2000]473)27,198 Concrete walt &base Neitzer 122|cy $500 $61,000 40 10 309]100]159]50)650 65]36460]3646]$101,306 Rocktid Neitzer S00|cy $15 $7,500 5 5]20 4 20]ql 38 6 3235)324]$11,059 Grouted Rockhill Neltzer 450|cy $65 $29,250 10 10]40 G 40]a 116]11)6420)642 $36,312]$204,587 [Dam and Spitlway intake Intake base Neitzer 1 $3,500 $3,500 5 5 40)109]40 10 110)11)5805 5B1 $9,886 Intake columns and footings Netzer 8{column $2,000 $2,000 $32,000 10 10 60]R 60]12 164 16 8750]875 $41,625 a building &Neltzer a|building &fnd $25,000 $1,500 $26,500 4 20 30 6 30 6 96 10 5840)584 $32,924 Screen and operator Neitzer $2,000 $200 $2,200 a 30 30 G 70 7 5480 348 $3,228 $92,663 fintake Valve chamber |I Neitzer 40dtcy $10 $1 $4,400 4 20 4 20)4 52 5]2630]263)$7,293 rock anchars Neltzer 14|W11x16'&epoxy 300 20 $4,480 4 19 16 4 16|4 $4 5]3270 327 $8,077 F concrete &sump Neitzer 25}cy 700 50 $18,750 10 5]40)20!80]40;195)20)9930]993 $29,673 Walls w/pipe penetrations Nettzer Boley $800 75,$70,000 40 20]240 120 240 120]780]78 42420)4242 $116,662 Hatches ladder &grating Neitzer tot $2,000 $300 $2,300 4 20 4 a Z 38]q 2130)213)$4,643 42"Valve &0)Neitzer instati $6,000 $1,000 $7,000 4 4 a0]30 60 30 208]20}11084)1108 $19,192 12°Valve &DJ Neitzer Install $800 $100 $900 1S 6]15 6 42 4 2120)212 $3,232 $188,772 [Penstock (solation Val Mechanical Vent Pipe Neitzer 1[12°x100"$4,000 $500 $4,500 4 4 60 40 30 20 158)16 9284]928 $14,712 Bypass Pipe 18°x.25 Netzer B0|feet $30 $4 $2,720 4 4)120]$0)120}50 348 35)18034]1803 $22,587 Tees &Els|Nettzer ilot $20,000 $1,500 $11,500 2 192]19]$11,713 Flanges &Oriflec Neitzer lot $2,500 $500 $3,000 z 192 19 $3,211 Fit jvaive Beste 1]Valve 12°BF Manul $4,500 $150 8 al 1 aig 82 $5,550 $57,742 [Valve House Mechani Electrical Design &Specification APRT \Vatve Vault Electrical | Valve operator 48vdc Berreth 1 5,000 $5,000 6 L}576}58 5,634 [valve auto/off/manual panel |Berreth 1 1,000 $1,000 6]8 14)976)98)2,074 Magnetic flow meters Berreth 2 1,500 $3,000 2 a 10 592 59]3,651 junction box for ac/de &control Berreth Iftot 300 300 4 16 20 1184]118]1,602 tights and jence outlets Berreth ifiot 250 250 4 a 12 784 73]1,212 lights f Berreth y 200 200 2 f)6 392]39 $631 Heater and !Berreth q 300 300 2 4 6 392!39]$731 Conduit,fittings,wire &cable Berreth 1fot 700 700 é 8 14 976 98 $1,774 Conduits and cable to Control BKd_-_[Berreth Tot 850 850 3 ig]24 1568]157 $2575 $19,784 [Valve Vault Electrical [Control building Electrical |ago Berreth 1 $1,250 $1,250 z 4 6 392 39]1,681 lagov &breakers Berreth 1 $800 $800 4 4 3 584 5a]1,442 120/240 &brkrs Berreth 1 $500 $500 4 4 al 5384)58,1,142 4Bvdc battery andrack |Berreth 1 $1,000 $1,000 4 8 12 784 78|1,862 4Bvde battery charger |Berreth q 400 400 2 4 6 392 39 $831 a8vde &breakers Berreth y $800 800 7]4 6 392 39]$1,231 Lights and outlets Berreth iflot 250 250 4 4 8 584]58 892 lights |Berreth 1 200 200 2 4 ij 392 39 631 Heater and i Berreth 1 300 300 z 4 G 392 39 731 Conduit,fittings,wire &cable Berreth 1|tot 700 700 16 16|322 2336]734|$3,270 [Control panel w/PLC &progs Berreth 1 $17,000 $17,000 40 a 43 4240)a4 $21,664 Fish Screen control panel |Berreth $0 §16]22 1376]138)$1,514 Fish Screen hydraulic control panel [Berreth $0 6j 4]10)776)78)$asa Lake level]Berreth 1 850 850 z]a 6 392]33 $1,281 Riches Pond Level Berreth 1 850 850 7 4 6 392]39]$1,281 [Screen Pres DIff Berreth 1 200 200 2 4 6 392 39]632 Wate Berreth 1 150 150 2 4 Ga 392 39]582 Penstack Flow Berreth 1 150 150 z a 10 592]59]801 Bypass Flow Berreth 1 150 150 z Bj 10 592]59]B01 $43,224 [Control Bldg Electrical PENSTOCK (WO RCO906)[Pipe jon 1460°42°x 3/16 61T Coupe 63|ton 2,500 200 {$201,300 6 79 35 4526]453 $206,279 420"42°x1/4 23ST Coupe 2alton 2,500 800 77,550 2 32 3 1742 174]79,466 1260°42°x5/16 887 Coupe Balton 2,500 800 $290,400 E 114 122 6468 647]$297,515 320°42°x3/8_270 Coupe 27{ton 2,500 800 89,100 2 35 37]1942|194]91,236 |$674,496 [Steet Pipe [TASK cose MATERIALS I Man-hours including travel TOTAL feQuipMenT|veHICLe [contract [TOTAL MOBILIZATION (WO RC0914)[Estimator |Quantity pit Yolicost [Frelaht MatecialsCost |Superintendent |_Engineer Tradesman Trades OT}Laborer labOT jTotal Man-hr|per-diem |Labor cost Special Light Dollars F (17 units?)coupe T7]pe $3,200 $600 |_$64,600 a 35 43 2518 252]$67,370 joints t {13 units)Neltzer 13}pc $6,000 $600 $85,800 4 35 39)2134]213 $28,147 1"$155,527 [PipePipeSuProcurement7eeaddsstrap,ett base saz Neitzer 1,500 $80 $69,520 15 4 19)1509)353 $71,180eto12”Neitzer 2,400 $100 |"$22,500 is 4 As]1509)154 $24,160 i2°to 18"|Netzer 2,900 $150 $6,100 15 4 19 1809)1st $7,760 Pipe Brace material 6"sch 40 Neitzer B00/ft $30 $7 $23,600 2 2 150]is $25,765 |__$132,865 [Pipe SupportsHighlinesetup_|_Neltzer 1 $80,000 $5,000 $85,000 409]200 600}69 38000)3800)25000{$151,800 $151,800 [Highline Setup Upper section to Sta.6+00 (Clearing and disposal Neltzer 1 $2,000 $2,000 4 ig 4 24 2 1509]150]1500]$5,150 &cover mat Neitzer 5000]$10 $1 $55,000 20 2 350 150]522 50)32942 3294]$91,236[Concrete Neier 245 iit $300 $50 $50,750 4 2 250 60)216 22 13592 1359]$65,701 Supports (2)<6"Netzer 2 $100 $50 $300 1 20)4 20 al Sa}5 2501]250 $3,051 Support concrete saddle Neltzer 5 $2,800 $25 $14,125 60 10)30 5 Fst)11 S875 saa $20,588MiterJointsprefabbedNetzer4$200 |$200 1,600 4 75 10 30 5 126 13 6809]681]9,090 Miter Joints field welded Neltzer E)$200 $200 1,200 2 30 5 30)5 74|7 3692]369 5,262 Elbow 90 Spe Netzer i $4,000 $1,000 5,000 z 2 30 s 30 |74 8 3742 374 9,116 Joints (2)weld on Netzer 1 $200 $250 $450 2 2 40 1 s 2 63,7 3832 383 54,665 Pipe {iSeax 40)Neltzer soo]ft $33 $6 $23,400 15 is]275 50)100,40 495 so 27365)20000)2737]$73,502 c block concrete Neltzer Tsley $500 $200 $52,500 5 10]79}38 79 35 225 23]12235 1224]$65,959 Horizontal thrust bik concrete Neitzer afteust bik $25,000 $2,000 $78,000 8 al 150 75|150 75 466]47 24718]2472|$105,190[Type 1Rock anchors &spares $1,200 $100 7,800 Fi 4]12]z 12)2 1734 173]9,707FType2#11 anchors 2y $200 $20 4,620 1 1 3 2 4 841 a4 5,545 Manhole (1)I Neitzer $4,000 $1,000 5,000 2 2 40 12 S|2 63 4 3722|378}9,160Vac/Air Valves &Heat Trace Netzer 2 $4,500 $500 $10,000 1 1 16|4 i6|4 1931 193 $12,124]$495,045 [Upper Section InstallHighlinesectiontoSta29+00 (Clearing and disposal |Neltzer 1 $2,000 $2,000 4 ig|4 24)3 1550]155 1500}$5,205[Excavation 63 supports &TB Neltzer 63]$200 5 $6,615 10 10)110 33 82]14)259 26 14075 1408 22,058 15+20 to 26+20 Neltzer 400[cy 50 S $22,000 4 1 40)29]65 7 4246 425 26,671Excavation18+60 to 19460 Neitzer 300lcy 50 s $16,500 4 1 30 15|3021)302 19,82310+60 to 11460 Neitzer 150)50 q $3,250 4 1 15]72 6996 700 15,946Support$o<6"high Neitzer @0jea 100 5 $4,200 20 20 350 160]350)169 1060]106 55920)5592,$65,712é'-17'high Neitzer Sea 150 5 $1,395 5 5 90 20 30 20 230 23]11605 116}|$24,16112'-18'high Neltzer ifea 200 5 $208 1 1 1 4 12 4 34]3 1761]176 $2,142Joints(8)welded in Neitzer 7 200 $10 $1,470 14 14]280]4B 20)3 384]35 22904 2230]526,664Pipe(58eax 40)Neitzer 2320/f $50 Se]$129,920 $8 58 1063]194 387 156 1916]iis[__102198 10220]$242,338MiterJointsprefabbedNeitzer11$200 $10 $2,310 12 R 110]33 82 14 263 26 14417 1442 $18,169VertUpthrustblockconcreteNeitzerz$40,000 $1,000 $82,000 1 1 100]50 100 50 302 30 1567]1567 $93,238[Type 1Rock anchors &spares Neitzer 4 $1,200 $100 $5,200 2 4 8 1 a 1 24]z 1394]139]$6,733[Type 2 rock anchor 80 $150 $50 16,000 4 4]32 a 16)4 68 7 3854 389 20,283VertDwnThrustblackconcreteNeltzer4$12,500 $500 52,000 1 1 100 50 100 50 302 30]15671 1567|69,238[ype 2 rock anchor 36 $150 $20 46,320 4 4 38 9]20 5 a9 B 4484 448 21,252ComboThrustblock|Neitzer 75{cy 3500 $200 52,500 5 10|70 35 7a 35 225 22]12235 1224]65,959PipesupportsCr.crossing Neitzes 2 3,000 $25 $6,050 3 2 40 10 20 5 80 8 4332 439]10,881Manhole|Neitzer G 5,000 $1,000 $36,000 12 2 249]72 30 22|378 38 22792 2279)61,071Blowoffvalve8"|Neltzer 1 1,500 $200 $1,700 1 1 4 1 4 I R i 661]66 $2,427\Vac/Air Vatves&Heat Trace Neitzer 1 $4,500 $500 $5,000 1 i 3 2 8 2 22 2 1351!15)$6,266 |$822,277 |Middte Section InstallLowersection|I [Clearing and disposal |Neitzer 1 $1,000 $1,000 a 64 16 64 16 tea]17]3450]849 $10,3396supportsNeitzer6$50 $100 $900 1 1 22 6 i6|3 ag 5]2586 259 $3,745forpipeNeltzer1$14,000 $100 $14,100 1 1 20 4 s 31]3 1771 177 $16,048Supports ]<6'high Neitzer 3 $100 $5 $315 2 1 30 6 30 Gg 75|al 3766 377 $4,458[concrete saddies Neitzer G $3,000 $25 $18,150 &72 32 36 3 129 13 6815|622 25,647Joints(3)weld on Neitzer 3 $200 $10 $630 6 Gi 120]36 30 6 204 20 11896 1190]13,716Pipeion(400']Neitzer 400 $50 $6 $22,400 15 15|275|Ey 100 40 495 50]27365 2737 52,502CombaThrustblock|Neitzer 75[cy $500 $200 $52,500 5 10 70 35 70)35 225 23]12285 1229 66,014VertUpThrustblockconcreteNeltzerz$40,000 $1,000 $82,000 1 1 100 50 100 50 302 30 1567]1567 99,238[type 1Rock anchors &spares Netzer 4 $1,200 $100 $5,200 2 4]8 1 3 1 24 2 1354 139)$6,733[Type 2 tock anchor 80 $150 $20 $13,600 4 a 32 3 i6 4 6a 7 3894]389]17,883VertOwnThrustblockconcreteNeltzer2$12,500 $500 $26,000 i 1 50 25 59]25)152 15,7921)72 34,713[type 2 rock anchor 4a $150 $50 $3,600 8 8 20 4 20 4 64 é 3748 375 23,723MiterJointsprefabbed(Turga)Neitzer 6 $200 $i0 $1,260 6 G 12 15 4s 8 392,19|10411 1041 12,712 [$347,338 {Lower Section installPowerhousej Reducer,HW pipe &flange Neitzer 32000|tb $2 $1 $33,000 4 z 60 20 30 i0 126 13)6992]699 40,69118"&24"Bypass pipe|Neitzer 3000|Ib $2 $1 $22,500 4 2 80 30 40 15 17]27]9467 947]32,914BypassTeeprefab|Neitzer dea $5,000 600 $5,600 4 2 80 30 40 15)mil 17]9467 947]16,014[Install vault,iso &sleeve valve Neltzer ijea $3,000 500 $3,500 2 1 40}19 40 19 i03|10 5146 515 $9,161Thrustblockconcrete(80cy?)Neitzer BOlcy $500 200 $56,000 5 10]79 35 70 35]225 23]12285 i229 $69,514 L [rask_|J cost MATERIALS Man-hours including travel ToTat [equipment jveHicle [contract |TOTAL (wo rceai4)|{Quantity Ynit MaterlalsCost Engineer Trades OT]Laborer Lab OT _|Total Man-hr|_per-diem [Labor cost Special Light Doltars [__type 1Rock anchors &spares Neitzer 4)$1,200 $100 $5,200 2 4 E 1 B t 4 2 1394]139 36,733 [io Tivpe2 rock anchor 2 $150 $20 $4,080 4 4 io 4 10 4 36|4 2164|216 $6,460 |$181,487 [Po Piping_| Highline demob ]Neitzer 1 $0 10 100)sol 100]50;310)31 16300]1630]25000)$42,930 $42,930 [Highline Demob | Pt SUILDING {WO RCO305) Design (based on turbine selection) Building size and equi locations Coupe 2)Office Sup 5 5 8 40)48 4440)444)4,889 IPEMB spec with craneway Coupe iOffice Sup '5 5 4 24|28]2604)260)2,869 Ground Grid Coupe 1Office Sup.5 18)18)1728)473]1,906 [Coupe 2/Office Sup 0 Buliding Coupe 1Office Sup $5 S 4 120!124)11820)1182)$13,007 Coupe 1Office Sup 5 Ss [Blockouts/Anchors/embeds {Coupe 1)Office Sup 5 S oO q|$5 Thrust Block/Tailrace Coupe iOffice Sup S S iy Ly $5 Conduit slze/locations Coupe Office Sup.5.5 2 36]33]3606)$3,611 Pit grates/ladders Coupe Office Sup 5 6 2 16]18]1686 $1,691 fT,Coupe 1/Office Sup S 5 8 64 nR 6744]$6,749 $34,732 Design site bused,Neltzer ljacre $500 $500 10)40)20)10)3 83]S|5145)515]2500)$8,660 Site prepartion Construction surveyin,Neitzer Afcontract z 100)10}2000)2,110 Drains Catch basins Neitzer 2|Basin $1,500 $1,000 $5,000 4 16]4 3)E}34 4 2014)201)7,215 Retaining walls (rock)Neitzer Alwall $0 4 20]10)34]4 2334)233]2,567 eset |Neitzer t[lot $5,000 $1,000 $6,000 4 16)4 32 10 66 7 3160)316 9,476 Site &Neitzer 4000|cy $10 $1 $44,000 4 16]160)60}4g 15 295]30/17711)4771)$63,482 $84,851 [Powerh Site PEMB Neitzer 1 $70,000 $2,500 $72,500 8 32 40}Ly 3672)367}$76,539 $76,539 |Pre Mig Building Procurement/instafl Bridge crane Neitzer I $40,000 $3,000 $43,000 4 40 20]10]40 20)134 13 8640)864)$52,504 Ground Grid Neitzer Ajlot $1,500 300,$1,800 8g]10!r}10)2 32 3 1958 136 $3,954 embeded Condult Neitzer Ijtot $500 200 $700 L}BO}40 80)40 248!25)13218}1322]$15,240 Grate and ladders Neitzer Alot $2,000 500 2,500 4 15)7 15;7 48 5j 2590)259)$5,349 $77,047 Mechant Bypass vault INeltzer 1jtot $4,000 100 4,100 concrete Neitzer SO0|cy $400 $75 $237,500 20 20)350]150)350)150]1040)105)54670)5467;$297,637 $297,637 Concrete Backfill and grading Neitzer 100\cy $10 1,000 4 20 10)34 4 2250]225)$3,475 PEMB Erection |Neitzer contract $o 40 10 50!28 $360)$36 35000 $40,896 $40,896 [Pre Mig 8idg Erection) a ent Neitzer 100}cy $25 $2,500 10)4 10)4 28 3 1430}143)$4,073 $7,548 |Site Work { POWERHOUSE EQUIPMENT {WO RC0907} (Specify/Procure Turbine Beste 1)Turb/gen.1,379,579 $10,000 |_$1,385,579 40]40)3840)$1,393,419 $1,393,419 |Turbine Gen Package Beste $0 0]0}$0 Gen Terminal Cabinet and NGR Beste 1},Cabinet $10,000 500 $10,500 20 20]1920)$12,420 Lube/b cooling unit,piping &fill Beste Ulot 3,500 300 3,800 12)32)1152 4,952 HPU pipe/fittings and initlal oi fill Beste Ajlot 2,400 200,2,600 12 12 1152]3,752 inlet i i Beste 1)Bolts/Gkts 1,000 150 1,150 8 a 768}1,918 $23,042 [Turbine Gen Accessor} Bypass valves 18"isolation w/actuator Beste 1 $46,000 $1,000 $47,000 16 16|1536}$48,536 Bypass sleeve valve |I Beste 7 $225,000 52,000 $227,000 40 40 3840]$230,840 $279,376 |Bypass Valves {external t Q| Flow]J Berreth 1]$1,500 $1,500 z 2 192|$1,692 Pressure [Berreth fl 250 250 Z 2]392]442 Water Berreth BE!150 150.1 2 36 246 Buitding Berreth 1 150 150 1)Ij 36 246 $2,626 Contral System [ Contcol Panel and Swit Berreth 1 $300,000 $300,000 220 300)420]37800 $337,800 [Statlon Battery |_Berreth T{lot $3,000 $3,000 a 3 768 $3,768 Station Battery Charger Berreth 1 $1,200 $1,200 2 2 192]$1,392 $342,960 |Controls Station Electrical -_| Motor control center Berreth 1 $3,000 $3,000 32)32]3072|$6,072 ISS 4BOv 212kva Berreth 1 $5,800 $5,800 3 2 192]$5,992 Main breaker I Berreth 1 $600 $600 1 1 96]$696 120/240 30 kva Berreth 1 2,500 2,500 1 i 96 2,596 ABO v Berreth 1 2,500 2,500 4 4 384 2,884 220/240 Berreth 1 1,200 4,200 2 2 192)1,392 SS w-hr meter Berreth 1 800 $300 Fy 1 96 $396 Motor starters.Berreth 5 300 1,500 6 6 576)2,076 Building fighting Berreth 6]300 1,800 6 6]576)2,376Building/:pl 'alot $3,000 3,000 8 B 768 3,768 $28,748 Electrical {vise/toots Berreth Alot $1,000 1,000 2 2 192 1,192storagecabinetis)[Berreth 2Hot $600 1,200 Z|2 i192)1,392 Powerhouse desk/chain/file cabinet Berreth Aflor $eso0 $650.2 2]$650 $3,234 Accessor [Task cost MATERIALS Man-hours including travel TOTAL [EQUIPMENT |VEHICLE |CONTRACT |TOTAL MOBILIZATION (WO RCO914)Estimator |Quantity|nit |Vnitcost|Freight isCost |Superintendent |Engineer Tradesman Trades OT]_Laborer labOT _[Tolal Man-hr]per-dlem |Labor cost Special tight Dollars |_|_[Turbine/Generator Mech I fAlign/Neitzer tot $3,500 $500 $4,000 460]200 20)380)37|__28710)2071 $35,581 Lube/bearing cooling unit mechanical 9 I and plumb Beste 7 $500 $50 $550 10 80]80 20)190 18|14830]1483 $16,863 Turbine shutoff valve [Install coord with penstock flange [Beste Fl $500 $50 $sso 10 30 30 8|73 7 6080]608]$7,238 PU Beste 1 $200 $20 $220 20 60]60)16 156 15 12210}1221 $13,651 Conduit and fittings floor t Berreth tflot $3,000 $200 $3,200 24 40)64 6 4604]460)$8,264 $81,597 |Turbine Generator ing Control panel and switchgear | (Cable and wire |i] ISKV Term Cabinet to I $4,000 4,000 is 16)32 3 2486)249)6,735 [eabte |Berreth 240]$9 2,100 4 32 36 3 2134)213 4,447 4/3 conductor $900 3,600 2 16 18 i 1042)104|4,746Conduit&GOOv Wire SS xfmrto (Berreth alot $450 450 2 8 10 1 642 64 1,156 i to Equip Berreth Iftot 750 750 32 32 64 Gj 4972)497 6,219 FC to Gen Berreth ijiot 500 500 16 24 49 3 2886 389]3,675 te to Berreth iliot 200 200 12 12 24 2 1852 185 2,237 TC Switchboard to bypass valves Berreih Alot 100 100 1 22]24 2 1852]135 2,137 $31,353 [Control Panel &Swite [Station Battery &charger [Assemble Rack,batterles &charger __[Nelteer i fot $20 $20 20 20|4 44 a 3000)300 $3,320 Cable ac and battery to charger Berreth Affot $50 $50 2 4 6 El 442 44 536, Battery di switch |Berreth 1 500 500 2 2 4 292 23 821 DC Cable to Berreth I[lot 250 250 2 4 G 1 442 4a 736 DC Pnibrd to HPU and Lube pumps _[Berreth Tot 200 200 z 6 a 1 542 $4 796 DC Pribrd to Inlet valve Berreth Alot 200 200 z 6 a 1 $42 3a]796 OC Pribrd to bypass vaives|Berreth Iftet 200 200 2 4 4]A 4a2|44 686 IDC Pnibrd to switchboard Berreth Aflot 200 200 2 4 i}392;39 Ey $8,323 [Station Battery mcc| Locate and ground Berreth 3 [tot 500 500 4 8 22 Fl 834]83 417 TC to Berreth Ifiot $00 500 4 B 2 Fl 834]83]1,417WiretoHPu|Berreth aflot 200 200 4 6 10]1 734 2B 1,007 Wire to Lube Unit Besreth Ifiot 100 100 4 G 10 1 74 73 $907WiretoHVAC|Berreth iftot 100 200 70 4 G 20)16 2234]723]2,587 Wire &condult to lighting circuits [Berreth Iffot 100 100 50 4 50 104)2 7734 73 8,607 Wire &condult to cre [Berreth Ito 100 100 4 16 20)2 1284]128 1,512 Wire to Oil Water separator Berreth lot 100 100 2 4 G 392 39 $531 $17,958 [MCC instalSCADA|Berreth q $40,000 $200 $40,200 300 300 10]23000]8000)$71,200 $71,200 [SCADA SUBSTATION AND SWITCHING (WO ACO309) Substation/Switchyard design location and layout deste Office Sup 20 20 By 36 44 4 4256 426]$4,702 Coupe 1 [Office Sup 20 20 t)0 $20GroundGrid_|Coupe iOffice Sup 20 20 2 14 16 y 1saq|154 1,728CoupeUOfficeSup2020z262822745]275]3,041ConduitsandracewaysBerrethilot$300 $300 18 16 34 3 2678]268 3,246louBerrethiflor$2,000 $2,000 18 8 26 2 2228]23 4,451 $17,177 Design'Substation Construction [Ground Grid Neitzer tflot $1,500 $300 $1,800 a 19)Z|10)2 32 3 1958 196 $3,954 i C Neitzer Iflot $6,000 2,000 8,000 6 4 30]60]40 30 220}2 12984)1298)$22,282[Getaway and switch Neltzer Ifiot $3,000]1,000 4,000 6 2 20 10]20 19,68 7 3792|379 $8,171Condults&bedding |Neitzer afiat $3,000]1,000 4,000 4 4 120 90]218 22 14534]1453 $19,987Drainage&Oli/Water separtor Neitzer Tfunit $4,000 2,000 6,000 4 2 20 10 20 10)66 5 3542]354 $9,896Fencing75'x 50"Neltzer 250/ft $60 32 $15,500 $0 50]5 4000)409]$19,900 $80,237 ConstructigchyardEqupment |Procure/Install Getaway structure Beste 1/Galv Steel $3,500 $500 $4,000 40}30 a 78 7 6290]629 10,919Craneway?__|Beste 1]Galy Steel $3,500 $500 $4,000 4g 30 3 78 7 6290)629]10,919SMVABerreth1|copper $90,000 $90,000 20 6 24)50 4 3476]348]93,824Switches@erreth1(3 phase $2,500 $2,500 4 n 16 1 1034 103 $3,63735kyCircultSwitcher,complete Berreth 1 $60,000 $60,000 20 G 24]50)4 3476 ET $63,824&wire Berreth Aftot $18,000 $18,000 6 24]30]2 1876 133}$20,064ArrestorsIBerreth3$2,000 $6,000 2 6 ai 492 49 6,541a5kv250kemcuswitches&ximr___[Berreth Iflot $2,500 $2,500 20 2 16 38 3 2642 264 5,406[Bolts and Connectors Berreth Iflot $500 $500 2 a 10)1 642 64 2,206[Skv parallel S60 kem to pwrhs Berreth 7o0|ft $9 $6,125,2|16 18 z 1092 109 7,326bolts&Berreth 4[3 conductor $900 $3,600 F)f 10]fy 682]64)$4,306 |$227,972 [Swi 0 [task |cost MATERIALS Man-hours including travel TOTAL [EQUIPMENT |VEHICLE [CONTRACT TOTAL MOBILIZATION (WO RCO914)Estimator nil Yott Ynit cost Ezelght MaterlalsCost nt |Engineer Tradesman Trades OT|Laborer tab OT [Total Man-hr]_per-diem [Labor cost Special Ught Dollars TAILRACE (WO _RCO308) [Procurement JTalirace Pipe 54°x1/4'Netzer 380|feet $100 $50 $57,000 4 16]20)2 1936 194 $59,130 Construction surveying Neitzer contract 4000)$1,000 ecscf |Neitzer 4s0lft $2 $o $540 4 16 4 24 3 1110}113]$4,761 Pipe Weld joints Neitzer 10[welds $200 350 100]100 EY)600}60)33250 3325)36,575 Netzer 1200|cy $15 $1 15,200 10 10|29 2 1810]181 21,191 Bedding &Cover Neltzer 500/cy $25 12,500 4 60 20 aal 9 5250]$25 18,275 [Above ground supports Neltzer S|concrete pler $2,500 $500 15,000 4 G 100 50 100 sol 310)31 16426 1643)33,069 Pipe pl (10)40°pe Neltzer 10[pipe section $20 $10 $300 10 10]15 5|15)5 60)G 3810]381 $4,491 Perched Ledge Outfall i Neltzer F $1,500 $100 $1,600 2 2 8]2 14 2 992 1000]99 $3,692 jrock wall Neitzer 1 $0 2 G 3 if 1 725 2 $798|$179,980 |[Tailrace COMMUNICATIONS {WO RCO910) [Construction phone/fax/internet ATC tftot $2,500 $100 $2,600 20}$0)70)s|4670)467|$7,737 ]Permanent ATC Ajlot $3,000 $100 $3,100 40,50)90)5]6590]659]$10,349 $18,086 |e 1]$49,590 PERMITTING (WO RC0912)APT/HDR 1 $0 100]109]3600 $9,600 $9,600 [Permitting [Jf [{Tt JSTART-UP s mere vin I[misc equip $1,000 $250 $1,250 $00)30)60 490 40|46400]4640)$52,290 $52,290 [Start up DEMOBILIZATION | LCM &heavy veh vin allot $5,000 $5,000 so 200]50 300]5 17750 1775 24,525 Vehicles iftot $20,650 $20,650 150 150 s 7750}75 29,175 Boats ifiot $2,200 $2,200 50 100]150 8750}875 14,825 $65,525 $7188 $14,941,036 Colleen To:riely_assoc&yahoo.com Subject:FW:Bonding Rates Attachments:image001.png From:Colleen {maite:colieen@insuranceladyak.com] Sent:Monday,October 25,2010 3:10 PM To:riley assoc@yahod.com Subject:Bonding Rates Class B Rates contract at $9,000,000 $100,000 x §25.00 per thousand $2,500.00 $400,000 X S 15.00 per thousand $6,000.00 $2,000,000 X §10.00 per thousand $20,000.00 $6.506,000 xX S 7.50 per thousand $48,750.00 Total Premium is $77,250.00 Kiewitt may qualify for the preferred rates of $10.00 for the first $2.500,000 million of contract value and then the scale changes to $7.00 per thousand for the remainder of the contract balance. Please give me a call if you should have any questions Cali¢en M.Ferris Bond Specialist DL#(907)-373-5273 Fax (907)373-5238 502 E.Park Ave.#2 Wasilla,AK.99654 insurance Reynolds Creek Hydroelectric Project Opinion of Probable Costs Excerpts from Selected Contract Documents Terms and Conditions Related to the Allocation of Contract Cost Risks Introduction This document summarizes excerpted sections from standard HDR contract documents:the Bid Form, Agreement,and General Conditions that relate to accounting for project costs and to the allocation of risks between the Owner and the Contractor.The terms and conditions are based upon the widely used construction document standards as published by the Engineers Joint Contract Documents Committee (EICDC).The purpose of compiling these excerpts from these documents is to provide examples of how risk is allocated between the Owner and Contractor in a typical construction contract.These are only limited excerpted sections that are not intended to either represent the entire content of these documents or to be reused in this form in any contract documents. Selected Bid Form Provisions Related to Bidder Acknowledgements BIDDER has visited the site and become familiar with and is satisfied as to the general,local and site conditions that may affect cost,progress,performance and furnishing of the Work. BIDDER is familiar with and is satisfied as to all federal,state and local Laws and Regulations that may affect cost,progress,performance and furnishing of the Work. BIDDER has carefully studied all:(1)reports of explorations and tests of subsurface conditions at or contiguous to the site and all drawings of physical conditions in or relating to existing surface or subsurface structures at or contiguous to the site (except Underground Facilities)which have been identified in the SUPPLEMENTARY CONDITIONS as provided in Paragraph 4.02A.of the General Conditions,and (2)reports and drawings of Hazardous Environmental Conditions that have been identified in the SUPPLEMENTARY CONDITIONS. BIDDER acknowledges that such reports and drawings are not Contract Documents and may not be complete for BIDDER's purposes. BIDDER acknowledges that OWNER and ENGINEER do not assume responsibility for the accuracy or completeness of information and data shown or indicated in the Bidding Documents with respect to existing Underground Facilities at or contiguous to the site. BIDDER has obtained and carefully studied (or assumes responsibility for having done so)all reasonable additional or supplementary examinations,investigations,explorations,tests,studies and data concerning conditions (surface,subsurface and Underground Facilities)at or contiguous to the site or otherwise which may affect cost progress,performance or furnishing of the Work or which relate to any aspect of the means,methods,techniques,sequences and procedures of construction to be employed by BIDDER and safety precautions and programs incident thereto. BIDDER does not consider that any additional examinations,investigations,explorations,tests,studies or data are necessary for the determination of this Bid for performance and furnishing of the Work in accordance with the times,price and other terms and conditions of the Contract Documents. BIDDER has correlated the information known to BIDDER,information commonly known to CONTRACTORS doing business in the locality of the Site,information and observations obtained from visits to the site,reports and drawings identified in the Contract Documents and all additional examinations,investigations,explorations,tests,studies and data with the Contract Documents. BIDDER has given ENGINEER written notice of all conflicts,errors,ambiguities or discrepancies in the Contract Documents and the written resolution thereof by ENGINEER is acceptable to BIDDER,and the Contract Documents are generally sufficient to indicate and convey understanding of all terms and conditions for performing and furnishing the Work for which this Bid is submitted. Where conflicts,errors,ambiguities or discrepancies have been discovered in or between Contract Documents and/or other related documents,and where said conflicts,etc.,have not been resolved through the interpretations or clarifications by ENGINEER as described in the INSTRUCTIONS TO BIDDERS, because of insufficient time or otherwise,BIDDER has included in the Bid the greater quantity or better quality of Work,or compliance with the more stringent requirement resulting in a greater cost. The Bidding Documents are generally sufficient to indicate and convey understanding of all terms and conditions for performance and furnishing of the Work. Selected Construction Agreement Terms Related to Time,Payment, and Contractor Representations Article 4.CONTRACT TIMES 4.1.Time of the Essence. A.All time limits for Milestones,if any,Substantial Completion,and completion and readiness for final payment as stated in the Contract Documents are of the essence of the Contract. 4.2.{Days to Achieve}{Dates for Achieving}Substantial Completion and Final Payment. 4.3.Liquidated Damages. A.OWNER and CONTRACTOR recognize that time is of the essence of this AGREEMENT and that OWNER will suffer financial loss if the Work is not completed within the times specified in Paragraph 4.2.above,plus any extensions thereof allowedin accordance with Article 12 of the General Conditions.The parties also recognize the delays,expense and difficulties involved in proving in a legal or arbitration proceeding the actual loss suffered by OWNER if the Work is not completed on time. Accordingly,instead of requiring any such proof,OWNER and CONTRACTOR agree that as liquidated damages for delay (but not as a _penalty)CONTRACTOR =shall pay OWNER dollars ($)for each day that expires after the time specified in Paragraph 4.2.for Substantial Completion until the Work is substantially complete.After Substantial Completion,if CONTRACTOR shall neglect,refuse or fail to complete the remaining Work within the time specified in Paragraph 4.2.for completion and readiness for final payment or any proper extension thereof granted by OWNER, CONTRACTOR shall pay OWNER dollars ($)for each day that expires after the time specified in Paragraph 4.2.for completion and readiness for final payment. Article 6.PAYMENT PROCEDURES 6.2.Progress Payments;Retainage. OWNER shall make monthly progress payments on account of the Contract Price on the basis of CONTRACTOR's Applications for Payment as recommended by ENGINEER,during construction as provided in Paragraphs 6.1.1 and 6.1.2 below.All such payments will be measured by the schedule of values established in Paragraph 2.07A.of the General Conditions (and in the case of Unit Price Work based on the number of units completed)or,in the event there is no schedule of values,as provided in the General Requirements. 1.Prior to Substantial Completion,progress payments will be made in an amount equal to the percentage indicated below,but,in each case,less the aggregate of payments previously made and less such amounts as accordance with Paragraph 14.02 of the General Conditions. a.percent of Work completed (with the balance being retainage).If Work has been 50 percent completed as determined by ENGINEER,and if the character and progress of the Work have been satisfactory to OWNER and ENGINEER,OWNER,on recommendation of ENGINEER,may determine that as long as the character and progress of the Work remain satisfactory to them, {retainage will be reduced to {}percent of all of the Work completed to date and for subsequent future progress payments until Substantial Completion.} b.percent (with the balance being retainage)of materials and equipment not incorporated in the Work (but delivered,suitably stored and accompanied by documentation satisfactory to OWNER as provided in Paragraph 14.02 of the General Conditions). Article 8.CONTRACTOR'S REPRESENTATIONS 8.1.In order to induce OWNER to enter into this Agreement,CONTRACTOR makes the following representations: CONTRACTOR has examined and carefully studied the Contract Documents (including the Addenda listed in Article 9.)and the other related data identified in the Bidding Documents. CONTRACTOR has visited the site and become familiar with and is satisfied as to the general, local and site conditions that may affect cost,progress,performance or furnishing of the Work. CONTRACTOR is familiar with and is satisfied as to all federal,state and local Laws and Regulations that may affect cost,progress,performance or furnishing of the Work. CONTRACTOR has carefully studied all:(1)reports of explorations and tests of subsurface conditions at or contiguous to the Site and all Drawings of physical conditions in or relating to existing surface or subsurface structures at or contiguous to the Site (except Underground Facilities)which have been identified in the Supplementary Conditions as provided in Paragraph 4.02A.of the General Conditions and (2)reports and drawings of a Hazardous Environmental Condition,if any,at the Site which have been identified in the Supplementary Conditions as provided in Paragraph 4.06 of the General Conditions. 2.CONTRACTOR acknowledges that such reports and Drawings are not Contract Documents and may not be complete for CONTRACTOR's purposes. 3.CONTRACTOR acknowledges that OWNER and ENGINEER do not assume responsibility for the accuracy or completeness of information and data shown or indicated in the Contract Documents with respect to Underground Facilities at or contiguous to the Site. E.CONTRACTOR has obtained and carefully studied (or assumes risk for not doing so)all reasonable additional or supplementary examinations,investigations,explorations,tests,studies, and data concerning conditions (surface,subsurface,and Underground Facilities)at or contiguous to the Site which may affect cost,progress,or performance of the Work or which relate to any aspect of the means,methods,techniques,sequences,and procedures of construction to be employed by Contractor,including any specific means,methods,techniques,sequences,and procedures of construction expressly required by the Bidding Documents,and safety precautions and programs incident thereto. F,CONTRACTOR does not consider that any additional examinations,investigations,explorations, tests,studies or data are necessary for the performance and furnishing of the Work at the Contract Price,within the Contract Times and in accordance with the other terms and conditions of the Contract Documents. G.CONTRACTOR is aware of the general nature of work to be performed by OWNER and others at the site that relates to the Work as indicated in the Contract Documents. H.CONTRACTOR has correlated the information known to CONTRACTOR,information commonly known to contractors doing business in the locality of the Site,information and observations obtained from visits to the site,reports and drawings identified in the Contract Documents and all additional examinations,investigations,explorations,tests,studies and data with the Contract Documents. I CONTRACTOR has given ENGINEER written notice of all conflicts,errors,ambiguities or discrepancies in the Contract Documents and the written resolution thereof by ENGINEER through issued addendum or addenda is acceptable to CONTRACTOR,and the Contract Documents are generally sufficient to indicate and convey understanding of all terms and conditions for performance and furnishing of the Work.When said conflicts,etc.,have not been resolved through interpretation or clarification by ENGINEER,because of insufficient time or otherwise,CONTRACTOR has included in the Bid the greater quantity or better quality of Work, or compliance with the more stringent requirement resulting in a greater cost;and said greater cost is included in the Contract Price. J.The Contract Documents are generally sufficient to indicate and convey understanding of all terms and conditions for performance and furnishing of the Work. Selected General Conditions Terms Related to Data,Differing Conditions,Adjustments,Costs,and Delays 4.02 Subsurface and Physical Conditions B.Limited Reliance by Contractor on Technical Data Authorized:Contractor may rely upon the accuracy of the "technical data”contained in such reports and drawings,but such reports and drawings are not Contract Documents.Such "technical data”is identified in the Supplementary Conditions.Except for such reliance on such "technical data,”Contractor may not rely upon or make any claim against Owner or Engineer,or any of their officers,directors,members,partners,employees,agents,consultants,or subcontractors with respect to: 1,the completeness of such reports and drawings for Contractor's purposes,including,but not limited to, any aspects of the means,methods,techniques,sequences,and procedures of construction to be employed by Contractor,and safety precautions and programs incident thereto;or 2.other data,interpretations,opinions,and information contained in such reports or shown or indicated in such drawings;or 3.any Contractor interpretation of or conclusion drawn from any "technical data”or any such other data, interpretations,opinions,or information. 4.03 Differing Subsurface or Physical Conditions A.Notice:If Contractor believes that any subsurface or physical condition that is uncovered or revealed either: 1.is of such a nature as to establish that any "technical data”on which Contractor is entitled to rely as provided in Paragraph 4.02 is materially inaccurate;or 2.is of such a nature as to require a change in the Contract Documents;or 3.differs materially from that shown or indicated in the Contract Documents;or 4.is of an unusual nature,and differs materially from conditions ordinarily encountered and generally recognized as inherent in work of the character provided for in the Contract Documents;then Contractor shall,promptly after becoming aware thereof and before further disturbing the subsurface or physical conditions or performing any Work in connection therewith (except in an emergency as required by Paragraph 6.16.A),notify Owner and Engineer in writing about such condition.Contractor shall not further disturb such condition or perform any Work in connection therewith (except as aforesaid)until receipt of written order to do so. C.Possible Price and Times Adjustments: 1.The Contract Price or the Contract Times,or both,will be equitably adjusted to the extent that the existence of such differing subsurface or physical condition causes an increase or decrease in Contractor's cost of,or time required for,performance of the Work;subject,however,to the following: a.such condition must meet any one or more of the categories described in Paragraph 4.03.A;and b.with respect to Work that is paid for on a unit price basis,any adjustment in Contract Price will be subject to the provisions of Paragraphs 9.07 and 11.03. 2.Contractor shall not be entitled to any adjustment in the Contract Price or Contract Times if: a.Contractor knew of the existence of such conditions at the time Contractor made a final commitment to Owner with respect to Contract Price and Contract Times by the submission of a Bid or becoming bound under a negotiated contract;or b.the existence of such condition could reasonably have been discovered or revealed as a result of any examination,investigation,exploration,test,or study of the Site and contiguous areas required by the Bidding Requirements or Contract Documents to be conducted by or for Contractor prior to Contractor's making such final commitment;or c.Contractor failed to give the written notice as required by Paragraph 4.03.A. 5 3.If Owner and Contractor are unable to agree on entitlement to or on the amount or extent,if any,of any adjustment in the Contract Price or Contract Times,or both,a Claim may be made therefore as provided in Paragraph 10.05.However,neither Owner or Engineer,or any of their officers,directors, members,partners,employees,agents,consultants,or subcontractors shall be liable to Contractor for any claims,costs,losses,or damages (including but not limited to all fees and charges of engineers,architects, attorneys,and other professionals and all court or arbitration or other dispute resolution costs)sustained by Contractor on or in connection with any other project or anticipated project. 9.07 Determinations for Unit Price Work A.Engineer will determine the actual quantities and classifications of Unit Price Work performed by Contractor.Engineer will review with Contractor the Engineer's preliminary determinations on such matters before rendering a written decision thereon (by recommendation of an Application for Payment or otherwise).Engineer's written decision thereon will be final and binding (except as modified by Engineer to reflect changed factual conditions or more accurate data)upon Owner and Contractor,subject to the provisions of Paragraph 10.05. 11.01 Cost of the Work A.Costs Included:The term Cost of the Work means the sum of all costs,except those excluded in Paragraph 11.01.B,necessarily incurred and paid by Contractor in the proper performance of the Work. When the value of any Work covered by a Change Order or when a Claim for an adjustment in Contract Price is determined on the basis of Cost of the Work,the costs to be reimbursed to Contractor will be only those additional or incremental costs required because of the change in the Work or because of the event giving rise to the Claim.Except as otherwise may be agreed to in writing by Owner,such costs shall be in amounts no higher than those prevailing in the locality of the Project,shall not include any of the costs itemized in Paragraph 11.01.B,and shall include only the following items: 1.Payroll costs for employees in the direct employ of Contractor in the performance of the Work under schedules of job classifications agreed upon by Owner and Contractor.Such employees shall include, without limitation,superintendents,foremen,and other personne]employed full time on the Work. Payroll costs for employees not employed full time on the Work shall be apportioned on the basis of their time spent on the Work.Payroll costs shall include,but not be limited to,salaries and wages plus the cost of fringe benefits,which shall include social security contributions,unemployment,excise,and payroll taxes,workers'compensation,health and retirement benefits,bonuses,sick leave,vacation and holiday pay applicable thereto.The expenses of performing Work outside of regular working hours,on Saturday, Sunday,or legal holidays,shall be included in the above to the extent authorized by Owner. 2.Cost of all materials and equipment furnished and incorporated in the Work,including costs of transportation and storage thereof,and Suppliers'field services required in connection therewith.All cash discounts shall accrue to Contractor unless Owner deposits funds with Contractor with which to make payments,in which case the cash discounts shall accrue to Owner.All trade discounts,rebates and refunds and returns from sale of surplus materials and equipment shall accrue to Owner,and Contractor shall make provisions so that they may be obtained. 3.Payments made by Contractor to Subcontractors for Work performed by Subcontractors.If required by Owner,Contractor shall obtain competitive bids from subcontractors acceptable to Owner and Contractor and shall deliver such bids to Owner,who will then determine,with the advice of Engineer,which bids,if any,will be acceptable.If any subcontract provides that the Subcontractor is to be paid on the basis of Cost of the Work plus a fee,the Subcontractor's Cost of the Work and fee shall be determined in the same manner as Contractor's Cost of the Work and fee as provided in this Paragraph 11.01. 4,Costs of special consultants (including but not limited to engineers,architects,testing laboratories, surveyors,attorneys,and accountants)employed for services specifically related to the Work. 5.Supplemental costs including the following: a.The proportion of necessary transportation,travel,and subsistence expenses of Contractor's employees incurred in discharge of duties connected with the Work. b.Cost,including transportation and maintenance,of all materials,supplies,equipment,machinery, appliances,office,and temporary facilities at the Site,and hand tools not owned by the workers,which are consumed in the performance of the Work,and cost,less market value,of such items used but not consumed which remain the property of Contractor. c.Rentals of all construction equipment and machinery,and the parts thereof whether rented from Contractor or others in accordance with rental agreements approved by Owner with the advice of Engineer,and the costs of transportation,loading,unloading,assembly,dismantling,and removal thereof. All such costs shall be in accordance with the terms of said rental agreements.The rental of any such equipment,machinery,or parts shall cease when the use thereof is no longer necessary for the Work. d.Sales,consumer,use,and other similar taxes related to the Work,and for which Contractor is liable,as imposed by Laws and Regulations. e.Deposits lost for causes other than negligence of Contractor,any Subcontractor,or anyone directly or indirectly employed by any of them or for whose acts any of them may be liable,and royalty payments and fees for permits and licenses. f.Losses and damages (and related expenses)caused by damage to the Work,not compensated by insurance or otherwise,sustained by Contractor in connection with the performance of the Work (except losses and damages within the deductible amounts of property insurance established in accordance with Paragraph 5.06.D),provided such losses and damages have resulted from causes other than the negligence of Contractor,any Subcontractor,or anyone directly or indirectly employed by any of them or for whose acts any of them may be liable.Such losses shall include settlements made with the written consent and approval of Owner.No such losses,damages,and expenses shall be included in the Cost of the Work for the purpose of determining Contractor's fee. g.The cost of utilities,fuel,and sanitary facilities at the Site. h.Minor expenses such as telegrams,long distance telephone calls,telephone service at the Site,express and courier services,and similar petty cash items in connection with the Work. i.The costs of premiums for all bonds and insurance Contractor is required by the Contract Documents to purchase and maintain. B.Costs Excluded:The term Cost of the Work shall not include any of the following items: 1.Payroll costs and other compensation of Contractor's officers,executives,principals (of partnerships and sole proprietorships),general managers,safety managers,engineers,architects,estimators,attorneys, auditors,accountants,purchasing and contracting agents,expediters,timekeepers,clerks,and other personnel employed by Contractor,whether at the Site or in Contractor's principal or branch office for general administration of the Work and not specifically included in the agreed upon schedule of job classifications referred to in Paragraph 11.01.A.1 or specifically covered by Paragraph 11.01.A.4,all of which are to be considered administrative costs covered by the Contractor's fee. 2.Expenses of Contractor's principal and branch offices other than Contractor's office at the Site. 3.Any part of Contractor's capital expenses,including interest on Contractor's capital employed for the Work and charges against Contractor for delinquent payments. 4.Costs due to the negligence of Contractor,any Subcontractor,or anyone directly or indirectly employed by any of them or for whose acts any of them may be liable,including but not limited to,the correction of defective Work,disposal of materials or equipment wrongly supplied,and making good any damage to property. 5.Other overhead or general expense costs of any kind and the costs of any item not specifically and expressly included in Paragraphs 11.01.A. C.Contractor's Fee:When all the Work is performed on the basis of cost-plus,Contractor's fee shall be determined as set forth in the Agreement.When the value of any Work covered by a Change Order or when a Claim for an adjustment in Contract Price is determined on the basis of Cost of the Work, Contractor's fee shall be determined as set forth in Paragraph 12.01.C. 41.02 Allowances A.It is understood that Contractor has included in the Contract Price all allowances so named in the Contract Documents and shall cause the Work so covered to be performed for such sums and by suchpersonsorentitiesasmaybeacceptabletoOwnerandEngineer. B.Cash Allowances: 1.Contractor agrees that: a.the cash allowances include the cost to Contractor (less any applicable trade discounts)of materials and equipment required by the allowances to be delivered at the Site,and all applicable taxes;and b.Contractor's costs for unloading and handling on the Site,labor,installation,overhead,profit,and other expenses contemplated for the cash allowances have been included in the Contract Price and not in the allowances,and no demand for additional payment on account of any of the foregoing will be valid. C.Contingency Allowance: 1.Contractor agrees that a contingency allowance,if any,is for the sole use of Owner to cover unanticipated costs. 11.03 Unit Price Work A.Where the Contract Documents provide that all or part of the Work is to be Unit Price Work,initially the Contract Price will be deemed to include for all Unit Price Work an amount equal to the sum of the unit price for each separately identified item of Unit Price Work times the estimated quantity of each item as indicated in the Agreement. B.The estimated quantities of items of Unit Price Work are not guaranteed and are solely for the purpose of comparison of Bids and determining an initial Contract Price.Determinations of the actual quantities and classifications of Unit Price Work performed by Contractor will be made by Engineer subject to the provisions of Paragraph 9.07. C.Each unit price will be deemed to include an amount considered by Contractor to be adequate to cover Contractor's overhead and profit for each separately identified item.Work described in the Contract Documents,or reasonably inferred as required for a functionally complete installation,but not identified in the listing of unit price items shall be considered incidental to unit price work listed and the cost of incidental work included as a part of the unit price. D.Owner or Contractor may make a Claim for an adjustment in the Contract Price in accordance with Paragraph 10.05 if: 1.the quantity of any item of Unit Price Work performed by Contractor differs materially and significantly from the estimated quantity of such item indicated in the Agreement;and 2.there is no corresponding adjustment with respect to any other item of Work;and 3.Contractor believes that Contractor is entitled to an increase in Contract Price as a result of having incurred additional expense or Owner believes that Owner is entitled to a decrease in Contract Price and the parties are unable to agree as to the amount of any such increase or decrease. 12.03 Delays A.Where Contractor is prevented from completing any part of the Work within the Contract Times due to delay beyond the control of Contractor,the Contract Times will be extended in an amount equal to the time lost due to such delay if a Claim is made therefore as provided in Paragraph 12.02.A.Delays beyond the control of Contractor shall include,but not be limited to,acts or neglect by Owner,acts or neglect of utility owners or other contractors performing other work as contemplated by Article 7,fires,floods, epidemics,abnormal weather conditions,or acts of God. Time extensions will not be granted for rain,wind,flood,or other natural phenomena of normal intensity for the locality where Work is performed.For purpose of determining extent of delay attributable to unusual weather phenomena,a determination shall be made by comparing the weather for a minimum continuous period of at least one-fourth of the Contract Time involved with the average of the preceding five-year climatic range during the same time interval based on U.S.Weather Bureau statistics for the locality where the Work is performed. B.If Owner,Engineer,or other contractors or utility owners performing other work for Owner as contemplated by Article 7,or anyone for whom Owner is responsible,delays,disrupts,or interferes with the performance or progress of the Work,then Contractor shall be entitled to an equitable adjustment in the Contract Price or the Contract Times,or both.Contractor's entitlement to an adjustment of the Contract Times is conditioned on such adjustment being essential to Contractor's ability to complete the Work within the Contract Times. C.If Contractor is delayed in the performance or progress of the Work by fire,flood,epidemic,abnormal weather conditions,acts of God,acts or failures to act of utility owners not under the control of Owner,or other causes not the fault of and beyond control of Owner and Contractor,then Contractor shall be entitled to an equitable adjustment in Contract Times,if such adjustment is essential to Contractor's ability to complete the Work within the Contract Times.Such an adjustment shall be Contractor's sole and exclusive remedy for the delays described in this Paragraph 12.03.C. D.Owner,Engineer,and their officers,directors,members,partners,employees,agents,consultants,or subcontractors shall not be liable to Contractor for any claims,costs,losses,or damages (including but not limited to all fees and charges of engineers,architects,attorneys,and other professionals and all court or arbitration or other dispute resolution costs)sustained by Contractor on or in connection with any other project or anticipated project. E.Contractor shall not be entitled to an adjustment in Contract Price or Contract Times for delays within the control of Contractor.Delays attributable to and within the control of a Subcontractor or Supplier shall be deemed to be delays within the control of Contractor. REYNOLDS CREEK HYOROELECTRIC PROJECT Civit Contractor Bid ttems FERC Item Unit Amount Work inciuded Acc No_No.Description Quantity Unit Price ($)_In Cost tems _330 MOBILIZATION AND LOGISTICS basr,et Camp setup,oftice,vehicles,equipment, see Pa marine port of i highline ; 1 Mobiization (civil contractor)1 LS $0l"i used),batch plant [if usec,fuel storage,9 coe,icommunications oro 2 $8 million Construction Bond 1 LS $0) 3 Camp fixed daily costs (3 nine month seasons)800 DAY $0]Camp operation tixed daily costs .4 |Per diem camp costs 6,400 |Person Day $0)cooreieranen variable costs,including crew boatvc«6S |Fueldelivery 140,000}GAL $0 6 Surveying,Engineering 1 LS $0/Construction surveying and engineering7ContractorPermits/Insurance 1 LS $0]All contractor obtained permits and insurance8|Erosion and Sediment Control 1 LS $0]Erosion and sediment control measures .Demobilizaiton 1 Ls $0|Demobilization and cleanup Subtotal -Acc No.330.2 -Mobilization and Logistics $0 331 STRUCTURES AND IMPROVEMENTS Powerhouse and Bypass Vault 9 Site Clearing &Grubbing 1 LS $0|Powerhouse,access road,and talirace 10 |Powerhouse Site Excavation 1 Ls $0|Powerhouse site excavation 11 |Powerhouse Structure Excavation 1 LS $0|Structure excavation12|}Powerhouse Backfill (1 inch minus)1 LS $0/Structure backfill ..\Powerhouse and vault area final grading and |18 |Site Work and Drainage 1 LS $0\vainage grading ..F for tailrace,and"14 |Reinforced Concrete 400 cy $0 valve vault |Building,erection,HV,electrical,plumbing,lighting,15 {Pre-Engineered Metal Building {including erection)1 LS $0|bridge crane supports, i ion,doors, jpainting16|Furnishings and Fixtures (Allowance)1 LS $14,000 $14,000}Allowance-..17 |Heating,Ventilating,Plumbing,and Conduit 1 Ls $0}Basic building systems ees,18 15 Ton Bridge Crane {load tested)1 EA $0/Supply,install,and test Subtotal -Acc Noe.331 -Structures and Improvements $14,000 RESERVOIRS,DAMS,AND WATERWAYS Temporary Diversion 19 |Temporary Diversion and Care of Water 1 Ls $0 Penn saa iosetti vernoval,'ees .(Clearing and excavation of channel between Lake20|Lake Mellen Channel Excavaion 800 cy $0,Mellen and Rich's Pond Subtotal Temporary Diversion $0 Grouted Rock Dam All clearing and pi ion of areas for y21'|Clearing (including access roads,diversion conduit,etc.)1 Ls $0jdiversion and conduit,diversion dam,intake,access roads,control building22|Excavation 600 CY $0}Dam excavation and material disposal23|Reinforced Concrete Wall 115 CY $0|Reintorced concrate core wali 24 |Ungrouted Rock Fill 420 CY $0]Quarry,size,transport,and place 25 |}Grouted Rock Fill 370 cY $OlQuarry,size,transport,and place,and grout.«26 |Pressure Grouting Holes 300 LF $0{Place and drill dam cutoff wail grout holesieiicais27|_Pressure Grouting 90 CY $0|Labor and materials for grouting Subtotal -Grouted Rock Dam $0; intake Screen system,concrete footings,pipe supports, 28 |Retractable Fish Screen System 1 Ls $0|grout,baits,rei tootings,"se uae controls,connection to control building Subtotal -Fish Screen System $o . Controis/Electrical Building 5 29 Pre-Eng'd Building,siab,footings 1 Ls $0 insulated nny Uneaten.slab,erection,door,Subtotal -Mechanical Building $0 Valve Vauit ees"30 |Excavation 270 CY $0}Valve vautt excavation ,31 Bedding/Backfill 50 cy $0}Vaive vauit bedding/backiill :Rock Anchors 14 EA $0)|Rock anchors for vault Concrete 90 CY $0|Reinforced concrete tormed in place Hatches and Metals 1 LS $0]installed hatches and metals 42"Butterfly Valve and Actuator 1 LS $0]Vaive,actuatorand accessories Valve Vault Piping/Mechanical 1 Ls $0|All piping and mechanical within the vautt Subtotal -Valve Vault $0! Penstock a 37 «|Clearing &Grubbing (40'wide along route}1.0 Ls $0|Clear and grub penstock route Earthwork Route Shaping &Contouring 1 Ls $0|Preparing the penstock route Excavation 6,500 cy $0|Penstock excavation Structure Excavation 400 CY $0 ion for sup Bedding 500 CY $0]Pipe bedding in place Backiili 1,000 CY $0]Pipe backfill in place Steet Pipe 42°diameter x 0.25"thick wall 265 LF $0]|Lined and coated steel pipe fob Seattle 42°diameter x 0.375"thick wall 2,865 LF $0]Lined and coated steel pipe fob Seattle 42°diameter x 0.5"thick wall 370 LF $O]Lined and coated steel pipe fob Seattle Pipe Fabrications/Expansion Joints 1 LS $O]Al required pipeline fabrications and expansion joints Access Manways 7 EA $0}Penstock access manways Vent Pipe 1 LS $0}Vent pipe in place Shipping and Handling from Seattle 1 ts $0|Shipping pipe from Seattle to jobsite Fabricated steel supports materials,low frictionPenstockSupportsbearings,'arreanon welsing.coatingsShortPipeSupports54EA$0|Stee!pive supports up to 6-teet to pipe CL Medium Pipe Supports 18 EA $0/Steel pipe supports 6.1-ft to 12-4t to pipe CL Tall Pipe Supports 2 EA $0|Steel pipe supports over 12.1-ft to pipe CL Concrete Encasement 120 cy $0/Rei pipeline Saddles,Thrust Blocks 1,100]CY so}eine Pipeline supports and thrust -Type 1 Rock Anchors 34 EA $0|Mechanical rock anchors basta act,56 |Type 2 Rock Anchors 1,000 EA $0|Grouted rock anchors REYNOLDS CREEK HYDROELECTRIC PROJECT Civil Contractor Bid Items FERC item Unit Amount Work included Acc No _No.Description Quantity Unit Price ($)In Cost ttems .57 |No.11 Grouted Epoxy Rebar Anchors 43 EA $O|Epoxy coated grouted rebar anchors actiime.98 |Air Release Valves 3 EA $0]Vaives,vaive enciosures,heat stripping Penstock installation 59 Sta 00+32 to Sta 05+60 1 ts $0|Penstock staging,placing,welding,field lining/coating 60 Sta 05+60 to Sta 30+31 2,620 LF $0|Penstock staging,placing,welding,field lining/coating 61 Sta 30+31 to Powerhouse (approx 34+13 for Turgo)380 LF $0|Penstock staging,placing,welding,fieid lining/coating Subtotal Penstock $0 [Powerhouse Bypass pot freer 7 iB:iping between penstock vaive vault andao62|Bypass Piping 1 LS $0 trace en per -63 |Bypass Valve 18°Isolation Valve 1 EA $0|Bypass isolation vatve in vault |...64 |Bypass Sleeve Valve 1 EA $O]High pressure bypass sleeve vatve and controls Subtotal Powerhouse Bypass $0. Tailrace -65 |Taiirace Pipe Excavation 1,500 CY $0|Tailrace pipe excavation 66 |Backfill 500 cy $0]Pipe backfill 67 |Bedding 200 cy $0)Pipe beading 68 |54°Tailrace Pipe 380 LF $0|Tailrace pipe *68 |Pipe Installation and supports 380 LF $0}Pipe supports and installation ceetatga,70 |Outfall Plunge Pool &Rip Rap 1 Ls 0]Outtall plunge pool and riprap Subtotal Tailrace 0. Subtotal -Acc No.332 -Reservoir,Dams,&Waterways $0 336 ROADS ”"71.|Powerhouse Access Road 440 LF $0|Access road to powerhouse .72 |Dam and Highline Access Road 1,480 LF $0|Access road to dam,intake and highline site -".*73 |Deer Bay Road Improvements (7 miles)1 LS $0!improvements to Deer Bay road 94 |Copper Harbor Road Improvements (4 miles)1 Ls $0|Improvements to Copper Harbor Road ""75 |Drainage and iniets 1 Ls $0}Roadway drainage 76 |Lake Melien Road improvements (2.9 miles)1 LS $0}Improvements to Lake Melian Road i*77 |Bridge (65 teet-long)1 LS $0)Bridge foundation,abutments,and bridge structure Subtota!-Roads $0 336 MARINE ACCESS Pe"<*78 |Copper Harbor Marine Access (with dock)1 Ls $0|Copper Harbor marine access ramp with dock ux,79 |Deer Bay Marine Access 1 LS 0|Deer Bay marine access ramp Subtotal -Marine Access 0 Subtotal -Acc No,336 Roads and Marine Access $0 COST SUMMARY 330 MOBILIZATION AND LOGISTICS.$0 331 STRUCTURES AND.IMPROVEMENTS $14,000 332 RESERVOIRS,DAMS,AND WATERWAYS $0 336 ROADS AND MARINE ACCESS $0 TOTAL CIVIL CONSTRUCTION COSTS $14,000 REYNOLDS CREEK HYDROELECTRIC PROJECT Electrical Contractor (AP&T)Bid Items FERG Unit Amount Work Included Acc No Description Quantity Unit Price ($in Cost Items330MOBILIZATIONANDLOGISTICS eo net of office,vehicles,marine1Mobilization(AP&T)1 us bad transport,communications2Electrical/l&C design (AP&T)1 Ls 3 Field construction surveying 1 Ls 4 Camp and worksite fixed daily costs (3 nine month seasons)600 DAY $0}Prorated share of camp fixed costs 5 Per diem camp costs 3,500 |Person Day $0}Prorated camp per diem costs 6 Project crew boat (lease AP&T boat 3 seasons)3|Season $0|Provide crew boat tor three seasons 7 Project landing cratt lease (3 nine month seasons)3}Season $0|Provide landing craft tor three seasons 8 Crew boat/landing craft operator(s)(3 seasons)3|Season $0|Landing craft lease with operator9FueV/delivery/storage 40,000 GAL $0}Prorated fue!10 |Contractor Permits/Insurance 1 LS SOjAlI ined permits and11|Erosion and Sediment Control 1 Ls $0}Erosion and sediment contro!measures 12 |Demobilization 1 LS $O}D ilization and cleanup Subtotal -Acc No.330.2 -Mobilization and Logistics $o 331 STRUCTURES AND IMPROVEMENTS Powerhouse and Bypass Vault 13 |Grounding Grd 1 LS $0]Supply and install grounding grid Subtotal -Acc No.331 -Structures and improvements $0 332 RESERVOIRS,DAMS,AND WATERWAYS Controis/Electrical Buitding ye ..Supply and install contro!building electrical,controls14|Control Building Electrical,Contols,and instrumentation 1 LS $0)ond instrumentation Subtotal -Mechanical Building $0 Valve Vault |15 |Valve Vautt Electrical i LS $0}Vaive vault and controls Subtotal -Vaive Vault $0) Subtotal -Acc No.332 -Reservoir,Dams,&Waterways $0) 333 TURBINES AND GENERATORS 16 |Provide Turbine/Generator Accessories 1 LS $0 Receive,accept,store,and install turbine system ..it jing provion and il ion of ail required17|install Turbine/Generator Package and Accessories 1 LS $0)accessories (that have not been included in the turbine generator package) 18 |Control Panel,Switchgear,and Battery/Charging System 1 Ls $0 Soster ne and 8 (Complete motor control center,transformers,19 |MCC -Transformers,Breakers,Panels 1 LS $0 breakers,and panels20|Instrumentation and SCADA 1 ts $0|Compiete instrumentation and SCADA sytems 21 Field Testing,Commision,Startup,and Acceptance Test 1 Ls $0 Neca Startup and r Subtotal -Ace No.333 -Turbines and Generators $0 334 ACCESSORY ELECTRICAL EQUIPMENT 22 |Powerhouse/Intake Communications (penstock conduit/wiring)1 LS $OlAdded cost for condult Subtotal -Acc No.334 -Accessory Electrical Equ i $0 353 SUBSTATION EQUIPMENT AND STRUCTURES F i ing grid,fencing, conduits,drainage {incld.ofl water separator),23 |Reynolds Creek Switchyard 1 LS $Oji wiring,main and (wira, connectors) Subtotal -Acc No.353 -Substation Equipment $o 355 TRANSMISSION LINE .Clearing,poles,conductor,structures,24 |Hydaburg (Sta 2+41)to Jumbo Island Crossing (Sta 371+60)1 LS $0|communications cable A Clearing,poles,conductor,structures,25 |Jumbo Island Crossing (Sta 371+60 to 421+23}1 LS $0 communications cable Clearing,poles,conductor,structures,26 |Jumbo island Crossing to Powerhouse (Sta 421+23 to 636+64)1 Ls $0)communications cable 27 |_Erom Powerhouse to Diversion/intake (along penstock)1 Ls $0|Conduit,brackets,conductor,terminals Subtotal -Acc No.355 -Transmission Line $0 COST SUMMARY 330 MOBILIZATION AND LOGISTICS $0) 331 STRUCTURES AND IMPROVEMENTS $0 332 RESERVOIRS,DAMS,AND WATERWAYS $0333TURBINESANDGENERATORS$0 334 ACCESSORY ELECTRICAL EQUIPMENT $0 353 SUBSTATION EQUIPMENT AND STRUCTURES $0 355 TRANSMISSION LINE $0) TOTAL ELECTRICAL CONSTRUCTION COSTS $0 'REYNOLDS CREERHYOROELECTRPROKECT r 7 ;5 Toon ene Curaian wer a EST 7 oe 7 om ae Bn 7 me os oe °ge :a et fo ie ot Wer ce)hae toy Oe __ia Met Aer La Mt fo -ho seer an 'Aipeisiit's chit consravenon sewabitd wer .fabiegi Man ad”Pa ernits ni -- ee2th ARAL ROLEABS OF constaUenenrunenee top 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Licensee has previously informally advised the Commission staff that it was awaiting approval of a $9 million Power Project Fund loan from the Alaska Energy Authority ("AEA”) and,with the October 24,2010 deadline for commencement of construction,was therefore unable to comply with Article 306 Finance Plan deadline of six months prior to construction pending the necessary commitment of funds from AEA.That AEA Board of Directors'approval was given on August 11,2010 and Licensee has proceeded diligently to submit this plan with documentation of such approval.Accordingly,Licensee respectfully requests a waiver of that time deadline to allow the timely consideration and approval of the attached Financing Plan. In light of the October 24,2010 deadline for commencement of construction,we thank you in advance for your cooperation in prompt consideration of and action approving the Project Financing Plan. *Haida Corporation,93 FERC 62,055 (2000). Should you have any questions or require additional information regarding these matters, please contact the undersigned. Sincerely, Haida Energy,Inc. By its coppsel:MAAnaldH.Clarke,Esq. Law Offices of GERSE Enclosures:Project Financing Plan Appendices A-1 through D-2 LAW OFFICES OF GKRSE REYNOLDS CREEK HYDROELECTRIC PROJECT,FERC Project No.11480, FINANCING PLAN J.INTRODUCTION Haida Corporation received a license from the Federal Energy Regulatory Commission ("FERC”or "Commission”)on October 24,2000 for the Reynolds Creek Hydroelectric Project,FERC Project No.11480 ("Project”).The Project license was amended by Commission order issued on December 10,2009 to provide for the installation of a single 5.0 mega-watt (MW)turbine generating unit.”On January 6,2010,the Commission issued an order approving thetransferofthelicensetoHaidaEnergyInc.("Haida Energy”) 1.1 The Commission Mandate Article 306 of the License states the following: Article 306.At least six months before the start of project construction,the licensee shall file with the Commission,for approval,three copies of a project financing plan.The plan must show that the licensee has acquired the funds,or commitment for funds,necessary to construct the project in accordance with this license.The licensee shall not start any project construction,land-clearing,or land-disturbing activities that are inseparably associated with the project (other than those required for subsurface site exploration) before the project financing plan is approved. Il.FINANCING REQUIRED The cost of the Project as described in Haida Corporation's August 1,2008 application for amendment of license to FERC on November 25,1997 was $11,700,000.The total cost for construction of the Project is now $17,245,000.The cost estimate was compiled by Haida Energy's consultant,HDR.The detailed cost estimate includes $4,309,129 of costs incurred to date (fully funded with equity with the exceptions of $120,000 from an early Federal grant and a $100,000 State of Alaska grant),and is as follows: 'Haida Corporation,93 FERC 62,055 (2000). ?Haida Corporation,129 FERC {62,190 (2009). 3 Haida Energy,130 FERC §62,012 (2010). Recon/Permitting &Design/Prelim Design $2,120,000 Final Design/Surveying/Final Permits 2,000,000 Construction Construction Management $500,000 Mobilization 700,000 Access Facilities 1,000,000 Diversion Structure 1,000,000 Penstock 3,000,000 Powerhouse 4,000,000 Transmission Facilities 2,500,000 Completion 300,000 13,000,000 Power Sales Agreement/Regulatory 125,000 $17,245,000 As described herein,Haida has secured financing in the amount of $18,429,130,and has an estimated excess of funds of $1,184,130. I.FINANCING PLAN 3.1 Federal Financing Department of Energy On April 30,2009,Haida Corporation applied for a Department of Energy ("DOE”) Renewable Energy and Energy Efficiency in Indian Country grant,Funding Opportunity Number:DE-PS36-09GO99014.This grant is for the amount of $1,120,000.On August 12, 2009,Haida received a letter from DOE informing it that Haida's application had been accepted for negotiations leading to an award.This letter is attached as Appendix A-1 and the application is attached as Appendix A-2.For further information on this grant,the Commission may contact Ms.Lizana Pierce,Merit Review Committee Chairperson with DOE,at (303)275-4727. 3.2 State Financing Alaska Energy Authority Grant Haida Energy has been authorized by the Alaska Energy Authority ("AEA”),and approved by the Alaska State Legislature,for grants totaling $4 million as described and included in the confirmation letter provided by the Executive Director,AEA,designated as Appendix B-1.The first grant is for $2 million authorized under the Renewable Energy Fund in Round I.This grant has been authorized and the award to Haida Energy is in process.The application for the Renewable Energy Fund grant (without attachments)is included as AppendixB-2.*The AEA list of grant allocations is included as Appendix B-3.The second grant by the AEA was authorized for $2 million and awarded to Haida Energy on November 24,2008.As noted in Appendix B-1,the AEA is in the process of amending the grant to accurately reflect the 'For the Commission's convenience,the lengthy attachments are omitted as part of this filing.Similar modifications have been made on other appendices.Haida Energy will be pleased to provide the Commission with complete copies immediately upon request. proposed activity by Haida Energy.The 2008 Alaska State Legislature approval of these grants is attached as Appendix B-4. Alaska Energy Authority Loan Haida Energy applied for a $9 million loan for the Project from the AEA,which has been specifically authorized by the Alaska State Legislature.See Appendix C-1 for the bill text and legislative history,HCS SB 301 (RLS).The bill was signed by the Governor on June 14, 2010.The loan application,which is attached in Appendix C-2,was approved by the AEA Board at their August 11,2010 meeting.Documentation of AEA Board final approval is included in Appendix C-3. Alaska Energy Authority,Denali Commission Grant On January 20,2009,Haida Corporation received a grant from the AEA,Denali Commission for $100,000.The application is attached as D-1]and the grant authorization and invoice are attached in Appendix D-2. 3.3 Equity Investor Financing Haida Energy has $4,089,130 of private equity financing for the Project.This amount represents costs incurred to date and financed through equity contributions of the Haida Energy, Inc.and its shareholders,Haida Corporation and Alaska Power &Telephone Company. IV.Summary Haida Energy has obtained a total of $4.1 million dollars in grants for the construction of the Project.Additionally,Haida Energy has obtained an additional $9 million loan from the AEA,which is has been authorized by the legislature and approved by the AEA Board.The Commission license states that "[t]he [finance]plan must show that the licensee has acquired the funds,or commitment for funds,necessary to construct the project in accordance with this license.”With this plan and documentation,Haida Energy respectfully submits that it has adequately demonstrated that it has the commitment for funds up to $18 million for ProjectconstructionconsistentwithrelevantCommissionprecedent.”This amount exceeds the estimated $17 million that Haida Energy estimates thatis needed for Project construction. LIST OF APPENDICES I.Appendix A-1-August 2009 DOE Grant Letter AcceptanceAppendixA-2-April 2009 DOE Grant Application | Appendix B-1 -June 8 2010 Letter from AEA to HaidaAppendixB-2-September 2008 AEA Renewable Energy Grant Fund AplicationAppendixB-3 -AEA Grant Allocation (Round I) Appendix B-4-2008 Alaska Legislative Appropriations Approval ! Appendix C-1 -AEA Loan,Bill Text and Legislative History,HCS SB 301 (RLS) Appendix C-2 -October 2009 Application for AEA Power Project Fund Approval >See,e.g.,Gustavus Electric Company,Falls Creek Hydroelectric Project No.11659,Letter Order (March 28, 2006),http://elibrary.ferc.gov/idmws/common/opennat.asp?fileID=10991803 Appendix C-3 AEA Board Approval of Power Project Fund Loan Appendix D-1 -February 2008 AEA Denali Commission Application (Preconstruction) Appendix D-2 -January 2009 Denali Commission check,letter,grant authorization Appendix A-1 - August 2009 DOE Grant Letter Acceptance Department of Energy Golden Field Office 1617 Cole Boulevard Golden,Colorado 80401-3305 August 12,2009 Vincent Jameson Chairman of the Board Haida Power,Inc. P.O.Box 89 Hydaburg,AK 99922 Dear Chairman Jameson: SUBJECT:Application Submitted Under Funding Opportunity Announcement Number DE-PS36-09G099014,Entitled "Renewable Energy and Energy Efficiency Deployment in Indian Country',Application Title:Reynolds Creek Hydroelectric Project Evaluation of your application received in response to the subject Funding Opportunity Announcement has been completed.After a careful review,|am pleased to inform you that your application has been selected for negotiations leading to an award.You will benotifiedinthenearfuturebyarepresentativefromthisofficeiffurtherinformationis needed to clarify and supplement your application,in order for an award to be finalized. During fiscal year 2008,this office implemented a new electronic,paperless procurement system called STRIPES.Upon implementation of STRIPES,ALL organizations currently doing or wanting to do business with this office MUST BE registered with the Central Contractor Registration (CCR)and with FedConnect.Asa result,it is imperative that you read and follow the instructions provided in the document entitled "CCR and FedConnect Registrations”at https:Jhon.eere-pmc.energy.gov/Forms.aspx. Your organization must register with FedConnect to receive your award documents.It is imperative that you register as soon as possible.More information is available athttps:/Awww.fedconnect.net/FedC onnect/PublicPages/FedConnect_Ready Set _Go.pdf.Questions pertaining to registration for FedConnect should be directed by e-mail to support@FedConnect.net or by phone to FedConnect Support at 1-800-899-6665. On behalf of the Department of Energy,|would like to express my appreciation of your interest and participation in the Tribal Energy Program and look forward to working with you. Federat Recycling Program &Printed on Recycled Paper Vincent Jameson -2-August 12,2009 Any questions can be addressed to me at (303)275-4727 or lizana.pierce@qo.doe.gov. Sincerely, Merit Review Committee Chairperson cc:Mike Stimac,Project Manager HDR Engineering,Incorporated 500 -108th Avenue NE,Suite 1200 Bellevue,WA 98004 Appendix A-2 - April 2009 DOE Grant Application Renewable Energy and Energy Efficiency Deployment in Indian Country Funding Opportunity Number:DE-PS36-09G099014 CFDA Number:81.087 Topic Area 3:Construction of Renewable Energy Power Projects PROJECT:Reynolds Creek Hydroelectric Project LOCATION:Prince of Wales Island,Alaska OWNER:Haida Power,Inc.,a Joint Venture between Haida Corporation,Inc.and Alaska Power Company Business Point of Contact:Technical Point of Contact: Vincent Jameson Mike Stimac Haida Corporation HDR Engineering,Inc. P.O.Box 89 500 -108"Avenue NE Hydaburg,AK 99922 Suite 1200 Phone:(907)285-3721 Bellevue,WA 98004 Fax:(907)285-3944 Phone:(425)450-6330 vjameson@excite.com Fax:(425)453-7107 mike.stimac@hdrinc.com April 30,2009 Reynolds Creek Hydroelectric Project Table of Contents Section I:Goals and ObDjectives.........cccssssssseccccsessececssnnssscccens 1 Project OVEFVIEW .........cceeeeeccceceeeesseeeseeseveneeceeecnerseenssnaenenseeeeeeeeeeeeesesesssesssneeseeeess 1 Project Management Plan ..............:essscseseecesceeeeseeeetereeeeaeeaeeaeeaeeseesetaeeneraeeseeaees 1 U.S.Department of Energy Funding ............cc eeeeeeeccececeeseeeeessesseeeesenteeteteees 1 Time for Reynolds Creek...cecccsccccesssnneeeeeecneeeeeresenenseeceseessneeeeeseeessnseersonnees 2 Section Il:Project Description and Implementation Plan.....2 Project DESCTIPTION ............cccccceeeeeeeeeeeneneenseneeeeteneesecsenensenecaeeseseeneceeterenteeesenaaeaeas 2 Dam Intake ...........ccc ccccccceecceececeenececeeaeeseaenaeeaeaeaaaseesceeeusreeeeeeeeeeeeeeseseeeeseneeseaea 2 PO@NStOCK .........ccccceeessececececneccececccceeseeeeeeeecsusneesncesssegececeseeseterteeereeteecereeseseseeeaea 3 POWEINOUSE......cc cessesssesessceseseseseecenenencuceccenceceeeeseseneneeseesesaeaceeeueusseeseseeenseeees 3 TAIITACE oo...eee cecceseseccceceeeeceeaenenseesaeaeeeeseerereeeeereetesereeeeeceeseeeseeeneceaaenanesanoneenooes 3 Transmission Line to Hydaburg/Switchyard ................cceeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee 3 ACCESS ROAdS.......ccccccscesssscssnssssessssesseseneseceeeetetecseencnenseeteeeeeeeseeeeeeeeeeseseseeeseeon 4 Existing Energy System .000......ccecesesssssseseeneesesseesseaeueuseeassesaeseesenssseseaeeneessens 4 Basic Configuration.............:.:ccccceeeeeeceeececeerereereeeeneerensensensseaeasesaeasaaeaccesansnsagens 4 Existing Energy Resources Used .00....ec eceecescseeseeeeeeeeseesesessssesereeeesenseeesees 6 Availability of Renewable RESOUICE ...........eeeeteseeeeeeeeeeteeeeneeeeseeeeseseeneseseanaass 6 Renewable Energy Technology to be Installed 0...eee eeeeecessenseeeeeenteeeeees 7 Renewable Energy Technology Specific to Location ...0....0.eessseeeeeeeeeeee 7 Optimum Capacity 00...ceeceeeeeessseceereeesceserssssuseeesesessesetesesensecegscuenseneenense 7 Anticipated Capacity Factor...eeccssssssessseesesseseesseseessereessenseeesessesecsnaeees 7 Anticipated Annual Generation 200.0000...cecceeeeccceneesesesneeeseeeseceesseneesseseeeees 7 Anticipated Barriers ............:::ccccccccccesssessennsesseeeessessceeseuenssesessseessensaneeneeeseeees 7 Basic Integration Concept...ccecesssecesseeseeseseenseeenseneeeeeeeessneeseesseseaeeeeees 7 Delivery Methoduu...cece eeceeeeeesessececesnsneeenscesensnsaeeeneeesseaeeseeeeseseeseeesensaeeaeens 8 Business Sustainability..............ccssccccccsssncceceseeresseesseeeeeesssseeereesesesssuanssensnseeesees 8 Section Ill:Environmental Considerations ...........cseccssseseesecees 8 Regulatory/Permitting...........::ccsscsessscesesesssscesssseusseeseseesesenseseeseesaneessesensesenseeeens 9 FERC License Compliance .0.0.......ce eccesesecceeesecsessecereeusenssnsneseneseusnseeeeseneesneeess 9 DE-PS36-09GO099014 i April 30,2009 Reynolds Creek Hydroelectric Project Section IV:Roles,Responsibilities, Resources and Capabilities................:::sssessseeesseresssscssnsenessessenenees 10 Land OWNESSNID ........ccccccccceceeeccceeereccecnececaeceeaaeeaeececeaceeeeeeaeeaseneaeeesstseseteeseeees 10 Alaska Power &Telephone/Alaska Power Company.............::::ssssssssssssessesseees 10 Haida Corporation,INC.0.0...ccesssesesssreeesseeessereeessnssecseesecsseeseseeasesseesenseeeeenes 11 HDR Engineering,INC.........cece esceceeeceseeneeeeeseeneetesssssuausesesseeeensuesenseesueneeeeaees 11 Project Financing ............:eceeesseesessseessseeevsseeersnerevesseceeseeseasaseeeseasensenseeeeesssees 12 Section V:Project Activities and Timing ............ccssesssesesesees 14 DE-PS36-09G099014 li April 30,2009 Reynolds Creek Hydroelectric Project Merit Review Criteria Discussion Section I:Goals and Objectives Project Overview The Reynolds Creek Hydroelectric Project ("Reynolds Creek”or the "Project”) is a 5-megawatt hydroelectric resource to be constructed on Prince of Wales Island,Alaska,approximately ten miles east of Hydaburg.The Project will interconnect with the existing transmission grid on the island and will be used by the residents and businesses of Craig,Klawock,Hollis,Hydaburg,Thorne Bay, and Kasaan.In addition,once the interconnected grid is expanded to Coffman Cove and Naukati in 2009,those two communities will also directly benefit from Reynolds Creek.The Project will be constructed and owned by the Haida Power,Inc.,a Joint Venture between the Haida Corporation,Inc.,and Alaska Power Company (APC),the local electric utility on Prince of Wales Island and a subsidiary of Alaska Power &Telephone (AP&T).Haida Power will be a utility regulated by the Regulatory Commission of Alaska (RCA). Project Management Plan Lead project management of Reynolds Creek lies with Mr.Todd Tew,Chief Financial Officer of the Haida Corporation,Inc.,and Mr.Robert Grimm,President and CEO of AP&T/APC.The two bring the financial and construction experience required to successfully complete the Project within the scope,schedule,and budget as described herein.Mr.Tew is a Certified Public Accountant and is well experienced in managing public funds.Mr.Grimm has been with AP&T for 36 years,and through his leadership,several other hydroelectric projects have been constructed and brought on line in Southeast Alaska.Assisting them are the technical staff at AP&T,HDR Engineering,Inc.(lead consultant),and several specialty sub-consultants (Pentec -fisheries,Sentec surveying,and Shannon &Wilson -geotechnical/seismic). Haida Corporation considers Reynolds Creek to be a long-term investment. Hydroelectric projects that are properly operated and maintained can continue to generate clean (green)energy indefinitely.Additionally,Reynolds Creek will provide employment opportunities for the Haida people both during construction and operation.Haida Power's return on its equity investment will be regulated by the RCA.Benefits resulting from receipt of grant monies will be passed on to theratepayersonPrinceofWalesIsland. U.S.Department of Energy Funding The U.S.Department of Energy (DOE)previously evaluated Reynolds Creek in 1996/1997 and awarded a $2,925,000.00 grant to Haida Corporation under DE-PS36-09G099014 1 April 30,2009 Reynolds Creek Hydroelectric Project instrument no.DE-FC07-971D13424.Payment amounts were received for $50,000.00 and $70,000.00 associated with the approval of the Project Management Plan by the DOE and receipt of the FERC License,respectively. However,because Hydaburg was not yet integrated with the electrical grid on Prince of Wales !sland and the electrical load growth in Hydaburg was minimal, Haida Corporation chose to delay construction of the Project and relinquished the remaining $2,805,000.00 of the DOE grant in 2003.Since that time,Haida Corporation has maintained the FERC License and the other approvals that were received and continued to monitor the need for new electrical generating resources on the island. Time for Reynolds Creek Hydaburg is now connected to the electrical grid on Prince of Wales Island,new communities are being added to the electrical grid as noted above,and oil prices as high as $150.00 barrel have been experienced.As a result,AP&T/APC has urged Haida Corporation to move ahead with the construction and operation of the Project and,in fact,will have a 25 percent equity share of Haida Power. Final design of the Project is nearing completion and site preparation activities are planned for mid-2009. The time has come to make the Reynolds Creek Hydroelectric Project a reality. Section Il:Project Description and Implementation Plan Project Description The Reynolds Creek Hydroelectric Project will be a 5-megawatt electrical generating facility located approximately ten miles east of Hydaburg.Annual energy production during an average water year is estimated to be 19.3 million kilowatt-hours,subject to usability in the area load.The principal Project components are as follows: Dam/Intake A diversion will be constructed near the outlet of Rich's Pond,a small sub-basin at the outlet of Lake Mellen.The spillway crest of the dam will be at elevation 876 fmsl.The diversion structure will be grouted riprap with a concrete core cutoff wall.The crest length of the structure will be approximately 28 feet and the section will act as a weir with uncontrolled overflow when the lake is above elevation 876 fmsl.The backwater from the dam will inundate Rich's Pond and interconnect to the existing surface elevation of Lake Mellen. The intake structure will include a fish screen.A steel transition piece will connect the intake to the penstock.A small valve house will be located immediately downstream of the intake.The valve house will house the penstock shutoff valve and operator as well as an uninterruptible power supply to ensure fail-safe operation of level contro!elements and flow sensors. DE-PS36-09G099014 2 April 30,2009 Reynolds Creek Hydroelectric Project A bypass pipe will pass directly through the center of the diversion structure. This bypass pipe will provide uninterrupted flow to the bypass reach downstream of the diversion.The bypass pipe will be oversized for the required flows.The inlet of the bypass pipe will be protected by a bar structure to prevent debris from entering.The outlet of the bypass pipe will be equipped with either an orifice plate or valve which will be used to regulate discharge flows. Penstock An approximate 3,200-foot-long welded steel penstock will convey water from the intake to the powerhouse.The penstock will have a diameter of 42 inches corresponding to a maximum flow rate of 90 cfs.The penstock will be of above- ground construction on simple saddle supports.The penstock will have an epoxy lining and coating to provide corrosion protection.Thrust blocks will be provided at changes in alignment and grade as well as at the powerhouse.The penstock will have a leak detection system installed which will automatically close the intake pipeline shutoff valve in the event that a leak occurs. Powerhouse The powerhouse will be located in plan at the approximate location of the anadromous barrier of Reynolds Creek.The powerhouse will sit on an excavated bench at or about elevation 110 fmsl,which is approximately 20 feet above the ordinary high water mark of Reynolds Creek.The actual design elevation will be determined once geotechnical investigations are completed during mid-2009 in conjunction with final design. The powerhouse will be an insulated,pre-engineered metal building on a concrete slab foundation.The powerhouse will contain a single 5 MW horizontal impulse turbine/generator set,flywheel,inlet piping,guard valve,switchgear,and controls.Centerline of the turbine will be at approximately elevation 115.0 fmsl. Tailrace A pipe and tailrace channel will return project flows back to Reynolds Creek as near as possible to the anadromous barrier.The pipe and excavated tailrace channel will extend about 80 feet from the powerhouse back to Reynolds Creek. It is proposed to have the tailrace return to Reynolds Creek at the base of the falls where the creek daylights from the canyon at the approximate location of the base of the existing log jam at about elevation 90 fmsl.The tailrace will return flow over a perched ledge to act as a barrier to fish migration into the tailrace. The tailrace location is approximately 50 feet downstream of the location of the anadromous barrier identified by the agencies.This location was selected because it would return the water to the creek with the least amount of construction-related impacts to the stream. Transmission Line to Hydaburg/Switchyard The switchyard at the powerhouse will consist of a pad-mounted disconnect switch and a pad-mounted step-up transformer.An overhead 34.5 kV transmission line will follow the access road from the powerhouse and existing DE-PS36-09G099014 3 April 30,2009 Reynolds Creek Hydroelectric Project logging roads along the edge of Copper Harbor north along Hetta Inlet. Approximately 3.3 miles from the powerhouse,the transmission line will make an aerial crossing of Hetta Inlet via Jumbo Island.The line will then follow the existing road to a point approximately 1.4 miles northeast of the town of Hydaburg where it will connect with an existing powerline.Total length of the transmission line will be approximately 10.9 miles.Except for the aerial crossing of Hetta Inlet,the poles would be designed as tangent line structures on about 300 foot centers.Design of the line will also incorporate the latest raptor protection guidelines.Collision avoidance devices will be installed on the line at appropriate locations to protect migratory birds. Access Roads A limited amount of new access road will be needed to construct the Project. The major landowner,Sealaska Corporation,constructed much of the road system when the area was logged.It is estimated that less than 3000 feet of new road will be required to access both the powerhouse site and the diversion site.Access roads constructed in conjunction with the Project will be of the same design as the primary logging roads. Additional details can be found by reviewing the 40%-level drawings in the Design and Engineering File. The Project is being designed to accommodate increased storage in the future that would allow for better matching generation with load requirements.This feature is not felt to be warranted at this time but can be added as loads increase. Existing Energy System Basic Configuration The power system on Prince of Wales Island is comprised of two "areas”-the interconnected grid and the non-interconnected area.Within the interconnected grid there are five communities:Craig,Klawock,Hollis,Hydaburg,Thorne Bay, and Kasaan.Generation ts primarily from two hydroelectric resources,Black Bear Lake and South Fork,with diesel generation used for supplemental requirements. Black Bear Lake and South Fork provide most of the electrical generation on Prince of Wales Island.However,current load levels require supplemental diesel generation,and this use is increased during dry water years or in years with significant freezing conditions.A cold storage facility is now being constructed in Craig,further increasing the need for diesel generation.Reynolds Creek will eliminate the need for most,if not all,of the supplemental diesel requirements for a number of years. Financial benefits to the ratepayers will accrue through the near elimination of diesel costs and the related costs of diesel plant operations.Fuel costs in the DE-PS36-09G099014 4 April 30,2009 Reynolds Creek Hydroelectric Project interconnected grid averaged approximately $3.22/gallon for the first eight months of 2008,reaching a high of $4.08/gallon in July.At an average fuel efficiency of 12.7 kWh (sold)/gallon,this equates to $0.254/kWh of fuel costs that will be displaced. As a regulated utility,Haida Power will pass the benefits of grants directly on to the ratepayers.Detailed projections of financial benefits to the consumers can be found in the Draft Plan of Finance included in the Study and Assessment File. Benefits from Reynolds Creek are not limited to quantifiable financial benefits. Power users will also benefit from the increased stability in the cost of power as well as an increase in reliability of the electrical system.All residents on the island and in the surrounding area will benefit from the increased use of clean energy production.Several letters of support from the community are included in the Statement of Commitment and Cost Sharing File. Currently,the non-interconnected area includes Naukati,Coffman Cove,and Whale Pass,each electrically isolated.Generation to these three villages is provided from diesel generation at each location.AP&T will be extending the interconnected grid to Naukati and Coffman Cove in 2009 so that the ratepayers will gain access to hydro resources on the island.Thus,Reynolds Creek has the potential for allowing nearly the entire Prince of Wales Island to have 100 percent renewable energy generation. A summary of the installed generation on the Prince of Wales Island is provided in the following table. Fuel Name/Location Interconnected aerial wy) Hydro Black Bear Yes 1 4,500 Hydro South Fork Yes 1 2,300 Diesel Craig Yes 6 6,835 Diesel Thorne Bay Yes 2 1,075 Diesel Kasaan Yes 2 180 Diesel Hollis Yes 1 250 Diese!Hydaburg Yes 3 1,010 Diesel Coffman Cove No 3 855 Diesel Naukati No 3 483 Diesel Whale Pass No 3 295 DE-PS36-09G099014 5 April 30,2009 Reynolds Creek Hydroelectric Project Existing Energy Resources Used Although the installed capacity of APC's existing hydroelectric resources are greater than the peak demand of the interconnected grid,diesel generation is required due to water sometimes not being available for generation.Icing conditions also curtail/decrease hydro generation.Electrical generation on Prince of Wales Island since the beginning of 2006 is summarized in the following table.South Fork became operational in late 2005. Annual Generation (MWh) ..tsolated Load CentersPeriodinterconnectedGrid(All Diesel) Black South Total .Coffman .Whale Bear Fork Hydro Diesel Total Cove Naukati Pass 2006 19,382 5,156 24,538 2,008 26,546 902 502 340 2007 20,315 6,961 27,276 243 27,519 944 528 298 2008 15,101 6,559 21,660 4,654 26,314 677 376 216 Reynolds Creek will be fully incorporated with the other hydro resources so that the renewable resources will be dispatched as an integrated system.Reynolds Creek is also lower in altitude than the other two hydroelectric projects and should not experience icing problems during the winter months.Therefore,it is expected that the Project will eliminate the need for essentially all diesel generation on the interconnected grid.When the grid is expanded to Coffman Cove and Naukati,that diesel generation will also be eliminated. Availability of Renewable Resource Streamflow data was recorded by the USGS at two locations on Reynolds Creek. USGS gage no.15081995,which was located near the outlet of Lake Mellen and had a drainage area of 5.2 square miles,operated from July 1982 through September 1985.USGS gage no.15082000,which was located just downstream of the proposed powerhouse site and had a drainage areas of 5.7 square miles,operated from June 1951 through September 1956.An eight year period for the Project was obtained combining the flow records of these two gages.It was determined that the estimated average annual flow of Reynolds Creek at the point of diversion is 57 cfs.The average monthly flows and annual flow duration curve are shown in the Resource Assessment File. Haida Corporation intends to re-establish the gages in 2009 and filed a Gaging Plan in compliance FERC License Article 411 on April 29,2009. DE-PS36-09G099014 April 30,2009 Reynolds Creek Hydroelectric Project Renewable Energy Technology to be Installed Renewable Energy Technology Specific to Location The Project will be a conventional hydroelectric project.Hydroelectric technology is well developed,and provides most of the renewable energy generated in the world in general,and Southeast Alaska in particular.The Project will utilize the abundant rainfall and steep topography afforded by the Reynolds Creek basin to generate renewable energy.Other potential hydroelectric sites exist in the area but are much smaller than Reynolds Creek and would have significantly less energy potential.Tidal generating technology may be applicable to the area but is considered too experimental and expensive to compete with Reynolds Creek. Wind,biomass,wave,and other renewable technologies are not suitable to the area. Optimum Capacity When the Project was originally investigated,Hydaburg was not interconnected with the Prince of Wales Island transmission grid.Thus,the Project was initially planned as a 1.5-megawatt facility with expansion to 5.0 megawatts when Hydaburg became interconnected.Because Hydaburg is now interconnected and the electrical load on the island has increased,the Project will be developed at the full licensed capacity of 5.0 megawatts. Anticipated Capacity Factor Studies performed by HDR Engineering,Inc.,indicate the annual capacity factor is expected to be approximately 44 percent initially,eventually increasing to more than 90%. Anticipated Annual Generation -19,300,000 kWh Anticipated Barriers -None Basic Integration Concept The Prince of Wales Island electrical system is already hydro-based with diesel backup.Integrating another hydro project with the system will not present any difficulties.The Power Sales Agreement between Haida Power,Inc.,and APC will specify that APC will purchase at least 6 million kwh of Reynolds Creek energy on a fixed payment basis.Thus,there will be no economic incentive to not dispatch Reynolds Creek,and the Project will be fully integrated into the system.Dispatch of the three hydro resources on the island will essentially be as follows: 1.Minimum flow requirements per Black Bear Lake's licensing requirements 2.South Fork (run of river with no storage) 3.Minimum purchase requirements (6 million kwh)from Reynolds Creek DE-PS36-09G099014 7 April 30,2009 Reynolds Creek Hydroelectric Project 4.Remaining energy from Black Bear Lake 5.Remaining energy (13.1 million kwh)from Reynolds Creek. Delivery Method Reynolds Creek will be interconnected to the grid with a 10.9-mile,34.5-kV transmission line that is considered part of the Project and included in Project costs. Business Sustainability APC,as the local utility that will operate,maintain,and dispatch Reynolds Creek into the transmission grid,has participated in design activities to achieve a practical,functional project and to facilitate long-term operations. Responsibilities of Haida Power,Inc.,and APC will be documented in an Operations and Maintenance Agreement currently being developed. Once Reynolds Creek is operating,APC's obligation to operate and maintain the Project will be central to the sustainability of Reynolds Creek.APC's payment obligations remain in effect until loads grow and the Project generates additional revenues.At prescribed times,payment obligations shift to Haida Power in phases.Details are presented in the Memorandum of Understanding (MOU) between Haida Corporation,Inc.,Haida Power,Inc.,Alaska Power Company,and Alaska Power &Telephone,included in the Agreements File. APC currently owns and operates two other hydro resources on Prince of Wales Island and four other hydro resources in southeast Alaska ranging in age from 2 - 13 years.Operations of Reynolds Creek can easily be absorbed by its crews and equipment. A number of regulatory agencies will also monitor operations and can dictate certain actions,if required.These agencies include the Federal Energy Regulatory Commission (FERC),Regulatory Commission of Alaska (RCA), Alaska Department of Fish &Game (ADF&G),Alaska Department of Natural Resources (ADNR),Alaska Energy Authority (AEA),NOAA Fisheries,U.S.Fish &Wildlife Service (USFWS),and the Corps of Engineers (Corps). Section Ill:Environmental Considerations Reynolds Creek has undergone a thorough environmental review by the FERC and other federal and state agencies.All known environmental issues have been addressed.As a result,a Commissioner-Level Final Consistency Determination was issued by the State of Alaska,Office of the Governor,Office of Management and Budget,Division of Governmental Coordination on July 23,1999,and the FERC issued the License for the Project on October 24,2000.The licensing process included the preparation of an Environmental Assessment to achieve compliance with the National Environmental Policy Act,included in the Resource Assessment File. DE-PS36-09G099014 8 April 30,2009 Reynolds Creek Hydroelectric Project Recent additional detailed field investigations have been conducted in support of final design of the Project and in preparation for the start of construction.These activities have included coordination with the FERC,ADF&G,ADNR,NOAA Fisheries,and the USFWS.No new issues have been identified. Regulatory/Permitting The following major permits/approvals have been received to construct,operate, and maintain the Project subject to certain conditions: Federal Energy Regulatory Commission License (FERC Project No. 11480) Coastal Zone Consistency Determination No.AK 9902-06JJ from the State of Alaska,Office of the Governor,Office of Management and Budget,Division of Governmental Coordination Fish Habitat Permit FG-00-I(POW)-0018 from the Alaska Department of Fish and Game Corps of Engineers Permit No.2-950127 from the Department of the Army,U.S.Army Engineer District,Alaska The following major permitting actions are in process and have yet to be completed: Easement from the Alaska Department of Natural Resources for the transmission line crossing of Hetta Inlet pending determination of the final routing of the line.It is anticipated that final versions of the applications for this permit and the temporary permits for barge facilities in Deer Bay and Copper Harbor will be submitted to the ADNR no later than August 2009. Water rights from the Alaska Department of Natural Resources for use of water from Lake Mellen pending receipt by Haida Corporation from Sealaska of a possessory interest in the property where the water is to be used (See Sealaska September 8,2008,letter in the Environmental Analyses and Approvals File). FERC License Compliance Articles of the FERC License require Haida Corporation to file for approval certain environmental plans,as well as design drawings,specifications,and reports.HDR has prepared seven of the plans and has submitted them for review by various state and federal agencies.Following receipt of agency comments, they were submitted to FERC. The remaining plans are in various stages of development and will all be submitted to FERC by September 2009.The design drawings,specifications, and reports are currently being developed by HDR and will be submitted to DE-PS36-09G099014 9 April 30,2009 Reynolds Creek Hydroelectric Project FERC for approval when complete.The proposed construction schedule includes sufficient time for obtaining FERC approval of these items. Section IV:Roles,Responsibilities,Resources and Capabilities Land Ownership The Project will be on both Haida Corporation and Sealaska land.(See the map in the Resource Assessment File.)Sealaska has proposed a set of fees,and an agreement between Haida Power and Sealaska is now being negotiated around that fee structure.Roles,Responsibilities,Resources and Capabilities Alaska Power &Telephone/Alaska Power Company Alaska Power &Telephone (AP&T),parent company of Joint Venture partner Alaska Power Company (APC),will be the primary construction firm.In the last 14 years,AP&T has completed four hydroelectric projects in Southeast Alaska: e Black Bear Lake Project,4.5 MW,Prince of Wales Island,1995 e Goat Lake Project,4.0 MW,Skagway,1998 e South Fork Project,2.0 MW,Prince of Wales Island,2005 e Kasidaya Creek Project,3.0 MW,Skagway,2008 For the first two of these projects,AP&T managed the civil works construction by contractors and constructed most of the mechanical and electrical works with its own personnel.Both of these projects utilized highline systems for installing the penstock,which is a technique likely to be used for Reynolds Creek.For the latter two projects (South Fork and Kasidaya Creek),AP&T performed nearly all of the work using its own personnel,since competent contractors were not readily available.The Kasidaya Creek Project is particularly relevant because the primary access to the site is by watercraft,which is also the case for Reynolds Creek.AP&T already owns an LCM-8 landing craft and a 34-ft crewboat (both USCG certified)that are available for use.Other major construction equipment owned by AP&T that can be used at Reynolds Creek includes: Kobelco 400 excavator Kobelco 200 excavator Komatsu 200 excavator Caterpillar 416C backhoe Mack fuel truck Mack dump truck FL concrete mixer truck DE-PS36-09G099014 10 April 30,2009 Reynolds Creek Hydroelectric Project Morooka MST 2000 tracked dump truck Morooka MST 2200 tracked dump truck Fire trailers (2) 3,000-gallon double-walled fuel tank Other equipment necessary for the construction will be purchased or leased as necessary.AP&T will utilize the expertise of the following key personnel,all of whom have had the same roles in the South Fork and Kasidaya Creek construction: Vern Neitzer,Construction Manager Roger Bargar,Construction Superintendent (except transmission line) Larry Coupe,Civil Engineer Ben Beste,Mechanical Engineer Bob Berreth,Electrical Engineer Résumés for these individuals are provided in the Resumes File. Other key personnel will be added to the construction team as shown below; these positions have not yet been filled and,therefore,resumes are not provided: e Civil construction inspector (full-time HDR employee anticipated) e Electrical/transmission inspector (periodic inspection by HDR employee) e Environmental Compliance Monitor (ECM)(local hire expected -must be approved by fish and wildlife agencies) APC will also operate and maintain the Project.Specific responsibilities are set forth in an Operation and Maintenance Agreement which is currently being developed. Haida Corporation,Inc. Haida Corporation will have a 75%equity share of the Project/Haida Power,Inc. As a result,Haida Corporation will maintain overall management responsibility for the construction,operation,and maintenance of Reynolds Creek.As indicated, delegation of authority for certain activities will be achieved via various agreements and contracts.Todd Tew,Chief Financial Officer,will serve as the primary point of contact.Mr.Tew's resume is included in the Resume File. HDR Engineering,Inc. HDR is an architect/engineering company with more than 7500 employees and 150 offices nationwide.HDR has been consultant to Haida Corporation since May 1997 and has been responsible for the environmental analyses,licensing activities,and the engineering design for the Reynolds Creek Project.HDR is currently completing the final design,developing various plans and documents to comply with the FERC License and the other approvals that have been received, and leading the planning efforts for the start of construction.HDR will serve as DE-PS36-09G099014 11 April 30,2009 Reynolds Creek Hydroelectric Project the Owner's Engineer during construction and Project start up and will conduct the inspections as noted above as well as be available to address concerns raised by the construction workforce.Mike Stimac,who has had various responsibilities on the project since 1997,is currently the HDR Project Manager and will continue in that role.His resume is included in the Resume File. Major generating equipment for the project will be obtained through a competitive bidding process managed by the Owner's Engineer (HDR).Only well-known suppliers with international scope will be allowed to bid to ensure that high quality generating equipment is installed.The award of equipment contracts is anticipated during the second half of 2009 and early 2010.Other equipment for the project,such as the powerhouse crane,control system,valves,penstock pipe,and transformers will be obtained either by competitive bids or by negotiated purchase orders with vendors previously used by AP&T in its prior construction projects. Project Financing In late 2008,HDR updated previous construction cost projections after completing more refined design activities and contacting various vendors.The updated cost estimate of $14 -15 million excluded previously spent costs.The total Project cost estimate,including costs spent to date,is summarized in the following table. Recon/Permitting &Design/Prelim Design $2,120,000 Final Design/Surveying/Final Permits 2,000,000 Construction Construction Management $500,000 Mobilization 700,000 Access Facilities 1,000,000 Diversion Structure 1,000,000 Penstock 3,000,000 Powerhouse 4,000,000 Transmission Facilities 2,500,000 Completion 300,000 13,000,000 Power Sales Agreement/Regulatory 25,000 $17,145,000 To best meet the challenges in development,Haida Corporation and APC have formed a Joint Venture for the development and operations of the Project.The Joint Venture will sell power to APC pursuant to the terms and conditions of a Power Sales Agreement.Although the terms of the agreement must be approved by the Regulatory Commission of Alaska,the Power Sales Agreement is anticipated to be framed around the following concepts: e APC will use a minimum of 6 million kilowatt-hours per year from Reynolds Creek. DE-PS36-09G099014 12 April 30,2009 Reynolds Creek Hydroelectric Project e For this base amount of energy,the utility will pay a fixed payment of $300,000/year. e Any additional sales will be based on the rate in effect for the Black Bear Lake Hydroelectric project,one of APC's other hydro resources on the island. e APC will pay for all operating and maintenance costs until the net income to the Joint Venture is $500,000/year.At that time,operating and maintenance costs are split 50/50 until the net income to the Joint Venture again reaches $500,000/year.At that time,the Joint Venture is responsible for all operating and maintenance costs. It is important to note that the Joint Venture will be regulated by the Regulatory Commission of Alaska with rates based on costs.Return on equity investment will also be regulated. The following table summarizes the sources and uses of funding for the Project. The additional $5.125 million required can be funded with debt secured by the $300,000 fixed payment if interest rates are less than 4 percent.Current rates - from the Rural Utilities Service (FFB Guaranteed Loan Program)and the Alaska Energy Authority's Power Project Fund both have interest rates that meet this goal.However,use of the entire $300,000 fixed payment for debt service does not allow any meaningful return on investment absent large load growth. REYNOLDS CREEK' Summary of Currently Identified Funding Sources Project Costs $17,145,000 Sources of Funds Equity To Date $3,800,000 New 4,000,000 Subtotal -Equity $7,800,000 Grants Federal $120,000 State 4,100,000 Subtotal -Grants 4,220,000 Total 12,020,000 Net Required $5,125,000 The Alaska Energy Authority's Power Project Fund allows interest rates to be set as low as zero percent to allow financial feasibility.Even with interest rates set at zero percent,the Joint Venture would achieve less-than-market return on equity absent additional grant funding. |Verification of the award of the state grants can be obtained by calling the Alaska Energy Authority at 907.771.3000. DE-PS36-09G099014 13 April 30,2009 Reynolds Creek Hydroelectric Project The strategy developed to finance and construct Reynolds Creek is based on bringing the resource on-line as soon as possible while seeking additional grants to allow a reasonable return on investment.Pending necessary approvals, limited construction can start this summer on certain preliminary components such as transmission right-of-way clearing and marine access.Financing is to be sought from two sources.First,an additional $5.125 million in grants is targeted. At the same time,a loan authorization from the Power Project Fund is to be secured in the event additional grants are less than targeted.A loan guarantee from the Bureau of Indian Affairs is to be sought in concert with the Power Project Fund loan authorization. This strategy is described in greater detail in the Plan of Finance in the Study and Assessment File. Section V:Project Activities and Timing As discussed above,Haida Corporation is completing the necessary steps to initiate on-site construction preparation activities during the second half of 2009. Two construction seasons will likely be needed due to poor weather conditions during the winter.Anticipated major milestones leading to commercial operation are as follows: Complete Development of Power Sales Agreement, Operation and Maintenance Agreement,Land Lease Agreement,and Plan of Finance.............June 2009 Complete Application for Certificate of Public Convenience and Necessity and file with the Regulatory Commission of Alaska.................July Complete Geotechical Investigations.....................08 August Complete Final DeSign....................ccceeceeeeeeeeseeeeees September Begin Marine Access Preparation, Install USGS Gages...............ccceceseeeeeeeeeeeees September Order Equipment/Materials..................eeeeeeeeeeeeeeeeee October-December Submit Remaining Plans and Drawings to FERC.......NLT October Begin Transmission Line Construction...................0.October Coordinate Detailed Construction Planning Activities with AP&T/APC...............cceceeeeeeees January-March 2010 DE-PS36-09G099014 14 April 30,2009 Reynolds Creek Hydroelectric Project Initiate Remaining Major Construction Activities........April Complete Major Construction Work................:.0:000 September 2011 Begin Start-up TeSting.............ccceceesceeseeeeeeeeeeeeneeesOctober Begin Commercial Operation...........cssessseseseeeecses December Demobilization................cceceeeeeeeeceresetaeeeennaeeetaeees January-March 2012 DE-PS36-09G099014 15 April 30,2009 Appendix B-1 - June 8 2010 letter from AEA to Haida oy "All [=ALASKA@2>ENERGY AUTHORITYx4AlaskaIndustrialDevelopmentandExpertAuthority June 8,2010 The Honorable Kimberly D.Bose VIA FEDEX: Secretary 8245 9406 4074 Federal Energy Regulatory Commission Mail Code:PJ 12.3 888 First Street,NE Washington DC 20426 RE:Haida Corporation;Reynolds Creek Hydroelectric Project (FERC Project No.11480);Finance Plan Dear Secretary Bose: Haida Energy,Inc.,a corporation owned by Haida Corporation and Alaska Power and Telephone,has requested the Alaska Energy Authority (AEA)provide you with information pertaining to the finance plan for the Reynolds Creek Hydroelectric Project.AEA is currently negotiating a loan and grant agreement with Haida Energy,Inc.and a grant agreement with Southeast Conference for the construction of the Reynolds Creek Hydroelectric Project,Federal Energy Regulatory Commission (FERC)Project No.11480 (the Project). The following grants have been authorized by the Alaska State Legislature for Project construction. 1.Haida Power to fund Reynolds Creek Hydroelectric Project. a.Grant Amount:$2,000,000 b.Authorization:Renewable Energy Fund (Round 1)and Legislative Budget and Audit approval.(CHAPTER 31 SLA 08 and Revised Program -Legislative 08-9- 0026) c.Grant Status:Not awarded but in process. 2.Southeast Conference,to fund the Reynolds Creek Hydroelectric Project. a.Grant Amount:$2,000,000 b.Authorization:State appropriation:CHAPTER 29 SLA 08,page 220,section 60d,lines 22-25. c.Grant Status:Awarded on November 24,2008;In the process of amending the grant to reflect proposed activity by Haida Energy. 813 West Northem Lights Boulevard *Anchorage,Alaska 99503-2495 www.aidea.org ©907/771-3000 *FAX 907/771-3044 ®Tall Free (Alaska Only)888/300-8534 °www.akenergyauthority.org The Honorable Kimberly D.Bose June 8,2010 Page 2 of 2 In addition,AEA anticipates legislative authorization for AEA to approve a $9,000,000 loan for the Reynolds Creek Hydroelectric Project.HCS SB 301(RLS)passed the Legisiature in April 2010.As of June 3,2010,this bill awaits transmittal to the Governor for his action.The relevant section of this legislation: Sec.6.The uncodified law of the State of Alaska is amended by adding a new section to read: LEGISLATIVE APPROVAL OF LOAN FROM THE POWER PROJECT FUND. Provided the Alaska Energy Authority approves a loan for the Reynolds Creek hydroelectric project,the legislature authorizes the Alaska Energy Authority to loan $9,000,000 from the power project fund (AS 42.45.010)for the Reynolds Creek hydroelectric project.This section constitutes legislative approval under AS 42.45.010()for a loan from the fund that exceeds $5,000,000. Should you require anything further,please contact me. Sincerely, ALASKA ENERGY AUTHORITY MC ay2- oe HaagensonfixecutiveDirector cc:Alvin Edenshaw,Haida Energy,Inc. Robert Grimm,Haida Energy,Inc. c™ HAIDA ENERGY,INC. P.O.BOX 89 HYDABURG,ALASKA 99922 |April 67,2011 Mr.James Strandberg Alaska Energy Authority/AIDEA 813 W.Northern Lights Blvd. Anchorage,AK 99503 SUBJECT:REYNOLD'S CREEK HYDROELECTRIC PROJECT Finance Plan Dear Mr.Strandberg: As requested,attached is a finance plan for construction of the project.Funding sources for Project construction will include a combination of equity,grants,and debt. If you have any questions,please contact me. Sincerely, Corry V.Hildenbrand Project Manager REYNOLDS CREEK HYDROELECTRIC PROJECT FERC Project No.11480 FINANCING PLAN 1.INTRODUCTION Haida Corporation received a license from the Federal Energy Regulatory Commission ("FERC” or "Commission”)on October 24,2000 for the Reynolds Creek Hydroelectric Project,FERC Project No.11480 ("Project”).The Project license was amended by Commission order issued on December 10,2009 to provide for the installation of a single 5.0 mega-watt (MW)turbine generating unit.On January 6,2010,the Commission issued an order approving the transfer of the license to Haida Energy Inc.("Haida Energy”). 2.FINANCING REQUIRED The cost of the Project as described in Haida Corporation's August 1,2008 application for amendment of license to FERC on November 25,1997 was $11,700,000.The total cost for construction of the Project is now $27,963,176.The detailed cost estimate includes $4,309,129 of costs incurred to date (fully funded with equity with the exceptions of $120,000 from an early Federal grant and a $100,000 State of Alaska grant). A revised construction budget was prepared in March 2011 by HDR Engineering and the Project Management Team and is provided in Table 1. 3.FINANCING PLAN Funding sources for Project construction will include a combination of equity,grants,and debt and is summarized in Table 2.The debt service and operating expenses will be paid for via the terms and conditions of a power sales agreement between Haida Energy and Alaska Power Company.Since APC is regulated and HE will be regulated,the power sales agreement must be approved by the Regulatory Commission of Alaska,and Haida Energy's return on equity will be regulated and monitored by the RCA. 3.1.Federal Financing Department of Energy On April 30,2009,Haida Corporation applied for a Department of Energy ("DOE”) Renewable Energy and Energy Efficiency in Indian Country grant,Funding Opportunity Number:DE-PS36-09GO99014.This grant is for the amount of 3.2. 3.3. $1,120,000.On August 12,2009,Haida received a letter from DOE informing it that Haida's application had been accepted for negotiations leading to an award.For further information on this grant,the Commission may contact Ms.Lizana Pierce,Merit Review Committee Chairperson with DOE,at (303)275-4727. State Financing Alaska Energy Authority Grant Haida Energy has been authorized by the Alaska Energy Authority ("AEA”),and approved by the Alaska State Legislature,for grants totaling $4 million.The first grant is for $2 million authorized under the Renewable Energy Fund in Round I.This grant has been authorized and the award to Haida Energy is in process.The second grant by the AEA was authorized for $2 million and awarded to Haida Energy on November 24, 2008. Alaska Energy Authority Loan(s) Haida Energy applied for a $9 million loan for the Project from the AEA,which has been specifically authorized by the Alaska State Legislature.The loan application was approved by the AEA Board at their August 11,2010 meeting. On March 25,2011,Haida Energy applied for a $9.35 million loan for the Project from the AEA.Approval of this loan is pending.We are asking for the second loan to be deferred until the first loan is paid off.This will require not only the amount of the second loan to be approved by the legislature but also any deferral in excess of 10 years. Alaska Energy Authority,Denali Commission Grant On January 20,2009,Haida Corporation received a grant from the AEA,Denali Commission for $100,000. Equity Investor Financing The best unaudited estimate for the private equity investment from Haida Energy has-is $4.4 million ef private-equity financing for the Project funaudited}This amount represents costs incurred to date and financed through equity contributions of the Haida Energy,Inc.and its shareholders,Haida Corporation and Alaska Power &Telephone Company._We realize a subsequent review and audit may be required to verify the equity investment figure. 4.SUMMARY Haida Energy has obtained a total of $5.2 million dollars in grants for the construction of the Project.Additionally,Haida Energy has obtained an additional $9 million loan from the AEA, which is has been authorized by the legislature and approved by the AEA Board;and applied for another $9.35 million loan from the AEA.With this plan,Haida Energy respectfully submits that it has adequately demonstrated that it has the commitment for funds for Project construction. TABLE 1 COST ESTIMATE Recon/FERC Permitting &Design/Prelim Design HDR Task Order 5 $100,000 Project Management Agreement $100,000 SEC Grant Administration $5,628 HDR 2010 Outstanding Liabilities $607,548 Haida Energy Inc.(Equity Investment)$4,000,000 Alaska Power &Telephone (Equity nvestment)$400,000 Subtotal $5,213,176 Construction Costs Estimate (HDR 2/10/11)* Land and Land Rights $40,000 Mobilization and Logistics $3,685,000 Structures and Improvements $737,800 Reservoir,Dams,Penstocks &Waterways $6,363,280 Turbines and Generators $2,157,700 Accessory Electrical Equipment $40,000 Roads and Marine Access $929,200 Substation Equipment and structures $358,250 Transmission Line $3,350,000 Unaccounted construction costs (contingency)$2,207,770 Professional Services/Administrative costs $2,880,800 *Total (rounded)$22,750,000 TOTAL PROJECT COSTS $27,963,176 TABLE 2 FUNDING SOURCES Existing Grants Federal $1,120,000 State 4,100,000 Subtotal -Grants $5,220,000 PPF Loan 9,000,000 Equity 4,400,000 Subtotal -Existing Funds $18,620,000 Required Loan -No Additional Grants 9,350,000 Total $27,970,000 Reqired Loan -$3 million Additional Grant $24,970,000 HAIDA ENERGY,INC. P.O.BOX 89 HYDABURG,ALASKA 99922 April 6,2011 Mr.James Strandberg Alaska Energy Authority/AIDEA 813 W.Northern Lights Blvd. Anchorage,AK 99503 SUBJECT:REYNOLD'S CREEK HYDROELECTRIC PROJECT Finance Plan Dear Mr.Strandberg: As requested,attached is a finance plan for construction of the project.Funding sources for Project construction will include a combination of equity,grants,and debt.,; If you have any questions,please contact me. Sincerely, Corry V.Hildenbrand Project Manager REYNOLDS CREEK HYDROELECTRIC PROJECT FERC Project No.11480 FINANCING PLAN 1.INTRODUCTION Haida Corporation received a license from the Federal Energy Regulatory Commission ("FERC” or "Commission”)on October 24,2000 for the Reynolds Creek Hydroelectric Project,FERC Project No.11480 ("Project”).The Project license was amended by Commission order issued on December 10,2009 to provide for the installation of a single 5.0 mega-watt (MW)turbine generating unit.On January 6,2010,the Commission issued an order approving the transfer of the license to Haida Energy Inc.("Haida Energy”). 2.FINANCING REQUIRED The cost of the Project as described in Haida Corporation's August 1,2008 application for amendment of license to FERC on November 25,1997 was $11,700,000.The total cost for construction of the Project is now $27,963,176.The detailed cost estimate includes $4,309,129 of costs incurred to date (fully funded with equity with the exceptions of $120,000 from an early Federal grant and a $100,000 State of Alaska grant). A revised construction budget was prepared in March 2011 by HDR Engineering and the Project Management Team and is provided in Table 1. 3.FINANCING PLAN Funding sources for Project construction will include a combination of equity,grants,and debt and is summarized in Table 2.The debt service and operating expenses will be paid for via the terms and conditions of a power sales agreement between Haida Energy and Alaska Power Company.Since APC is regulated and HE will be regulated,the power sales agreement must be approved by the Regulatory Commission of Alaska,and Haida Energy's return on equity will be regulated and monitored by the RCA. 3.1.Federal Financing Department of Energy On April 30,2009,Haida Corporation applied for a Department of Energy ("DOE”) Renewable Energy and Energy Efficiency in Indian Country grant,Funding Opportunity Number:DE-PS36-09GO99014.This grant is for the amount of $1,120,000.On August 12,2009,Haida received a letter from DOE informing it that Haida's application had been accepted for negotiations leading to an award.For further information on this grant,the Commission may contact Ms.Lizana Pierce,Merit Review Committee Chairperson with DOE,at (303)275-4727. 3.2.State Financing Alaska Energy Authority Grant Haida Energy has been authorized by the Alaska Energy Authority ("AEA”),and approved by the Alaska State Legislature,for grants totaling $4 million.The first grant is for $2 million authorized under the Renewable Energy Fund in Round I.This grant has been authorized and the award to Haida Energy is in process.The second grant by the AEA was authorized for $2 million and awarded to Haida Energy on November 24, 2008. Alaska Energy Authority Loan(s) Haida Energy applied for a $9 million loan for the Project from the AEA,which has been specifically authorized by the Alaska State Legislature.The loan application was approved by the AEA Board at their August 11,2010 meeting. On March 25,2011,Haida Energy applied for a $9.35 million Joan for the Project from the AEA.Approval of this loan is pending. Alaska Energy Authority,Denali Commission Grant On January 20,2009,Haida Corporation received a grant from the AEA,Denali Commission for $100,000. 3.3.Equity Investor Financing Haida Energy has $4.4 million of private equity financing for the Project (unaudited). This amount represents costs incurred to date and financed through equity contributions of the Haida Energy,Inc.and its shareholders,Haida Corporation and Alaska Power & Telephone Company. 4.SUMMARY Haida Energy has obtained a total of $5.2 million dollars in grants for the construction of theProject.Additionally,Haida Energy has obtained an additional $9 million loan from the AEA, which is has been authorized by the legislature and approved by the AEA Board;and applied for another $9.35 million loan from the AEA.With this plan,Haida Energy respectfully submits that it has adequately demonstrated that it has the commitment for funds for Project construction. TABLE 1 COST ESTIMATE Recon/FERC Permitting &Design/Prelim Design HDR Task Order 5 Project Management Agreement SEC Grant Administration HDR 2010 Outstanding Liabilities Haida Energy Inc.(Equity Investment) Alaska Power &Telephone (Equity investment) Subtotal Construction Costs Estimate (HDR 2/10/11)* Land and Land Rights Mobilization and Logistics Structures and Improvements Reservoir,Dams,Penstocks &Waterways Turbines and Generators Accessory Electrical Equipment Roads and Marine Access Substation Equipment and structures Transmission Line Unaccounted construction costs (contingency) Professional Services/Administrative costs *Total (rounded) TOTAL PROJECT COSTS $100,000 $100,000 $5,628 $607,548 $4,000,000$_400,000 $40,000 $3,685,000 $737,800 $6,363,280 $2,157,700 $40,000 $929,200 $358,250 $3,350,000 $2,207,770$2,880,800 $5,213,176 $22,750,000 $27,963,176 TABLE 2 FUNDING SOURCES Existing Grants Federal $1,120,000 State 4,100,000 Subtotal -Grants $5,220,000 PPF Loan 9,000,000 Equity 4,400,000 Subtotal -Existing Funds $18,620,000 Required Loan -No Additional Grants 9,350,000 Total $27,970,000 Regired Loan -$3 million Additional Grant $24,970,000 Execution Copy 'POWER SALES AGREEMENT BETWEEN HAIDA ENERGY,INC. AND ALASKA POWER COMPANY This POWER SALES AGREEMENT,dated as'of September 23,2009 (this "Agreement”),is made between Haida Energy,Inc.(hereinafter called "Seller”),a corporationorganizedandexistingunderthelawsofAlaska,and Alaska Power Company (hereinafter called "Purchaser”,a corporation organized and existing under the laws of the State of Alaska. Whereas,the Seller plans to generate wholesale energy on Prince of Wales Island in'Alaska,and the Purchaser currently generates and purchasés electric power and energy which it uses and sells to its customer on Prince of Wales Island;and Whereas,the Seller intends to construct.a hydroelectric generating plant on or aboutReynoldsCreekonPrinceofWalesIslandforthepurposeofsupplyingelectricpowerandenergytothePurchaser;andWhereas,the Purchaser desires to ources electric power and energy from the Seller on the terms and conditions herein set forth; Now,therefore,in consideration of the mutual undertaking,herein contained,the parties'hereto agree as follows.1.DEFINITIONS.As used iin this Agreement,capitalized terms shall have the following meaning.Words not otherwise defined herein that have well-known and generallyacceptedtechnicalortrademeaningsareusedhereininaccordancewithsuchrecognizedmeanings. {a)"Additional Energy Payment”shall mean the payment made by the Purchaser for all electrical energy delivered to Purchaser in excess of the Reynolds Creek Base .Energy at the applicable rate per kilowatt hour as described in Exhibit A. (b)"Base Energy Payment”means an amount equal to the Monthly Minimum Payment.- (c)"BBL”means the hydroelectric project commonly referred to as the"black bear lake project”owned by Purchaser's subsidiary BBL Hydro,Inc.\ (d)."Business Day”means any Day except Saturday,Sunday or a day that is authorized as a holiday by banks in Ketchikan,Alaska or New York,New York. )(e)"Change-in-Law”means,after the date of this Agreement,the adoption,imposition,promulgation or modification by a Government Agency of any Law or ] Governmental Approval,or the issuance of an order,judgment,award or decree of a Government Agency having the effect of the foregoing. ()"Commercial Operation Date”means the date on which the last of the ,followmg events occurs (1)the Facility has completed all tests which must be performed prior to'commercial operation as required by applicable Laws,(2)the Facility has obtained all Governmental Approvals,including any approvals or consents from the Commission,required in order to begin producing electrical power for sale to Purchaserin accordance with this Agreement,and (3)Purchaser has-assumed operation of the Facility under the Operations andMaintenanceAgreement. (g)"Commission”means the Regulatory Commission of Alaska. (h)"Contract Year”means each twelve (12)month period starting onJanuary]and ending on December 31,provided that (i)the first Contract Year shall commenceontheCommercialOperationsDateandshallendonDecember31ofsuchContractYear,and(ii)the final Contract Year shall terminate on the last day of the Term. (i)'Delivery Point”means the interconnection point for delivering powerfromtheFacilitytoPurchaser's transmission system as describedin Section 4. (j)"Event of Default”means with respect to either Seller or Purchaser the events set forthin Section 12. '(k)="Facility”means the 5 megawatt hydroelectric generation plant to belocatedonoraboutReynoldsCreekonPrinceofWalesIsland,Alaska,authorized under FERC license 11480,together with all other equipment necessary for the generation and transmission of.- electrical energy to the Delivery Point including any additions or replacements thereof. ()"Facility Expenses”means all cash expenses and fees of the Seller related to the Facility,including,without limitation and without duplication: (1)__-all costs of Seller in connection with the operation and maintenance of the Facility,including,without limitation,all Operating Fees (as defined in the Operations and Maintenance Agreement)paid to the operator under the Operations and Maintenance Agreement;-(2)all costs of legal,accounting,tax preparation and other specializedconsultingorprofessionalservicesincludingenvironmental,engineering, architectural,and other building trades and inspection services,due dili gencecosts,title fees,escrow fees,closing fees,and other similar expenses; GB)all costs of Sellerin connection with the preparation of or relating to"notices or 'Teports made to the owners of Seller;: (4)all costs related to litigation involving Seller,directly or indirectly,relating to the F acility,without limitation,attorneys'fees incurredin connectiontherewith; Se . (5)__the costs of any insurance required to be maintained by Seller pursuant to ,the Operations and Maintenance Agreement, (6).all costs relating to transactions that are not consummated including legal, accounting-and consulting fees and all extraordinary professional fees incurred in connection with the business or management of the Facility;and (7)°any taxes,fees or other governmental charges levied against Seller directly or indirectly relating to the Facility and all costs incurredby Sellerin connectionwithanytaxaudit,investigation,settlement or review of Seller directly orindirectlyrelatingtotheFacility. (m)"Government Agency”means any federal,state,local,territorial ormunicipalgovernmentandanydepartment,commission,board,bureau,agency,instrumentality,Judicial or administrative body thereof having jurisdiction over the Facility,Purchaser or Seller,'as the case may be,including,but not limited to,the Commission;provided that none of Seller, Purchaser or any affiliate of Seller or Purchaser shall be a Government Agency. (n)"Government Approval'means any authorization,consent,approval,Hcense,ruling,permit,exemption,variance,order,judgment,decree,declarations of or-regulation by any Government Agency relating to the acquisition,development,ownership,° 'leasing,occupation,construction,start-up,testing,operation or maintenance of the Facility or to the execution,delivery or performance of this Agreement,including,but not limited to,the (',>approval of the Commission required pursuant to Section 18 hereof. (0)"Land Lease Reimbursement Amount”means an amount,which may be 'zero,calculated in accordance with Exhibit B as a portion of the Land Lease Reimbursable Expenses,for which Purchaser shall either make payment directly or shall reimburse Seller for in accordance with Section 8. (p)"Land Lease Reimbursable Expenses”means the total rates,fees, charges,and costs incurred by Seller under the Reynolds Creek Operation Lease between Seller and Sealaska Corporation and such other lease agreements for the lease'of land related to the .Facility as are delivered to Purchaser and approved by Purchaser from time to time.(q)="Laws”means (1)any statute,law,rule,regulation,code,ordinance,judgment,decree,writ,order,license,agreement,directive,guideline,policy,requirement,or other governmental restriction or any similar form of decision of or determination by,or any interpretation or administration of any of the foregoing by,any Government Agency,whether now or hereafterin effect or (2)any requitements or conditions on or with respect to the'issuance,maintenance or renewal of any Government Approval or applications therefor whethernoworhereafterineffect. ()"Minimum Monthly Payment”shall mean the required payment of$25,000 to be paid by Purchaser for each month.during the Term. (s)"Net Revenues”shall mean,in any year,all cash received by or on behalfofSeller,directly orT indirectly related to the Facility (not including any grant receipts,loan proceeds,or capital contributions)minus the sum of:(1)all principal and interest payments onindebtednessofSellerandallothersumspayabletolendersinrespectofsuchindebtednessand_(2)all expenditures for Facility Expenses.For the avoidance of doubt:(x)Net Revenues shallnotbereducedonaccountofanyequitydistributionsmadebySelleroranyreservesorotherset- asides established by Seller for future expenses and (y)Net Revenues shall include the Total Energy Payment and any Operations and Maintenance Reimbursable Expenses and Land LeaseReimbursementExpensesforwhichPurchaserisresponsibleunderSection8,whether paid toSellerorpaidtotheinvoicingpartyonbehalfofSeller. (t)"Operations and Maintenance Agreement”shall mean that certain Operations and Maintenance Agreement between Alaska Power &Telephone Company;as operator and Seller as Owner pursuant to which Alaska Power &Telephone Company has agreed to provide certain operation and maintenance services with respect to the Facility. (2)"Operations and Maintenance Reimbursable Expenses”means theOperatingFees,other than the Operating Fees related to Extraordinary Maintenance (as defined 'in the Operations and Maintenance Agreement),payable by Seller'each month for the operationandmaintenanceoftheFacility. (v)"Operations and Maintenance Reimbursement Amount”means an amount,which may be zero,calculated in accordance with Exhibit B as a portion of theOperationsandMaintenanceReimbursableExpenses,for which Purchaser shall either make - payment directly or shall reimburse Seller for in accordance with Section 8.(w)"Person”means any individual,corporation,partnership,limited liabilitycompany,joint venture,trust,unincorporated organization or Government Agency or any- business entity whose existence may be authorized by a Governmental Agency. (x)"Purchaser”shail be Alaska Power Company. (y)"Rate Stabilization Account”means the account in which deferred portions of annual revenue requirement are accrued as a regulatory asset of Seller under the Rate'Stabilization Methodology. {z)"Rate Stabilization Methodology”means a rate making procedure that avoids large rate increases for existing customers of Purchaser by deferring a portion of the allowable annual revenue requirements of major system assets (like the Facility)to future customers.The deferred portions of annual revenue requirements are accrued in an interest- .earning Rate Stabilization Account,which shall be considered a rate base asset of the Seller.Over time as customer loads increase,collections from rates will start exceeding actual annual revenue requirements and allow the pay down of the Rate Stabilization Account to zero,at which time the rate stabilization methodology will end and rates will be determined by standard ratemakingmethodologies. (aa)"Reynolds Creek Base Energy”means 6,000 megawatt-hours iin anyContractYear,as measured at the Delivery Point;provided that Reynolds Creek Base Energy foreachoftheinitialandfinalContractYearsshailbeproratedbasedontheactualnumberofdaysintherelatedContractYear. (bb)"Seller”shall be Haida Energy,Inc. (cc)"South Fork”is the existing hydroelectric project commonly referred toassthe"south fork project”,owned by Purchaser's subsidiary BBL Hydro,Inc. (dd)"Taxes”means,with respect to any Person,all taxes,withholdings, assessments,imposts,duties,governmental fees,governmental charges or levies imposed'directly or indirectly by any Governmental Agency on such Person or its income,-profits or property or measured by the production of energy or gross revenue,gross receipts or comparablemeasurethereof,and whether characterized as an ad valorem,sales,gross receipts,energy -production or other similar taxes. (ee)"Total Energy Payment”shall mean,for any mouth during a Contract_Year,the sum of (1)Base Energy Payment and (2)the Additional Energy Payment,if any,madebyPurchaserduringsuchmonth. 2.GENERAL. (a)Beginning on the Commercial Operation Date and continuing through thetermofthisAgreement,Seller shall sell and deliver to Purchaser,and Purchaser shall purchase and receive from Seller,electric output from the Facility to help meet Purchaser's supplemental -power requirements on Prince of Wales Island in accordance with the terms and conditions of this Agreement,including Exhibit AA. (b)So long as no Event of Default has occurred andis continuing with respect_to Purchaser,Seller shall not have the right to sell to third parties electrical capacity or electrical:energy generated from the Facility. 3.DISPATCH. (a)After the Commercial Operation Date,Purchaser (or a designee on behalf _of Purchaser)shall dispatch the Facility as necessary to meet Purchaser's need for electrical"energy.: @)The dispatch of the Facility,and Purchaser's obligation to purchase theoutputoftheFacility,shall be senior in priority to the dispatch,and Purchaser's use of the output of,any new additional power generation facilities (i.e.power generation facilities other than Purchaser's existing power generation facilities on Prince of Wales Island,including the BBL and South Fork projects)that are owned,leased,or for which the electrical generation output is purchased by Purchaser for its power requirements on Prince of Wales Island including anyoutputrelatingtoanycapitalizedimprovementbettermentstotheBBLandSouthForkprojects that may increase the capacity or available generation of either the BBL or South Fork projects. (c)Seller shall operate and maintain the Facility m accordance with prudent .utility industry practices.To the extent not inconsistent with prudent utility industry practices and manufacturers'guidelines and recommendations generally applicable to the Facility,Seller shall cause the Facility to promptly comply with all dispatch orders issued by Purchaser or on behalf of Purchaser.Notwithstanding the foregoing,Seller shall have the right to interrupt the supply of electrical power and energy for reasonable maintenance of lines,generation equipment and other facilities;provided that Purchaser shall receive reasonable prior notice of any suchinterruptionandSellershalltakereasonableeffortstoscheduleanysuchinterruptionforperiods.during which Purchaser advises Seller that-the Facilityis not anticipated to be dispatched pursuant to the priorities set forth in Section 3(a).Seller shall have no obligation or responsibility to Purchaser to provide standby generation iin the event power delivery from theFacilityisinterrupted. (d)=Ifeither Seller's ability.to supply available electric power and energy fromtheFacilityorPurchaser's ability to receive and transmit available electrical power and energyfromtheFacilityshallfail,be interrupted,or become defective through an act of God or public enemy,or because of accident,labor troubles,or any other cause beyond the reasonable controloftheaffectedparty(and which event or circumstance the affected party could not have broughtwithinitscontrolbytheexerciseofreasonablediligence),the affected party shall be excused©from performance of obligations under this Agreement to the extent such performanceis prevented or delayed by such event or circumstance and the affected party shal!not be liable therefore for damages caused thereby;provided that any such event affecting Purchaser's ability to receive or transmit electrical power and energy from the Facility shall not relieve Purchaser of the obligation to make the Minimum Monthly Payment.The relief provided by this section shallonlyapplyiftheaffectedpartyistakingcommerciallyreasonableeffortstoremedysuchsituationandsuchsituationwasnottheresultofthenegligenceorfaultoftheaffectedparty.No_event or circumstance shall be consider to excuse a party's obligations under this Agreement totheextentsucheventorcircumstancecouldhavebeenprevented,overcome or remedied if the affected party had exercised commercially reasonable efforts to do so,and shall expressly : exclude a party's financial inability to perform.A limitation of available electric output from the Facility due to drought or other water shortage conditions shall not be construed as a breech of - Seller's duty under this Agreement and shall not relieve Purchaser of the obligation to make the Minimum Monthly Payment. 4,TERM. (a)This agreement shall become effective upon the Commercial Operation Date and shall continue in effect for an initial period ending on October 1,2050,unlessotherwiseextendedorterminatedinaccordancewiththeprovisionsofthisAgreement. (b)The term of this Agreement may be extended 'by mutual agreement of .Purchaser and Seller for an additional period,provided that Purchaser or Seller requests in _writing an extension of this Agreement not less than eighteen (18)months prior to the expiration of the initial term set forth in Section 4(a).In the event an extension request is submitted by either party,Purchaser and Seller shall each negotiate in good faith using commerciallyreasonableeffortstoagreeontheterms;conditionsand length of an extended term. '{c)Seller agrees that the continued effectiveness of this Agreement iscontingentuponAlaskaPower&Telephone Company continuing to be a party to the Operations and Maintenance Agreement.Within ninety (90)days of the termination of the Operations and*Maintenance Agreement or the suspension of Alaska Power &Telephone Company's rights thereunder,Purchaser shall give written notice to Seller indicating whether Purchaser elects to continue or terminate this Agreement.In the event that Purchaser elects to terminate this Agreement pursuant to this Section 4(c),the notice from Purchaser shall state a termination date at least thirty (30)days from the date such notice is given and after such date,neither Seller nor Purchaser shall have any further liability or obligations to the other hereunder,except for'obligations or duties that accrued prior to such termination or that survive such termination bythetermsofthisAgreement. ({d)Seller and Purchaser agree that the purpose and intent of this Agreement is dependant on the successful completion of the construction of the Facility and the related achievement of the Commercial Operation Date.As such,in the event that construction of the Facility is at any time discontinued,abandoned or otherwise terminated by Seller or the.Commercial Operation Date is not achieved by December 31,2016 then either party may . _terminate this Agreement upon thirty (30)days'notice to the other party.In the event that a .party elects to terminate this Agreement pursuant to this Section 4(d),neither Seller nor Purchaser shall have any further liability or obligations to the other hereunder after the termination date,except for obligations or duties that accrued prior to such termination or thatsurvivesuchterminationbythetermsofthisAgreement.5.DELIVERY POINT. (a)As of the date of this Agreement,Purchaser has advised Seller thatPurchaseranticipatestakingdeliveryoftheelectricpowergeneratedbytheFacilityatoraroundtheReynoldsCreekssubstation.The parties shall agree in writing regarding the final location of the Delivery Point with Purchaser prior to Seller's construction or installation of any equipment required pursuant to Section 6 below.Seller and Purchase shall in good faith negotiate the final Jocation for the interconnection of the Facility to Purchaser's transmission system. (b)Electric power from the Facility shall be alternating current,three phase, sixty hertz.Seller will construct all final connections between the Facility and Purchaser's transmission system at Seller's side of the Delivery Point.The voltage shall be 34.5 kilovolts,line to line,60 hertz,three phase. 6.SUBSTATION AND METERING.(a)Prior to the Commercial Operation Date,Seller shall install,own,and maintain the necessary transmission,substation and generation equipment on Seller's side of the Delivery Point.Seller shall also own and maintain switching and protective equipment which may be reasonably necessary to enable Purchaser to take and use the energy hereunder and to protect the system of the Seller.Meters and metering equipment shall be furnished,maintained,and read by the Seller and shall be located at the high side of the Facility's step-up transformer on Seller's side of the Delivery Point or at any other point mutually agreed upon by the SellerandPurchaser. . (b)-Seller shall test and calibrate the meters by comparison with accuratestandardsatintervalssatisfactorytoSellerandPurchaser.Seller shall also make special meter. tests at any time at Purchaser's request.The costs of all tests shall be borne by Seller;provided, however,that if any special meter test made at Purchaser's request discloses that the meters are negative number,such difference shall be paid by Seller to Purchaser.Payment of such recording accurately,Purchaser shall reimburse Seller for the cost of such test.Meters registering no more,than two percent (2%)above or below normal shall be deemed to be -accurate.The readings of any meter which shall have been disclosed by the test to be inaccurateshallbecorrected,based on theinaccuracy at the time of testing,for the shorter of (1)thenumberofdayssincethemeterbeingtestedwasinstalled,(2)the number of days since the lasttestindicatingthatsuchmeterswereperformingproperly,or (3)the one-hundred eighty (180)days previous to the current test,in accordance with the percentage of iinaccuracy found by suchtest.: (c)To the extent that the adjustment period covers a period of deliveries forwhichpaymenthasalreadybeenmadebyPurchaser,Seller shall use the corrected measurements as determinedin accordance with Section 6(b)to re-compute the amount due (which amount _Shall not include interest)for the period of theinaccuracy and shall subtract the previouspaymentsbyPurchaserforsuchperiodfromsuchre-computed amount.If the differenceis a positive number,such difference shall be paid by Purchaser to Seller and if the differenceis a ' difference shall be made by means of a credit or an additional charge on the next statement rendered pursuant to Section 9, (ad)-Seller shall read the meters that measure the Purchaser's consumption monthly.Seller shall notify Purchaser a reasonable periodin advance of the time of any meter 'reading or tests so that Purchaser's representatives may be present at such meter reading or test. 7.RATE.Purchaser shall pay Seller for all electric power and energy delivered hereunder on the terms and conditions set forth in Section 9 and at the rates per kilowatt hour, subject to the Minimum Monthly Payment,set forth on ExhibitA hereto,allin accordance withtheRateStabilizationMethodology. 8.PAYMENT OF O&M REIMBURSEMENT.AMOUNTS.Each month,Seller"shall forward to Purchaser a copy of any invoices received (within three (3)days of its receipt) with respect to Operating Fees under the Operation and Maintenance Agreement and the fees that are Land Lease Reimbursable Expenses.Purchaser shall,at its election,either (i)pay the Operations and Maintenance Reimbursement Amount and/or the Land Lease Reimbursement Amount,if any,related to such invoice directly to the billing party or (ii)pay an amount equal to*the Operations and Maintenance Reimbursement Amount and/or the Land Lease Reimbursement.'Amount,if any,related to suchinvoice to Seller.Such payments shall be made on or before the -date suchinvoice is due if paid directly to theinvoicing party or no later than two (2)BusinessDaysbeforethedatesuchinvoiceisdueifpaidtoSeller.- 9.|METER READINGS AND PAYMENT OF BILLS. (a)Seller shall read Seller's metering equipment at the Delivery Pointon thelastdayofeachmonth,unless otherwise mutually agreed by the parties.Seller shall prepare andrendertoPurchaserwithinfive(5}Business Days after the end of each month a statement'detailing the meter reading and Seller's calculation of the payments due to Seller for such month;_provided that Purchaser,at its own cost and expense,shall have the right to monitor and witness'.such readingsin accordance with Section 6(d).: .t+Nee(b)_Electric power and energy furnished hereunder shail be paid for at the -office of the Seller,as designatedin writing by Seller,monthly within thirty (30)days ofPurchaser's receipt of the related bill. (c)IfPurchaser disputes the accuracy ofa bill the parties shall usecommerciallyreasonableeffortstoresolvethedisputeinaccordancewithSection16.Anyadjustmentswhichthepartiesmaysubsequentlyagreetomakewithrespecttoanysuchbilling dispute shall be made by a credit or additional charge on the next bill rendered..If the parties areunabletoresolvethedisputeinthismanner,any amounts disputed shall be deposited in an escrow account pending final resolution of the dispute in accordance with Section 16;provided that any undisputed amount shall be promptly paid. (d)Ifany payment due from either party under this Agreement shall not be paid when due there shall be due and payable to the other party compensation thereon,calculatedatarateequaltothelesserof(a)two percent (2%)over the "Prime Rate”as publishedin the "Money Rates”section of the New York city edition of The Wall Street Journal (or,if such section or publication is no longer available,such other comparable publication as mutually agreed to by the parties),as it changes from time to time and (b)the highest rate permitted byapplicableLaw,from the date on which such payment became overdue to and until suchpaymentispaidinfull..(e)At any time during normal business hours,either party shall have the right,_upon reasonable prior written notice to the other party,to examine and/or make copies of the records and data of the other party relating to this Agreement (including all records and data relating to or substantiating any charges paid by or to either party and including without limitation metering records of megawatt hours generated)for the period such records and dataarerequiredtobemaintained.All such records and data shall be maintained for a minimum of |seven (7)years after the creation of such record or data and for any additional time period required under applicable Law or by any Government Agency having jurisdiction over theFacilityortheapplicableparty. 10.TAXES,CHANGES IN LAWS AND CAPITAL IMPROVEMENTS (a).Seller shall be responsible for the payment of Taxes imposed directly onSelleranditsproperty,and the Total Energy Payments and other amounts payable by Purchaser _to Seller hereunder shall not be subject to direct pass-through of such Taxes (although Taxes paid by Seller shall be includable in Seller's revenue requirement for ratemaking purposes). Each party shall provide the other party upon written request a certificate of exemption or other reasonably satisfactory evidence of exemption if any exemption from or reduction of any Tax is applicable.Each party shall exercise commercially reasonable efforts to obtain and to cooperateinobtaininganyexemptionfromorreductionofanyTax. (b)_-_Seller shall be responsible for the capital or variable costs of the development,financing,design,construction,testing,commissioning,operation or maintenance of the Facility,including any changes as a result of a Change-in-Law,and the Total EnergyPaymentand/or any other amounts payable hereunder shall not be subject to direct pass-through 'of such costs,including any Change-in-Law affected costs,(although such costs paid by SellershallbeincludableinSeller's revenue requirement for ratemaking purposes). {c)Purchaser shall have the right at any time to request that Seller makecapitalimprovementsormodificationstotheFacility.Seller shall to the extent reasonablypracticable,and upon receipt of any required Government Approvals,make (or cause to bemade)such improvements or modifications to the Facility so long as (i)suchimprovements or modifications are made at the sole expense of Purchaser;(ii)the Total Energy Payment and/or any other amounts payable hereunder shall be adjusted,or Purchaser pays to Seller anonrefundablecontributioninaidofconstruction,(either of which shall bein addition to rates that are determined under any Rate Stabilization Methodology),to Seller's reasonable satisfaction to reflect any and all increases and decreases in the variable costs of the testing, commissioning,operation or maintenance of the Facility resulting from such improvements or modifications,and such adjustments or contributions are approved by the Commission;(iii)sachimprovementormodificationcouldnot,in Seller's sole discretion,invalidate or impair Seller'sinsurancepoliciesoraclaimagainstsuchinsuranceorthesuccessofanyclaimstobemade -thereunder,resultin a breach or constitute an event of default under any material agreement to _ which Selleris a party or cause Seller's actions or performance hereunder to deviate fromprudentutilityindustrypractices;and (iv)Seller does not object to such improvements on otherreasonable,prudent utility business grounds.11.RIGHT OF ACCESS.Duly authorized representatives of either party shall bepermittedentryand/or access to the premises,facilities and property of the other party,to theextentrelatedtotheFacility,at all reasonable times in order to carry out the provisions of thisAgreement. 12,EVENTS OF DEFAULT. (a)The occurrence.of any one of the following shall constitute an Event of Default with respect to Seller: (i)Seller shall fail to make payments for undisputed amounts dueunderthisAgreementtoPurchaserwithintenC0)days after notice from Purchaser that suchpaymentisunpaidanddue;. (ii)|Seller shall fail to comply with any material provision of thisAgreement(other than the obligation to pay money when due),and such failure shall continue - uncured for thirty (30)days after notice thereof by Purchaser,provided that if such failure is not capable of being cured within such period of thirty (30)days with the exercise of reasonable _diligence,then stich cure period shall be extended for an additional reasonable period of time(not to exceed one hundred and eighty (1 80)days)so long as Seller iis exercising reasonablediligencetocuresuchfailure;. (iii):Seller shall:(1)admitin writing its inability to pay its debts assuchdebtsbecomedue;(2)make a general assignment or ali arrangement or composition with orforthebenefitofitscreditors;(3)fail to controvert in a timely and appropriate manner,or acquiesce in writing to,any petition filed against such Seller under any bankruptcy or similar "10 law;or (4)take any action for the purpose of effecting any of the foregoing; (iv)A proceeding or case shall be commenced,without the application or consent of Seller,in any court of competent jurisdiction,seeking:(1)its liquidation,reorganization of its debts,dissolution or winding-up,or the composition or readjustment of its debts;(2)the appointment of a receiver,custodian,liquidator or the like of Seller or of all or anysubstantialpartofitsassets;or (3)similar reliefin respect of Seller under any law relating to bankruptcy,insolvency,reorganization ofits debts,winding-up,composition or adjustment of debt,and such proceeding shall remain in effect,for a period ofninety (90)days;or (v)The Facility shall be unavailable for dispatch by Purchaser for more than one hundred and twenty (120)days in any twelve (12)month period,regardless of whether the unavailability of the Facility is caused an act of God or public enemy,or because of 'accident,labor troubles,or any other cause beyond the control of the Seller;provided suchunavailabilityisnottheresultofthefaultornegligenceofPurchaser. (bo)The occurrence of any one of the following shall constitute an Evént ofDefaultwithrespecttoPurchaser: (i)Purchaser shall fail to make payments for undisputed amounts dueunderthisAgreementtoSellerwithinten(10)days after notice from Seller that such payment isunpaidanddue; Gi)'Purchaser shall fail to comply with any material provision of this Agreement (other than the obligation to pay money when due),and such failure shall continue uncured for thirty (30)days after notice thereof by Seller,provided that if such failureis not capable of being cured within such period of thirty (30)days with the exercise of reasonable diligence,then such cure period shall be extended for an additional reasonable period of time.{not to exceed one hundred and eighty (180)days)so long as Purchaser iis exercising reasonablediligencetocuresuchfailure; (iii)|Purchaser shall:(1)admitin writing its inability to pay its debts assuchdebtsbecomedue;(2)make a general assignment or an arrangement or composition with orforthebenefitofitscreditors;(3)fail to controvert in a timely and appropriate manner,oracquiesceinwritingto,any petition filed against Purchaser under any bankruptcy or similar law; 'or (4)take any action for the purpose of effecting any of the foregoing; (iv)©A proceeding or case shall be commenced,without the applicationorconsentofPurchaser,in any court of competent jurisdiction,seeking:(1)its liquidation,teorganization of its debt,dissolution or winding up,or composition or readjustment of its debt;(2)the appointment of a receiver,custodian,liquidator or the like of Purchaser or of all or any substantial part of its assets;or (3)similar reliefin respect of Purchaser under any law relating tobankruptcy,insolvency,reorganization of its debts,winding-up,composition or adjustment of debts,and such Proceeding shall remain in effect,for a period of ninety (90)days.(©)If an Event of Default occurs with respect to a defaulting party at any timeduringthetermofthisAgreement,the non-defaulting party may,for so°long as the Event of'Defaultis continuing: il (i)deliver a written notice which establishes a date (which date shall be no earlier than thirty (30)days after the non-defaulting party delivers notice)on which this: Agreement shall be terminated and neither party shall have any further liability or obligations to_the other hereunder after such termination date,except for obligations or duties that accrued priortosuchterminationorthatsurvivesuchterminationbythetermsofthisAgreement,and/or (ii)-pursue any other remedies available at law or in equity,except totheextentsuchremediesareexpresslylimitedbythisAgreement.. 13.SUCCESSORS AND ASSIGNS. (a)This Agreement shallinure to the benefit of and shall be binding upon therespectivesuccessorsandassignsofthepartiestothisAgreement. (b)Subject to Sections 13(c)and (d),neither this Agreement,nor any of the rights or obligations hereunder,may be assigned,transferred or delegated by either party withouttheexpresspriorwrittenconsentoftheotherparty,which consent shail not to be unreasonablywithheld. (c)Purchaser agrees that Seller may assign,mortgage,hypothecate,pledge or otherwise encumber all or any portion of Seller's interest in and to this Agreement in favor of any party providing financing for the Facility as security for any such financing for the Facility. '(d)Nothing in this Agreement shal]restrict the transferability of shares, partnership interests,member interests or other interests in Seller or Purchaser,or the issuance by Seller or Purchaser of additional interests in such party. 14.LIMITATIONS OF LIABILITY;REMEDIES AND DAMAGES. (a)Each party acknowledges and agrees thatin no event shall any partner,shareholder,member,manager,owner,officer,director,employee or affiliate of either party bepersonallyliabletotheotherpartyforanypayments,obligations,or performance due under this-Agreement or any breach or failure of performance of either party and the sole recourse for 'payment or performance of the obligations under this Agreement shall be against Seller or Purchaser and each of their respective assets and not against any other Person,except for suchliabilityasexpresslyassumedbyanassigneepursuanttoanassignmentofthisAgreementiinaccordancewiththetermshereof. .(b)UNLESS EXPRESSLY PROVIDED IN THIS AGREEMENT,NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR CONSEQUENTIAL,INCIDENTAL, PUNITIVE,EXEMPLARY OR INDIRECT DAMAGES SUFFERED BY THAT PARTY OR BY ANY CUSTOMER OR ANY PURCHASER OF THAT PARTY;LOST PROFITS;OR: OTHER BUSINESS INTERRUPTION DAMAGES;REGARDLESS OF WHETHER ACLAIMFORSUCHDAMAGESARISESBYSTATUTE,IN TORT OR CONTRACT,. UNDER ANY INDEMNITY PROVISION,OR OTHERWISE (EXCEPT TO THE EXTENT THAT AN INDEMNIFYING PARTY PURSUANT TO THE PROVISIONS OF SECTION 15 HEREOF IS OBLIGATED TO INDEMNIFY AGAINST THIRD PARTY CLAIMS NOTARISINGOUTOFCONTRACTSWITHTHEINDEMNIFIEDPARTYFOR 12 CONSEQUENTIAL,INCIDENTAL,PUNITIVE,EXEMPLARY OR INDIRECT DAMAGESORLOSTPROFITSOROTHERBUSINESSINTERRUPTIONDAMAGES).ITIS THE - INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES _.AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO,INCLUDING,WITHOUT LIMITATION,THENEGLIGENCEOFANYPARTY,WHETHER SUCH NEGLIGENCE BE SOLE,JOINT OR*CONCURRENT,OR ACTIVE OR PASSIVE. (c).The provisions of this Section 14 shall survive the termination of this Agreement. 1S.INDEMNITY.Each of Seller and Purchaser agrees to indemnify,defend and hold the other party (and its officers,directors,affiliates,agents,employees,contractors andsubcontractors)harmless from and against any and all costs,expenses,damages,liens,charges,claims demands,reasonable attorney's fees,penalties,fine,or liabilities whatsoever (hereinafterinthisSection15referredtoasa"Claim”)arising out of or in any manner connected with or _resulting from the negligence or willful misconduct of such party (and its officers,directors,-affiliates,agents,employees,contractors and subcontractors),to the extent not attributable to the negligence or willful misconduct of the other party (and its officers,directors,affiliates,agents,employees,contractors and subcontractors),which may be asserted by any third party whomsoever against the other party.The obligations of each of Seller and Purchaserunder this paragraph shall include,but not be limited to,obligations arising out of such party's violations (and its officers,directors,affiliates,agents,employees,contractors and subcontractors - violations)of any applicable Environmental Law which requires cleanup or mitigation of any hazardous or toxic wastes,substances or materials,or other poliution.Environmental Laws shall mean and include those statutes (including CERCLA,SARA),regulations,orders orjudgments,which relate to or otherwiseimpose standards of conduct concerning discharges,emissions,.releases,or threatened releases of pollutants,contaminants,or hazardous substances.For the avoidance of doubt,in the event that any loss or damage with respect to any Claim is caused by 'the negligence or willful misconduct of both Seller and Purchaser,including their respective officers,directors,affiliates,agents,employees,contractors or subcontractors,such loss or damage shall be borne by Seller and Purchaser in the proportion that their respective negligence _or willful misconduct bears to the total negligence or willful misconduct causing such loss ordamage. 16.DISPUTE RESOLUTION. (a);Prior to taking action pursuant to Section 16(b): (i)Each of Seller and Purchaser shall designate in writing to the other'Party a representative who shall be authorized to resolve any claim,dispute or controversy-arising out of or relating to this Agreement or the breach,validity,or termination thereof (each,a'Dispute”)in an equitable manner and,unless otherwise expressly provided herein,to exercise -,the authority of such party to make decisions by mutual agreement.. Gi) Ifsuch designated representatives are unable to resolve a Dispute,such Dispute shall be referred by each party's representatives,respectively,to a senior officer 13 designated by Seller and a senior officer designated by Purchaser for resolution upon five (5)Business Days'written notice from either party. _ii)_The parties hereto agree (i)to attempt to resolve all Disputespromptly,equitably andin a good faith manner;and (ii)to provide each other with reasonable access during normal business hours to any and all non-privileged records,information and data pertaining to any such Dispute. .b)Any Dispute will first be attempted to be resolved in accordance with Section 16(a).Should the parties be unable to resolve the dispute to their mutual satisfaction within two (2)Business Days after such negotiation by senior management,or any other mutually agréeable time period,the parties will attempt to resolve the dispute through mediation in Ketchikan,Alaska..The mediator will be named by mutual agreement of the parties or by obtaininga list of five (5)qualified persons from the parties and alternately striking names.The ©mediator will have the duty and responsibility to assist the parties in resolving allissues'submitted for mediation.Both parties agree to cooperate and operate in good faith to resolve all-matters in dispute with the assistance of the mediator.Each party shall be responsible for its own expenses and one-half of any mediation expenses incurred to resolve the dispute.The mediator will provide the parties with a fee and expense schedule in advance of mediation.Mediation will terminate by:(i)written agreement signed by both parties,(ii)determination by the mediator that-the parties are at an unresolvableimpasse,or (iii)two unexcused absences by either party from the mediation sessions.The mediator will never participate in any claim or controversy covered by this Section 16(b)as a witness,collateral contract,or attorney and may not be called as a witness to testify in any proceeding involving the subject matter of mediation.Ifthe parties are still unable to resolve their differences after good faith consideration of a resolution through mediation for a period not to exceed thirty (30)days,each party shall have the right to file suit inaccordance'with Section 17(c). (c)Unless otherwise agreed in writing,each party shall diligently continue to perform its obligations under this Agreement during the pendency of any Disputes or mediation proceedings so long as all undisputed amounts payable hereunder have been paid. 17.MISCELLANEOUS. (a)_Ifany section,paragraph,clause,or provision of this agreement shall befinallyadjudicatedbyacourtorcompetentjurisdictiontobeinvalidorunenforceable,theremainingprovisionsofthisagreementshallremaininfullforceandeffectasthoughsuch section,paragraph,clause,or provision or any part thereof so adjudicated to be invalid had not _been included herein. (b).Any notices,demands,or requests required or authorized by this _ agreement to be given to the parties hereto shall be deemed properly given if mailed,postage.*prepaid,as follows: "To:Seller Haida Energy,Inc. -8th &Cedar Street 14 So Hydabure,Alaska 99922 .Attention:President .Telephone:907-285-3721 .Facsimile:907-285-3944 with a copy to: TO BE DETERMINED _Attention: Telephone:Facsimile: and another copy to: ;Haida Corporation os _8th &Cedar Street , Hydaburge,Alaska 99922 Attention:Chairman of the Board Telephone:907-285-3721 Facsimile:907-285-3944 | To:Purchaser Alaska Power Company. 193 Oito Street ."ts P.O.Box 3222 Port Townsend,WA 98368 Attention:Bob Grimm -President Telephone:800-982-0136 x120 Facsimile:. with a copy to: Davis Wright Tremaine LLP 1201 Third Avenue,Suite 2200 Seattle,WA 98103 Attention:Scott MacCormack Telephone:206-757-8263 Facsimile:206-757-7263 The parties may from time to time designate a new address to which notices,demands,orrequestsrequiredorauthorizedbytheiragreementmaybeaddressed,and from and after any 15 such designation,the address designated shall be deemed to be the address of such partyin lieuoftheaddresshereinabovegiven. (c)This Agreement shall be governed by,and construed in accordance with, the law of the State of Alaska,exclusive of conflicts of laws provisions.Venue for any dispute under this Agreement shall bein a Superior Court or Federal District Court locatedin the FirstJudicialDistrictfortheStateofAlaskaat:Ketchikan,Alaska.(d)This Agreement may be executedin counterparts,all of which shallconstituteoneagreementbindingonbothpartiesheretoandshallhavethesameforceand effect.as an original instrument,notwithstanding that both parties may not be signatories to the sameoriginalorthesamecounterpart. (ec)This Agreement constitutes the entire understanding between the parties' and supersedes any and all previous understandings or agreements between the parties withrespecttothesubjectmatterhereof. (8 "No delay or omission to exercise any right,power or remedy accruing upon the occurrence of any Purchaser Event of Default or Seller Event of Default hereunder or any breach or default of any party hereto under this Agreement shall impair any such right, power or remedy of such party,nor shall it be construed to be a waiver of any such breach or.. default,or an acquiescence therein,or of or in any similar breachor default thereafter occurring, nor shall any waiver of any single Purchaser Event of Default or Seller Event of Default or otherbreachordefaultbedeemedawaiverofanyotherPurchaserEventofDefaultorSellerEventof Default or other breach or default theretofore or thereafter occurring.Any waiver,permit,' consent or approval of any kind or character on the part of any party hereto of any Event of Default describedin the preceding sentence or other breach or default under this Agreement,or any waiver on the part of any party hereto of any provision or condition ofthis Agreement,mustbeinwritingandShallbeeffectiveonlytotheextentspecificallysetforthinsuch°writing.(g)|No modification,amendment or waiver of any provision of thisAgreementshallbevalidunlessitisinwritingandsignedbybothPurchaserandSeller. (h)This Agreementis intended solely for the benefit of Purchaser and Seller. Nothingin this Agreement shall be construed to create any duty or liability to,or standard of care with reference to,any other Person.; 18.COMMISSION APPROVAL.In accordance with Alaska Statutes 42.05.361(a) and 3 Alaska Administrative Code 48.200 -3AAC 48.450,parties acknowledge there understanding that (A)this Agreement (1)must be filed with the Commission,(2)does not take effect without prior approval of the Commission;and (3)is at all times subject to revisions by the Commission,and (B)the parties to this Agreement shall be given notice and an opportunity to be heard before the Commission as a condition precedent to revising this Agreement. 16 SELLER - i GAVbs bd IN WITNESS WHEREOR,Seller and Purchaser have caused this Agreement to beexecutedbytheirdulyauthorizedrepresentativesasofthedayandyearfirstwrittenabove. .mL INC.Sya) €Date :7/2 Je vi Date {Signature page to Power Sales Agreement} 7aEXHIBIT A Rate Schedule Purchaser shall pay Seller for power as follows:) 1,Base Energy Payment.Starting with the Commercial Operation Date,for electrical energy delivered by Seller and accepted by Purchaser during any Contract Year up totheamountoftheReynoldsCreekBaseEnergy(as prorated based on the number of daysin the Contract Year),Purchaser shall pay Seller each month the "Base Energy Payment,”equal to the Minimum Monthly Payment.The Minimum Monthly Payments for the initial month and finalmonthoftheTermofthisAgreementshallbeproratedbasedontheactualnumberofdaysin .the respective months.In the event the performance of Seller is excused as a result of Section 3(d)of the Agreement,and an amount less than the Reynolds Creek Base Energy divided by 12isdeliveredinanymonthasaresultthereof,then the Minimum Monthly Payment for theaffectedmonthshallbereducedonaproratabasis-to reflect the number of days during the applicable month for which Seller was unable to perform (this sentence shall not apply to any shortage of energy delivered caused by drought or other water shortage condition,in which casenoreductiontotheMinimumMonthlyPaymentshallberequired).2.-Additional Energy Payment.For all electrical energy delivered by Seller andacceptedbyPurchaserinexcessoftheReynoldsCreekBaseEnergyforanyContractYear(as prorated based on the number of days in the Contract Year for the first and last Contract Year),Purchaser shall pay Seller for such electrical energy,iin addition to the Minimum Monthly'Payments required under Section 1 above,at an "Additional Energy Rate”thatis establishedinthefollowingmanner: (a)_Initia]Additional Energy Rates."Initial Additional Energy Rates,”including adjustments to those rates as provided for in this Subsection (a),shall be determinedusingtheRateStabilizationMethodology.This Agreementis contingent upon the approval bytheCommissionoftheratemakingmethodologysetforthiinthisExhibitA.- .(1)='The first Initial Additional Energy Rate shall be $0.0648 per kWh,which is equal to the current rate for Purchaser's power purchases from BBL Hydro,Inc. (2)Under the Rate Stabilization Methodology,the portion of Seller's annual revenue requirement that is not actually recovered from customer rates during that-yearshallbedeferredandaccrued-in a Rate Stabilization Account,which shall be considered a ratebaseassetoftheSellerandaccrueannualinterest(return on rate base)at a rate (annual"Ratemaking RORB”)that corresponds to a fixed annual rate of return on equity ("ROE”)equal,to 15.0 percent ("Ratemaking ROE”),given Seller's actual capital structure and actual cost ofdebt. -(3)Seller may adjust the original and subsequently revised Initial.Additional Energy Rates based upon allowable revenue requirement items (which shall include _the Rate Stabilization Methodology and the Ratemaking RORB and Ratemaking ROE)and 'A-l Version 12 (9-11-09) updated load growth projections,as necessary to ensure that the Rate Stabilization Account is projected to.be,and ultimately in fact is,reduced to zero within twenty (20)years after the - -Commercial Operation Date,or earlier.No other types of rate adjustments shall be allowed '.during the period when the Rate Stabilization Methodology is in effect (except as contemplatedinSection10(c)).To the extent they are determined using the Rate Stabilization Methodology set forth in this Agreement,these interim rate adjustments shall be determined without strict compliance with standard rate making methodologies as specified in 3 AAC 48.275. (b}Subsequent Additional Energy Rates.When the Rate Stabilization Account is reduced to zero,the Rate Stabilization Methodology shall terminate and the Additional Energy Rate shall be determined under standard rate making methodologies as specified in Commission regulations inchiding 3 AAC 48.275 and Commission precedent. --°oo,NaEXHIBIT B O&M Reimbursement The Operations and Maintenance Reimbursement Amount and Land Lease ReimbursementAmountshallbe: (a)initially 100%of all Operations and Maintenance Reimbursable Expensesand100%of Land Lease Reimbursable Expenses;then (b)50%ofall Operations and Maintenance Reimbursable Expenses,and 50%of all Land Lease Reimbursable Expenses,for each Contract Year after the Contract Year in which Seller's Net Revenue first equals or exceeds $500,000;unless it is determined,by clearandconvincingevidence,that Seller's Net Revenue being equal to or exceeding $500,000 was the result ofunusual,nonrecurring events,and it is further determined,by clear and convincing evidence,that such a result is unlikely to occur again during the current Contract Year;then (c)0%ofall Operations and Maintenance Reimbursable Expenses,and 0%of all Land Lease Reimbursable Expenses,for Contract Year after the second Contract Year (which Contract Year need not immediately follow the Contract Year set forth in clause (b)above)in| which Seller's Net Revenue again equals or exceeds $500,000;unless it is determined,by clear and convincing evidence,that Seller's Net Revenue being equal to or exceeding $500,000 was _the result of unusual,nonrecurring events,and it is further determined,by clear and convincing evidence,that such a result is unlikely to occur.again during the current Contract Year. B-1 Execittion Copy _OPERATION AND MAINTENANCE AGREEMENT THIS OPERATION AND MAINTENANCE AGREEMENT (together with the Exhibitshereto,this "Agreement”)is made and enteredinto effective as of September 23,2009,by andbetweenHaidaEnergy,Inc.,an Alaska corporation ("Owner”),and Alaska Power &Telephone Company,an Alaska corporation ("Operator”)(Owner and Operator are individually referred to herein as a "Party”and collectively as the "Parties”),with reference to the following facts. A Owner is undertaking to develop,construct,finance and own a hydroelectric power facility (the "Facility”),to be located on or about Reynolds Creek on Prince of Wales Island,Alaska,and the net electrical output of the Facility will be purchased by.Operator pursuant to a Power Sale Agreement dated as of September 23,2009 by and between Owner and 'Alaska Power Company (the "Power Sale Agreement”); B.Operator has expertise in the operation and maintenance of hydroelectric power'facilities of the type and character of the Facility,and desires to provide operation andmaintenanceservicestotheFacilityonthetermsandsubjecttotheconditionssetforth iin this_Agreement;and C.Owner desires to appoint Operatorto operate and maintain the Facility on thetermsandsubjecttotheconditionsofthisAgreement. NOW,THEREFORE,in consideration of the foregoing,and for other good and valuable consideration,the receipt and sufficiencyof which are hereby acknowledged by-each Party,thePartiosheretoagreeasfollows: ARTICLE I "DEFINITIONS;INTERPRETATION Section 1.1 Definitions.In this Agreement the following terms shall have thefollowingmeanings:"Business Day”means any day except Saturday,Sunday or a day thatis authorized as a|holiday by banksin Ketchikan,Alaska or New York,New York. "Claims”means any claims,judgments,losses,liabilities,costs,expenses (including | reasonable attorneys'fees)and damages of any nature whatsoever (except workers'compensation claims)in relation to personalinjury,death or:Property damage incurred or madebythirdparties. "Commercial Operations Date”has the meaning assigned to such term in the Power"Sale Agreement. "Contract Year”means each twelve (12)month period starting on January }and endingon.December 31,provided that (i)the first Contract Year shall commence on the Commercial oo Operations Date and shall end on December 31 of such Contract Year,and (ii)the final ContractYearshallterminateonthelastdayofthetermofthisAgreement. "Default Rate”means the lesser of (i)the "Prime Rate”as publishedin the "Money Rates”section of the New York city edition of The Wall Street Journal (or,if such section or publicationis no longer available,such other comparable publication as determined by the' Paying Agentin its reasonable discretion)plus two percent (2.00%)as adjusted from time-to-time,and (ii)the maximum rate permitted by law. "Delivery Point”has the meaning assigned to such term in the Power Sale Agreement. "Effective Date”means the date of this Agreement. "Expected Dispatch Schedule”means the dispatch schedule for the Facility set forthin Section 3 of the Power Sale Agreement. "Extraordinary Maintenance”means necessary repair,replacements,or maintenance, that:(1)arise solely as a result of unforeseeable "acts of God”(including earthquakes,floods, lightning strikes,fires,tidal waves,landslides,or avalanches);or (2)involve significant Facility or equipment damage or failure that is not normally expected during the life of a project of the.type and size of the Facility (including repair ofmajor hydro conduit failure,damage fromaircraftimpact,or damage due to vandalism,sabotage,or arson).For clarification,"extraordinary maintenance”shall not include repair,replacements,or maintenance that is 'expected to be required at some point in time,even if it is not expected annually or routinely scheduled (including rehabilitation or replacement of diversion or controls instrumentation, penstock external and internal inspection and coating,turbine runner and nozzle reconditioning, bearings replacement,major rehabilitation maintenance,powerhouse instrumentation and controls rehabilitation or replacement,or intake screen rehabilitation),but "extraordinarymaintenance”shall include turbine runner and nozzle replacement. "Facility”has the meaning assigned to such term in the preamble to this Agreement. "Force Majeure”means an event or circumstance not within the reasonable control of a Party (and which event or circumstance could not have been brought within the reasonablecontrolofsuchPartythroughsuchParty's commercially reasonable efforts to limit the extent © and duration of delays in its performance),including,without limitation,acts of God,fire, .explosion,terrorism,embargo,riot,earthquake,flood,epidemic,acts of public enemy,war, sabotage,a national,regional or local labor dispute (but expressly excluding any such labor dispute directed at the employment practices of Operator or any subcontractor),any delay by a Government Agency in taking,or failure of a Government Agency to take,requested action necessary in connection with performance of the Services,provided that payment of all _hecessary fees and charges was made,diligent and continuous pursuit of the application was -taade,and the delay arising from such event could not be avoided or mitigated by any reasonable method,and unusually severe or disruptive weather (e.g.,tornado or hurricane),but excluding storms,rain or other types of bad weather that could reasonably be expected in the area in which the Facility is to be located.No event or circumstance shall be considered to be an event of Force Majeure to the extent such event or circumstance could have been prevented,overcome or 2 egremedied if the Party claiming Force Majeure had exercised commercially reasonable efforts todoso,and Force Majeure events shall expressly exclude a Party's financial inability to perform. "Government Approval”means all authorizations,consents,approvals,licenses,leases,rulings,permits,tariffs,rates,certifications,exemptions,filings,variances,orders,judgments,decrees,publications,notices to,declarations of or with or registration by or with any Government Agency relating to the Services., "Government Agency”means any federal,state,local,territorial.or municipal government and any department,commission,board,bureau,agency,instrumentality,judicial or administrative body thereof having jurisdiction over the Facility,Operator or Owner,as the case may be;provided that none of Operator,Owner or any Affiliate of Operator or Owner shall be a -Government Agency. "Ground Lease”means the Ground Lease by and between Sealaska Corporation,as_-lessor,and Owner,as lessee,relating to the real property on which the Facilityis located. "Index”means the Gross Domestic Product Implicit Price Deflator Index published in _the Survey of Current Business by the United States Department of Commerce,Bureau ofEconomicAnalysis(starting date December 31,2009)for the month of January.If the Index is discontinued or replaced during the term of this Agreement,or any extensions thereof,such other governmental index or computation which replaces the Index shall be usedin order to obtainsubstantiallythesameresultaswouldbeobtainediftheIndexhadnotbeendiscontinuedor'.teplaced. "Law”means (i)any statute,law,rule,regulation,code,ordinance,judgment,decree, -writ,order,license,agreement,directive,guideline,policy,requirement,or other governmentalrestrictionoranysimilarformofdecisionofordeterminationby,or any interpretation oradministrationofanyoftheforegoingby,any Government Agency,whether now or hereafter in' effect or (ii}any requirements or conditions on or with respect to the issuance,maintenance or renewal of any Government Approval or applications therefor whether now or hereafter in effect. "Lien”means,with respect to any property of any Person,any mortgage,lien,pledge, charge,lease,easement,servitude,night of others or security interest or encumbrance of any kind in respect of such property of such Person. "Loss”means any losses,liabilities,costs,expenses,claims,proceedings,actions, demands,obligations,deficiencies,lawsuits,judgments,awards,penalties imposed by.Government Authoritiesor damages. "MW”means "megawatt,”or one million watts of electric power. "O&M Employees”means (i)the employees of Operator who are directly engaged by Operator to perform Services under this Agreement,and (ii)employees who are indirectly engagéd to perform Services hereunder,whether pursuant to a subcontract or otherwise. "Operating Fees”shall have the meaning set forth in Section 8.1. ae! "Operating Period”means the period commencing on the Commercial Operations DateandterminatingonthelastdayofthetermofthisAgreement. "Operating Plan”means the operating plan(s)for any period prepared by Operatorshowingonamonth-by-month basis,all relevant information relating to the anticipatedoperationandmaintenanceoftheFacility. )"Operating Services”means the services identified in Exhibit B. "Operating Standard”shall have the meaning set forth in Section 3.3(a). "Operator's Representative”means the individual designated by Operator in accordance with Section 5.3(a). "Owner's Representative”means the individual designated by Ownerin accordancewithSection5,4(a): ”a"Person”means any individual,corporation,company,firm,entity,partnership,jointventure,association,trust,unincorporated organization or Government Agency."Power Sale Agreement”has the meaning assigned to such term in the preamble to thisAgreement. "Prudent Utility Practice”means any of the practices,methods,standards and acts (including,but not limited to,the practices,methods and acts engaged in or approved by asignificantportionoftheelectricpowergenerationindustryintheUnitedStates)that,at a"-particular time,in the exercise of reasonable judgmentin light of the facts known or that shouldreasonablyhavebeenknownatthetime2decisionwasmade,could have been expected to accomplish the desired result consistent with good business practices,reliability,economy, safety and expedition,and which practices,methods,standards and acts generally conform to operation and maintenance.standards recommended by the Facility's equipment suppliers andmanufacturers,the Design Limits and applicable Governmental Approvals and Law. "Scheduled Maintenance”means providing all consumables,and inspecting andprovidingregularandscheduledmaintenancefortheFacilityandcorrectingallmalfunctions andrepairingorreplacinganyequipment,parts or components of the Facility which are,or which Operator reasonably believes to be damaged or worn,as part of the normal operation of the'Facility during the Operating Period. "Services”means the services to be provided by Operator pursuant to this Agreement,including,without limitation the Operating Services to be provided by Operator during the Operating Period (including,without limitation,Scheduled Maintenance and ExtraordinaryMaintenance).. "Site”means the real property in which Owner has a leasehold estate pursuant to theGroundLeaseandanyotherleaseagreementsandonwhichtheFacilitywillbelocated. "Taxes”means,with respect to any Person,all taxes,withholdings,assessments,imposts,duties,governmental fees,governmental charges or levies imposed directly or indirectly by any 4: Governmental Agency on such Person or its income,profits or property or measured by theproductionofenergyorgrossrevenue,gross receipts or comparable measure thereof,and_whether characterized as an ad valorem,sales,gross receipts,energy production or other similar taxes. "Termination Date”shall have the meaning set forth in Section 11.3. "Termination Notice”shall have the meaning set forth in Section 11.3. ).Section 1.2 Interpretation. Unless the context otherwise requires: (a)Words singular and plural in number shall be deemed to include the other and pronouns having masculine or feminine gender shall be deemed to include the other. (b)Subject to Section 1.2(g),any reference in this Agreement to any Person includes its successors and assigns and,in the case ofany Government Agency,any Person.succeeding to its functions and capacities. (c)©Anyreference in this Agreement to any Section or Exhibit means and refers to the Section containedin,or Exhibit attached to,this Agreement unless otherwise'specified. (d)Other grammatical forms of defined words or phrases have correspondingmeanings.Do (ec)Areference to writing includes typewriting,printing,lithography,photography and any other mode of representing or reproducing words,figures or symbolsin alastingandvisibleform., (fh A reference to a specific time for the performance of an obligation isisareferencetothattimeintheplacewherethatobligationiistobeperformed.. (g)Arreference to a Party to this Agreement includes that Party's successors and permitted assigns.. (h).Areference to a document or agreement,including this Agreement, includes a reference to.that document or agreement as novated,amended,supplemented orrestatedfromtimetotime. )(i)If any payment,act,matter or thing hereunder would occur on a day that is - not a Business Day,then such payment,act,matter or thing shall,unless otherwise expressly provided for herein,shall occur on the next succeeding Business Day. !oYteeARTICLE II -TERM Section 2.1 Initial Term..This agreement shall become effective upon the Commercial Operation Date and shall continue in effect for an initial period ending on October1,2050,unless otherwise extended or terminated iin accordance with the provisions of thisAgreement. Section 2.2 Extended Term..The term of this Agreement may be extended by mutual'agreement of Owner and Operator for an additional period,provided that Owner.or Operatorrequestsinwritingan-extension of this Agreement not less than eighteen (18)months prior to the expiration of the initial term set forth in Section 2.1.In the event an extension request issubmittedbyeitherparty,Owner and Operator shall each negotiate in good faith using commercially reasonable efforts to agree on the terms,conditions and length of an extended term. Section 2.3 Termination Option. (a)Owner agrees that the continued effectiveness of this Agreement iscontingentuponAlaskaPowerCompanycontinuingtobeapartytothePowerSaleAgreement...Within ninety (90)days of the termination of the Power Sale Agreement-or the suspension ofAlaskaPowerCompany's rights thereunder,Operator shall give written notice to OwnerindicatingwhetherOperatorelectstocontinueorterminatethisAgreement.In the event that'Operator elects to terminate this Agreement pursuant to this Section 2.3(a),the notice fromOperatorshallstateaterminationdateatleastonehundredandtwenty(120)days from the datesuchnoticeisgivenandaftersuchdate,neither Owner nor Operator shall have any further -liability or obligations to the other hereunder,except for obligations or duties that accrued prior étosuchterminationorthatsurvivesuchterminationbythetermsofthisAgreement. (b)*Owner and Operator agree that the purpose and intent of this Agreement is dependant on the successful completion of the construction of the Facility and the related achievement of the Commercial Operation Date.As such,in the event that construction of the Facility is at any time discontinued,abandoned or otherwise terminated by Owner or the Commercial Operation Date is not achieved by December 31,2016 then either Party may terminate this Agreement upon 30 days'notice to the other Party.In the event that a Party elects .to terminate this Agreement pursuant to this Section 2.3(6),neither Operator nor Owner shail have any further liability or obligations.to the other hereunder after the termination date,except for obligations or duties that accrued prior to such termination or that survive such termination ,by the terms of this Agreement. ARTICLE I SCOPE OF SERVICES Section 3.1 General.Operator shall operate and maintain the Facility in accordance with the provisions of the Agreement and the instructions from Owner,provided such instructions are not inconsistentwith the balance of the provisions of this Agreement. Section 3.2 Operating Period.During the Operating Period,Operator shall beresponsibleforallaspectsoftheoperationandmaintenanceoftheFacility,and shall ensure that all necessary services required to operate and maintain the Facility,including without limitationScheduledMaintenanceandExtraordinaryMaintenance,are timely performedin accordancewiththisAgreement.Without limiting the foregoing,Operator shall provide or cause theprovisiontoOwnerbyO&M Employees,the Operating Services set out in Exhibit A. Section 3.3-Standard for Performance of Obligations. (a)Operator shall operate and maintain the Facility and perform all theServiceshereunderinaccordancewiththefollowing(collectively referred to herein as the"Operating Standard”): (i)all applicable Laws; (ii) -any applicable permits,regulations or provisions set forth byreliabilitycouncilsorGovernmentAuthorities,including,but not limited to,all environmentalpermits,notifications,registrations,laws and regulations,other operating rules or procedures,and any other rules and regulations applicable to the Facility; (iii)the terms ofthis Agreement; (iv)Prudent Utility Practice; (v)the Operating Plan,as in effect from time-to-time; (vi)the original equipment manufacturer requirements for the-preservation of equipment warranty rights except for agreed modifications which may beapprovedbyOwner;and (vii)the terms of Operator's and Owner's respective insurance policies.(b)Operator shall give precedence to the obligations iin the priority set forth .in Section 3.3(a)unless otherwise agreed to by Owner and Operator. Section 3.4 _Liens.Operator shall not permit any Lien to be filed or otherwise imposed 'on any part of the Facility as a result of the Services or its employment of any subcontractor for .the performance of the Services;provided,however,that Operator shall not be responsible for any Lien resulting from Owner's breach of its responsibilities hereunder. Section 3.5 Qualification to Operator's Obligations.Operator shall not be liable to _Owner for any Loss suffered or incurred by Owner to the extent such Loss is a result of: (a)|Operator's compliance with any written instruction,direction or parameter.given by Owner or any constraint imposed by Owner at any time upon Operator,in either case,which is materially different from those otherwise provided by this Agreement;or (b)__the failure by Owner to comply with its obligations under this Agreement,_which failure has a material adverse effect on Operator's ability to perform the Services,except 7 . on ons,\ to the extent that such failure is a result of any gross negligence or willful misconduct-of -Operator or its officers,directors,employee or other agents.-- Section 3.6 |Government Approvals.Operator shall perform the Services,including- the operation and maintenance of the Facility,in accordance with the terms and conditions of all Government Approvals applicable to the operation and maintenance of the Facility,whether such approvals are obtained in the name of Owner or Operator. _Section 3.7 Access.Operator shall provide Owner and its officers,directors,employees or other agents,access to the Facility to review and inspect the Facility,the operation and maintenance thereof and Operator's performance of the Services and its obligationshereunder.Operator may also provide its officers directors,employees or other agents access to 'the Facility in such Persons'capacities as purchaser under the Power Sale Agreement in order for such Persons to review metering equipment or other make inspections of the Facility. Section 3.8 Affiliate Transactions.Operator acknowledgesthat in performing theServiceshereunderOperatormayberequiredtoadministerandenforcecontractsandagreementsbetweenOperatorandoneormoreaffiliatesofOperator.Operator may coordinate its performance of the Services hereunder with the needs of Operator or its affiliates in order to 'conform to the Expected Dispatch Schedule and any other requirements under the Power SaleAgreement.Section 3.9 Qperator to Act as Independent Contractor-Operator hereby agrees tocarryoutthefunctionsofandtoactasanindependentcontractorforthepurposeofthe performance of the Services in accordance with the terms of this Agreement. ARTICLE IVRESPONSIBILITIESANDRIGHTS OF OWNER Section 4.1 Owner's Responsibilities.Owner shal!be responsible for the following activities:_ (2)|Owner shall provide access to all utility interconnections to the interconnection points,including all easements and rights of way required for Operator to carry out the Services and other obligations under this Agreement; (b)Owner shall designate lay-down and storage areas in the Facility and on _the Site,to facilitate Operator'S provision of the Services and other obligations under this.Agreement; (c)Owner shall provide Operator with access to the Facility and the Site as_taay be necessary or convenient for Operator to perform the Services and other obligations under this Agreement;. (d)|Owner shall pay Operator the Operating Fees owed to Operator for theServicesassetforthinARTICLEVIIIandanysumsdueOperatorunderthetermsofthis Agreement,as and when the same are properly due and payable; ",en!(e)|Owner shall pay for the costs of all Scheduled Maintenance andExtraordinaryMaintenance; (6 Owner shall pay any and all Taxes related to the Facility (including realandpersonalpropertyTaxesontheFacilityandincomeTaxesofOwner),but specifically excluding Taxes which are the legal responsibility of Operator,inchiding but not limited to Operatorincome taxes and real and personal property taxes assessed onnn property owned orleasedbyOperator; (g),Provide.and maintain insurance in accordance with Section 15.1; (h)Manage and perform Owner''s obligations under the Ground Lease,any"other leases relating to the Site,and the Power Sale Agreement,to the extent such obligations are-not delegated to Operator under this Agreement;, Gi)|Pay all fees due with respect to Government Approvals that are the responsibility of Owner under Section 4.3 (other than fines or penalties due to Operator's failuretocomplywithPrudentUtilityPracticesresultinginabreachofapplicableLawsorsuchGovernmentApprovals)as and when the same are properly due and payable;and (j)-Manage any grant,loan or other financing agreements related to theFacility., Section 4.2 Review and Approval Owner shall,subject to Section 7.2 and except as expressly otherwise set forth in this Agreement,review in a timely fashion all items submitted byOperatorforitsapproval:Notwithstanding the foregoing,the Operating Plan shall governOperator's performanceof its obligations hereunder until a new planis approvedin accordancewithSection7.2. Section 4.3 Government Approvals.Owner shall procure,obtain and maintain on behalf of itself and Operator those Governmental Approvalsthat must be obtained directly by Owner.Operator shall give reasonable advance written notice to Owner of the necessity of any such Government Approvals that must be obtained directly by Owner.Operator shall provide Owner with such assistance and cooperation as may reasonably be requiredin order to obtainandmaintainanysuchGovernmentApprovals. ARTICLE V0&M EMPLOYEES AND REPRESENTATIVES Section 5.1 "O&MEmployees.Operator shall identify,recruit,interview and hire all.labor,professional,supervisory and managerial personnel as are required to perform the Services hereunder.The O&M Employees shall be qualified (and if required,licensed)and experienced in the duties to which they are assigned.To the extent possible and consistent with sound _business practices and applicable law,regulation or financing requirements,Operator shshall seek:to employ.and train local people residingin the area of the Facility.Section 5.2 Employment of O&M Employees.All O&M Employees shall be employed by Operator or a subcontractor and shallin no event be deemed to be the employees of 9 the Owner.Operator or a subcontractor,as applicable,will be responsible for paying the salaries and all benefits of such employees,meeting all governmental liabilities with respect to suchemployees,supervising and determining all job classifications,staffing levels,duties,safetytraining,security clearances,fitness for duty and other terms of employment for the O&MEmployeesinaccordancewithapplicableLaws.Operator shall,at all times during the term of'this Agreement,have full supervision and control overthe O&M Employees that it employs and shall at all times maintain appropriate order and discipline among its personnel and shall cause each subcontractor to maintain similar standards with respect to such subcontractor's employees. Section 5.3 Representative of Operator. (a)|Operator shall designate a single individual (or one or more replacementsthereoffromtimetotime)as Operator's Representative to act as a single point of contact for .Owner with respect to the performance of the Services who shall be authorized to act on behalfofOperatorandadministerthisAgreementonbehalfofOperator,agree upon procedures for coordinating Operator's efforts with those of Owner and furnish information,when appropriate,- to Owner;provided,that no amendment or modification of this Agreement shall be effectedexceptbyanamendmenttothisAgreement.(b)Operator's Representative is authorized and empowered to act for and on behalf of Operator on all matters concerning this Agreement and its obligations hereunder,otherthananyamendmentstoorwaiversunderthisAgreement.In all such matters,Operator shall be bound by the written communications,directions,requests and decisions given or made by the 'Operator's Representative (or its designee)within the scope of its responsibilities. Section 5.4 Representative of Owner. (a)Owner shall desi gnate a single individual (or one or more replacementsthereoffromtimetotime)as Owner's Representative to act as a single point of contact forOperatorwithrespecttotheperformanceoftheServiceswhoshallbeauthorizedtoacton behalf _ of Owner on routine matters and generally administer this Agreement on behalf of Owner,agree upon procedures for coordinating Owner's efforts with those of Operator and furnish information,when appropriate,to Operator;provided,that no amendment or modification of this" Agreement shall be effected except by an amendment to this Agreement. (b).|Owner's Representative is authorized and empowered to act for and onbehalfofOwneronallmattersconcerningthisAgreementanditsobligationshereunder,other -than any amendments to or waivers under this Agreement.In all such matters,Owner shall beboundbythewrittencommunications,directions,requests and decisions given or made by the|Owner's Representative (or its designee)within the scope of its responsibilities. ARTICLE VI INFORMATION,REPORTS,RECORDS AND AUDITS Section 6.1 Information.Owner shall provide Operator with information-in itspossessionwhichisreasonablyrequestedbyOperatorandnecessaryforOperatortocarry out itsdutieshereunder. 10 i)Section 6.2 Reports and Written Notices.(a)_Operator shall cause all Facility books and records to be available to be'audited by Owner or its agents. (b)Operator shall provide to Owner the reports Owner may from time to timereasonablyrequestregardingtheoperationandmaintenanceoftheFacility. (¢)Operator shall promptly submit to Owner any information concerning neworsignificantaspectsoftheoperationsoftheFacility,any complaint about the Facility from any'Person who complains directly to Operator or of which Operator becomes aware and,uponOwner's request,any other information Concerning the Facility or the Services performed byOperator. }. Section 6.3.Audits.Owner shall have the right to carry out audit tasks of a financial,technical or other nature in relation to the operation and maintenance of the Facility once each -Contract Year upon not léss than thirty (30)days (or such shorter period if required by applicable - Law)prior notice to Operator.Operator shall make available,at the Facility site or at Operator's home office location,to Owner and Owner shall have the right to review,all contracts,books, records,and other documents relating to the Services provided by Operator,and Owner may make such copies thereof or extracts therefrom as Owner deems appropriate. ARTICLE VII OPERATING PLANS Section 7.1 Operating.Plan, (2)After commencement of the Operating Period,but not later thanSeptember1beforethebeginningofanysubsequentContractYearduringtheOperating Period, Operator shall prepare and submit to Owner a proposed Operating Plan for the immediately succeeding partial or complete Contract Year,as the case may be. (b)Each proposed Operating Plan shall show,in such detail reasonablyrequiredbyOwnerandonamonth-by-month basis,all relevant information relating to theanticipatedoperationandmaintenanceoftherelevantfacilitiesbyOperator. Section 7.2 Approval of Operating Plans., (a)|Upon receipt by Owner of a proposed Operating Plan,Owner shall-consider the proposed Operating Plan and,on or before November 1,shall either provide its-written approval of same or request amendments to be made thereto. (b)If Owner requests amendments to a proposed Operating Plan,Operatorshall,within a reasonable time andin no event later than thirty (30)days afterits receipt of suchrequest,submit to Owner a revised Operating Plan incorporating the requested amendments, other than any such amendments which,in the reasonable and professional opinion of Operator, »will prevent its ability to perform its obligations in accordance with the provisions of ARTICLE1. Il (c)Within thirty (30)days after its receipt of any revised Operating Plan,© Owner shall either provide written approval of the same or notify Operator of the amendments which it wishes to make together with its reasons therefor.Lf Owner requests additionalamendments,Owner and Operator shall attempt to resolve all outstandingissues within areasonabletimeafterreceiptbyOperatorofthenotificationofrequestedamendmentstothe revised Operating Plan.If Operator and Owner are unable to agree on a new Operating Plan for any Contract Year by the expiration of the previous Contract Year's Operating Plan,theproposedOperatingPlanshallbecomeeffectiveinallrespectsotherthanthoseportions for which a disagreement remains,and as to those disputed portions,the existing Operating Plan for the previous Contract Year shall continue to remain in effect until a new OperatirigPlanis”-- agreed to by the Parties,with any amounts for expenditures under such continuing Operating Plan being adjust upward to reflect the change to the Index over the previous Contract Year. Section 7.3 Extraordinary Maintenance.- If the Operator learns of an event or other contingency that requires Extraordinary -Maintenance,the Operator shall promptly notify Owner of the circumstances and request prior authorization from Owner to incur costs or make expenditures to provide such Extraordinary'*Maintenance.-After-such notice is given,and if required by Owner,the Operator shall develop a scope,schedule,budget and proposed plan of work and deliver the same with a request to proceed-as soon as practicable.Owner shall respondin writing to the Operator's request as soonaspracticableafterreceiptoftheplan.Upon authorization by Owner,the Operator shall performsuchworkconsistentwiththeplan.The Operator shall not incur any costs for Extraordinary Maintenance without the written approval required in this subsection,except that Operator shall not be required to obtain such approval if emergency conditions require the Operator to incur such costs prior to obtaining written approval. ARTICLE VIII OPERATING FEES Section 8.1 Operator Fees.In consideration of the Operating Services and any other|obligations of Operator under this Agreement,Owner agrees to pay Operator for the Operating Services,monthly,in arrears,an amount equal to Operator's actual costs andexpensesof performing such Services plus fifteen percent (15%)of such actual costs and expenses during _such period (the "Operating Fees”).The costs and expenses of Operator shall include theactual,hourly costs of salaries and benefits for O&M Employees,the actual costs of parts and theuseofequipmentthatisnototherwiseownedorpaidforbyOwnerandsuchoverheadcostsas are allocable to the Facilityin accordance with Operator's cost allocation manual as then-approved by the Regulatory Commission of Alaska.Operator shall maintain.documentation"substantiating the costs and expenses incurred. Section 8.2 Billing and Payment.As soon as practicable after the end of each month, but in any case within ten (10)Business Days after the end of each month,Operator shall provide | to Owner a monthly invoice setting forth the Services provided during the prior month,the costs and expenses of Operator incurredin performing such Services and the related Operating Fees°owedin connection therewith.Such invoice shall be accompanied by appropriate records and -other information as Owner may reasonably request to.verify that the costs and expenses were properly incurred.Owner hereby agrees to pay,or cause to be paid,invoices submitted by .12 Operator which are undisputed by Owner within thirty (30)days after receipt of the invoice from Operator. Section 8.3.Disputed Items.If either Party disputes the accuracy of an invoicesubmittedpursuanttoSection8.2(a),the Parties shall use commercially reasonable effortstoresolvethedisputeinaccordancewithArticleXIV.Any adjustments which the Parties maysubsequentlyagreetomakewithrespecttoanysuchbillingdisputeshallbemadebyacredit oradditionalchargeonthenextinvoicerenderedbyOperator.If the Parties are unable to resolvethedisputeinthismanner,any amounts disputed shall be depositedin an escrow account pending final resolution of the dispute in accordance with Article XIV,provided that any undisputed amount shall be promptly paid. ARTICLE IXREPRESENTATIONSANDWARRANTIES Section 9.1 Representations and Warranties by Operator.Operator represents andwarrantstoOwnerthat: (a)Operator is a corporation duly organized,validly existing and in goodStandingunderthelawsofthestateofAlaskaandisqualifiedandingoodstandingineachotherjurisdictionwherethefailuresotoqualifywouldhave.a material adverse effect upon thebusinessorfinancialconditionofOperatorortheFacility,and Operator has all requisitepower _and authority to conduct its business,to.own its properties and to execute,deliver and perform itsobligationsunderthisAgreement. (0)The execution,delivery,and performance of its obligations under thisAgreementbyOperatorhavebeendulyauthorizedbyallnecessaryaction,and do nott and shallnot: G)as to execution and delivery but not performance,require any consent or approval of Operator's shareholders or board of directors which has not been obtained.and each such consent and approval that has been obtainedis in full force and effect, (ii)violate any provision of any law,rule,regulation,order,writ, judgment,injunction,decree,determination,or award having applicability to Operator or any provision of the articles ofincorporation or by-laws of Operator,the violation of which couldreasonablybeexpectedtohaveamaterialadverseeffectontheabilityofOperatortoperform itsobligationsunderthisAgreement,. (iii)resultin a breach of or.constitute a default underany provision ofthearticlesofincorporationorby-laws of Operator,- -(iv)_resultin a breach of or constitute a default under any agreementrelatingtothe'management or affairs of Operator or any indenture or Joan or credit agreement oranyotheragreement,lease,or instrument to which Operatoris a party or by which Operator oritspropertiesorassetsmaybeboundoraffected,the breach or default of which could reasonably be-expected to have an adverse effect on the ability of'Operator to perform its obli gations underthisAgreement,or 13 4 (v)resultsin,or require the creation or imposition of any Lien or otherchargeorencumbranceofanynature(other than as may be contemplated by this Agreement)upon or with respect to any of the assets or properties of Operator now owned or hereafter acquired,the creation or imposition of which could reasonably be expected to have a materialadverseeffectontheabilityofOperatortoperformitsobligationsunderthisAgreement. (c)This Agreement constitutes a legal,valid and binding obligation of Operator and is enforceable against Operator in accordance with its terms,except as may be lumited by bankruptcy,insolvency,reorganization,moratorium or other similar laws relating tooraffectingtherightsofcreditorsgenerallyandexcept'as the enforceability of this Agreement issubjecttotheapplicationof(i)general principles of equity (regardless of whether considered in a proceeding in equity or at law),including,without limitation,the possible unavailability of specific performance,injunctive relief or any other equitable remedy and (ii)concepts ofmateriality,reasonableness,good faith and fair dealing.(d)Thereis no pending or,to the best of Operator's knowledge,threatened action or proceeding affecting Operator before any court,Governmental Agency or arbitratorthatcouldreasonablybeexpectedtomateriallyandadverselyaffectthefinancialconditionoroperationsofOperatorortheabilityofOperatortoperformitsobligationshereunder,or that purports to affect the legality,validity or enforceability of this Agreement;and"4 (e)It has substantial expertise and experience in the operation andmaintenanceofpowerproductionfacilitiesandis,or will hire such O&M Employees who are, fully qualified or able to be qualified to operate and maintain the Facility iin accordance with thetermshereof.. Section 9.2 Reneesintutions and Warranties by Owner.Owner represents andwarrantstoOperatorthat:(a)Owner iis a corporation duly organized and validly existing under the laws of Alaska and has the full legal right,power and authority to conduct its business,to own its -properties and to execute,deliver and perform its obligations under this Agreement. (b)The execution,delivery,and performance of its obligations under thisAgreementbyOwnerhavebeendulyauthorizedbyallnecessarycorporateaction,and do not|and shall not:- 69)as to execution and delivery but not performance,require any . consent or approval of Owner's shareholders or board of directors which has not been obtained'and each such consent and approval that has been obtained is in full force and effect, (i) -s violate any provision of any law,rule,regulation,order,writ,judgment,injunction,decree,determination,or award having applicability to Owner or anyprovisionofthearticlesofincorporationorby-laws of Owner,the violation of which could reasonably be expected to have a material adverse effect on the ability of Owner to perform itsobligationsunderthisAgreement,: 14 oN, (ii)'result iin a breach of or constitute a default under any provision ofthearticlesofincorporationorby-laws of Owner, (iv)resultin a breach of or constitute a default under any agreementrelatingtothemanagementoraffairsofOwneroranyindentureorloanorcreditagreementor. any other agreement,lease,or instrument to which Owneris a party or by which Owner or its properties or assets maybe bound or affected,the breach or default of which could reasonably be expected to have a material adverse effect on the ability of Owner to perform its obligations . under this Agreement,or (v)result in,or require,the creation or imposition of Lien or other charge or encumbrance of any nature (other than as may be contemplated by this Agreement) upon or with respect to any of the assets or properties of Owner now owned or hereafter acquired,the creation or imposition of which could reasonably be expected to have a material adverse effect on the ability of Owner to perform its obligations under this Agreement. (c)This Agreement constitutes a legal,valid and binding obligation of Owner and is enforceable against Owner in accordance with its terms,except as may be limited by bankruptcy,insolvency,reorganization,moratorium or other similar laws relating to or affecting the rights of creditors generally and except as the enforceability of this Agreement is subject to the application of (i)general principles of equity (regardless of whether considered in a . proceeding in equity or at law),including,without limitation,the possible unavailability of specific performance,injunctive relief or-any other equitable remedy and (ii)concepts of materiality,reasonableness,good faith and fair dealing. '(4) 'There is no pending or,to the best of Owner's knowledge,threatened action or proceeding affecting Owner before any court,Governmental Agency or arbitrator that could reasonably be expected to materially and adversely affect the financial condition or operations of Owner or the ability of Owner to perform its obligations hereunder,or that purports 'to affect the legality,validity or enforceability of this Agreement. ARTICLE X INDEMNIFICATION Section 10.1 Indemnification.Each Party shall indemnify,defend and hold the otherPartyanditsofficers,directors,affiliates,agents,employees,contractors and subcontractors,-harmless from and against any and all Claims,to the extent caused by the negligence or willfulmisconductoftheindemnifyingPartyortheindemnifyingParty's own officers,directors, affiliates,agents,employees,contractors or subcontractors.For the avoidance of doubt,in the event that any loss or damage with respect to any Claim is caused by the negligence or willful . misconduct of both Operator and Owner,including their respective officers,directors,affiliates, 'agents,employees,contractors or subcontractors,such loss or.damage shall be borne by Operator and Ownerin the proportion that their respective negligence or willful misconduct bears to thetotalnegligenceorwillfulmisconductcausingsuchlossordamage. 15 Section 10.2 Fines. (a)Any fines,penalties or other costs incurred by either Party or such Party's agents,employees or subcontractors for non-compliance by such Party,its agents,employees orsubcontractorswiththerequirementsofanyLawsorGovernmentalApprovalsshallnotbereimbursedbytheotherPartybutshaltbethesoleresponsibilityofsuchnon-complying Party., (b)_-'If such fines,penalties or other costs are assessed against Operator by any Governmental Agency or court of competent jurisdiction due to the non-compliance by Owner with any Laws or Governmental Approvals;and to the extent that Owner's non-compliance was -not caused by Operator's failure to perform a duty imposed under this Agreement,Owner shall indemnify and hold harmless Operator against any and all losses,liabilities,damages and claims suffered or incurred because of the failure of Owner to comply therewith,subject to refund in the event that Owner or Operator prevailsin any contest described below.Owner shall also 'reimburse Operator for any and all legal or other expenses (including attorneys'fees)reasonablyincurredbyOperatorinconnectionwithsuchlosses,liabilities,damages and claims. (c)If such fines,penalties or other costs are assessed against Owner by any *Governmental Agency or court of competent jurisdiction due to the non-compliance by Operator with any Laws or Governmental Approvals,Operator shall indemnify and hold harmless Owneragainstanyandalllosses,liabilities,damages and claims suffered or incurred because of the 'failure of Operator to comply therewith,subject to refundin the event that Operator or Owner prevailsin any contest described below.Operator shall also reimburse Owner for any and alllegalorotherexpenses(including attorneys'fees)reasonably incurred by Ownerin connection with such losses,liabilities,damages and claims. (d)In the case of Section 10.2(b)and (c),either Party shall,upon written notice to the other Party,have the right to reasonably contest in the name of either or both Parties,as required,or to require the other Party to reasonably contest,the assessment of such. fines,penalties or costs and such contesting Party shall be responsible for any costs and expenses _(including the costs and expenses of the other Party)relating to such contest. .ARTICLE XI EVENTS OF DEFAULT;REMEDIES Section 11.1 Operator Events of Default.The following shall constitute 'events ofdefaultonthepartoftheOperatorunderthisAgreement: (i)Operator shall fail to make payments for undisputed amounts due under this Agreement to Owner within ten (10)days after notice from Owner that such payment is unpaid and due; (it)|Operator shall fail to comply with any material provisionof thisAgreement(other than the obligation to pay money when due),and such failure shall continue 'uncured for thirty (30)days after notice thereof by Owner,provided that if such failure is notcapableofbeingcuredwithinsuchperiodofthirty(30)days with the exercise of reasonable _diligence,then such cure period shall be extended for an additional reasonable period of time 16 "(not to exceed one hundred and eighty (180)days)so long as Operator is exercising reasonablediligencetocuresuchfailure; (iii)Operator shall:(a)admitin writing its inability to pay its debts assuchdebtsbecomedue;(b)make a general assignment or an arrangement or composition with or for the benefit ofits creditors;(c)fail to controvert in a timely.and appropriate manner,or-acquiesce in writing to,any petition filed against Operator under any bankruptcy or similar law;(d)take any action 'for the purpose of effecting any of the foregoing; :;(iv)A proceeding or case shall be commenced,without the applicationorconsentofOperator,in any court of competent jurisdiction,seeking:(a)its liquidation,"reorganization of its debts,dissolution or winding-up,or the composition or readjustment of itsdebts;(b)the appointment of a receiver,custodian,liquidator or the like of Operator or of all or°any substantial part ofits assets;or (c)similar reliefin respect of Operator under any law relating to bankruptcy,insolvency,reorganization of its debts,winding-up,composition or adjustment of debt,and such proceeding shall remain in effect,for a period of ninety (90)days;or (v)Any representation made by Operator under Section 9.1 shall be falsein any material respect when made and Operator fails to remedy such false representationwithinthirty(30)days (or such longer periodis reasonably required;provided that such remedyisbeingdiligentlypursued)after notice thereof by Owner.Section 11.2.Owner Events of Default.The following shall constitute events'of defaultonthepartofOwner,under this Agreement: (i)Owner shall fail to make payments for undisputed amounts due.under this Agreement to Operator within ten (10)days after notice from Operator that such.payment is unpaid and due; (ii)|Owner shail fail to comply with any material provision of this Agreement (other than the obligation to pay money when due),and such failure shali continueuncuredforthirty(30)days after notice thereof by Operator,provided that if such failure is notcapableofbeingcuredwithinsuchperiodofthirty(30)days with the exercise of reasonable_diligence,then such cure period shall be extended for an additional reasonable period of time(not to exceed one hundred and eighty (180)days)so long as Owneris exercising reasonablediligencetocuresuchfailure; (iii)|Owner shall:(a)admitin writing its inability to pay its debts as-such debts become due;(b)make a general assignment or an arrangement or composition with or_for the benefit of its creditors;(c)fail to controvert in a timely and appropriate manner,or acquiesce in writing to,any petition filed against Owner under any bankruptcy or similar law;(d)'take any action for the purpose of effecting any of the foregoing; (iv)A proceeding or case shall be commenced,without the application'or consent of Owner,in any court of competent jurisdiction,seeking:(a)its liquidation, reorganization of its debts,dissolution or winding-up,or thé composition or readjustment of its 'debts;(b)the appointment of a receiver,custodian;liquidator or the like of Owner or of all or any substantial part of its assets;or (c)similar relief in respect of Owner under any law relating 17 'to bankruptcy,insolvency,reorganization of its debts,winding-up,composition or adjustment of debt,and such proceeding shall remain in effect,for a period of ninety (90)days;or (v)Any representation made by Owner under Section 9.2 shall befalseinanymaterialrespectwhenmadeandOwnerfailstoremedysuchfalserepresentationwithinthirty(30)days (or such longer period is reasonably required;provided that such remedy -is being diligently pursued)after notice thereof by Operator. Section 11.3 Remedies for Default..If an Event of Default occurs with respect to a_defaulting Party at any time during the term of this Agreement,the non-defaulting Party may,forsolongastheEventofDefaultiscontinuing,(i)deliver a written notice (a "Termination Notice”)which establishes a date (which date shall be no earlier than thirty (30)days after the Non-Defaulting Party delivers notice)on which this Agreement shall be terminated (the "Termination Date”),(ii)withhold any payments due in respect of this Agreement and (iii) pursue any other remedies available at law or in equity,except to the extent such remedies areexpresslylimitedbythisAgreementincludingbutnotlimitedtounderArticleXII. Section 11.4 Survival.Expiration or termination of this Agreement shall not affect any rights or obligations,which have arisen or accrued before such expiration or termination.In addition,the obligations set out in (i)Article XTI and Article XIV shall survive in full force and effect the expiration or termination of this Agreement,and (ii)Article X and Article XVI shall survive in full force and effect the expiration or termination of this Agreement for a period offive(5)years following the end of the term of this Agreement.\):-ARTICLEXII FORCE MAJEURE Section 12.1 Excuse of Performance,Neither Party shall be in breach or liable for any delay or failure in its performance under this Agreement to the extent such performance is prevented or delayed due to a Force Majeure Event,provided that: (a)the non-performing Party shall give the other Party written notice within forty-eight (48)hours of the commencement of the Force Majeure Event,with details to be supplied within ten (10)days after the commencement of the Force Majeure Event further describing the particulars of the occurrence of the Force Majeure Event; (b)__the delay in pérformance shall be of no greater scope and ofno longerdurationthanisdirectlycausedbytheForceMajeureEvent; (c)©the Party whose performance is delayed or prevented shall proceed with commercially reasonable efforts to overcome the events or circumstances preventing or delaying. performance and shall provide weekly written progress reports to the other Party during the period that performance is delayed or prevented describing actions taken and to be taken to remedy the consequences of the Force Majeure Event,the schedule for such actions and the expected dateby which performance shall no longer be affected by the Force Majeure Event,and eae ; .18 .A oon'C) (d)when the performance of the Party claiming the Force Majeure event is nolongerbeingdelayedorprevented,that Party shall give the other Party written notice to thateffect. ARTICLE XILIMITATIONONLIABILITY Section 13.1 Consequential Damages Limitation.UNLESS EXPRESSLY PROVIDED IN THIS AGREEMENT,NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR CONSEQUENTIAL,INCIDENTAL,PUNITIVE,EXEMPLARY OR INDIRECT DAMAGES SUFFERED BY THAT PARTY OR BY ANY CUSTOMER OR ANY PURCHASER OF THAT PARTY;LOST PROFITS;OR OTHER BUSINESS INTERRUPTION DAMAGES; REGARDLESS OF WHETHER A CLAIM FOR SUCH DAMAGES ARISES BY STATUTE, IN TORT OR CONTRACT,UNDER ANY INDEMNITY PROVISION ,OR OTHERWISE _(EXCEPT TO THE EXTENT THAT AN INDEMNIFYING PARTY PURSUANT TO THE *PROVISIONS OF SECTION 10.1 HEREOF IS OBLIGATED TO INDEMNIFY AGAINST THIRD PARTY CLAIMS NOT ARISING OUT OF CONTRACTS WITH THE INDEMNIFIED PARTY FOR CONSEQUENTIAL,INCIDENTAL,PUNITIVE, EXEMPLARY:OR INDIRECT DAMAGES OR LOST PROFITS OR OTHER BUSINESS 'INTERRUPTION DAMAGES).IT IS THE INTENT OF THE PARTIES THAT.THE :/ LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING,WITHOUT LIMITATION,THE NEGLIGENCE OF ANY PARTY,WHETHERSUCHNEGLIGENCEBESOLE,JOINT OR CONCURRENT,OR ACTIVE OR PASSIVE. Section 13.2 Limitation of LiabilityExcept iin cases of Operator's gross negligence orwillfulmisconduct,and except for liability arising from claims by third parties under Article X, the aggregate liability of Operator to Owner or Owner to Operator,arising out of theperformanceornonperformanceoftheServicesoranyotherobligationsunderthisAgreement, whether based in tort (including negligence and strict liability),contract or otherwise,shall notexceedanamountequaltotheOperatingFeepaidduringtheimmediatelypriorContractYear. Section 13.3 No Implied Warranties.EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT,OPERATOR DOES NOT MAKE ANY EXPRESS OR IMPLIED WARRANTIES OR REPRESENTATIONS OF ANY KIND WHATEVER RELATING ..EITHER TO THE SERVICES,EQUIPMENT OR MATERIALS TO BE SUPPLIED BY OPERATOR UNDER THIS AGREEMENT OR THE FACILITY,INCLUDING (WITHOUT LIMITATION)ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR. A PARTICULAR PURPOSE.ALL SUCH WARRANTIES ANDREPRESENTATIONS AREHEREBYDISCLAIMED. Section 13.3.The provisions of this Article XIII shall survive the termination of thisAgreement.. 19 os,:oo,LAARTICLE XIV_ DISPUTE RESOLUTION Section 14.1 _Senior Officers. (a)Each of Owner and Operator shall designatein writing to the other Party arepresentativewhoshallbeauthorizedtoresolveanyclaim,dispute or controversy arising out of or relating to this Agreement or the breach,validity,or termination thereof (each,a "Dispute”)inanequitablemannerand,unless otherwise expressly provided herein,to exercise the authority of such Party to make decisions by mutual agreement. (b)If such designated representatives are unable to resolve a Dispute,such Dispute shall be referred by each Party's representatives,respectively,to a senior officer _designated by Seller and a senior officer designated by Purchaser for resolution upon five (5)days'written notice from either Party.©)The Parties hereto agree (i)to attempt to resolve all Disputes promptly, equitably and in a good faith manner;and (ii)to provide each other with reasonable access during normal business hours to any and all non-privileged records,information and data .pertaining to any such Dispute.-Section 14.2 Mediation.Any Dispute will first be attempted to be resolvedin accordance with Section 16.1.Should the Parties be unable to resolve the dispute to their mutual _Satisfaction within two (2)days after such negotiation by senior management,or any othermutuallyagreeabletimeperiod,the Parties will attempt to resolve the dispute through mediationinKetchikan,Alaska.The mediator will be named by mutual agreement of the Parties or by obtaining a list of five (5)qualified Persons.from the parties and alternately striking names.The"mediator will have the duty and responsibility to assist the parties in resolving al!issues submitted for mediation.Both Parties agree to cooperate and operate in good faith to resolve all matters in dispute with the assistance of the mediator.Each Party shall be responsible for its own expenses and one-half of any mediation expenses incurred to resolve the dispute.The mediator will provide the parties with a fee and expense.schedule in advance of mediation. Mediation will terminate by:(i)written agreement signed by both parties,(ii)determination bythemediatorthatthepartiesareatanunresolvableimpasse,or (iii)two unexcused absences byeitherPartyfromthemediationsessions.The mediator will never participate in any claim or:controversy covered by this Section 14.2 as a witness,collateral contract,or attorney and maynotbecalledasawitnesstotestifyinanyproceedinginvolvingthesubjectmatterofmediation. If the Parties are still unable to resolve their differences after good faith consideration of aresolutionthroughmediationforaperiodnottoexceedthirty(30)days,each Party shall have therighttofilesuitinaccordancewithSection20.1. Section 14.3 Performance to Continue.Unless otherwise agreed in writing,each PartyshalldiligentlycontinuetoperformitsobligationsunderthisAgreementduringthependencyof any Disputes or mediation proceedings so long as all undisputed amounts payable hereunderhavebeenpaid. 20 mnNeoo,.oeARTICLE XV INSURANCE Section 15.1 Owner's Insurance.The provisions of this Section 15.1 do not modify or change any responsibility of Owner stated elsewhere in this Agreement.During the term of this Agreement,Owner shall maintain,at Owner's expense,insurance policies of the type and with terms that are commonly used by owners of facilities of the type and character of the Facility.Operator and its successors,assigns,officers,employees and agents shall be named as additional insureds to the extent of Owner's liability under this Agreement,under all policies of liability insurance to be maintained by Owner.All policies maintained by Owner shall include a waiver of subrogation in favor of Operator and all additional insureds.Operator may,at Operator's sole option but with the consent of Owner,elect to maintain all or part of the insurance required of Owner by the foregoing provisions.Any such decision by Operator to maintain such insurancemaybeterminatedattheelectionofeitherOperatororOwner,and thereupon,the obligation to procure and maintain such insurance shall return to Owner's responsibility.In any event,thecostsandexpensesofsuchinsurancepoliciesshallremainOwner's responsibility and at:Owner's expense regardless of which party arranges suchinsurance. Section 15.2 Operator's Insurance.The provisions ofthis Section 15 2 do not modifyorchangeanyresponsibilityofOperatorstatedelsewhereinthisAgreement.During the term of this Agreement,Operator shall maintain,as a cost includable as partof Operating Fees under thisAgreement,insurance policies of the type and with terms that are commonly used by operators of facilities of the type and character of the Facility.Owner and its successors,assigns,officers, employees and agents shail be named as additional insureds to the extent of Operator's liability under this Agreement under all policies of liability insurance to be maintained by Operator, except any workers'compensation and/or professional liabilityinsurance.All policies,exceptanyworkers'compensation policy,shall include a waiver of subrogation iin favor of Owner andalladditionalinsureds. ARTICLE XVI __ CONFIDENTIALITY x, Section 16.1 Confidential Information.Any information provided by either Party to the"other Party pursuant to this Agreement and labeled "CONFIDENTIAL”shall be utilized by the - receiving Party solely in connection with the purposes of this Agreement and shall not bedisclosedbythereceivingPartytoanythirdparty,except with the providing Party's consent, and upon request of the providing Party shall be returned thereto.Notwithstanding the above, the Parties acknowledge and agree that such information may be disclosed to actual and prospective suppliers and potential suppliers of major equipment to the Facility and other thirdpartiesasmaybenecessaryforOperatororOwnertoperformitsrespectiveobligationsunderthisAgreement.To the extent that such disclosures are necessary,the Parties also agree that theyshall.in disclosing such information seek to preserve the confidentiality of such disclosures.This provision shall not prevent either Party from providing any confidential information receivedfromtheotherPartytoanycourtinaccordancewithaproperdiscoveryrequestorinresponse tothereasonablerequestofanyGovernmentalAgencychargedwithregulatingthedisclosing_Party's affairs,provided that,if feasible,the disclosing Party shall give prior notice to the other - Party of such disclosure and,if so requested by such other Party,shall have used allcommerciallyreasonableeffortstoopposeorresisttherequesteddisclosure,as appropriate under21 C-) C) the circumstances,or to otherwise make such disclosure pursuant to a protective order or othersimilararrangementforconfidentiality.ARTICLE XVII ASSIGNMENT Section 17.1 Assignment by OperatorSubject to Section 17.1 (b)and Section 17.1(c),neither this Agreement,nor any of the rights or obligations hereunder,may be assigned,transferred or delegated by either Party without the express prior written consent of the otherParty,which consent shall not to be unreasonably withheld. (b}Operator agrees that Owner may assign,mortgage,hypothecate,pledge or"otherwise encumber all or any portion of Owner's interest in and to this Agreement in favor of any lender as security for any financing provided by such lender. (c)Nothing jin this Agreement shall restrict the transferability of shares,partnership interests,member interests or other interestsin Operator or Owner,or the issuance by_Purchaser or Seller of additional interests in such Party. ARTICLE XVHI NOTICES -Section 18.1 Notice.Any notice,consent,approval or other communication under this Agreement shall be in writing and shall be personally delivered,sent by pre-paid mail or by an. internationally recognized overnight courier or transmitted by facsimile to a Party as follows (ortosuchotheraddressorfacsimilenumberasthePartymaysubstitutebynoticeinaccordancewiththisSection18.1 after the date of this Agreement): If to Operator:| Alaska Power &Telephone Company-193 Otto Street _P.O.Box 3222 Port Townsend,WA 98368 Attention:Robert Grimm -President Fax:360-385-5177 With a copy to: 'Davis Wright Tremaine LLP '1201 Third Avenue,Suite 2200 Seattle,Washington 98101. Attention:Scott W.MacCormack .Fax:206-447-0849 )Ifto Owner: 22 | analJeoHaida Energy,Inc. 8th &Cedar Street P.O.Box 8&9 Hydaburg,Alaska 99922 Attention:President Fax:907-285-3944 With a copy to: _TO BE DETERMINED Section 18.2 Effective Time.Notices shall be effective when each of the requiredcopiesisreceivedbytheintendedrecipient. ARTICLE XIX » MISCELLANEOUS Section 19.1 Governing Law.This Agreement shall be construed and enforced in -accordance with and governed by the laws of the State of Alaska without regards to provisions relating to choice of law.Venue for any dispute under this Agreement shall be in a SuperiorCourtorFederalDistrictCourtlocatedintheFirstJudicialDistrictfortheStateofAlaskaat Ketchikan,Alaska. Section 19.2 Severability.The invalidity or unenforceability,iin whole or in part,ofanyoftheforegoingsectionsorprovisionsofthisAgreementshallnotaffectthevalidityorenforceabilityoftheremainderofsuchsectionsorprovisions.In the event any materialprovisionofthisAgreementisheldinvalidorunenforceable,the Parties shall promptly.renegotiate new provisions to replace such invalid or unenforceable provision so as to restore thisAgreementasnearlyaspossibletoitsoriginalintentandeffect.Section 19.3 Entire Agreement.This Agreement,including any schedules,exhibits or attachments hereto,contains the complete agreement between the Parties with respect to the matters contained herein and supersedes all other agreements,whether written or oral,with'respect to the subject matter hereof. Section 19.4 Amendment.No modification,amendment,or other change will be .binding on any Party unless consented to in writing by both Parties. Section 19.5 Additional Documents and Actions.Each Party agrees to execute anddelivertotheotherPartysuchadditionaldocuments,and to take such additional actions and provide such cooperation,as may be reasonably required to consummate the transactions contemplated by;and to effect the intent of,this Agreement.Section 19.6 Delay and Waiver.No delay or omission to exercise any right,power orremedyaccruingupontheoccurrenceofanyOperatoreventofdefaultorOwnereventofdefault hereunder or any breach or default of any Party hereto under this Agreement shall impair any 23 such right,power or remedy of such Party,nor shall it be construed to be a waiver of any suchbreachordefault,or an acquiescence therein,or of or in any similar breach or default thereafter .occurring,nor shall any waiver of any.single Operator event of default or Owner event of default or other breach or default be deemed a waiver of any other Operator event of default or Owner"event of default or other breach or default theretofore or thereafter occurring.Any waiver,permit,consent or approval of any kind or character on the part of any Party hereto of any event of default described im the preceding sentence or other breach or default under this Agreement,or any waiver on the part of any Party hereto of any provision or condition of this Agreement,must be in writing and shall be effective only to the extent specifically set forth in such writing. Section 19.7 Exhibits,The schedules,exhibits and attachments to this Agreement formpartofthisAgreementandwillbeoffullforceandeffectasthoughtheywereexpresslysetoutinthebodyofthisAgreement;provided,however,that such schedules,exhibits and attachmentsareappropriatelyreferencedhereinand,in the event and onlyin the event,of any conflict_between the terms,conditions and provisions of this Agreement and the schedules,exhibits orattachmentshereto,the terms of this Agreement shall prevail. 'Section 19.8 Interest for Late Payment.Any amount properly due to a Party pursuant to this Agreement and remaining unpaid after the date when payment was due shall bear interest -(both before and after judgment),such interest to accrue from day-to-day from the date such payment was due until such amount is paid in full at a rate equal to the Default Rate,from thedatewhenpaymentwasdueuntiltheamountdueisactuallyreceivedbythepayee. Section 19.9 No Partnership.Nothingin this Agreement shall be construed to create apartnership,joint venture or association,or establish a principal and agent relationship or anyotherrelationshipofasimilarnature,between the Parties. Section 19.10 No Third-Party Beneficiary.This Agreement is intended solely for the benefit of the Parties.Nothing in this Agreement shal!be construed to create any duty or. liability to,or standard of care with reference to,any other Person. Section 19.11 Counterparts,This Agreement may be executed in one or morecounterpartseachofwhichshallbedeemedanoriginalandallofwhichshallbedeemed one>andthesameAgreement. Section 19.12 Costs,Each of the Parties shall pay its own costs and expenses of andincidentaltothenegotiation,'preparation and completion of this Agreement.*Section 19.13 No Recourse to Affiliates.This Agreementis solely and exclusivelybetweenOwnerandOperator,and any obligations created herein shall be the sole obligations of the Parties.No Party shall have recourse to any parent,subsidiary,partner,joint venture,affiliate,director or officer of any other Party for performance of such obligations unless suchobligationswereassumediinwritingbythePersonagainstwhomrecourseissought. Section 19.14 Decision-Making by Parties.Except where this Agreement expresslyprovidesforadifferentstandard,whenever this Agreement provides for a determination, decision,permission,consent or approval of a Party,the Party shall promptly make such determination,decision,grant or withholding of permission,consentor approval in a 24 commercially reasonable manner and without unreasonable delay.Any denial of consent.required to be made in a commercially reasonable manner shall include in reasonable detail thereasonfordenialoraspectoftherequestthatwasnotacceptable. 25 ned;eetJN WITNESS WHEREOF,the Parties have caused this Agreement to be executed bytheirdulyauthorizedrepresentativesasofthedayandyearfirstabovewritten. Haida Energy,Inc. sl Met CDenob,ast *)Name:4A Vin:SA ens” Title:'paw a)LA Alaska Power &Telephone Company By: Name: Title: [Signasurepage to Operation and Maintenance Agreement] their duly authorized representatives as of the day and year first above written.IN WITNESS WHEREOF,the Parties have caused this Agreement to be executed by > Haida Energy,Inc. {Signature page to Operation and Maintenance Agreement}denotemenymeterenemeanerere EXHIBIT A. SERVICES DURING THE OPERATING PERIOD Services to be provided by Operator to Owner during the Operating Period include but.are not limited to: Facility Operations,The Services that Operator shall provide in connection with operation of all components of the Facility shall consist of the following specific responsibilities: (a)Dispatching,starting and stopping,adjusting,and operating the generatingunitsandappurtenances,and maintaining station logs,and other records; .(b)_-_'Providing all labor,technical support,and training,to the extent necessary-to operate the Facility in accordance with the Expected Dispatch Schedule; (c)Reading,maintaining,and operating all Facility metering devices; .{d)Integrating power from the Facility into Alaska Power Company's (in its,capacity as Purchaser under the Power Sales Agreement)system with due regard for the(}capability limits of the Facility,planned water reserves,and overall system power needs"consistent with Prudent Utility Practices; (e).Monitoring and recording the operating characteristics of all equipment and machinery,and taking actions in accordance with manufacturer's recommendations andPrudentUtilityPracticeinresponsetoalarmsandsystemsmalfunctions; (f)Preparing and maintaining operating logs,records and monthly reportsregardingtheoperationandmaintenanceoftheFacility;and (zg)Providing adequate security for the Facility and response to emergency'situations. Facility Maintenance.The Services that Operator shall provide in connection withmaintenanceofallcomponentsoftheFacilityshallconsistofthefollowingspecificTesponsibilities: (a)Conducting Scheduled Maintenance of the Facility; (b)Assisting Owner in the review and contracting for and overseeing theperformanceofanyExtraordinaryMaintenancerequiredfortheFacility; (c)Providing.technical engineering support for'solving operational and€)-maintenance problems;a .A-1- QO (d).Performing management services required to procure all spare.parts,overhaul parts,tools,equipment,consumables and supplies required to operate and maintain the Facility; (e)Maintaining all yards,walkways,and utilities on the Facility; (}Inspecting and cleaning of Facility intakes;and (g)Recommending Facility modifications,capital improvements orreplacementsthatwouldenhancetheoverallperformanceorreliabilityoftheFacility. ae James Strandberg From:Steve Pratt <steve.pratt@acsalaska.net> Sent:Thursday,June 21,2012 2:23 PM To:James Strandberg;Brian Bjorkquist Ce:Mark Davis Subject:FW:AEA Letter Attachments:Reynolds Creek ProForma Analysis Pre Tax Rev 2 SP Mod June 2012.xlsx;Reynolds Creek Loan Write-up Revision May 2012 spv1.pdf;Rate Instability Example.pdf;Net Change in Cost of Service With Interest Charges.pdf;Cap Structure Alternatives Reynolds Creek May 2012 Attach D.pdf;Reynolds Creek Hydro Facility Expenses Reimb and Nonreimbursable.pdf fyi Steve Pratt Steve Pratt Enterprises 3115 Seawind Dr Anchorage,Ak 99516 . 907.440.4752 From:Steve Pratt [mailto:steve.pratt@acsalaska.net] Sent:Wednesday,June 20,2012 2:16 PM To:'Mark Davis' Subject:FW:AEA Letter Mark- Attached are - 1.The Excel spreadsheet |believe was used to show differences between Cost of Service,Rates,and future Rate Instability.E.g.Rev.Req.exceeds 13 cents per KWH. 2.My current write-up re the loan (this assumed APT was ensuring the loan,not APC;that can be revisited but | don't have APC's financials as of yet. 3.Attachments A,B,C,and D.A=Rate Instab.;B =Net change in COS with variable interest rates;C =Reimb/Non- Reimbursable expenses;D =Cap Structure Change Impacts to rates. Feel free to share any or all with Mr.Grimm. Let me know how you wish to proceed. Thanks. Steve Pratt Steve Pratt Enterprises 3115 Seawind Dr Anchorage,Ak 99516 907.440.4752 From:Mark Davis [mailto:MDavis@aidea.org] Sent:Wednesday,June 20,2012 9:56 AM To:Steve Pratt (steve.pratt@acsalaska.net) Subject:FW:AEA Letter Steve, Could you please read Bob Grimm's request and tell me if you could provide this information. Thank you, Mark Davis From:Bob Grimm [mailto:bob.q@aptalaska.com] Sent:Wednesday,June 20,2012 8:32 AM To:Mark Davis Cc:Sandra Moller;James Strandberg;Sara Fisher-Goad;'Alvin Edenshaw (dooner@aci.net)' Subject:RE:AEA Letter Mark AP&T believes that a financial solution and the terms of the Power Project Fund loan are a key determinate to the success of the Reynolds Creek project.The August 8,2011 letter from the AEA indentified a target price for the output of the project at $.10 per KWH.Perhaps if you could share the live modeling prepared by the AEA's economist Mr.Pratt showing his conclusion as to the initial price for the output of the project required to support the project under the terms offered by the AEA,this could be a productive place to start the dialogue. Thank you for your consideration of this request. Bob Grimm,CEO Alaska Power &Telephone Company P.O.Box 3222 193 Otto Street Port Townsend,WA 98368 800-982-0136 x120 Office 360-385-1733 x120 Office 360-301-3636 cell WWW.APTALASKA.COM From:Mark Davis [mailto:MDavis@aidea.org] Sent:Tuesday,June 19,2012 1:40 PM To:Bob Grimm Cc:Sandra Moller;James Strandberg Subject:RE:AEA Letter Bob, Thanks for your email.The status of the loan request is that AEA has HE's positions taken in its letter of June 13,2012 under review.In the main,HE's response letter dated June 13,2012 raises two major,outstanding issues,although it should be noted that there are other non-resolved ,and not agreed to,issues between the parties,several of which are set forth under the rubric "Loan Prerequisites”at p.3 of the HE Reply letter.These other include,but are not limited to, HE's position that it requests AEA to fund the construction of the project,but not offer AEA any security in the property, plant or equipment that is paid for by the PPF loan requested. One central idea in HE's March 7"term sheet and its Reply letter to AEA is the concept of recapitalizing the company with approximately $4M in PPF loan proceeds.The letter states that HE believes that capital restructure in allowed under AS 42.45.010(1})(A)because the funds now residing in HE equity were used for the intended uses of feasibility, licensing and other preconstruction activities.AEA has initiated a legal review of this issue. A second important difference between HE and AEA is with regard to whether any interest should apply to the requested loan over the full term of the loan.HE has requested a zero interest rate for the entire term of the PPF loan while AEA has set forth an idea of interest rates applying when the project reaches a certain usage levels.The parties are not in agreement as shown by the first two sentences of the first full paragraph at p.2 of HE's Reply letter dated June 13,2012: "You indicate that in AEA's viewa sliding scale on interest rates should apply .Haida Energy the borrower believes otherwise.” AEA has the economic and legal issues that are raised by and pertain to HE's position that the loan must have a constant zero interest rate under consideration and review.("Haida Energy believes that the significant increase in retail rates of APC asa result of the project coming online demonstrates that the project is not feasible with any level of interest expense.”}(emphasis original).SeeHE Reply letter dated June 13,2012 at p.2. As noted previously,AEA is prepared to meet with HE's management team to discuss these and other pertinent issues. Cordially, Mark Davis From:Bob Grimm [mailto:bob.q@aptalaska.com] Sent:Tuesday,June 19,2012 9:01 AM To:Mark Davis Cc:Sandra Moller;Sara Fisher-Goad;James Strandberg Subject:FW:AEA Letter Mark What in your opinion of the next step in getting this loan finalized? Bob Grimm,CEO Alaska Power &Telephone Company P.O.Box 3222 193 Otto Street Port Townsend,WA 98368 800-982-0136 x120 Office 360-385-1733 x120 Office 360-301-3636 cell WWW.APTALASKA.COM From:Bob Grimm [mailto:bob.q@aptalaska.com] Sent:Thursday,June 14,2012 9:01 AM To:'Mark Davis' a Cc:'Sara Fisher-Goad';'James Strandberg';'Sandra Moller' Subject:RE:AEA Letter Mark We are quickly running out of time and need to get this transaction finalized.|have attached Haida Energy's reply to your letter ofJuly 6. Bob Grimm,CEO Alaska Power &Telephone Company P.O.Box 3222 193 Otto Street Port Townsend,WA 98368 800-982-0136 x120 Office 360-385-1733 x120 Office 360-301-3636 cell WWW.APTALASKA.COM From:Mark Davis [mailto:MDavis@aidea.org] Sent:Wednesday,June 06,2012 3:01 PM To:Bob Grimm (bob.q@aptalaska.com) Subject:AEA Letter ° Dear Bob, The letter i referenced is attached.The original was mailed. Cordially, Mark Davis James Strandberg From:Steve Pratt <steve.pratt@acsalaska.net> Sent:Tuesday,June 26,2012 12:11 PM To:James Strandberg;Mark Davis Subject:Reynolds Creek Hydro Financial Review Attachments:Reynolds Creek ProForma Analysis Pre Tax Rev 2 SP Mod June 2012.xlsx;Reynolds Creek Loan Write-up Revision May 2012 spv1.pdf;Rate Instability Example.pdf;Net Change in Cost of Service With Interest Charges.pdf;Cap Structure Alternatives Reynolds Creek May 2012 Attach D.pdf;Reynolds Creek Hydro Facility Expenses Reimb and Nonreimbursable.pdf Attached are - 1.The Excel spreadsheet that is used to determine Cost of Service and Rates,and demonstrate future Rate Instability with the proposed HE rate design.The Rev.Req.exceeds 13 cents per KWH.The Black and Veatch load scenario is used where growth is positive but not especially robust -load always exceeds the 6 GWH minimum contained in the Power Sales Agreement. My current write-up re the loan with a description of the project,a review of risks,some financial projections, and references to Attachments A,B,C,and D.(Note:this assumed APT was securing the loan,not APC;that can be revisited but I don't have APC's financials as of yet.It won't impact the economics of the project directly, but may shift qualitative loan security.) Attachments A,B,C,and D.A=Rate Instability review;B =Net change in COS with variable interest rates;C = Reimb/Non-Reimbursable expenses;D =Cap Structure Change Impact to rates that flow through to end user customers. These documents all work together to assess the overall quality of the loan and the ability of the project to displace diesel fuel costs for the foreseeable future. Ultimately the RCA would establish the revenue requirement for the project and,thus,the energy charges to APC.This would be true as long as HE is subject to RCA regulatory oversight. Thanks. Steve Pratt Steve Pratt Enterprises 3115 Seawind Dr Anchorage,Ak 99516 907.440.4752 PPF Committee Loan Review Haida Energy,Inc.Reynolds Creek Loan Request $20 Million For 50 Years @ Zero Percent Interest requested Threats to Loan Repayment e The Power Sales Agreement can terminate in 2050 after 40 years,13 years before the loan is paid off e Sales are dependent on local economic development and production at Black Bear Lake and South Fork hydro projects since Reynolds Creek receives a lower dispatch priority e Management's ability to exercise cost control/reaction to events needs to be demonstrated because Haida Energy,Inc.is a new entity e Pricing energy below cost during the first 5 years reduces the amount of financial reserves the company will accumulate to secure enterprise longevity e Contractual Uncertainty -Mechanisms implementing the Rate Stabilization Methodology to change prices are undefined in the Power Sales Agreement e Ability to repay the loan is highly dependent on load growth,the ability to change prices,and the veracity of AP&T's commitment to cover principle payments e Incremental power sales will have to occur at 28 to 30 cents a Kwh e APC,Haida Energy's only customer,is a wholly-owned subsidiary of APT which owns 25%of Haida Energy,Inc.(apparently APT wishes to reduce its equity in HE to zero by using loan proceeds to return capital to APT)and is responsible for all facility operations. Therefore,this is not an arms-length contract between an unaffiliated energy producer and energy purchaser. A.Subject Approval of a loan for up to $20,000,000 from the Power Project Fund to Haida Energy, Inc.(Haida)to finance in part a new 5 megawatt hydroelectric project located at Reynolds Creek on Prince Wales Island in southeast Alaska.Haida requests a 0%loan to reduce the cost of energy to customers.Principal payments are based on Schedule A, beginning at $250,000 in 2025 and increasing in five to seven year increments,reaching $750,000 per year in years 2056 -2062.Although the loan will be issued to Haida Energy,Inc.,Alaska Power and Telephone has agreed to co-sign the loan to guarantee the principal payments on Schedule A. Background In 2010 the Alaska Energy Authority provided Haida with a $9,000,000 Fixed Line of Credit Loan Commitment to finance construction of the facility.Upon project completion,the balance in the Fixed Line of Credit was to be converted to a 33 year term loan.Issuance of the Loan Commitment letter was based on a total project cost of $17,245,000 with loan security provided by revenue from a Power Sales Agreement (PSA)with Alaska Power Company (APC). In March,2011,Haida submitted an application for an additional $9,350,000 loan as new cost estimates increased project costs to $27,970,000.No changes to the Power Sales Agreement were made to reflect these increased costs.In its application,Haida proposed that this new loan be issued separately from the first,with repayment deferred until the first $9,000,000 loan is fully amortized -i.e.no payments or interest accrual for 33 years then amortized over a 20 or 30 year period. AEA's $9,000,000 Fixed Line of Credit commitment to Haida terminated on April 16, 2011.During the 2011 Legislative Session AEA was given the authority to issue up to $20,000,000 in loan financing for the Reynolds Creek Hydro project from the Power Project Fund. AEA Staff have had several meetings and discussions with Haida about the $20,000,000 loan,and expressed several concerns.Haida has asked that AEA review the loan application and Power Sales Agreement as presented and make a determination about issuing the loan based on the provisions of those documents. Geography The map in this section shows a schematic of Prince of Wales Island,including: °Major communities; °The existing electrical grid (solid bold line)connecting Craig,Klawock,Thorne Bay,Kasaan,Hollis,and Hydaburg; °The new transmission line to Coffman Cove and Naukati Bay (dotted line - expected to be operational in 2013/2014); °The existing Black Bear Lake and South Fork hydroelectric projects; °The proposed Reynolds Creek hydroelectric project (Reynolds Creek). Ownership Alaska Power Company (APC),a wholly owned subsidiary of AP&T,owns and operates the electric utility systems in all of the above communities as well as the Black Bear Lake and South Fork hydro projects.A Federal Energy Regulatory Commission license to construct,own,and operate Reynolds Creek was issued to Haida Corporation in 2000. In September of 2009 Haida Corporation and APT formed Haida Energy,Inc.,a joint venture with respective ownership shares of 75%and 25%,to facilitate development and operation of the Reynolds Creek hydro project.Power from the project will be sold to APC under the terms and conditions of the Power Sales Agreement executed in September of 2009.Haida Energy,Inc.has no financial statements yet. Cost and Capital Structure The project is expected to cost $27,970,000.Grants of $5,220,000 have been awarded and,according to the application,$4,400,000 in equity has been invested.According to the March 2011 application,"if the project is under budget,Haida Energy,Inc.will seek reimbursement for $1,095,000 (sic)equity investment.”If equity is reduced to $3,300,000 and a $20,000,000 Ioan is issued,this would leave Haida Energy,Inc.with a 14%equity position and very little cash with which to operate.In the Term Sheet dated March 7,2012,Alaska Power and Telephone proposes to use loan proceeds to reduce or eliminate its equity investment in Haida Energy,Inc.,reducing the equity level for all owners to $900,000.The proposed capital structure includes $19.8 Million in debt and $900,000 in equity,apparently eliminating any APT equity investment and most Haida Corp equity investment and increasing leverage to over 95%debt. Attachment D shows the difference in costs per Kwh on a levelized basis over a 50 year period for the 5%equity case and the 20%equity case.If it is assumed that reducing the equity component of the capital structure does not increase the cost of debt because AEA is indifferent to the financial risk profile of Haida Energy,using loan proceeds to return capital to the joint venture partners reduces the levelized cost per Kwh by somewhere in the range of $0.0072 per Kwh and $0.0276 per Kwh.The most likely result is somewhere near the middle of this range.If sales over time exceed 6 MWH per year,these numbers are reduced.__Increasing the financial risk of Haida Energy substantially to achieve relatively small potential rate reductions does not appear to be prudent or necessary to reduce costs substantially below the diesel alternative.Loan provisions deferring principal and interest payments on debt until 2025 will allow Haida Energy to build its cash position,thus reducing its equity risk exposure. The Project The project will be capable of delivering over 19 Million KWH of energy annually,and will allow all current and projected loads within the interconnected system to be met with renewable hydroelectric power.According to the loan application,power supply for 2010,including interconnected and isolated load centers,required 6,038 MWH of diesel power: Prince of Wales Island Sources of Power-2010 Total Energy Requirements 27,695 MWH Generation by Source Black Bear Hydro Plant 15,101 South Fork Hydro Plant 6,558 Diesel 6,036 Total Generation 27,695 MWH ||=e *POINT BAKER *PORT PROTECTIONi rat|clOFFMAN COVE $e anime ==*EDNA BAY |==:naucall-pf S======|=iti|itl|lUh!Fon <nNameneame=nae,ponent]ee Eee &ot eSSoaCR,a am a,ay a--=.Le =-ee -aa sane -====-2 ES Tare =-sa A ==ee ere ane!Te,fs=e SSS SSS tSeneaeeRRmebassetant-a ---Se acca an r-)fememsene =< a cee oe csr me Peano reeseSSeeeeeeeee-"SE Renrene reer aE menace aeeaelreaceenaraA D.The Power Sales Agreement The Power Sales Agreement (PSA)and a separate letter agreement by APT to make principle payments provide security for the loan.The PSA contains a two-part rate structure consisting of a $300,000 annual fixed fee for up to 6 Million KWH ($0.05/Kwh)plus a variable "Additional Energy Rate”applied to production over 6 Million Kwh.'In addition,the Agreement provides for APC,for a time,to reimburse Haida Energy for all or a portion of Operating Fees paid to Alaska Power and Telephone and Land Lease fees paid to Sealaska.” The contract specifies "The first Initial Additional Energy Rate shall be $0.0648 per kWh,which is equal to the current rate for Purchaser's power purchases from BBL Hydro,Inc.”The March 2011 loan application states additional energy will be priced at the "Black Bear rate (currently $0.071/kWh)”.The parties may intend for the 2015 Black Bear Hydro rate to apply when operations commence in 2015,but this is not clear in the PSA.Regardless of how it is determined,once the first Initial Additional Energy Rate is established the Black Bear Hydro rate becomes forever irrelevant?and the rate is adjusted over time based on the "Rate Stabilization Methodology”. The "Rate Stabilization Methodology”is defined in the PSA as "a ratemaking procedure that avoids large rate increases for existing customers of Purchaser by deferring a portion of the allowable annual revenue requirements of major assets to future customers.””In other words, the contract specifically and intentionally sets initial prices to collect less than the established revenue requirement,intending on charging future customers more than the revenue requirement at that time to make up for past under-collections'. _The result,shown on Attachment 1 to Haida's August 19 letter and reproduced below,is substantial under-pricing for the first few years then a 40 to 50 percent price increase to reflect current costs plus capture early year deficits. 1 psa Exhibit A,the Rate Schedule,details these rate elements. ?PSA Exhibit B,O&M Reimbursement,details these provisions.Operating Fees are monthly fees paid to APT to perform operations and maintenance services.Land lease expenses are expenses incurred under various agreements that allow access to and use of property.Attachment C lists examples of reimbursable and non- reimbursable expenses Haida Energy is likely to incur. *In its August 19 letter Haida indicates that contractual rates for energy over 6 million Kwh will increase automatically with the Black Bear Hydro rate.The contract,on the other hand,specifies that the Rate Stabilization Methodology will be used to adjust the Initial Additional Energy Rate and "no other types of rate adjustments shall be allowed”. "it is unclear why pricing Reynolds Creek Hydro energy at full cost of service would result in "large rate increases”- or even small rate increases -since it will displace diesel fuel with a cost at least as great as the cost of RCH power. *The regulatory treatment of recovery of past losses is questionable.To the extent revenue requirements reflect cost,shifting cost recovery from early customers to latter customers would violate the cost-causer/cost-payer regulatory goal. Attachment 1 :B/V Low Forecast 30-year Deficit Amortization 0.30 { O25 ProjectRevenues-$/kWh0.10 0.05 ae Deferred revenue collections are capitalized,accrue interest and a return on equity,and are accounted for in a "Rate Stabilization Account”that becomes a rate base asset of the company. The balance in this account is then rolled into future revenue requirement determinations and rate setting equations.The PSA requires that "Initial Additional Energy Rates”be adjusted over time to ensure that all deferred revenue collections and accumulated interest in the "Rate Stabilization Account”are collected from APC within 20 years of the commencement of operations.®No other types of rate adjustments are allowed until the balance of this account reaches zero,after which Additional Energy Rates are set based on standard revenue requirement ratemaking procedures. Ironically,as shown on Attachment 1 of Haida's August 19 letter and on Attachment A to this document,Haida's plan to implement the Rate Stability Methodology destabilizes rates in two ways.First,the overall charge per Kwh increases significantly in the 5th year of operation as rates need to reflect actual operating costs plus need to start collecting amounts in the Rate Stabilization Account to ensure it reaches a zero balance in year 20 or before.This increases the average cost per Kwh by 4 or 5 cents (50%). 5 Haida Energy's March,2011 loan application states that under-recoveries will be recovered by "increasing the Fixed Payment”.However,only adjustments to the "Initial Additional Energy Rate”-a variable rate -are provided for in Exhibit A,the Rate Schedule,of the PSA.In describing changes to the variable rate,the PSA states "no other types of rate adjustments shall be allowed”.Changes to the variable rate have therefore been used in modeling the economic and financial feasibility of loan repayment. Secondly,and more importantly in terms of the ability to generate sales to service debt and pay operating costs,since the $300,000 fixed rate applicable to the first 6 Million Kwh doesn't change,the entire additional revenue amount must come from adjustments to the variable Initial Additional Energy Rate.The result,shown on the right-hand column of Attachment A,is a rate of 28.91 cents per Kwh for sales in excess of 6 Million during operating year five. Power plant operators make dispatch decisions at the margin "What facilities do |have available for dispatch and which is the least incremental cost?”In this case,diesel might be the least-cost option.Why pay 29 cents per Kwh (the Initial Additional Energy Rate)for incremental energy you can obtain for 24 cents per Kwh (Approx.cost of diesel fuel)?Rather than incent use of Reynolds Creek,the rate structure proposed by Haida may uneconomically discourage it.For this project to succeed economically it will have to send correct price signals and it is unclear that the anticipated rate structure does so. As shown on Attachment A,the actual revenue requirement is fairly stable and flat over the first 30 years of operation.Haida's plan to underprice energy below these levels during the first several years,then overprice energy for a long period of time,harms the prospects of achieving adequate financial reserves early on to cover administrative costs and service debt as Kwh sales levels fluctuate from year to year.It may also harm prospects for incremental sales. E.Kwh Sales and Revenue The financial success of the project,and Haida's prospects as a going concern,are dependent as much on developing loads as an economically efficient rate structure.In its March 2011 loan application Haida projected minimum sales levels,6 Million per year,for the first five years,and finally reaching full capacity in the 4o""operating year.Black and Veatch load growth scenarios are more optimistic with beginning sales of over 7 Million Kwh annually and growing either moderately (low growth scenario)or rapidly (high growth scenario with new loads). Using the Black and Veatch low growth scenario,Haida expects the $300,000 fixed fee plus Additional Energy Rates to generate $2.3 Million in revenue during the first five years.This compares to a revenue requirement during the same time period of $4.9 Million and cash expenses,excluding Haida internal administrative costs',of $1.8 Million.The $2.6 Million under-recovery of costs during the first five years is reduced to a net loss of $900,000 through offsetting O&M expense reimbursements collected pursuant to Exhibit B of the PSA (described below).The "Rate Stabilization Methodology”®is used to adjust rates up and down to ensure this amount -$900,000 -plus interest at the cost of debt and a 15%return on equity,is recovered from APC during the first 20 years of operation. 7Haida's business management,accounting,administration,regulatory and legal plans are undefined. 5 It is unclear how the RSM will work or how often or how long it will take to change rates. F.The Operations and Maintenance Agreement In its March 2011 application,Haida estimates annual operating costs of $310,027 per year. Haida states that the $300,000 fixed fee is pledged and dedicated to debt service,”so revenue generated through Additional Energy Rates has to cover operating expenses and return on equity investment.Sales would have to exceed 10.8 Million Kwh to produce the 4.8 Million Kwh (at $0.0648/Kwh)in Additional Energy sales needed to cover $310,027 in operating costs. This level of sales is not expected to occur for many years. Particularly during the early years before rates are increased under the Rate Stabilization Methodology,Haida and its customer,APC,are concerned that Haida might not have enough revenue or resources to pay for operating expenses necessary to keep the facility operational. This is a valid concern since even with zero debt service the company may not generate enough revenue at the prices in the PSA to cover operating expenses at realistic sales levels. To ensure operating costs of the facility are covered,Exhibit B to the PSA,"O&M Reimbursement”,states that Haida's sole customer,APC,will reimburse Haida for amounts paid by Haida to Alaska Power and Telephone Company,the facility operator,as well as land lease costs paid to Sealaska.APC will reimburse Haida for 100%of cash expenses for these items until Haida's "Net Revenue”(Revenue less debt service)reaches $500,000 in a single year,after which APC will reimburse Haida for 50%of such costs until "Net Revenue”(Revenue less reimburseable cash expenses less debt service)once again reaches $500,000.After the second year this threshold is met APC's reimbursement obligation terminates. Attachment C summarizes expenses APC will likely reimburse Haida for under the PSA and those that APC will not reimburse Haida for.With no financial responsibility for facility O&M costs,Haida may not have the incentive to develop the management oversight necessary to effectively control operating costs and obtain timely regulatory rate relief necessary to meet debt service covenants.As a new entity with no operating history,combined with a challenging economic environment,Haida will have to implement positive management controls early on. Yet,in its loan application and financial modeling Haida makes no monetary provision for administrative costs necessary to effect that capability.A management plan needs to be in place if Haida is to fulfill its contractual loan commitments.Any delay in implementing rate changes associated with the Rate Stabilization Methodology can have large cash flow impacts on Haida. 5 This is insufficient to service the debt.Even at zero percent interest,$300K/yr for 46 years provides less than $14 Million. G.Economic Feasibility The economic feasibility of the Reynolds Creek Hydroelectric Project is highly dependent on load growth and hydro production assumptions on Prince of Wales Island.Under the terms of the PSA between Haida and APC,APC will have what amounts to a take-or-pay contract for 6 Million KWH per year for the life of the contract.Reynolds Creek will have priority dispatch over assets placed in service at a later date,but will be dispatched only after South Fork and Black Bear Hydro facilities and any other existing APC facilities are operating at optimum levels. In a very wet year,Reynolds Creek sales may fall well below the 6 million Kwh threshold because South Fork and Black Bear are ramped up. While the loan application states that the project will "displace over 6 million kilowatt-hours of diesel generation at current loads”,this number may vary considerably.Nonetheless,the application states that APC generated 6,036,000 Kwh in 2010 using diesel generation.The difference in diesel displacement is significant with respect to the cash flow benefits of the project.Ata fuel cost of $3.50/gallon,a fuel efficiency of 13.5 kwh/gallon,a 45 year,$20 Million debt at an average cost of 0.00%,the comparison between Reynolds Creek costs and fuel savings is: Impact to Annual Gallons of Fuel Cost Revenue System-wide End Kwh Diesel Savings @ Requirement User Rates - Displaced Displaced $3.50/Gallon 26,254,580 Kwh 6,000,000 444,444 $1,555,554 $980,000 -$0.0219 Unaccounted for in this analysis are savings due to lower maintenance an O&M costs for diesel plant which will used for standby emergency purposes rather than for everyday power generation once Reynolds Creek comes online. H.Financial Feasibility Financial feasibility means not only that the borrower will have sufficient funds to repay the loan but also that consumers will not unnecessarily incur major or unacceptable cost increases. Power Project Fund (PPF)statutes provide that the interest rate on PPF loans will equal the average rate over the prior 12 months of municipal revenue bonds,unless a lower rate is needed for the project to meet financial feasibility criteria.Also allowed are deferred principal payments for up to 10 years for certificated entities to allow a project to get off the ground and generate earnings sufficient to repay the loan.The "presumptive”rate (i.e.the average municipal revenue bond rate)is currently 5.10%. Annual debt service on a PPF loan of $20,000,000 at 5.10%over 46 years (the project is expected to become operational in year four)is $1,135,169.With O&M this would render the project not economic unless it was operating at near capacity. In its application Haida states that the $300,000 annual fixed payment will be used exclusively for debt service.At zero percent the Haida-proposed annual debt service amount,$300,000, can support a 46 year $13,800,000 loan.This is not enough to finish the project,nor does it provide loan security for an $18 Million to $20 Million loan,nor does it provide revenue sufficient to pay economically justified interest charges as economic development generates increased sales.Loan security therefore needs to be provided by Additional Energy sales and/or other revenue sources sufficient to pay for all administrative and operating costs Haida is responsible for plus margins sufficient to meet debt service requirements and covenants. Increasing sales over time results in reduced fixed costs per Kwh,economically justifying increased interest charges as sales rise without increasing costs to end users.Attachment B shows the application of a sliding scale interest rate where a loan to Haida is provided and interest applied on the loan balance based on sales relative to the minimum 6 Million Kwh (0.0%interest)-and maximum -20 Million Kwh (5.1%interest).As sales increase,O&M costs per Kwh decrease and interest cost per Kwh increase.The net impact on end user rates is between an increase of 1.09 cents and a decrease of 2.23 cents per Kwh depending on loan balance at the time. Applying interest rates in this fashion would ensure that the PPF's at-risk investment fulfill legislative directives that loan rates generally reflect market conditions with deference to undue customer impacts.Haida has indicated that it wants AEA only to consider and approve or disapprove a zero interest loan. While the economics indicate there is enough value to justify the project,significantly under- pricing energy -i.e.pricing the first 6 Million Kwh at $0.05 per Kwh and Additional Energy sales beginning at $0.0648 per Kwh -both well below cost -reduces the ability of Haida to create a financial buffer against reduced sales or future increased costs that can jeopardize debt service coverage.Prices closer to cost would allow Haida to build equity in the enterprise to weather most sales downturns or unexpected costs. Under the PSA once Haida reaches sales of approximately 9 Million Kwh,it will become responsible for all O&M costs.Administratively,it will need to deal with emergencies,set prices sufficient to recover all of its costs plus "deferred revenue”due to the historical under- pricing of energy and generate adequate margins.Haida's financial projections assume it can sell 1.5 Million+Kwh in Additional Energy for 29 to 30 cents a Kwh (Attachment A). I.Cash Flow Cash flow is highly dependent on developing loads.Below are comparison net revenues by PSA source assuming B/V average growth over the first 20 years of operation and assuming no growth: Assuming B/V Average Growth No P&l Deferral P&I5S Yr Deferral Sales (Kwh)256,713,000 256,713,000 Defined Revenue Fixed Revenue $6,000,000 S$6,000,000 Variable Revenue $10,798,000 $10,798,000 Total $16,798,000 $16,798,000 Cash Expenses”$11,070,120 $11,070,120 Debt Service (0%Int.)S$7,922,290 S 5,594,695 Net Defined Revenue -§2,194,510 S 133,185 Undefined/Uncertain Revenue Rate StabilityRevenue'”§$4,235,892 $4,235,892 "Reimburseable”Revenue”$1,645,574 $1,645,574 Net Revenue S 3,686,956 S 6,014,651 Assuming no growth Sales (Kwh)120,000,000 120,000,000 Defined Revenue Fixed Revenue 5 6,000,000 S 6,000,000 Variable Revenue $@)$0 Total S 6,000,000 S$6,000,000 Cash Expenses S 9,761,316 S 9,761,316 Debt Service S 7,956,000 S$6,695,122 Net Defined Revenue -$11,717,316 -$10,456,348 Undefined/Uncertain Revenue "Reimburseable”Revenue S$7,761,316 S 7,761,316 Net Revenue -§3,956,000 -$2,695,032 1 Includes $100,000/yr.in Haida Energy,Inc Admin costs not reimbursed via the O&M agreement. 1 This is Haida's assumption.How the Rate Stabilization Methodology will develop the "Deficit Adder”and incorporate it into the rate structure is unknown.According to the contract,the company can develop these rates without compliance with RCA regulations. *These amounts are dependent on Haida not breaching the $500,000 "net revenue”condition and can go away. J.Certification In its March 2011 loan application,Haida states that it will soon submit an application for a Certificate of Public Convenience and Necessity with the RCA to become a certificated utility with the ability to collect revenue as a utility.In order to be certificated,Haida will need to demonstrate that it is operationally,managerially and financially fit,willing,and able to provide sustainable,dependable utility service. Given that Haida is undercapitalized,lacks any utility management experience as an entity,and will require its only customer,APC,to pay operating costs,the RCA can be expected to look to the security the PSA provides Haida as a going concern.Since AEA statutes only allow deferred payments for certificated utilities,should the AEA Board approve this loan and a deferred provision,deferral should be conditioned on obtaining certification KWH Revenue &Cost Per Operating Year Average Revenue $/KWH* Revenue Req. $/KWH $0.1015 $0.1331 Reynolds Creek Power Sales AgreementRateInstability B/V Low Growth Scenario & Extremely High Prices for Variable Rate Power Attachment A Rate Structure $300K Fixed Fee $/KWH Variable Rate $/KWH Operating Year $0.1030 $0.1042 $0.1054 $0.1499 $0.1206 $0.1226 $0.1247 $0.1269 10.$0.1291 $0.1342 $0.1340 $0.1339 $0.1339 $0.1233 $0.1237 $0.1241 $0.1246 $0.1251 $0.1330 $0.1354 $0.1379 $0.1404 $0.1430 $0.1475 $0.1503 $0.1532 $0.1561 20 $0.1591 $0.1288 $0.1294 $0.1301 $0.1307 $0.1314 $0.1360 $0.1369 $0.1378 $0.1388 $0.1399 $0,1800 $0.1700 = 80,1600 - -$0.1500° $0.1400$0.1300 - "§0.1200. 80.1400 - $0.1000. -$0,0900 -seator20,80.40 50 eye "Revenue vs Cost Comparison imI ; SIKH -Operating Year TU ARUAARRSAIARASSESEERRUOESLECORUOSOIESOLELOLAGAL : oe-Revenue S/KWHSo7RevenueReq.S/kWH $0.0500 $0.0723 | $0.0500 $0.0500 $0.0500 $0.0500 $0.0500 $0.0500 $0.0500 $0.0500 $0.0500 $0.0728 $0.0734 SO.0740|$0.2891S028| $0.2889 $0.2892 $0.2899 $0.2909 10° *Includes O&M Payments by Haida's Customer,APC $0.0500 $0.0500 $0.0500 $0.0500 $0.0500 $0.0500 $0.0500 $0.0500 $0.0500 $0.0500 $0.2921 $0.2935 $0.2952 $0.2971 $0.2991 $0.3014 $0.3039 $0.3065 $0.3094 $0.3124 90 ; Attachment B As Sales Increase,O&M Costs Per KWH Decrease and Interest Costs Per KWH Increase The Net Change in Total Cost Per KWH is Between +1.09 Cents/KWH and -2.23 Cents/KWH Net Change in Per KWH Cost of Service i.e.Net of O&M*Plus Interest Charges Loan Balance $18,000,000 $15,000,000 $10,000,000 $5,000,000 Sales in KWH 6 Million $0.0000 $0.0000 $0.0000 $0.0000 8 Million $0.0039 $0.0012 -$0.0034 -$0.0079 10 Million $0.0062 $0.0019 -$0.0054 -$0.0127 15 Million $0.0093 $0.0028 -$0.0081 -$0.0191 20 Million $0.0109 $0.0033 -$0.0095 -$0.0223 *Assumes O&M at $300,000/year Interest Cost Per KWH Sold Loan Balance $18,000,000 $15,000,000 $10,000,000 $5,000,000 Sales in KWH (Int.Rate) 6 Mill (0.00%)$0.0000 $0.0000 $0.0000 $0.0000 8 Mill (0.73%)$0.0164 $0.0137 $0.0091 $0.0046 10 Mill (1.46%)$0.0262 $0.0219 $0.0146 $0.0073 15 Mill (3.27%)$0.0393 $0.0328 $0.0219 $0.0109 20 Mill (5.10%)$0.0459 $0.0383 $0.0255 $0.0128 Attachment C Reynolds Creek Hydro Facility Expenses Reimbursable Operating Fees Paid Monthly to APT (Estimated at $300K/yr) e Facility operations like dispatch,metering,monitoring,maintaining logs,security,insurance e APT bills monthly at total cost,including overheads,as assigned in its Cost Allocation Manual,plus 15%of the Total.The higher the cost, the greater the margin to APT Land Lease Expenses e Payments to Sealaska for Rights of Way (Estimated at $15K/year) e Payments to Sealaska for Operating Rents (SO initially;$45K in year 5,$140K in year 20,$225K in year 30) e Lease Payments to any other entity approved by APC Nonreimburseable Any Haida Energy,Inc.Cost Not Paid to APT or Sealaska e Legal,accounting,tax,title,escrow,closing fees e Cost of preparing and delivering notices to Haida Energy Owners e Litigation and attorney's fees e Professional fees associated with business management e Taxes,fees,governmental charges assessed to Haida Energy e Professional fees associated with regulatory filings and requirements e General administration and office maintenance Attachment D Total Capitalization-..(Capital-Structure Alternatives sasA Debt CostnC:5.i%And Equity Cost &8.0%fog 820,700,000-»NEE ae35%Debt Alternative -80%Debt Alternative Debt $19,665,000.00 $16,560,000.0 Cost of Debt 5.10%5.10% Levelization Period in Years 50 50 Levelized Annual Debt Service $545,429.05 $459,308.68 Equity $1,035,000.00 $4,140,000.00 Cost of Equity 8.00%8.00% _Levelization Period in Years 50 50 Levelized Annual Equity Cost*$42,236.28 $168,945.12 Total Annual Levelized Payments to Debt and Equity aS $628,253.80DifferenceiinAnnualCost>PEAS Ss pe one :meee -$40,588 AG.Changein Cost per Kwh @ 6 MWH/Y.r With More Equity iin Cap Structure we $0.0072 Total Capitalization .-«Capital:Structure Alternatives siaA DebtLCost1g 0%-And:Equity Cost @*12%'$20,700,000#4 3:O5%Debt Alternative 80%Debt Alternative Debt $19,665,000.00 $16,560,000.0 Cost of Debt 0.00%0.00% Levelization Period in Years 50 50 Levelized Annual Debt Service $196,650.00 $165,600.00 Equity $1,035,000.00 $4,140,000.00 Cost of Equity 12.00%12.00% Levelization Period in Years 50 50 Levelized Annual Equity Cost*$62,283.56 $249,134.26 Tota!Annual Levelized Payments to Debt and Equity $258,933.56 S414,734.26DifferenceinAnnualCost,i $155,800.69°Changein-Cost per Kwh @6 MWHIY r With More Equity in Cap Structure eee $0.0276 *Note:Analysis ignores theincome tax effect of equity returns. Powerr Requirements /Sources of Power Deprectation /Net Plant Debt Facility Operational}Power |Resources Gross A het Payment en 1 South |Reynoids Diesel Plant Depe coum,_ Period Year Beck "me (Net of kaw Expense Depr Ptant Rate Amount Principal Interest BalanceaymentPayment Grants) ty)[')29,089 19,248 6,000 -3841 $:0.00%86 :$: $: 9 0 30,916 19,248 6,000 -5,668 -9.00%+::0.00 $- - 0 0 31,494 19,248 6,000 *6,246 :0.00%:-:0.00 : . °0 31,939 19,248 6,000 -6,691 -0.00%---0.00 : : i 1 32,599 19,248 6,000 7,351 :20,735,871 1.50%310,399 310,399 20,425,472 0.00 :-:18,235,871 1 2 32,568 19,248 6,000 7,320 -20,735,871 1.49%309,090 619,489 20,116,382 0.00 ::-(8,235,871 1 3 32,633 19,248 6,000 7,385 -20,735,871 1.50%341,834 931,323 19,804,548 0.00 --.18,235,871 {4 32,699 19,248 6,000 7,451 -20,735,871 1.52%314,625 1,245,944 19,489,927 0.00 ..*18,235,871 1 $32,764 19,248 6,000 7,546 -20,735,871 1.53%317,366 1,563,310 19,172,561 0.00 -.-18,235,871 2 6 32,830 19,248 6,000 7,582 -20,735,871 1.54%320,153 1,883,463 18,852,408 0.04 303,280 303,280 -17,932,591 2 7 32,895 19,248 6,000 7,647 .20,735,871 1.56%322,897 2,206,361 18,529,510 0.04 305,880 305,880 -17,626,711 2 8 32,961 19,248 6,000 713 -20,735,871 1.57%325,684 2,532,045 18,203,826 0.04 308,520 308,520 -17,318,191 2 9 33,027 19,248 6,000 1,779 -20,735,871 1.58%328,471 2,860,516 17,875,355 0.04 341,160 311,160 .17,007,031 2 10 33,093 19,248 6,000 7,845 -20,735,871 1.60%331,258 3,191,774 17,544,097 0.04 313,800 313,800 -16,693,231 3 "33,159 19,248 6,000 7,911 -20,735,871 161%334,045 3,525,819 17,210,052 0.04 316,440 316,440 -16,376,791 3 12 33,225 19,248 6,000 1977 -20,735,871 1.62%336,832 3,862,651 16,873,220 0.04 319,080 319,080 -16,057,711 3 13 33,292 19,248 6,000 8,044 -20,735,871 1.64%339,661 4,202,312 16,533,559 0.04 321,760 321,760 -15,735,951 3 4 33,358 19,248 6,000 8,110 .20,735,871 1.65%342,448 4,544,760 16,191,111 0.04 324,400 324,400 -15,411,551 3 15 33,425 19,248 6,000 8,177 -20,735,871 1.67%345,277 4,890,037 15,845,834 0.04 327,080 327,080 :15,084,471 4 16 33,492 19,248 6,000 8,244 -20,735,871 1.68%348,106 5,238,143 15,497,728 0.05 370,980 370,980 .14,713,491 4 ie 33,559 19,248 6,000 8311 -20,735,871 169%350,935 $,589,078 15,146,793 0.05 373,995 373,995 -14,339,496 4 18 33,626 19,248 6,000 8,378 -20,735,871 1.71%353,764 $,942,842 14,793,029 0.05 377,010 377,010 .13,962,486 4 19 33,693 19,248 6,000 8,445 :20,735,872 1.72%356,593 6,299,436 14,436,435 0.05 380,025 380,025 -13,582,461 4 20 33,761 19,248 6,000 8,513 +20,735,871 1.73%359,465 6,658,900 14,076,971 0.05 383,085 383,085 -13,199,376 4 ai 33,828 19,248 6,000 8,580 -20,735,871 1.75%362,294 7,021,194 13,714,677 0.05 386,100 386,100 .12,813,276 4 22 33,997 19,248 6,000 8,749 -20,735,871 1.78%369,430 7,390,624 13,345,247 0.05 393,705 393,705 -12,419,571 4 23 34,167 19,248 6,000 8,919 -20,735,871 1.82%376,008 7,767,232 12,968,639 0.05 401,355 401,355 -12,018,216 4 24 34,338 19,248 6,000 9,090 -20,735,871 1.85%383,829 8,151,061 12,584,810 0.05 409,050 409,050 -11,609,166 4 25 34,510 19,248 6,000 9,262 :20,735,871 1.89%391,091 8,542,152 12,193,719 0.05 416,790 416,790 -41,192,376 4 26 34,683 19,248 6,000 9,435 -20,735,871 1.92%398,396 8,940,549 11,795,322 0.05 471,750 471,750 -10,720,626 4 27 34,856 19,248 6,000 9,608 :20,735,871 1.96%405,701 9,346,250 11,389,621 0.05 480,400 480,400 :10,240,226 4 28 35,030 19,248 6,000 9,782 -20,735,871 1.99%413,049 9,759,299 10,976,572 0.05 489,100 489,100 -9,751,126 5 241 9,957 -20,735,871 2.03%10,179,737 10,556,134 0.05 497,850 497,850 -9,253,276 : iy lei :TOTS ees BOOKS Bedeitioos 4 v 35,558 19,248 6,000 10,310 :20,735,871 2.10%435,344 11,042,950 9,692,921 0.05 515,500 515,500 -8,231,126 4 32 35,136 19,248 6,000 10,488 -20,735,871 2.14%442,860 11,485,810 9,250,061 0.05 $24,400 524,400 -7,106,726 4 33 35,915 19,248 6,000 10,667 .20,735,871 2.17%450,418 11,936,228 8,799,643 0.05 $33,350 $33,350 :7,173,376 4 4 36,094 19,248 6,000 10,846 -20,735,871 2.21%457,976 12,394,205 8,341,666 0.05 $42,300 542,300 -6,631,076 4 35 36,275 19,248 6,000 11,027 +20,735,871 2.25%465,619 12,859,824 7,876,047 0.05 551,350 551,350 -6,079,726 4 36 36,456 19,248 6,000 11,208 :20,735,871 2.28%473,262 13,333,086 7,402,785 0.05 560,400 560,400 -5,519,326 4 7 36,638 19,248 6,000 11,390 -20,735,871 2.32%480,947 13,814,033 6,921,838 0.05 569,500 $69,500 -4,949,826 4 38 36,822 19,248 6,000 11,574 -20,735,871 2.36%488,717 14,302,750 6,433,121 0.05 578,700 578,700 +4,371,126 4 39 37,006 19,248 6,000 E758 -20,735,871 2.39%496,486 14,799,236 5,936,635 0.05 587,900 587,900 -3,783,226 ls i :Selina ni 7 j PUR 4 -20,735,871 x 512,152 15,815,685 0.05 606,450 606,450 -2,579,626 4 42 37,564 19,248 6,000 12,316 -20,735,871 2.51%520,048 16,335,733 0.05 615,800 615,800 -1,963,826 4 43 37,751 19,248 6,000 12,503 :20,735,871 2.55%527,944 16,863,677 0.05 625,150 625,150 :1,338,676 4 44 37,940 19,248 6,000 12,692 :20,735,871 2.58%535,925 17,399,601 0.05 634,600 634,600 -704,076 4 45 38,130 19,248 6,000 12,882 -20,735,871 2.62%$43,947 17,943,549 2,792,322 0.05 644,100 644,100 -59,976 4 46 38,321 19,248 6,000 13,073 *20,735,871 2.66%552,012 18,495,561 2,240,310 0.05 59,976 59,976 -- 4 47 38,512 19,248 6,000 13,264 -20,735,874 2.10%560,077 19,055,639 1,680,232 0.05 :.-. 4 48 38,512 19,248 6,000 13,264 -20,735,871 2.70%560,077 19,615,716 1,420,155 0.00 ---- 4 49 38,512 19,248 6,000 13,264 :20,735,871 2.70%560,077 20,175,794 560,077 0.00 -:-: 4 50 20,735,871 2.70%560,077 20,735,871 :0.00 ---- 38,512 19,248 6,000 13,264 - * * Cost of Capttal Rate Base/Retura on Rate Basesci."peat |OPeations Working Toul Rete |Retum onPeriodYearDebt]Equity |Weighted Net Plant Capital Rate of Rate (12.5%O&M)Base Return Bass 2011 0 0 0.0%0.0%0.0%$.$-$.00%$- 2012 Q Q 0.0%0.0%0.0%---0.0%: 203 0 Qo 0.0%0.0%0.0%-:.0.0%. 204 0 0 00%00%0.0%:::0.0%. 2015 1 1 0.0%13.0%1.6%20,425,472 .20,425,472 16%320,135 2016 1 2 0.0%13.0%16%20,116,382 -20,116,382 16%315,291 2017 1 3 00%13.0%1.6%19,804,548 :19,804,548 1.6%340,403 2018 I 4 00%130%16%19,489,927 :19,489,927 1.6%305,472 2019 1 5 00%13.0%=1.6%19,172,561 :19,172,561 1.6%300,498 2020 2 6 0.0%13.0%1.6%18,852,408 -18,852,408 16%299,86620212700%130%1.6%18,529,510 :18,529,510 1.6%299,209 2022 2 8 00%13.0%1.6%18,203,826 :18,203,826 1.6%298,526 2023 2 9 0.0%13.0%L7™%17,875,355 -17,875,355 1%297,815 2024 2 to 00%13.0%«1.7%17,544,097 22,021 17,566,118 1.7%297,448 2025 3 ul 0.0%13.0%7%17,210,052 24,275 17,234,327 1%296,722 2026 3 12 00%13.0%1.8%16,873,220 24,984 16,898,204 1.8%295,937 2027 3 13 0.0%13.0%13%16,533,559 25,718 16,559,274 18%295,118 2028 3 4 00%130%1.8%16,191,111 26,466 16,217,877 1.8%294,263 2029 3 15 0.0%13.0%1.8%15,845,834 21,240 15,873,074 1.8%293,370 2030 4 16 00%13.0%1.9%15,497,728 29.971 15,527,699 1.9%293,171 2031 a 17 0.0%13.0%1.9%15,146,793 30,860 15,177,653 1%292,927 2032 4 18 00%130%20%14,793,029 31,775 14,824,803 2.0%292,669 2033 4 19 0.0%13.0%2.0%14,436,435 65,434 14,501,869 2.0%293,059 2034 4 20 00%13.0%=.2.1%14,076,971 67,375 14,144,346 2.1%292,809 2035 4 21 0.0%13.0%2.1%13,714,677 69,372 13,784,049 21%292,545 2036 4 22 00%130%22%13,345,247 11,653 13,416,901 2.2%292,267 2037 4 23 0.0%13.0%2.2%12,968,639 74,010 13,042,649 22%291,968 2038 4 24 0.0%13.0%2.3%12,584,810 76,444 12,661,254 2.3%291,648 2039 4 25 00%13.0%24%12,193,719 78,959 12,272,677 2.4%291,302 2040 4 26 0.0%13.0%25%11,795,322 81,556 EE,876,878 2.5%291,967 2041 4 27 00%13.0%2.6%11,389,621 84,237 11,473,857 2.6%292,695 2042 4 28 00%15.0%2.7%10,976,572 87,006 11,063,578 2.7%293,497 2043 4 29 00%13.0%2.8%10,556,134 89,866 10,646,000 2.8%294,382 2045 4 31 00%«13.0%3.0%9,692,921 95,872 3.0%296,461 2046 4 32 00%130%32%9,250,061 99,024 3.2%297,691 2047 4 33 0.0%13.0%34%8,799,643 102,281 3.4%299,081 2048 4 34 0.0%13.0%3.6%8,341,666 105,641 8,447,307 3.6%300,663 2049 4 35 00%130%3.8%7,876,047 109,115 7,985,162 3.8%302,478 2050 4 36 00%130%41%7,402,785 '112,701 7515486 4.1%304,581 2051 4 37 0.0%13.0%44%6,921,838 116,404 7,038,242 44%307,045 2052 4 38 00%130%47%6,433,121 120,233 6,553,354 4.7%309,970 4 124,184 6,060,819 5.2%313,496 a Mi pig TI SENS 2055 4 4l 0.0%13.0%6.4%4,920,186 132,481 5,052,667 6.4%323,275 2056 4 42 0.0%13.0%13%4,400,138 136,835 4,536,973 13%330,326 2057 4 43 0.0%13.0%8.5%3,872,194 141,328 4,013,522 85%339,803 2058 4 44 0.0%13.0%10.1%3,336,270 (45,973 3,482,243 10.1%353,215 2059 4 4s 0.0%13.0%127%2,792,322 150,771 2,943,093 12.7%373,638 2060 4 46 0.0%13.0%13.0%2,240,310 185,727 2,396,036 13.0%311,485 2061 4 4 0.0%13.0%13.0%1,680,232 160,841 1,841,073 13.0%239,340 2062 4 48 0.0%0.0%0.0%1,120,155 (165,264 1,285,419 0.0%- 2063 4 49 0.0%0.0%0.0%560,077 169,809 729,886 0.0%+ 2064 4 30 0.0%0.0%0.0%.174,478 (74,478 =0.0%- 8,108,662 _(5,099,748) Revenues Revenue Requirements {Under Recovery) Facility i Variable TotalOperational Net O&M RetumnRent ili Period |YS Fixed Nanable Adder Dollers sawn O&M im Fecilty Subtotal a Payment by Eacre on Ineome Toul Annuad |Cumulative |ck Rate Dollars Rate Dollars Haide Egy Rate Base 0 0 ::$::.:s -:.:-s -§.-bd .-.. 0 0 ------:-----.:::.-: 0 0 .-.----.-----.---.. °0 -:--- ::.--- 1 !300,000 0.0723 97,633 -:397,633 0.084 334,386 13,857 -348,243 (348,243)-310,399 320,135 630,534 (232,901)(232,901)#aaavtT 1 2 300,000 0.0728 96,156 :.396,156 0.054 343,582 14,238 -357,820 (357,820).309,090 315,291 624,380 (228,225)(472,771)seREE 1 3 300,000 0.0734 101,698 .-401,698 0.054 353,03!14,630 -367,660 (367,660)-311,834 310,403 622,238 (220,540)(716,950)a##HANE 1 4 300,000 0.0740 107,396 .:407,396 0.055 362,739 15,032 -37770 (377,771)-314,621 305,472 620,093 (212,697)(965,494)##RAHEH I 5 300,000 0.0746 113,105 0.0433 325,106 738,211 0.098 372,714 15,445 -388,159 (388,159)-317,366 300,498 617,864 120,347 (893,422)120,347 2 6 300,000 0.0752 118,973 0.0446 337,800 756,773 0.100 255,309 15,870 43,417 34,597 (314,597)-320,153 299,866 620,019 136,755 (801,338)136,755 2 7 300,000 0.0758 124,852 0.0459 350,917 718,769 0.101 262,330 16,306 44,994 323,630 (323,630)-322,897 299,209 622,106 153,663 (687,742)153,663 2 8 300,000 0.0764 130,894 0.0473 364,564 795,458 0.103 269,544 16,755 46,630 332,929 (332,929)-325,684 298,526 624,210 171,248 (550,881)171,248 2 9 300,000 0.0770 137,025 0.0487 378,714 815,739 0.105 276,957 17,216 48,322 342,495 (342,495).328,471 297,815 626,286 189,453 (388,973)189,453 2 10 300,000 0.0776 143,246 6.0501 393,385 336,630 0.107 284,573 17,689 50,073 352,335 (176,167)176,167 331,258 297,448 804,873 31,757 (376,664)31,757 3 is]300,000 0.0783 149,557 0.0516 408,595 858,152 0.108 292,399 18,176 77,824 388,398 (194,199)194,199 334,045 296,722 824,966 33,186 (362,311)33,186 3 R 300,000 0.0789 $55,960 0.0532 424,364 880,324 0.110 300,440 18,675 80,631 399,746 (199,873)199,873 336,832 295,937 832,642 47,682 (332,745)47,682 3 iz]300,000 0.0795 162,535 0.0548 440,766 903,301 0.112 308,702 19,189 83,544 411,435 (205,717)205,747 339,661 295,118 840,497 62,805 (286,578)62,805 3 ta 300,000 0.0802 169,126 0.0564 457,714 926,840 O14 317,191 19,717 86,546 423,454 (211,727)211,727 342,448 294,263 848,438 78,402 (222,505)78.402 3 15 300,000 0.0808 175,892 0.0581 475,340 951,232 0.116 325,914 20,259 89,660 435,833 (17,917)217917 345,277 293,370 856,563 94,669 (138,960)94,669 4 16 300,000 0.0814 182,756 0.0599 493,612 976,368 O18 334,877 20,816 123,841 479,534 (239,767)239,767 348,106 293,171 881,044 95,324 (50,585)95,324 4 7 300,000 0.0821 189,718 0.0617 512,553 1,002,271 0.121 344,086 21,388 128,281 493,755 (246,878)246,878 350,935 292,927 890,739 53,514 :111,531 4 18 300,000 0.0828 196,780 0.0785 658,049 1,154,829 0.138 353,548 21,977 132,871 508,396 (254,198)254,198 353,764 792,669 900,631 --254,198 4 9 300,000 0.0834 203,943 0.0792 669,178 4,173,021 0.139 363,271 22,581 137,617 $23,469 -523,469 356,593 293,059 1,473,121 --- 4 20 300,000 0.0841 211,292 0.0799 679,984 1,191,276 0.140 373,261 23,202 142,540 $39,003 *539,003 359,465 292,809 1,191,276 :-: 4 21 300,000 0.0848 218,661 0.0806 691,156 1,209,816 0.141 383,525 23,840 147,613 554,978 -554,978 362,294 292,545 1,209,816 -:- 4 2 300,000 0.0854 234,348 0.0800 700,076 1,234,924 0.141 394,072 24,496 154,660 $73,227 -573,227 369,430 292,267 1,234,924 -.- 4 23 300,000 0.0861 251,366 0.0795 709,290 1,260,655 0.141 404,909 25,169 162,00!592,079 :592,079 376,608 291,968 1,260,655 --. 4 24 300,000 0.0868 268,220 0.0791 718,809 1,287,029 0.142 416,044 25,861 169,647 611,552 -611,552 383,829 291,648 1,287,029 --: 4 25 300,000 0.0875 285,415 0.0787 728,647 1,314,062 0.142 427,485 26,573 77611 631,668 .631,668 291,302 $,314,062 .-. 4 26 300,000 0.0882 02,956 0.0784 739,855 1,342,818 0.142 439,241 27,303 185,904 652,448 -652,448 291,967 1,342,811 --- 4 Pri 300,000 0.0889 320,760 0.0782 751,529 1,372,290 0.143 451,320 28,054 194,518 673,893 -673,893 292,695 1,372,290 --- 4 28 300,000 338,919 0.0781 163,671 -'1,402,590 0.143 463,732 28,826 203,487 696,044 :696,044 293,497 1,402,590 --. 4 29 776,308 1,433,746 476,484 29,618 212,824 718,926 :746 :-: Be iy KER dee q si Viper EVER 2 4 at 300,000 0.0918 395,579 .803,202 1,498,781 $03,051 +166,977 435,344 1,498,781 4 2 300,000 0.0925 415,212 0.0779 817,535 1,532,747 516,885 32,130 243,181 792,196 -792,196 442,860 297,691 1,532,747 --- 4 33 300,000 0.0933 435,226 0.0780 $32,519 1,567,745 531,100 33,013 254,133 818,246 -818,246 450,418 299,081 1,567,745 ..- 4 34 300,000 0.0940 455,534 0.0782 848,234 1,603,768 545,705 33,921 265,503 845,129 .845,129 457,976 300,663 1,603,768 --. 4 35 300,000 0.0948 476,329 0.0784 864,69!$60,712 34,854 277,357 872,923 :872,923 465,619 302,478 1,641,020 -. 4 36 300,000 0,0955 497,427 0.0787 882,02!576,131 35,812 289,662 901,606 :901,606 473,262 304,581 1,679,449 ..- 4 ”300,000 0.0963 518,929 0.0790 900,296 )591,975 36,797 302,46!93¢,233 .931,233 480,947 307,045 1,719,225 :-: 4 38 300,000 0.0970 540,937 919,612 0.152 608,254 37,809 315,799 961,863 -961,863 488,717 309,970 1,760,549 --. 4 9 563,264 940,190 0.153 624,981 329,642 993,472 :993,472 496,486 313,496 1,803,454 rs eeee609,188 0.1002 632,797 0.1010 656,744 0.1618 681,238 0.1026 706,185 0.1034 731,590 0.1043 757,357 0.1051 763,416 0.1059 769,523 0.1068 715,679 * 0.0776 0.0617 0.0640 0.0664 . Sie 986,085 1,012,256 1,041,629 1,075,688 4,097,570 1,077,721 1,028,786 818,773 849,024 880,225 e sit 1,895,273 1,945,052 £,998,373 2,056,927 2,123,755 2,109,311 2,086,143 1,882,188 1,918,546 1,955,904 . 659,828 677,973 696,617 15,774 735,458 755,683 716,464 797,817 819,757 842,300 . 407,520 424,995 443,157 461,997 474,701 487,756 501,169 * 1,094,679 1,130,626 1,167,787 1,206,169 1,245,813 1,286,726 1,322,001 1,358,469 1,395,827 * :1,059,846 .1,094,679 .1,130,626 -1,167,787 .1,206,169 -1,245,813 -1,286,726 :1,322,111 .1,358,469 .1,395,827 . IES by icetniteh oHEN$12,152 $20,048 527,944 535,925 $43,947 552,012 560,077 560,077 360,077 $60,077 ° 31} 330,326 339,803 353,215 373,638 301,485 239,340 323,275 1,895,273 1,945,052 1,998,373 2,056,927 2,123,755 2,109,311 2,086,143 1,882,188 1,918,546 1,955,904 . eae James Strandberg From:Mark Davis Sent:Tuesday,June 19,2012 12:40 PM To:Bob Grimm Ce:Sandra Moller;James Strandberg Subject:RE:AEA Letter Bob, Thanks for your email.The status of the loan request is that AEA has HE's positions taken in its letter of June 13,2012 under review.In the main,HE's response letter dated June 13,2012 raises two major,outstanding issues,although it should be noted that there are other non-resolved ,and not agreed to,issues between the parties,several of which are set forth under the rubric "Loan Prerequisites”at p.3 of the HE Reply letter.These other include,but are not limited to, HE's position that it requests AEA to fund the construction of the project,but not offer AEA any security in the property, plant or equipment that is paid for by the PPF loan requested. One central idea in HE's March 7"term sheet and its Reply letter to AEA is the concept of recapitalizing the company with approximately $4M in PPF loan proceeds.The letter states that HE believes that capital restructure in allowed under AS 42.45.010(1)(A)because the funds now residing in HE equity were used for the intended uses of feasibility, licensing and other preconstruction activities.AEA has initiated a legal review of this issue. Asecond important difference between HE and AEA is with regard to whether any interest should apply to the requested loan over the full term of the loan.HE has requested a zero interest rate for the entire term of the PPF loan while AEA has set forth an idea of interest rates applying when the project reaches a certain usage levels.The parties are not in agreement as shown by the first two sentences of the first full paragraph at p.2 of HE's Reply letter dated June 13,2012: "You indicate that in AEA's view a sliding scale on interest rates should apply .Haida Energy the borrower believes otherwise.” AEA has the economic and legal issues that are raised by and pertain to HE's position that the loan must have a constant zero interest rate under consideration and review.("Haida Energy believes that the significant increase in retail rates of APC asa result of the project coming online demonstrates that the project is not feasible with any level of interest expense.”}(emphasis original).SeeHE Reply letter dated June 13,2012 at p.2. As noted previously,AEA is prepared to meet with HE's management team to discuss these and other pertinent issues. Cordially, Mark Davis From:Bob Grimm [mailto:bob.q@aptalaska.com] Sent:Tuesday,June 19,2012 9:01 AM To:Mark Davis Cc:Sandra Moller;Sara Fisher-Goad;James Strandberg Subject:FW:AEA Letter Mark o What in your opinion of the next step in getting this loan finalized? Bob Grimm,CEO Alaska Power &Telephone Company P.O.Box 3222 193 Otto Street Port Townsend,WA 98368 800-982-0136 x120 Office 360-385-1733 x120 Office 360-301-3636 cell WWW.APTALASKA.COM From:Bob Grimm [mailto:bob.q@aptalaska.com] Sent:Thursday,June 14,2012 9:01 AM To:'Mark Davis' Cc:'Sara Fisher-Goad';'James Strandberg';'Sandra Moller' Subject:RE:AEA Letter Mark We are quickly running out of time and need to get this transaction finalized.|have attached Haida Energy's reply to your letter ofJuly 6. Bob Grimm,CEO Alaska Power &Telephone Company P.O.Box 3222 193 Otto Street Port Townsend,WA 98368 800-982-0136 x120 Office 360-385-1733 x120 Office 360-301-3636 cell WWW.APTALASKA.COM From:Mark Davis [mailto:MDavis@aidea.org] Sent:Wednesday,June 06,2012 3:01 PM To:Bob Grimm (bob.q@aptalaska.com) Subject:AEA Letter Dear Bob, The letter |referenced is attached.The original was mailed. Cordially, Mark Davis ©/s/s at Mark Davis To:Juday,Jerry H (LAW)(jerry,juday@alaska.gov) Cec:Sandra Moller Subject:Reynolds Creek PPF Loan Request Attachments:2012_06-06_Edenshaw-Grimm_final.pdf;ATP AEA REPLY 6132012.pdf;Grimm March 1 2012 term sheet with notes.pdf;Typewritten notes from March 7 APT Terms Sheet Reynolds Creek.pdf;Pratt Review Reynolds Creek May 2012.pdf Jerry, |would request your review of an issue regarding a request for an AEA PPF loan submitted by Haida Energy for the construction of a hydroelectric project at Reynolds Creek on Prince of Wales Island.The most recent negotiations began with the borrower providing AEA with a Term Sheet on March 1 (attached).This term sheet had handwritten additions in green ink which are my notes of a conversation with Bob Grimm regarding the Term Sheet.Due to my handwriting,| had my notes typed for easier reading (attached).AEA then took the revised Term Sheet and had it analyzed by an economist,Steve Pratt. Prate produced a report on the credit based on the Term Sheet.See Attached Pratt review May 2012.Based on this, AEA sent Haida Energy a letter dated June 6™that is attached.Mr.Grimm responded on June 13"(attached as ATP AE Reply).. In the Term Sheet at Par.2 it stated that:"Loan can be to pay for construction costs of the project and capital restructuring needed to lower costs.”AEA does not believe that PPF loan proceeds can be used for a capital restructure and informed Haida Energy of this position in in June 6"letter as follows: "The March 7,2012 term sheet at Paragraph 2 proposes using some loan proceeds for a capital restructure.This proposal raises an issue under the statutes that govern the PPF loan program. Power Project Fund loans are specifically intended for enumerated feasibility studies,and the construction and improvement of power production facilities.See,e.g,AS 42.45.01 0(1 )(A)and (B).These loans cannot be used for working capital or capital restructuring.As a result,HE should borrow only so much as it needs for statutorily allowable costs to make the project operational.As a result,the parties will have to agree to the size of any potential PPF loan.” Haida Energy's response letter dated June 13 at p.2 disagrees with this position and states the following on this issue: "Haida Energy believes that the capital structuring is allowed under AS 42.45.010(1)(A).Because the funds now residing in Haida Energy equity were used for the intended uses of feasibility,licensing and other preconstruction activities.The reason to restructure these cost by moving them from equity to debt is that it results in a lower revenue requirement and thus results in lower retail rates for the Price o Wales Island.” |would ask for your review as to whether PPF loan proceeds can be used for capital restructuring or to pay forexpensesthatwerenotpartofaloanapplication,or pay for expenses such as licensing and non-specified preconstruction activities. Cordially, Mark Davis Mark Davis From:Bjorkquist,Brian D (LAW)<brian.bjorkquist@alaska.gov> Sent:Friday,June 15,2012 11:00 AM To:Mark Davis Subject:RE:Reynolds Creek Proposed PPF Loan Yes,thanks.That puts things into context to help my review. From:Mark Davis [mailto:MDavis@aidea.org] Sent:Friday,June 15,2012 9:51 AM To:Bjorkquist,Brian D (LAW) Subject:RE:Reynolds Creek Proposed PPF Loan Brian,We do not agree that all the capital restructuring as HE is using that phrase would be for eligible costs.For example,HE wants to use loan proceeds to pay for the licensing process costs which are not part of construction,a feasibility study,a reconnaissance effort or an examination of the energy source.|can find no statutory basis for loan proceeds to be used for licensing.In discussions with other utilities,it is generally agreed that licensing costs are characterized as working capital.This is in part because licensing fees are not part of feasibility studies and such fees must be paid in cash which is liquid capital.Further,HE does not appear to be stating that it will be providing AEA with invoices regarding statutory enumerated items,such as a reconnaissance study;instead,the proposal is that approximately $4M of the loan proceeds will be booked on HE accounts in order to "lower retail rates”.It is not intended to be a submission of statutorily enumerated pre-construction invoices that are reimbursable,but rather the use of loan proceeds as an accounting device.|recognize that HE may have some pre-construction,reimbursable items, but this is not the essence of the proposal. |hope this clarifies the issues. Cordially, Mark Davis From:Bjorkquist,Brian D (LAW)[mailto:brian.bjorkquist@alaska.gov]} Sent:Friday,June 15,2012 9:24 AM To:Mark Davis Subject:RE:Reynolds Creek Proposed PPF Loan CONFIDENTIAL ATTORNEY CLIENT COMMUNICATION/ATTORNEY WORK PRODUCT Mark: Before getting into the statutes etc.,|want to make sure |have the correct framework. Regarding "capital restructuring,”does everyone agree that AP&T is correct that under their request,the PPF loan woul: be used to reimburse HE for project costs that would have been eligible to be covered by the PPF loan if the costs had been incurred after the PPF loan was issued? Thanks. Brian Bjorkquist Haida Energy,Inc P.O.Box'89 Hydaburg,Alaska 99922 June 13,2012 Mark Davis,Deputy Director Infrastructure Development,AIDEA Alaska Energy Authority 813 West Northern Lights Blvd Anchorage,Alaska 99503 RE:Application for Power Project Fund Loan for Reynolds Creek Hydropower Project Dear Mr.Davis: "Thank you for the results of your in-depth review of the draft term sheet we submitted to the AEA on March 7"2012.We believe that the term sheet submitted at that time was clear however,based upon. the contents of your letter has been misunderstood. Contractual Commitment by Alaska Power &Telephone Company:Your discussion surroundinga your understandiing that Alaska Power &Telephone Company {AP&T)astheparentcompanyofthepurchaserAPCwouldbeguaranteeingtheloanisincorrect.Under the terms of the revised (conforming to the terms and conditions of a Power Project Fund Loan)Power Sales - Agreement APC the purchaser by agreeing to make principal only payments over the term of the PSA tofullyandtimelyrepaythePPFLwithinthe50-year term our term sheet makes no mention of APC parent AP&T.. We agree that this commitment by APC to make unconditional scheduled principal payments during the' entire term (50-year)of the loan and this contractual commitment by APC via a Power Sales Agreement in its entirely approved by the RCA should satisfactorily ameliorate the risk of the PPF loan not beingrepaid. neThe credit worthiness of APC by virtue of its financial statements can be determined as the Audited Statement is attached for your review.In add ition,APC is regulated by the RCA another state agencies that also has an interest in keeping APC as a regulated electric utility in a solid financial condition. in response to your comments under the heading:Other Loan Provisions and Conditions;Interest Rate and Restriction on Cash Distributions: ,, You indicate that in AEA's view a sliding scale of interest rates should apply.Haida Energy the borrower believes otherwise.The addition of interest cost results in a double dipping of risk aversion by the AEA which Haida Energy feels in unfair to the purchaser of the output of the project {APC)and the residents of Prince of Wales Island that.will be required to pay the costs of the loan through the regulated rates ofAPC.) AEA objected to the concept of the State.via the AEA assuming the risk that the output of the project would not grow over time and that the seasonal output of the project would occur at a time when it is valuable to the residents of Prince of Wales Island.Haida Energy was advised that the risk that theprincipaloftheLoancouldunderadverseeconomicconditionsnotberepaidbytheendofthe50-yeartermwasunacceptableandthatrepaymentriskwouldhotbeassumedbytheAEA.- Haida Energy accepted this position by AEA and negotiated a power sales agreement with APC that would ameliorate that risk and find that the AEA while it appears satisfied with Haida Energy's attempttoamelioratethatrisknowwishestoenjoyinterestincomefromanyupsideintheeconomicconditions that may or may not occur.Haida Energy does not believe this is a reasonable position for AEA to take.Haida Eriergy has requested that the interest rate on the unpaid balance of the PPF loan be zero inaccordancewithAS42.45.010. Haida Energy believes that the significant increase in retail rates of APC as a result of the project coming on line demonstrates that the project is not feasible with any level of interest expense.Further Prince of Wales Island as a sub-region within SE Alaska is not unique in its efforts to increase its renewable energy capacity.There are similar efforts occurring in Ketchikan (Whitman Lake)and Sitka (Blue Lake Expansion) we future efforts in regards to the Southeast Alaska Power Authority (SEAPA).Due to the other efforts are being put forward by public sector organizations the funding plan is quite different as compared to that being employed by Haida Energy as a private sector investor/developer.Since it is the Energy Policy of the State of Alaska to encourage private sector investment we would hope that the funding solutionsbeingpursuedresultinunderlyingretailratesforallofthesub-regions would be reasonable regardiessofownershipprivatevs.public.Haida Energy observes that the amount of state investment in energy infrastructure being enjoyedis much higherin some other subregions when compared to Prince of Wales Istand. Use of Loan Proceeds for Capital Restructuring: 'Haida Energy believes that the capital structuring is allowed under AS 42.45.010(1){A).Because the funds now residing in Haida Energy equity were used for the intended uses of feasibility,licensing and other preconstruction activities.The reason to restructure these costs by moving them from equity to debtis that it resultsin a lower revenue requirement and thus resultsin lower retail rates;for the PrinceofWalesisland. Loan Prerequisites: Haida Energy has always had the honest intention to file an application for a certificate of public ; convenience and necessity.Unfortunately Haida Energy is unable to do so without a solid plan of finance-that show it is "fit”to provide public utility services.As previously discussed the.single most important -component of the solid plan of finance is the PPF Loan which is the subject of this letter.Haida Energy ispreparedtofileaCPCNapplicationwiththeRCAupontheAEABoard's approval of a loan provided itcontainstermsandconditionsshowingitarefittoprovideregulatedservice. Haida Energy is not requesting an unsecured loan under AS 42.45.010({e).Haida Energy is proposing to -assign an asset of Haida Energy in the form of a Power Sales Agreement with APC that has been ,approved by the RCA to the AEA as security this collateral clearly demonstrates that it has sufficient revenues to repay the PPF Loan.” Haida Energy wishesto retain any security value of the property,plant and equipment for strengthening its financial condition by exploring the use of New Market Tax Credits to strengthen its balance sheet. 'Hydaburg is a distressed census area and qualifies for this program.It would allow Haida Energy to 'increase its equity via this program where the financial cost of the equity is provided by the US Gov't in the way of tax credits rather than the financial cost of equity being borne by the residents of the area via increased retail rates.if the benefits of this program do not justify its expense Haida Energy has noobjectiontoprovidingtheAEAwiththesecurityinterestintheproperty,plant and equipmentassociatedwiththeprojectbeingfinanced. "Conclusion: Haida Energy believes it can meet with the AEA to discuss terms and conditions of a legislatively approved loan with the goalof preparing a final term sheet and credit report and AEA staffrecommendationtobepresentedtotheAEAatitsJulymeeting.The goal should be to arrive at terms and conditions for the PPF loan that meet the requirements of 42.45.010 provide a fair return to theinvestorsintheborrowerHaidaEnergyandresultinreasonableratesfortheresidentsofPrinceof 'Wales Island. Robert $Grimm,Vice President hey Cc Sandra Moller,Deputy Director-Rural Energy,AEA 3 Sara Fischer-Goad,Executive Director,AEA James Strandberg,Project Manager,AEA May 14,2012 Steve Pratt Steve Pratt Enterprises P.O.Box 112781 Anchorage,Alaska 99511 Mark Davis 813 West Northern Lights Boulevard Anchorage,Alaska 99503 Re:Reynolds Creek Hydro Loan Request Dear Mark, |have reviewed the proposed modifications to the terms under which the Alaska Energy Authority might provide financing for the Reynolds Creek Hydro project on Prince of Wales Island.|reviewed past analysis,discussions,and conclusions regarding financial feasibility, various payment schedules and terms,security for the loan,the Power Sales Agreement (PSA), Operating Agreement,Alaska Power and Telephone financial statements,and estimates of power sales for the foreseeable future. Haida Energy Inc.is proposing a $19.8 million,zero percent interest,50 year loan which it proposes to pay back over a 37 year period beginning in 2025 with a $250,000 payment, escalating to a $750,000 payment in 2062.Attached are the prior review documents and conclusions,including a discussion of project benefits,potential threats to loan repayment,and interest rate scenarios. Changes to HE Equity Position In the original application Haida Energy Corp.(HE)stated that $4.4 Million in equity had been invested in the project up until that time.While the equity amount has never been validated, on the proposed term sheet equity investment is reduced to $900,000.This indicates that $3.5 Million of the loan amount will be paid out to Alaska Power and Telephone and/or Haida Corp. to reduce the at-risk investment claimed for the project. In the PSA equity is presumed to carry a market based opportunity cost of 15%,so the state would be loaning HE $3.5 Million at zero percent for 50 years which Haida and APT will be able to extract from the project and invest elsewhere to earn 15%rather than impose the 15%cost of equity on HE customers.Given the economic challenges to the project,it would be better Pratt Review Reynolds Creek May 14,2012 for HE,the longevity of the project,and at-risk financial incentives to ensure project success to borrow and repay $3.5 Million less rather than borrowing more than necessary in an effort to recapitalize HE. Additional Loan Security Two components of the current proposal modify past conclusions. 1.Alaska Power and Telephone's commitment to guarantee payment of principal from revenue generated by all of its assets. 2.HE statement that it may try to exempt itself from RCA tariff review after the PSA is approved. The second modification will perhaps make it easier for HE to modify rates once it enters the "Rate Stabilization”period when rates will need to increase significantly,and at later dates when rates will have to change to equate revenue with revenue requirements.While this might save on administrative costs,there are dangers in that contract disputes will need to be resolved solely through contract dispute resolution procedures.Since HE's only customer, Alaska Power Company,is affiliated with an HE owner,Alaska Power and Telephone,it is unclear if the interests of APC customers,who are the intended beneficiaries of a State of Alaska low interest loan,would be at the forefront of dispute resolution. The PSA also contemplates rates being established using standard ratemaking procedures after the first 20 years.Without the involvement of the Regulatory Commission of Alaska,it is unclear what standard ratemaking procedures would be utilized. More important than the second modification is the first.AP&T's commitment to pledge revenue from all sources to guarantee principal payments is highly significant so long as AP&T's assets and revenue generation potential continue to grow and prosper. AP&T Financial Health Attached are AP&T's 2010 financials.Earnings Before Interest Taxes Depreciation and Amortization (EBITDA)was $16,830,000,interest expense was $4,327,000,and cash provided through operating activities was $10,515,000.On the proposed loan amortization schedule, the largest single year repayment obligation would be $750,000.So long as AP&T's asset and revenue base are not eroded over the next 50 years,this proposal significantly adds to the security of the loan and provides a high level of assurance as to repayment. This commitment is particularly noteworthy given that the PSA can terminate in 2050 with 50% of the loan yet to be paid off. Pratt Review Reynolds Creek May 14,2012 Summary Attached are documents associated with the prior review of Haida Energy Corp.'s application for a Power Project Fund loan to complete the Reynolds Creek Hydro project.All of the economic and financial analysis done at that time seem to hold true today.Threats to repayment of additional loan amounts are significantly mitigated by AP&T's disassociating loan repayment with the economic viability of the project. Over a 50 year period major shifts can occur in the fortunes of companies and technologies as well as energy sources.For the AP&T loan security to be meaningful,adequate provisions would need to be made to ensure that assets and/or revenue base providing that security are not eroded without adequately reserving for the potential that HE revenue might prove insufficient to service the loan. Please feel free to call and discuss this review and any further analysis you believe would be useful. Steve Pratt Pratt Review Reynolds Creek May 14,2012 James Strandberg From:Bob Grimm <bob.g@aptalaska.com> Sent:Monday,April 16,2012 2:55 PM To:James Strandberg;'Dooner' Ce:Sara Fisher-Goad;'Robert Venables';Mark Davis;'Dean Thompson';Jolene Edenshaw' Subject:RE:Request for status of project -Reynolds Creek Hydroelectric project Jim When we met on March 5"we gave you a new term sheet (with the specific loan repayment via the PSA)and explained that we needed quick action on getting our loan approved.We told you that the loan was the major piece of the financial package and we needed that specifically (with terms and conditions)approved so we could build the rest of the financial plan around the approved loan. It is clear without the completion of the finance package (per Sara's email)we do not have access to the remaining grant funds without knowing the status of the loan approval we are hard pressed to make plans for construction this season. We know we havea little authorized spending left,but without more information on the progress of the loan approval, it is hard to make a decision as to the best use of the limited dollars.The best way to proceed is for AEA to either approve our proposed loan terms or not in the best and fastest manner possible.Sara mentioned a target of the May 10th AEA Board Meeting,but hesitated to commit Mark Davis to that schedule. |believe the reason Jolene,Alvin and Dean stopped by was to get an update from Mark on where AEA was in the loan processing or approval process.Based upon the report Mark Davis has selected Steve Pratt to assist him in putting the recommendation together and he (Mark)should know something soon since Steve has had the assignment for 1% weeks.The subject of access to the grant funds was mentioned to Mark who referred the issue to AEA rather than AIDEA.Since Jolene,Alvin and Dean were in the AEA offices they stopped by to see you.You informed them of Sara's position on the grants that without a full plan of finance no access would be allowed.We had already been informed of this current AEA position on this by Sara directly. What was learned by representatives of Haida Energy stopping by your office? 1.We learned that you had already forgotten the importance of getting the loan approved as it is the peg in the ground we need to get the financial package put together.This concept is key and we need to reinforce its importance to the "AEA Manager”. 2.Mark had told us on March 5"that someone with a lending and credit background would be hired to assist him in putting the loan recommendation together.That expert is Steve Pratt who is knowledgeable but we are aware of his lending and credit credentials.|hope that Steve does not get stuck in the weeds as he did earlier when working on this loan which did not lead to an acceptable conclusion or meaningful progress. 3.We feel that things are moving,but not as quickly as they need to be. Jim thanks for the email asking for an update.Haida Energy remains very interested in the loan approval process and would like you to know that we are standing by,to assist in moving the process forward.We view the loan a key component that is needed,together with detailed terms and conditions to put the full financial package together and once that has been completed Haida Energy has several other issues in regards to grant agreements and lack thereof, Project Management Agreement if it is needed or not,if so what revisions are necessary and finally a determination to continue,or not,if so what revisions are necessary to the consulting agreement with Hildenbrand Associates. ec As you can understand,we are under the gun as to this construction season and we also received a draft schedule and scope from Hildenbrand and have it under consideration.But without closure on the loan approval process it makes it difficult to make decisions when we are not sure of the direction of the project. We also have a major problem with HDR Engineering,once Lisa Lang (Project Representative)got the first grant from the legislature (2008)and because we were under pressure by FERC to commence construction Haida Energy authorized - engineering work to ready the project for construction and other engineering services which was successfully completed.Although,we have asked the AEA to pay these delinquent project expenses frequently,permission has not been forthcoming from you as "AEA Manager”according to Hildenbrand. AP&T and Haida Corporation are established businesses with ongoing operations and cannot have our credit rating or our professional relationships and reputations negatively and adversely impacted by AEA lack of decision making.You have asked the invoice be reviewed and they have and ail have been found to be in accordance with the task work order and budget by Hildenbrand and associates.You have told us that the problem of lack of authorization for payment is Sara's reluctance to pay prior bills.These bills are not old bills.|just wonder.if Sara has been advised or understands the fact of the matter. They were incurred after the first grant SLA 2008 was awarded and thus should be recognized as authorized project related expenses.|again ask that AEA grant permission for these project related expenses to be paid.As you know, vendors like HDR have the ability to file a formal lien against the project and recover interest and cost of collection.This situation has been on my mind a lot and it remains outstanding.|wonder what would be less impressive to FERC;failure to pay for project related costs prudently incurred,failure to make a down payment on a turbine without the direction of the project being known. i have copied Sara since she was copied on your request for an update.|did not copy Hildenbrand,as you did,since we were discussing his contract.|do have concerns about Steve Pratt and his engagement,but |did not copy him because it would not be appropriate.Also the email you are using for Alvin is not correct please use Dooner@ci.net in the future. End Update! Bob Grimm,CEO Alaska Power &Telephone Company P.O.Box 3222 193 Otto Street Port Townsend,WA 98368 800-982-0136 x120 Office 360-385-1733 x120 Office 360-301-3636 cell From:James Strandberg [mailto:JStrandberg@aidea.org] Sent:Friday,April 13,2012 5:48 PM To:Alvin Edenshaw (dooner@gci.net);Corry Hildenbrand Cc:Bob Grimm;Sara Fisher-Goad;Robert Venables (energy@seconference.org);Mark Davis Subject:Request for status of project -Reynolds Creek Hydroelectric project Alvin, It was nice to see you when you stopped in yesterday,with Jolene and Dean Thompson.We had a good discussion on the status of the Reynolds Creek project during our meeting. 2 " |would like to get an update from you on the planned construction work on the Reynolds Creek project for this year.We have a project management agreement in effect with your company,and your project manager,Mr.Corry Hildenbrand has sent out a project schedule for this year's work. Please confirm whether you intend to go forward using Mr.Hildenbrand as project manager,and that you intend on completing the agreed to tasks for the current grant funds that include making a down payment on the water turbine - generator. The reason |!am making this inquiry,is that during a March 5""meeting held at our office,Mr.Grimm suggested that Haida Energy may wish to alter its project approach by asking to be relieved of the project management agreement terms and conditions,and to shift project responsibility over to Alaska Power and Telephone.|have not heard anything further on this different approach;hence the inquiry.Mr.Grimm,yourself,Brooks Laning,Dean Thompson,Mark Davis and me were at the meeting. |look forward to hearing from you on this matter. Regards,Jim Strandberg dune 6,2012 Mr.Alvin Edenshaw,President Mr.Bob Grimm,Vice-President Haida Energy,Inc.g'"&Cedar Street Hydaburg,Alaska,99922 RE:Application for Power Project Fund Loan for the Reynolds Creek Hydro Electric Project Dear Messers Edenshaw and Grimm: Introduction Recent discussions between representatives from Haida Energy,Inc.("HE”)and.Alaska Energy Authority ('AEA”or the "agency”)staff have demonstrated the potential to reduce AEA's loan risk exposure that formed the basis for our August 8,2011 proposal to you to provide project financing for construction of the Reynolds's Creek Hydro facility.As a result,we have reviewed the proposal set forth in a March 7,2012 draft term sheet that Mr.Grimm provided to AEA together with oral representations made by Mr.Grimm combined with a proposed payment schedule for the Proposed PPF loan that was attached to the term sheet as Schedule A.Certain aspects of these proposals could potentially reduce risk to AEA and may provide a basis for the negotiation of de novo loan agreement term sheet. As part of this in-depth review process,we retained an economist,Steve Pratt,to review the term sheet and Schedule A with the other documentation previously provided by HE,including the Power Sales Agreement (PSA).As you may recall,Mr.Pratt had previously analyzed thisproject's loan application and is familiar with the project and the history of loan requests made to this agency with regard to that project. Contractual Commitment by Alaska Power and Telephone Company A major,new term,based on our conversation with Mr.Grimm in March,concerns a contract commitment for the payment of principal loan payments.It is our understanding that Alaska Power and Telephone Company ("APTC”)as the parent company of the power purchaser under the terms of the PSA (Alaska Power Company),is willing to enter into a contractual arrangement with AEA under which APTC would agree to make complete,on-time loan principal payments for the 40-year payback period of the proposed PPF loan.These proposed principal payments are.set forth in column three of Schedule A to the March 7,2012 Term Sheet.These payments would be made from all of APTC's revenue sources and not only from revenues generated by or derived from the proposed Reynolds Creek Hydroelectric project, APC,or HE. This proffered commitment by APTC to make principal only payments during the entire term of the loan is of interest to AEA because it has the potential to ameliorate certain risks inherent in this Joan request.These risk factors include,but not limited to,the possibility that demand for ryea?akéenergyauthority.org- 813 West Northem Lights Boulevard Anchorage,Alaska 99503 T 907.771.3000 Toll Free (Alaska Only)888.300.8534.F 907.771.3044 Messers Edenshaw and Grimm June 6,2012 Page 2 electricity will not increase in the area served by the dam,or that the facility may not produceoptimalamountsofpowergivenseasonalflowfluctuations. Another risk factor requires an analysis of thé current financial position of APTC as well as forming a reasonable projection of the ability of the companyto be able to make payments overthe50yeartermoftherequestedloan. AP&T's recent financial statements indicate the company produces Eamings Before Interest, Depreciation and Amortization (EBITDA)of almost $17 Million per year,operating cash flow of over $10,000,000 per year,and year-end cash balances of $2 Million to $3 Million.Provided thatamechanismcanbeputinplaceandagreedtobythepartiestopreventtheerosionofthe value of this loan security over a 50-year périod of time,we believe our previous requirementthatsubstantialchangestothePowerSalesAgreement("PSA”)be implemented prior to loanissuanceneednotapply. However,the term of the PSA would have to be lengthened so that.the term of the proposed PPF loan and the PSA are both 50 years.At present,the Power Sales Agreement ends in 2050 when the requested loan would only be 50%paid off.Although there are provisions forextensionsofthePSA,we believe that the term of the PSA should be the same as the loan to ensure that thereis another source of revenue for the repayment of the loan over its entire term in addition to the commitment by APTC to make principal payments. Other Loan Provisions and Conditions Interest Rate and Restrictions on Cash Distributions The March 7,2012 term sheet proposes that the interest rate on the unpaid balance of the PPF loan should be zero for the entire period of the loan,even when the project is achieving salesthatleadtosignificantrevenues.In AEA's view,other provisions of the agency's August 8,2011lettershouldstillapply,including the application of a sliding scale of interest rates based on howsuccessfultheprojectisinachievingsalesandsomerestrictionsoncashdistributionstoHE owners until a substantial portion of the debt has been paid down.These conditions are designed to accomplish several underwriting goals. First,it allows for risk-sharing between the Power Project Loan Fund and HE.If market sales significantly expand,the Power Project Loan fund can obtain a return on its investment closer tomarketinterestratesthanthezeropercentrateover50yearsproposedbyHE.Further this can be done without increasing the cost of service to Prince of Wales Island customers since fixed costs will be spread over more KWH sales.Equity owners in the project will benefit from increased sales as well debt holders. Second,all stakeholders should have significant financial incentives to make the project a success.From our perspective,reduction of equity investment in the project at its outset,before at least some debt obligations are satisfied,is not satisfactory.Such an equity reduction increases risks of the project.Therefore,some type of restriction on cash distributions to equityholdersuntildebtisreducedtoanagreeduponamountwouldbealoancondition. Messers Edenshaw and Grimm June 6,2012 Page 3 Third,because APTC would be contractually agreeing to make minimum principal payments based on Schedule A,AEA needs to have procedures in place to ensure that APTC continues to be in a financial position to make the contractually agree to payments over the full term of the loan and especially during the repayment period set forth in Exhibit A.This will require that APTC report to AEA concerning any organic changes to the corporation or the assumption ofdebtorliabilitieswhichcouldthreatenitsabilitytomaketheagreedtoprincipalpayments. Use of Loan Proceeds for Capital Restructuring The March 7,2012 term sheet at Paragraph 2 proposes using some loan proceeds for a capital restructure.This proposal raises an issue under the statutes that govern the PPF loan program. Power Project Fund loans are specifically intended for enumerated feasibility studies,and the construction and improvement of power production facilities.See,e.g,AS 42.45.010(1)(A)and (B).These foans cannot be used for working capital or capital restructuring.As a result,HE should borrow only so much as it needs for statutorily allowable costs to make the project operational.As a result,the parties will have to agree to the size of any potential PPF loan. Loan Prerequisites As a condition to a PPF loan,AEA may require that certain pre-conditions are met.An example,with respect to this.proposed loan,one condition is HE obtaining a Certificate of Convenience and Necessity (Certificate)from the Regulatory Commission of Alaska.In its March 2011 PPF loan application HE states that it will be submitting an application to the RCA for certification. AEA has not received any information since that time about the status of the certificate. Additionally,the term sheet in paragraph 4b proposes that the PSA shall be submitted to the RCA for approval and that after such approval the PSA would "be assigned to AEA as the sole security for this loan.”AEA understands this to mean that the agency would not be.granted a security interest in the assets owned by HE,HE's accounts,or in the improvements constructed using the.PPF loan.Usually,AEA requires a security interest in the project funded by the PPF loan consistent with the Alaska UCC, _As a result,the term sheet is in essence requesting that this loan be unsecured.A pertinent statute,AS 42.45.010(e),provides for the following: The Authority may make an unsecured loan from the power project fund to a borrower regulated by the Regulatory Commission of Alaska under AS 42.05 if the borrower has asubstantialhistoryofrepayinglong-term loans and the capacity to repay the loan. Based on the information provided in the application,AEA does not believe that at present HE meets the statutory qualifications needed to receive an unsecured loan. Finally,the PPF staff noted HE's request that AEA eliminate the project management agreement which currently is in place with regard to the Reynolds Creek project.AEA would not make this a condition of any loan.If HE believes that the project management agreement is not needed,it should address its concerns to the AEA project manager,Jim Strandberg. Messers Edenshaw and Grimm June 6,2012 Page 4 Conclusion Within the above parameters,AEA believes that it can meet with HE to discuss terms of a potential PPF loan.The goal would be to prepare a term sheet agreed to by the parties which would be used for the preparation of a credit report which it turn could be presented to the PPF Loan Committee for its review and consideration.AEA would also point out,that given the size of therequested Ioan,this loan must be submitted for approval to the Board of AEA In closing,we note that AEA much reach a finding that the project is economically feasible withtheloanpaymentterms,the Maintenance and Operations Agreement,and the Power Sales. Agreement all being components in that determination.We look forward to working with Haida Energy and its members to achieve this finding considering these three key project components. Sincerely,BCEMarkDavis,Deputy Director Infrastructure Development,AIDEA cc Sandra Moller,Deputy Director-Rural Energy,AEASaraFisher-Goad,Executive Director,AEA James Strandberg,Project Manager,AEA. James Strandberg From:Bob Grimm <bob.g@aptalaska.com> Sent:Wednesday,April 04,2012 12:38 PM To:"Bob Grimm';'Corry Hildenbrand';'Dooner' Ce:'Lisa Lang';matthewjakupcak@aol.com;Sara Fisher-Goad;James Strandberg;'SEC Energy';'Dean Thompson' Subject:RE:2012 Start-up Schedule for the Reynolds Creek Hydro Project Attachments:AEAEmail442012.pdf |attached the email from Sara in PDF format Bob Grimm,CEO Alaska Power &Telephone Company P.O.Box 3222 193 Otto Street Port Townsend,WA 98368 800-982-0136 x120 Office 360-385-1733 x120 Office 360-301-3636 cell From:Bob Grimm [mailto:bob.q@aptalaska.com] Sent:Wednesday,April 04,2012 1:35 PM To:'Bob Grimm';'Corry Hildenbrand';'Dooner' Ce:'Lisa Lang';'matthewjakupcak@aol.com';'Sara Fisher-Goad','James Strandberg';'SEC Energy';'Dean Thompson' Subject:RE:2012 Start-up Schedule for the Reynolds Creek Hydro Project To all; |just this email from Sara at AEA as far the loan approval schedule.You can read the email but it looks like May 10"is the earliest that AEA Board can take this up. Bob Grimm,CEO Alaska Power &Telephone Company P.O.Box 3222 193 Otto Street Port Townsend,WA 98368 800-982-0136 x120 Office 360-385-1733 x120 Office 360-301-3636 cell From:Bob Grimm [mailto:bob.q@aptalaska.com] Sent:Wednesday,April 04,2012 1:09 PM To:'Corry Hildenbrand';'Dooner' Cc:'Lisa Lang';'matthewjakupcak@aol.com';'Tracy Moore';'Susan Tinney';'Sara Fisher-Goad';'James Strandberg';'SEC Energy';'paul.rusanowski@shipleygroup.com';'Dean Thompson' Subject:RE:2012 Start-up Schedule for the Reynolds Creek Hydro Project 1 Corry Can you confirm that we have not yet been reimbursed by the AEA for project costs November and December 2011?| have been working on trying to firm up the schedule but still awaiting clarification of what AEA has in mind. Bob Grimm,CEO Alaska Power &Telephone Company P.O.Box 3222 193 Otto Street Port Townsend,WA 98368 800-982-0136 x120 Office 360-385-1733 x120 Office 360-301-3636 cell From:Corry Hildenbrand [mailto:cbhildenbrand@qmail.com] Sent:Wednesday,April 04,2012 12:41 PM To:Dooner Cc:Bob Grimm;Lisa Lang;matthewjakupcak@aol.com;Tracy Moore;Susan Tinney;James Strandberg;SEC Energy; paul.rusanowski@shipleygroup.com;Dean Thompson Subject:2012 Start-up Schedule for the Reynolds Creek Hydro Project Hello Alvin, As you requested I have put together a quick schedule of work to be done this spring.A more detail schedule and itemized budget is in my 2011 Annual Project Report you have received.The following activities are budgeted under the $2M SEC Grant: e Durette on site weekend of the 7th of April to check equipment,bring in supplies,and check snow conditions at the dam site. e Durette to start-up for this years work on about the 23rd of April,about 2 weeks to finish road to dam site,snow dependent. e Fishery studies to start on week of the 23rd or 30th of April dependent on Durette's start-up date,2 to 3 days. e Geologist at dam site week of May 7th or May 14th dependent on Durette's progress on road to dam site, 2 days. e FERC and Project Manager on site week of May 7th or May 14th with Geologist at dam site. e Exploratory drilling to start on May 21st or May 28th depend on Durette's dam road progress,2 to 3 weeks two drillers. e Geologist on site with drillers to log cores,start May 21st or May 28th,2 to 3 weeks. e Durette to finish up remaining contract work from last year,starting May 7th or 14th depending on progress on on dam road.3 to 4 weeks to finish up lasts years contract work could put them off site by mid-June or so. e ADFG meeting in August to finalize revised ADFG permit conditions based on field study results. We have about $700,000 remaining in the SEC Grant funding.If work progresses as planned we will likely draw down all funds from the SEC Grant in July or August of this year.We are maintaining a good relationship with the FERC but we have not ordered the Turbine/Generator as required by the FERC because the funding sources have not been firmed up for the project.Without full project funding we are unable to commit to field work required to finalize the project design,specifications,material ordering and move the project forward to a 2 . 2014 start-up.It appears we are going to lose another construction season because of lack of funding.Let me know if have question or would like to discuss any issues. Corry Hildenbrand Project Manager 425 276 5516 (OQ) 425 999 7458 (C) James Strandberg From:Bob Grimm <bob.g@aptalaska.com> Sent:Monday,April 02,2012 6:46 AM To:Sara Fisher-Goad Ce:'Alvin Edenshaw';Mark Davis;James Strandberg;Sandra Moller Subject:RE:We only have a few weeks before we are ready to begin construction at Reynolds Creek Sara The standard time frame on a special contract is 45 days.However,if we jointly petition for an expedited review it could be a little shorter.As long as we have unfettered access to grant dollars we can live with the 45 days it takes the RCA to rule. Bob Grimm,CEO Alaska Power &Telephone Company P.O.Box 3222 193 Otto Street Port Townsend,WA 98368 800-982-0136 x120 Office 360-385-1733 x120 Office 360-301-3636 cell From:Sara Fisher-Goad [mailto:SFisherGoad@aidea.org] Sent:Tuesday,March 27,2012 7:48 PM To:Bob Grimm Ce:'Alvin Edenshaw';Mark Davis;James Strandberg;Sandra Moller Subject:RE:We only have a few weeks before we are ready to begin construction at Reynolds Creek Thanks for the email Bob -Mark Davis is working through the loan analysis and you have provided terms that are different than before and these proposed terms will need analysis.Mark is in the process of hiring for the needed analysis. Question on the RCA approval of the PSA.This is a positive step;however,if the PSA is assigned to AEA as security for the loan,this will probably have to be a condition of the loan,which means we could not release funds until that approval is finalized.How long do you think RCA approval will take? Sara From:Bob Grimm [mailto:bob.q@aptalaska.com] Sent:Tuesday,March 27,2012 8:35 AM To:Sara Fisher-Goad Cc:'Alvin Edenshaw' Subject:We only have a few weeks before we are ready to begin construction at Reynolds Creek Sara: Anything you need to move Reynolds along please ask ! Bob Grimm,CEO Alaska Power &Telephone Company P.O.Box 3222 193 Otto Street Port Townsend,WA 98368 800-982-0136 x120 Office 360-385-1733 x120 Office 360-301-3636 cell Attachment A Reynolds Creek Hydroelectric Project Proposed Loan Term Sheet March 7,2012 Loan amount up to $20 million.aLoancanbetopayforconstructioncostsoftheprojectandcapitalrestructuring g4neededtolowercosts.ae The books and records of Haida Energy will be subject to an independent audit C ™1(GAAP)after its first full year of normal operations.Upon the receipt of an pt 4 4unqualifiedaccountingopiniononthatfirstauditorsubsequentaudits,the Da vs 0Arequirementforannualindependentauditswillceasetobearequirementofthe loan. a. b. c (? Loan Debt Service aeLieNoprincipaluntilafterthe10thoperatingyear. Haida Energy shall obtain approval by RCA of a Power Sales Agreement (PSA)with Alaska Power Company (APC)as the purchaser,which requires APC to make the annual debt service payments to AEA.The approved PSA will be assigned to AEA as the sole security for this loan.Principal paymentswill be based on Schedule A with a Balloon payment in the final year if necessary due to the final loan amount exceeding $19,835,871. Interest rates on the unpaid balance of the PPF will be zero in accordance with AS 42.45.010. 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2038 2039 Debt Service per KWH Sold $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0000 $0.0323 $0.0312 $0.0302 $0.0293 $0.0284 $0.0330 $0.0320 $0.0311 $0.0302 $0.0294 $0.0382 $0.0371 $0.0362 $0.0353 $0.0344 $0.0377 $0.0368 $0.0359 $0.0351 $0.0342 $0.0409 $0.0400 $0.0391 $0.0382 $0.0374 $0.0483 725,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 485,871 250,000 250,000 250,000 250,000 250,000 300,000 300,000 300,000 300,000 300,000 400,000 400,000 400,000 400,000 400,000 450,000 450,000 450,000 450,000 450,000 550,000 550,000 550,000 550,000 350,000 725,000 725,000 725,000 725,000 725,000 725,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 485,871 - $19,835,871 Balance $- 19,835,871 19,835,871 19,835,871 19,835,871 19,835,871 19,835,871 19,835,871 19,835,871 19,835,871 19,835,871 19,585,871 19,335,871 19,085,871 18,835,871 18,585,871 18,285,871 17,985,871 17,685,871 17,385,871 17,085,871 16,685,871 16,285,871 15,885,871 15,485,871 15,085,871 14,635,871 14,185,872 13,735,871 13,285,871 12,835,871 12,285,871 11,735,871 11,185,871 10,635,871 10,085,871 9,360,871 8,635,871 7,910,871 7,185,871 6,460,871 5,735,871 4,985,871 4,235,871 3,485,871 2,735,871 1,985,871 1,235,871 485,871 Schedule A Major Assumptions:Historical Load Scenarto,$7.34 million in Grant Funding,$900,000 of Equity,$19.8 million in Loan Funding HAIDA ENERGY,INC.EGE |V E P.O.BOX 89 AUG 19 2011 HYDABURG,ALASKA 99922 AIDEAAEA Sara Fisher-Goad,Executive Director Alaska Energy Authority - 813 West Northern Lights Boulevard Anchorage,Alaska 99503-2495 RE:Reynolds Creek Hydro Loan Application Dear Sara: Haida Energy is in receipt of your letter dated August.8,2011,regarding a loan from the Power Project Fund for the construction of the Reynolds Creek Hydroelectric Project.Weappreciate the time that AEAhasspentconsideringourloanapplicationandattemptingtoworkoutloantermsthatwillallowthe Projectto move forward.Once completed,the interconnected grid on Prince of Wales Island will rely completely on renewable energy for the foreseeable future. We are concerned,however,that we are no further along than we were several months ago.In your letter,you state that AEA does not guarantee that any PPF loan will contain all the terms in your letter 'and that loan documents may contain additional terms.For the past several months,we have had varying proposals placed in front of us for consideration and then withdrawn.Certainly,you can understand our frustrationin the delays this has caused and oar reluctance to consider yet another partial proposal that may be withdrawnin the future. The indicated terms contained in your letter does not reflect the factual business "deal”that has been entered into by the parties.This deal is an interrelated set of comprehensive agreements,license and leases that are presently legally binding upon the parties.The parties to these agreements,license and leases are Federal Energy Regulatory Commission,Alaska Power &Telephone Company,Haida Corporation,Haida Energy,Alaska Power Company and Sealaska Corporation. The negotiations and effort to legally document the results of the negotiations took over two years and tens of thousands dollars.In addition,the agreements,license and leases are legally interrelated making' it impossible to reopen certain agreements,specifically the Sealaska Land Use Lease,the Operation and Maintenance Agreement and Power Sales Agreement as suggested by the AEA without opening up all of the interrelated agreements among all of the parties. While |am unable to factually state that this is impossible,it will require the entire "deal”be undone, re-negotiated and re-documented.This will take significant effort,time and legal expense which we believe is not necessary,and we have not been presented with a valid reason by the AEA staff why it is necessary.This will result in waste and further delay.Further like "humpty dumpty”the pieces may not be able to be put back together in a manner that is agreeable to all parties,their respective Board of Directors and the Alaska Energy Authority staff resulting in unnecessary additional delay and waste. Why the Alaska Energy Authority is unable to review the "deal”as agreed to by the parties is a mystery. We respectfully request that the Alaska Energy Authority review the "deal”as it is,in accordance with the Statutes and their Regulations pertaining to the Power Project Loan Fund make the necessary findings.and present it to the Board of Directors of the Alaska Energy Authority with their recommendation.Under the Regulations the AEA staff recommendation is required to be shared with the applicant well ahead of the scheduled meeting date and we would be ina position to present a contrary opinion of the AEA staff findings to the AEA Board of Directors. But perhaps more to the point,it is clear that AEA staff simply does not understand the mechanics of: the power sales agreement between Haida Energy and Alaska Power Company.ttem 5 of Attachment A provided by AEA Staff,states that the Project should generate a wholesale power rate of at least 10 cents/kilowatt-hour. Quite simply,it does and more. Project revenues consist of the following: 1.A fixed payment of $300,000/year. 2.Avariable energy payment for any power above 6 million kilowatt-hours.This variable payment is equal to the rate then in effect for the Black Bear Hydroelectric Project,which is expected to increase with time,albeit less than general inflation. 3.Payments by APC to pay for operations and maintenance in the early years.Perhaps AEA staff does not recognize the importance of this risk mitigation measure contained in the existing PSA. The project company,Haida Energy (HE)during the early years of the contract is relieved of the working capital requirements associated with numerous issues that could affect HE's ability to meet its working capital requirements.Reduced sales levels due to circumstances outside the contral of HE could cause working capital requirements to exceed the working capital resources of HE.Large non-recurring annual O&M expenses such as insurance premiums,FERC license fees and extra-ordinary repairs of maintenance will have an adverse impact upon working capital requirements of HE.If this unique feature of the PSA were not in place HE only recourse would be to fund these working capital requirements by requesting a capital call upon its owners. These capitals would need to be funded by the owners regardless of their respective cash resources.In the event the one or more of the owners did not have sufficient cash reserves to cover these working capital risks or choose not to meet the capital call.It could cause HE to be in a position that to remain solvent it would have no choice but delay or simple not pay these costs which would jeopardizes the projects ability to provide reliable electrical capacity andenergyona24/7 basis.The PSA by placing the obligation to fund O&M upon the purchaser (APC)mitigates this risk until such time that HE has accumulated sufficient reserves,providing assurance to landlords,vendor and FERC that this obligation is supported by the balance sheet of APC. 4.Rate adjustments as required to allow recovery of all revenue requirements to ensure a. reasonable return on Haida Energy equity in the Project. Attachment 1 provides a summary of these revenues over the initial 50 years of the Project.As you can see,the wholesale power rate starts at a level around AEA's threshold of 10 cents/kilowatt-hour and increases to the 15 cents/kilowatt-hour range.Certain assumptions have been used in developing this projection,with the most notable including: 1.The AEA loan is repaid with SO years. 2.The loan has a zero percent interest rate. 3.The Return on Equity is set at approximately 8 percent (post tax).Please note that this is considerably less than the 11.5 percent (post tax)allowed by AEA in its grant agreements. AEA has included in its "proposal”a sliding interest rate based on energy production.Our analyses has shown that even a 1.0 percent interest rate adds up to 2 cents/kilowatt-hour to Project revenue requirements,which would,in turn,be passed on to APC by increased rate adjustments in the future (Attachment 2).For this project to be a success it must balance the needs of residents of Prince of Wales island,State of Alaska and Haida Energy.To put additional upward rate pressure on the residents of the area while convenient is not acceptable.According to the AEA website,"The mission of the Alaska Energy Authority is to reduce the cost of energy in Alaska”.The loan application submitted to the AEA already contains significant upward rate adjustments.The retail rates on Prince of Wales Island are already much higher than those in Wrangell,Petersburg and Ketchikan.One reason for the rate disparity is the level of state grants and other support to those communities exceeds those similar grants and other support received by the resident's of Prince of Wales Island.One way of correcting this social injustice is to make additional grant funding available to the project or reduce the interest rate on the loan to zero as we have requested and in accordance with the Statutes and AEA regulations.Further,the State of Alaska will be receiving significant benefits from even a zero interest loan as the project will create savings that will directly save the PCE Program,thus the State pocketbook many millions and result in an 11%return on the funds lent under the PPF.Haida Energy is already at least initially accepting a lower return that usually allowed by the AEA and Regulatory Commission of Alaska.Thus all parties are contributing in adopting this balanced approach. Equity is another issue.While we would certainly like to invest as much equity in the Project as possible, we have long recognized that the Project cannot support large amounts of equity simply because debt has a lower cost.Large amounts of equity would place undue burdens on the ratepayers in an already high-cost environment.By increasing equity from $2.5 million to $5 million,wholesale power rates would increase by up to 10 cents/kilowatt-hour (Attachment 3).Again,these projections are based ona return on equity well below that allowed by AEA or by the Regulatory Commission of Alaska (who will regulate rates for the Project). We recognize that Project economics are somewhat different with high load growth.But even so,the "terms”proposed by AEA result in a wholesale rate well in excess of 10 cents/kilowatt-hour . AEA's letter contains other conditions that are clearly not acceptable.to Haida Energy nor are they,to our knowledge,applied to other loan or grant recipients of AEA.Such items include,but are not limited to,the restriction of loan proceeds to be used only for construction and no equity distributions until half the loan is paid off. A great deal of time has been wasted over the past several months with AEA's proposal submittals followed by retractions.AEA staff indicated that they would work diligently to get the loan application before its Board first at the June meeting,then the July,then the August.'Yet,we now see that there is no scheduled meeting until October.Furthermore,staff now indicates that grant funds will not be released until they have some sort of "indication”regarding our willingness to accept their proposal. Evenifthe terms were acceptable to us (which they are not),we could not agree since AEA has reserved the right to retract it once again this we believe is a very unfair approach especially given the time frame we are under.While not blackmail maybe to strong it does not.reflect good faith negotiations. In an effort to get the Project back on track,we propose that the AEA staff submit the terms and conditions set forth in our loan application in accordance with 3 AAC106.110(d)to the PPF loan Committee.That Committee will either accept our proposed terms and conditions or reject them.In the case of a rejection we assume the committee would describe the specific reasons and providing reference to the specific analyses,reasoning and modeling used to come to that conclusion.This would become the basis of the AEA Staff recommendation to the Board,which we would assume in this case, would recommend to the Board against making the loan.The AEA Staff recommendation would then be shared with the applicant in accordance with AEA Statutes and Regulations allowing the applicant to have the complete record of the analyses,reasoning and modeling used by the AEA staff leading them to come to that conclusion.The applicant can then makea decision to either accept the specific and well documented conclusion of AEA staff contained in the Board recommendation or in the alternative respectfully disagree with AEA Staff provide the AEA Board with its rebuttal analyses,reasoning and modeling and ask the AEA Board to adjudicate the matter by making a decision based upon the record of either approving the loan or rejecting the application in accordance with the AEA Statutes and Regulations. |would suggest to make sure we make the October Board meeting that you direct staff to hold the PPF Loan Committee Meeting and complete AEA Staff recommendation on this loan by September 5,2011 and forward the same to the applicant by September 6,2011 that would give us at least two weeks to either agree to the specific terms and conditions contained in the recommendation or prepare rebuttal evidence and alternative terms and conditions to be adjudicated by the AEA Board. Sincerely, Ni Lb ah Haida Energy Alvin Edenshaw,President ProjectRevenues-$/kWhAttachment 1 B/V Low Forecast 30-year Deficit Amortization 0.30 0.25 0.20 0.15 0.10 0.05.- 20 @ Base Pay 30 40 @ Deficit Adder w O&M Offset @ Additional Energy ment 'SO ProjectRevenues-$/kWh0.25 0.20 0.15 0.10 0.05 0.00 Attachment 2 Interest Rate Sensitivity B/V Low Forecast SS2a wom0%Interest oom 1°Interest momen2%Interest q u U LJ LI y T T T q fi T T J t T T tT t Li q t T TT t t qT q UJ f T T TF T T T T t t T F Ls T T T T 'T 1 10 20 30 40 s0 ProjectRevenues-$/kWh0.30 0.25 0.20 0.15 0.10 4 0.05 0.00 Attachment 3 Equity Sensitivity B/V Low Forecast =--$2.5 millon Equity $5 milllon Equity T T t T T T T LU T q T t UJ 1 t wT T 1 T v T |T T T J T UJ tT T F T T UJ T T T T Ls Lens Goerae T U T T 1 10 20 30 40 50 f_)ENERGY AUTHORITY"IDEN./B ALASKA August 8,2011 Mr.Corry Hildenbrand Project Manager Reynolds Creek Hydro Project Hildenbrand Associates LLC 17220 117"Avenue SE Renton,WA 98058 RE:Reynolds Creek Hydro Loan Application Dear Mr.Hildebrand: The Alaska Energy Authority (AEA)has reviewed the Power Project Fund Loan Application (PPF Application)submitted by Haida Energy,Inc.(HE)with respect to the proposed ReynoldsCreekHydroProjectonPrinceofWalesIsland.AEA and project representatives have met several times to discuss the project technical and financial feasibility. AEA first became involved in the Reynolds Creek Hydro power project in 2009,when a $2.0M grant for the project was provided to Southeast Conference through AEA.Additional grants were awarded by AEA through the Renewable Energy Grant Fund process. AEA required HE to provide a finance plan to assure there were funds to construct the project and place it into commercial operation.In the process of developing the finance plan for the project,HE elected to apply to AEA for a loan from the Power Project Fund (PPF).An initial loan of $9.0M was approved by the legislature,the AEA PPF loan committee,and the AEA Board in 2010. AEA approved the release of grant funds for construction to begin,which was a FERC license condition.The three elements of early construction consisted of procuring the water turbine, building a section of transmission line,and clearing and road construction.AEA also approved grant funds to be used for HE to hire a project manager to accomplish the early construction and to provide overall management of the Reynolds Creek Project. When the project cost estimate was updated for 2010 costs the overall project cost exclusive of "equity investments made to date increased to $23M.HE applied for a $20M loan,inclusive of the original $9M request,as a part of the finance plan. Haida Energy Current Loan Request HE's current loan request is for up to twenty million dollars ($20,000,000)at a zero percent (0%) interest rate with a loan term of fifty (50)years.The proposed repayment source for the PPF loan is revenue generated by the project under a Power Sales Agreement (PSA)with Alaska Power Company (APC). 813 West Northern Lights Boulevard *Anchorage,Alaska 99503-2495 www.aidea.org ©907/771-3000 *FAX 907/771-3044 ®Toll Free (Alaska Only)888/300-8534 *www.akenergyauthority.org Mr.Corry Hildenbrand August 8,2011 Page 2 of 3 In order to approve a PPF loan,AEA must find the project both financially and technicallyfeasible.We have several concerns with the project. AEA Engineering Concerns with Project -Design and Permitting It is my understanding there are several design and permitting issues including: 1.The design places the diversion dam within Rich's pond at a difficult to reach location where geotechnical conditions are not known. 2.The fish screen at the penstock inlet could require significant maintenance and operations cost in addition to being a major construction cost element in the project. These costs require justification. 3.Environmental flow requirements for the project appear to be unreasonably high,and the time period for in-stream work appears to be very short. We understand you are working on these and several other issues;however,prior to the loan being presented to the AEA loan committee,these issues need to be resolved to the satisfaction of the AEA Project Manager,Jim Strandberg. AEA Economic and Financial Concerns -Revenue Sufficiency AEA's is concerned with the ability of the project,under the PSA,to generate sufficient revenue to pay all operating,maintenance and debt service costs over the life of the loan.Based on financial information provided by HE,the cost of supplying power from the project is in the 10 to 11 cents per KWH range (see attached spreadsheet).Yet HE proposes to charge APC only 5 cents per KWH for the first 6 million KWH per year,and 6.48 cents per KWH thereafter. Because of this contemplated revenue deficiency,the PSA requires the project's only customer, APC,to pay,for a time,for documented operations and maintenance costs incurred by HE in addition to the energy charges noted above.Once certain net revenue thresholds are met,APC is relieved of the obligation to pay for operations and maintenance costs incurred by HE and pays only for contractual energy charges.Rates in the PSA should reflect the cost of service for operations and maintenance,debt service and margin requirements.It is unlikely that sufficient revenue will be generated under the existing PSA;therefore,HE must demonstrate to AEA how it intends to cover the costs associated with this project. The loan terms specified on Attachment A as explained in Attachment B provide terms,we believe generate sufficient revenue to repay the loan. AEA staff will submit the loan to the PPF loan committee per 3 AAC 106.110(d)as soon as HE agrees with the terms as outlined or AEA receives information necessary to amend the indicated terms.Amendments to the proposed terms must demonstrate to AEA that HE can cover costs associated with the project including debt service. This letter serves as a representation that AEA is prepared to submit the request to the loan committee using the terms and conditions set forth in the attachments and not on the terms and conditions set forth in HE's PPF application. Mr.Corry Hildenbrand August 8,2011 Page 3 of 3 AEA must state that this letter does not guarantee or represent that:(1)a PPF loan will be issued to HE;(2)that a PPF loan will be issued to HE at any particular time;or (3)that any PPF loan offered by AEA to HE will contain all the terms set forth in this letter and/or in HE's PPF application.Additionally,the loan documents which AEA intends to offer HE for its consideration may contain additional terms not expressly referenced in the attachments. AEA looks forward to working with you and Haida Energy on the Reynolds Creek PPF loan request. Sincerely. ALASKA ENERGY AUTHORITY Sats.Gai-Sara Fisher-Goad Executive Director Attachments OOAttachment A Reynolds Creek Hydroelectric Project Loan Terms Review August 8,2011 .Loan amount up to $20 Million. Loan can be used only to pay for construction costs of the project. .AEA will have the right to audit Haida Energy equity and ascertain the existence of equity levels based on AEA's equity criteria. Loan Debt Service a.No principal or interest payments until the earlier of the 6 operating year or the year after the project achieves operating earnings sufficient to pay the loan. b.Haida Energy shall maintain a minimum Debt Service Coverage Ratio of 1.25. c.Principal Payments will be based on Schedule A with a Balloon payment in the final year if necessary due to the final loan amount exceeding $18.35 Million. d.Interest rates on the unpaid balance will vary from 0.0%to 5.1% annually based on the following formula: 5.1%X ((Prior Year MWH Sales -6,000)/14,000) e.Haida Energy will establish a restricted reserve account sufficient to ensure debt service payments can be met in all potential operating scenarios;no cash distributions to the company's owners shall occur until 50%of the principal is paid off. .Haida Energy will demonstrate its proposed rates will allow it to pay for all debt service,maintenance and operating expenses,and provide a reasonable return to equity holders.AEA believes the Wholesale Power Rate needs to be at least 10 cents per KWH. AEA will have reasonable access rights to the project,the right to project security in case of default,and the right to revenue security in case of default. .Haida Energy will contract for Maintenance and Operations services with APT or make other arrangements agreeable to AEA;it shall pay for such services out of its operating revenue or reserve accounts;it shall not transfer responsibility for payment of M&O to any other entity. Attachment B Reynolds Creek Hydroelectric Project Comments on Terms for Loan Approval 1.Haida Energy has indicated it wants to initially price power from the project at an average of less than 6 cents per KWH.This rate is not sufficient to pay for the costs of the project.The project needs to generate sufficient revenue to pay for operating costs,cover debt service,and provide an equity return.A prevailing power rate of at least 10 cents per KWH seems to produce the required revenue at reasonable sales levels.The acceptability of this rate for Prince of Wales Island energy purchasers is demonstrated by a.APC is expected to include 10 to 11 cents per KWH for wholesale purchases from RCH in the Power Cost Adjustment charge to its end users during the early years of operation; there have been no suggestions that this rate places an unreasonable burden on end users or stifles demand. b.A 10 cent rate represents a substantial savings over diesel fuel costs of 24 cents per KWH or more. c.The revenue requirement per KWH for the project is in the 10 to 11 cent range for low,average,and high demand growth rate scenarios. d.With proper loan terms,the project can be expected to keep wholesale prices in the 10 to 11 cent per KWH range for 20 years. e.Chugach Electric in Anchorage recently agreed to purchase wholesale power for 10.7 cents per KWH. f.Other hydro and renewable projects can be expected to provide power for roughly the same cost as RCH -10 to 11 cents per KWH in 2011 dollars., g.The Black Bear Hydro project,built in the mid-1990s,charges 6.48 cents per KWH for power.In 2011 dollars,this amounts to a current rate of 9.6 cents per KWH based on changes to the U.S.Consumer Price Index. (1995 CPI =152.7;2011 CPI =225.7). 2.If load increases fail to develop,and RCH never produces power beyond the minimum 6 GWH level,AEA should participate with the equity holders in the risk and accept a low return,including zero interest rates.Prince of Wales Island customers should still be required to pay back the full amount of the loan. 3.Deferral of the payment schedule will result in loan dollars being let between 5 and 8 years before repayment begins or interest accrues. 4.If sales increase through community economic development,AEA should participate in that growth and receive interest payments commensurate with the ability of the project to pay debt service at prevailing power prices.Increased production should lead to higher interest rates,subject to the statutory cap. 5.Neither Haida Energy nor AEA dispute the fact that the economic cost of producing power from Reynolds Creek is in the 10 to 11 cents per KWH range. 6.Establishing a schedule of debt service payments that is variable based on sales reduces risk that the company will not be able to meet debt service and reduces the need for a Rate Stabilization Methodology since by definition it stabilizes rates.Any return on a rate stabilization account will be capitalized at APT debt cost. 7.Pricing power at the prevailing rate (i.e.a minimum of 10 cents per KWH),and assuming load growth equal to the average of the Black and Veatch high and low estimates!the proposed schedule of debt service payments is economically and financially feasible.See attached spreadsheet. 2 The "average”case may actually be the least likely since the high assumes mining activity loads which either will or will not occur. Schedule A -Principal Repayment Reynolds Creek Hydro Operating PayeeYear:($000's) 1 2 3 4 5 6 $250 7 $250 8 $250 9 $250 10 $250 11 $300 12 $300 13 $300 14 $300 15 $300 16 $350 17 $350 18 $350 19 $350 20 $350 21 $400 22 $400 23 $400 24 $400 25 $400 26 $450 27 $450 28 $450 29 $450 30 $450 31 $550 32 $550 33 $550 34 $550 35 $550 36 $600 37 $600 38 $600 39 $600 40 $600 4]$650 42 $650 43 $650 44 $650 45 $650 46 $600 $18,350 Melt wh we m4 wis 2h dt? 2018 yoy pips PORT 2022 z7t m24 qs wide aug? Piles Mem PURI wy mn? ait Ina Ms 206 2037 20K 2039 dow aay ant? par dees 24S HG 27 'Hy any ste st ws uss st 2058 2thn 287” 2058 2089 as 2061 Mur 2G 204 Rerraue Requirements (Rey Reg tinuter Revavery)Kesenees 1h "[udal Revenue feaum Yet cent aml Eredhty van -revue Youd Arnal |CinmtawseDasthare$hWh Lene Ker Hrpenee Hate tae Faves Ker Hey pet AW fo 3 . ..ps - u .... . qu . -... 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..?.eee .e ....° AEA Project Manager Approval DateItemTitleRequirement No.Signature 1 |AP&T Transmission Line Signed purchase order or contract A MA?Work Ch .g /!tfit 2 |AP&T Transmission Line Sole Source Justification Of (Work afialu 3__|Clearing -Crown Logging Sole Source Justification Ur 3/it fu 4 |Gilkes Turbine Order Purchase Order and Signed Contract ¢sO between Gilbert Gilkes &Gordon,Pending LTD and Haida Energy ' 5 |Project Cost Estimate Put together a project cost estimate y haaworkingwithEngineerofRecord(EOR)Fr 2/17 [1 6 |PMA Agreement &Provide EOR a copy of project A,tithe " Correspondence management agreement 2 '7 /| 7 |Haida Energy &HDR Provide signed contract between HE av))Contract -Task Order No.5 |and EOR AL!Blizlit 8 |Financial Controls HE to provide approach for financial A.a control of funds ACE 8 /'2 |u9|Plan of Operations HE to provide a plan of operations,\- maintenance and ownership for the project 10 |Project Development Plan HE to provide a project development,plan for detailing a time schedule for design &construction,8 A /rmcommissioningandcommercial1 operation.phe 11 |Staffing Pian HE to provide a staffing plan for Ateprojectdutiesandresponsibilities.CHA 3A af Yj 12 |Project Manager's Resume _|HE to provide the Project Manager's Oe }resume eA fa BS lia /y 13 {|Project Manager's Site Provide documentation Access &Control demonstrating the Project Manager has site access and control for the Project B/i7{uSued Reynolds Creek Hydroelectric Project Page 2 PMA Compliance Matrix/AEA Sign-Off - Item Title No. Requirement AEA Project Manager Approval Signature Date 14 |Power Purchase Agreement HE to provide the negotiated andsignedpowerpurchaseagreement15|RCA documents HE to provide application for CPCN to the RCA Pending 16 |R&M Engineering SurveyWork Sole Source Justification MILEa apt l4 Reynolds Creek Hydroelectric Project Page 3 PMA Compliance Matrix/AEA Sign-Off T /s /UfReynoldsCreekLoan Term Sheet Issues To Be Discussed Produced ou,Pratt Final Amount of Loan.We need to finalize an amount to properly model repayment. Deferred Principal and Interest Payments.Haida Energy brought this up several times. Is this important to allow the project to get off the ground?Can it be combined with something like dividend restrictions until 50%of principal is paid off to protect the lender if agreed to? Rising O&M (APC charges actual costs,including overheads,plus 15%)and Facility Rent costs (see attached spreadsheet)are of concern to AEA to the extent they add risk to loan servicing.Under the terms of the contract,as we understand it,adjustments to KWH sales prices can only take place in accordance with the Rate Stabilization Methodology so long as there exists an under recovery of historical revenue requirements in the Rate Stabilization Account.How will these changes be implemented? Under the terms of the Power Sales Agreement,as we understand it,wholesale power rates are required to be adjusted over time to ensure that no unrecovered historical revenue requirement exists at the end of the 20"year of Commercial operation.Can this be modeled to give us assurance that the market will support resulting prices?The 0.5%annual increase in variable rates in Haida's model do not seem to be sufficient since the model shows a $5.6 million cumulative under recovery in year 20.Are there any concerns that the RCA would not allow these adjustments? Haida Energy has indicated that the intent of the parties to the Power Sales Agreement is to have the terms of Exhibit B,O&M Reimbursement,apply even after the second Contract Year in which Haida Energy's Net Revenue exceeds $500,000.Since O&M and Facility Rent costs have primacy over debt service,we would like to see contract language governing this application. Establishment of a Reserve Account.Power sales from Reynolds Creek will fluctuate from year to year,perhaps dramatically.We need to agree on a sufficient reserve to protect debt service even as an appropriate debt service coverage ratio (1.25?)is maintained. James Strandberg From:Bob Grimm <bob.g@aptalaska.com> Sent:Thursday,June 30,2011 9:13 AM To:James Strandberg;May Clark Ce:Mark Davis;Michael Catsi;'SEC Energy';'Steve Pratt';'Corry Hildenbrand';'Michael D. Hubbard,P.E.';'Alvin Edenshaw (dooner@gci.net)';dooner@gci.net; riely_assoc@yahoo.com Subject:RE:Reynolds Creek meeting Attachments:Term Sheet Initial June 29 2011 Revised RSGAEAedits.doc Jim: Attached please find our initial comments and suggestion on how to proceed with the loan approval!process for the July 19"Meeting of the AEA Board of Directors.We hope to get approval of this proposed process at today's teleconference with you. Thanks Bob Grimm,CEO Alaska Power &Telephone Company P.O.Box 3222 193 Otto Street Port Townsend,WA 98368 800-982-0136 x120 Office 360-385-1733 x120 Office 360-301-3636 cell From:James Strandberg [mailto:JStrandberq@aidea.orq] Sent:Thursday,June 30,2011 9:45 AM To:May Clark Cc:Mark Davis;Michael Catsi;'SEC Energy';'Steve Pratt';Corry Hildenbrand;Michael D.Hubbard,P.E. (mhubbard@FinancialEngineeringCo.com);Bob Grimm;Alvin Edenshaw (dooner@aci.net) Subject:Reynolds Creek meeting May, Please set up a telephone conference call for 10 am this morning,Reynolds Creek,notify the cc list,max of 10 people for 2 hours.Please include the attached term sheet,and power sales agreement and M&O agreement as well as load forecasts (hi and low)as attachments to the meeting invitation.R.Jim Jim: Here are our initial comments and request on how to handle the loan approval process. This term sheet does not reflect the factual business "deal”that has been entered into by the parties.This deal is an interrelated set of comprehensive agreements, license and leases that are presently legally binding upon the parties.The parties to these agreements,license and leases are Federal Energy Regulatory Commission,Alaska Power &Telephone Company,Haida Corporation,Haida Energy,Alaska Power Company and Sealaska Corporation. The negotiations and effort to legally document the results of the negotiations took over two years and hundreds of thousands dollars.In addition,the agreements,license and leases are legally interrelated making it impossible to reopen certain agreements,specifically the Sealaska Land Use Lease,the Operation and Maintenance Agreement and Power Sales Agreement as suggested by the AEA without opening up all of the interrelated agreements among all of the parties. While |am unable to factually state that this is impossible,it will require the entire "deal”be undone re-negotiated and re-documented.This will take significant effort,time and legal expense which we believe is not necessary,and we have not been presented with a valid reason by the AEA staff.This will result in waste and further delay.Further like "humpty dumpty”the pieces may not be able to be put back together in a manner that is agreeable to all parties,their respective Board of Directors and the Alaska Energy Authority resulting in unnecessary additional delay and waste. Why the Alaska Energy Authority is unable to review the "deal”as agreed to by the parties is a mystery.We respectfully request that the Alaska Energy Authority review the "deal”as it is,in accordance with the Statutes and their Regulations pertaining to the Power Project Loan Fund make the necessary findings and present it to the Board of Directors of the Alaska Energy Authority with their recommendation.If the "deal”results in a loan package that is unreasonable, illegal,not in the public interest or is inconsistent with the Statutes and Regulations of the Alaska Energy Authority we would expect the AEA Staff to not recommend approval to their Board at the July 19 Meeting.Under the Regulations the AEA staff recommendation is required to be shared with the applicant well ahead of the schedule meeting date and we would be in a position to present a contrary opinion of the AEA staff findings to the AEA Board of Directors.This approach will allow us to remain on schedule with the matter being adjudicated and a decision rendered by the Board of AEA. oncept Term Sheet Reynolds Creek Alaska Energy Authority Haida Energy Inc (Haida Corp/Alaska Power Company) Basic Terms 1.$18.6 Million Loan to Haida Energy Inc.Should Be equal to amount approved by Legislature. 2.Term is 50 Years. 3.Initial Interest Rate at Start-up is 0%;Maximum Interest Rate is 5.1% Special Conditions 1.During construction no principal payments are due nor are any interest accrued. 2.Sales from the project to APC during the initial year of operation shall be made at 11 cents per KWH.This is not consistant with the power sales agreement. 3.All appropriate Operations,Maintenance,Right of Way and Land Use Fees, Debt Costs and Equity return shall be included in the power sales rate.This is not consistent with the Power Sales Agreement and the Operation and Maintenance Agreement. 4.Haida Energy Inc.will maintain a capital structure containing no more than 85%debt. 5.Haida Energy Corp.will ensure it maintains a Debt Service Coverage Ratio of at least 1.25 for each and every year the loan is outstanding. 6.Haida Energy Inc.and APC will establish reasonable methods and metrics to ensure Operations,Maintenance,and other fees and expenses do not jeopardize the ability of Haida Energy to meet minimum loan terms.This is not consistent with the Operation and Maintenance Agreement and Power Sales Agreement. 7.The Facility Rental Charge shall never exceed 1 cent per KWH during the term of the loan.This is not consistent with the land use agreement in place from Sealaska. 8.Haida Energy Inc.shall ensure that,in case of default,AEA shall have all rights of access and control of all facilities necessary to operate the project either directly or through transfer and assignment. 9.The floor payment for energy sales to APC initially includes $200,000 for Debt Service costs and $100,000 for equity return.The floor payment for Debt will escalate on an agreed-to schedule to ensure that the principal of the loan will be paid over the 50 year life of the loan.If energy sales are only 2 GWH becauseof a very wet year and the floor payment is$300,000 who and how is the O&M _paid and how does Haida Energy get the additional funds to demonstrate a 1.25 debt coverage ratio. 10.A variable annual finance charge of between 0%and 5.1%on the unpaid balance will be computed and paid monthly to AEA.The statutory rate of 5.1% is charged in any year where the previous year was fully subscribed.0%will be charged in any year following a year where sales do not exceed 6,000 MWH.A proportionate rate between 0%and 5.1%is charged when prior year sales are between 6,000 MWH and full subscription.Has a model been developed that shows the project is feasible under these terms in accordance with the Statutes and Regulations of the Power Project Fund. 11.Computed equity will be the audited and approved Haida Energy LLC equity (currently proposed at approximately $4.0 M)and an allowable pre-tax equity return on investment of 7%.During any year in which a realized after tax equity return exceeds 7%,Haida Energy Inc.shall make an extra loan principal payment equal to the amount of realized return in excess of 7%times the ratio of AEA debt in its capital structure.Why do others under the AEA program allowed 11%after tax and HE is limited to 7%.Everyone under similar circumstances should be allowed the same return. Variable Interest Rate Application MWH Sales Interest Rate 6,000 (Min.)0.0% 12,650 (Mid)2.55% 19,300 (Max)5.1% Has a model been developed that shows the project is feasible under these terms in accordance with the Statutes and Regulations of the Power Project Fund. James Strandberg From:Bob Grimm <bob.g@aptalaska.com> Sent:Wednesday,July 14,2010 1:42 PM To:James Strandberg;'SEC Energy' Ce:'Terry Riely';Steve Haagenson Subject:Reynolds Creek Plan of finance Attachments:10_07_02 --Haida Financing Plan(gkrse)-Reynolds Creek.docx Jim and Robert: As you can see the AEA Board of Approval of the $9 million loan is essential to the Plan of Finance.|doubt that the plan will be approved without it.As you know,we have a October deadline to commence construction and the AEA Board Approval keeps moving later and later.FERC Has six months to approve but we got them to committed to doing it sooner when we were shooting for loan approval at the July 13 AEA Board Meeting.Now it appears that the decision is being delayed until August 11"which is really pushing the edge. Any information you have and the likelihood of a AEA board decision on or before August 11™would be greatly appreciated. Bob Grimm,CEO Alaska Power &Telephone Company P.O.Box 3222 193 Otto Street Port Townsend,WA 98368 800-982-0136 x120 Office 360-385-1733 x120 Office 360-301-3636 cell James Strandberg From:James Strandberg Sent:Tuesday,June 28,2011 11:40 AM To:Corry Hildenbrand;William (Bill)Phelan;'Steve Pratt' Cc:bob.g@aptalaska.com;Alvin Edenshaw (dooner@gci.net);Sara Fisher-Goad;Mark Davis; Jennifer Hamilton;Michael Hubbard (mhubbard@FinancialEngineeringCo.com);'SEC Energy' Subject:Reynolds Creek Loan We now have draft load forecasts for prince of wales island,with low growth and high growth options.The PR for Steve Pratt is being processed this morning.We intend to have Mr.Pratt and Mr.Phelan to put the loan package together under the direction of Mark Davis. AEA would like to take this loan to the July 19"board meeting.The agenda deadline for this meeting is close of business July 1*,2011. Here is the schedule: Tuesday,6/28/11 -Draft term sheet for the loan completed by close of business today,and emailed to Corry. Wednesday,6/29/11 -Review and approval by Haida Energy,with possible teleconference Thursday,6/30/11 -Haida Energy Board Approval and resolution Friday,7/1/11 -Loan staff memo and interest rate finding completed and provided to Shauna Howell for inclusion in AEA board packet.PWNPWe request that Alvin Edenshaw,Bob Grimm,Corry Hildenbrand,and Robert Venables plan on being at the July 19" board meeting in person.May |request confirmation from these folks on their attendance.Given that it appears the power sales agreement will need to be modified,|expect that the APC board will also need to approve.Our hope is that this could occur prior to the July 19™board meeting.If that is not possible,then the loan approval will likely need to be contingent on the APC board approval.It will be a stronger case if we can get a resolution from APC before July 19", however. The new terms for the loan are: 1.M&O,equity return and annual finance charges should be included in the project rate from day one. 2.The project rate should be $0.11/kwh.An escalation of this rate may be appropriate,probably at a rate lower than the CPI. 3.APC will budget for and agree with HE to a fixed M&O charge for the project,that can be escalated at the CPI or as appropriate. 4.The floor payment for energy out of the project should include initially $200,000 for finance charges,and not more than $100,000 for equity return.This floor payment should escalate over the 45 year period,in a fashion that the principal of the loan will be returned over the life of the project,if only floor charges prevail for the 45 years.. 5.Anannual variable finance charge will be computed each year,based on project power production.The variable amount will be proportional with power production,such that in a given year when the project is fully subscribed,the project is charged the statutory rate.In years with lesser production,a lower interest rate is charged.[Bill Phelan and Steve may develop an alternate variable finance charge rate approach in consultation with HE,but the fundamental is the project finance package is backward loaded,so that in early years finance charges reflect the ability of the project to pay.Between Bill and Steve and Corry,an approach will be developed on the schedule for principal return and interest charged that satisfies Bill's loan servicing considerations.} 1 e 6.Given that APC is the purchaser of the power,Bob Grimm will need to be a part of the loan discussions,as well as determination of the annual finance charge. 7.Anallowable equity return payment shall be calculated each year based on actual power production.Beginning with an allowable $100,000 for 6,000 MWh production,this allowable amount will increase in proportion to production up to the computed equity return.Alvin Edenshaw and Bob Grimm will need to be involved in these discussions. 8.Computed equity will be the audited and approved HE equity (currently proposed at approximately $4.0 M)and an allowable equity return on investment of 7%. These are basic terms that |believe need to be on the term sheet for the loan.This will require modifications to the power sales agreement. One key task for Pratt will be to reflect these terms in two cash 50 year proformas,one with high load growth and one with low load growth,which have been provided by B&V for the SEIRP. |have asked Mr.Pratt to begin with a cash proforma at full statutory rate,and then develop alternate proformas with reduced interest rates and principal recovery to develop economic scenarios.|have also asked him to analyze the long run dynamics of when the loan is repaid,and the overall effective interest rate charged for the project at the time the loan is fully paid. The goal is to develop our best prediction of future production and costs for the project,to estimate the correct,and economic trajectory of interest charge and principal return.From this we develop a flexible financing approach (term sheet)that will allow the project to operate without future power sales agreement reopeners. At the present time,to avoid confusion,suggest that Mr.Pratt accomplish the budget proforma and the direct support for the loan documents.|expect the AEA loan memo will be by Bill Phelan and Mark Davis with my support.The statutory finding for reduced interest rate will be by AEA. Feel free to call with any questions.My hope is we can generally agree with this approach and move ahead with loan approval in July. Regards,jim