platte river power authority - emma · pdf filemore particularly described herein; (ii)...
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NEW ISSUE Ratings: (See “RATINGS”): S&P: “AA”BOOK-ENTRY ONLY Fitch: “AA”
In the opinion of Sherman & Howard L.L.C., Bond Counsel, assuming continuous compliance with certain covenants described herein, interest on the Series JJ Bonds is excluded from gross income for federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended to the date of delivery of the Series JJ Bonds (the “Tax Code”), interest on the Series JJ Bonds is excluded from alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code except that such interest is required to be included in calculating the “adjusted current earnings” adjustment applicable to corporations for purposes of computing the alternative minimum taxable income of corporations, and interest on the Series JJ Bonds is excluded from Colorado taxable income and Colorado alternative minimum taxable income under Colorado income tax laws in effect on the date of delivery of the Series JJ Bonds as described herein.
$147,230,000PLATTE RIVER POWER AUTHORITY
COLORADOPOWER REVENUE BONDS, SERIES JJ
Dated: Delivery Date Due: June 1, as shown below
The Platte River Power Authority Power Revenue Bonds, Series JJ (the “Series JJ Bonds”) will be issued as fully registered bonds, initially registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York (DTC), securities depository for the Series JJ Bonds. Purchases of the Series JJ Bonds are to be made in book-entry form only. Purchasers will not receive certificates representing their beneficial ownership interest in the Series JJ Bonds. See “THE SERIES JJ BONDS – Book-Entry Only System.” The Series JJ Bonds will be available to ultimate purchasers (Beneficial Owners) in denominations of $5,000 or any integral multiple thereof. Principal and semiannual interest (June 1 and December 1, commencing December 1, 2016) on the Series JJ Bonds will be payable to DTC by Wells Fargo Bank, National Association, Denver, Colorado, as Trustee.
The maturity schedule for the Series JJ Bonds appears on the inside cover page of this Official Statement.
The Series JJ Bonds will be subject to redemption prior to maturity at the option of the Authority as described in “DESCRIPTION OF SERIES JJ BONDS – Redemption Provisions.”
The proceeds of the Series JJ Bonds will be used to: (i) refund certain outstanding Authority bonds as more particularly described herein; (ii) finance certain capital improvements for the Authority’s electric power and energy system (the “System”), and (iii) pay the cost of issuing the Series JJ Bonds. See “SOURCES AND USES OF FUNDS.”
The Series JJ Bonds are not an obligation of the State of Colorado or any political subdivision thereof, other than the Authority. The Authority has no taxing power. The Series JJ Bonds are limited obligations of the Authority payable solely from the revenues of the System and other funds pledged under the Bond Resolution, subject to the prior payment from revenues of maintenance and operation costs of the System and the accrual of reserves therefor, as further described herein.
This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision.
The Series JJ Bonds are offered when, as and if issued and accepted by the initial purchaser, subject to the delivery of an approving opinion by Sherman & Howard L.L.C., Denver, Colorado, as Bond Counsel. Sherman & Howard L.L.C. has also acted as special counsel to the Authority in connection with this Official Statement. It is expected that delivery of the Series JJ Bonds will be made on or about April 26, 2016 through the facilities of DTC.
This Official Statement is dated April 12, 2016
$147,230,000 PLATTE RIVER POWER AUTHORITY
COLORADO POWER REVENUE BONDS, SERIES JJ
MATURITY SCHEDULE (CUSIP©©©© Six-Digit issuer number: 727818)
Maturity (June 1)
Principal Amount
Interest
Rate
Yield
CUSIP© Issue No.
Maturity (June 1)
Principal Amount
Interest
Rate
Yield
CUSIP© Issue No.
2018 $1,625,000 5.000% 0.700% HH2 2028 $14,015,000 3.500% 2.170%(1) HT6
2019 1,710,000 5.000 0.810 HJ8 2029 14,535,000 4.000 2.240(1) HU3
2020 9,645,000 5.000 0.920 HK5 2030 2,860,000 5.000 2.090(1) HV1
2021 10,125,000 5.000 1.060 HL3 2031 3,010,000 5.000 2.160(1) HW9
2022 10,635,000 5.000 1.220 HM1 2032 3,165,000 5.000 2.220(1) HX7
2023 11,170,000 5.000 1.340 HN9 2033 3,325,000 5.000 2.280(1) HY5
2024 11,730,000 5.000 1.490 HP4 2034 3,495,000 5.000 2.340(1) HZ2
2025 12,320,000 5.000 1.620 HQ2 2035 3,675,000 5.000 2.400(1) JA5
2026 12,875,000 4.000 1.760 HR0 2036 3,865,000 5.000 2.450(1) JB3
2027 13,450,000 5.000 1.810(1) HS8
(1) Priced to the par call on June 1, 2026.
© Copyright 2016, American Bankers Association. CUSIP data is provided by Standard & Poor’s, CUSIP Services Bureau, a division of The McGraw-Hill Companies, Inc.
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PLATTE RIVER POWER AUTHORITY 2000 East Horsetooth Road
Fort Collins, Colorado 80525-5721 (970) 226-4000
Member Municipalities
ESTES PARK FORT COLLINS LONGMONT LOVELAND Board of Directors
Tom Roiniotis, Chairman...................................................................................... Longmont Reuben Bergsten, Vice Chairman .........................................................................Estes Park Cecil Gutierrez, Secretary ..........................................................................Mayor, Loveland Steve Adams .......................................................................................................... Loveland Dennis Coombs ........................................................................................ Mayor, Longmont Gerry Horak ....................................................................................................... Fort Collins Bill Pinkham ............................................................................................ Mayor, Estes Park Wade Troxell ........................................................................................ Mayor, Fort Collins
Management
Jacqueline A. Sargent........................................ General Manager/ Chief Executive Officer Jason E. Frisbie ............................................................................... Chief Operating Officer Peter D. Hoelscher ........................... Chief External Affairs & Customer Relations Officer Karin L. Hollohan .................................................... Chief Administrative Services Officer Deborah R. Schaneman ................................................................Chief Compliance Officer David D. Smalley ............................................... Chief Financial & Risk Officer, Treasurer Joseph B. Wilson, Esq. ...............................................................................General Counsel
Bond and Special Counsel
Sherman & Howard L.L.C. Denver, Colorado
Financial Advisor
Public Financial Management, Inc. Arlington, Virginia
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USE OF INFORMATION IN THIS OFFICIAL STATEMENT
This Official Statement, which includes the cover page, the inside cover page and the appendices, does not constitute an offer to sell or the solicitation of an offer to buy any of the Series JJ Bonds in any jurisdiction in which it is unlawful to make such offer, solicitation, or sale. No dealer, salesperson, or other person has been authorized to give any information or to make any representations other than those contained in this Official Statement in connection with the offering of the Series JJ Bonds, and if given or made, such information or representations must not be relied upon as having been authorized by the Authority. The Authority maintains an internet website; however, the information presented there is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the Series JJ Bonds.
The information set forth in this Official Statement has been obtained from the Authority and from the other sources referenced throughout this Official Statement, which the Authority believes to be reliable. No guarantee is made by the Authority, however, as to the accuracy or completeness of information provided from sources other than the Authority. This Official Statement contains, in part, estimates and matters of opinion that are not intended as statements of fact, and no representation or warranty is made as to the correctness of such estimates and opinions, or that they will be realized.
The information, estimates, and expressions of opinion contained in this Official Statement are subject to change without notice, and neither the delivery of this Official Statement nor any sale of the Series JJ Bonds shall, under any circumstances, create any implication that there has been no change in the affairs of the Authority, or in the information, estimates, or opinions set forth herein, since the date of this Official Statement.
This Official Statement has been prepared only in connection with the original offering of the Series JJ Bonds, and not in connection with any subsequent sale or transfer of the Series JJ Bonds, and may not be reproduced or used in whole or in part for any other purpose.
The Series JJ Bonds have not been registered with the Securities and Exchange Commission due to certain exemptions contained in the Securities Act of 1933, as amended. The Series JJ Bonds have not been recommended by any federal or state securities commission or regulatory authority, and the foregoing authorities have neither reviewed nor confirmed the accuracy of this document.
THE PRICES AT WHICH THE SERIES JJ BONDS ARE OFFERED TO THE PUBLIC BY THE INITIAL PURCHASER (AND THE YIELDS RESULTING THEREFROM) MAY VARY FROM THE INITIAL PUBLIC OFFERING PRICES OR YIELDS APPEARING ON THE INSIDE COVER PAGE HEREOF. IN ADDITION, THE INITIAL PURCHASER MAY ALLOW CONCESSIONS OR DISCOUNTS FROM SUCH INITIAL PUBLIC OFFERING PRICES TO DEALERS AND OTHERS. IN ORDER TO FACILITATE DISTRIBUTION OF THE SERIES JJ BONDS, THE INITIAL PURCHASER MAY ENGAGE IN TRANSACTIONS INTENDED TO STABILIZE THE PRICE OF THE SERIES JJ BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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TABLE OF CONTENTS Page Page
INTRODUCTION ..................................................... 1�General .......................................................................... 1�The Authority ................................................................ 1�The Municipalities ......................................................... 1�Security for the Series JJ Bonds .................................... 2�Lien Position ................................................................. 2�Purpose of the Series JJ Bonds ...................................... 3�Tax Status of Interest on the Series JJ Bonds ................ 3�Forward Looking Statements......................................... 3�Additional Information .................................................. 3�
SOURCES AND USES OF FUNDS ......................... 4�Improvement Projects .................................................... 4�Refunding Project .......................................................... 5�Verification of Mathematical Computations ................. 5�
DESCRIPTION OF SERIES JJ BONDS .................. 6�General .......................................................................... 6�Optional Redemption .................................................... 6�Springing Modifications to the Bond Resolution .......... 6�Tax Covenants ............................................................... 7�Book-Entry Only System .............................................. 7�
SECURITY FOR SERIES JJ BONDS ...................... 7�Pledge Effected by the Bond Resolution ....................... 7�Rate Covenants .............................................................. 8�Electric Power Contracts with the Municipalities.......... 9�
OUTSTANDING OBLIGATIONS ......................... 10�POWER BOND SERVICE REQUIREMENTS ...... 11�THE AUTHORITY ................................................. 12�
Brief History ................................................................ 12�Service Area ................................................................ 12�Organization, Management and Employees ................ 13�Pension Plans............................................................... 15�Insurance Coverage ..................................................... 17�Operating Results ........................................................ 17�Management’s Discussion of Operating Results ......... 19�Strategic Financial Plan ............................................... 20�Cash Reserves and Liquidity ....................................... 20�Debt Service Coverage ................................................ 21�Power Requirements .................................................... 22�Power Resources ......................................................... 22�Future Capital Projects ................................................ 24�Rate Regulation ........................................................... 25�Wholesale Rate History ............................................... 26�Regional Coordination................................................. 26�
RAWHIDE ENERGY STATION ........................... 27�Fuel Supply ................................................................. 28�Water Supply ............................................................... 29�Solar Development at Rawhide ................................... 30�
CRAIG UNITS 1 AND 2 ........................................ 30�Ownership and Operation of the Yampa Project ......... 30�Craig Units 1 and 2 Fuel Supply ................................. 32�Litigation Challenging Mining Permits ....................... 33�Federal Leasing Moratorium ....................................... 33�Yampa Project Water Supply ...................................... 34�
GREENHOUSE GAS REGULATION ................... 34�
SUPPLY CONTRACTS WITH WESTERN AREA POWER ADMINISTRATION ................................ 34�
Background ................................................................ 34�RENEWABLE ENERGY SOURCES ..................... 35�TRANSMISSION FACILITIES .............................. 36�MUNICIPAL ELECTRIC SYSTEMS SUPPLIED BY THE AUTHORITY ................................................. 36�
General ....................................................................... 36�Electric System Properties .......................................... 36�Rates and Comparative Power Costs .......................... 38�Municipal Electric Systems ........................................ 39�Largest Customers Served by the Municipalities ........ 39�Historical Operating Results ....................................... 39�
ADDITIONAL REGULATORY AND CLIMATE FACTORS AFFECTING THE AUTHORITY AND THE ELECTRIC UTILITY INDUSTRY ................ 41�
General ....................................................................... 41�Expanded FERC Jurisdiction ...................................... 41�Renewable Portfolio Standards ................................... 42�Environmental Regulations ........................................ 43�Effects of Drought and Low-Water Conditions .......... 44�
LITIGATION........................................................... 44�CONTINUING DISCLOSURE ............................... 44�LEGAL MATTERS ................................................. 45�TAX MATTERS ...................................................... 45�
Federal Tax Matters .................................................... 45�INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS .................................................... 47�FINANCIAL ADVISOR ......................................... 47�RATINGS ................................................................ 47�UNDERWRITING .................................................. 48�OFFICIAL STATEMENT CERTIFICATION ........ 48�MISCELLANEOUS ................................................ 48� APPENDIX A PLATTE RIVER POWER
AUTHORITY FINANCIAL STATEMENTS ............................ A-1
APPENDIX B SUMMARY OF CERTAIN PROVISIONS OF THE GENERAL POWER BOND RESOLUTION .. B-1
APPENDIX C BOOK-ENTRY ONLY SYSTEM ...................................... C-1
APPENDIX D FORM OF BOND COUNSEL OPINION ..................................... D-1
APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE ... E-1
APPENDIX F ECONOMIC AND DEMOGRAPHIC INFORMATION ........................... F-1
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INDEX OF TABLES
NOTE: Tables marked with an (*) indicate Annual Financial Information to be updated pursuant to SEC Rule 15c2-12, as amended. See Appendix E – Form of Continuing Disclosure Certificate. Sources and Uses of Funds .............................................................................................................4�Refunded Bonds ..............................................................................................................................5�Power Bond Debt Service Requirements ......................................................................................11�Annual Required Contributions – Actuarial Assumptions ...........................................................15�Authority’s Plan Contributions .....................................................................................................16�Net Pension Liability ....................................................................................................................16�Comparative Statements of Revenues, Expenses and Charges in Net Position ...........................18�Debt Service Coverage .................................................................................................................21�Power Resources and Loads .........................................................................................................23�Authority’s Wholesale Rates ........................................................................................................26�Rawhide Unit 1 Capacity Factors and Equivalent Availability ....................................................28�Craig Units Capacity Factors and Equivalent Availability ...........................................................30�Comparison of Estimated Monthly Electric Charges ...................................................................38�Customer Classification ................................................................................................................39�Historical Operating Results of the Electric Systems of the Municipalities .................................40�Population ................................................................................................................................... F-1�Age Distribution .......................................................................................................................... F-2�Annual Per Capita Personal Income ........................................................................................... F-2�Median Household Effective Buying Income ............................................................................. F-3�Percent of Households by Effective Buying Income Groups – 2016 Estimates ......................... F-3�Labor Force and Percent Unemployed ....................................................................................... F-4�Average Number of Employees within Selected Industries - Boulder County .......................... F-5�Average Number of Employees within Selected Industries - Larimer County .......................... F-6�Major Private Non-Retail Employers in Boulder County ........................................................... F-7�Major Private Non-Retail Employers in Larimer County ........................................................... F-7�Retail Sales .................................................................................................................................. F-8�Building Permits Issued for New Structures in City of Fort Collins .......................................... F-9�Building Permits Issued for New Structures in the City of Longmont ....................................... F-9�Building Permits Issued for New Structures in the City of Loveland ...................................... F-10�History of Foreclosures ............................................................................................................. F-10�
OFFICIAL STATEMENT
$147,230,000 PLATTE RIVER POWER AUTHORITY POWER REVENUE BONDS, SERIES JJ
INTRODUCTION
General
This Official Statement, including the cover page, the inside cover page and the appendices, is furnished by the Platte River Power Authority (the “Authority”) to provide information about the Authority and its $147,230,000 Power Revenue Bonds, Series JJ (the “Series JJ Bonds”). The Series JJ Bonds are being issued pursuant to the General Power Bond Resolution adopted February 26, 1987 by the Board of Directors of the Authority (the “Board”), as supplemented and amended to date and by the Eleventh Supplemental Bond Resolution adopted March 31, 2016 (the “Eleventh Supplemental Resolution”). The General Power Bond Resolution, as so supplemented, is referred to herein as the “Bond Resolution.” Capitalized terms used herein that are otherwise not defined have the meanings ascribed to them in Appendix B – Summary of Certain Provisions of the Bond Resolution.
This Introduction is only a brief description of certain matters set out in this Official Statement and is subject in all respects to more complete information contained in this Official Statement. Investors should make a full review of this Official Statement, which includes the cover page and attached Appendices, as well as of the documents summarized and described in this Official Statement, before making a decision to purchase any of the Series JJ Bonds.
The Authority
The Authority was formed as a joint action power authority in 1975 pursuant to a contract entered into by the municipalities of Estes Park, Fort Collins, Longmont and Loveland (the “Municipalities”). The Authority’s mission is to effect the development of electric energy resources and the production and transmission of electric energy in whole or in part for the benefit of the inhabitants of the Municipalities. The Authority is a generation and transmission utility operating in the wholesale market, and does not serve retail customers. The electric utility retail distribution systems of the Municipalities are the main beneficiaries of the Authority’s electric operations. The Authority’s electric power and energy system (the “System”) sells surplus electricity not needed by the Municipalities to other electric utilities in the region and provides transmission service.
The Municipalities
The Municipalities are located along the northern Front Range of Colorado. Each Municipality owns an electric distribution utility that serves residents and businesses within the Municipality’s limits. Some of the Municipalities have service areas outside municipal limits. In 2014, the estimated populations of the Municipalities were: Fort Collins 154,570, Longmont 90,855, Loveland 72,983 and Estes Park 6,197. Fort Collins, Longmont, and Loveland have
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diverse economies, whereas the Estes Park economy is based primarily on tourism. The Municipalities serve large loads in the brewing and beverage, information and computer technology, food processing, warehousing, and product distribution industries as well as educational and medical institutions.
Security for the Series JJ Bonds
The Series JJ Bonds are secured by a pledge of the Authority’s “Net Revenues.” Net Revenues are essentially equal to all revenues derived by the Authority attributable to its ownership and operation of the System (the “Revenues”) less maintenance and operation costs of the System (the “Maintenance and Operation Costs”). Revenues include amounts received by the Authority under electric service contracts or any other contracts for the sale of power or other services from the System. In addition to expenses for salaries and wages, materials and supplies and administrative and general expenses, Maintenance and Operation Costs include costs of fuel, purchased power and transmissions service. As described under “SECURITY FOR SERIES JJ BONDS – Rate Covenants,” Net Revenues can be increased or decreased by amounts paid into or withdrawn from a Rate Stabilization Reserve Account. “Net Revenues,” “Revenues,” “Maintenance and Operation Costs” and the “Rate Stabilization Reserve Account” are more fully described in Appendix B – Summary of Certain Provisions of the Bond Resolution.
The Municipalities have each agreed to buy essentially all of their electric requirements from the Authority through 2050. The Authority’s contracts with the Municipalities authorize the Authority to set the rates it charges the Municipalities’ utilities at levels that are sufficient to pay the Authority’s cash operating expenses and its bonds and any surplus “coverage” required in its bond covenants. The Municipalities are obligated to make payments to the Authority only from their electric utility revenues; the Municipalities’ taxing powers and non-utility revenues are not pledged or available to pay debt service on the Series JJ Bonds. The Authority makes sales to other utilities of surplus electric power and energy as well as transmission service, but the power supply contracts with the Municipalities are intended (and written) to provide sufficient Net Revenues through 2050 to meet the Authority’s obligations, i.e., for a longer period than the term of the Series JJ Bonds.
Lien Position
Upon issuance of the Series JJ Bonds, the Authority will have $234,505,000 in aggregate principal of outstanding power revenue bonds (including the Series JJ Bonds) that are secured by the same “Net Revenues” pledge as that securing the Series JJ Bonds. These bonds are known as “Power Revenue Bonds,” and the Series JJ Bonds’ claim on the Authority’s Net Revenues will rank equally with all other Power Revenue Bonds issued before or after the Series JJ Bonds. Thus, the Series JJ Bonds are on parity with all other Power Revenue Bonds. The Authority has promised not to issue any bonds that would have a claim on its Net Revenues prior to that of Power Revenue Bonds. In this sense, the Authority’s Power Revenue Bonds, including the Series JJ Bonds, are considered to have a first (but not an exclusive) lien on Net Revenues. See Appendix B – Summary of Certain Provisions of the Bond Resolution.
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Purpose of the Series JJ Bonds
Net proceeds of the Series JJ Bonds are to be used (a) to advance refund a portion of the Authority’s Power Revenue Bonds, Series HH, maturing on June 1, 2020 to 2029 (the “Refunded Bonds”) on their redemption date of June 1, 2019 (the “Refunding Project”); (b) to finance a number of transmission capital improvements to the System, including 230kV circuit breakers and transformers, a new substation, and improvements to related facilities (the “Improvement Projects”); (c) to finance a number of generation capital improvements to the System including a distributed control system replacement, dust collection system upgrades, general plant purchases, and improvements to related facilities; and (d) to pay certain costs of issuing the Series JJ Bonds. See “SOURCES AND USES OF FUNDS.”
The specific principal amount, if any, of each maturity of the Refunded Bonds that will be refunded will be determined by the Authority on the day of pricing of the Series JJ Bonds. The issuance of the Series JJ Bonds and the refunding of the Refunded Bonds is subject to market conditions, and the Authority will only issue the Series JJ Bonds to refund any of the Refunded Bonds if such issuance and refunding result in acceptable debt service savings to the Authority.
Tax Status of Interest on the Series JJ Bonds
In the opinion of Sherman & Howard L.L.C., Bond Counsel, assuming continuous compliance with certain covenants described herein, interest on the Series JJ Bonds is excluded from gross income for federal income tax purposes pursuant to Section 103 of the Internal Revenue Code of 1986, as amended to the date of delivery of the Series JJ Bonds (the “Tax Code”), interest on the Series JJ Bonds is excluded from alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code except that such interest is required to be included in calculating the “adjusted current earnings” adjustment applicable to corporations for purposes of computing the alternative minimum taxable income of corporations, and interest on the Series JJ Bonds is excluded from Colorado taxable income and Colorado alternative minimum taxable income under Colorado income tax laws in effect on the date of delivery of the Series JJ Bonds as described herein.
Forward Looking Statements
This Official Statement contains statements which, to the extent they are not recitations of historical fact, constitute “forward-looking statements.” In this respect the words “estimate,” “project,” “anticipate,” “expect,” “intend,” “believe” and similar expressions are intended to identify forward-looking statements. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
Additional Information
This Official Statement contains information that the Authority considers current as of its date. The Authority will sign a Continuing Disclosure Certificate on the issuance date of the
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Series JJ Bonds agreeing to update certain information in this Official Statement after its date, as described under “CONTINUING DISCLOSURE.” This Official Statement contains summaries of the terms of the Series JJ Bonds, the Bond Resolution and certain contracts and other arrangements entered into by the Authority and relating to the System, which by definition are not complete. Copies of these complete documents may be requested from:
David D. Smalley, Chief Financial & Risk Officer Platte River Power Authority 2000 East Horsetooth Road
Fort Collins, Colorado 80525-5721 Telephone number: 970-226-4000
SOURCES AND USES OF FUNDS
The sources and uses of funds related to the issuance of the Series JJ Bonds are set forth in the following table.
Sources and Uses of Funds
Sources of Funds: Principal amount of Series JJ Bonds $147,230,000 Premium 31,939,991 Transfers from existing bond fund 2,196,667
Total Sources of Funds $181,366,658
Uses of Funds: Refunding Project $120,755,329 Improvement Projects 60,000,000 Cost of issuance (including Underwriters’ discount) 611,329
Total Uses of Funds $181,366,658 Improvement Projects
Approximately $60 million in proceeds from the Series JJ Bonds will be used to finance a number of transmission and production capital improvements to the System including (a) transmission projects consisting of (i) the engineering, procurement, and installation of a 115/230kV autotransformer and associated facilities for the Boyd Substation, (ii) the engineering, design, and construction of a new substation to be known as the Foothills Substation to serve the City of Loveland, Colorado, (iii) the procurement and installation of a generation availability transformer at the Rawhide Substation, (iv) the engineering, design, and construction of a six bay 230kV breaker-and-a-half bus and a new autotransformer for the LaPorte Substation, (v) the procurement and installation of a new 230/34.5kV interconnection transformer and associated facilities to support the new Rawhide Flats Solar Project, and (vi) miscellaneous transmission projects, including numerous breaker replacements throughout the system, and (b) generation projects at the Rawhide Generating Station consisting of (i) the procurement and installation of replacement air heater baskets, (ii) the procurement, construction and installation of a new pneumatic conveying coal dust collection system, (iii) the procurement and installation
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of replacements to the existing dust collection system in the Rawhide coal conveyor transfer building and the crusher building, (iv) the procurement and installation of replacements to the existing generator rotor and blower, and the on-site rewind of the existing generator stator at Rawhide Unit 1, (v) the procurement and installation of replacement HVMCC switchgear facilities, (vi) the procurement and installation of replacement programmable logic controllers at Rawhide Unit 1, (vii) the procurement and installation of an approximately 500,000 gallon water tank and associated valves for raw water storage at the Rawhide Generating Station, and (viii) miscellaneous generation projects, including several large coal handling equipment purchases.
Refunding Project
The Authority is undertaking the Refunding Project in order to lower interest costs and effect other economics. See “INTRODUCTION – Purpose.”
The following table details the maturity dates, principal amounts and payment or redemption dates of the Series HH Bonds to be refunded or defeased with the proceeds of the Series JJ Bonds and other available funds.
Refunded Bonds
CUSIP (Base No. 727818)
Maturity Date
(June 1)
Outstanding Principal Amount
Principal Amount to be
Refunded
Optional Redemption
Date
Redemption
Price FZ4 06/01/2020 $8,385,000 $8,385,000 06/01/2019 100% GA8 06/01/2021 8,800,000 8,800,000 06/01/2019 100 GB6 06/01/2022 9,240,000 9,240,000 06/01/2019 100 GC4 06/01/2023 9,705,000 9,705,000 06/01/2019 100 GD2 06/01/2024 10,190,000 10,190,000 06/01/2019 100 GE0 06/01/2025 10,700,000 10,700,000 06/01/2019 100 GF7 06/01/2026 11,235,000 11,235,000 06/01/2019 100 GG5 06/01/2027 11,795,000 11,795,000 06/01/2019 100 GH3 06/01/2028 12,385,000 12,385,000 06/01/2019 100 GJ9 06/01/2029 13,005,000 13,005,000 06/01/2019 100
To accomplish the Refunding Project, the Authority will deposit a portion of the Series JJ Bond proceeds, together with other available Authority funds, with the Escrow Agent pursuant to an escrow agreement dated as of the date of delivery of the Series JJ Bonds. The amounts deposited with the Escrow Agent will be deposited into the escrow account created under the Bond Resolution and will be held in cash or invested in Federal Securities maturing at such times and in such amounts as required to provide funds sufficient to pay the interest on the Refunded Bonds through June 1, 2019 and principal on the Refunded Bonds to their redemption date on June 1, 2019.
Verification of Mathematical Computations
Causey Demgen & Moore P.C. (“Causey”), a firm of independent public accountants, will deliver to the Authority, on or before the settlement date of the Series JJ, its verification report indicating that it has verified, in accordance with standards established by the American Institute of Certified Public Accountants, the mathematical accuracy of the mathematical computations of the adequacy of the cash and the maturing principal of and interest on the
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Federal Securities, to pay, when due, the maturing principal of and interest on the Refunded Bonds.
The verification performed by Causey will be solely based upon data, information and documents provided to Causey by the Authority and its representatives. Causey has restricted its procedures to recalculating the computations provided by the Authority and its representatives and has not evaluated or examined the assumptions or information used in the computations.
DESCRIPTION OF SERIES JJ BONDS
General
The Series JJ Bonds will be issued in the principal amount of $147,230,000. The Series JJ Bonds are to be issued in denominations of $5,000 or integral multiples thereof through an electronic book-entry system run by Depository Trust Company (“DTC”). The Series JJ Bonds will be issued as fully registered bonds without coupons and will initially be registered in the name of “Cede & Co.,” as nominee for DTC, New York, New York as securities depository for the Series JJ Bonds. (See Appendix C.) The Series JJ Bonds will be dated and bear interest from the date of delivery, at the rates per annum set forth on the cover page hereof, payable semiannually on June 1 and December 1, commencing December 1, 2016, and will mature on the dates and in the principal amounts set forth on the cover page hereof. Wells Fargo Bank, N.A., will act as trustee and paying agent for the Series JJ Bonds under the Bond Resolution.
Optional Redemption
The Series JJ Bonds maturing on and after June 1, 2027, are subject to redemption at the option of the Authority at any time on or after June 1, 2026, as a whole or in part, at a redemption price equal to the principal amount thereof, together with accrued interest to the redemption date. If less than all Series JJ Bonds are to be optionally redeemed on any date, the maturities to be so redeemed may be selected by the Authority in its discretion.
Springing Modifications to the Bond Resolution
The Authority intends to modify certain of the provisions contained in the supplemental bond resolutions authorizing the issuance of all of its outstanding additional parity bonds. The Modifications (collectively, the “Modifications”) will also be reflected in the Bond Resolution and will not be effective until the Effective Date, which is defined as the earlier of the date on which (a) none of the Authority’s Power Revenue Bonds, Series GG (the “Series GG Bonds”), the Authority’s Power Revenue Bonds, Series HH (the “Series HH Bonds”) or the Authority’s Power Revenue Bonds, Series II (the “Series II Bonds”) are outstanding, or (b) the holders of not less than 60% in aggregate principal amount of the sum of the Series GG Bonds, the Series HH Bonds, the Series II Bonds, the Series JJ Bonds and any other series of bonds issued under the Bond Resolution then outstanding, as well as any other entities whose consent is required, have consented. The purchasers of the Series JJ Bonds will be deemed to have consented to the Modifications by purchasing the Series JJ Bonds. The sale of the Series JJ Bonds, in combination with the refunding of the Refunded Bonds, will cause the 60% requirement to be satisfied and the Modifications to become effective if the Authority obtains all other required consents.
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The Modifications relate solely to the substitution of written certificates of the Authority for certificates currently required to be provided by the independent engineer as more particularly described in Appendix B – Summary of Certain Provisions of the Bond Resolution.
Tax Covenants
In the Bond Resolution, the Authority covenants for the benefit of the owners of the Series JJ Bonds that it will not take any action or omit to take any action with respect to the Series JJ Bonds, the proceeds thereof, any other funds of the Authority or any project refinanced with the proceeds of the Series JJ Bonds if such action or omission (i) would cause the interest on the Series JJ Bonds to lose its exclusion from gross income for federal income tax purposes under Section 103 of the Tax Code, or (ii) would cause interest on the Series JJ Bonds to lose its exclusion from alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code, except to the extent such interest is required to be included in the adjusted current earnings adjustment applicable to corporations under Section 56 of the Tax Code in calculating corporate alternative minimum taxable income. The foregoing covenants shall remain in full force and effect notwithstanding the payment in full or defeasance of the Series JJ Bonds until the date on which all obligations of the Authority in fulfilling the above-described covenants under the Tax Code have been met.
Book-Entry Only System
The Series JJ Bonds will be available in book-entry form only. DTC will act as the initial securities depository for the Series JJ Bonds. The ownership of one fully registered Series JJ Bond for each maturity in each series of the Series JJ Bonds as set forth on the inside cover page of this Official Statement, each in the aggregate principal amount of such maturity, will be registered in the name of Cede & Co., as nominee of DTC. See Appendix C – Book-Entry Only System.
SO LONG AS CEDE & CO., AS NOMINEE OF DTC, IS THE REGISTERED OWNER OF THE SERIES JJ BONDS, REFERENCES IN THIS OFFICIAL STATEMENT TO THE REGISTERED OWNERS OF THE SERIES JJ BONDS WILL MEAN CEDE & CO. AND WILL NOT MEAN THE BENEFICIAL OWNERS.
None of the Authority, the trustee or the paying agent will have any responsibility or obligation to DTC’s Participants or Indirect Participants (defined in Appendix C), or the persons for whom they act as nominees, with respect to the payments to or the providing of notice for the DTC Participants, the Indirect Participants or the beneficial owners of the Series JJ Bonds as further described in Appendix C to this Official Statement.
SECURITY FOR SERIES JJ BONDS
Pledge Effected by the Bond Resolution
The Series JJ Bonds, together with all other Power Revenue Bonds previously or hereafter issued and outstanding under the Bond Resolution, are payable from and are secured by a pledge of (i) Revenues (as defined in Appendix B) derived by the Authority from the ownership and operation of the System, subject to prior payment from such Revenues of
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Maintenance and Operation Costs, including accrual of reserves therefore and for a fuel acquisition reserve, and (ii) certain funds held under the Bond Resolution. See Appendix B – Funds Established and Allocation of Revenues. As described at greater length in Appendix B, Maintenance and Operation Costs are defined in the Bond Resolution to include all actual maintenance and operation costs of the System, insofar as such charges are made in conformity with generally accepted accounting principles. To the extent consistent with those principles (as now or hereafter in effect), payments by the Authority under water, power or other purchase contracts (including payments under a take-or-pay contract due whether or not deliveries are actually made) may constitute Maintenance and Operation Costs, payable prior to bond service on the Power Revenue Bonds. See “OUTSTANDING OBLIGATIONS.” The flow of funds under the Bond Resolution is described in Appendix B under “Funds Established and Allocation of Revenue.” The Authority derives most of its Revenues from the sale of electric power to the Municipalities.
THE SERIES JJ BONDS ARE NOT AN INDEBTEDNESS OF ANY MUNICIPALITY, THE STATE OF COLORADO OR ANY OTHER POLITICAL SUBDIVISION THEREOF, AND NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF COLORADO OR ANY MUNICIPALITY IS PLEDGED FOR THE PAYMENT OF THE SERIES JJ BONDS. THE AUTHORITY HAS NO TAXING POWER. THE SERIES JJ BONDS ARE SPECIAL OBLIGATIONS OF THE AUTHORITY, PAYABLE SOLELY FROM NET REVENUES OF THE SYSTEM AND CERTAIN FUNDS PLEDGED UNDER THE BOND RESOLUTION, ON A PARITY WITH ALL OTHER POWER REVENUE BONDS HERETOFORE OR HEREAFTER ISSUED AND OUTSTANDING UNDER THE BOND RESOLUTION AS DESCRIBED ABOVE.
Rate Covenants
The Authority covenants in the Bond Resolution that it will, while Power Revenue Bonds remain outstanding, establish, fix, prescribe and collect rates and charges for the sale and use of electric power and energy or related services produced, transmitted, distributed or furnished by the System which, together with other income, are reasonably expected to yield Revenues for the forthcoming 12-month period at least equal to all Maintenance and Operation Costs of the System and 1.10 times the sum of Adjusted Aggregate Bond Service (as such term is defined in Appendix B) for such period, but excluding any principal installment which the Authority intends to pay from sources other than Revenues.
The Authority has established a Rate Stabilization Reserve Account within the General Fund under the Bond Resolution. Transfers into the Rate Stabilization Reserve Account have the effect of reducing Net Revenues (as defined in Appendix B) under the Bond Resolution in the year of transfer, while transfers from that account into the Revenue Fund established under the Bond Resolution are included in the calculation of Net Revenues when so transferred. By means of such transfers to and from the Rate Stabilization Reserve Account, the Authority retains the flexibility to set aside Revenues surplus to its Bond Resolution requirements in any period, to be available in future periods to offset the amount of current Revenues required to be obtained from the Municipalities or other power purchasers to meet the rate covenant and other revenue requirements under the Bond Resolution. As of December 31, 2015, there was approximately $20.2 million on deposit in the Rate Stabilization Reserve Account. The Authority does not
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currently have plans to draw moneys from the Rate Stabilization Reserve Account, though no guarantees can be made that it will not in the future.
The Bond Resolution requires the Authority to review and revise, if necessary, electric rates at least once every calendar year and promptly after any material change in the circumstances which were contemplated at the time of the most recent rate review. Such rates and charges are required, in any event, to produce moneys sufficient to enable the Authority to comply with all its covenants under the Bond Resolution. See “THE AUTHORITY – Wholesale Rate History.”
Electric Power Contracts with the Municipalities
The Authority originally entered into Contracts for the Supply of Electric Power and Energy (collectively, the “Electric Power Contracts”) with each of the four Municipalities on September 5, 1974. In December 1974, a Declaratory Judgment was entered by the Larimer County District Court that concluded that the Electric Power Contracts had been duly executed and delivered by each of the Municipalities and constituted valid and legally binding obligations of each of the Municipalities in accordance with their terms. The Electric Power Contracts are amended and extended at routine intervals, most recently in September 2010, and now extend through December 2050 and thereafter until terminated by a party following not less than six (6) months’ notice. The Authority did not consider it necessary to seek declaratory judgments with respect to the contract extensions.
The Electric Power Contracts are identical in all significant respects. Under each Electric Power Contract, the Authority agrees to sell and deliver to the contracting Municipality, and the Municipality agrees to take and pay for all electric power and energy that the Municipality requires for the operation of its municipal electric system to the extent that the Authority has such power and energy available, with three exceptions: 1) each Municipality retains the right to continue to generate power and energy to the extent of the capacity of its generating facilities in service on September 5, 1974; 2) each Municipality may own and operate new generation resources with a total rated capacity no greater than 1,000 kW or one percent of the peak load of that Municipality, whichever is greater; and 3) each Municipality may purchase from net metered customers.
Under the first exception listed above, Longmont, Loveland and Estes Park each operated small hydropower units. The Estes Park unit was destroyed in a flood in 1982 and was not rebuilt. Until recently, Longmont and Loveland continued to operate hydropower facilities; the total combined capacity of these units was 1.4 MW. The Loveland facility was destroyed during a flood event in September, 2013. Loveland is in the process of receiving funds from the Federal Emergency Management Agency (“FEMA”) as reimbursement for municipal facilities destroyed in the flood and is planning to replace the damaged hydropower unit, which was rated at 900 kW, with a solar facility with an estimated rated capacity of 3.0 MW. The capacity of the solar facility is roughly equivalent to the combined capacity of the destroyed hydropower unit and one percent of the Loveland municipal peak load. The parties intend to enter a power purchase agreement whereby the Authority purchases the output of the remaining 0.5 MW. The Longmont hydro facility was forced off-line by the flood event and experienced some damage, but is expected to return to production at full capacity.
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The wholesale rate for electric service provided under the Electric Power Contracts to the Municipalities is established by the Board. The Electric Power Contracts provide that the Board shall review the rates, at intervals not less frequently than once each calendar year, and shall, if necessary, revise the rates such that they will produce revenues that shall be sufficient, but only sufficient, with the revenues of the Authority from all other sources to:
(1) meet the cost of operation and maintenance (including, without limitation, replacements, insurance, taxes and administrative and general overhead expense) of the electric generating plants, transmission system and related facilities of the Authority;
(2) meet the cost of any power and energy purchased for resale under the Electric Power Contracts by the Authority and the cost of transmission service;
(3) make payments of principal and interest on all indebtedness and revenue bonds of the Authority and provide an earnings margin adequate to enable the Authority to obtain revenue bond financing on favorable terms; and
(4) provide for the establishment and maintenance of reasonable reserves.
Each Electric Power Contract provides that the obligation of the Municipality to pay the Authority for all electric power and energy furnished to the Municipality is a special obligation of the Municipality payable solely from revenues to be received from the sale of electric power and energy to electric utility customers during the term of such Electric Power Contract. The special obligation is not a lien, charge, or liability against the Municipality or against its property or funds other than revenues to be received from the sale of electric power and energy to the Municipality’s electric utility customers during such term. Each Municipality agrees to maintain rates for electric power and energy furnished to its electric utility customers that will, after payment of all costs of operation and maintenance, return to such Municipality sufficient revenue to meet its obligations to the Authority under its Electric Power Contract.
The Authority bills each Municipality monthly, with payment due within 15 days after billing. Service may be discontinued for nonpayment beyond 30 days of billing and written notice from the Authority. No party may be considered to be in default in respect of any of its obligations under the Electric Power Contracts if prevented from performing such obligations by uncontrollable forces.
OUTSTANDING OBLIGATIONS
Upon issuance of the Series JJ Bonds, the Authority will have outstanding an aggregate principal amount of $234,505,000 Power Revenue Bonds (including the Series JJ Bonds), under its Bond Resolution.
In addition to its outstanding Power Revenue Bonds, the Authority has approximately $3.2 million in outstanding principal capitalized lease obligations which are being amortized through 2017 for water supply to the Rawhide Energy Station. The Authority treats payments on such obligations as Maintenance and Operation Costs payable out of Revenues of the System
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prior to debt service on the Power Revenue Bonds. See Note 8 to the Authority’s audited financial statements included as Appendix A.
POWER BOND SERVICE REQUIREMENTS
The following table shows the bond service requirements for the Outstanding Power Revenue Bonds and of the Series JJ Bonds. Bond service payment amounts are for the years in which they accrue, not for the years in which they are paid.
Power Bond Debt Service Requirements
Year Ended Dec. 31
Bond Service on Outstanding
Power Revenue Bonds(1)(2)
Series JJ Bonds
Total Power Bond Service
Requirements Principal Interest Refunded Debt
Service(3)(4)
2016 $29,560,540 -- $4,680,300 $3,587,889 $30,652,951 2017 25,346,477 $947,917 6,877,175 5,272,000 27,899,569 2018 17,600,863 1,674,583 6,829,779 5,272,000 20,833,226 2019 15,528,138 6,338,750 6,746,050 10,163,250 18,449,688 2020 15,524,788 9,925,000 6,429,113 13,654,521 18,224,380 2021 15,523,750 10,422,500 5,932,863 13,652,750 18,226,363 2022 15,524,283 10,947,083 5,411,738 13,654,500 18,228,604 2023 15,523,921 11,496,667 4,864,383 13,655,604 18,229,367 2024 15,526,525 12,074,167 4,289,550 13,655,792 18,234,450 2025 15,527,000 12,643,750 3,685,842 13,656,000 18,200,592 2026 15,525,796 13,210,417 3,128,758 13,654,979 18,209,992 2027 15,525,796 13,779,583 2,521,883 13,654,396 18,172,867 2028 15,525,521 14,318,333 1,955,535 13,654,938 18,144,452 2029 7,561,292 7,724,583 1,412,000 5,689,688 11,008,188 2030 1,869,979 2,947,500 1,086,333 -- 5,903,812 2031 1,869,750 3,100,417 938,958 -- 5,909,125 2032 2,722,813 3,258,333 783,938 -- 6,765,084 2033 3,330,958 3,424,167 621,021 -- 7,376,146 2034 3,332,500 3,600,000 449,813 -- 7,382,313 2035 3,331,417 3,785,833 269,813 -- 7,387,063 2036 3,332,083 1,610,417 80,521 -- 5,023,021
2037 1,389,063 -- -- -- 1,389,063
Total $256,503,252 $147,230,000 $68,995,364 $152,878,306 $319,850,312 _________________________ (1) Includes the principal and interest payment due on the Refunded Bonds. (2) Includes principal, interest and mandatory sinking fund payments with respect to the Parity Bonds, excluding
the Series JJ Bonds. (3) Fiscal Year 2016 calculations exclude the impact of $2,196,667 in debt service fund contributions that will be
contributed to the 2016 Escrow Account. (4) Includes accrued principal and interest beginning on the closing date. Interest accrued (but not paid) prior to the
closing date in Fiscal Year 2015 and Fiscal Year 2016 is $2,123,444.
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THE AUTHORITY
Brief History
The Authority supplies electric energy at wholesale to the Municipalities. The Authority’s predecessor was initially established by the Municipalities in January 1966 as a nonprofit corporation and began revenue-producing operations in July 1973. Revenue-producing operations were initially limited to purchasing energy from the U.S. Bureau of Reclamation and reselling it to the Municipalities.
In 1975, legislation was adopted by the Colorado General Assembly allowing any combination of cities and towns that own and operate electric systems to establish by contract a separate governmental entity, known as a “power authority,” to effect the development of electric energy in whole or in part for the benefit of their inhabitants. The Authority was established as a power authority and a separate governmental entity and political subdivision of the State of Colorado on June 17, 1975, through the execution of an “Organic Contract” by the Municipalities. Under the Organic Contract, the Authority became the successor to the nonprofit corporation, entitled to all rights and privileges and subject to all obligations and liabilities of such corporation. In 2010, the Organic Contract’s term was extended through December 31, 2050, and thereafter until terminated by any Municipality following not less than six months written notice to the other Municipalities of its intention to terminate.
Service Area
The area served by the Authority and the Municipalities is situated just east of the Front Range of the Colorado Rocky Mountains and north of Denver. This region was historically devoted to agriculture, ranching, education, and tourism. Over the last three decades, substantial economic development has resulted from an influx of industries attracted by the natural beauty and skilled work force found in the region. Included among the industries new to the region are brewing and beverage, information and computer technology, medical technology, food processing, and warehousing and product distribution.
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Organization, Management and Employees
The Authority is governed by an eight member Board. The Board includes the mayor (or a member of the governing body designated by the mayor) of each Municipality. The other four members are appointed to four-year staggered terms by the governing bodies of each of the Municipalities and are selected for judgment, experience, and expertise which make them particularly qualified to serve as a director of an electric utility. The present members of the Board are shown in the table below.
Director
Board Position
Representing
Title
Current Term Expires
Tom Roiniotis Chairman Longmont GM, Power & Comm. December 2018 Reuben Bergsten Vice Chairman Estes Park Utilities Director December 2019 Cecil Gutierrez Secretary Loveland Mayor November 2017 Steve Adams Director Loveland Director, Water & Power December 2017 Dennis Coombs Director Longmont Mayor November 2017 Gerry Horak Director Fort Collins Mayor Pro Tem December 2016 Bill Pinkham Director Estes Park Mayor April 2016(1) Wade Troxell Director Fort Collins Mayor April 2017
(1) Mr. Pinkham’s term limit as Mayor of Estes Park expires in April 2016. His successor will be elected in an
April 2016 election.
The Authority operates under the direction of a General Manager/CEO who serves at the
pleasure of the Board. The Authority’s senior management has substantial experience, with an average of over 25 years of service in the utility industry, including:
Jacqueline A. Sargent
Jacqueline A. Sargent joined the Authority as General Manager/CEO in 2012. Ms. Sargent brings over 27 years of experience in the energy industry including electric and gas utility operations, power generation, energy marketing, rates and regulatory affairs, strategic planning, acquisitions and mergers, and project development. Prior to joining the Authority, Ms. Sargent was the Senior Vice President of Power Supply and Market Operations for Austin Energy located in Austin, Texas. Ms. Sargent started her career with Black Hills Corporation; a diversified energy company located in Rapid City, SD where Ms. Sargent advanced to the position of Vice President of Power Supply and Renewables Integration in a career spanning over 22 years. Ms. Sargent holds a Bachelor of Science degree in electrical engineering and a Master of Science degree in technology management, both from the South Dakota School of Mines and Technology. Ms. Sargent is also a licensed professional engineer.
Jason E. Frisbie
Jason E. Frisbie joined the Authority in 1982. Mr. Frisbie has served in multiple roles since joining the Authority, including Bulk Material Operator, Site Maintenance Supervisor, Bulk Material Supervisor, Air Quality/Water Supervisor, Plant Maintenance Manager, Division Manager-Power Production (since 1999), and Chief Operating Officer (since 2011). Mr. Frisbie
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holds a B.S. in Industrial Technology, Colorado State University, and an MBA from University of Phoenix.
Peter D. Hoelscher
Peter D. Hoelscher joined the Authority in 2015 as Director of Communications and Marketing and was named Chief External Affairs and Customer Relations Officer in 2016. Mr. Hoelscher has more than 25 years’ experience in corporate communication, public affairs, executive coaching, and organizational development. Immediately prior to joining the Authority, Mr. Hoelscher was Manager of Communications at Southwest Power Pool, a Regional Transmission Organization based in Little Rock, Arkansas. Mr. Hoelscher holds a B.A. in journalism/public information from the University of Arkansas at Little Rock and is a graduate of the Defense Information School.
Karin L. Hollohan
Karin L. Hollohan joined the Authority in 2011 as Human Resources Manager, and became the Corporate Services Director in 2013. In 2016 Ms. Hollohan became the Chief Administrative Services Officer. Prior to joining the Authority, Ms. Hollohan was employed for seventeen years by Colorado Springs Utilities, in addition to positions with Pima County Government and Arizona Electric Power Cooperative. Ms. Hollohan holds a B.A. in Organizational Management, University of Phoenix, along with multiple certifications in Human Resources, public process and labor relations.
Deborah R. Schaneman
Deborah R. Schaneman joined the Authority in 2000 as Staff Accountant, and served as Staff Accountant, Senior Accountant, Power System Operator, Reliability Compliance Officer, Environmental Services and Compliance Director in 2013, before becoming Chief Compliance Officer in 2016. Ms. Schaneman was employed by manufacturing, environmental, and consulting firms prior to joining the Authority. Ms. Schaneman holds a B.S. in Business Administration/Accounting from the University of Northern Colorado and is a NERC Certified Reliability System Operator.
David D. Smalley
David D. Smalley, CPA, joined the Authority in 1993 and served in various roles, including Staff Accountant, Investment and Financial Analysis Officer, Financial Planning and Treasury Manager before being named Chief Financial Officer in 2006 and then Chief Financial and Risk Officer in 2013. Prior to joining the Authority, Mr. Smalley worked for a CPA firm auditing federal and non-profit agencies. Mr. Smalley holds a B.S. in Accounting from San Diego State University, and is a member of the American Institute of Certified Public Accountants.
Joseph B. Wilson
Joseph B. Wilson joined the Authority in 2005 and has served as General Counsel since 2007. Prior to joining the Authority, Mr. Wilson served as Regulatory Counsel for Colorado
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Springs Utilities and as General Counsel for the Colorado Association of Municipal Utilities. Mr. Wilson received a law degree from the University of Denver and has been a member of the Colorado bar since 1985.
Pension Plans
The Authority’s regular employees hired prior to September 1, 2010, are covered by the Platte River Power Authority Defined Benefit Plan (the “Plan”), a single-employer, defined benefit pension plan administered by the Authority. The Plan provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to Plan members and beneficiaries. Benefit provisions of the Plan are determined and authorized by the Board.
The Plan’s funding policy is intended to fund current service costs as they accrue, plus an additional funding charge if the market value of the assets is less than 100% of the actuarial present value of accumulated plan benefits.
The annual required contributions are determined using a frozen-initial-liability method. Actuarial assumptions included:
Annual Required Contributions – Actuarial Assumptions
Valuation as of: 01/01/2014 01/01/2015 01/01/2016
Investment Rate of Return 8.0% 8.0% 7.5%
Projected Salary Increase 2.6% (2014), 4.5% (2015+)
3.0% (2015), 4.5% (2016+)
3.0%
Mortality Table RP-2000 RP-2000 RP-2014, with
modified MP-2014 projection scale
Cost of living assumptions are based on the U.S. Consumer Price Index. Effective
January 1, 2016, for participants in pay status prior to January 1, 1992, a 2.25% cost-of-living adjustment per annum is assumed. For all other participants, a 1.5% per annum cost of living is assumed.
Information prepared by the Authority’s actuaries for financial reporting appears below. This information was prepared for financial reporting purposes only and it may not be suitable for use in any other context, and the Authority’s actuaries accept no responsibility for such use.
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Five-year trend information for the Authority’s contributions to the Plan is as follows:
Authority’s Plan Contributions (Dollars in Thousands)
2011 2012 2013 2014 2015
Actuarially Determined Contribution $4,390 $3,561 $4,544 $3,905 $3,302
Authority Contribution $4,390 $3,561 $4,544 $3,905 $3,302
Deficiency (Excess) $0 $0 $0 $0 $0
Covered Employee Payroll $18,728 $18,766 $18,614 $17,951 $17,305
Contributions as % of Payroll 23% 19% 24% 22% 19%
Source: The Authority’s Defined Benefit Plan Financial Statements and Actuarial Valuation Reports.
The components of the net pension liability of the Authority are shown below:
Net Pension Liability (Dollars in Thousands)
2014 2015 2016(1)
Total Pension Liability $93,937 $98,124 $109,985 Plan Fiduciary Net Position 87,155 91,431 89,477 Net Pension Liability $ 6,782 $ 6,693 $ 20,508 Plan Fiduciary Net Position as a % of the Total Pension Liability 92.8% 93.2% 81.4%
(1) Net pension liability increased in 2016 due to changes in Plan assumptions and Plan return performance.
Source: The Authority’s Defined Benefit Plan Actuarial Valuation Reports.
Employees hired on or after September 1, 2010, are only eligible to participate in a defined contribution money purchase pension plan created in accordance with Internal Revenue Code Section 401(a). Contributions made by the Authority are not taxed until they are withdrawn. Employee contributions are made into a 457 plan with pre-tax dollars, and the earnings on employer and employee contributions are not taxed until withdrawn. For the years ended December 31, 2014 and 2015, contributions to the 401(a) plan by the Authority were $237,000 and $459,000, respectively.
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Insurance Coverage
The Authority maintains a number of different types of insurance including auto liability, commercial crime, directors and officers liability, fiduciary liability, excess liability, medical professional, property, employee health, and workers’ compensation. The aggregate property casualty limits are $150 million. The Authority self-insures the first one million dollars of general liability exposure with an excess liability policy of $35 million. The Authority carries directors and officers liability insurance of $10 million.
Operating Results
The table on the following page is a summary of historical operating results for the Authority for the fiscal years ended December 31, 2011-2015, which was derived from the audited financial statements of the Authority for such fiscal years.
The Authority’s audited financial statements as of and for the years ended December 31, 2014 and December 31, 2015, together with the related report of BKD, LLP independent certified public accountants, are included as Appendix A and should be referred to for a complete presentation of the recent operating results of the Authority. See “INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.”
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Comparative Statements of Revenues, Expenses and Charges in Net Position (Dollars in Thousands)
Audited 2011 2012 2013 2014 2015
Operating Revenue:
Sales to Municipalities(1) $150,474 $159,675 $169,311 $169,773 $175,998
Sales for Resale & Other 30,969 22,960 25,627 30,094 23,435
Total Operating Revenues 181,443 182,635 194,938 199,867 199,433
Operating Expenses:
Purchased Power(2) 27,979 22,262 23,760 26,904 32,548
Fuel(3) 43,025 44,417 52,592 49,975 46,446
Operations & Maintenance(4) 47,976 49,420 52,521 55,337 62,854
Administrative and General 11,330 11,316 12,287 14,395 15,906
Depreciation 30,974 33,503 33,355 28,374 26,987
Total Operating Expenses 161,284 160,918 174,515 174,985 184,741
Operating Income 20,159 21,717 20,423 24,882 14,692
Nonoperating Revenues (Expenses):
Interest Income 946 737 570 641 745
Other Income 351 822 (505) 1,368 900
Interest Expense (13,815) (12,092) (11,155) (10,421) ( 9,438) Allowance for Funds Used During Construction 4,115 381 83 97 - Net Increase (Decrease) in Fair Value of Investments (347) (161) (128) 39
(112)
Total Nonoperating Revenues (Expenses) (8,750) (10,313) (11,135) (8,276) (7,905)
Income before Contributions 11,409 11,404 9,288 16,606 6,787
Contributions of Assets to Municipalities(5) (155) (155) (155) (155) (155)
Change in Net Position 11,254 11,249 9,133 16,451 6,632
Net Position at Beginning of Year(6) 446,821 458,075 469,324 478,457 492,031
Net Position at End of Year $458,075 $469,324 $478,457 $494,908 $498,663
(1) Sales to the Municipalities for 2011, 2012, 2013, 2014, and 2015 include a 6.1%, 6.1%, 5.1%, 2.0%, and 2.5%
rate increase, respectively. (2) Includes Western Area Power Administration (“Western”) allocation, wind purchases, and other purchases for
outage assistance, resale, to meet load and minimum reserve requirements. (3) Fuel costs include coal and transportation costs for Rawhide Unit 1 and Craig Units 1 and 2, and natural gas and
transportation costs for Rawhide combustion turbines A, B, C, D, and F. (4) Includes operations and maintenance expenses for Rawhide Unit 1, Craig Units 1 and 2, Rawhide combustion
turbines A, B, C, D and F, wind generation, the transmission system, and Windy Gap Project (including related debt service) and System operations expenses.
(5) Reflects a return of capital in the amount of $155,000 which is amortized over the life of the fiber optic network, 20 years to 2018.
(6) Net position at beginning of year for 2015 is adjusted due to implementing a change in accounting principle. Source: The Authority’s Audited Financial Statements.
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Management’s Discussion of Operating Results
The Authority’s audited financial statements including management’s discussion and analysis for the calendar years ended December 31, 2014 and 2015 are included in Appendix A.
Operating Revenue Trends
Operating Revenues in 2015 decreased $0.4 million from 2014.
Municipal sales revenue increased $6.2 million over 2014 as the result of a 2.5% increase in wholesale rates and an increase in municipal energy deliveries of 1.5%. Billing demand decreased 0.4% from 2014.
Surplus sales revenue (Sales for Resale & Other) decreased $6.7 million in 2015 compared to 2014 resulting from lower contract and short-term sales. Contract sales decreased $0.9 million as the contract ended mid-year 2015. Short-term sales decreased $5.8 million with a lower average selling price and less energy sold. The surplus market conditions were unfavorable in 2015 as a result of low natural gas prices and mild weather. The Authority increased the Municipal rate by 4.5% for 2016 in part to offset the reduction in surplus sales revenue. Wheeling revenues were relatively flat from 2014.
Operating Expense Trends
Operating Expenses in 2015 increased $9.8 million over 2014.
Purchase Power costs for 2015 increased $5.6 million compared to 2014. Wind purchased power contracts were in place for a full year in 2015 resulting in $4.8 million more in expense. Market purchases were $5.6 million higher for the Rawhide Unit 1 and Craig Unit 2 scheduled maintenance outages and to meet loads during peak periods but were offset by the $5.0 million replacement power outage accrual. Purchased reserves also increased $0.7 million due to reserves required for the additional wind on the Authority’s system. The increase in costs was partially offset by $0.3 million received from Tri-State Generation and Transmission, Inc. (Tri-State) under the forced outage exchange agreement. See “THE AUTHORITY – Regional Coordination.”
Fuel expense decreased $3.5 million from 2014. The majority of the decrease relates to fuel for the Craig Units and Rawhide Unit 1, $2.9 million and $1.5 million, respectively. The Craig Units’ generation was 11.7% less than 2014 as Craig Unit 2 had a six-week scheduled maintenance outage. In addition, Craig Units were held back due to the unfavorable surplus sales market. Rawhide Unit 1’s generation was 10.8% less than 2014 mainly due to a six-week scheduled maintenance outage. Natural gas for the combustion turbines increased $0.9 million to meet load requirements and sales.
Operations and Maintenance expenses were $7.5 million more than 2015. Rawhide Unit 1 had a six-week scheduled maintenance outage creating the majority of the increase over 2014. The outage was one of the most extensive outages performed since 2005. Major activities included a complete inspection of the turbine and generator, extensive inspections of the boiler, burners, and air heater system to address areas of concern identified in the 2014 minor scheduled
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maintenance outage. Craig Unit 2 also performed a six-week scheduled maintenance outage during 2015. This outage was necessary for the construction of the SCR project that is scheduled to go commercial in the spring of 2017. The overall outage expenses were offset by amounts previously accrued. The increase in 2015 is also partially due to an increase of $2.3 million in wheeling expenses, which were required for the transmission of additional wind purchases.
Administration and General expenses increased $1.5 million over 2014 mainly due to increased personnel expenses, demand side management program funding, professional services, and facilities planning and maintenance.
Depreciation expense decreased $1.4 million from 2014 as the original Rawhide Energy Station and Craig Station assets reached the end of their depreciable lives.
Strategic Financial Plan
The Authority’s Strategic Financial Plan (SFP) provides direction to create long-term financial stability. The priorities of the SFP are to generate adequate cash flows, maintain access to low cost capital, provide stable and competitive wholesale rates, and effectively manage risk. The key financial policies and goals contained in the SFP are listed below:
• Generate minimum debt service coverage of 1.5 times • Generate minimum net income equal to $6 million • Target minimum 200 unrestricted days’ cash on hand • Maintain $20 million in the rate stabilization fund • Target debt to capitalization ratio less than 50 percent
The Board reviews the policies, goals and financial projections at least annually. Under
Colorado law, the Board has the exclusive authority to establish electric rates. The power supply agreements with the Municipalities require the Board to review rates at least once each calendar year. The Board reviewed and approved the SFP in December 2015.
Cash Reserves and Liquidity
The Authority maintains cash reserves for a number of reasons, including operating cash requirements, construction cash requirements, dealing with the impacts of wholesale market conditions, gas and electric market volatility, and to allow the Authority the flexibility to increase rates on a scheduled basis. As previously noted, the Authority approved the SFP, which establishes guidelines for maintaining a target of unrestricted reserves sized at a minimum of 200 days’ cash, including at least $20 million in the Rate Stabilization Fund. The Authority has maintained those minimum levels of cash reserves, as specified in the policy, for the past five years.
As of December 31, 2015, the required level of unrestricted cash reserves under the adopted policy was approximately $86 million, representing 200 days’ of operating cash on hand. As of December 31, 2015, the Authority’s unrestricted cash reserves were $88.6 million. In anticipation of future debt financings, the Authority has purposefully reduced the unrestricted reserves during 2015 to its current level, but expects the unrestricted reserves to increase over the next few years. The unrestricted cash reserves include a $20 million portion of those funds
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within the Rate Stabilization account. In addition to unrestricted operating cash reserves, the Authority currently maintains a variety of other restricted cash reserves (excluding bond proceeds) totaling approximately $22 million as of December 31, 2015. Within its restricted reserves, the Authority maintains a Reserve and Contingency fund in the amount of $11.7 million. The Reserve and Contingency fund can be used for limited purposes relating to significant, unanticipated events. Additionally, a portion of the Series JJ proceeds will be used to reimburse previous capital expenditure by the Authority and will further increase the Authority’s unrestricted operating cash balances.
Debt Service Coverage
The following table shows debt service coverage as calculated by the Authority with respect to the years indicated.
Debt Service Coverage (Dollars in Thousands)
Audited 2011 2012 2013 2014 2015
Net Revenues
Operating Revenues $181,443 $182,635 $194,938 $199,867 $199,433 Operating Expenses, Excluding Depreciation 130,310 127,415 141,160 146,611 157,754
Net Operating Revenues 51,133 55,220 53,778 53,256 41,679 Plus Interest and Other Income(1) 1,210 1,404 1,889 2,013 1,672
Net Revenues before Rate Stabilization 52,343 56,624 55,667 55,269 43,351
Rate Stabilization:
Deposits (Withdrawals) 0 0 0 0 0
Total Net Revenues $52,343 $56,624 $55,667 $55,269 $43,351
Bond Service:
Power Revenue Bonds $33,117 $33,294 $32,777 $32,385 $28,637 Allowance for Funds Used During Construction (4,115) (381) (83) (97) -
Net Revenue Bond Service $29,002 $32,913 $32,694 $32,288 $28,637
Coverage:
Total Power Revenue Bonds(2) 1.80 1.72 1.70 1.71 1.51
(1) Excludes unrealized gains and losses on investments. (2) Total Net Revenues divided by Net Revenue Bond Service. Source: The Authority’s Audited Financial Statements.
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Power Requirements
The Authority furnishes virtually all of the power supply requirements of the Municipalities under long-term contracts. Through 2015, the Municipalities’ energy requirements have increased over the last ten years as follows: Estes Park 3%, Fort Collins 6%, Longmont 1%, and Loveland 19%. Overall, Municipal energy requirements of the Municipalities increased 7%.
The System’s coincident peak was set in 2012 at 653 MW. Through 2015, the Municipalities’ peak demand has increased over the last ten years as follows: Estes Park 7%, Fort Collins 0%, Longmont -1%, and Loveland 18%. Overall peak demand for the Municipalities increased 3%.
Power Resources
The Authority’s power resources include generation from coal, natural gas, wind, allocations of federal hydropower from Western, and a forced outage exchange agreement. The Authority meets the projected power and energy requirements of the Municipalities through six resources:
(1) Rawhide Unit 1, which is a coal-fired electric generating facility and has a net max rating of 280 MW. Unit 1 is located at the Rawhide Energy Station in northeastern Larimer County, Colorado, which commenced commercial operation in March 1984 and is wholly owned and operated by the Authority. See “RAWHIDE ENERGY STATION”;
(2) output from the Authority’s 18% undivided ownership interest (154 MW net capability share) in the Yampa Project coal-fired Craig Units 1 and 2 (855 MW combined net capability) near Craig, Colorado, that were placed in commercial operation in 1980 and 1979, respectively, and are owned jointly with four other regional utilities as tenants in common. See “YAMPA PROJECT”;
(3) natural gas combustion turbines (Rawhide Units A, B, C, D and F) located at the Rawhide Energy Station, with a net capability of 388 MW. The combustion turbines are used to meet peak load demands, to provide reserves during outages of the coal-fired units, to make short-term surplus sales, and assure reliability to the Municipalities. See “RAWHIDE ENERGY STATION”;
(4) renewable energy from wind generation power purchase agreements totaling 78 MW: purchases of 6 MW from the Medicine Bow Wind Project located near Medicine Bow, Wyoming under a contract through 2033; purchases of 12 MW of capacity from Silver Sage Windpower Project located west of Cheyenne, Wyoming under a 20 year contract through 2029; and purchases of 60 MW of capacity from Spring Canyon Expansion Wind Energy Center in northeastern Colorado under a contract expiring in 2040. Wind generation output is intermittent and therefore considered to provide a reduced amount of firm capacity. See “RENEWABLE ENERGY SOURCES”;
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(5) power and energy received from Western pursuant to two Contracts for Electric Service and Transmission Service. See “SUPPLY CONTRACTS WITH WESTERN AREA POWER ADMINISTRATION”; and
(6) forced outage exchange agreement with Tri-State whereby in the event either Rawhide Unit 1 or Tri-State’s Craig Unit 3 is out of service the other utility will provide up to 100 megawatts of generation on a short-term basis. See “THE AUTHORITY – Regional Coordination.”
Power Resources and Loads
2015 Summer Capacity
(MW)(1) Winter Capacity
(MW)(1) Annual Energy
(GWh)(1)
Resources: Rawhide Unit 1(2) 280 280 1,933 Craig 1 and 2(2) 154 154 956 Rawhide Peaking Units 388 388 57 Western CRSP(3) 60 85 502 Western LAP(3) 30 32 110 Wind(4) 10 10 273 Other Purchases & Misc.(5) - - 235
Total Resources 922 949 4,066 Loads: Municipal Load(6) 639 487 3,201 Firm Sales(7) 65 65 - Short Term Sales(8) - - 713 Reserves(9) 2 2 - Losses, Station Service & Misc.(10) 8 6 152
Total Loads 714 560 4,066 (1) Summer Season = June through August; Winter Season = September through May; Annual = calendar year. (2) Yampa Project entitlement is 18% of 855 MW in Craig Units 1 and 2 or 154 MW. (3) Based on monthly scheduled quantities contained in the Western contracts for CRSP and LAP power with
maximum allocations available in July and December. (4) The Authority receives energy from three wind generation facilities. Wind generation provides a reduced
amount of reliable capacity from the wind unit rating at time of System peak. (5) Includes all non-capacity energy purchases. (6) Capacity includes interruptible demand, distribution losses and demand side management savings. Values are
the System coincident peak seasonal demand. Annual Energy includes transmission losses and off-line station load at Craig and Rawhide during outages.
(7) In 2015, the Authority provided 65 MW of firm capacity to Municipal Energy Agency of Nebraska. This contract ended after June 2015.
(8) The Authority sells energy in the short term market, Short Term Sales include a contract sale that provides up to 11 MW of unit contingent power to Twin Eagle through the expiration date of the sales contract of December 31, 2016.
(9) The Authority obtains necessary reserves from Xcel Energy or self provides, if available. (10) Losses are the difference between what is generated and imported into the Authority’s boundary area to serve
the Authority’s load, and what is delivered on the low side of the transformer. Annual Energy includes transmission losses and off-line station load at Craig and Rawhide during outages.
Source: Internal reports of the Authority.
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Future Capital Projects
The Authority budgeted approximately $42.0 million in capital expenditures for 2016, which is approximately $4.2 million more than the amount budgeted for 2015. The funds are to be used for general capital improvements to the System. The Authority’s current five year capital plan, 2016 through 2020, projects expenditures totaling approximately $225 million.
The expenditures in the five year capital plan are based on current financial projections and are anticipated to be funded with $90 million in cash generated from operations and $135 million in new debt financings, including $60 million in proceeds from the Series JJ Bonds.
One of the major projects included in the five-year capital plan is the Authority’s participation in the Windy Gap Firming Project. At present, the water necessary to support generation operations at Rawhide is provided from the Windy Gap Project. Because of the project’s junior water rights, Windy Gap water cannot be diverted in years of low runoff. Conversely, during some wet periods storage space in Lake Granby is not available for Windy Gap water. Windy Gap water has not been diverted in ten out of the past thirty years because of either a lack of available storage space in Lake Granby or Windy Gap water rights were not in priority during dry years. The firming project would provide greater physical assurance of water availability for the Rawhide Energy Station. See “RAWHIDE ENERGY STATION – Water Supply.”
The Windy Gap Firming Project will develop a storage reservoir on the east side of the Continental Divide to store up to 90,000 acre-feet of Windy Gap water for future release to support the Authority’s operations. Chimney Hollow Reservoir would change the project’s reliable annual yield from zero acre-feet of water to about 30,000 acre-feet, improving the reliability of water deliveries to participating water providers and, ultimately, the water users they serve. The Authority is one of thirteen participants in the project, which includes municipalities and water districts along the front range of Colorado. The Authority is participating in the funding of the environmental studies, permitting, and design work of the Windy Gap Firming Project, and has preliminarily indicated an interest in 12,000 acre-feet of firming storage capacity in the proposed reservoir, which equates to approximately 13% of the total storage capacity.
On December 19, 2014, the U.S. Bureau of Reclamation (“Reclamation”), Northern Colorado Water Conservancy District and its Municipal Subdistrict signed a new Windy Gap carriage contract, which was an important step forward for the project. Simultaneously, Reclamation issued a Record of Decision for the Windy Gap Firming Project. The design phase will commence in early 2016. The Municipal Subdistrict of the Northern Colorado Water Conservancy District, manager of the Windy Gap Firming Project, currently estimates the cost of the project at approximately $4,635 per acre-foot of storage, for a total estimated cost of $55.8 million to the Authority. Project costs may be financed by the Authority in a future bond issue.
The five-year capital plan also includes cost estimates for environmental upgrades at the Craig station. During 2011 the Colorado Air Quality Control Division formally requested that the Environmental Protection Agency (“EPA”) approve the State Implementation Plan (“SIP”) for Regional Haze. The SIP as approved by the EPA required emission controls on Craig Unit 2
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in the form of Selective Catalytic Reduction (“SCR”) for the removal of Nitrogen Oxides (“NOx”). The SCR is scheduled to be installed by December 31, 2017. The EPA approval of the SIP was challenged in litigation, which resulted in an order to install SCR on Unit 1 by August 31, 2021. Final cost estimates will need to be determined during the 2016/2017 budget cycle.
Rate Regulation
The enabling statute under which the Authority was formed, C.R.S. § 29-1-204, vests legislative authority with the Board, including authority to establish rates for the services provided by the Authority. In 1975, the Public Utilities Commission of the State of Colorado (“PUC”), through Decision No. 87291, affirmed that the rates the Authority charges to the Municipalities are not subject to PUC review.
Similarly, the rates charged by the Municipalities to customers inside municipal boundaries are not subject to PUC review pursuant to Article XXV of the Colorado Constitution.
The PUC has limited regulatory jurisdiction over the rates charged by municipalities to customers outside municipal boundaries. The Municipalities serve relatively few customers outside their boundaries. To date, the rates charged to those customers are the same as those for customers inside the Municipalities’ boundaries.
The rates charged by the Authority to the Municipalities are not subject to review by the Federal Energy Regulatory Commission (“FERC”).
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Wholesale Rate History
The Board may adjust its wholesale electric rates to the Municipalities at any time with a majority vote of the Board. The following table provides the Authority’s basic wholesale rates to the Municipalities since 2005.
Authority’s Wholesale Rates
Effective Date
Demand Rate ($/kW-mo)
Energy Rate (Mills/kWh)
January 2005 11.71 16.50 January 2008 12.05 17.00 January 2009 12.48 17.70 January 2010 12.53 20.20 January 2011 12.42 23.10
Winter 2012
Summer 2012
Winter 2013 Summer 2013
Winter 2014
Summer 2014
Winter 2015 Summer 2015
Winter 2016
Summer 2016
7.53 10.05
7.57 10.84
7.57 10.84
7.57 10.84
7.91 11.33
33.40 35.13
35.58 36.65
36.51 38.06
37.83 39.43
39.54 41.21
Beginning in 2012, the Authority implemented seasonal rate charges with a summer seasonal rate for June through August and a winter seasonal rate for January through May and September through December.
Regional Coordination
Load Control Area
The Authority operates a boundary metered system internal to the Xcel Energy Balancing Authority footprint. In this arrangement, the Authority balances its load and resources on an hourly basis, and pays Xcel Energy for balancing authority ancillary services provided. These services include scheduling and dispatch, regulation, energy imbalance, and operating reserves. The Authority pays for the services through Xcel Energy’s transmission tariff.
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Forced Outage Assistance
The Authority currently has a signed a Forced Outage Assistance Agreement with Tri-State. The agreement provides that the Authority will receive 100 MW per hour of energy in the event of a forced outage of Rawhide Unit 1. The outage assistance is for 24 hours per day, and can last up to seven days if the repair of Rawhide Unit 1 were to last that long. Most forced outages last two to four days. The Authority has an identical 100 MW per hour delivery obligation to Tri-State in the event Tri-State’s Craig Unit 3 experiences a forced outage. The assistance power provided by the parties is netted with a payment obligation triggered only if the balance in an account – after netting – exceeds a threshold of either 73,000 MWh or $12,000,000.
Western Electricity Coordinating Council
The Authority is a full member of the Western Electricity Coordinating Council (“WECC”). WECC is the Regional Entity responsible for coordinating and promoting bulk electric system reliability in the Western Interconnection. In addition, WECC provides an environment for coordinating the operating and planning activities of its members. WECC is one of the eight Regional Entities that have Delegation Agreements with the North American Electric Reliability Corporation (“NERC”) to monitor and enforce reliability standards. The Authority’s staff actively participates in various committees, subcommittees and workgroups of the WECC.
The Authority is a class two member of PEAK reliability. PEAK is the designated reliability entity within WECC providing the wide view of the western interconnect with the overall mission of assuring reliable electric operations. The Authority also subscribes to the PEAK Real Time Contingency analysis tool.
Western Systems Power Pool
The Authority is a member of the Western Systems Power Pool (“WSPP”). The primary function of WSPP is to facilitate the sale of surplus capacity and energy within the Western Interconnection. WSPP developed a standard contract to define business procedures for short-term sales between signatory members of the organization, and this standard agreement governs many of the short-term power purchase and sales agreements entered into by the Authority.
RAWHIDE ENERGY STATION
The Rawhide Energy Station consists of: (i) Rawhide Unit 1, a 280 MW (net capability) coal-fired generating facility, cooling reservoir and coal-handling facilities; (ii) Rawhide Units A, B, C, D and F, five natural gas combustion turbines and related natural gas transmission and processing facilities; and (iii) related electric transmission facilities. The site is large enough to accommodate further generation facilities. The Rawhide site is located about 20 miles north of Fort Collins. Rawhide Unit 1 commenced commercial operation March 31, 1984. Rawhide Units A, B, C and D began commercial operations in 2002 and 2003. Rawhide Unit F began commercial operation in 2008.
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The station is connected to the System by two double-circuit 230 kV transmission lines. The following table presents historical capacity factors and equivalent availability factors for Rawhide Unit 1 for the period 2011-2015:
Rawhide Unit 1 Capacity Factors and Equivalent Availability
Year Capacity factor Equivalent Availability
2011 93.4 98.6
2012* 86.2 90.2
2013 96.1 98.5
2014* 88.4 97.0
2015* 78.8 84.7 *Capacity and availability factors impacted by planned maintenance outages.
Rawhide Units A, B, C and D are General Electric Model EA natural gas combustion
turbine generating units, which have a combined year-round capacity rating of 260 MW. Rawhide Unit F is a General Electric Model 7FA natural gas combustion turbine with a capacity rating of 128 MW.
The Authority operates Rawhide Unit 1 (coal) and Rawhide Units A, B, C, D and F (natural gas) under Federal Title V operating permits administered by the State of Colorado pursuant to 5 CCR 1001-5 Part C. The Authority is in compliance with all Title V operating permit requirements.
Fuel Supply
To secure a fuel source for Rawhide Unit 1, the Authority signed a coal supply agreement with the Antelope Coal Company (now Kennecott Coal Sales LLC or “Kennecott”) in 1978, which has been replaced by several subsequent agreements. In early 2007, the Authority negotiated a long-term contract starting in 2008 with Kennecott that provides supply assurance through 2017. The contract requires Kennecott to deliver up to 1.3 million tons of coal per year (enough to operate Rawhide Unit 1 at a 100% plant factor) from its Antelope Mine located in northeastern Wyoming, and is subject to annual tonnage nominations made by the Authority.
The coal price was fixed during the initial years of the agreement, but for years 2013 through 2017, the coal price defaults to a market index unless the Authority chooses to utilize price lock provisions outlined in the contract. A new coal contract with Kennecott was executed in November 2015, with a term beginning in 2018 and will secure all of Rawhide’s coal needs through 2022. The new contract has similar terms and conditions to the current contract. Both the current and future contracts guarantee 100% of the coal requirements for Rawhide Unit 1.
The Antelope Mine is 242 miles northeast of the Rawhide Energy Station. Deliveries by rail are made routinely to the Rawhide Energy Station by Burlington Northern. The Authority owns 99 rail cars, which are used to transport the coal. A long term transportation agreement with Burlington Northern establishes a base rate per ton, which is subject to annual adjustment in accordance with specified indices and a fuel adjustment charge.
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On January 15, 2016, a moratorium was imposed on new coal leases on federal lands to allow for a comprehensive review of the program. The moratorium is effective immediately, and is anticipated to remain in effect at least through 2016. The moratorium does not apply to coal reserves already under federal lease. The Authority staff reached out to the owner of the Antelope Mine and was assured that this moratorium will not have an impact on coal supplies for either the near or intermediate future.
The Authority obtains natural gas for Units A, B, C, D and F through spot market purchases. The pipeline that supplies these units is owned and operated by the Authority and is connected to a regional hub that provides access to multiple gas suppliers. At this time, natural gas needs are projected to be minimal due to slow load growth, market energy prices, and the addition of renewable energy resources.
The Authority has adopted an Energy Risk Management Policy (“ERMP”), which governs the Authority’s forward hedging program. The primary goal of the forward hedging program is to stabilize fuel and energy costs to enhance the probability of meeting Strategic Financial Plan goals. The ERMP provides for the use of futures contracts, option contracts, over-the counter instruments, insurance contracts, or physical forward contracts for hedging purposes. Also specified in the ERMP are the management of the hedging program, counterparty credit rating requirements, transaction volume and time limits, and the prohibition of speculative transactions.
Water Supply
Rawhide Unit 1 utilizes water for both cooling and process purposes. The source of cooling water for Rawhide Unit 1 is treated wastewater effluent, recycled from the City of Fort Collins. Under a three-party agreement among the Authority, Fort Collins, and a local irrigation company, a minimum of 4,200 acre-feet of treated effluent is made available to the Authority for cooling purposes each year. In exchange for the effluent, 4,200 acre-feet of water is delivered from the Windy Gap Project/Colorado-Big Thompson System to the City of Fort Collins. Rawhide Unit 1 also uses approximately 550 acre-feet of process water each year; this water is delivered directly from the Windy Gap Project and is used for boiler makeup water, site service water, fire water, and drinking water. The Windy Gap Project, completed in 1986, was designed to bring a projected average of 48,000 acre-feet of total project water each year from the Colorado River basin to northeastern Colorado through the existing Colorado-Big Thompson System. The Authority is entitled to an allocation of one-third of the available water from the Windy Gap Project. The water can be pumped from the Colorado River basin when the Windy Gap water decrees are in priority. The Windy Gap flow right decrees are typically in priority beginning in April and ending in July, however due to the seniority of other appropriation decrees on the Colorado River the Windy Gap decrees may not be in priority during some years. When Windy Gap Project water is not available, an alternate water supply must be secured and is subject to the lease market. See discussion at “THE AUTHORITY – Future Capital Projects” regarding Windy Gap Firming Project.
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Solar Development at Rawhide
On July 29 2015, the Authority executed a power purchase agreement with Bison Solar LLC for the development of a 30 MW solar photovoltaic power plant located at the Rawhide Energy Station. PSEG Solar Source, New Jersey is designing and constructing the 180 acre project. The project will connect to newly constructed interconnection facilities owned by the Authority. Commercial operation of the facility is planned for October of 2016. Under such agreement, the Authority is to purchase the output of the project at a fixed price per MWh over the twenty-five year term of the agreement. Based upon estimated generation output of the project, the Authority will spend approximately $3.2 million annually for the solar energy. After ten (10) years, the Authority has the option to purchase the solar facility.
CRAIG UNITS 1 AND 2
Craig Unit 1 is rated at 427 MW and Unit 2 is rated at 428 MW net capacity, of which the Authority’s share is 154 MW (total from both units). Craig Units 1 and 2 are part of the Yampa Project, which also includes a water storage reservoir and related transmission facilities. Located on the Yampa River in northwestern Colorado, the Craig Units 1 and 2 are four miles southwest of the town of Craig, Colorado. The following table presents historical capacity factors and equivalent availability factors for Craig Units 1 and 2 for the period 2011-2015.
Craig Units Capacity Factors and Equivalent Availability
Capacity Factor Equivalent Availability Year Unit 1 Unit 2 Unit 1 Unit 2 2011 67.2* 77.0 81.1* 93.2 2012 79.8 74.5 96.5 93.2 2013 59.9 70.7* 67.8 80.9* 2014 71.9 88.3 78.2 95.9 2015 74.6 67.3* 93.3 83.9*
*Capacity and availability factors impacted by planned maintenance outages. Ownership and Operation of the Yampa Project
Background
The Yampa Project was constructed in the late 1970s. Currently, the Authority, Xcel Energy, Salt River Project Agricultural Improvement and Power District (“Salt River”), Tri-State and PacifiCorp (collectively, the “Yampa Participants”) own the Yampa Project as tenants-in-common. The Yampa Project is operated pursuant to a participation agreement (the “Participation Agreement”) among the Yampa Participants, which names Tri-State as the Yampa Project’s operating agent, responsible for Yampa Project management and administration and the performance of all operation, maintenance, and repair work.
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Participation Agreement
The Participation Agreement provides for the joint ownership of Craig Units 1 and 2 at the Yampa Project, together with related water rights by the Yampa Participants as tenants in common, as shown in the following table.
The Authority Salt River Tri-State PacifiCorp Xcel Energy Craig Units 1 and 2 18.0% 29.0% 24.0% 19.3% 9.7%
Participation shares in and capacity entitlement to transmission facilities included as part of the Yampa Project vary by line and substation. Under the Participation Agreement, each Yampa Participant is entitled to schedule energy from Craig Units 1 and 2 up to the amount of its percentage share of the available operating capacity of the units. The primary contract path for the delivery of Craig output to the Authority is over the Craig/Ault transmission line, which is owned by Western and for which the Authority’s transmission operations has rights for 190 MW of delivery capacity.
Tri-State, as the operating agent, is responsible for the daily management, administration, operation and maintenance of the Yampa Project. The Participation Agreement also provides for three committees made up of Yampa Participant representatives: (1) a Coordinating Committee responsible for liaison among Yampa Participants and overall supervision of the Yampa Participant committees; (2) an Engineering and Operating Committee responsible for providing liaison among Yampa Participants and the operating agent, approving budgets, and reviewing and approving procedures and practices of the operating agent; and (3) an Audit Committee responsible for accounting, audit and financial matters relating to the Yampa Project. Any action or determination of a committee must be by “double majority” (i.e., on a one-utility-one-vote basis, as well as a majority-of-percentage-ownership basis), unless otherwise provided. Unresolved matters are to be submitted to the Coordinating Committee or to arbitration.
All costs of operation and maintenance of the Yampa Project, other than fuel costs, are shared on a pro rata ownership basis, and Yampa Participants are obligated to advance funds to the operating agent as required to make payments of operating and maintenance costs when due. Basic fuel costs are allocated on the basis of the energy generation scheduled by each Yampa Participant from its share of capacity. Each Yampa Participant makes individual commitments to supplement fuel on a “take-or-pay” basis and may be billed separately or through Tri-State (as the participant elects). All capital improvements are included in the annual capital expenditures budget and upon approval of the budget by the Engineering and Operating Committee; each Yampa Participant is obligated for its percentage share of the capital costs contained in the budget. The Engineering and Operating Committee may authorize capital improvements not included in the annual budget up to the sum of $500,000 per single improvement. The Engineering and Operating Committee works closely with the Tri-State staff in developing capital and operation and maintenance budgets that ensures future plant reliability through the life of the project. Current projections estimate the life of the facility to be 60 years from the initial date of commercial operation.
In the event of a default, or alleged default, by any Yampa Participant of any obligation, including the obligation to make payments when due, the non-defaulting Yampa Participants are
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required to remedy such default, either by advancing the necessary funds or commencing to render the necessary performance, or a combination thereof. Each non-defaulting Yampa Participant agrees to contribute to such remedy in the ratio, which its ownership share bears to the total of all ownership shares of the non-defaulting Yampa Participants. The defaulting Yampa Participant, upon notice by a non-defaulting Yampa Participant of a default or alleged default under such Agreement, is required to remedy such default or alleged default, together with interest thereon. If the defaulting Yampa Participant disputes the default, it is required to pay the disputed payment or perform the disputed obligation but may do so under protest, in which event the matter in dispute is to be submitted to arbitration and if so submitted the arbitration decision will be binding upon the parties to the extent permitted by Colorado law. No Yampa Participant will be considered in default of its obligations under the Participation Agreement, except obligations to pay costs and expenses, when a failure of performance is due to certain specified uncontrollable forces. If a default continues for three months or longer, the non-defaulting Yampa Participants may suspend the right of the defaulting Yampa Participant to receive all or any part of its generating capacity.
Each Yampa Participant may mortgage or create a security interest in all or part of such Yampa Participant’s interest in the Yampa Project without the consent of the other Yampa Participants. If any Yampa Participant should desire to transfer its interests or any part thereof, each remaining Yampa Participant has the right of first refusal to purchase such interest. If more than one of the Yampa Participants desires to purchase such interest, unless otherwise agreed, it shall be transferred in the ratio that the participation share of each Yampa Participant desiring to purchase bears to the total participation shares of such Yampa Participants.
The term of the Participation Agreement extends until both the Craig Units 1 and 2 are retired from service. Upon termination of the Participation Agreement, the facilities comprising the Yampa Project are to be disposed of in a manner to be mutually agreed upon by the Yampa Participants.
The Authority is actively seeking to diversify its resource portfolio and limit its reliance on coal-fired resources. Based on the recommendations of staff, in July, 2015 the Board instructed the Authority’s management to develop an exit strategy to divest ownership in Craig Unit 1. While such exit strategy is still in the process of being determined, the Authority does not believe that any likely strategy will have a materially negative effect over the next fifteen years on either Net Revenues or the operation of the System based upon the Authority’s remaining resource portfolio and its rate structure.
Craig Units 1 and 2 Fuel Supply
Trapper Mine
In December 1997, Williams Fork, Inc., and Trapper Colorado (both of which were wholly owned by the Yampa Participants) were merged to form Trapper Mining, Inc., a cooperative corporation. This corporation owns the Trapper Mine, adjacent to Craig Units 1 and 2 of the Yampa Project, which is the principal source of coal for those units. The Authority’s ownership share of Trapper Mining, Inc. is 19.93%.
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The Trapper Mine has historically provided the bulk of the coal requirements through contract and spot coal deliveries for Craig Units 1 and 2 of the Yampa Project.
On October 8, 2006, Trapper Mine experienced a significant landslide that covered a large portion of the active coal reserves. After extensive evaluation it was determined that the majority of these reserves could be mined with a different mining technique. While the cost to mine these reserves has increased compared to the previous plan, the equipment can be utilized to mine other reserves on the property that were previously thought to be cost prohibitive. With the addition of the extended reserves, a new mine plan has been developed that is estimated to increase the life of the mine through the year 2020. As a result, a contract extension was entered into in 2010. The extension provides up to 2.5 million tons per year through 2020.
Colowyo Mine
The Authority and the other Yampa Participants are also parties to agreements for supplemental coal from the Colowyo Coal Company (“Colowyo”). The Colowyo mine is located 20 miles from the Yampa Project and is owned by Tri-State. In 1992, Colowyo and the Yampa Participants amended the coal sales agreement. Under this amended agreement, Colowyo must deliver specified amounts of coal to each Yampa Participant each year from 1992 through 2017. The price of such coal is subject to adjustment based on inflation, the thermal content of delivered coal, certain costs of production and certain market indices of the price of coal in Colorado. The Yampa Participants are currently negotiating with Colowyo and other regional suppliers to provide additional tonnage to meet the future Yampa Project fuel requirements.
Litigation Challenging Mining Permits
In February, 2013, WildEarth Guardians, environmental advocacy group, filed suit in federal court challenging a number of mining permits issued by the Department of the Interior for federal lands in western states. Both the Colowyo and Trapper Mines were involved in the challenge. The Authority was not a named defendant. A ruling was issued in May, 2015, that found in favor of WildEarth Guardians resulting in the need for a new environmental assessment (“EA”) to support the challenged permits. Mining continued at both mines during the EA process. The EA for the Colowyo mine was completed in 2015 and will be completed at the Trapper Mine by the end of April, 2016. An appeal of the district court ruling is pending.
Federal Leasing Moratorium
On January 15, 2016, a moratorium was imposed on new coal leases on federal lands to allow for a comprehensive review of the program. The moratorium is effective immediately, and is anticipated to remain in effect at least through 2016. The moratorium does not apply to coal reserves already under federal lease. Representatives of both the Trapper and Colowyo Mines have assured the Authority that this moratorium will not have an impact on coal supplies for either the near or intermediate future.
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Yampa Project Water Supply
Water for plant operations is supplied from the Yampa River, which is just north of the plant site. The Yampa Project Participants own the necessary water rights as tenants in common. A closed cycle cooling system is used to minimize the amount of water required for plant processes. Additional water is stored in Elkhead Creek Reservoir to ensure adequate supplies in times of emergency or drought.
GREENHOUSE GAS REGULATION
One of the most significant issues facing the electric utility industry in general and the Authority in particular is the regulation of greenhouse gas emissions. The Authority is heavily reliant on base load coal-fired generation resources, of which it has 434 MW of capacity. During 2015, approximately 63% of the energy the Authority provided to the Municipalities was generated by coal units. Other utilities in the region also use large amounts of coal in their resource mixes due to the proximity of coal deposits and the extended history of coal as a generation fuel source in this area.
Over the last several years, the Authority has been actively involved in a strategy to diversify its generation resources through the divestiture of its ownership in Craig Unit 1 and the addition of new wind and solar generation. On August 3, 2015, the EPA finalized both the Clean Power Plan (“CPP”) addressing greenhouse gas emissions from existing electric generating plants and standards for new, modified and reconstructed power plants (each subsequently published in the Federal Register on October 23, 2015). The CPP is designed to reduce CO2 emissions from the power sector by 32% on average nationwide by 2030. The Rawhide and Craig units are regulated by the CPP.
Although subject to legal challenge and currently stayed, if ultimately upheld, the CPP will result in significant changes to the resource portfolio and operations of the Authority. The Authority is actively engaged in the stakeholder process commenced by the Colorado Department of Public Health and Environment (“CDPHE”) that will result in a State Plan for Colorado, and will remain engaged if the stakeholder process continues to move forward in the face of the stay. Although the recent stay from the Supreme Court has added another layer of uncertainty to this process, Authority staff has been modeling the potential rate impacts of CPP compliance under different compliance scenarios. While there are still many unknowns, based on rate analysis conducted in 2016, the average rate increase between 2018 and 2030 is estimated to be approximately 3.5% annually. The high end of rate projection is based on 50% CO2 reduction and allowance purchases for all carbon-based energy. The Authority will continue to analyze and update rate impacts due to CPP compliance as new information is obtained and it is possible that the rate impacts may increase or decrease.
SUPPLY CONTRACTS WITH WESTERN AREA POWER ADMINISTRATION
Background
The Authority’s long term power contracts with Western provide for federal hydroelectric power to be supplied from two sources: (1) the Colorado River Storage Project (“CRSP”), and (2) the Loveland Area Projects (“LAP”). A new LAP contract was signed in
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2015 extending the contract through September 2054. The CRSP contract continues through September 2024 but currently some discussions are on-going to extend this contract by up to an additional 40 years. During 2015, Western resources provided approximately 19% of the annual energy that the Authority supplies to the Municipalities. CRSP accounts for 82% of the Western deliveries; LAP accounts for the balance.
Other changes to hydro system operations could occur during the next several years that may reduce the capacity/energy provided by the federal hydro resource contracts and increase the pricing. For example, Western resources are subject to future reductions to create a resource pool for new customers. These allocation withdrawals occur at established intervals and will continue in the post-2025 agreements with both the CRSP and LAP. The post-2024 LAP contract provides for the possibility of a one-percent (1%) reduction in future LAP power allocations in 2024, 2034 and 2044. These potential periodic allocation adjustments create a resource pool for new customers. Western has provided notice of the possibility of a similar two-percent (2%) reduction in CRSP resources in the post-2024 CRSP agreements. Environmental issues associated with the operation of the Glen Canyon Dam on the Colorado River may lead to restrictions in deliveries from Western. Currently an environmental assessment of water releases is underway, referred to as the Long-Term Experimental and Management Plan (“LTEMP”). The draft LTEMP environmental impact statement was released for comment and a record of decision is expected as early as April, 2016.
RENEWABLE ENERGY SOURCES
Historically, the Authority has serviced the Municipalities with reliable, low-cost base-load coal resources and natural gas-fired peaking resources owned by the Authority. In addition, the Authority has long-term contracts to receive significant hydro-based power. This supply has evolved in recent times to become more diverse with the addition of wind and solar resources.
The Authority purchases wind energy from three sources: First, Medicine Bow Wind Project, a 6 MW wind project owned by Medicine Bow Wind, LLC, located near the town of Medicine Bow, Wyoming, is forecasted to provide approximately 17,000 MWh per year through 2033. Second, the Silver Sage Windpower Project, which is owned and operated by Silver Sage Windpower, a subsidiary of Duke Energy Corporation, is located west of Cheyenne, Wyoming and is forecasted to provide 37,000 MWh per year through 2029. Finally, the Spring Canyon Expansion Wind Energy Center, located in northeastern Colorado, is projected to provide about 240,000 MWh per year and is owned and operated by NRG Energy. This contract runs through 2040. These purchases are made under long-term contracts and all of this renewable energy is provided to the Municipalities. Wind generation output is intermittent and therefore considered to provide a reduced amount of firm capacity.
In order to meet the requirements of the Municipalities, the Authority also purchases Renewable Energy Certificates (“RECs”) from wind generation facilities in the region. Currently, the Authority purchases 50,000 MWh per year of unbundled RECs from EDF Energy under a contract through 2024.
In 2014, the Board authorized the acquisition of solar energy from a facility to be built at the Rawhide Energy Station. The Authority anticipates that by the end of 2016 the Rawhide
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Solar Flats project will be online. This project will be owned and operated by Bison Solar LLC, a subsidiary of PSEG Solar Source, and is anticipated to have a nameplate capacity of 30 MW (ac basis) and provide over 60,000 MWh per year. This contract runs through 2041.
Distributed solar generation is also growing within the Municipalities. The utilities have sponsored community solar projects and other programs that purchase energy from commercial solar projects totaling 3,760 kW with other projects in development. In addition, there are an estimated 600 customer-sited residential and commercial solar projects that are net-metered, with a total capacity estimated at 3,920 kW.
The Authority anticipates continued growth in its renewable energy supply, energy efficiency and demand-side management programs. Current renewable energy supplies to the Municipalities already exceed the Municipalities’ requirements under the Colorado Renewable Energy Standard. Future resource planning efforts are expected to be able to leverage the Authority’s current supply with additional renewable resource options that will strengthen the Authority through diversification of generation type including distributed generation within the system.
TRANSMISSION FACILITIES
The Authority owns and operates approximately 63 circuit miles of 115 kV lines and 195 circuit miles of 230 kV transmission lines. Electric service is provided through 26 substations, which are either wholly owned by the Authority, or jointly owned with the Municipalities. In addition, the Authority participates with neighboring utilities in the ownership of approximately 366 circuit miles of 345 kV transmission lines, nearly 145 circuit miles of 230 kV transmission lines, and related substation facilities.
MUNICIPAL ELECTRIC SYSTEMS SUPPLIED BY THE AUTHORITY
General
The electric distribution systems supplied by the Authority were established by their respective municipalities in the first half of the 20th century: Longmont in 1911, Loveland in 1925, Fort Collins in 1935, and Estes Park in 1945. Each Municipality has the authority to generate, distribute and sell electric power within its municipal limits and in adjacent service areas, if any, which have been certificated to it by the PUC. A 1991 Colorado Supreme Court decision allows municipalities to compete for customers in recently annexed territory, as an alternative to condemnation and mandatory payment to the previous supplier. See also “ADDITIONAL REGULATORY AND CLIMATE FACTORS AFFECTING THE AUTHORITY AND THE ELECTRIC UTILITY INDUSTRY.”
Electric System Properties
Each of the Municipalities independently owns and operates its own electric system and distributes electric power and energy at retail to residential, commercial and industrial customers and for municipal and public use within its service area. The electric system properties are operated and maintained by the electric departments of each Municipality consistent with normal
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utility practices, including financial records maintained substantially in accordance with the Uniform System of Accounts as prescribed by the FERC.
Pursuant to the Electric Power Contracts, the Municipalities have assigned the Authority the responsibility of operating and maintaining their 115 kV facilities, and the planning, construction, ownership, operation, and maintenance of all future transmission facilities needed to supply power and energy to each Municipality, as well as for interconnections with other utilities in the region.
Estes Park
The Estes Park municipal electric system purchases all of its power requirements from the Authority. During the calendar year 2015, Estes Park purchased 129,633,723 kWh, an increase of 0.2% over the same period in 2014. An annual peak demand of 25,799 kW occurred in December 2015.
Fort Collins
The Fort Collins municipal electric system purchases essentially all of its energy requirements from the Authority and is its largest municipal customer. During calendar year 2015, Fort Collins purchased 1,516,550,194 kWh, an increase of 2.8% over the same period in 2014. An annual peak demand of 292,093 kW occurred in July 2015.
Longmont
The Longmont municipal system purchases essentially all of its power requirements from the Authority. During calendar year 2015, Longmont purchased 801,097,572 kWh, an increase of 0.7% over the same period in 2014. An annual peak demand of 170,209 kW occurred in August 2015. Longmont owns and operates a 500 kW hydroelectric plant.
Loveland
The City of Loveland municipal electric system purchases nearly all of its electric power requirements from the Authority. In 2015, total purchases from the Authority were 753,919,656 kWh, a decrease of 0.1% compared to the same period in 2014. An annual peak demand of 160,904 kW occurred in July 2015. Loveland’s electric utility owned and operated a 900 kW hydroelectric plant, which was destroyed during the September, 2013 floods. As discussed previously, a solar facility with a capacity of approximately 3.0 MW will be constructed to replace the destroyed hydropower unit. The capacity of the solar facility is sufficient to both replace the lost hydropower capacity and expand municipal owned generation to an amount of one percent of peak load allowed as an exception to the all-requirements obligation in the Power Supply Agreement. The parties intend to enter a power purchase agreement whereby the Authority purchases the output of the remaining 0.5 MW.
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Rates and Comparative Power Costs
Rates charged by the Municipalities are generally lower than those of neighboring utilities. The Municipalities’ average residential rates are about 11% to 27% lower than the averaged rates of neighboring utilities, while large commercial rates are 15% to 26% lower.
Comparison of Estimated Monthly Electric Charges(1)
As of January 2016
(1) Exclusive of state and local sales taxes. The Municipalities are exempt from sales taxes in the State of
Colorado. KWh amounts represent average usage per customer in service category. (2) There are no customers classified as industrial in Estes Park. (3) Fort Collins, Loveland, and Xcel Energy have seasonal electric retail rates. Rates depicted for the “summer”
are taken from the July 2015 CAMU survey summary. Source: Colorado Association of Municipal Utilities.
Residential (700 kWh)
Small Commercial (2,000 kWh,
10 kW)
Large Commercial (45,000 kWh,
130 kW)
Industrial (1,900,000 kWh,
3,000 kW) Municipalities Estes Park $77 $206 $3,511 $ -- (2) Fort Collins (summer)(3) 71 199 4,040 126,701 Fort Collins (winter)(3) 66 173 3,586 117,567 Longmont 63 172 3,542 116,360 Loveland (summer)(3) 70 202 4,003 135,530 Loveland (winter)(3) 65 198 3,718 128,064 Neighboring Utilities Xcel Energy (summer)(3) 82 237 4,353 127,699 Xcel Energy (winter)(3) 73 183 3,993 110,439 Poudre Valley R.E.A. 89 216 5,260 153,782 United Power 92 246 4,810 157,911 Avg. Neighboring Utility 86 224 4,748 143,587
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Municipal Electric Systems Supplied by the Authority – Classification of Customers Supplied by the Municipalities
The Municipalities serve residential and commercial, as well as, several large industrial customers. The combined retail energy sales to the principal customer classes of the Municipalities for 2015 are shown in the following table.
Customer Classification Year ended December 31, 2015
Customer Classification MWh % of Energy
Sold Residential 1,093,146 35.3% Small Commercial 405,178 13.1% Large Commercial 929,491 30.0% Industrial(1) 657,584 21.2% Other 12,573 0.4% Total 3,097,972 100.0%
(1) For purposes of this report, commercial and industrial customers are defined by each Municipality’s own
standards. Source: Unaudited data compiled from reports of the Municipalities.
Largest Customers Served by the Municipalities
The ten largest customers served by the Municipalities during 2015 represented approximately 20% of total aggregate annual energy sales of all Municipalities for the 12 calendar months of 2015. No single customer accounted for more than 4.2% of total aggregate annual energy sales of all Municipalities for the 12 calendar months of 2014.
Historical Operating Results of the Electric Systems of the Municipalities
The table on the following page shows historical operating results for the electric systems of the Municipalities, as compiled by the Authority.
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Historical Operating Results of the Electric Systems of the Municipalities(1)
(For the Years Ended December 31)
(Dollars in Thousands) 2010 2011 2012 2013 2014 Estes Park
Operating Revenues $12,164,539 $12,633,404 $12,992,626 $13,985,164 $15,024,773
Operating Expenses 10,096,837 10,636,059 11,176,881 11,830,312 12,161,450
Operating Income 2,067,702 1,997,345 1,815,745 2,154,852 2,863,323
Non-Operating Revenues (Expenses) (143,842) (173,849) (293,370) 88,060 97,258
Net Position Before Contributions & Transfers 1,923,860 1,823,496 1,522,375 2,242,912 2,960,581
Capital Contributions & Transfers (1,007,750) (1,039,550) (588,062) (1,309,962) (1,332,853)
Change in Net Position $916,110 $783,946 $934,313 $932,950 $1,627,728
Total Net Position $17,816,928 $18,600,874 $19,535,187 $20,362,972(2) $21,990,700
Light and Power Revenue Bonds Outstanding $5,505,000 $5,270,000 $5,025,000 $4,770,000 $4,510,000
Fort Collins
Operating Revenues $93,165,407 $99,656,563 $108,634,479 $114,757,689 $114,114,704
Operating Expenses 98,739,277 103,606,031 108,403,008 117,009,318 115,537,653
Operating Income (5,573,870) (3,949,468) 231,471 (2,251,629) (1,422,949)
Non-Operating Revenues (Expenses) 5,037,657 7,369,378 7,462,585 1,067,971 1,871,198
Net Position Before Contributions & Transfers (536,213) 3,419,910 7,694,056 (1,183,658) 448,249
Capital Contributions & Transfers 1,756,039 1,936,753 3,414,650 12,911,011 9,590,547
Change in Net Position $1,219,826 $5,356,663 $11,108,706 $11,727,353 $10,038,796
Ending Net Position $161,387,298 $166,743,961 $177,687,691(2) $189,415,044 $199,453,840
Light and Power Revenue Bonds Outstanding $16,085,000 $14,670,000 $13,215,000 $11,725,000 $10,205,000
Longmont
Operating Revenues $49,440,782 $53,838,044 $57,182,388 $60,870,571 $63,773,864
Operating Expenses 51,545,941 55,941,603 57,660,556 60,244,781 62,507,619
Operating Income (2,105,159) (2,103,559) (478,168) 625,790 1,266,245
Non-Operating Revenues (Expenses) 1,446,724 3,614,417 573,740 134,072 517,170
Net Position Before Contributions & Transfers (658,435) 1,510,858 95,572 759,862 1,783,415
Capital Contributions & Transfers 447,840 546,788 441,220 2,435,792 1,646,578
Change in Net Position ($210,595) $2,057,646 $536,792 $3,195,654 $3,429,993
Ending Net Position $171,156,383 $173,214,029 $53,210,787(2) $56,406,441 $59,836,434
Electric Revenue Bonds Outstanding - - - - -
Loveland
Operating Revenues $43,883,091 $47,374,718 $50,842,437 $53,050,161 $53,950,905
Operating Expenses 42,895,642 45,197,485 47,438,659 53,828,288 56,745,573
Operating Income 987,449 2,177,233 3,403,778 (778,127) (2,794,668)
Non-Operating Revenues (Expenses) 223,439 721,177 284,638 593,738 33,894
Net Position Before Contributions & Transfers 1,210,888 2,898,410 3,688,416 (184,389) (2,760,774)
Capital Contributions & Transfers 2,412,097 2,525,485 739,261 5,139,853 5,837,109
Change in Net Position $3,622,985 $5,423,895 $4,427,677 $4,955,464 $3,076,335
Total Net Position $117,209,545 $122,633,440 $127,061,117 $132,016,581 $135,092,916
Power Revenue Bonds Outstanding - - - - -
(1) Format changed in 2012 to reflect statement of revenues, expenses and changes in fund net position of the
Municipalities. (2) Restated beginning net assets: Fort Collins in 2012 to $166,578,985, Longmont in 2012 to $52,673,995, Estes
Park in 2013 to $19,430,022.
Source: Audited CAFRs of the Municipalities.
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ADDITIONAL REGULATORY AND CLIMATE FACTORS AFFECTING THE AUTHORITY AND THE ELECTRIC UTILITY INDUSTRY
General
The operations and financial performance of the electric utility industry is affected by a number of factors. These factors include (a) sudden swings in the price of energy purchased or sold in the wholesale market, (b) changing environmental, safety, licensing, regulatory and legislative requirements, (c) conservation, increased energy efficiency and demand-side management measures that affect the timing and use of electric energy, (d) changes in national energy policy, (e) competition resulting from mergers, acquisitions, and “strategic alliances” of competitors, (f) changes to market structure and existing service territory protections, (g) increased customer-owned distributed generation, (h) new federal reliability mandates, (i) new federal physical and cyber security mandates, and (j) uncertain availability of capital.
The factors described in more detail below may apply more specifically to the Authority.
Expanded FERC Jurisdiction
Through a number of rulemakings beginning in the mid-1990s, the FERC has mandated open access transmission service, functional unbundling of reliability and merchant services, standardized transmission planning and created broad reliability and security (physical and cyber) mandates implemented through the NERC and regional reliability councils.
Some of these FERC initiatives apply to political subdivisions of state government; entities that previously were beyond the jurisdiction of FERC. For example, the electric reliability standards adopted by FERC apply to both the Authority and the Municipalities. FERC regulations require each owner, operator, and user of the bulk power system to register with NERC and to comply with approved reliability standards. NERC has delegated responsibility to eight regional reliability entities for identifying the organizations to be registered in the NERC Compliance Registry. The Authority is registered as a Transmission Operator, Planning Coordinator, Transmission Planner, Transmission Service Provider, Transmission Owner, Resource Planner, Generation Owner, and Generation Operator with the NERC in the WECC region. Registration for these functions subjects the Authority to monitoring and enforcement of compliance with all the applicable requirements for the FERC approved reliability standards. The Authority is legally responsible for any sanctions, penalties, and mitigation plans that are assessed due to noncompliance. Compliance audits are conducted by WECC on-site every three years. No findings of noncompliance were made during the 2015 WECC audit and the Authority has no outstanding self-reports that will result in a financial penalty.
On January 21, 2016, FERC issued an order approving revised Critical Infrastructure Protection (CIP) Standards modified by NERC in response to FERC’s earlier directives. The approved CIP Standards provided for new cyber security controls and require that a greater number of utility systems be protected. Due to the complexity of the changes, NERC has been facilitating utility compliance planning through its comprehensive CIP Transition Program. The Authority is on track and expects to be fully transitioned and compliant with the new versions of
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the CIP Standards which become enforceable on April 1, 2016 and July 1, 2016. The Authority is required to submit a Self-Certification stating its compliance status with the WECC.
Unlike the reliability and physical/cyber security regulations, the FERC-initiated market reforms do not directly apply to the Authority. Nevertheless, the Authority has chosen to implement some of the FERC policy initiatives required of jurisdictional utilities. For example, the Authority has provided open access transmission service since 1998 and conducts transmission planning in conformance with FERC Order No. 890 and is an active participant in the Colorado Consolidated Planning Group. The Authority is also actively engaged in a number of regional market initiatives. For example, the Authority along with Public Service Company of Colorado and Black Hills Energy developed an intra-hour economic dispatch agreement, referred to as the Joint Dispatch Agreement (JDA). The JDA was approved by FERC during February 2016 and is planned for implementation in 2016. The Authority is also active in the planning efforts to create a regional transmission tariff. To date the Authority has chosen not to functionally unbundle its merchant and reliability functions, however functional unbundling may be a logical outgrowth of participation in these regional efforts.
The Authority believes it is well positioned in case the jurisdiction of FERC expands further, but such expansion would create new costs and regulatory exposures.
Renewable Portfolio Standards
Colorado adopted a renewable portfolio standard (“RPS”) in 2004 (later replaced with a renewable energy standard (“RES”)). The RES does not apply directly to the Authority, but does apply to municipal electric utilities serving 40,000 or more customers. Presently, Fort Collins is the only Municipality subject to the RES. Longmont and Loveland may meet the customer threshold in the next several years. The RES requires that ten percent (10%) of the retail energy sold by covered municipal utilities be from qualified renewable sources, as that term is defined in the RES, by 2020 (with some variation for municipal utilities that meet the 40,000 customer threshold subsequent to 2004). The Authority added 60 MW of wind capacity during 2014 – 2015 and a new 30 MW solar resource is expected to come on line in 2016. At present, the Authority has sufficient resources to meet the RES obligations of the Municipalities.
It is possible that the Colorado RES may be modified – it has been subject to multiple legislative changes and rulemakings since 2004 – or that a federal RES may be adopted. If this occurs the Authority will have the advantages of a history of wind generation operation and proximity to good wind resources, however the Authority may face operational issues associated with integration of large amounts of intermittent resources. This may require an increased utilization of natural gas for generation, which will have a cost impact. Increased transmission and ancillary services support may also be needed for new wind or other qualified renewable sources, adding to the cost. Transmission costs associated with regional wind resources is a motivating factor for the Authority’s participation in the above-described regional transmission tariff effort.
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Environmental Regulations
Federal, state and local environmental standards and regulations applicable to electric generation and transmission impacts continue to evolve. Efforts to comply with future environmental standards may be expensive and could result in reduced operating levels of coal-fired generating plants. The Authority has adopted a proactive Environmental Policy and operates its facilities pursuant to an Environmental Management System used to manage compliance requirements in order to ensure optimum environmental performance. As technology improves and opportunities arise, the Authority evaluates and implements voluntary improvements in its operations that balance environmental benefits and other factors including cost.
The Authority works with internal and external stakeholders in the rulemaking process with an intent to ensure that regulations are cost-effective and subject to effective and efficient implementation.
On April 17, 2015 the EPA published new regulations affecting coal combustion residuals (“CCR”). The regulations became effective October 17, 2015. In response to the CCR Rule, the CDPHE is planning to update their solid waste regulations and incorporate the new EPA requirements. The Authority is participating in the related rulemaking stakeholder process to communicate the need for achievable standards with clear expectations. In preparation for these new requirements, the Authority has expanded the existing groundwater monitoring plan, inspections, and is posting compliance information to its website. If results from expanded groundwater monitoring are unfavorable, upgrades may be required.
On June 29, 2015 the EPA published a final rule formalizing the definition of Waters of the United States (“WOTUS”). The purpose of this rule is to clarify the scope of waters protected under the Clean Water Act in light of several Supreme Court decisions that have affected its interpretation over time. The result of this rule appears to be a significant expansion of permitting requirements for activities that may not have required permits previously. No effects are currently expected by the Authority to routine operations although there is a potential for expanded regulatory requirements for future construction activities located in the vicinity of any newly protected water features. Cooling reservoirs constructed on dry land, like Hamilton Reservoir at Rawhide, are specifically exempted from the WOTUS definition. The Authority’s staff will continue to monitor this new regulation as it is implemented.
On October 1, 2015, the EPA announced revisions for ground-level ozone. The standard changed from 75 parts per billion (ppb) to 70 ppb. The change has no immediate effect on the Authority’s current operations, but may have future implications including more difficult and complicated permit requirements including the need for offsets for increased emissions. If the new standard cannot be achieved through existing regulations and planned reductions, additional state rulemakings is possible, requiring reduction mandates or new controls for existing units potentially including Rawhide Unit 1.
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Effects of Drought and Low-Water Conditions
Though moisture levels have recovered in the region over the last few years, a lack of precipitation in Colorado and the West could affect the Authority in three principal ways. First, it could affect the availability of water for cooling operations at Rawhide Unit 1. As discussed under “THE AUTHORITY – Future Capital Projects,” participation in the Windy Gap Firming Project could minimize this risk. Second, drought conditions during the 2000 through 2005 time period affected the production of hydroelectric facilities of the federal government, and increased the price of Western’s power and energy, forcing the Authority to either utilize its own generation resources or to make purchases in the wholesale power market. Recently the drought conditions have eased, but production has not yet improved. The Authority anticipates it will take several more years of favorable water conditions before hydroelectric production improves. Finally, sustained drought conditions could limit economic and population growth in Colorado, including the Municipalities’ service territories, limiting load growth.
LITIGATION
There is no litigation pending in any court (either state or federal) or, to the knowledge of counsel to the Authority, threatened against the Authority in any way questioning or affecting the validity of the Power Revenue Bonds. From time to time, the Authority is involved in litigating condemnation, personnel claims, contract claims and other miscellaneous actions arising in the ordinary course of its electric utility operations; however, the Authority does not anticipate that the outcomes of any such pending actions will, in the aggregate, materially adversely affect the results of its operations.
CONTINUING DISCLOSURE
The Authority will execute a continuing disclosure certificate (the “Continuing Disclosure Certificate”) at the time of the closing for the Series JJ Bonds. The Continuing Disclosure Certificate will be executed for the benefit of the Beneficial Owners of the Series JJ Bonds. The Continuing Disclosure Certificate will provide that so long as the Series JJ Bonds remain outstanding, the Authority will annually provide certain financial information and operating data relating to the Authority, the System and the Municipalities (the “Annual Report”) and will provide notice of certain material events to the Municipal Securities Rulemaking Board (“MSRB”) through its Electronic Municipal Market Access System (the “EMMA System”) or any successor method designated by the MSRB, in compliance with the Continuing Disclosure Certificate. The form of the Disclosure Certificate is attached to this Official Statement as Appendix E.
The failure by the Authority to observe or perform any of its obligations under the Continuing Disclosure Certificate will not be deemed an “event of default” under the Bond Resolution. If the Authority fails to comply with any provision of the Continuing Disclosure Certificate, any Bondholder or Beneficial Owner of the Outstanding Series JJ Bonds may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the Authority to comply with its obligations under the Continuing Disclosure Certificate. However, the Continuing Disclosure Certificate provides that no Bondholder or Beneficial Owner will have the right to challenge the content or the adequacy
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of the information contained in any Annual Report or any Material Event Notice by judicial proceedings unless the Bondholders or Beneficial Owners representing at least 25 percent in aggregate principal amount of all Series JJ Bonds join in such proceedings.
During the past five years, the Authority has generally complied with its obligations under previous continuing disclosure agreements pursuant to Rule 15c2-12 promulgated under the Securities Exchange Act of 1934. However, due to delays in availability of the Municipalities’ audited financial reports, the Authority submitted the audited financial reports for fiscal year 2014 after the June 30 deadline set forth in such agreements.
LEGAL MATTERS
Legal matters incidental to the authorization and issuance of the Series JJ Bonds are subject to the approving opinion of Sherman & Howard L.L.C., Denver, Colorado, as Bond Counsel. Sherman & Howard L.L.C., Denver, Colorado, also has been engaged to advise the Authority as special counsel in connection with the preparation of this Official Statement and the sale of the Series JJ Bonds to the purchasers.
TAX MATTERS
Federal Tax Matters
In the opinion of Bond Counsel, assuming continuous compliance with certain covenants described below, interest on the Series JJ Bonds is excluded from gross income under federal income tax laws pursuant to Section 103 Tax Code, and interest on the Series JJ Bonds is excluded from alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code except that such interest is required to be included in calculating the “adjusted current earnings” adjustment applicable to corporations for purposes of computing the alternative minimum taxable income of corporations as described below.
The Tax Code imposes several requirements which must be met with respect to the Series JJ Bonds in order for the interest thereon to be excluded from gross income and alternative minimum taxable income (except to the extent of the aforementioned adjustments applicable to corporations). Certain of these requirements must be met on a continuous basis throughout the term of the Series JJ Bonds. These requirements include: (a) limitations as to the use of proceeds of the Series JJ Bonds; (b) limitations on the extent to which proceeds of the Series JJ Bonds may be invested in higher yielding investments; and (c) a provision, subject to certain limited exceptions, that requires all investment earnings on the proceeds of the Series JJ Bonds above the yield on the Series JJ Bonds to be paid to the United States Treasury. The Authority will covenant and represent in the Bond Resolution that it will take all steps to comply with the requirements of the Tax Code to the extent necessary to maintain the exclusion of interest on the Series JJ Bonds from gross income and alternative minimum taxable income (except to the extent of the aforementioned adjustment applicable to corporations) under such federal income tax laws. Bond Counsel’s opinion as to the exclusion of interest on the Series JJ Bonds from gross income and alternative minimum taxable income (to the extent described above) is rendered in reliance on these covenants, and assumes continuous compliance therewith. The failure or inability of the Authority to comply with these requirements could cause the interest on
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the Series JJ Bonds to be included in gross income, alternative minimum taxable income or both from the date of issuance. Bond Counsel’s opinion also is rendered in reliance upon certifications of the Authority and other certifications furnished to Bond Counsel. Bond Counsel has not undertaken to verify such certifications by independent investigation.
Section 55 of the Tax Code contains a 20% alternative minimum tax on the alternative minimum taxable income of corporations. Under the Tax Code, 75% of the excess of a corporation’s “adjusted current earnings” over the corporation’s alternative minimum taxable income (determined without regard to this adjustment and the alternative minimum tax net operating loss deduction) is included in the corporation’s alternative minimum taxable income for purposes of the alternative minimum tax applicable to the corporation. “Adjusted current earnings” includes interest on the Series JJ Bonds.
With respect to the Series JJ Bonds that are sold in the initial offering at a discount (the “2016 Discount Bonds”), the difference between the stated redemption price of the 2016 Discount Bonds at maturity and the initial offering price of the 2016 Discount Bonds to the public (as defined in Section 1273 of the Tax Code) will be treated as “original issue discount” for federal income tax purposes and will be used in determining the basis of the 2016 Discount Bonds for the purpose of determining the amount of gain or loss on such 2016 Discount Bonds on the sale or other disposition thereof. At the election of the owner of a 2016 Bond, exercised in the manner provided in the Tax Code and regulations and other official pronouncements thereunder, such de minimis original issue discount may be treated as regular “original issue discount,” a portion of which is included as interest income in the gross income of the 2016 Discount Bond owner annually as provide in the Tax Code. Owners who desire to make such an election or who make such an election, and owners who do not purchase the 2016 Discount Bonds in the initial offering or who purchase the Series JJ Bonds in the initial offering at a price different from the initial offering price of the 2016 Discount Bonds to the public, should consult their own tax advisors about the tax consequences thereof.
The Tax Code contains numerous provisions which may affect an investor’s decision to purchase the Series JJ Bonds. Owners of the Series JJ Bonds should be aware that the ownership of tax-exempt obligations by particular persons and entities, including, without limitation, financial institutions, insurance companies, recipients of Social Security or Railroad Retirement benefits, taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, foreign corporations doing business in the United States and certain “subchapter S” corporations may result in adverse federal tax consequences. Certain of the Series JJ Bonds may be sold at a premium, representing a difference between the original offering price of those Series JJ Bonds and the principal amount thereof payable at maturity. Under certain circumstances, an initial owner of such bonds (if any) may realize a taxable gain upon their disposition, even though such bonds are sold or redeemed for an amount equal to the owner’s acquisition cost. Bond Counsel’s opinion relates only to the exclusion of interest on the Series JJ Bonds from gross income and alternative minimum taxable income as described above and will state that no opinion is expressed regarding other federal tax consequences arising from the receipt or accrual of interest on or ownership of the Series JJ Bonds. Owners of the Series JJ Bonds should consult their own tax advisors as to the applicability of these consequences.
47
The opinions expressed by Bond Counsel are based upon existing law as of the delivery date of the Series JJ Bonds. No opinion is expressed as of any subsequent date nor is any opinion expressed with respect to any pending or proposed legislation. Amendments to the federal tax laws may be pending now or could be proposed in the future which, if enacted into law, could adversely affect the value of the Series JJ Bonds, the exclusion of interest on the Series JJ Bonds from gross income or alternative minimum taxable income or both from the date of issuance of the Series JJ Bonds or any other date, or which could result in other adverse federal tax consequences. Bond owners are advised to consult with their own tax advisors with respect to such matters.
The Internal Revenue Service (the “Service”) has an ongoing program of auditing tax-exempt obligations to determine whether, in the view of the Service, interest on such tax-exempt obligations is includable in the gross income of the owners thereof for federal income tax purposes. No assurances can be given as to whether or not the Service will commence an audit of the Series JJ Bonds. If an audit is commenced, the market value of the Series JJ Bonds may be adversely affected. Under current audit procedures, the Service will treat the Authority as the taxpayer and the Owners may have no right to participate in such procedures. The Authority has covenanted in the Bond Ordinances not to take any action that would cause the interest on the Series JJ Bonds to lose its exclusion from gross income for federal income tax purposes or lose its exclusion from alternative minimum taxable income except to the extent described above for the owners thereof for federal income tax purposes. None of the Authority, the initial purchaser of the Bonds, Financial Advisor or Bond Counsel is responsible for paying or reimbursing any Registered Owner or Beneficial Owner for any audit or litigation costs relating to the Series JJ Bonds.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The financial statements of the Authority as of and for the years ended December 31, 2015 and December 31, 2014, included in Appendix A to this Official Statement, have been audited by BKD, LLP, independent certified public accountants, as stated in their report appearing herein.
FINANCIAL ADVISOR
Public Financial Management Inc. (the “Financial Advisor”) has assisted the Authority with various matters relating to the planning, structuring and delivery of the Series JJ Bonds. The Financial Advisor is a financial advisory firm and is not engaged in the business of underwriting or distributing municipal securities or other public securities. The Financial Advisor assumes no responsibility for the accuracy, completeness or fairness of this Official Statement. The Financial Advisor will receive compensation from the Authority contingent upon the sale and delivery of the Series JJ Bonds.
RATINGS
The Series JJ Bonds have been assigned the ratings specified on the cover page hereof by Standard and Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. (“S&P”) and Fitch Ratings, Inc. (“Fitch”), respectively. Such ratings reflect only the views of the
48
respective rating agencies, and do not constitute a recommendation to buy, sell or hold securities. Explanations of the significance of such ratings may be obtained from the rating agencies. The ratings are subject to revision or withdrawal at any time by the respective rating agency and there is no assurance that the ratings will continue for any period of time or that they will not be revised or withdrawn. The Board has undertaken no responsibility either to bring to the attention of the holders of the Series JJ Bonds any proposed revision or withdrawal of the ratings of the Series JJ Bonds or to oppose any such proposed revision or withdrawal. Any downward revision or withdrawal of such ratings could have an adverse effect on the market price of the Series JJ Bonds.
UNDERWRITING
The Authority sold the Series JJ Bonds at public sale to J.P. Morgan Securities LLC at a price of $178,911,510.37 (equal to the par amount of the Series JJ Bonds, plus original issue premium of $31,939,990.75, and less underwriter’s discount of $258,480.38).
OFFICIAL STATEMENT CERTIFICATION
The undersigned official hereby confirms and certifies that the execution and delivery of this Official Statement and its use in connection with the offering and sale of the Series JJ Bonds has been duly authorized by the City Council.
MISCELLANEOUS
The references in this Official Statement (including the appendices hereto) to the Bond Resolution, statutes, resolutions, contracts, and other documents are brief outlines or partial excerpts of certain provisions of the documents. These outlines or excerpts do not purport to be complete, and reference is made to the documents, copies of which are available at the offices of the Authority, for full and complete statements of their provisions. All estimates used in this Official Statement are intended only as estimates and not as representations.
The execution and delivery of this Official Statement has been duly authorized by the Board.
PLATTE RIVER POWER AUTHORITY By /s/ Jacqueline A. Sargent
General Manager/ CEO By /s/ Tom Roiniotis
Chairman, Board of Directors
APPENDIX A
PLATTE RIVER POWER AUTHORITY FINANCIAL STATEMENTS
[THIS PAGE INTENTIONALLY LEFT BLANK]
Platte River Power Authority
Independent Auditor's Report and Financial Statements
December 31, 2015 and 2014
A-1
Platte River Power Authority
Financial Statements
Years Ended December 31, 2015 and 2014
Contents
Independent Auditor's Report ..........................................................................................................1
Management's Discussion and Analysis (Unaudited) ....................................................................3
Financial Statements
Statements of Net Position .............................................................................................................16
Statements of Revenues, Expenses and Changes in Net Position .................................................18
Statements of Cash Flows ..............................................................................................................19
Notes to Financial Statements ........................................................................................................21
Required Supplementary Information (Unaudited) .......................................................................50
Other Information (Unaudited) ......................................................................................................53
A-2
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Independent Auditor's Report
Board of DirectorsPlatte River Power AuthorityFort Collins, Colorado
We have audited the accompanying basic financial statements of Platte River Power Authority(Platte River), which are comprised of a statement of net position as of December 31, 2015 and 2014, andthe related statements of revenues, expenses and changes in net position and of cash flows for the yearsthen ended, and the related notes to the basic financial statements, as listed in the table of contents.
Management's Responsibilify for fhe Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements inaccordance with accounting principles generally accepted in the United States of America; this includesthe design, implementation and maintenance of internal control relevant to the preparation and fairpresentation of financial statements that are free from material misstatement, whether due to fraud orerror,
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. Weconducted our audits in accordance with auditing standards generally accepted in the United States ofAmerica. Those standards require that we plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe financial statements. The procedures selected depend on the auditor's judgment, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud or error.In making those risk assessments, the auditor considers internal control relevant to the entity's preparationand fair presentation of the financial statements in order to design audit procedures that are appropriate inthe circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity'sinternal control. Accordingly, we express no such opinion. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of significant accounting estimatesmade by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.
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A-3
Board of DirectorsPlatte River Power Authority
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, therespective financial position of Platte River as of December 31, 2015 and 2014, and the changes in itsfinancial position and its cash flows for the years then ended in accordance with accounting principlesgenerally accepted in the United States of America.
Emphasis of Matter
As discussed in Note 3 to the financial statements, in 2015, Platte River adopted new accountingguidance, Governmental Accounting Standards Board Statement No. 68, Accounting and FinancialReportingfor Pensions — an amendment of GASB Statement No. 27. Our opinion is not modified withrespect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management'sdiscussion and analysis and pension information listed in the table of contents be presented to supplementthe basic financial statements. Such information, although not part of the basic financial statements, isrequired by the Governmental Accounting Standards Board, who considers it to be an essential part offinancial reporting for placing the basic financial statements in an appropriate operational, economic orhistorical context. We have applied certain limited procedures to the required supplementary informationin accordance with auditing standards generally accepted in the United States of America, whichconsisted of inquiries of management about the methods of preparing the information and comparing theinformation for consistency with managements responses to our inquiries, the basic financial statementsand other knowledge we obtained during our audits of the basic financial statements. We do not expressan opinion or provide any assurance on the information because the limited procedures do not provide uswith sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audits were conducted for the purpose of forming an opinion on the basic financial statements as awhole. The Other Information (Budgetary Comparison Schedule) listed in the table of contents ispresented for purposes of additional analysis and is not a required part of the basic financial statements.Such information has not been subjected to the auditing procedures applied in the audits of the basicfinancial statements, and accordingly, we do not express an opinion or provide any assurance on it.
Denver, ColoradoMarch 16, 2016
A-4
Platte River Power Authority
Management's Discussion and Analysis(Unaudited)
December 31, 2015 and 2014
This discussion and analysis provides an overview of the financial performance of Platte RiverPower Authority (Platte River) for the fiscal years ended December 31, 2015 and December 31,2014. The information presented should be read in conjunction with the basic financialstatements and accompanying notes to the financial statements.
Platte River is a wholesale electricity generation and transmission provider that delivers safe,reliable, environmentally responsible and competitively priced energy and services to its fourowner municipalities, Estes Park, Fort Collins, Longmont and Loveland.
Platte River's power resources include generation from coal, natural gas, wind, allocations offederal hydropower from Western Area Power Administration (Western), and a forced outageexchange agreement.
n Coal-fired generation includes Rawhide Unit 1 (280 megawatts), located 25 miles northof Fort Collins at the Rawhide Energy Station, and 18% ownership in Craig Units 1 and 2(154 megawatts combined), located in northwest Colorado.
n Gas-fired combustion turbines located at Rawhide Energy Station include five simplecycle combustion turbines, four GE 7EAs (65 megawatts each), and a GE 7FA (128megawatts). The combustion turbines are utilized to meet peak load demands, to providereserves during outages of the coal-fired units, and to make short-term surplus sales.
n Wind generation includes 78 megawatts provided under long-term purchase poweragreements. The agreements are for deliveries from Spring Canyon Expansion WindEnergy Center (60 megawatts) in Colorado, Silver Sage Windpower Project (12megawatts) and Medicine Bow Wind Project (6 megawatts) both in Wyoming.
n Hydropower is received under two long-term contracts with Western. The first contract,which provides the largest allocation of power, is from Colorado River Storage Projectand the second contract is from Loveland Area Projects.
n Platte River has a forced outage exchange agreement with Tri-State Generation andTransmission, Inc. (Tri-State) whereby in the event either Rawhide Unit 1 or Tri-State'sCraig Unit 3 is out of service the other utility will provide up to 100 megawatts ofgeneration on a short-term basis.
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Platte River Power Authority
Management's Discussion and Analysis (continued)(Unaudited)
December 31, 2015 and 2014
Platte River operates as a utility enterprise and follows the Uniform System of Accounts
prescribed by the Federal Energy Regulatory Commission (FERC). Platte River has implemented
all applicable Governmental Accounting Standards Board (GASB) pronouncements. The
accompanying financial statements are prepared on the accrual basis of accounting in conformity
with accounting principles generally accepted in the United States of America.
Financial Summary
Platte River reported income before contributions of $6.8 million in 2015; approximately $9.8
million lower than 2014. The year ended with an increase in operating expenses of $9.8 million,
a decrease in operating revenues of $0.4 million offset by a decrease in nonoperating expenses,
net, of $0.4 million. In 2015, Platte River implemented GASB Statement No. 68, Accounting and
Financial Reporting for Pensions, an amendment of GASB Statement No. 27 and GASB
Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement
Date—an amendment of GASB Statement No. 68. In implementing GASB 68 and 71, Platte
River recognized the effect of a change in accounting principle in the amount of a $2.9 million
decrease to net position as of January 1, 2015.
Condensed Financial Statements
The following condensed statements of net position and condensed statements of revenues,
expenses and changes in net position summarize Platte River's financial position and changes in
financial position for 2015, 2014, and 2013.
4A-6
Platte River Power Authority
Management's Discussion and Analysis (continued)(Unaudited)
December 31, 2015 and 2014
Condensed Financial Statements (continued)
Condensed Statements of Net Position
December 31,2015 2014 ..__2013
(In thousands)AssetsElectric utility plantSpecial funds and investmentsCurrent and other assetsTotal assets
Deferred outflows of resourcesLiabilitiesNoncurrent liabilitiesCurrent liabilitiesTotal liabilities
Deferred inflows of resourcesNet positionNet investment in capital assetsRestrictedUnrestrictedTotal net position
$ 574,453 $ 571,240 $ 582,88479,967 95,085 87,33683,949 91,763 89,179
738,369 758,088 759,3996.174 1,908 3,072
203,163 217,236 243,50441,098 39,072 37,631
244,261 256,308 281,1351,619 8,780 2,879
366,412 339,567 329,29421,421 24,559 24,750110,830 130,782 124,413
$ 498,663 $ 494,908 $ 478,457
Net Position
Total net position at December 31, 2015 was $498.7 million, an increase of $3.8 million over
2014. As a result of implementing GASB 68 in 2015, Platte River recognized the effect of a
change in accounting principle in the amount of a $2.9 million decrease to net position as of
January 1, 2015. Total net position at December 31, 2014 was $494.9 million, an increase of
$16.4 million over 2013.
A-7
Platte River Power Authority
Management's Discussion and Analysis (continued)(Unaudited)
December 31, 2015 and 2014
Net Position (continued)
Electric utility plant increased $3.2 million during 2015, primarily the result of a $24.3 million
increase in construction work in progress and a $5.3 million increase in plant and equipment in
service. Accumulated depreciation also increased $26.4 million, which partially offset the overall
increase. In 2014, electric utility plant decreased $11.6 million during 2014, primarily the result
of a $23.8 million increase in accumulated depreciation. Also, plant and equipment in service
increased $16.5 million and construction work in progress decreased $4.3 million. Additional
details about electric utility plant can be found in Note 4 to the financial statements.
Special funds and invest~rtents during 2015 decreased $15.1 million from 2014. The decrease
relates to a decrease in both restricted and dedicated funds. The decrease is due to expenses
associated with the Rawhide Unit 1 and the Craig Unit 2 scheduled maintenance outages and
continued capital investments. In 2014 the funds increased $7.8 million over 2013. The increase
was the result of an increase in dedicated funds partially offset by a decrease in restricted funds
due to capital expenditures from the Series II project fund.
Current and other assets decreased $7.8 million during 2015 primarily due to a decrease in cash
and cash equivalents. Cash decreased as a result of increased expenses related to the scheduled
maintenance outages along with continued capital investments. Regulatory assets and other long-
term assets also decreased. These decreases were partially offset by increases in fuel inventory,
other temporary investments, accounts receivable, material and supplies and prepayments. Fuel
inventory was the largest increase. The inventory balance at the Rawhide Energy Station was
lower than normal at the beginning of year but inventory has built over the course of the year and
is back to normal levels. Craig Station inventory levels have been higher than normal as a result
of lower generation due to scheduled and unplanned maintenance outages and surplus sales
market conditions. In 2014, current and other assets increased $2.6 million as the result of an
increase in cash and cash equivalents, accounts receivable, and materials and supplies inventory.
These increases were partially offset by decreases in fuel inventory, other temporary
investments, regulatory assets, and prepayments.
Deferred outflows of resources increased $4.3 million in 2015 due to implementing GASB 68.
This amount includes 2015 pension contributions and differences in actual and expected earnings
of the pension investments that will be amortized over future periods. Partially offsetting this
increase is the amortization of the deferred losses on debt refunding. In 2014, a decrease of $1.2
million occurred due to the amortization of the deferred losses on debt refunding.
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Platte River Power Authority
Management's Discussion and Analysis (continued)(Unaudited)
December 31, 2015 and 2014
Net Position (continued)
Noncurrent liabilities decreased $14.1 million in 2015 and $26.3 million in 2014. For both
years, the decrease was mainly the result of the principal retirements of debt and a decrease in
the capitalized lease obligation. In 2015, the net pension liability of $6.7 million was recorded as
required by GASB 68. Additional details about long-term debt can be found in Note 7 and the
defined benefit pension liability in Note 11 to the financial statements.
Current liabilities reflect a $2.0 million increase in 2015 due to increases in accounts payable
and the current portion of the capitalized lease obligation partially offset by decreases in thecurrent portion of long-term debt, accrued interest, and other liabilities. Accounts payable
increased due to accrued but unpaid expenses for the Rawhide Unit 1 scheduled maintenanceoutage that occurred at the end of the year. In 2014 current liabilities increased $1.4 million due
to increases in the current portion of long-term debt, the current portion of the capitalized leaseobligation, accounts payable, and accrued liabilities partially offset by decreases in accruedinterest.
Deferred inflows of resources decreased $7.2 million in 2015 due to reversing the accrual for the
2015 scheduled maintenance outage expenses for Rawhide Unit 1. Additional pension deferrals
to reflect differences in the pension plan's expected and actual experience and assumptionchanges were recorded as a result of implementing GASB 68, which will be amortized over
future periods. Deferred inflows of resources increased $5.9 million in 2014 due to reinstating
the accrual for the 2015 scheduled maintenance outage expenses for Rawhide Unit 1. The
accrual of the maintenance outage liability was suspended in 2013 to mitigate the rate increase to
the municipalities.
7A-9
Platte River Power Authority
Management's Discussion and Analysis (continued)(Unaudited)
December 31, 2015 and 2014
Condensed Statements of Revenues, Expenses and Changes in Net Position
Years Ended December 31,2015 2014 2013
(In thousands)
Operating revenuesOperating expensesOperating incomeNonoperating expenses, netIncome before contributionsContributions of assets tomunicipalities
Change in net positionBeginning net positionCumulative effect of change inaccounting principle
Ending net position
Changes in Net Position
$ 199,433 $ 199,867 $ 194,938184,741 174, 9 8 5 174, 51514,692 24,882 20,423(7,905) (8,276) (11,135)6,787 16,606 9,288
(155) (155) (155)6,632 16,451 9,133
494,908 478,457 469,324
(2,877) — —$ 498,663 $ 494,908 $ 478,457
Net position increased $3.8 million in 2015; $12.6 million lower than 2014. An increase inoperating expenses and a decrease in operating revenues more than offset a decrease innonoperating expenses, net. The $2.9 million adjustment for a change in accounting principlewith the implementation of GASB 68 also impacted the change in net position. The change in netposition was an increase of $16.4 million in 2014, $7.3 million higher than 2013. An increase inoperating revenues and a decrease in nonoperating expenses, net, more than offset an increase inoperating expenses.
Operating revenues in 2015 decreased X0.4 million from 2014.
n Municipal sales revenue increased $6.2 million over 2014 as the result of a 2.5%increase
in wholesale rates and an increase in municipal energy deliveries of 1.5%. Billingdemand decreased 0.4°/a from 2014.
8A-10
Platte River Power Authority
Management's Discussion and Analysis (continued)(Unaudited)
December 31, 2015 and 2014
Changes in Net Position (continued)
n Surplus sales revenue (sales for resale and other) decreased $6.7 million in 2015
compared to 2014 resulting from lower contract and short-term sales. Contract sales
decreased $0.9 million as the contract ended mid-year 2015. Short-term sales decreased
$5.8 million with a lower average selling price and less energy sold. The surplus marketconditions were unfavorable this past year as a result of low natural gas prices and mildweather. Wheeling revenues were relatively flat from 2014.
Operating revenues in 2014 increased $4.9 million over 2013.
n Municipal sales revenue increased slightly by $0.5 million in 2014 over 2013 primarily as
the result of a 2.0% increase in wholesale rates. Municipal energy deliveries decreased
1.3%and billing demand decreased 1.9% from 2013.
n Surplus sales revenue (sales for resale and other) increased $4.4 million in 2014
compared to 2013 resulting from higher contract and short-term sales. Contract sales
increased $0.6 million representing a full year of the contract in 2014. Short-term sales
increased $3.4 million with a higher average selling price and more energy sold.
Wheeling revenues increased $0.4 million due to a rate increase in Platte River's
transmission tariff and an increase in customer loads.
Operating expenses in 2015 increased $9.8 million over 2014.
n Purchased power costs for 2015 increased $5.6 million compared to 2014. Wind
purchased power contracts were in place for a full year in 2015 resulting in $4.8 million
more in expense. Market purchases were $5.6 million higher for the Rawhide Unit 1 and
Craig Unit 2 scheduled maintenance outages and to meet loads during peak periods but
were offset by the $5.0 million replacement power outage accrual. Purchased reserves
also increased $0.7 million due to reserves required for the additional wind on Platte
River's system. The increase in costs was partially offset by $0.3 million received from
Tri-State under the forced outage exchange agreement and $0.2 million in other expenses.
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Platte River Power Authority
Management's Discussion and Analysis (continued)(Unaudited)
December 31, 2015 and 2014
Changes in Net Position (continued)
Fuel expense decreased $3.5 million from 2014. The majority of the decrease relates to
fuel for the Craig units and Rawhide Unit 1, $2.9 million and $1.5 million, respectively.
The Craig units' generation was 11.7% less than 2014 as Craig Unit 2 had a six-week
scheduled maintenance outage. In addition, Craig units were held back due to the
unfavorable surplus sales market. Rawhide Unit 1's generation was 10.8% less than 2014
mainly due to a six-week scheduled maintenance outage. Natural gas for the combustion
turbines increased $0.9 million to meet load requirements and sales.
Operations and maintenance expenses were $7.5 million more than 2014. Rawhide Unit 1
had asix-week scheduled maintenance outage creating the majority of the increase over
2014. The outage was one of the most extensive outages performed since 2005. Major
activities included a complete inspection of the turbine and generator, extensive
inspections of the boiler, burners, and air heater system to address areas of concern
identified in the 2014 minor outage. Craig Unit 2 also performed asix-week scheduledmaintenance outage. This outage was necessary for the construction of the SCR project
that is scheduled to go commercial in the spring of 2017. The overall outage expenses
were offset by amounts previously accrued. The increase in 2015 is also partially due to
an increase of $2.3 million in wheeling expenses, which were required for the
transmission of the additional wind purchases.
Administrative and general expenses increased $1.5 million over 2014 mainly due to
increased personnel expenses, demand side management program funding, professional
services, and facilities planning and maintenance.
n Depreciation expense decreased $1.4 million from 2014 as the original Rawhide Energy
Station and Craig Station assets reached the end of their depreciable lives.
Operating expenses in 2014 increased $0.5 million over 2013.
Purchased power costs for 2014 increased $3.1 million compared to 2013 for several
reasons. Reinstating the replacement power accrual for the 2015 scheduled maintenance
outage, which was suspended in 2013, added $1.9 million to 2014. Further, new wind
purchased power contracts were in place resulting in $1.6 million more in expense.
Replacement power costs were also $0.6 million higher for the Rawhide Unit 1 and Craig
Unit 1 outages and to meet loads during peak periods. The increase in costs was partially
offset by $0.7 million received from Tri-State under the forced outage exchange
agreement and $0.3 million less in purchased reserves.
10A-12
Platte River Power Authority
Management's Discussion and Analysis (continued)(Unaudited)
December 31, 2015 and 2014
Changes in Net Position (continued)
Fuel expense decreased $2.6 million from 2013. The majority of the decrease relates tofuel for Rawhide Unit 1 and natural gas for the combustion turbines, $3.8 million and$1.5 million, respectively. Rawhide Unit 1's generation was 7.9% less than 2013 as unitgeneration was held back to build coal inventory levels. The combustion turbines wereutilized less in 2014. These decreases were partially offset by increased fuel costs forhigher generation of the Craig Units as 2013 had two major outages (one scheduledmaintenance outage of Craig Unit 2 and one forced outage of Craig Unit 1). In lateOctober of 2014, Craig Unit 1 suffered problems with main turbine lubrication and wasremoved from service for repair. The unit was returned to service early January 2015.
Operations and maintenance expenses were $2.8 million more than 2013. In 2013, theoutage accrual was suspended for rate making purposes whereas $4.0 million wasrecognized as expense in 2014. Approximately $2.6 million less in expenses wererecognized for the Yampa Project as a result of the Craig units outages mentioned above.There was also $0.8 million more in wheeling expenses related to additional windpurchases and maintenance outages on transmission lines. During 2014, a scheduled 10-day maintenance outage for Rawhide Unit 1 was completed for $1.4 million. Variousinspections were performed in order to find and correct potential problems that wouldcause unplanned outages from occurring. These inspections also identified work that willneed to be accomplished during the 2015 major outage.
n Administrative and general expenses increased $2.1 million over 2013 mainly due toexpenses related to creating a strategic planning department, as well as an increase indemand side management program funding. There were also increases in personnelexpenses.
Depreciation expense decreased $5.0 million from 2013 as many of the originalRawhide Energy Station and Craig Station assets reached the end of their depreciablelives.
Nonoperating expenses, net, decreased $0.4 million in 2015 compared to 2014. The maincontributor is lower interest expense of $1.0 million. Other income decreased $0.5 million asthere was aone-time water lease of surplus effluent in 2014. Higher interest income of $0.1
million and a decrease in fair value of investments of $0.2 million were also recorded in 2015.
11A-13
Platte River Power Authority
Management's Discussion and Analysis (continued)(Unaudited)
December 31, 2015 and 2014
Changes in Net Position (continued)
Nonoperating expenses, net, decreased $2.9 million in 2014 compared to 2013. In 2013 a $1.5million loss was recognized on the sale of the Medicine Bow Wind Project equipment. The losswas the net result of the proceeds received from the sale and the write-off of the net book valueof the assets. In 2014, other income included $0.4 million in revenue from a water lease ofsurplus effluent. Lower interest expense of $0.7 million, higher interest income of $0.1 million,and an increase in fair value of investments of $0.2 million were also recorded in 2014.
12A-14
Platte River Power Authority
Statements of Net Position
December 31, 2015 and 2014
Operating Revenues and Expenses(In millions)
Operating Revenues$200
$180
$160 ~
$140
$120 i n 2015$100 ,
~ 2014$80 `
$60 ~ ~ 2013
$40
$20
Municipal Sales Surplus Sales and Other
Operating Expenses
$70
$60
$50
$40 2015
$30 _ 2014
2013
Purchased Fuel Operations & Administrative DepreciationPower Maintenance &General
13A-15
Platte River Power Authority
Statements of Net Position
December 31, 2015 and 2014
Debt Ratings
Platte River's ratings on its Power Revenue fonds were as follows as of December 31, 2015 and2014:
Bond Issue S&P Fitch
Power Revenue BondsSeries GG Aa2 AA AASeries HH Aa2 AA AASeries II Aa2 AA AA
Budgetary Highlights
Platte River's Board of Directors approved the 2015 Annual Budget with total revenues of$211.7 million, operating expenses of $165.8 million, debt service expenditures of $28.6 millionand capital additions of $37.8 million. The following budgetary highlights are presented on anon-GAAP budgetary basis.
Total operating revenues of $199.4 million ended the year $10.8 million below budget.Municipal sales of $176.0 million were $0.6 million below budget due to below-budget variancein billing demand. Energy deliveries were right at budget. Surplus sales and wheeling totaled$23.4 million and were $10.2 million below budget mainly due to the surplus sales market. Lownatural gas prices and mild weather impacted the average sales price, which, excludingcombustion turbine sales, was 25% below-budget. As a result of the market, approximately 19%less energy was sold as the Craig units were held back. Wheeling revenues were also $0.2million below budget from a decrease in customer loads and the 2015 rate decrease in PlatteRiver's transmission tariff.
Operating expenses totaled $157.3 million and were $8.5 million below budget. Fuel expensewas the largest variance, $4.7 million below budget, primarily due to lower generation from theCraig units as a result of surplus sales market conditions and the extension of the scheduledoutage of Craig Unit 2. Lower coal prices than budget were experienced for both Rawhide Unit 1and the Craig units. Natural gas expense partially offsets the below-budget coal expense. Naturalgas expense was above budget due to operating the combustion turbines to meet loadrequirements and surplus sales.
14A-16
Platte River Power Authority
Statements of Net Position
December 31, 2015 and 2014
Budgetary Highlights (continued)
Production expenses ended the year $1.8 million below budget with lower-than-budgetedoperations and maintenance costs for the Craig units, Rawhide Unit 1, the combustion turbines,
and power operations. As mentioned previously, Rawhide Unit 1 and Craig Unit 2 bothunderwent scheduled maintenance outages that were completed successfully.
Purchased power expenses were $0.8 million below budget. Energy was provided to Tri-Stateunder the forced outage assistance agreement creating a credit to purchased power. Unfavorablewind conditions resulted in lower generation from purchased power contracts for wind energy.There were also fewer reserve purchases partially due to lower loads and holding reserves on theCraig units. These below-budget expenses were partially offset by above-budget supplemental
purchases, which were required mainly due to extensions of the scheduled maintenance outages.Market purchases were also made to take advantage of the favorable pricing.
Transmission expenses were below budget $0.6 million from lower personnel expenses, joint
facility expenses, and general maintenance expenses. Administrative and general expenses were$0.6 million below budget mainly due to personnel expenses from vacant positions, planningexpenses, professional services, and computer expenses.
Debt service expenditures totaled $28.6 million, which were at budget. Capital additions of $33.1million in 2015 were $4.7 million below budget. This variance was due to construction schedule
changes, contract delays, staff shortages, canceled projects, and favorable pricing. Productionadditions, transmission additions and general additions were below budget $2.1 million, $1.5
million and $1.1 million, respectively. The majority of the variance will be carried over to the
2016 Annual Budget in order to complete the projects. (See Budgetary Comparison Schedule on
page 53.)
15A-17
Platte River Power Authority
Statements of Net Position
December 31, 2015 and 2014
December 31,2015 2014
(In thousands)
Assets
Electric utility plant, at original cost (Notes 3 and 4):Land and land rights $ 14,515 $ 14,515
Plant and equipment in service 1,275,987 1,270,710
Less: accumulated depreciation (759,951) (733,588)
Plant in service, net 530,551 551,637
Construction work in progess 43,902 19,603
Total electric utility plant 574,453 571,240
Special funds and investments (Note S):Restricted funds and investments 22,201 25,425
Dedicated funds and investments 57,766 69,660
Total special funds and investments 79,967 95,085
Current assets:Cash and cash equivalents (Notes 3 and 5) 10,126 24,234
Other temporary investments (Note S) 20,711 20,238
Accounts receivable-municipalities 14,503 14,230
Accounts receivable-other 7,501 7,260
Fuel inventory, at last-in, first-out cost 13,590 7,612
Materials and supplies inventory, at average cost 12,362 12,278
Prepayments and other assets 1,364 1,346
Total current assets 80,157 87,198
Noncurrent assets:Regulatory assets (Note 9) 2,437 3,054
Long-term prepayments 1,355 1,511
Total noncurrent assets 3,792 4,565
Total assets 738,369 758,088
Deferred Outflows of Resources
Deferred loss on debt refundings (Note 7)Pension deferrals (Note 11)
1,033 1,9085,141 -
Total deferred outflows of resources
See accompanying notes.
6,174 1,908
LGA-18
Platte River Power Authority
December 31, 2015 and 2014
December 31,2015 2014
(In thousands)
Liabilities
Noncurrent liabilities (Notes 3 and 6):Long-term debt, net (Note 7)Capitalized lease obligation (Note 8)Net pension liability (Note 11)Other liabilities and creditsTotal noncurrent liabilities
Current liabilities:Current maturities of long-term debt (Notes 6 and 8)Current portion of capitalized lease obligation (Note 6)Accounts payableAccrued interestAccrued liabilities and otherTotal current liabilities
Total liabilities
Deferred Inflows of Resources
Regulatory credits (Note 9)Pension deferrals (Note 11)
Total deferred inflows of resources
Net Position
Net investment in capital assets (Note 10)RestrictedUnrestricted
Total net position
See accompanying notes.
Statements of Net Position (continued)
$ 183,559 $ 201,5723,229 6,2926,693 -9,682 9,372
203,163 217,236
16,615 21,9803,063 2,77519,297 11,686
780 8671,343 1,764
41,098 39,072
244,261 256,308
1,006 8,780613 -
1,619 8,780
366,412 339,56721,421 24,559
110,830 130,782
$ 498,663 $ 494,908
17A-19
Platte River Power Authority
Statements of Revenues, Expenses and Changes in Net Position
December 31, 2015 and 2014
Years Ended December 3l,2015 2014
(In thousands)
Operating revenues (Note 3):Sales to municipalitiesSales for resale and otherTotal operating revenues
Operating expenses:Purchased powerFuelOperations and maintenanceAdministrative and generalDepreciationTotal operating expenses
Operating income
Nonoperating revenues (expenses) (Notes 5 and 7)Interest incomeOther income (expense)Interest expenseAllowance for funds used during constructionNet increase (decrease) in fair value of investments (Note S)Total nonoperating revenues (expenses)
Income before contributions
Contributions ofassets to municipalities (Note 14)
Change in net positionNet position at beginning ofyear, as previously reportedAdjustment for change in accounting principle (Note 3)Net position at beginning ofyear, adjustedNet position at end ofyear
See accompanying notes.
$ 175,998 $ 169,77323,435 30,094
199,433 199, 867
32,548 26,90446,446 49,97562,854 55,33715,906 14,39526,987 28,374184,741 174,98514,692 24,882
745 641900 1,368
(9,438) (10,421)— 97
(112) 39(7,905) (8,276)
6,787 16,606
(155) (155)
6,632 16,451494,908 478,457(2,877) —
492,031 —$ 498,663 $ 494,908
18A-20
Platte River Power Authority
Statements of Cash Flows
December 31, 2015 and 2014
Years Ended December 31,2015 2014
(In thousands)
Cash flows from operating activitiesReceipts from customersPayments for operating goods and servicesPayments for employee servicesNet cash provided by operating activities
Cash flows from capital and related financing activitiesAdditions to electric utility plantPayments from accounts payable incurred for electric utility
$ 199,008 $ 198,451(136,175) (109,152)(32,472) (29,932)30,361 59,367
(27,747) (15,829)
plant additions (962) (942)
Principal payments on long-term debt (21,980) (21,060)
Interest payments on long-term debt (9,874) (10,866)
Net cash used in capital and related financing activities (60,563) (48,697)
Cash flows from investing activitiesPurchases and sales oftemporary and restricted investments, net 14,505 (6,459)
Interest and other income, including realized gains and losses 1,589 1,931
Net cash provided by (used in) investing activities 16,094 (4,528)
(Decrease) increase in cash and cash equivalents (14,108) 6,142
Balance at beginning ofyear in cash and cash equivalents 24,234 18,092
Balance at end ofyear in cash and cash equivalents $ 10,126 $ 24,234
See accompanying notes.
19A-21
Platte River Power Authority
Statements of Cash Flows (continued)
December 31, 2015 and 2014
Years Ended December 31,2015 2014
(In thousands)
Reconciliation of operating income to net cash
provided by operating activitiesOperating incomeAdjustments to reconcile operating income to net cash provided
by operating activities:DepreciationChanges in assets and liabilities which provided (used) cash:
Accounts receivableFuel and materials and supplies inventoriesPrepayments and other assetsDeferred outflows of resourcesAccounts payableNet pension liabilityOther liabilitiesDeferred inflows of resources
Net cash provided by operating activities
$ 14,692 $ 24,882
26,987 28,374
(514) (1,349)(6,062) 2,843
582 601(1,236) —5,965 419(89) —
(2,803) (2,304)(7,161) 5,901
$ 30,361 $ 59,367
Noncash capital and related financing activitiesAdditions of electric utility plant through incurrence of accounts
payable $ 2,608 $ 962
Amortization ofbond premiums and deferred loss on refundings (522) (577)
Amortization of regulatory asset (debt issuance costs) 173 210
See accompanying notes.
20A-22
Platte River Power Authority
Notes to Financial Statements
December 31, 2015 and 2014
1. Organization
Platte River Power Authority (Platte River) was organized in accordance with Colorado law as aseparate governmental entity by the four municipalities of Estes Park, Fort Collins, Longmont,and Loveland. Platte River contracted to supply the wholesale electric power and energyrequirements of each of these municipalities (except for energy produced by each municipality'shydro facilities in service at September 1974). These contracts currently extend throughDecember 31, 2050. Each of the four member municipalities has a residual interest in PlatteRiver's assets and liabilities upon dissolution, which is proportional to the total revenue receivedfrom each municipality since Platte River was organized, less any contributions previouslydistributed. Based upon electric revenues billed from inception through December 31, 2015,these residual interests are approximately as follows:
ResidualInterest
City of Fort Collins 48%City of Longmont 26%City of Loveland 21Town of Estes Park 5%
100%
Under Colorado law and the municipal contracts, Platte River's Board of Directors has theexclusive authority to establish the electric rates to be charged to the member municipalities.Platte River must follow specified statutory procedures, including public notice and holding ahearing to receive public comments, before adopting an annual budget and implementing anychanges in the electric rates.
21A-23
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
2. Operations
Rawhide Energy Station
The Rawhide Energy Station consists of Rawhide Unit 1, a 280-megawatt (net) coal-fired
generating facility, a cooling pond, coal-handling facilities, related transmission facilities, and
five simple-cycle gas-fired combustion turbines. Units A through D have a summer peaking
capacity of 65 megawatts each and Unit F has a summer peaking capacity of 128 megawatts. The
Rawhide Energy Station facilities are wholly owned and operated by Platte River.
Yampa Project
Platte River owns 18%, or 154 megawatts, of Craig Units 1 and 2 of the Yampa Project as a
tenant-in-common with four other electric utilities. The current Yampa Project Participation
Agreement took effect on April 15, 1992. The Yampa Project consists of 855 megawatts of coal-
fired generation and associated transmission plant facilities located near the town of Craig in
northwestern Colorado. Platte River's share of the plant investment is included in plant in
service, net, in the accompanying statements of net position. Platte River's share of operating
expenses of the Yampa Project is included in operating expenses in the accompanying statements
of revenues, expenses and changes in net position. Separate financial statements for the Yampa
Project are not available. In addition, Platte River and all but one of the other Yampa Project
participants own Trapper Mining, Inc., which owns and operates the adjacent coal mine that
supplies the majority of Craig Units 1 and 2 fuel needs.
3. Summary of Significant Accounting Policies
Reporting Entity
For financial reporting purposes, Platte River meets the criteria of an "other stand-alone
government" and has no component units as defined in Governmental Accounting Standards
Board (GASB) Statements No. 14 and 39, The Financial Reporting Entity and Determining
Whether Certain Organizations Are Component Units—an amendment of GASB Statement No.
14. As a municipal utility and a separate governmental entity, Platte River is exempt from taxes
on its property and income.
22A-24
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
3. Summary of Significant Accounting Policies (continued)
Basis of Accounting
Platte River accounts for its financial operations as a "proprietary fund" and the accompanyingfinancial statements have been prepared using the accrual method of accounting in conformity
with accounting principles generally accepted in the United States of America. Platte River's
accounts are maintained in accordance with the Uniform System of Accounts as prescribed by
the Federal Energy Regulatory Commission.
As aBoard-regulated entity, Platte River is subject to the provisions of GASB Statement No. 62,
Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30,
1989 FASB and AICPA Pronouncements, Regulated Operations, paragraphs 476-500, which
requires the effects of the rate-making process to be recorded in the financial statements.Accordingly, certain expenses and revenues normally reflected in the statements of revenues,
expenses and changes in net position as incurred are recognized when they are included in Platte
River's wholesale rates. Platte River has recorded various regulatory assets and credits to reflect
the rate-making process (Note 9).
Budgetary Process
A formal budgetary process is required by Colorado State Local Government Law and is utilized
as a management control tool. A proposed annual budget must be submitted to Platte River's
Board of Directors by October 15 of each year. Following public hearings, the budget is
considered for adoption by the Board of Directors on or before December 31. Since Platte River
operates as an enterprise, it is not subject to Colorado's Taxpayers' Bill of Rights (TABOR)
provisions.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America as prescribed by GASB requires management to make
estimates and assumptions that affect the reported amounts of assets, deferred outflows of
resources, liabilities and deferred inflows of resources and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results may differ from those estimates.
23A-25
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
3. Summary of Significant Accounting Policies (continued)
Electric Utility Plant and Depreciation
Electric utility plant is stated at the historical cost of construction. Construction costs includelabor, materials, contracted services, and the allocation of indirect charges for engineering,
supervision, transportation, and administrative expenses. The cost of additions to utility plant andreplacement property units is capitalized. Repairs, maintenance, and minor replacement costs are
charged to expense when incurred. When construction is debt-financed, an allowance for
borrowed funds used during construction is included in the project cost.
Depreciation is recorded using the straight-line method over the estimated useful lives of the
various classes of plant in service, which range from five to fifty years. Depreciation expense
was approximately 2.1 % of depreciable property for the year 2015 and 2.2% for 2014. The
original cost of property replaced or retired, and removal costs less salvage, are charged to
accumulated depreciation.
Cash and Cash Equivalents
For purposes of the statements of cash flows, Platte River considers all cash on deposit with
financial institutions and highly liquid investments with an original maturity of less than three
months, excluding special funds and investments, as cash and cash equivalents.
Closure and Postclosure Care Costs of Disposal Facility
Platte River accrues a liability of estimated future closure and postclosure care costs for its
Rawhide Energy Station ash disposal facility. The liability is determined by multiplying the
estimated closure and postclosure care costs in current dollars by the percentage of the disposal
facility's total estimated capacity used through the end of the year.
Long-term Debt
The difference between the reacquisition price and the net carrying amount of refunded debt
(deferred amount on refundings) in an advance refunding transaction is deferred and amortized
as a component of interest expense using the bonds outstanding method over the shorter of the
remaining life of the defeased debt or the life of the new debt. The deferred amount is reported as
a deferred outflow of resources.
A-26
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
3. Summary of Significant Accounting Policies (continued)
Energy Risk Management
Platte River has established a formal energy risk management program to manage its exposure torisks associated with wholesale energy and natural gas market price fluctuations. Under Board of
Directors approved policies, Platte River may use various physical and financial instruments,such as physical forward contracts, futures, swaps, and option agreements. These transactions arehedges and any expense, gain or loss that is realized on these transactions is recorded as
purchased power or fuel expense in the accompanying statements of revenues, expenses andchanges in net position.
During 2015 and 2014, Platte River entered into natural gas swap contracts to fix prices for thepurpose of hedging against natural gas price fluctuations. The contracts are based on theColorado Interstate Gas Co. (CIG) index published in Gas Daily. There were no swap contractsoutstanding at December 31, 2015. At December 31, 2014, Platte River had swap contracts for
20,000 mmBtu at an average fixed price of $3.38 per mmBtu, which expired in July and August2015. These contracts had a negative fair value of $13,000 as of December 31, 2014, based on
price estimates provided by Goldman Sachs &Company, Platte River's counterparty for theswap contracts. As a result of hedging contracts, there was an increase in fuel expense of
$15,000 for the year ended December 31, 2015 and an increase of $1,000 for the year endedDecember 31, 2014. No cash was paid or received by Platte River when the contracts were
initiated. Platte River is the fixed price payer. The natural gas swap contracts are considerednormal purchase contracts because Platte River takes delivery of the natural gas. Thus, thecontracts are not included in the scope of GASB Statement No. 53, Accounting and FinancialReporting for Derivative Instruments.
Operating Revenues and Expenses
Operating revenues and expenses consist of those revenues and costs directly related to the
generation, purchase, and transmission of electricity. Operating revenues are billed and recorded
at the end of each month for all electricity delivered. Revenues and expenses related to financing,
investing, and other activities are considered to be nonoperating.
25A-27
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
3. Summary of Significant Accounting Policies (continued)
Defined Benefit Pension Plan
The Platte River Power Authority Defined Benefit Plan (the Plan) is asingle-employer definedbenefit pension plan. For purposes of measuring the net pension liability, deferred outflows ofresources and deferred inflows of resources related to pensions, and pension expense,information about the fiduciary net position of the Plan and additions to/deductions from thePlan's fiduciary net position have been determined on the same basis as they are reported by thePlan. For this purpose, benefit payments are recognized when due and payable in accordancewith the benefit terms. Investments are reported at fair value.
Deferred Outflows of Resources
Deferred outflows consist of unamortized deferred losses on refunding of debt and pension-related deferrals.
Deferred Inflows of Resources
Deferred inflows consist of the estimated incremental expenses of scheduled major maintenanceoutages and pension-related deferrals.
Use of Restricted and Unrestricted Resources
The use of restricted and unrestricted resources will be based on the intended purposes asindicated in the bond resolutions.
Recent Accounting Pronouncements
In 2015, Platte River implemented GASB Statement No. 68, Accounting and FinancialReporting for Pensions, an amendment of GASB Statement No. 27 and GASB Statement No. 71,Pension Transition for Contributions Made Subsequent to the Measurement Date—anamendment of GASB Statement No. 68. In implementing GASB 68 and 71, Platte River
recognized the effect of a change in accounting principle in the amount of $6,782,000 for the netpension liability and $3,905,000 to deferred outflows of resources for the 2014 pensioncontribution made subsequent to the measurement date for a net adjustment to net position of
$2,877,000 as of January 1, 2015. There was no impact to deferred inflows of resources for prior
years. Prior period financial statements were not restated due to the unavailability of information.
26A-28
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
4. Electric Utility Plant
Electric utility plant asset activity for the year ended December 31, 2015 was as follows:
Nondepreciable assets:Land and land rightsConstruction workin progress
Depreciable assets:Production plantTransmission plantGeneral plant
Less accumulateddepreciation
Total electric utility plant
December 31 December 312014 Increases Decreases 2015
(In thousands)
$ 14,515 $ - $ - $ 14,515
19,603 33,219 (8,920) 43,90234,118 33,219 (8,920) 58,417
891,344 4,240 (2,273) 893,311343,649 3,019 (1,162) 345,50635,717 2,032 (579) 37,170
1,270,710 9,291 (4,014) 1,275,987
(733,588) (26,987) 624 (759,951)$ 571,240 $ 15,523 $ (12,310) $ 574,453
Electric utility plant asset activity for the year ended December 31, 2014 was as follows:
December 31 December 312013 Increases Decreases 2014
(In thousands)Nondepreciable assets:Land and land rightsConstruction work
in progress
Depreciable assets:Production plantTransmission plantGeneral plant
Less accumulateddepreciation
Total electric utility plant
$ 14,517 $ - $ (2) $ 14,515
23,925 19,608 (23,930) 19,60338,442 19,608 (23,932) 34,118
882,033 13,676 (4,365) 891,344337,534 8,024 (1,909) 343,64934,596 2,971 (1,850) 35,717
1,254,163 24,671 (8,124) 1,270,710
(709,721) (28,374) 4,507 (733,588)
$ 582,884 $ 15,905 $ (27,549) $ 571,240
27A-29
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
5. Cash and Investments
Investment of Platte River's funds is administered in accordance with Colorado law and Platte
River's General Power Bond Resolution, Fiscal Resolution and Investment Policy. Accordingly,
Platte River may only invest in obligations of the United States government and its agencies and
other investments permitted under Colorado law. Platte River records its investments at their
estimated fair market values. The unrealized holding gains and losses on these investments are
included in net increase (decrease) in fair value of investments in the statements of revenues,
expenses and changes in net position.
The fair value of investments is presented on the statements of net position as special funds andinvestments, cash and cash equivalents, and other temporary investments. Special funds andinvestments are either internally dedicated by Board Resolution (dedicated funds and
investments) or restricted as to use by Platte River's General Power Bond Resolution (restrictedfunds and investments). The fair value of investments, exclusive of accrued interest of $140,000
and $121,000 as of December 31, 2015 and 2014, respectively, are shown in the following
tables.
As of December 31, 2015, Platte River had the following cash and investments and related
maturities:
Investment Maturities (in years)
Cash and Fair LessInvestment Type Value Than 1 1- 2 2- 3 3- 4 4- 5
(In thousands)
U,S. TreasuriesU,S. Agencies:FFCBFHLBFHLMCFNMA
Total securitiesCertificates of depositCash and money market funds
Total cash and investments
$ 48,955 $ 21,004 $ 23,936 $ 4,015 $ — $ —
11,007 — 9,020 1,987 — —15,012 3,864 5,096 6,052 — —11,098 11,098 — — — —3,000 3,000 — — — —
89,072 38,966 38,052 12,054 — —11,099 3,012 8,087 — — —10,493 10,493 — — — —
$ 110,664 $ 52,471 $ 46,139 $12,054 $ — $ —
28A-30
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
5. Cash and Investments (continued)
Statement of net position presentation of cash, cash equivalents and investments is as follows asof December 31, 2015:
Fair AccruedValue Interest Total
(In thousands)
Restricted funds and investments $ 22,190 $ 11 $ 22,201
Dedicated funds and investments 57,665 101 57,766Cash and cash equivalents 10,126 - 10,126Other temporary investments 20,683 28 20,711
Total cash and investments $ 110,664 $ 140 $ 110,804
As of December 31, 2014, Platte River had the following cash and investments and related
maturities:
Investment Maturities (in years)
Cash and Fair Less
Investment Type Value Than 1 1- 2 2- 3 3- 4 4- 5
(In thousands)
U.S. Treasuries $ 43,855 $6,542 $ 21,030 $16,283 $ - $ -
U.S. Agencies:FFCB 15,015 2,052 3,993 8,970 - -
FHLB 2,662 - 1,997 665 - -
FHI,MC 8,564 1,001 6,563 1,000 - -
FNMA 10,945 4,003 6,942 - - -
Total securities 81,041 13,598 40,525 26,918 - -
Certificates of deposit 13,490 8,698 - 4,792 - -
Cash and money market funds 44,905 44,905 - - - -
Total cash and investments $139,436 $67,201 $ 40,525 $31,710 $ - $ -
29A-31
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
5. Cash and Investments (continued)
Statement of net position presentation of cash, cash equivalents and investments is as follows as
of December 31, 2014:
Restricted funds and investmentsDedicated funds and investmentsCash and cash equivalentsOther temporary investmentsTotal cash and investments
Interest Rate Risk
Fair AccruedValue Interest Total
(In thousands)
$ 25,419 $ 6 $ 25,42569,566 94 69,66024,234 — 24,23420,217 21 20,238
$ 139,436 $ 121 $ 139,557
As a means of limiting its exposure to fair value losses arising from rising interest rates, Platte
River's investment policy and Colorado state statutes limit the investment portfolio to maturities
of five years or less. Platte River uses a laddered approach to investing funds based on projected
cash flows. The assumed maturity date for callable securities is based on market conditions as of
December 31, 2015. If the price of the security is at or above its call price, the security is
assumed to be redeemed on its next call date.
Credit Risk
Platte River's investment policy allows investments in local government investment pools and
money market funds. As of December 31, 2015, Platte River maintained investments in funds
managed by the local government investment pool Colorado Local Government Liquid Asset
Trust (COLOTRUST), the Colorado Statewide Investment Program (CSIP), and the Wells Fargo
Heritage Money Market Fund. All of these funds are rated AAAm by Standard and Poor's
Ratings Services (S&P). Platte River's investments in Federal Farm Credit Bank (FFCB),
Federal Home Loan Bank (FHLB), Federal Home Loan Mortgage Corporation (FHLMC), and
Federal National Mortgage Association (FNMA) were rated Aaa by Moody's Investors Service
and AA+ by S&P.
30A-32
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
5. Cash and Investments (continued)
Concentration of Credit Risk
Platte River's investment policy states that assets held in Platte River's funds shall be diversified
to eliminate the risk of loss resulting from over concentration of assets in a specific maturity, a
specific issuer or a specific class of securities. As of December 31, 2015, more than 5% of Platte
River's investments were concentrated in FFCB, FHLB and FHLMC. These investments are
10%, 14% and 10%, respectively, of Platte River's total investments (including outside
investment pools and certificates of deposit).
6. Noncurrent Liabilities
Noncurrent liability activity for the year ended December 31, 2015 was as follows:
December 31 December 31 Due within2014 Additions Reductions 2015 one year
(In thousands)
Long-term debt, net $ 223,552 $ — $ (23,378) $ 200,174 $ 16,615
Capitalized lease obligation 9,067 — (2,775) 6,292 3,063
Net pension liability — 6,693 — 6,693 —
Reclamation liability 4,250 3 — 4,253 —
Disposal facility closure costs 190 2 — 192 —
Compensated absences 3,997 802 (357) 4,442 305
Lease advances 906 — (83) 823 83
Yampa employee obligation 353 7 — 360 —
Total noncurrent liabilities $ 242,315 $ 7,507 $ (26,593) $ 223,229 $ 20,066
31A-33
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
6. Noncurrent Liabilities (continued)
Noncurrent liability activity for the year ended December 31, 2014 was as follows:
December 31 December 31 Due within2013 Additions Reductions 2014 one year
(In thousands)
Long-term debt, net $ 246,353 $ — $ (22,801) $ 223,552 $ 21,980
Capitalized lease obligation 11,708 — (2,641) 9,067 2,775
Reclamation liability 4,087 163 — 4,250 —
Disposal facility closure costs 188 2 — 190 —
Wind turbine reimbursement 171 — (171) — —
Compensated absences 3,790 492 (285) 3,997 241
Lease advances 990 — (84) 906 83
Yampa employee obligation 334 19 — 353 —
Total noncurrent liabilities $ 267,621 $ 676 $ (25,982) $ 242,315 $ 25,079
32A-34
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
7. Long-term Debt
Long-term debt outstanding as of December 31, 2015 and 2014 consists of the following:
Interest Rate
Power Revenue Bonds—Series GG:Serial Bonds—Maturing 6/1/2018 4.50%-5.00%
Series HH:Serial Bonds—Maturing 6/1/2029 3.00%--5.00%
Series II:Serial Bonds—Maturing 6/1/2037 4.00%-5.00%
Unamortized bond premiumTotal revenue bonds outstandingLess: due within one yearTotal long-term debt, net
December 312015 2014
(In thousands)
$ 41,560
113,725
$ 58,175
113,825
37,430 42,695192,715 214,695
7,459 8,857200,174 223,552(16,615) (21,980)
$ 183,559 $ 201,572
Fixed rate bond premium costs are amortized over the terms of the related bond issues.
Interest expense for the years ended December 31, 2015 and 2014 is comprised of the following:
2015 2014(In thousa~ads)
InterestAmortization of bond related costsTotal interest expense
$ 9,787 $ 10,788(349) (367)
$ 9,438 $ 10,421
33A-35
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
7. Long-term Debt (continued)
Bond service funding requirements projected for all bonds outstanding are shown in the tablebelow:
Year ending December 31 Principal Interest Total(In thousands)
Deposits in 2015 for 2016 payment201620172018201920202021-20252026-20302031-20352036-2037
$ 9,692 $ 779 $ 10,47120,660 8,900 29,56017,370 7,977 25,34710,429 7,172 17,6018,873 6,655 15,5289,307 6,218 15,525
53,883 23,743 77,62646,548 9,460 56,00811,520 3,068 14,5884,433 288 4,721
$ 192,715 $ 74,260 $ 266,975
In prior years, Platte River defeased certain revenue bonds by placing the proceeds of therefunding bonds and available cash in an irrevocable trust to provide for all future debt service
payments on the refunded bonds. Accordingly, the trust account assets and the liability for the
defeased bonds are not included in Platte River's financial statements. As of December 31, 2015,$16,975,000 of the defeased Series I Bonds remains outstanding.
Other Long-term Debt
On January 17, 2014, Platte River paid the City of Fort Collins the remaining principal andinterest in the amount of $176,000 to terminate the note payable for the wind turbinereimbursement.
34A-36
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
7. Long-term Debt (continued)
Bond Service Coverage
Power revenue bonds are secured by a pledge of the revenues of Platte River after deductingoperating expenses, as defined in the General Power Bond Resolution. The power revenue bondsissued by Platte River may be subject to early call provisions. Principal and interest payments aremet from net revenues earned from wholesale electric rates charged to the municipalities andothers, and from interest earnings.
Under the General Power Bond Resolution, Platte River is required to charge wholesale electricenergy rates to the municipalities that are reasonably expected to yield net revenues for theforthcoming 12-month period that are at least equal to 1.10 times total power bond servicerequirements. Under the General Power Bond Resolution, Platte River has established a RateStabilization Reserve Account. Deposits to this account are a reduction to current net revenuesfor purposes of computing bond service coverage. Future withdrawals will increase net revenuesfor purposes of computing bond service coverage and could assist Platte River, at such time, inmeeting its wholesale rate covenant. The balances in the Rate Stabilization Reserve Account atDecember 31, 2015 and 2014 were $20,216,000 and $20,236,000, respectively, excludingaccrued interest. The Rate Stabilization Reserve Account is included in dedicated funds andinvestments in the statements of net position.
35A-37
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
7. Long-term Debt (continued)
The following table is a calculation of the power revenue bond coverage ratios for the yearsended December 31, 2015 and 2014:
2015 2014(In thousands)
Net revenues:Operating revenuesOperating expenses, excluding depreciation
Net operating revenues
Plus interest and other income~~~Net revenues before rate stabilization
Rate stabilization:DepositsWithdrawals
Total net revenues
Bond service:Power revenue bondsAllowance for funds used during construction
Net revenue bond service
Coverage:Power revenue bonds
$ 199,433 $ 199,867157,754 146,61141,679 53,256
1,672 2,01343,351 55,269
$ 43,351 $ 55,269
$ 28,637 $ 32,385— (97)
$ 28,637 $ 32,288
1.51 1.71
~~~ Excludes unrealized holding gains and losses on investments.
36A-38
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
7. Long-term Debt (continued)
Arbitrage Rebate
Under U.S. Treasury Department regulations, all governmental tax-exempt debt issued afterAugust 31, 1986 is subject to arbitrage rebate requirements. Interest income on bond proceeds
that exceeds the cost of borrowing is payable to the federal government on every fifthanniversary of each bond issue. No arbitrage liability was outstanding as of December 31, 2015and 2014.
Deferred Outflows of Resources Related to Debt
With the adoption of GASB 65, Platte River recognizes certain debt-related items as deferredoutflows of resources. As of December 31, 2015 and 2014, deferred outflows related to debtconsisted of the unamortized deferred loss on debt refundings of $1,033,000 and $1,908,000,respectively.
8. Capitalized Lease Obligation
Under an agreement with the Municipal Subdistrict of the Northern Colorado WaterConservancy District, Platte River is entitled to an allocation of one-third of the available waterfrom the Windy Gap Project, a water diversion facility completed May 1, 1985. Under theagreement, Platte River is obligated to pay each year one-third of the debt service andapproximately one-third of the actual operating and maintenance costs of the Windy Gap Project.These payments, which totaled $4,605,000 and $4,575,000 in 2015 and 2014, respectively, havebeen included in operations and maintenance expenses in the accompanying statements ofrevenues, expenses and changes in net position, as allowed under GASB 62, paragraphs 476-500. Platte River originally recorded $41,590,000 as a capitalized lease for its water allotment
and has recorded $35,298,000 accumulated amortization as of December 31, 2015. Theremaining liability of $6,292,000 represents Platte River's share of principal amounts of theSubdistrict's Series H and J Bonds outstanding as of December 31, 2015. These amounts will beamortized over the terms of the Subdistrict's Water Revenue Bonds, which mature in 2017.
37A-39
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
8. Capitalized Lease Obligation (continued)
The following is a schedule of the future minimum lease payments for the capital lease:
Year ending December 31(In thousands)
20162017
Less: amount representing interestTotal lease paymentsLess: due within one yearFuture net payments
$ 3,3943,3986,792(500)6,292(3,063)
$ 3,229
9. Regulatory Assets and Deferred Inflows of Resources Related to Regulatory Credits
Re~ulatory Assets
Additional Pension Expense
Platte River funds its defined benefit pension plan (Note 11) based on cost estimates developedon an actuarial basis. In addition to the base contribution, Platte River has an additional fundingcharge if the market value of the assets is less than 100% of the actuarial present value ofaccumulated plan benefits. Effective January 1, 2010, the Board of Directors approved a policyunder GASB 62, paragraphs 476-500, that provides for the expense recognition of any additionalpension funding charge to be spread over aten-year period. Each subsequent year's additionalfunding charge, if any, will be added to the regulatory prepaid asset and amortized over anadditional ten-year period. There was no additional pension funding charge for 2015 and 2014.The regulatory prepaid asset for additional pension expense was $1,985,000 and $2,429,000 asof December 31, 2015 and 2014, respectively. The current portion of these amounts, $443,000 asof December 31, 2015 and 2014, is included as a component of prepayments and other assets inthe statements of net position.
38A-40
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
9. Regulatory Assets and Deferred Inflows of Resources Related to Regulatory Credits(continued)
Debt Issuance Costs
Under GASB 65, debt issuance costs are required to be expensed in the period incurred ratherthan amortized over the life of the related debt. In order to provide recovery for debt issuancecosts through rates, the Board of Directors approved the use of GASB 62, paragraphs 476-500,to recognize debt issuance costs as a regulatory asset and to amortize these costs over the life ofthe associated debt. Unamortized debt issuance costs were $895,000 and $1,069,000 as ofDecember 31, 2015 and 2014, respectively.
Deferred Inflows of Resources Related to Regulatory Credits
Accrued Maintenance Outage Costs
As allowed under GASB 62, paragraphs 476-500, an accrual for a portion of the estimatedincremental expenses of future scheduled major maintenance outages is recorded each year. Priorto the major maintenance outage at Rawhide Unit 1 in the fall of 2015, a portion of the estimatedmaintenance expenses was accrued. After the 2015 outage was completed, a portion of theestimated maintenance and replacement power costs for the next major maintenance outage,planned for the fall of 2018, was accrued. As of December 31, 2015, $295,000 was accrued as a
deferred inflow of resources for the 2018 scheduled maintenance outage planned for RawhideUnit 1. As of December 31, 2014, $8,780,000 was accrued for the fa112015 scheduled outage.
Pension Contribution Expense Recognition
Effective for the year ending December 31, 2015, Platte River's Board of Directors approvedrecording pension contributions as pension expense under GASB 62, paragraphs 476-500, sincethe pension contribution amount is known at the time of budget preparation and rate setting. Anydifference between pension contribution and pension expense, as calculated by the actuary underGASB 68, will be amortized over aten-year period beginning the following year. Theamortization amount will be included in pension expense along with the pension contribution foreach year calculated. At December 31, 2015, a regulatory credit of $711,000 was recorded in
deferred inflows of resources as a result of the difference between the 2015 contribution amountof $3,302,000 and pension expense of $2,591,000 as calculated under GASB 68.
39A-41
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
10. Net Investment in Capital Assets
Net investment in capital assets is comprised of the following as of December 31, 2015 and
2014:
2015 2014(In thousands)
Electric utility plantDeferred loss on debt refundingsLong-term debt, netCapitalized lease obligationAccounts payable incurred for capital assets
$ 574,453 $ 571,2401,033 1,908
(200,174) (223,552)(6,292) (9,067)(2,608) (962)
$ 366,412 $ 339,567
11. Defined Benefit Pension Plan (As of and for the year ended December 31, 2015,
accounted for and reported in accordance with GASB 68)
Plan Description
The Platte River Power Authority Defined Benefit Plan (the Plan) is asingle-employer, defined
benefit pension plan administered by Platte River. The Plan provides retirement and disability
benefits, annual cost-of-living adjustments, and death benefits to Plan participants and
beneficiaries. All regular Platte River employees hired prior to September 1, 2010 are covered by
the Plan. The Plan is closed to new employees hired on or a$er that date. Benefit provisions of
the Plan are determined and authorized by the Board of Directors of Platte River. Platte River
issues a publicly available financial report for the Plan that can be obtained at www.prpa.or~.
Benefits Provided
The Plan provides for 100% vesting after five years of service to all eligible employees.
Retirement benefits are based upon years of service rendered and the final average compensation
earned by the participant in accordance with the Plan's provisions. The Plan provides for normal
retirement at age 65. Participants who are at least age 55 and have 10 years or more of credited
service may choose early retirement with a reduced benefit. A special early retirement benefit is
available at age 62, with unreduced benefits, if certain years of service and age requirements are
met as defined by the plan document.
40A-42
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
11. Defined Benefit Pension Plan — GASB 68 (continued)
Benefits paid by the Plan are adjusted annually by the change in the consumer price index,subject to a maximum increase of 6% for employees who retired prior to December 6, 1991.Those employees who retired on or after December 6, 1991 receive two-thirds of the change inthe consumer price index, up to a maximum of 4.0%.
At December 31, 2015, the participants in the Plan are:
Number ofParticipants
Retirees and beneficiaries currently receiving benefits 128Terminated vested employees not yet receiving benefits 53Active plan participants 155Total participants 336
Contributions
Ail contributions to the Plan are authorized by the Board of Directors and made by Platte River.
The Plan's funding policy is intended to fund current service costs as they accrue, plus an
additional funding charge if the market value of the assets is less than 100% of the actuarial
present value of accumulated plan benefits. Platte River's contribution to the Plan for the year
ended December 31, 2015 of $3,302,000 equaled the actuarially determined requirements.
Net Pension Liability
Platte River reported a net pension liability of $6,693,000 at December 31, 2015. The netpension liability was measured as of December 31, 2014 and the total pension liability used to
calculate the net pension liability was determined by an actuarial valuation as of that date.
The total pension liability in the December 31, 2014 actuarial valuation was determined using
the following actuarial assumptions, applied to all periods included in the measurement:
Salary increases 2014: 2.6%, 2015: 3.5%, 2016+: 4.5%Investment rate of return 8.0%Cost of living 2.0%
41A-43
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
11. Defined Benefit Pension Plan — GASB 68 (continued)
Mortality rates were based on the RP-2000 mortality table for males and females withoutprojection and without collar or amount adjustments.
The expected long-term rate of return of 8% is based upon historical results of the Plan'sinvestments and is reviewed annually by the Retirement Committee with third-party consultants.The investments are actively managed by a third party to enhance the expected overall return ofthe portfolio by taking advantage of certain market timing and the overall market conditions.
The discount rate used to measure the total pension liability was 8.0%. To determine theprojection of cash flows, the following assumptions were made: employer contributions aremade throughout the year and, on average, at mid-year; benefit payments are assumed to bemade uniformly throughout the year and, on average, at mid-year; annuity payments are payablemonthly at the beginning of the month and lump sum payments are payable on the date ofdecrement. Based on those assumptions, the Plan's fiduciary net position was projected to beavailable to make all projected future benefit payments of current plan members. Therefore, thelong-term expected rate of return on plan investments was applied to all periods of projectedbenefit payments to determine the total pension liability.
42A-44
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
11. Defined Benefit Pension Plan — GASB 68 (continued)
Changes in the net pension liability for the year ended December 31, 2015 was as follows:
Balance at December 31, 2014Changes for the year:Service costInterestDifferences between expectedand actual experience
Employer contributionsNet investment incomeBenefit paymentsChange of assumptions
Net changesBalances at December 31, 2015
Total Pension Plan Fiduciary Net PensionLiability Net Position Liability(a) (b) (a) — (b)
(In thousands)
$ 93,937 $ 87,155 $ 6,782
1,885 — 1,8857,343 — 7,343
(180) — (180)— 3,905 (3,905)— 4,658 (4,658)
(4,287) (4,287) —(574) — (574)4,187 4,276 (89)
$ 98,124 $ 91,431 $ 6,693
The change of assumptions was due to a revision of the salary increase assumptions from 4.5%to 3.0% due to employer experience.
The following presents the net pension liability (asset) of Platte River, calculated using thediscount rate of 8.0%, as well as what the net pension liability would be if it were calculatedusing a discount rate that is 1-percentage-point lower (7.0%) or 1-percentage-point higher (9.0%)than the current rate:
(In thousands)
1 %Decrease (7.0%)Current discount rate (8.0%)1 %Increase (9.0%)
15,6506,693(1,099)
43A-45
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
11. Defined Benefit Pension Plan — GASB 68 (continued)
Pension Expense and Deferred Outflows of Resources and Deferred Inflows of ResourcesRelated to Pensions
The Board of Directors approved policies under GASB 62, paragraphs 476-500, that allows
Platte River to recognize pension expense when recovered through rates rather than recording theamount calculated under GASB 68. For the year ended December 31, 2015, Platte Riverrecognized pension expense of $3,745,000. Pension expense consists of the $3,302,000 employercontribution plus $443,000 amortization of the additional pension funding charge. Additional
details about regulatory accounting for pension expense can be found in Note 9.
At December 31, 2015, Platte River reported deferred outflows of resources and deferred inflows
of resources related to pensions from the following sources:
Deferred Outflows Deferred Inflowsof Resources of Resources
(In thousands)
Differences between expected andactual experience
Changes of assumptionsNet difference between projected andactual earnings on pension plan investments
Contributions subsequent to themeasurement date
Total
— $ 146— 467
1,839 —
02 —$ 5,141 $ 613
44A-46
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
11. Defined Benefit Pension Plan — GASB 68 (continued)
Contributions of $3,302,000 made subsequent to the measurement date and reported as deferredoutflows of resources will be recognized as a reduction of the net pension liability in the yearended December 31, 2016. Other amounts reported as deferred outflows of resources anddeferred inflows of resources related to pensions will be recognized in pension expense asfollows:
Year ending December 31(In thousands)
2016 $ 3192017 3192018 3192019 3192020 (50)
12. Defined Benefit Pension Plan (As of and for the year ended December 31, 2014,
accounted for and reported in accordance with GASB 27)
Contributions and Net Pension Obligation
For the year ended December 31, 2014, as reported under GASB 27, the annual pension cost andrequired contribution by Platte River was $3,905,000, which equaled the actuarially determinedrequirements. There was no net pension obligation as of December 31, 2014.
The annual required contribution for the year ended December 31, 2014 was determined as partof the January 1, 2013, actuarial valuation using the frozen-initial-liability method. The actuarialassumptions included: (a) 8% investment rate of return, (b) 3.0% projected salary increase due toinflation, merit and seniority for the year 2013, reverting to 4.5% for years thereafter, and (c)
3.0% per year cost-of-living adjustment for participants in pay status prior to January 1, 1992,and 2.0% per year for all other participants. The actuarial value of Plan assets was determinedusing techniques that smooth the effects of short-term volatility in the market value ofinvestments over afour-year period.
45A-47
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
12. Defined Benefit Pension Plan — GASB 27 (continued)
Three-year trend information for Platte River's pension cost and contributions is as follows:
Annual PercentageYear Pension Cost of APC Net Pension
Ended (APC) Contributed Obligation(In thousands)
2012 $ 3,561 100.0% $ —
2013 4,544 100.0 —2014 3,905 100.0 —
The Schedule of Funding Progress, presented as required supplementary information following
the notes to the financial statements, presents multiyear trend information about whether the
actuarial value of plan assets are increasing or decreasing over time relative to the actuarial
accrued liability for benefits. The mortality table used in the actuarial calculations of the liability
was the RP-2000 mortality table,
13. Defined Contribution Pension Plan
Effective September 1, 2010, the Board of Directors established the Platte River Power
Authority Defined Contribution Plan (in accordance with the Internal Revenue Code Section
401(a)) for all regular employees hired on or after that date. As of December 31, 2015, there
were 82 plan participants. The plan's assets are held in an external trust account. The General
Manager of Platte River is the Plan Administrator and benefit provisions and contribution
requirements are authorized and may be amended by the Board of Directors.
Platte River contributed the required contribution of 5% of earnings for plan participants with
fewer than five years of service and 7% for those with five or more years of service. Platte River
will also contribute to the 401(a) an amount equal to 50% of the participant's contributions to a
separate 457(b) plan, taking into account only such participant contributions up to 6% of the
participant's earnings. For the years ended December 31, 2015 and 2014, contributions to the
401(a) plan by Platte River, which were recognized as expenses, were $459,000 and $237,000,
respectively. The employer contributions to the 401(a) plan vest 100% after three years. The
plan's records are kept on the accrual basis.
46A-48
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
14. Contribution of Fiber Optic Network to Municipalities
During 1998, Platte River constructed a fiber optic network between and around the fourmunicipalities to which it provides electric service. The surplus capacity in the network builtaround the City of Longmont was contributed to the City of Longmont in 1998 and was recordedas a return of capital. Platte River retained ownership of the remaining fiber optic network, andin 1999, began leasing surplus portions of the dark fiber for the benefit of each of the remainingthree municipalities to independent telecommunication service providers. The contribution of thefiber assets to the municipalities, $155,000 annually, is considered a return of capital on theoriginal asset. As of December 31, 2015 and 2014, lease advances of $823,000 and $906,000,respectively, have been recorded as a liability in the statements of net position. Themunicipalities' portion of the lease payments received is flowed through to the municipalities,net of Platte River's costs.
15. Insurance Programs
Platte River has purchased insurance policies to cover the risk of loss related to various generalliability and property loss exposures. The amount of insurance settlements has not exceededinsurance coverage in the past three years. Platte River also provides aself-insured medical anddental plan to its employees. Medical stop-loss insurance has been purchased, which covers]osses in excess of $175,000 per person per incident. A liability was recorded for estimatedmedical and dental claims that have been incurred but not reported of $499,000 at December 31,
2015 and $505,000 at December 31, 2014. Athird-party administrator is used to account for thehealth insurance claims and provides the estimated medical claims liability based on prior claimspayment experience. The medical claims liability is included as a component of accounts payablein the statements of net position.
Changes in the balance of the medical claims liability during 2015 and 2014 were as follows:
2015 2014(In thousands)
Medical claims liability, beginning of year $ 505 $ 261Current year claims and changes in estimates 2,934 3,098Claim payments (2,940) (2,854)
Medical claims liability, end of year $ 499 $ 505
47A-49
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
16. Commitments
Platte River has two long-term purchase power contracts with the Western Area Power
Administration. The contract with the Colorado River Storage Project continues through
September 30, 2024. In March 2015, the Loveland Area Projects contract was extended through
June 30, 2054. The federal hydroelectric power received in 2015 provided approximately 19% of
the resources needed by Platte River to serve the loads of the four owner municipal systems. The
contract rates and the amount of energy available are subject to change. During 2015, Platte
River purchased $17,928,000 under these contracts.
Platte River and three of the other four participants in the Yampa Project own Trapper Mine, the
primary source of coal for the Yampa Project. The original contract provided delivery of
specified amounts of coal to each Yampa Participant through June 2014. In September 2009, the
contract was extended through 2020. Supplemental coal will be supplied through the year 2017
under a contract with ColoWyo Coal Company. These contracts are subject to price escalation
adjustments. During 2015, coal purchases totaled $13,096,000 from Trapper Mine and
$5,046,000 from ColoWyo Coal Company.
The Rawhide Energy Station's coal purchase and transportation agreements are under multiple-
year contracts. Base prices for these contracts are subject to future price adjustments. During
2015, Platte River paid $30,411,000 for coal delivered under these agreements.
Platte River has committed to purchase Renewable Energy Certificates (RECs) for the years
2016 through 2024 with future payments of $4,838,000. During 2015, Platte River purchased
$471,000 under these REC agreements.
In addition, Platte River has entered into agreements to purchase renewable wind energy output
of 12 megawatts from Silver Sage Windpower Project through 2027, 60 megawatts from Spring
Canyon Expansion Wind Energy Center through 2039, and approximately 6 megawatts from
Medicine Bow Wind Project through 2033. During 2015, Platte River purchased $8,210,000
under these renewable wind energy agreements.
Platte River and the other Yampa Project participants, in order to comply with recent
environmental regulations, have agreed to upgrade the NOx emissions control equipment at
Craig Units 1 and 2 beginning in 2012. Platte River's share of the capital costs of these upgrades,
expected to be completed in 2017, is estimated to be approximately $32,659,000 of which
$15,495,000 has been expended through December 31, 2015.
48A-50
Platte River Power Authority
Notes to Financial Statements (continued)
December 31, 2015 and 2014
17. Risks and Contingencies
In the ordinary course of business, Platte River may be impacted by various legal matters and issubject to legislative, administrative, and regulatory requirements relative to environmentalissues. Although the outcomes of such matters are not possible to predict, management is awareof no pending legal matters or environmental regulations for which the outcome is likely to havea material adverse effect upon Platte River's operations, financial position or changes in financialposition in the near term.
Platte River obtains the majority of its power from coal generating facilities. Changes inenvironmental regulations could affect the cost of generation for these facilities or could requiresignificant capital expenditures. The impacts of the recently issued Clean Power Plan are beinganalyzed by Platte River in order to prepare for potential COz related expenses. Such costs couldmaterially affect the rates Platte River charges its customers.
18. Subsequent Event
The Platte River Power Authority Defined Benefit Plan was amended and restated effectiveJanuary 1, 2016 to modify certain provisions and actuarial equivalence assumptions. Forpurposes of determining total pension liability at January 1, 2016, valuation assumptions wereupdated to be consistent with plan actuarial equivalence assumptions. Assumption changesinclude updating the mortality table from the current RP-2000 to the RP-2014 table combinedwith the modified MP-2014 projection scale, reduce the cost of living assumption from 2.0% to1.5%, and reduce the Plan stated interest rate assumption from 8.0% to 7.5%. Other valuationassumptions were changed as well, including reducing the assumed rate of return on plan assetsfrom 8.0% to 7.5% and reducing the salary increase assumption from 4.5% to 3.0%. The effectof the assumption changes on the total pension liability at January 1, 2016 is an increase ofapproximately $6,058,000.
49A-51
Platte River Power Authority
Required Supplementary Information
Schedule of Changes in Net Pension Liability and Related Ratios — GASB 68
Last 2 Calendar Years
2015 2014(In thousands)
Total pension liabilityService cost $ 1,885 $ 1,949Interest 7,343 7,005Changes of benefit terms — (135)Differences between expected and actual experience (180) 86Changes of assumptions (574) (726)Benefit payments (4,287) (3,886)
Net change in total pension liability 4,187 4,293Total pension liability—beginning 93,937 89,644
Total pension liability—ending (a) $ 98,124 $ 93,937
Plan fiduciary net positionContributions —employer $ 3,905 $ 4,544Net investment income 4,658 12,011Benefit payments (4,287) (3,886)
Net change in plan fiduciary position 4,276 12,669Plan fiduciary net position—beginning 87,155 74,486
Plan fiduciary net position—ending (b) $ 91,431 $ 87,155
Net pension liability—ending (a) — (b) $ 6,693 $ 6,782
Plan fiduciary net position as a percentage of the totalpension liability 93.18% 92.78%
Estimated covered employee payroll $ 17,951 $ 18,614
Net pension liability as a percentage of estimatedcovered employee payroll 37.29% 36.43%
Note to Schedule
Historical information is not available for the years 2006 through 2013; additional years will be
displayed as they become available.
50A-52
Platte River Power Authority
Required Supplementary Information
Schedule of Employer Contributions — GASB 68Last 10 Calendar Years
2015 2014 2013 2012 2011 2010 2009 2008 2007 2006(In thousands)
Actuarially determined contribution $ 3,302 $ 3,905 $ 4,544 $ 3,561 $ 4,390 $ 7,736 $ 2,867 $ 2,673 $ 2,737 $ 2,498Contribution in relation to the
actuarially determined contribution 3,302 3,905 4,544 3,561 4,390 7,736 2,866 2,673 2,737 2,498Contribution deficiency (excess) $ — $ — $ — $ — $ — $ — $ 1 $ _ $ _ $
Estimated covered employee payroll $ 17,305 $ 17,951 $ 18,614 $ 18,766 $ 18,728 $ 17,714 $ 18,521 $ 16,320 $ 15,290 $ 14,675
Contributions as a percentage ofestimated covered employee payroll 19.08% 21.75% 24.41% 18.98% 23.44% 43.67% 15.47% 1638% 17.90% 17.02%
Notes to Schedule
Valuation date:
Actuarially determined contribution rates are calculated as of January 1, two years prior to the end of the calendar year in which contributions are reported.
Methods and assumptions used to determine contribution rates:
Actuarial cost method Frozen initial liability, entry age normal
Amortization method 5-year, level dollar, open period
Asset valuation method 4-year smoothed market
Salary increases 3.2%, average
Cost of living adjustments For participants in pay status prior to 1/1/92-3.00%, for ali other participants 2.00%Investment rate of return 8.0%
S1
A-53
Platte River Power Authority
Required Supplementary Information
Schedule of Funding Progress — GASB 27
Actuarial UAAL as aActuarial Accrued Unfunded Percentage
Actuarial Value of Liability AAL Funded Covered of CoveredValuation Assets (AAL) (UAAL) Ratio Payroll Payroll
Date (al lbl (b-a) (a/b) (c) ~(b-a)/c~(In thousands)
1/1/12 $ 67,677 $ 67,677 $ — 100.0% $ 18,766 —1/1/13 74,215 74,215 — 100.0 18,614 —
1/1/14 82,349 82,349 — 100.0 17,951 —
52A-54
Platte River Power Authority
Other Information
Budgetary Comparison Schedule(Unaudited)
RevenuesOperating revenues:Municipal salesContract surplus salesShort-term surplus sales
Total operating revenues
Nonoperating revenues:Interest income~~~Other income
Total nonoperating revenues
Total revenues
ExpendituresOperating expenses~2~:Purchased powerFuel expenseProduction expensesTransmission expensesAdministrative and general
Total operating expenses
Debt service expenditures~3~:Interest expensePrincipal
Total debt service expenditures
Capital additions:ProductionTransmissionGeneral
Total capital additions
Total expenditures
Revenues less expenditures
Year Ended December 31, 2015Budget Actual Variance
(In thousands)
$ 176,586 $ 175,998 $ (588)1,219 1,219 -
32,380 22,216 (10,164)210,185 199,433 (10,752)
713 772 59788 900 112
1,501 1,672 171
$ 211,686 $ 201,105 $ (10,581)
$ 33,305 $ 32,548 $ 75751,111 46,446 4,66551,800 49,959 1,84113,264 12,633 63116,280 15,723 557
165,760 157,309 8,451
9,787 9,787 -18,850 18,850 -28,637 28,637 -
25,015 22,896 2,1199,027 7,519 1,5083,759 2,715 1,044
37,801 33,130 4,671
$ 232,198 $ 219,076 $ 13,122
$ ~Zo,s 12~ $ ~1~,9~1~ ~ Z,s41
~`~ Interest income excludes unrealized investment holding gains and losses.~z~ Operating expenses do not include depreciation and other nonappropriated expenses.~3~ Debt service expenditures represent monthly principal and interest funding.
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APPENDIX B
SUMMARY OF CERTAIN PROVISIONS OF THE GENERAL POWER BOND RESOLUTION
Certain Definitions
The following are definitions in summary form of certain terms contained in the Power Bond Resolution and used herein, including the amendments thereto which will take effect on the Effective Date (as defined below):
Accreted Value: With respect to any Capital Appreciation Bonds as of any specified Valuation Date, the amount set forth for such Valuation Date in the Supplemental Resolution authorizing such Capital Appreciation Bonds. The General Power Bond Resolution provides a method of calculating such Accreted Value as of dates between Valuation Dates.
Accrued Aggregate Bond Service: As of any date of calculation, the sum of the amounts of Bond Service that have accrued with respect to all Series of Power Revenue Bonds, calculating the Bond Service with respect to each Series as an amount equal to the sum of (i) interest on the Power Revenue Bonds of such Series that has accrued and is unpaid and that will have accrued by the end of the then current calendar month, and (ii) that portion of the next due Principal Installment for the Power Revenue Bonds of such Series which would have accrued (if deemed to accrue in the manner set forth in the definition of Bond Service) by the end of the then current calendar month; provided that any Refundable Principal Installments are excluded from this calculation. Principal and interest portions of Accreted Value of Capital Appreciation Bonds due at maturity or upon a Sinking Fund Installment are included in the calculations of accrued and unpaid and accruing interest or Principal Installments in such manner and during such period of time as is specified in the Supplemental Resolution authorizing such Capital Appreciation Bonds.
Adjusted Aggregate Bond Service: For any period, and as of any date of calculation, the Aggregate Bond Service during such period for all Series of Power Revenue Bonds, except that, if any Refundable Principal Installment for any Series of Power Revenue Bonds is included in Aggregate Bond Service for such period, Adjusted Aggregate Bond Service shall mean Aggregate Bond Service determined as if each such Refundable Principal Installment had been payable, over a period extending from the due date of such Principal Installment through the later of the 35th anniversary of the issuance of such Series of Power Revenue Bonds or the 10th anniversary of the due date of such Principal Installment, in installments which would have required equal annual payments of principal and interest over such period. Interest deemed payable in any fiscal year after the actual due date of any Refundable Principal Installment of any Series of Power Revenue Bonds shall be calculated at the average rate of interest actually payable on the Power Revenue Bonds of such Series at the time the calculation is made (using the true, actuarial method of calculation) or such higher rate as Platte River determines appropriate.
Aggregate Bond Service: For any period, and as of any date of calculation, the sum of the amounts of Bond Service for all Series of Power Revenue Bonds for such period; provided,
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however, that for purposes of estimating Aggregate Bond Service for any future period, the principal of any Option Bonds Outstanding during such period shall be assumed to be payable on the stated maturity dates thereof or on any Sinking Fund Installment dates applicable thereto. Principal and interest portions of the Accreted Value of Capital Appreciation Bonds due at maturity or upon a Sinking Fund Installment are included in the calculations of accrued and unpaid and accruing interest or Principal Installments in such manner and during such period of time as is specified in the Supplemental Resolution authorizing such Capital Appreciation Bonds.
Bond Reserve Account Installments: Substantially equal monthly payments to be made by Platte River into the Bond Reserve Account established under the Power Bond Resolution pursuant to the provisions of the Power Bond Resolution permitting funding of the Bond Reserve Account Requirement during the 60 months after issuance of a Series of Power Revenue Bonds.
Bond Reserve Account Requirement: As of any calculation date an amount equal to the lesser of (i) Maximum Adjusted Aggregate Bond Service less the total amount of unaccrued Bond Reserve Account Installments or (ii) the amount established as the maximum Bond Reserve Account Requirement in any Supplemental Resolution authorizing a new Series of Power Revenue Bonds; provided that no subsequent Supplemental Resolution shall reduce the clause (ii) maximum amount established under a previous Supplemental Resolution so long as any Power Revenue Bonds authorized under such previous Supplemental Resolution are deemed Outstanding, without consent of the owners of 60% of such Outstanding Power Revenue Bonds.
Bond Service: For any period, and as of any date of calculation, and with respect to any Series, an amount equal to the sum of (i) interest accruing during such period on the Power Revenue Bonds of such Series provided that interest is excluded to the extent Escrowed Interest is available to pay such interest, and (ii) that portion of each Principal Installment for the Power Revenue Bonds of such Series which would accrue during such period if each such Principal Installment were deemed to accrue daily in equal amounts from the next preceding Principal Installment due date for such Series (or, (a) if there shall be no such preceding Principal Installment due date, or (b) if such preceding Principal Installment due date is more than one year prior to the due date of such Principal Installment, then from the later of a date one year preceding the due date of such Principal Installment and the date of issuance of the Power Revenue Bonds of such Series). Such interest and Principal Installments for such Series shall be calculated on the assumption that (x) no Power Revenue Bonds (except for Option Bonds actually tendered for payment and not purchased in lieu of redemption prior to the redemption date thereof) of such Series Outstanding at the date of calculation will cease to be Outstanding except by reason of the payment of each Principal Installment for the Power Revenue Bonds of such Series on the due date thereof and (y) the principal amount of Option Bonds tendered for payment and not purchased in lieu of redemption before the redemption date thereof shall be deemed to accrue on the date required to be paid pursuant to such tender. Principal and interest portions of the Accreted Value of Capital Appreciation Bonds due at maturity or upon a Sinking Fund Installment are included in the calculations of accrued and unpaid and accruing interest or Principal Installments in such manner and during such period of time as is specified in the Supplemental Resolution authorizing such Capital Appreciation Bonds.
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Capital Appreciation Bonds: Any Power Revenue Bonds as to which (i) no interest is payable or (ii) interest is payable only: (a) at the maturity or prior redemption of such Power Revenue Bonds or (b) from and after such earlier date (the “Interest Commencement Date”) as is specified in the Supplemental Resolution authorizing such Power Revenue Bonds. Power Revenue Bonds designated as Capital Appreciation Bonds pursuant to clause (ii) (b) of the prior sentence shall be considered to be Capital Appreciation Bonds only until the Interest Commencement Date. For the purposes of (1) receiving payment of the redemption price if a Capital Appreciation Bond is redeemed prior to maturity, (2) receiving payment of a Capital Appreciation Bond if the principal of all Power Revenue Bonds is declared immediately due and payable following an event of default as provided in the Power Bond Resolution, or (3) computing the principal amount of Power Revenue Bonds held by the registered owner of a Capital Appreciation Bond in giving to Platte River or the Trustee any notice, consent, request or demand pursuant to the Power Bond Resolution for any purpose whatsoever, the principal amount of a Capital Appreciation Bond shall be deemed to be its Accreted Value as of the relevant date.
Cost of Construction: With respect to any Project, Platte River’s costs of acquisition or construction, including but not limited to the costs of acquisition by or for Platte River of real or personal property or any interest therein, costs of physical construction, and costs of Platte River incidental to such acquisition or construction, the cost of acquisition of fuel supply (including amounts paid in respect of a termination or renegotiation of a fuel supply contract) and any reserve for fuel costs, the cost of any indemnity and surety bonds and premiums on insurance during construction, engineering expenses, legal fees and expenses, cost of audits, fees and expenses of the Trustee and paying agents and costs of training, testing, financing, Credit Facilities, administrative and general overhead and keeping accounts and making reports required by the Power Bond Resolution prior to the completion of construction of such Project, amounts, if any, required by the Power Bond Resolution to be paid into the Bond Fund or the Reserve and Contingency Fund established under the Power Bond Resolution upon the issuance of any Series of Power Revenue Bonds, payments when due (whether at the maturity of principal or the due date of interest or upon redemption) on any indebtedness of Platte River (other than the Power Revenue Bonds) incurred for such Project, costs of machinery, equipment and supplies and initial working capital and reserves required by Platte River for the commencement of operation of such Project, and the costs of preliminary and developmental work relating to any Project, and shall include reimbursement to Platte River for any such items of Cost of Construction theretofore paid by or on behalf of Platte River.
Credit Facility or Credit Facilities: Any letter or line of credit, policy of bond insurance, surety bond or guarantee or similar instrument issued by a financial, insurance or other institution and which provides security for Bond Service for Power Revenue Bonds or (except to the extent utilized to meet the Bond Reserve Account Requirement) which provides liquidity support for Power Revenue Bonds.
Cross-over Date: With respect to Cross-over Refunding Bonds, the date on which the principal portion of the related Cross-over Refunded Indebtedness Outstanding as of such date is to be paid or redeemed from the escrowed proceeds of such Cross-over Refunding Bonds or other funds available to Platte River and irrevocably deposited in such escrow for such purpose.
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Cross-over Refunded Indebtedness: Power Revenue Bonds intended to be refunded by Cross-over Refunding Bonds and as to which an irrevocable escrow sufficient for such purposes is in existence.
Cross-over Refunding Bonds: Power Revenue Bonds the proceeds of which are irrevocably deposited in escrow to secure the payment on a Cross-over Date of principal or redemption price as of such date of the Cross-over Refunded Indebtedness (or the principal or redemption price as of such date of such refunding Power Revenue Bonds under certain circumstances) and to secure payment of all interest on such refunding Power Revenue Bonds until the Cross-over Date.
Date of Commercial Operation: With respect to any Project, the date upon which such Project is completed and tested and is ready for commercial operation (or if a Project which is completed and tested and is ready for commercial operation is to be acquired, the date of such acquisition).
Effective Date means the earlier of the date on which (i) none of the presently Outstanding Power Revenue Bonds of Platte River are Outstanding or (ii) the holders of not less than 60% in aggregate principal amount of the sum of such presently Outstanding Power Revenue Bonds of Platte River, the Series JJ Bonds and any other Series of Power Revenue Bonds hereafter issued then Outstanding, as well as any other entities whose consent is required, have consented, or in the case of the Series JJ Bonds or any other Series of Power Revenue Bonds hereafter issued are deemed to have consented, to the provisions contained in the Eleventh Supplemental Power Bond Resolution to which the Effective Date pertains.
Electric Service Contracts: The four separate Amended Contracts for the Supply of Electric Power and Energy between Platte River and the Town of Estes Park, Colorado, the City of Fort Collins, Colorado, the City of Longmont, Colorado, and the City of Loveland, Colorado, respectively, all dated March 31, 1980, and each contract hereafter entered into between Platte River and a Power Purchaser designated in a Supplemental Resolution as an “Electric Service Contract” under the Power Bond Resolution, the term of which does not end earlier than the final maturity date of all Outstanding Power Revenue Bonds.
Escrowed Interest: (i) Interest on Power Revenue Bonds to be paid from amounts deposited in the Bond Service Account (including amounts transferred thereto from the Construction Fund) in connection with the issuance of Power Revenue Bonds or Subordinated Indebtedness or earnings on such amounts which are required to be applied to pay interest on Power Revenue Bonds during any period and (ii) amounts irrevocably deposited in the escrow in connection with the issuance of Cross-over Refunding Bonds or earnings on such amounts which are required to be applied to pay interest on such Cross-over Refunding Bonds.
Estimated Net Revenues: Based upon estimates prepared by the consulting engineer, or on and after the Effective Date prepared by the Authority, for any calendar year, the estimated Net Revenues for such year.
Generally Accepted Accounting Principles: Accounting principles, methods and terminology followed and construed, as nearly as practicable, in conformity with the accounting
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rules and regulations prescribed by the Federal Energy Regulatory Commission for privately owned power companies which are subject to its jurisdiction and engaged in business comparable to the business of Platte River, as amended from time to time.
Investment Securities: Any of the following, if and to the extent the same are at the time legal for investment of Platte River funds:
(a) Direct obligations of or obligations the principal of and interest on which are guaranteed by the United States of America;
(b) Any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state (i) which are not callable prior to maturity or as to which irrevocable instructions have been given to the trustee of such bonds or other obligations by the obligor to give due notice of redemption and to call such bonds for redemption on the date or dates specified in such instructions (and which are not callable at an earlier date than the date specified in such instructions), (ii) which are secured as to principal and interest and redemption premium, if any, by a fund consisting only of cash or bonds or other obligations of the character described in clause (a) hereof, which fund may be applied only to the payment of such principal of and interest and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (iii) as to which the principal of and interest on the bonds and obligations of the character described in clause (a) hereof which have been deposited in such fund along with any cash on deposit in such fund are sufficient to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this clause (b) on the maturity date or dates thereof or on the redemption date or dates specified in the irrevocable instructions referred to in subclause (i) of this clause (b), as appropriate;
(c) Bonds, debentures or notes or other evidence of indebtedness issued by any of the following agencies: Bank for Cooperatives; Federal Intermediate Credit Banks; Federal Home Loan Mortgage Corporation; Federal Land Banks; the Federal National Mortgage Association; the United States Postal Service; the Tennessee Valley Authority; the Federal Housing Administration; the Federal Financing Bank; or any agency or instrumentality of the United States of America which shall be established for the purposes of acquiring the obligations of any of the foregoing or otherwise providing financing therefor; and
(d) Any other investments permitted under Colorado law.
Maintenance and Operation Costs: Platte River’s expenses of maintaining and operating the System or charges made therefor in conformity with Generally Accepted Accounting Principles, including amounts reasonably required to be set aside in reserves for such items the payment of which is not then immediately required, and including, but not limited to, all expenses for ordinary repairs, renewals and replacements of the System; salaries and wages; employees’ health, hospitalization, pension and retirement expenses; fees for services, materials and supplies; rents; administrative and general expenses; insurance expenses; legal, engineering, accounting and financial advisory fees and expenses and costs of other consulting and technical services; taxes; payments in lieu of taxes and other governmental charges; fuel costs, including
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the leasing of nuclear fuel; costs of purchased power and transmission service; and any other current expenses or obligations required to be paid by Platte River under the Power Bond Resolution or by law, all to the extent properly allocable to the System; and the fees and expenses of the Trustee and any paying agent. Such costs do not include depreciation or obsolescence charges or reserves therefor; amortization of bonded or other indebtedness of Platte River; costs, or charges made therefor, for capital additions, replacements, betterments, extensions or improvements to or retirements from the System which under Generally Accepted Accounting Principles are properly chargeable to the capital account or the reserve for depreciation; losses from the sale, abandonment, reclassification, revaluation or other disposition of any properties of the System; nor such property items, including taxes and fuel, which are capitalized by Platte River.
Maximum Adjusted Aggregate Bond Service: As of any date of calculation, the Adjusted Aggregate Bond Service as computed for the calendar year in which such sum is the largest. For purposes of the foregoing calculation, it shall be assumed that Variable Rate Bonds will bear interest during any period at a constant rate per annum equal to (i) the rate of interest borne by such Power Revenue Bonds when initially issued plus (ii) one half of the difference between the maximum rate of interest which such Power Revenue Bonds may bear at any time and (i). For purposes of the foregoing calculation, Cross-over Refunding Bonds shall not be considered to be Outstanding under the Power Bond Resolution until and after the application of the proceeds of such Cross-over Refunding Bonds to payment of the principal or redemption price of the Cross-over Refunded Indebtedness refunded thereby on the applicable Cross-over Date.
Net Revenues: For any period, the Revenues during such period, determined on an accrual basis plus (i) the amounts, if any, paid from the Rate Stabilization Reserve Account into the Revenue Fund established under the Power Bond Resolution during such period (other than amounts representing interest earnings credited from such Account to the Revenue Fund pursuant to the Power Bond Resolution), and minus (ii) the sum of (a) Maintenance and Operation Costs during such period, determined on an accrual basis, to the extent paid or to be paid from Revenues and (b) the amounts, if any, paid from the Revenue Fund into the Rate Stabilization Reserve Account during such period.
Option Bonds: Power Revenue Bonds which by their terms may be tendered by and at the option of the owner thereof for payment prior to the stated maturity thereof, or the maturities of which may be extended by and at the option of the owner thereof.
Outstanding: As of any date of calculation, all Power Revenue Bonds executed, issued and delivered by Platte River and authenticated by the Trustee under the Power Bond Resolution, but not held by Platte River, except (i) Power Revenue Bonds canceled by or surrendered to the Trustee for cancellation, (ii) Power Revenue Bonds in substitution for which other Power Revenue Bonds have been executed, issued and delivered by Platte River and authenticated by the Trustee under the Power Bond Resolution, (iii) upon proper notice given in accordance with the Power Bond Resolution, Power Revenue Bonds or portions thereof for the payment or redemption of which moneys sufficient under the Power Bond Resolution shall be held in irrevocable trust for such payment or redemption (whether at or prior to the maturity or redemption date), and (iv) Power Revenue Bonds defeased in accordance with the Power Bond Resolution.
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Power Purchaser: Any entity which operates an electric system and which shall have entered into a contract with Platte River having terms as described under the definition of Electric Service Contracts.
Principal Installment: As of any date of calculation, and with respect to any Series of Power Revenue Bonds, so long as any Power Revenue Bonds thereof are Outstanding, (i) the principal amount of Power Revenue Bonds (including the principal amount of any Option Bonds tendered for payment and not purchased in lieu of redemption prior to the redemption date thereof) of such Series due on a certain future date for which no Sinking Fund Installments have been established, or (ii) the unsatisfied balance (determined as provided in the definition of Sinking Fund Installment) of any Sinking Fund Installment due on a certain future date for Power Revenue Bonds of such Series, plus the amount of the sinking fund redemption premiums, if any, which would be applicable upon redemption of such Power Revenue Bonds on such future date in a principal amount equal to such unsatisfied balance of such Sinking Fund Installment, or (iii) if such future dates coincide as to different Power Revenue Bonds of such Series, the sum of such principal amount of Power Revenue Bonds and of such unsatisfied balance of such Sinking Fund Installment due on such future date plus such applicable redemption premiums, if any.
Project: A power generating facility to be acquired or constructed by Platte River or a power generating facility to be added to an existing power generating facility of Platte River (in each case including related transmission and transformation facilities); any transmission or transformation facility acquired or constructed (in each case, in whole or in part) by Platte River; any mine, well, pipeline, plant, structure or other facility for the development, production, manufacture, storage, transportation, fabrication or processing of fossil or nuclear fuel of any kind (including any fuel supply contract) or any facility or rights with respect to the supply of water, in each case for use, in whole or in major part, in any of Platte River’s generating plants (or, where Platte River will acquire a proportionate interest in any of the foregoing to be constructed or otherwise acquired by a joint venture or other cooperative arrangement, the interest of Platte River therein); the right of Platte River to receive a power supply or transmission capacity by making a prepayment of capital costs associated therewith; any additions, repairs, renewals and replacements, improvements or expansions of the System; and preliminary and developmental work in connection with the planning and development of power resources and the determination of the feasibility thereof, or any one or more of the foregoing, as designated in a Supplemental Resolution.
Rate Stabilization Reserve Account: Any account within the General Fund established under the Power Bond Resolution designated as such by a Supplemental Resolution.
Refundable Principal Installment: Any Principal Installment for any Series of Power Revenue Bonds which Platte River intends to pay with moneys other than Revenues received in the year such Principal Installment comes due; provided that such intent shall have been expressed in the Supplemental Resolution authorizing such Series of Power Revenue Bonds; and provided further that (unless there are available on such date amounts sufficient to pay in full such Refundable Principal Installment) such Principal Installment shall be a Refundable Principal Installment only through the penultimate day of the month preceding the month in which such Principal Installment comes due or such earlier time as Platte River no longer intends
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to pay such Principal Installment with moneys other than Revenues received in the year such Principal Installment comes due.
Revenues: All revenues, income, rents and receipts derived by Platte River from or attributable to the ownership and operation of the System, including all revenues attributable to the System received by Platte River under the Electric Service Contracts or under any other contract for the sale of power or other services from the System or any lease or other contractual arrangement with respect to the use of the facilities of the System or the services, output or capacity thereof or from the sale of any property of the System permitted under the Power Bond Resolution and the proceeds of any insurance covering business interruption loss relating to the System, all as determined in accordance with Generally Accepted Accounting Principles, and all interest, profits or other income derived from the investment of any moneys held pursuant to the Power Bond Resolution and required to be paid into the Revenue Fund. “Revenues” does not include the proceeds of Power Revenue Bonds (including Cross-over Refunding Bonds) or investment income thereon which is required to pay principal of Cross-over Refunding Bonds or Cross-over Refunded Indebtedness or which constitute Escrowed Interest.
Series: All of the Power Revenue Bonds designated as being of the same series authenticated and delivered on original issuance in a simultaneous transaction, and any Power Revenue Bonds thereafter authenticated and delivered in lieu thereof or in substitution therefor pursuant to the Power Bond Resolution.
Sinking Fund Installment: An amount of principal of a Series of Power Revenue Bonds designated as a sinking fund installment in a Supplemental Resolution authorizing the issuance of such Series of Power Revenue Bonds.
Subordinated Indebtedness: Any evidence of debt referred to in, and complying with the provisions of, the Power Bond Resolution described under “Subordinated Indebtedness” below.
Supplemental Resolution: Any resolution in full force and effect which is designated as such, which purports to supplement or amend the terms of the Power Bond Resolution (in connection with authorization of a Series of Power Revenue Bonds or otherwise) and which has been duly adopted by Platte River’s Board of Directors, but only if and to the extent that such resolution is adopted in accordance with the provisions of the Power Bond Resolution.
System: The entire electric power and energy system of Platte River, including all the existing electric production, transmission, distribution and general plant facilities of Platte River and all the electric production, transmission, distribution and general plant and other related facilities and all Projects of Platte River, together with all additions, betterments, extensions and improvements to said electric power and energy system or any part thereof made and together with all lands, easements and rights of way of Platte River and all other works, property or structures of Platte River and contract rights and other tangible and intangible assets of Platte River used or useful in connection with or related to said electric power and energy system, including any and all rights of Platte River under all Electric Service Contracts.
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Valuation Date: With respect to any Capital Appreciation Bonds the date or dates set forth in the Supplemental Resolution authorizing such Power Revenue Bonds on which specific Accreted Values are assigned to the Capital Appreciation Bonds.
Variable Rate Bond: Any Power Revenue Bond not bearing interest throughout its term at a specified rate or specified rates determined at the time of issuance of the Series of Power Revenue Bonds of which such Power Revenue Bond is one; provided that any Power Revenue Bond which was a Variable Rate Bond at issuance, the interest rate on which shall have been subsequently converted to a fixed rate to maturity shall no longer be considered a Variable Rate Bond from and after the date of such conversion.
[Power Bond Resolution, Section 1.01 and Eleventh Supplemental Power Bond Resolution, Section 1.02]. Pledge of Revenues and Funds
The payment of the principal and redemption price of, and interest on, the Power Revenue Bonds is secured by the Revenues and certain funds established by the Power Bond Resolution. The pledge of Revenues is subject to the payment of all reasonable and necessary Maintenance and Operation Costs as they become due and payable.
[Power Bond Resolution, Sections 5.01, 5.04, 5.05 and 5.06]. Additional Parity Power Revenue Bonds Prior to the Effective Date
Completion of Projects: Platte River may issue additional Series of parity Power Revenue Bonds in compliance with the Power Bond Resolution for the purpose of completing any Project for which Power Revenue Bonds have theretofore been issued without the necessity of satisfying any earnings test.
Additional Projects: Platte River may issue additional Series of parity Power Revenue Bonds in compliance with the Power Bond Resolution for the purpose of initiating any new Project if, among other things, (i) the Net Revenues for any period of 12 consecutive calendar months out of the 24 calendar months next preceding the issuance of such Power Revenue Bonds were at least equal to 1.10 times the sum of the Adjusted Aggregate Bond Service during such 12-month period, (ii) such Project can be beneficially used by Platte River to meet the long-term power and energy requirements of Power Purchasers (and as to any calendar year referred to in (iii) below in which the entire energy, capacity, use or services of such Project is not needed to meet such requirements of Power Purchasers, and in which a part of the Estimated Net Revenues referred to in (iii) below are estimated to be derived from sales of surplus energy or capacity or the furnishing of use or services of such Project to other than Power Purchasers, there is a market for such surplus at the rates used in computing that part of Estimated Net Revenues applicable to such sale or furnishings to others), and (iii) the Estimated Net Revenues (giving effect to the completion of all uncompleted Projects) for each of the five calendar years succeeding the latest estimated Date of Commercial Operation of any uncompleted Project (together with the then current calendar year and each succeeding calendar year through the calendar year of such estimated Date of Commercial Operation, if no interest during construction is funded) are not
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less than 1.10 times the sum of the Adjusted Aggregate Bond Service for each of such calendar years for all Series of Power Revenue Bonds estimated to be Outstanding during such years. Satisfaction of the above tests is to be evidenced by certain certificates to be delivered by Platte River, a qualified independent engineer and an independent certified accountant. In the event one or more additional Series of Power Revenue Bonds will be required to complete a Project or in the event Variable Rate Bonds have been issued, the Adjusted Aggregate Bond Service shall be calculated on the following basis: with respect to (a) any Power Revenue Bonds which are not Outstanding on the date the required Platte River certificate is delivered but which are projected to be issued during the period covered by such project certificate, and (b) any Variable Rate Bonds Outstanding on the date such certificate is delivered, Platte River shall estimate the Bond Service on such Power Revenue Bonds upon such assumptions as Platte River shall consider reasonable and set forth in such certificate, including assumptions with respect to the interest rate or rates to be borne by such Power Revenue Bonds and the amounts and due dates of the Principal Installments for such Power Revenue Bonds; provided, however, that the interest rate or rates assumed to be borne by any Variable Rate Bonds shall not be less than the interest rate borne by such Variable Rate Bonds at the time that Platte River delivers such certificate. In the event Cross-over Refunding Bonds have been issued, the Adjusted Aggregate Bond Service (in the case of refunded Power Revenue Bonds) shall be calculated for any period after the Cross-over Date related to such Cross-over Refunded Indebtedness on the assumption that the principal or redemption price of the Cross-over Refunded Indebtedness was paid on the Cross-over Date. If the additional parity Power Revenue Bonds are to be issued for the purpose of paying for a Project necessary to keep the System in good operating condition or to prevent a loss of Revenues therefrom, or to comply with the requirements of any governmental agency having jurisdiction over any facilities of the System, or for preliminary development of a Project, then the foregoing tests need not be satisfied.
[Power Bond Resolution, Sections 2.02 and 2.03]. Additional Parity Power Revenue Bonds Subsequent to the Effective Date
Completion of Projects: Platte River may issue additional Series of parity Power Revenue Bonds in compliance with the Power Bond Resolution for the purpose of completing any Project for which Power Revenue Bonds have theretofore been issued without the necessity of satisfying any earnings test.
Additional Projects: Platte River may issue additional Series of parity Power Revenue Bonds in compliance with the Power Bond Resolution for the purpose of initiating any new Project if, among other things, (i) the Net Revenues for any period of 12 consecutive calendar months out of the 24 calendar months next preceding the issuance of such Power Revenue Bonds were at least equal to 1.10 times the sum of the Adjusted Aggregate Bond Service during such 12-month period, (ii) such Project can be beneficially used by Platte River to meet the long-term power and energy requirements of Power Purchasers (and as to any calendar year referred to in (iii) below in which the entire energy, capacity, use or services of such Project is not needed to meet such requirements of Power Purchasers, and in which a part of the Estimated Net Revenues referred to in (iii) below are estimated to be derived from sales of surplus energy or capacity or the furnishing of use or services of such Project to other than Power Purchasers, there is a market for such surplus at the rates used in computing that part of Estimated Net Revenues applicable to
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such sale or furnishings to others), and (iii) the Estimated Net Revenues (giving effect to the completion of all uncompleted Projects) for each of the five calendar years succeeding the latest estimated Date of Commercial Operation of any uncompleted Project (together with the then current calendar year and each succeeding calendar year through the calendar year of such estimated Date of Commercial Operation, if no interest during construction is funded) are not less than 1.10 times the sum of the Adjusted Aggregate Bond Service for each of such calendar years for all Series of Power Revenue Bonds estimated to be Outstanding during such years. Satisfaction of the above tests is to be evidenced by certain certificates to be delivered by Platte River and an independent certified accountant. In the event one or more additional Series of Power Revenue Bonds will be required to complete a Project or in the event Variable Rate Bonds have been issued, the Adjusted Aggregate Bond Service shall be calculated on the following basis: with respect to (a) any Power Revenue Bonds which are not Outstanding on the date the required Platte River certificate is delivered but which are projected to be issued during the period covered by such project certificate, and (b) any Variable Rate Bonds Outstanding on the date such certificate is delivered, Platte River shall estimate the Bond Service on such Power Revenue Bonds upon such assumptions as Platte River shall consider reasonable and set forth in such certificate, including assumptions with respect to the interest rate or rates to be borne by such Power Revenue Bonds and the amounts and due dates of the Principal Installments for such Power Revenue Bonds; provided, however, that the interest rate or rates assumed to be borne by any Variable Rate Bonds shall not be less than the interest rate borne by such Variable Rate Bonds at the time that Platte River delivers such certificate. In the event Cross-over Refunding Bonds have been issued, the Adjusted Aggregate Bond Service (in the case of refunded Power Revenue Bonds) shall be calculated for any period after the Cross-over Date related to such Cross-over Refunded Indebtedness on the assumption that the principal or redemption price of the Cross-over Refunded Indebtedness was paid on the Cross-over Date. If the additional parity Power Revenue Bonds are to be issued for the purpose of paying for a Project necessary to keep the System in good operating condition or to prevent a loss of Revenues therefrom, or to comply with the requirements of any governmental agency having jurisdiction over any facilities of the System, or for preliminary development of a Project, then the foregoing tests need not be satisfied.
[Eleventh Supplemental Power Bond Resolution, Section 4.02]. Refunding Power Revenue Bonds
One or more Series of Power Revenue Bonds may be issued to refund, immediately or by defeasance or by redemption on a specified Cross-over Date, any Outstanding Power Revenue Bonds or to repay any borrowing the proceeds of which shall have been applied to the payment of the amount due with respect to any Refundable Principal Installment. Power Revenue Bonds issued for such purposes shall not be subject to any earnings test.
[Power Bond Resolution, Section 2.04]. Subordinated Indebtedness
Platte River may, at any time, or from time to time, issue evidences of indebtedness payable out of, and which may be secured by a pledge of, such amounts in the General Fund as
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may from time to time be available; provided, however, that such pledge shall be and shall be expressed to be subordinate in all respects to the pledge of the Revenues, moneys, securities and funds created by the Power Bond Resolution.
[Power Bond Resolution, Section 5.11]. Funds Established and Allocation of Revenues
The Resolution establishes the following funds (“Funds”) for the application of Revenues:
Fund Held By Construction Fund Platte River Revenue Fund Platte River Bond Fund Trustee Reserve and Contingency Fund Platte River General Fund Platte River
All Revenues shall be deposited in the Revenue Fund. Moneys in the Revenue Fund
shall be used to pay all reasonable and necessary Maintenance and Operation Costs as they become due and payable, and maintain reserves therefor, including a reserve for acquisition of fuel. As soon as practicable in each month and after the payment of Maintenance and Operation Costs for such month, but in any case prior to the end of such month, moneys shall be paid from the Revenue Fund to the following Funds in the order of priority as follows:
1. To the Bond Fund: (i) for credit to the Bond Service Account therein, the amount required so that the balance in said Account shall equal the Accrued Aggregate Bond Service; provided that, for the purposes of computing the amount in said Account, there shall be excluded the amount, if any, set aside in said Account which was deposited therein from the proceeds of Power Revenue Bonds less an amount equal to the interest accrued and unpaid and to accrue on Bonds to the last day of the then current calendar month; and (ii) subject to the two provisos hereinafter stated, for credit to the Bond Reserve Account therein, the amount, or a Credit Facility in the amount, if any, required for such Account after giving effect to any Credit Facility theretofore deposited into such Account, to equal the Bond Reserve Account Requirement; provided, however, that any deficiency in such Account, after giving effect to any Credit Facility available to such Account, other than a deficiency attributable to a withdrawal of amounts therefrom to cure any deficiencies in the Bond Service Account, shall be cured by depositing into such Account each month during the twelve-month period, commencing with the month following the determination of the deficiency, an amount equal to one-twelfth of the deficiency except that if a new valuation of the Investment Securities held in such Account is made during the period that such deposits are required, then the obligation of Platte River to make deposits during the balance of such period on the basis of the preceding valuation shall be discharged and the deposits, if any, required to be made for the balance of the period shall be determined under this proviso on the basis of the new valuation; provided, further, however, that if Platte River shall issue a Series of Power Revenue Bonds on a date occurring during such twelve-month period, all of the deposits accruing during the balance of such twelve-month period following the
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date of delivery of such Series of Power Revenue Bonds shall be deposited into the Account no later than such date of delivery.
2. To the Reserve and Contingency Fund, an amount equal to not less than 3/100 of 1% of the net depreciable plant in service at the end of such month, until there shall be on deposit in said Fund the greater of (i) 2% of the net depreciable plant in service, or (ii) such greater amount as may be required by any Supplemental Resolution.
3. To the Rate Stabilization Reserve Account within the General Fund, if any, the amount required or permitted to be deposited therein by the annual budget of Platte River or by Supplemental Resolution, and to the General Fund, the remaining balance, if any, of moneys in the Revenue Fund (other than the fuel reserve and the general reserve for items of Maintenance and Operation Costs the payment of which is not then immediately required) after making the above deposits.
So long as there shall be held in the Bond Fund an amount sufficient to fully pay all Outstanding Power Revenue Bonds in accordance with their terms (including principal or applicable sinking fund redemption price and interest thereon), no deposits shall be required to be made into the Bond Fund.
[Power Bond Resolution, Sections 5.02, 5.04, 5.05 and 5.06]. Bond Fund
The Trustee shall pay from the Bond Service Account in the Bond Fund the amounts required (i) for the payment of interest and Principal Installments on the Power Revenue Bonds when due, (ii) on or before any redemption date of Power Revenue Bonds, for payment of the principal of and any premium and accrued interest on the redemption of Bonds and the purchase price on the purchase of Power Revenue Bonds, through application of moneys accumulated in the Bond Service Account when applied at least 60 days prior to the due date of a Sinking Fund Installment to the retirement of the balance of such Installment, and (iii) accrued interest included in the purchase price of Power Revenue Bonds purchased for retirement.
If on the last business day of any month the amount in the Bond Service Account shall be less than the amount required to be in said Account, the Trustee shall apply amounts from the Bond Reserve Account to the extent necessary to make good the deficiency.
Upon issuance of any Series of Power Revenue Bonds, Platte River shall provide for deposits to the Bond Reserve Account (from Power Revenue Bond proceeds, a Credit Facility or other available sources of Platte River) sufficient to make such Account equal to the Bond Reserve Account Requirement. Platte River may, upon the issuance of any Series of Power Revenue Bonds, elect to fund the amount described in the preceding sentence over a period of 60 months by crediting to such Account monthly, commencing with the month next succeeding the month in which such Series of Power Revenue Bonds are delivered, amounts, or Credit Facilities, in substantially equal installments to accumulate or reaccumulate the amount required for such Account to equal, apart from such installments, the Bond Reserve Account Requirement by not more than 60 such monthly payments.
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A Credit Facility may be deposited into the Bond Reserve Account to satisfy the Bond Reserve Requirement only to the extent that such Credit Facility meets the requirements of this paragraph. The Credit Facility so deposited must be an irrevocable surety bond, an insurance policy, a letter of credit or similar obligation. The surety bond, insurance policy, letter of credit or other similar obligation shall be payable (upon the giving of notice as required thereunder) on any due date on which moneys will be required to be withdrawn from the Bond Reserve Account and applied to the payment of a Principal Installment of or interest on any Power Revenue Bonds and such withdrawal cannot be met by amounts on deposit in the Bond Reserve Account. The insurer providing such surety bond or insurance policy shall be an insurer whose municipal bond insurance policies insuring the payment, when due, of the principal of and interest on municipal bond issues results in such issues being rated in the highest rating category by both Moody’s Investors Service (“Moody’s”) and Standard and Poor’s Corporation (“S&P”) (unless either such agency is no longer in the business of rating municipal bond issues, in which case such agency’s rating is not required). The letter of credit issuer shall be a bank or trust company which on the date of issuance of the letter of credit has an outstanding unsecured, uninsured and unguaranteed debt issue which is rated not lower than the second highest rating category by Moody’s and S&P (except as set forth above). The issuer of any other similar obligation shall have the qualifications set forth in a Supplemental Resolution authorizing the issuance of a Series of Power Revenue Bonds. If a disbursement is made pursuant to a surety bond, an insurance policy, a letter of credit or any other similar obligation, Platte River shall within twelve months either (i) reinstate the maximum limits of such surety bond, insurance policy, letter of credit or other similar obligation or (ii) deposit into the Bond Reserve Account funds in the amount of the disbursement made under such surely bond, insurance policy, letter of credit or other similar obligation, or a combination of such alternatives, as shall provide that the amount in the Bond Reserve Account equals the Bond Reserve Account Requirement. In the event that the rating attributable to any insurer providing any surety bond, insurance policy or other similar obligation or any bank or trust company providing any letter of credit or other similar obligation held as above provided in the Bond Reserve Account shall fall below that required as above provided, Platte River shall within twelve months either (a) replace such surety bond, insurance policy, letter of credit or other similar obligation with a surety bond, insurance policy, letter of credit or other similar obligation which shall meet the above provided requirements or (b) deposit into the Bond Reserve Account sufficient funds, or a combination of such alternatives, as shall provide that the amount in the Bond Reserve Account equals the Bond Reserve Account Requirement.
Whenever the value of the Bond Reserve Account, after giving effect to any Credit Facility deposited in such Account, shall exceed the Bond Reserve Account Requirement, the excess shall be applied in the same manner as Revenues.
Whenever the amount in the Bond Reserve Account, excluding any amounts represented by a Credit Facility, together with the amount in the Bond Service Account, is sufficient to pay in full all Outstanding Power Revenue Bonds in accordance with their terms, including principal or applicable sinking fund redemption price and interest thereon, the amounts on deposit in the Bond Reserve Account shall be transferred to the Bond Service Account.
[Power Bond Resolution, Sections 5.07 and 5.08].
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Reserve and Contingency Fund
Platte River shall use moneys in the Reserve and Contingency Fund to pay the cost of major renewals and replacements (including damage restoration costs not covered by insurance) and to pay extraordinary Maintenance and Operation Costs, and contingencies, or to pay other costs necessary to maintain the System in good operating condition and such moneys may be applied from time to time to establish self-insurance as permitted by the Power Bond Resolution.
Whenever moneys and securities in the Reserve and Contingency Fund shall exceed the amount required to be on deposit therein and are not required to meet any deficiencies in the Bond Fund or needed for the purpose for which the Reserve and Contingency Fund was established, such excess shall be deposited in the General Fund.
[Power Bond Resolution, Section 5.09]. General Fund
Amounts in the General Fund will be available to make up deficiencies in the Bond Service Account or in the Bond Reserve Account.
Platte River shall use and apply amounts in the Rate Stabilization Reserve Account, if any, to make transfers to the Revenue Fund or otherwise as required or permitted by a Supplemental Resolution.
Amounts in the General Fund not required for the foregoing transfers and not pledged to the payment of Subordinated Indebtedness may be required to be transferred to the Project Account for any Project in the Construction Fund, and any remaining amounts therein may be applied to any one or more of the following:
(1) transfer to the Revenue Fund;
(2) to any fund or account established to pay the costs of the purchase and redemption of any Power Revenue Bonds and expenses therewith;
(3) payment of Subordinated Indebtedness;
(4) payments into any Project Account in the Construction Fund;
(5) improvements, extensions, betterments, renewals and replacements of the System; and
(6) any other lawful purposes of Platte River in connection with the System.
[Power Bond Resolution, Section 5.10].
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Construction Fund
The Power Bond Resolution establishes a Construction Fund, to be held by Platte River (unless otherwise required by a Supplemental Resolution), with a separate Project Account therein for each project for Platte River. The Power Bond Resolution provides that there shall be paid into the Construction Fund: (i) the balance of construction Power Revenue Bond proceeds remaining after the deposits required by the applicable Supplemental Resolution to be made in the Bond Service Account and Bond Reserve Account and other required deposits; and (ii) insurance proceeds, if any, from physical loss of or damage to a Project, or of contractors’ performance bond proceeds with respect thereto. In addition there may be paid into the Construction Fund, at the option of Platte River, any moneys received for or in connection with the System by Platte River from any other source, unless required to be otherwise applied as provided by the Power Bond Resolution.
Amounts in each Project Account in the Construction Fund shall be applied to the purpose or purposes specified in the Supplemental Resolution authorizing the Power Revenue Bonds issued with respect to such Project, or if no Power Revenue Bonds are so issued, as provided for in a resolution of the Board of Directors of Platte River. To the extent that other moneys are not available therefor, amounts in the Construction Fund shall be applied to the payment of principal of and interest on Power Revenue Bonds when due.
[Power Bond Resolution, Section 5.03]. System Rate Covenant
Platte River covenants that it will establish, fix, prescribe and collect rates and charges for the sale or use of electric power and energy or related services produced, transmitted, distributed or furnished by the System which are reasonably expected to yield Net Revenues for the forthcoming 12-month period equal to at least 1.10 times the sum of Adjusted Aggregate Bond Service for such period; provided, however, that any Principal Installment which is a Refundable Principal Installment may be excluded from Adjusted Aggregated Bond Service for purposes of the foregoing, but only to the extent Platte River intends to pay such Principal Installment from sources other than Revenues collected during such period. Platte River, promptly upon any material change in the circumstances which were contemplated at the time such rates and charges were most recently reviewed, but not less frequently than once in each calendar year, shall review the rates and charges for electric power and energy and such related services and shall promptly revise such rates and charges as necessary to comply with the foregoing requirement, provided that such rates and charges shall in any event produce moneys sufficient to enable Platte River to comply with all its covenants under the Power Bond Resolution. In estimating Adjusted Aggregate Bond Service on any Variable Rate Bonds for purposes of this covenant, Platte River shall be entitled to assume that such Variable Rate Bonds will bear such interest rate or rates as Platte River shall determine; provided, however, that the interest rate or rates assumed shall not be less than the interest rate borne by such Variable Rate Bonds at the time such estimate is made.
[Power Bond Resolution, Section 6.12].
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Certain Other Covenants
Construction of Projects
Once Platte River has determined to construct a Project, it will promptly commence or cause to be commenced the construction of such Project, and will continue or cause to be continued the same to completion with all practicable dispatch, except as otherwise provided with regard to reconstruction of a damaged or destroyed Project (see “Reconstruction of the System” below), and such Project will be constructed in a sound and economical manner.
[Power Bond Resolution, Section 6.02].
Against Encumbrances
Platte River will not create, and will use its best efforts to prevent the creation of, any mortgage or lien upon the System or any property essential to the proper operation of the System or to the maintenance of the Revenues (except those arising from construction of a Project or System improvements or those not yet due or being contested in good faith). Platte River will not create, or permit the creation of, any pledge, lien, charge or encumbrance upon the Revenues except only as provided in or permitted by the Power Bond Resolution.
[Power Bond Resolution, Sections 6.03 and 6.08].
Disposition of Properties
Platte River will not sell or otherwise dispose of any property essential to the proper operation of the System or to the maintenance of the Revenues. Platte River will not enter into any lease or agreement which impairs or impedes the operation of the System or which impairs or impedes the rights of the bondholders with respect to the Revenues.
[Power Bond Resolution, Section 6.04].
Maintenance and Operation of System
Platte River will operate the System continuously, to the extent practicable given conditions as they may arise, will maintain or cause to be maintained the System in its entirety in good working condition, and will make or cause to be made all necessary repairs or replacements so that the business of producing, transmitting and distributing electric power and energy may at all times be properly conducted in a manner consistent with prudent management.
[Power Bond Resolution, Section 6.05].
Maintenance of Revenues, Electric Service Contracts
Platte River will at all times comply with all terms, covenants and provisions, express and implied, of all contracts and agreements entered into by it for electric power and energy furnished by or available to the System, and all other contracts or agreements affecting or
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involving the System of the business of Platte River with respect thereto. Platte River shall promptly collect all charges due for electric power and energy supplied by it as the same become due, and shall at all times maintain and promptly and vigorously enforce its rights against any person who does not pay such charges when due. Platte River shall enforce the provisions of the Electric Service Contracts and duly perform its covenants and agreements thereunder, and covenants that it will not consent or agree to or permit, any rescission of or amendment to any Electric Service Contract which will in any manner impair or adversely affect the rights of Platte River thereunder or the rights or security of the bondholders under the Power Bond Resolution.
[Power Bond Resolution, Section 6.06].
Insurance
Subject to the condition that insurance is available at reasonable rates and upon reasonable terms and conditions, Platte River will procure and maintain, or cause to be procured and maintained, insurance on the System in such amounts and against such risks as are usually insurable in connection with similar systems and are usually carried by electric utilities operating similar systems. Such insurance shall be adequate in amount as to the risks insured against, and shall be maintained with responsible insurers.
Anything in the Power Bond Resolution to the contrary notwithstanding, Platte River may become self-insured for all or any part of the foregoing requirements and shall be permitted to use reserves established in the Reserve and Contingency Fund for such purpose.
[Power Bond Resolution, Section 6.09].
Accounts and Reports
Platte River will at all times keep, or cause to be kept, proper books of record and accounts in accordance with Generally Accepted Accounting Principles in which complete and accurate entries shall be made of all transactions relating to the System and the Revenues.
Platte River will place on file with the Trustee annually within one hundred twenty days after the close of each fiscal year a financial statement in reasonable detail for the preceding fiscal year showing the Revenues, all expenditures from the Revenues for operation and maintenance of the System and other expenditures from the Revenues applicable to the System, together with a balance sheet in reasonable detail reflecting the financial condition of Platte River, including the balances of all funds relating to the System as of the end of the each fiscal year, which financial statement and balance sheet shall be accompanied by an accountant’s certificate.
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The reports, statements and other documents required to be furnished to the Trustee pursuant to any provisions of the Power Bond Resolution shall be available for inspection of bondholders at the office of the Trustee and shall be mailed to each bondholder, investment banker, security dealer or other person interested in the Bonds who shall file a written request therefor with Platte River.
[Power Bond Resolution, Section 6.10].
Eminent Domain Prior to Effective Date
The net proceeds resulting from the taking, by eminent domain or conveyance in lieu thereof, of all or any part of the System shall be deposited in a special fund with the Trustee who shall apply and disburse the same, as provided in the Power Bond Resolution, towards the payment of principal, interest and redemption premiums for any Outstanding Power Revenue Bonds. In the event such net proceeds are insufficient to complete such disbursement, Platte River shall request in writing that the Trustee (i) apply such net proceeds to the purchase, redemption or retirement of all Outstanding Power Revenue Bonds on a pro rata basis in the same proportion to which the principal amount of each Series then Outstanding bears to the principal amount of all Power Revenue Bonds then Outstanding, (ii) apply such proceeds to the cost of additions, betterments, extensions or improvements to the System shown, in a manner provided in the Power Bond Resolution, to have been suffered as a result of the eminent domain proceedings, provided that such an application of funds will, in Platte River’s sole judgment, sufficiently offset the loss of Revenues resulting from such proceedings so that the ability of Platte River to meet its obligations under the Power Bond Resolution will not be substantially impaired, or (iii) upon the ground that the eminent domain proceedings have had no material effect upon the security of the Power Revenue Bonds or upon Platte River’s ability to meet its obligations under the Power Bond Resolution (as attested to by a qualified independent engineer) the proceeds of such proceedings may be delivered to Platte River.
[Power Bond Resolution, Section 6.14].
Eminent Domain Subsequent to Effective Date
The net proceeds resulting from the taking, by eminent domain or conveyance in lieu thereof, of all or any part of the System shall be deposited in a special fund with the Trustee who shall apply and disburse the same, as provided in the Power Bond Resolution, towards the payment of principal, interest and redemption premiums for any Outstanding Power Revenue Bonds. In the event such net proceeds are insufficient to complete such disbursement, Platte River shall request in writing that the Trustee (i) apply such net proceeds to the purchase, redemption or retirement of all Outstanding Power Revenue Bonds on a pro rata basis in the same proportion to which the principal amount of each Series then Outstanding bears to the principal amount of all Power Revenue Bonds then Outstanding, (ii) apply such proceeds to the cost of additions, betterments, extensions or improvements to the System shown, in a manner provided in the Power Bond Resolution, to have been suffered as a result of the eminent domain proceedings, provided that such an application of funds will, in Platte River’s sole judgment, sufficiently offset the loss of Revenues resulting from such proceedings so that the ability of Platte River to meet its obligations under the Power Bond Resolution will not be substantially
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impaired, or (iii) upon the ground that the eminent domain proceedings have had no material effect upon the security of the Power Revenue Bonds or upon Platte River’s ability to meet its obligations under the Power Bond Resolution (as attested to by Platte River) the proceeds of such proceedings may be delivered to Platte River.
[Eleventh Supplemental Power Bond Resolution, Section 4.02].
Reconstruction of the System Prior to Effective Date
If any useful portion of the System shall be damaged or destroyed, Platte River shall, as expeditiously as possible, continuously and diligently prosecute or cause to be prosecuted the reconstruction or replacement thereof, unless Platte River shall file with the Trustee a certificate of a qualified independent engineer to the effect that such reconstruction or replacement is not in the interests of Platte River and the bondholders. In accordance with the Power Bond Resolution, the proceeds of insurance paid on account of such damage or destruction are to be applied to such reconstruction or replacement.
[Power Bond Resolution, Section 6.15].
Reconstruction of the System Subsequent to Effective Date
If any useful portion of the System shall be damaged or destroyed, Platte River shall, as expeditiously as possible, continuously and diligently prosecute or cause to be prosecuted the reconstruction or replacement thereof, unless Platte River shall file with the Trustee a certificate to the effect that such reconstruction or replacement is not in the interests of Platte River and the bondholders. In accordance with the Power Bond Resolution, the proceeds of insurance paid on account of such damage or destruction are to be applied to such reconstruction or replacement.
[Eleventh Supplemental Power Bond Resolution, Section 4.02].
No Free Service
None of the electric power and energy owned, controlled or supplied by Platte River shall be furnished or supplied free, but on the contrary shall always be sold or furnished so as to produce Revenues.
[Power Bond Resolution, Section 6.16].
No Further Prior Lien Bonds
Platte River covenants that it will not issue any bonds that have a lien on Revenues prior or superior to the lien thereon of the Power Revenue Bonds issued under the Power Bond Resolution.
[Power Bond Resolution, Section 6.21].
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Investment of Certain Funds
Moneys held in the Bond Service Account and the Bond Reserve Account in the Bond Fund, the Revenue Fund, the Reserve and Contingency Fund and the General Fund, may be invested and reinvested by Platte River (or, in the case of the aforementioned Accounts in the Bond Fund, by the Trustee upon instructions from Platte River) to the fullest extent practicable in Investment Securities that mature no later than such times as shall be necessary to provide moneys when needed for payments to be made from such funds; provided, however, that Investment Securities purchased with moneys in the Reserve and Contingency Fund or the General Fund must mature within five years, while Investment Securities purchased with moneys in the Bond Reserve Account must mature in no more than fifteen years. Net interest earned on any moneys or investments in the Revenue Fund, the Bond Fund, the Reserve and Contingency Fund and the General Fund shall be paid into the Revenue Fund (except to the extent required to be transferred to a rebate fund or account established in connection with a Series of Power Revenue Bonds).
[Power Bond Resolution, Section 10.03].
Defeasance
Any Outstanding Power Revenue Bonds of any Series or any maturity within a Series shall prior to the maturity or redemption date thereof be deemed to have been paid and shall cease to be entitled to any lien, benefit or security under the Power Bond Resolution if the following conditions are met: (i) in the case of Power Revenue Bonds to be redeemed, Platte River shall have given to the Trustee irrevocable instructions to mail the notice of redemption therefor, (ii) there shall have been deposited with the Trustee in trust either moneys in an amount which shall be sufficient, or Investment Securities of the type listed in clauses (a) and (b) in the definition of “Investment Securities” under the caption Certain Definitions above, the principal of and interest on which, when due, will provide moneys which, together with any moneys also deposited, shall be sufficient to pay when due the principal or redemption price, if applicable, and interest due or to become due on such Power Revenue Bonds, and (iii) in the event such Power Revenue Bonds are not to be redeemed or paid within the next succeeding 60 days, Platte River shall give the Trustee irrevocable instructions to mail, as soon as practicable, a notice to the owners of such Power Revenue Bonds that the above deposit has been made with the Trustee and that such Power Revenue Bonds are deemed to be paid and stating the maturity or redemption date upon which moneys are to be available to pay the principal or redemption price, if applicable, of such Power Revenue Bonds.
For purposes of determining whether Variable Rate Bonds shall be deemed to have been paid prior to the maturity or redemption date thereof, as the case may be, by the deposit of moneys or Investment Securities and moneys, if any, the interest to come due on such Variable Rate Bonds on or prior to the maturity date or redemption date thereof, as the case may be, shall be calculated at the maximum rate permitted by the terms thereof; provided, however, that if on any date, as a result of such Variable Rate Bonds having borne interest at less than such maximum rate for any period, the total amount of moneys and Investment Securities on deposit with the Trustee for the payment of interest on such Variable Rate Bonds is in excess of the total amount which would have been required to be deposited with the Trustee on such date in respect
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of the requirements of the immediately preceding paragraph, the Trustee shall, if requested by Platte River, pay the amount of such excess free and clear of any trust, lien, security interest, pledge or assignment securing such Variable Rate Bonds, to Platte River for deposit in the same manner as Revenues are required to be deposited.
Option Bonds shall be deemed to have been paid only if, in addition to satisfying the requirements of the first paragraph under this caption, there shall have been deposited with the Trustee moneys (including excess Bond Reserve Account moneys) in an amount which shall be sufficient to pay when due the maximum amount of principal of and premium, if any, and interest on such Power Revenue Bonds which could become payable to the owners of such Power Revenue Bonds upon the exercise of any options provided to the owners of such Power Revenue Bonds. If any portion of the moneys deposited with the Trustee for the payment of the principal of and premium, if any, and interest on Option Bonds is not required for such purpose the Trustee shall, if requested by Platte River, pay the amount of such excess free and clear of any trust, lien, security interest, pledge or assignment securing such Power Revenue Bonds, to Platte River for deposit in the same manner as Revenues are required to be deposited pursuant to the Power Bond Resolution.
[Power Bond Resolution, Section 11.01].
Events of Default and Remedies
Events of default specified in the Power Bond Resolution include failure to pay principal or redemption price of any Power Revenue Bond when due; failure to pay any interest installment or the unsatisfied balance of any Sinking Fund Installment thereon when due; failure for 60 days after written notice thereof to Platte River by the Trustee or Platte River and the Trustee by the owners of not less than 25% of the aggregate principal amount of the Power Revenue Bonds Outstanding in the observance or performance of any other covenants, agreements or conditions; or if Platte River shall file a petition seeking a composition of indebtedness or other protection as a debtor under the Federal bankruptcy laws, or under any other similar applicable law or statute of the United States of America or of the State of Colorado.
Upon the happening of any such event of default, the Trustee or the owners of not less than 25% in aggregate principal amount of the Power Revenue Bonds then Outstanding may declare the principal and accrued interest on all Power Revenue Bonds then Outstanding immediately due and payable. Such declaration may be rescinded by written notice to Platte River and to the Trustee by the owners of not less than 25% of the aggregate principal amount of the Power Revenue Bonds Outstanding at any time after such declaration if: (i) all overdue installments of interest upon the Power Revenue Bonds, the reasonable and proper charges, expenses and liabilities of the Trustee and all other sums then due under the Power Bond Resolution (except the principal of, and interest accrued since the next preceding interest date on, the Power Revenue Bonds due solely by virtue of such declaration) shall either be paid by or for the account of Platte River or provision for such payment satisfactory to the Trustee shall be made; and (ii) all defaults under the Power Revenue Bonds or the Power Bond Resolution (other than the payment of principal and interest due and payable solely by reason of such declaration) shall be made good or secured (or provision for such making good or securing be made) to the
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satisfaction of the Trustee. If the Trustee shall have acted itself, and if there shall not have been theretofore delivered to the Trustee written direction to the contrary by the owners of not less than 50% in aggregate principal amount of the Power Revenue Bonds then Outstanding, then any such declaration shall ipso facto be deemed to be rescinded and any such default and its consequences shall ipso facto be deemed to be annulled, but no such rescission and annulment shall extend to or affect any subsequent default or impair or exhaust any right or power consequent thereon.
Upon occurrence of an event of default, which shall not have been remedied, Platte River shall subject the books of record and accounts of Platte River and all other records relating to the System to the inspection and use of the Trustee and its agents and attorneys.
Upon occurrence of an event of default which shall not have been remedied, Platte River shall, if demanded by the Trustee, account as a trustee of an express trust for all Revenues, moneys, securities and funds pledged or held under the Power Bond Resolution, and pay over to the Trustee all Revenues and all moneys, securities and funds held in any fund or account under the Power Bond Resolution and, as received, all Revenues. The Trustee shall apply such Revenues and such moneys, securities and funds and income therefrom in the following order: (i) to the payment of the reasonable and proper charges and expenses of the Trustee and the reasonable fees and disbursements of its counsel; (ii) to the payment of the Maintenance and Operation Costs of the System; and (iii) to the payment of interest and principal or redemption price then due on the Power Revenue Bonds. Unless the principal of all the Power Revenue Bonds shall have become or have been declared due and payable, payment shall be made (ratably, in the event funds are not sufficient for full payment) first, to persons entitled thereto, of all installments of interest then due, and then to persons entitled thereto, of the unpaid principal and redemption price that shall have become due, whether at maturity or by call for redemption. If the principal of all Power Revenue Bonds shall have become or have been declared due and payable, payment shall be made, as provided in the Power Bond Resolution, ratably, according to the amounts due respectively for principal and interest, to the persons entitled thereto without any preference given to one person over another and without any such priority of one type of payment over another as is described in the preceding sentence.
If all defaults under the Power Revenue Bonds or the Power Bond Resolution shall be cured, made good or secured to the satisfaction of the Trustee, Platte River and the Trustee shall be restored to their former position and rights, and all Revenues shall be applied as if there had been no event of default.
The Trustee is appointed by the Power Bond Resolution as trustee to represent the bondholders in the matter of exercising and prosecuting on their behalf such rights and remedies as may be available to such holders. Upon any default or other occasion giving rise to a right in the Trustee to represent bondholders, the Trustee may (but shall not be obligated to) take such action as may seem appropriate to it, and upon the request in writing of the owners of not less than 25% in aggregate principal amount of Power Revenue Bonds Outstanding, which request shall specify such default or occasion and the action to be taken by the Trustee, and upon being furnished with indemnity satisfactory to it, the Trustee shall take such action on behalf of such bondholders as may have been requested.
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Nothing in the Power Bond Resolution or the Power Revenue Bonds affects or impairs Platte River’s obligation to pay the Power Revenue Bonds and the redemption price and interest thereon when due or the right of any bondholder to enforce such payment.
No delay or omission of the Trustee or of any bondholder to exercise any right or power arising upon the happening of any event of default shall impair any such right or power or shall be construed to be a waiver of any such event of default or an acquiescence therein, and every such right or power may be exercised from time to time and as often as shall be deemed expedient. No remedy conferred upon or reserved to the Trustee is intended to be exclusive of any other remedy, and every such remedy shall be cumulative, and may be exercised at any time or from time to time, and as often as necessary.
Prior to the Cross-over Date established in the Supplemental Resolution authorizing a Series of Cross-over Refunding Bonds, any such Cross-over Refunding Bonds shall not be considered to be Outstanding Power Revenue Bonds for purposes of any provision in the Power Bond Resolution concerning defaults and remedies. Immediately upon payment of the principal of the Cross-over Refunded Indebtedness on the Cross-over Date, the related Cross-over Refunding Bonds will be considered Outstanding Power Revenue Bonds for such purposes. Any moneys or Investment Securities held by the Trustee in, or paid to the Trustee from, any escrow created in connection with a Series of Cross-over Refunding Bonds shall be held exclusively for the benefit of the owners of such Cross-over Refunding Bonds or Cross-over Refunded Indebtedness, to be applied only to payments in respect thereof upon the terms and conditions set forth in the agreement creating such escrow and in the Supplemental Resolution authorizing such Series of Cross-over Refunding Bonds.
[Power Bond Resolution, Article IX]. Supplemental Resolutions
For any of the following purposes, a Supplemental Resolution of Platte River may be adopted, without the consent of the bondholders, which shall be fully effective (1) to add to the covenants and agreements of Platte River in the Power Bond Resolution contained, other covenants and agreements thereafter to be observed, or to surrender any right or power reserved to or conferred upon Platte River in the Power Bond Resolution; (2) to make such provisions for the purpose of curing any ambiguity, or of curing any defective provision contained in the Power Bond Resolution, or in regard to questions arising under the Power Bond Resolution, as Platte River may deem necessary or desirable, and which shall not adversely affect the interests of the bondholders; and (3) to provide for the issuance of a Series of Power Revenue Bonds, and to provide the terms and conditions under which such Series may be issued, subject to and in accordance with the provisions of Article II of the Power Bond Resolution regarding authorization and issuance of Power Revenue Bonds.
[Power Bond Resolution, Section 8.01].
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Amendment with Consent of Bondholders
Any modifications or amendment of the Power Bond Resolution or any Supplemental Resolution may be made in any particular by a Supplemental Resolution, pursuant to an affirmative vote at a meeting of bondholders, or with the written consent without a meeting, (i) of the owners of at least 60% in principal amount of the Power Revenue Bonds Outstanding at the time such consent is given, and (ii) in case less than all of the several Series of Power Revenue Bonds then Outstanding are affected by the modification or amendment, of the owners of at least 60% in principal amount of the Power Revenue Bonds so affected and Outstanding at the time such consent is given, and (iii) in case the modification or amendment changes the terms of any Sinking Fund Installment, of the owners of at least 60% in principal amount of the Power Revenue Bonds entitled to such Sinking Fund Installment and Outstanding at the time such consent is given. If such modification or amendment will, by its terms, not take effect so long as any Power Revenue Bonds of any specified Series remain Outstanding, the consent of the holders of such Power Revenue Bonds shall not be required.
No such modification or amendment shall (i) extend the fixed maturity of any Power Revenue Bond, or reduce the principal amount or redemption price thereof, or reduce the rate or extend the time of payment of interest thereon, without the consent of the owner of each Power Revenue Bond so affected, or (ii) reduce the aforesaid percentage of Power Revenue Bonds required for the affirmative vote or written consent to an amendment or modification of the Power Bond Resolution, without the consent of the owners of all Outstanding Power Revenue Bonds, or (iii) modify any of the rights or obligations of the Trustee without its written consent thereto.
[Power Bond Resolution, Section 8.01].
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APPENDIX C
BOOK-ENTRY ONLY SYSTEM
DTC will act as securities depository for the Series JJ Bonds. The Series JJ Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered certificate will be issued for each maturity of each series of the Series JJ Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC.
DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.
Purchases of Series JJ Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series JJ Bonds on DTC’s records. The ownership interest of each actual purchaser of each 2016 Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series JJ Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Series JJ Bonds, except in the event that use of the book-entry system for the Series JJ Bonds is discontinued.
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To facilitate subsequent transfers, all Series JJ Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Series JJ Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series JJ Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series JJ Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Series JJ Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series JJ Bonds, such as redemptions, tenders, defaults, and proposed amendments to the 2016 Bond documents. For example, Beneficial Owners of Series JJ Bonds may wish to ascertain that the nominee holding the Series JJ Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the Registrar and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Series JJ Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. However, see “THE SERIES JJ BONDS – Redemption Provisions – Pro Rata Selection of Series JJ Bonds.”
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Series JJ Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Series JJ Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal, interest and redemption proceeds on the Series JJ Bonds will be made to Cede& Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Authority or the Paying Agent on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Paying Agent or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, interest or redemption proceeds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Paying Agent, disbursement of such payments to Direct Participants will be the
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responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as depository with respect to the Series JJ Bonds at any time by giving reasonable notice to the Authority or the Registrar and Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, 2016 Bond certificates are required to be printed and delivered.
The Authority may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, 2016 Bond certificates will be printed and delivered to DTC.
The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the Authority believes to be reliable, but the Authority takes no responsibility for the accuracy thereof.
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APPENDIX D
FORM OF BOND COUNSEL OPINION
April 26, 2016 Platte River Power Authority 2000 East Horsetooth Road Fort Collins, Colorado 80525
$147,230,000 Platte River Power Authority
Power Revenue Bonds, Series JJ Ladies and Gentlemen:
We have acted as bond counsel to Platte River Power Authority (“Platte River”) in connection with its issuance of the above-captioned bonds in the aggregate principal amount of $147,230,000 (the “Series JJ Bonds”) pursuant to Platte River’s Resolution No. 5-87 adopted on February 26, 1987, as supplemented by its Resolution No. 07-16 adopted on March 31, 2016 which, together with the related Supplemental Public Securities Act Certificate dated April 13, 2016, constitutes the “Eleventh Supplemental Power Bond Resolution” (collectively, the “Power Bond Resolution”). In such capacity, we have examined Platte River’s certified proceedings and such other documents and such law of the State of Colorado (the “State”) and of the United States of America as we have deemed necessary to render this opinion letter. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them by the Power Bond Resolution.
The Series JJ Bonds are issuable only as fully registered bonds in such denominations, are dated, mature on the dates and in the principal amounts, and bear interest at the rates as provided in the Eleventh Supplemental Power Bond Resolution. The Series JJ Bonds and the interest thereon are payable solely from Net Revenues derived from Platte River’s electric System and from funds pledged therefor under the Power Bond Resolution. Platte River may issue additional series of Power Revenue Bonds having a lien on Net Revenues on a parity with that of the Series JJ Bonds.
Regarding questions of fact material to our opinions, we have relied upon Platte River’s certified proceedings and other representations and certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation.
Based upon such examination, it is our opinion as bond counsel that:
1. Platte River is a political subdivision of the State, duly organized and validly existing under the provisions of the Act.
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2. The existing Electric Service Contracts with the Cities of Fort Collins, Longmont, and Loveland, Colorado and the Town of Estes Park, Colorado are valid and binding agreements of Platte River and such Municipalities, respectively.
3. The Power Bond Resolution has been duly adopted by Platte River and constitutes a valid and binding obligation of Platte River.
4. The Series JJ Bonds are valid and binding, special, limited obligations of Platte River payable solely from and secured by (i) a valid pledge of the Net Revenues, and (ii) other funds of Platte River as in the Power Bond Resolution provided, subject only to the provisions of the Power Bond Resolution permitting the application thereof for the purposes and on the terms and conditions set forth in the Power Bond Resolution.
5. Interest on the Series JJ Bonds is excluded from gross income under federal income tax laws pursuant to Section 103 of the Internal Revenue Code of 1986, as amended to the date hereof (the “Tax Code”), and interest on the Series JJ Bonds is excluded from alternative minimum taxable income as defined in Section 55(b)(2) of the Tax Code, except that such interest is required to be included in calculating the adjusted current earnings adjustment applicable to corporations for purposes of computing the alternative minimum taxable income of corporations. The opinions expressed in this paragraph assume continuous compliance with the covenants and representations contained in Platte River’s certified proceedings and in certain other documents and certain other certifications furnished to us.
6. Under the laws of the State in effect as of the date hereof, interest on the Series JJ Bonds is exempt from taxation by the State, except for inheritance, estate and transfer taxes.
The opinions expressed in this opinion letter are subject to the following:
The obligations of Platte River and the Municipalities under each Electric Service Contract and of Platte River under the Series JJ Bonds and the Power Bond Resolution may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights generally, and by equitable principles, whether considered at law or in equity.
In expressing the opinions above, we are relying, in part, on a report of independent certified public accountants verifying (i) the mathematical computations of the adequacy of the maturing principal amounts of and interest on the investments and moneys included in the Series 2016 Escrow Account to pay when due all interest when due on the Refunded Bonds and the principal thereof becoming due on the prior redemption thereof and (ii) the mathematical calculations of the yield of the Series JJ Bonds and the yield of certain investments made with the proceeds of the Series JJ Bonds and other moneys deposited in the Series 2016 Escrow Account.
In this opinion letter issued in our capacity as bond counsel, we are opining only upon those matters set forth herein, and we are not passing upon the accuracy, adequacy or completeness of the Official Statement dated April 12, 2016 or any other statements made in connection with any offer or sale of the Series JJ Bonds or upon any federal or state tax consequences arising from the receipt or accrual of interest on or the ownership or disposition of the Series JJ Bonds, except those specifically addressed herein.
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This opinion letter is issued as of the date hereof and we assume no obligation to revise or supplement this opinion letter to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur.
Respectfully submitted,
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APPENDIX E
FORM OF CONTINUING DISCLOSURE CERTIFICATE
WHEREAS, Platte River Power Authority (“Platte River”) heretofore has authorized the issuance of Platte River’s $147,230,000 Power Revenue Bonds, Series JJ (the “Series JJ Bonds”) pursuant to the General Power Bond Resolution adopted by Platte River on February 26, 1987, as supplemented (the “Bond Resolution”), including as supplemented by a resolution adopted by Platte River on March 31, 2016 entitled “Eleventh Supplemental Power Bond Resolution” relating to the Series JJ Bonds; and
WHEREAS, by Resolution adopted by Plate River on March 31, 2016, Platte River has
found and determined that it is necessary, in connection with the authorization and sale of the Series JJ Bonds, and in order to assist the Participating Underwriters (hereinafter defined) in complying with the Rule (hereinafter defined), that Platte River agree to provide certain continuing disclosure information with respect to itself, the System (as defined in the Bond Resolution), the Colorado municipalities of Estes Park, Fort Collins, Longmont and Loveland (collectively, the “Municipalities”) and the Series JJ Bonds; and
WHEREAS, the execution and delivery of this Continuing Disclosure Certificate has
been authorized by Platte River; NOW, THEREFORE, Platte River hereby agrees as follows:
SECTION 1. Definitions.
In addition to the definitions set forth in the Bond Resolution, which apply to any
capitalized term used in this Disclosure Certificate, unless otherwise defined in this Disclosure Certificate, the following capitalized terms shall have the following meanings:
“Annual Report” shall mean any Annual Report provided by Platte River pursuant to, and
as described in, Sections 3 and 4 of this Disclosure Certificate. “Audited Financial Statements” shall mean:
(a) in the case of Platte River, Platte River’s audited financial statements for its most
recent fiscal year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time (or such other accounting principles as may be applicable to Platte River in the future pursuant to applicable law); and
(b) in the case of each of the Municipalities, the audited financial statements for the electric systems of each such Municipality for its most recent fiscal year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time (or such other accounting principles as may be applicable to such Municipality in the future pursuant to applicable law).
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“Beneficial Owner” shall mean any person who (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Series JJ Bonds (including persons holding Series JJ Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Series JJ Bonds for federal income tax purposes.
“Disclosure Certificate” shall mean this certificate, as the same may be amended or
supplemented from time to time in accordance with the provisions hereof. “Dissemination Agent” shall mean Platte River, or any successor Dissemination Agent
designated in writing by Platte River and which has filed with Platte River a written acceptance of such designation.
“Final Official Statement” shall mean the Official Statement of Platte River, dated
April 12, 2016, relating to the Series JJ Bonds, as amended or supplemented. “Listed Events” shall mean any of the events listed in Section 5 of this Disclosure
Certificate. “MSIR” shall mean any other municipal securities information repository other than the
MSRB as may be required by law or applicable legislation, from time to time, to receive continuing disclosure documents for purposes of the Rule.
“MSRB” shall mean the Municipal Securities Rulemaking Board established in
accordance with the provisions of Section 15B(b)(1) of the Securities and Exchange Act of 1934. “Owners of the Series JJ Bonds” shall mean the registered owners, including the
Beneficial Owners, of the Series JJ Bonds. “Participating Underwriter” shall mean any of the original underwriters of the Series JJ
Bonds required to comply with the Rule in connection with the offering of the Series JJ Bonds. “Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time, together with all interpretive guidance or other official interpretations or explanations thereof that are promulgated by the SEC.
“SEC” shall mean the United States Securities and Exchange Commission. “State” shall mean the State of Colorado.
SECTION 2. Purpose of this Disclosure Certificate; Obligated Persons; Disclosure
Certificate to Constitute Contract. (a) This Disclosure Certificate is executed and delivered on behalf of Platte River for
the benefit of Bondholders and Beneficial Owners of the Series JJ Bonds and in order to assist the Participating Underwriters in complying with the Rule.
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(b) Platte River and the Municipalities each are hereby determined to be “obligated
persons” within the meaning of the Rule (and are the only “obligated persons” within the meaning of the Rule for whom financial information or operating data is presented in the Final Official Statement).
(c) In consideration of the purchase and acceptance of any and all of the Series JJ
Bonds by those who shall hold the same or shall own beneficial ownership interests therein from time to time, this Disclosure Certificate shall be deemed to be and shall constitute a contract between Platte River and the Bondholders and Beneficial Owners from time to time of the Series JJ Bonds; and the covenants and agreements herein set forth to be performed on behalf of Platte River shall be for the benefit of the Bondholders and Beneficial Owners of any and all of the Series JJ Bonds.
SECTION 3. Provision of Annual Reports.
(a) Platte River hereby covenants and agrees that it shall, or shall cause the
Dissemination Agent to, not later than nine months following the end of Platte River’s fiscal year (currently, by each September 30; each such date being referred to herein as a “Final Submission Date”), commencing September 30, 2016, provide to each MSIR in an electronic format as prescribed by the MSRB, an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than fifteen (15) business days prior to said date, Platte River shall provide the Annual Report to the Dissemination Agent. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross- reference other information as provided in Section 4 of this Disclosure Certificate; provided that any Audited Financial Statements may be submitted when available separately from the balance of the Annual Report and later than the Final Submission Date if they are not available by that date. If audited financial statements for the preceding fiscal year are not available for Platte River or the Municipalities when the Annual Report is required to be submitted, Platte River will use its best efforts to include in the Annual Report unaudited financial statements for the preceding fiscal year for the entity whose audited financial statements are unavailable, and Platte River shall provide the omitted audited financial statements as soon as practicable after the audited financial statements become available. If the fiscal year for Platte River or any of the Municipalities changes, Platte River shall give notice of such change in the same manner as for a Listed Event under Section 5.
(b) If Platte River or the Dissemination Agent (if any), as the case may be, has not
furnished an Annual Report to each MSIR by a Final Submission Date, Platte River or the Dissemination Agent, as applicable, shall send a notice to each MSIR a timely manner, on or prior to the Final Submission Date.
(c) The Dissemination Agent shall:
(i) determine each year prior to the date for providing the Annual Report the name and address of each MSIR; and (if the Dissemination Agent is other than Platte River)
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(ii) file a report with Platte River certifying that the Annual Report has been
provided pursuant to this Disclosure Certificate, stating the date it was provided and listing all the MSIRs to which it was provided.
SECTION 4. Content of Annual Reports. Platte River’s Annual Report shall contain or incorporate by reference the following:
(a) If available at the time of such filing, quantitative information for the preceding
fiscal year of the type presented in Platte River’s Final Official Statement relating to the Series JJ Bonds, including:
(1) The Audited Financial Statements. If any Audited Financial
Statements are not available by the Final Submission Date, the Annual Report shall contain unaudited financial statements for Platte River and/or such of the Municipalities for which Audited Financial Statements are not available, as applicable, in a format similar to the audited financial statements most recently prepared for such person(s), and such Audited Financial Statements shall be filed in the same manner as the Annual Report when and if they become available.
(2) Updated versions of the financial information and operating data as indicated in the “INDEX OF TABLES” on page iv of the Official Statement.
(3) Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues of Platte River or related public entities, which have been submitted to the MSRB and each of the MSIRs or the Securities and Exchange Commission. If the document incorporated by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. Platte River shall clearly identify each such other document so incorporated by reference.
(4) Notwithstanding the foregoing, insofar as the Final Official Statement contains (i) Audited Financial Statements of Platte River as of December 31, 2015 and for the year then ended and (ii) updated versions of the financial information and operating data required pursuant to paragraph 2 above for the year ended December 31, 2015, the Annual Report for the Fiscal Year ended December 31, 2015 need contain only (x) Audited Financial Statements of the Municipalities as of December 31, 2015 and for the year then ended and (y) updated versions of the financial information and operating data for the Municipalities required pursuant to paragraph 2 above for the year ended December 31, 2015.
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SECTION 5. Reporting of Listed Events. Platte River shall give notice, in a timely manner not in excess of ten business days after the occurrence of the event, to each MSIR in the appropriate format required by law or applicable regulation, notice of the occurrence of any of the following events with respect to the Series JJ Bonds:
(i) principal and interest payment delinquencies; (ii) non-payment related defaults, if material; (iii) unscheduled draws on debt service reserves reflecting financial
difficulties; (iv) unscheduled draws on credit enhancements reflecting financial
difficulties; (v) substitution of credit facility providers, or their failure to perform; (vi) adverse tax opinions, the issuance by the Internal Revenue Service of
proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Series JJ Bonds, or other material events affecting the tax status of the Series JJ Bonds;
(vii) modifications to rights of holders of the Series JJ Bonds, if material; (viii) Bond calls, if material, and tender offers; (ix) defeasances; (x) release, substitution or sale of any property securing repayment of the
Series JJ Bonds, if material; (xi) rating changes; (xii) bankruptcy, insolvency, receivership, or similar event of Platte River or
the Municipalities;
(xiii) consummation of a merger, consolidation, or acquisition involving Platte River or the Municipalities, or sale of all or substantially all of the assets of Platte River or the Municipalities, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and
(xiv) appointment of a successor or additional trustee or the change of name of
a trustee, if material.
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With regard to the reportable event described in subsection (xii) above, the event is
considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for Platte River or the Municipalities in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of Platte River or the Municipalities, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of Platte River or the Municipalities.
SECTION 6. EMMA.
Platte River agrees to make filings required of Platte River with the Electronic Municipal Market Access System (“EMMA”), as required by the Rule and the MSRB.
SECTION 7. Termination of Reporting Obligation. Platte River’s obligations under this Disclosure Certificate shall terminate upon the legal
defeasance in accordance with the terms of the Power Bond Resolution and the Series JJ Bonds, prior redemption or payment in full of all of the Series JJ Bonds.
SECTION 8. Dissemination Agent. Platte River may, from time to time, appoint or engage a Dissemination Agent to assist it
in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent.
SECTION 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, Platte River may
amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, if such amendment or waiver is permitted by the Rule, as evidenced by an opinion of counsel expert in federal securities law, which may also include bond counsel to Platte River, to the effect that such amendment or waiver would not cause the Disclosure Certificate to violate the Rule. The first Annual Report filed after enactment of any amendment to or waiver of this Disclosure Certificate shall explain, in narrative form, the reasons for the amendment or waiver and the impact of the change in the type of information being provided in the Annual Report.
If the amendment pertains to the accounting principles to be followed in preparing
financial statements, the Annual Report for the year in which the change is made shall include a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles
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and the impact of the change in the accounting principles on the presentation of the financial information in order to evaluate the ability of Platte River to meet its obligations. To the extent reasonably feasible, the comparison shall also be quantitative. A notice of the change in the accounting principles shall be sent to each MSIR.
SECTION 10. Default. In the event of a failure of Platte River to comply with any provision of this Disclosure
Certificate, any Owners of the Series JJ Bonds may seek a court order for specific performance by Platte River of its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Power Bond Resolution or constitute a default with respect to the Series JJ Bonds, and the sole remedy under this Disclosure Certificate in the event of any failure of Platte River to comply with this Disclosure Certificate shall be an action for specific performance of Platte River’s obligations hereunder and not for money damages in any amount.
SECTION 11. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent Platte River from
disseminating, or require Platte River to disseminate, any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If Platte River chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, Platte River shall have no obligations under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.
SECTION 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this
Disclosure Certificate. Platte River agrees, to the extent permitted by law, to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. The obligations of Platte River under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Series JJ Bonds.
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SECTION 13. Beneficiaries.
This Disclosure Certificate shall inure solely to the benefit of the Dissemination Agent, and Owners from time to time of the Series JJ Bonds, and shall create no rights in any other person or entity.
Date: April 26, 2016.
Platte River Power Authority By __________________________________
General Manager
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APPENDIX F
ECONOMIC AND DEMOGRAPHIC INFORMATION
This portion of the Official Statement contains general information concerning historic economic and demographic conditions in and surrounding the Municipalities. It is intended only to provide prospective investors with general information regarding the Municipality’s community. The information was obtained from the sources indicated and is limited to the time periods indicated. The information is historic in nature; it is not possible to predict whether the trends shown will continue in the future. Platte River makes no representation as to the accuracy or completeness of data obtained from parties other than Platte River.
Population and Age Distribution
Population. The following table sets forth the respective populations of the Municipalities and the State of Colorado for the time periods shown. Between 2000 and 2010, the growth rates of the Cities of Fort Collins, Longmont and Loveland exceeded the growth rate of the State as a whole.
Population
Year Town of
Estes Park Percent Change
City of Fort Collins
Percent Change
City of Longmont
Percent Change
1970 1,616 -- 43,337 -- 23,209 -- 1980 2,703 67.3% 65,092 50.2% 42,942 85.0% 1990 3,191 18.1 87,491 34.4 51,976 21.0 2000 5,413 69.6 118,652 35.6 71,093 36.8 2010 5,858 8.2 143,986 21.4 86,270 21.3 2014 6,197 5.8 154,570 7.4 90,855 5.3
Year City of
Loveland Percent Change
Colorado
Percent Change
1970 16,220 -- 2,209,596 -- 1980 30,215 86.3% 2,889,735 30.8% 1990 37,357 23.6 3,294,473 14.0 2000 50,608 35.5 4,301,261 30.6 2010 66,859 32.1 5,029,196 16.9 2014 72,983 9.2 5,353,471 6.4
Sources: United States Department of Commerce, Bureau of the Census (1970-2010), and Colorado State Demography Office (2014).
F-2
Age Distribution. The following table sets forth a projected comparative age distribution profile for the Municipalities, the State and the nation as of January 1, 2016.
Age Distribution
Age Town of
Estes Park City of
Fort Collins City of
Longmont City of
Loveland Colorado United States
0-17 15.7% 19.6% 24.4% 22.5% 23.3% 23.0%
18-24 6.8 18.1 9.1 8.8 9.6 9.8
25-34 8.9 17.4 12.8 12.7 14.3 13.4
35-44 8.8 13.0 13.7 12.5 13.4 12.6 45-54 10.7 10.5 13.7 12.6 13.2 13.3 55-64 19.2 10.3 12.5 13.4 12.8 12.8 65-74 17.8 6.5 8.1 9.9 8.2 8.8 75 and Older 12.1 4.6 5.7 7.6 5.2 6.3
Source: © 2016 The Nielsen Company.
Income
The following table sets forth annual per capita personal income levels for the two counties in which the Municipalities are located, the State and the nation.
Annual Per Capita Personal Income
Year(1) Boulder
County(2) Larimer County(3) Colorado United States
2010 $50,674 $37,335 $41,877 $40,277 2011 52,700 39,301 44,349 42,453 2012 55,163 40,680 46,402 44,266 2013 56,047 41,824 46,746 44,438 2014 58,627 43,584 48,869 46,049
(1) MSA figures posted November 2015; state and national figures posted September 2015. All figures are subject
to periodic revisions. (2) Boulder County includes the major portion of the City of Longmont. (3) Larimer County includes the Cities of Fort Collins and Loveland and the Town of Estes Park. Source: United States Department of Commerce, Bureau of Economic Analysis.
F-3
The following two tables reflect the Median Household Effective Buying Income (“EBI”), and also the percentage of households by EBI groups. EBI is defined as “money income” (defined below) less personal tax and nontax payments. “Money income” is defined as the aggregate of wages and salaries, net farm and nonfarm self-employment income, interest, dividends, net rental and royalty income, Social Security and railroad retirement income, other retirement and disability income, public assistance income, unemployment compensation, Veterans Administration payments, alimony and child support, military family allotments, net winnings from gambling, and other periodic income. Deductions are made for personal income taxes (federal, state and local), personal contributions to social insurance (Social Security and federal retirement payroll deductions), and taxes on owner-occupied nonbusiness real estate. The resulting figure is known as “disposable” or “after-tax” income.
Median Household Effective Buying Income(1)
Year Town of
Estes Park City of
Fort Collins City of
Longmont City of
Loveland Colorado United States
2013 $41,971 $40,034 $45,467 $44,217 $43,718 $41,358 2014 46,085 41,675 49,944 44,900 47,469 43,715 2015 46,526 45,105 51,521 47,167 49,949 45,448 2016 52,037 48,349 55,605 49,195 52,345 46,738
(1) The difference between consecutive years is not an estimate of change from one year to the next; separate
combinations of data are used each year to identify the estimated mean of income from which the median is computed.
Source: © The Nielsen Company, SiteReports, 2013-2016.
Percent of Households by Effective Buying Income Groups – 2016 Estimates
Effective Buying Income Group
Town of Estes Park
City of Fort Collins
City of Longmont
City of Loveland Colorado
United States
Under $24,999 14.3% 24.4% 18.9% 20.6% 23.3% 24.8% $25,000 - 49,999 33.7 27.4 26.5 30.3 9.6 28.8 $50,000 - 74,999 25.0 18.9 20.7 23.0 14.3 19.1 $75,000 - 99,999 13.4 12.7 14.2 13.6 13.4 12.2 $100,000 - 124,999 5.4 6.8 7.8 5.6 13.2 5.8 $125,000 - 149,999 3.3 4.2 5.7 3.3 12.8 3.7 $150,000 - more 4.9 5.6 6.2 3.6 8.2 5.6 Source: © 2016 The Nielsen Company.
F-4
Employment
The following table sets forth information on employment for the two counties in which the Municipalities are located, the State and the nation for the period indicated.
Labor Force and Percent Unemployed
Boulder County(1) Larimer County(2) Colorado United States
Year Labor Force
Percent Unemployed
Labor Force
Percent Unemployed
Labor Force
Percent Unemployed
Percent Unemployed
2011 172,002 6.5% 170,942 7.2% 2,736,079 8.4% 8.9% 2012 174,462 6.2 173,006 6.7 2,759,437 7.9 8.1 2013 175,652 5.5 175,022 5.8 2,780,536 6.8 7.4 2014 177,043 4.1 177,950 4.3 2,815,200 5.0 6.2 2015 176,726 3.2 180,306 3.3 2,828,529 3.9 5.3
Month of February(3)
2015 176,641 3.9% 177,135 4.1% 2,819,395 4.7% 5.5% 2016 178,267 2.7 183,708 2.9 2,868,832 3.3 4.9 (1) Boulder County includes the City of Longmont. (2) Larimer County includes the Cities of Fort Collins and Loveland, and the Town of Estes Park. (3) Preliminary. Sources: State of Colorado, Department of Labor and Employment, Labor Market Information, Labor Force Data, and U.S. Bureau of Labor,
Bureau of Labor Statistics.
F-5
The following table sets forth the number of individuals employed within selected Boulder County industries which are covered by unemployment insurance. In 2014, the largest employment sector in the County was government (comprising approximately 16.1% of the county’s work force), followed, in order, by professional and technical services; health care and social assistance; manufacturing; and retail trade. For the twelve-month period ended December 31, 2014, total average employment in the County increased 2.7% as compared to the same period ending December 31, 2013, and average weekly wages increased approximately 3.1% during the same period.
Average Number of Employees within Selected Industries - Boulder County
Industry 2010 2011 2012 2013 2014 2015(1)
Agriculture, Forestry, Fishing, Hunting 382 389 385 394 405 456 Mining 545 251 251 212 276 291 Utilities 261 235 222 216 220 231 Construction 4,044 3,783 3,944 4,210 4,661 4,961 Manufacturing 15,202 15,920 16,543 17,148 17,437 17,549 Wholesale Trade 4,884 5,088 5,266 5,522 5,559 5,667 Retail Trade 15,181 15,582 16,009 16,177 16,500 16,794 Transportation & Warehousing 1,130 1,166 1,230 1,314 1,326 1,393 Information 8,692 8,657 8,724 8,338 8,279 8,043 Finance & Insurance 4,864 4,751 4,738 4,902 4,867 4,483 Real Estate, Rental & Leasing 2,056 2,082 2,168 2,224 2,317 2,439 Professional & Technical Services 21,059 22,185 23,303 24,047 25,267 25,944 Management of Companies/Enterprises 923 939 1,029 1,068 1,078 1,064 Administrative & Waste Services 5,830 6,492 6,617 6,832 7,038 6,906 Educational Services 1,867 1,922 2,032 2,137 2,384 2,436 Health Care & Social Assistance 17,605 18,314 18,853 19,558 19,960 20,674 Arts, Entertainment & Recreation 2,737 2,775 2,799 2,846 2,963 3,040 Accommodation & Food Service 14,259 14,977 15,525 15,856 16,333 16,879 Other Services 4,429 4,430 4,566 4,773 4,865 5,008 Non-classifiable 9 8 20 23 34 34 Government 26,156 26,189 26,472 26,788 27,284 27,790 Total(2) 152,116 156,134 160,697 164,583 169,053 172,082 (1) Averaged figures through 3rd quarter 2015. (2) Figures may not equal totals when added due to the rounding of averages. Source: State of Colorado, Department of Labor and Employment, Labor Market Information, Quarterly Census of Employment and Wages
(QCEW).
F-6
The following table sets forth the number of individuals employed within selected Larimer County industries which are covered by unemployment insurance. In 2014, the largest employment sector in Larimer County was government (comprising approximately 21.2% of the county’s work force), followed, in order, by retail trade; accommodation and food services; health care and social assistance; and manufacturing. For the twelve-month period ended December 31, 2014, total average employment in Larimer County increased by approximately 3.4% as compared to the twelve-month period ending December 31, 2013, and average weekly wages increased by approximately 5.1% during the same period.
Average Number of Employees within Selected Industries - Larimer County
Industry 2010 2011 2012 2013 2014 2015(1)
Agriculture, Forestry, Fishing, Hunting 613 627 791 676 677 727 Mining 308 333 360 437 562 556 Utilities 240 241 232 222 234 232 Construction 7,219 7,102 7,552 8,267 9,162 9,473 Manufacturing 10,582 10,947 11,418 11,747 12,135 12,834 Wholesale Trade 2,890 2,989 3,417 3,627 3,837 4,181 Retail Trade 16,528 16,816 17,050 17,177 17,389 17,757 Transportation & Warehousing 2,031 2,083 2,133 2,260 2,448 2,544 Information 2,514 2,504 2,467 2,403 2,526 2,661 Finance & Insurance 3,177 3,185 3,234 3,372 3,456 3,537 Real Estate, Rental & Leasing 2,177 2,138 2,215 2,250 2,422 2,639 Professional & Technical Services 8,792 8,893 9,035 9,467 9,922 10,270 Management of Companies/Enterprises 508 557 623 757 786 819 Administrative & Waste Services 8,191 8,204 8,298 9,031 8,484 8,492 Educational Services 1,121 1,207 1,251 1,317 1,408 1,431 Health Care & Social Assistance 16,257 16,884 17,199 12,759 13,350 13,873 Arts, Entertainment & Recreation 2,034 1,967 2,017 2,061 2,203 2,422 Accommodation & Food Service 14,223 14,788 15,594 15,972 16,770 17,639 Other Services 3,452 3,568 3,641 3,832 3,926 4,059 Non-classifiable 33 27 27 30 31 16 Government 23,767 23,746 24,059 29,487 30,023 30,401 Total(2) 126,658 128,806 132,613 137,152 141,748 146,562 (1) Averaged figures through 3rd quarter 2015. (2) Figures may not equal totals when added, due to the rounding of averages. Source: State of Colorado, Department of Labor and Employment, Labor Market Information, Quarterly Census of Employment and Wages
(QCEW).
F-7
Major Employers
The following two tables set forth a selection of the largest employers in the Counties of Boulder and Larimer. No independent investigation of the stability or financial condition of the employers listed hereafter has been conducted; therefore, no representation can be made that these employers will continue to maintain their status as major employers in these areas.
Major Private Non-Retail Employers in Boulder County
Name of Employer
City Location Product or Service Employment
Range(1)
IBM Corporation Boulder Computer systems & services 2,800 Boulder Community Health Boulder Healthcare 2,220 Medtronic PLC Boulder Medical Devices & Products 2,150 Good Samaritan Medical Center Lafayette Healthcare 1,410 Seagate Technology Longmont Computer hard drives 1,380 Ball Aerospace & Technologies Corp. Boulder Satellite products & equipment 1,350 Longmont United Hospital Longmont Healthcare 1,280 DigitalGlobe Longmont Imagery provider 900 Intrado Longmont 911 database service 860 Centura: Avista Adventist Hospital Louisville Healthcare 660 (1) Revised May 2015. Source: Development Research Partners as posted by Metro Denver Economic Development Corporation.
Major Private Non-Retail Employers in Larimer County
Name of Employer
City Location Product or Service Employment
Range(1)
University of Colorado Health Fort Collins Healthcare 5,740 Hewlett Packard Company Fort Collins Technology product design 1,490 Banner Health: McKee Medical Center Loveland Healthcare 1,340 Avago Technologies Fort Collins Semiconductor components 1,300 Woodward Fort Collins Speed controls 1,230 Hach Company Loveland Analytical instruments 800 Qualfon Fort Collins Customer care center 770 Otterbox Fort Collins Protective case manufacturing 580 New Belgium Brewing Company Fort Collins Brewery 540 Anheuser Busch Fort Collins Brewery 520 (1) Revised May 2015. Source: Development Research Partners as posted by Metro Denver Economic Development Corporation.
F-8
Retail Sales
The following table sets forth annual retail sales figures for the Municipalities and the State.
Retail Sales (in thousands)
Year Town of
Estes Park Percent Change
City of Fort Collins
Percent Change
City of Longmont
Percent Change
2010 $243,660 -- $3,841,549 -- $2,114,497 -- 2011 265,224 8.9% 4,069,396 5.9% 2,183,272 3.3% 2012 275,688 3.9 4,032,651 (0.9) 2,330,482 6.7 2013 269,102 (2.4) 4,227,517 4.8 2,506,605 7.6 2014 300,387 11.6 4,577,404 8.3 2,720,514 8.5 2015(1) 46,128 -- 1,076,443 -- 676,723 --
Year City of
Loveland Percent Change Colorado
Percent Change
2010 $2,164,175 -- $143,670,319 -- 2011 2,334,345 7.9% 154,697,943 7.7% 2012 2,500,172 7.1 164,387,648 6.3 2013 2,576,753 3.1 171,362,038 4.2 2014 2,792,286 8.4 182,374,957 6.4 2015(1) 683,909 -- 42,405,111 --
(1) Figures for 1st quarter 2015. Source: State of Colorado, Department of Revenue, “Sales Tax Statistics”, 2010-2015.
F-9
Building Permit Activity
The following three tables set forth a history of building permits issued for new residential and commercial construction for the Cities of Fort Collins, Loveland, and Longmont for the years indicated.
Building Permits Issued for New Structures in City of Fort Collins
New Single Family(1) New Multi-Family(2) New Commercial(3)
Year Permits Valuation Permits Valuation Permits Valuation
2011 258 $52,931,687 31 $33,871,698 11 $ 5,478,903 2012 469 88,140,793 32 66,316,142 11 15,943,281 2013(4) 630 127,920,826 40 90,876,458 20 13,358,135 2014 743 164,923,337 62 63,010,624 25 134,036,045 2015 509 133,046,263 49 59,469,368 30 107,395,464 2016(5) 63 20,747,077 3 1,463,626 1 3,162480
(1) Includes Detached and Attached Single Family residences. (2) Includes Commercial Mixed Use. (3) Includes Hotels/Motels; Office/Bank/Professional; Mercantile/Retail/Services; Recreation; Garage/Service
Station; Grocery/Convenience Store; and Industrial construction. (4) Permit total includes fire replacement permits due to the 2012 High Park wildfire which destroyed
approximately 259 homes. (5) As of February 29, 2016. Source: City of Fort Collins Neighborhood & Building Services.
Building Permits Issued for New Structures in the City of Longmont
Year
New Single Family Permits
New Other Residential Permits
2011 28 91 2012 104 274 2013 127 121 2014 150 291 2015 199 211 2016(1) 50 22
(1) As of February 29, 2016. Source: City of Longmont, Building Inspection Division.
F-10
Building Permits Issued for New Structures in the City of Loveland
New Residential(1) New Multi-Family(2) New Non-Residential
Year Permits Value Permits Value Permits Value
2011 165 $35,417,348 4 $ 3,293,962 14 $14,666,536 2012 274 60,114,037 7 14,267,605 6 4,219,653 2013 256 65,105,241 7 12,968,435 21 37,280,135 2014 327 97,999,812 27 48,701,958 56 60,926,898 2015 465 132,226,544 6 30,021,348 56 40,426,203 2016(3) 45 13,024,242 0 0 5 6,222,558
(1) Includes attached single family 1-2 dwelling units and detached single family dwelling. (2) Includes 3 or more dwelling units. (3) As of February 29, 2016. Source: City of Loveland Building Division.
Foreclosure Activity
The following table sets forth the number of foreclosures filed in each County during the time period shown. Such information only represents the number of foreclosures filed and does not take into account foreclosures which were filed and subsequently redeemed or withdrawn.
History of Foreclosures
Year Boulder County Percent Change Larimer County
Percent Change
2011 965 -- 1,329 -- 2012 789 (18.2)% 1,078 (18.9)% 2013 389 (50.7) 557 (48.3) 2014 249 (36.0) 399 (28.4) 2015 225 (9.6) 292 (26.8) 2016(1) 44 -- 44 --
(1) Number of filings as of February 29, 2016. Source: Colorado Division of Housing (2011-2014) and Counties of Boulder and Larimer Public Trustees’ Offices (2015-2016).
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