Alaska Industrial Development and Export Authority
March 12-13, 2013
Revolving Fund Credit Update and Strategic Outlook
1
Table of Contents
I. Introduction and Strategic Outlook
II. Revolving Fund Credit Foundations
III. Increasing Development Project Activity
IV. Conclusion
2
Participants
Alaska Industrial
Development and
Export Authority
Ted Leonard, Executive Director
Valorie Walker, Deputy Director – Finance
James Hemsath, Deputy Director – Project Development and Asset Management
Brenda Applegate, Controller
Western Financial
Group Pat Clancy, Financial Advisor
I. Introduction and Strategic Outlook
4
Management and Organizational Update
Introduction and Strategic Outlook
Deputy Director,
Commercial
Finance Chris Anderson
Deputy Director,
Infrastructure
Development Mark Davis
Deputy Director,
Project Dev. and
Asset Mngmt James Hemsath
Deputy Director,
Finance Valorie Walker
Business
Development
Officer Michael Catsi
Human
Resources
Manager Aaron Rhoades
Executive
Director Ted Leonard
Current AIDEA Organization Chart
Changes During 2013
Recently added a new “Deputy Director – Infrastructure Development” position
— Taking the lead on infrastructure development projects and innovative investment alternatives
Valorie Walker retiring at the end of May 2013
Hired Michael Lamb as the new “Deputy Director – Finance and Operations”
— Michael has been the CFO of the Fairbanks North Star Borough for the last 14 years
— New position will be responsible for:
– Management and coordination of the internal operations of the Authority
– Accounting and funds management for AIDEA & AEA assets
– Managing the Finance Division which includes investments, accounting, procurement, budgeting, and bonding
5
Revolving Fund: Summary Credit Update
1 Excluding restricted assets and assets related to the Snettisham Hydroelectric Project. 2 Includes government sponsored securities and securities explicitly guaranteed by the U.S. government.
³ Originated number does not include funding for Valley Utilities loan, but the dollar figure includes the portion allocable to 2012. 4 Comprised of $17.67 million in minimum receipts and $7.33 million in tonnage sensitive payments and the zinc price escalator. 5 Excludes Snettisham Hydroelectric Project.
Introduction and Strategic Outlook
Revolving Fund
Bond Security
Investment
Portfolio
Loan
Program
Development
Projects
Continued Financial
Strength of Revolving
Fund
AIDEA’s principal fund for core business activities: development projects, substantial investment
portfolio and loan program
Each core activity produces substantial cash flow
Secured by full faith and credit pledge of the revenues and assets of the Revolving Fund1
FY 2012 Debt Service Coverage 7.70x (covenant coverage)
30-Jun-2012 Ratio of Cash and Investments to Outstanding Debt is 4.11x5
Professionally managed with a focus on safety, liquidity and return
67% in AA or above investments²
Weighted average duration of 3.6 years
99.9% current (less than 90 days past due) as of 30-Jun-2012
Continued conservative underwriting practices drive strong performance
Originated 17 loans for $38.2mm in FY2012³
Diverse portfolio in terms of sector, geography, banks and borrowers
DMTS revenues remain strong and stable at $25mm in FY20124
Exploring ways to expand or continue use of other existing projects
Plans to grow development project portfolio
6
AIDEA’s strategic plan envisions increased activity across a range of businesses
— Expansion of loan participation program, including into energy projects
— Proactive solicitation and management of project opportunities
— Participation in high priority state resource development opportunities
— Develop new approaches to participate in projects (direct loans and LLC investments)
— Potential increased leverage in Revolving Fund to accommodate growing asset portfolio
— Potential to develop new credits beyond the Revolving Fund
The Governor and Legislature have provided AIDEA with several new tools to support its mission
— Ability to make direct loans and provide loan / bond guarantees from the Revolving Fund to facilitate New Markets
Tax Credit financings
— Ability to own a portion of an LLC
— Creation of Sustainable Energy Transmission and Supply Fund (“SETS”), separate from the Revolving Fund, to
invest in energy projects by making loan / bond guarantees and direct loans
AIDEA is also exploring enhancements and expansions to its existing tools
— Ability to make direct loans for development projects (HB74 / SB23)
— AIDEA as ‘clearinghouse’ for innovative investment alternatives and funding arrangements
— Potential creation of an Infrastructure Fund, managed by AIDEA
— Increasing capitalization and initiation of programs in the SETS Fund
AIDEA’s Strategic Plan and Recent
Developments
The State is encouraging AIDEA to take a proactive role in projects through additional capitalization
and other tools
Introduction and Strategic Outlook
7
AIDEA is Formalizing and Enhancing its Existing
Financial Management Approach
AIDEA has a history of careful and prudent financial decision making
— Debt
— Investment Portfolio
— Loans and Projects
As AIDEA contemplates increased project activity, growing its balance sheet, and the use of new tools, it is
carefully reviewing policies and practices to manage the growth in a responsible manner
— AIDEA will continue to manage its programs to maintain the highest possible ratings
Examples of policy reviews being undertaken include:
— Overall funding objectives and use of available funding tools
— Investment portfolio policies and review process
— Loan participation objectives, standards and performance monitoring
— Development program investment standards, project review process and portfolio analysis
— Equity investment parameters
— Loan / bond guarantee parameters and credit standards
— Debt and funding objectives and policies
AIDEA also remains committed to proactive communication with the rating agencies and investors
Introduction and Strategic Outlook
II. Revolving Fund Credit Foundations
9
Summary of Revolving Fund Bond Security
Investment Portfolio
30-Jun-2012 Cash and Investment
Securities: $364.1 million
Conservative investment policy in
place
Portfolio focus on quality and liquidity
Investment policy change allows non-
U.S. dollar denominated investments
Historical Coverage Components (FYE 30-Jun)
6.06x9.30x
9.00x
8.96x 7.70x
0
2
4
6
8
10
$0
$50
$100
$150
2008 2009 2010 2011 2012
Millions
Loan Principal & Interest Investment Earnings Development Project Receipts
Loan Program
30-Jun-2012 Loans Outstanding:
$468.8 million
Conservative credit criteria
Portfolio quality is a key focus
99.9% of loans are current (less than
90 days past due)
Development Projects
30-Jun-2012 Total Net Book Value:
$329.6 million
Cash Receipts FY ending
30-Jun-2012
— Red Dog $25.0 million
— Fed Ex $3.0 million
Revolving Fund Credit Foundations
The Revolving Fund Bonds are secured by a full faith and credit pledge of the revenues and assets of the
Revolving Fund
Debt S
erv
ice C
overa
ge
10
AIDEA’s Revolving Fund Bond Security is
Bolstered by a Strong Legal Framework
General obligation, full faith and credit pledge of Revolving Fund
AIDEA Coverage Covenant: Shall not borrow, make loans or expend any funds (other than necessary O&M or
principal and interest on Revolving Fund Bonds) if it would:
AIDEA Liquidity Covenant: Maintain, in the Revolving Fund, cash equivalents1 maturing within one year in an amount
at least equal to the lesser of $50,000,000 or 25% of Revolving Fund Indebtedness Outstanding
— Revolving Fund cash & cash equivalents were $51.2 million as of 30-Jun-20122
(Including $15 million held in actively managed portfolios)
Additional Bonds Test: Must show 1.50x MADS to issue new money bonds
State Law Non-Impairment Covenant – In AS 44.88.130, State has pledged and agreed not to limit the Authority’s
powers to fulfill the terms of the resolution nor will the State impair the rights of Bondholders
1 As defined in the Revolving Fund Bond Resolution. 2 25% of outstanding debt as of FY E2012 represents $22 million.
Revolving Fund Credit Foundations
Key Security Provisions
As of 30-Jun-2012
— Cause Revolving Fund coverage to fall below 1.50x 7.70x
— Cause unrestricted Revolving Fund surplus to be below lesser
of $200,000,000 or total outstanding Revolving Fund Bonds
and in no event less than $100,000,000
$1,039 million
11
AIDEA’s Cash & Investment Portfolio Carefully and Professionally Managed
Overview
Total FYE 2012 Cash & Investment Portfolio: $364.1 million
Fund management balance between external and internal
External goals: Safety and return
Internal goals: Safety and liquidity
Investment Policy – Internal Funds
Debt instruments issued or guaranteed by the U.S.
government, its agencies and instrumentalities and
Government-sponsored enterprises (GSEs)
Money market funds and repurchase agreements
collateralized by U.S. Treasury and agency securities
Other investments specifically approved by the Board of
Directors
Investment Policy - External Funds
Debt instruments issued or guaranteed by the U.S.
government, its agencies and instrumentalities and GSEs
Dollar-denominated debt instruments that have been issued
by domestic and nondomestic entities
Mortgage-backed securities issued or guaranteed by Federal
agencies or GSEs
Asset-backed securities, including collateralized mortgage
backed securities and collateralized mortgage obligations
(CMOs). CMOs are limited to the more stable classes;
prohibited CMO classes include those where principal and
interest components are separated or where leverage is
employed
Certificates of deposit and term deposits of United States
domestic financial institutions provided the institutions meet
guidelines set forth in the Resolution
Other money market instruments described in the Investment
Policy Resolution
Non-U.S. dollar denominated investments, provided the
greater of $200 mm or 60% of the externally managed
investment portfolios in aggregate are invested in U.S. dollar
denominated investments. Restrictions apply to limit the
portfolio amount of certain types of non-U.S. dollar
denominated investments
Revolving Fund Credit Foundations
12
Internal17%
Alaska Permanent
Capital
42%
Dodge & Cox41%
Cash & Investment Portfolio on 30-Jun-2012:
$364.1 mm1
Credit Quality
Management
Instruments
Duration in Years
Internal External
Money Market 0.09 0.12
U.S. Treasuries 0.78 6.12
U.S. Agencies & GSEs – 4.46
Corporates – 5.51
Mortgage Backed – 1.76
Asset Backed – 1.25
Municipal Bonds – 10.36
Weighted Average 0.44 4.27
1 Excludes $9.7 million related to the Snettisham Hydroelectric Project. 2 U.S. Treasury securities and securities of agencies or corporations explicitly guaranteed by the U.S. government are not considered to have credit risk. 3 Not rated.
Revolving Fund Credit Foundations
AAA17%
AA4%A
15%
BBB17%
BB1%
Government Sponsored Securities³
26%
No Credit Exposure2
20%
U.S. Treasuries
20%
U.S. Agencies and
GSEs4%
Corporates36%
Cash and Cash
Equivalents8%
Mortgage Backed
29%Asset Backed
1%
Municipal Bonds
2%
13
Conservative Credit and Underwriting Practices
Drive Strong Loan Portfolio Performance
Underwriting Practices
Potential applicants contact one of AIDEA’s eligible financial institutions
The financial institution independently reviews the loan request
Financial institution, after loan approval, applies to AIDEA for participation
Application of loan is reviewed by AIDEA staff
AIDEA Credit Committee initially reviews and provides final approval for participations
— Executive Director
— Deputy Director-Project Development/Asset Management
— Deputy Director-Infrastructure Development
AIDEA Board must approve individual loan participations equal to or greater than $3.0 million, and loan
participations that in aggregate are greater than $5.0 million
Review incorporates both individual loan and portfolio impacts
AIDEA staff conducts regular reviews of portfolio performance and any issues related to specific loans
Limitations on Participations
Participations limited to the lesser of (a) $20 million, or (b) 90% of total loan
Maximum loan-to-value of 75%
Revolving Fund Credit Foundations
14
46 40 33 30 18 11 17
38
17
$79$66 $61 $57 $48
$30 $38
$117
$38
$0
$50
$100
$150
2004 2005 2006 2007 2008 2009 2010 2011 2012
Number Value ($)
Loan Portfolio on 30-Jun-2012: $468.8 mm
Portfolio Statistics:
— Average loan balance on 30-Jun-2012: $1.6mm
— Pending loan commitments on 30-Jun-2012: $9.2mm
Loans current (less than 90 days past due)
— FYE 2012: 99.9%
— Average since 2004: 99.7%
— Average for Alaska Commercial Banks: 97.8%
AIDEA’s loan history and pricing produce adequate margins
for both borrowing and bad debt allowance
— AIDEA has no charge-offs from 2008-2012
— Loan pricing is computed as
– For internally funded loans: an index plus the cost of
providing loans3
– For loans funded with bond proceeds: the cost of
funds plus the cost of providing loans3
¹ OREO refers to Other Real Estate Owned. 2 2011 funding number includes Valley Utilities loan, dollars funded spanned 2011 and 2012. Originations include only those loans funded with cash. Does not include 2005 loan for
Mark Air property ($260,000) or $23.5 million funding of ASI. Both were OREO properties whose sale was financed by AIDEA. 3 Cost of providing loans includes salaries, allowance for loan losses and other out of pocket costs.
Revolving Fund Credit Foundations
Loan Composition
AIDEA’s Revolving Fund Loan Portfolio is comprised primarily of Loan Participations
Loans Originated by Year2 ($ in mm)
FYE Loans Outstanding ($ in mm)
$278$332 $361 $385 $382 $368 $378
$481 $469
$0
$100
$200
$300
$400
$500
2004 2005 2006 2007 2008 2009 2010 2011 2012
Loan Participations
91%
OREO & Other Loans¹
15
Loan Portfolio Analysis As of 30-Jun-2012
Loans by Industrial Sector ($ value)
Participating Bank Exposures
Geographic Distribution of Loans ($ value)
Top Exposures by Borrower and Related Entities
Anchorage Community Development, LLC $20,499,000
3000 C Street, LLC 19,309,520
Allen Marine Tours, Inc. 15,747,628
Valley Utilities, LLC 14,571,024
Kupreanof, LLC 12,637,737
UMED Hotel, LLC 12,017,652
Ketchikan Dock Company, LLC 10,854,903
Pike's Waterfront Lodge, LLC 10,712,463
VDG-OPA, LLC 9,513,917
City of Sitka (purchased1) 8,535,498
1 Purchased loans include buy-back provision and are therefore no risk to the Authority 2 Includes: Equipment, Laundromat, Manufacturing, Restaurant, Multifamily Dwelling 3 Includes: Aircraft, Vessel, Hangar/Terminal 4 Includes: OREO and Appropriated Loans
AIDEA’s loan portfolio is diverse in terms of sector, geography and exposure to banks and borrowers
Revolving Fund Credit Foundations
Purchased1
4%
AIDEA⁴8%
Alaska Pacific Bank6%
KeyBank4% First Bank
2%
Sterling Savings
3%
Alaska USA5%
Denali State<1%Mt. McKinley
<1%Mat Valley FCU
<1%
FNBA35%
Wells Fargo19%
Northrim12%
Purchased1
4%
Anchorage54%
Interior6%
Northern1%
Mat Su10%
Gulf Coast5%
Southeast19%
Southwest1%
Purchased1
4%Office/Warehouse
12%
Office/Business Condo17%
Other2
3%Healthcare
4%
Transportation3
8%
Car Wash3%
Recreation3%
Warehouse/Shop5%
Tourism19%
Retail19%
Wastewater Facility3%
16
Current AIDEA Development Projects
Project Type of Business Project Update
DeLong Mountain
Transportation System Public Port and Road
Annual revenues remain strong and stable
Exploring use by another mining company
Fed Ex Facility Hangar & Maintenance Facility Currently analyzing options for lease of facility after
expiration in 2015
Healy Clean Coal
Project Electric Power Plant
Currently maintaining in custodial status
In 2009, AIDEA agreed to sell the Healy Project to Tri-VEC, a
wholly-owned subsidiary of GVEA, with plans to restart the
Project
Negotiations with GVEA ongoing
Skagway Ore Terminal Ore Concentrate
Export Facility
Legislature authorized $65 million AIDEA bonding for
expansion
In conversations with four potential users of terminal
Ketchikan Shipyard Marine Dry-dock Facility
New operator: Vigor Industrial, LLC
Completed new ship assembly hall
Currently constructing a new panel shop
Revolving Fund Credit Foundations
17
Historical Debt Service Coverage for Revolving
Fund Bonds
($ in thousands)
Year Ended 30-Jun
2008 2009 2010 2011 2012
Loan Principal and Interest Payments $76,851 $67,243 $51,092 $59,584 $72,001
Investment Earnings¹ 19,558 13,806 14,107 15,854 12,813
Development Project Receipts² 24,862 27,599 31,833 43,602 27,998
Other Revenues 4,290 5,496 6,294 9,046 9,375
Total Receipts $125,561 $114,144 $103,326 $128,086 $122,187
Operating & Maintenance Expenses 12,111 12,641 13,140 13,509 16,199
Net Income Available for Debt Service $113,450 $101,503 $90,186 $114,577 $105,988
Annual Debt Service³ 18,732 10,911 10,022 12,787 13,770
Debt Service Coverage 6.06x 9.30x 9.00x 8.96x 7.70x
Note: Excludes income, expenses and debt service related to the Snettisham Hydroelectric Project.
¹ Excludes a level amortization of the net book value of Unrestricted Investment Securities that the Revolving Fund Bond Resolution includes for projected future debt service
coverage.
² Receipts for the DMTS and FedEx projects include the scheduled payments due each year. Actual date of July 1 payment receipts may have been the preceding June.
³ Excludes optional redemption of general obligation debt and payment on bonds issued to finance the Snettisham Hydroelectric Project.
Revolving Fund Credit Foundations
Loan principal and interest payments increased in 2012 primarily due to an increase in loan payoffs, scheduled
payments and interest receipts
Development project receipts decreased in 2012 due to the 2011 early payoff of the Skagway Ore Terminal direct
financing lease
O&M increased in 2012 due to increased cost of personnel and the addition of new personnel
III. Increasing Development Project Activity
19
AIDEA Has Made Recent Strategic Investments
and is Exploring Several More
Recent investments
— Kenai Offshore Ventures: Invested $24 million in an LLC which has brought a drilling rig to Cook Inlet to explore
for natural gas
— Mustang Road: Investing $20 million in an LLC which will own a 4.5 mile road and production pad on the North
Slope to connect the existing Tarn road to the proposed Mustang Field development
— DMVA: Investing up to $15 million to construct an expansion of the existing National Guard Armory on Joint Base
Elmendorf – Richardson (“JBER”)
A number of other development projects are under review and consideration
— Skagway Ore Terminal expansion
— Mustang Production Facility
— Central Alaska Energy Fuel Storage
— Port Projects: Arctic Slope, Ward Cove
— Ambler Mining District Access Road
— Fairbanks / North Slope LNG
Project timing, development and funding sources are early stage; projects may be funded through the
Revolving Fund or may be separately secured
— AIDEA will stay in close contact with the rating agencies and will clearly communicate its project development and
funding strategies as projects move forward
Increasing Development Project Activity
20
Map of AIDEA Development Projects
1 New projects.
Increasing Development Project Activity
INTERIOR
DeLong Mountain
Transportation System (DMTS)
Location: Northwest Arctic Borough
Federal Express
Maintenance Facility
Location: Anchorage
Kenai Offshore Ventures
Location: Cook Inlet
Mustang Road1
Location: North Slope
Skagway Ore Terminal
Location: Skagway
Ketchikan Shipyard
Location: Ketchikan
DMVA1
Location: JBER Anchorage
Mat Su
Anchorage
21
AIDEA Has a Rigorous, Documented Review and
Negotiation Process for New Projects
Increasing Development Project Activity
Phase 1 Phase 2 Phase 3 Phase 4
Project
Suitability Assessment Feasibility Analysis
Deal Structuring
& Due Diligence Finalization & Closing
Project
Sponsor
Submittals
Proposal information
Sponsor information
Estimated costs and timeline
Business and financing plan
Preliminary schedule
Execution/development plan
Final execution plans
Final financing plan
Joint work with AIDEA to
prepare contracts, financial &
security commitments, & other
as needed
AIDEA
Process
Is project consistent with AIDEA
Initiatives?
What is project feasibility?
What is the proponent’s
experience & capability?
Is AIDEA right source for
financing?
Is there a complete and
attainable business and
financing plan?
Is there public support?
What is the timing & status on
project?
What are the risks?
Test business case, technical
aspects, management, and
financial approach
Finalize finance plan
Complete due diligence
Prepare draft agreements
Final review & refinement of all
documents
Confirmation of assumptions
from previous phases
Output Project Information Form
Suitability Report
Reimbursement Agreement
Term Sheet
Risk Analysis
Financing documents
Ownership & Operating
Agreements
Due Diligence Checklist
Board Report & Resolution
Final documents
AIDEA
Decision
Making
Project Evaluation
Committee
Authorization to go to Feasibility
Analysis
Investment Committee
Authorization to go to Deal
Structuring & Due Diligence
AIDEA Board
Approve Reimbursement
Agreement
AIDEA Board
Acceptance of report
Approval of documents
substantially in form
Adoption of resolution delegating
authority
AIDEA Executive Director
Final review
Document execution
Closing
Project
Proceeds
To Funding,
Final Design,
Construction
& Operation
No Go Go No Go Go No Go Go No Go Go
22
Kenai Offshore Ventures, LLC
Increasing Development Project Activity
Business Case & Financing Project Overview
Mission Suitability / Economic Development Impact
AIDEA participates in an LLC for the purpose of owning a jack-up
rig with appropriate design for Cook Inlet and Alaskan operations
Drill rig Endeavour (previous Adriatic XI) originally designed for
operation in the cold waters of the North Sea, providing sufficient
toughness for operations in Alaskan waters
300 foot water depth capacity allows for use in all of the Cook Inlet
Original estimated cost to purchase and refurbish was $85 million;
actual cost is approximately $120 million
Rig was recently valued at $127 million
Kenai Offshore Ventures (KOV) LLC created to own and charter rig
Via a bareboat charter, to be operated by Kenai Drilling (Buccaneer)
and Spartan Offshore, with a guaranteed day rate paid to KOV
Buccaneer Alaska has a number of holdings in Cook Inlet that the rig
will be used to explore
Risk Mitigation
AIDEA partnered with three organizations to create KOV, LLC
— Buccaneer Energy
— Ezion Holdings Limited
— Oversea Chinese Banking Corporation (OCBC)
AIDEA contributed a total of $23.6 million
Oversea China Bank Corporation (OCBC) loaned $66 million to
KOV guaranteed by the common members
Buccaneer / Ezion have contributed approximately $30.4 million
Bareboat charter pays approximately $27 million/year
Revenues flow through KOV, paying OCBC debt first and AIDEA
second as preferred owner
Structure
— AIDEA preferred ownership will be repurchased in six annual
payments generated from cash flow from the bareboat charter
— AIDEA to receive fixed annual dividend of 8% of balance
— Common members responsible for all cost over runs
Minimum of 4 well guarantee
AIDEA holds a 3.5% overriding royalty (ORRI) on Buccaneer Texas
and Alaskan properties
Potential Risks Mitigation
Cost over runs on
refurbishment of rig
Common members responsible for all cost
over runs
Buccaneer
financing
In part mitigated by ACES credits in Cook Inlet
Overall default risk AIDEA can replace manager and lease to other
companies
Sales value of rig, ORRI’s in operating fields
Summary of Investment
Supports legislative incentives to explore in Cook Inlet
Cook Inlet in danger of running out of natural gas which would create
tremendous economic hardships in the State’s largest population
AIDEA’s involvement accelerates the development of Cook Inlet Oil
and Gas and helps secure and advance the region’s economy
Alaska jobs (service companies, operations, maintenance)
— 108 direct jobs
— 90 support jobs
— 317 indirect jobs (1.6x multiplier)
Rig can be used to support OCS exploration
23
Mustang Road
Increasing Development Project Activity
Mission Suitability / Economic Development Impact
Business Case & Financing Project Overview
Investment: LLC with expected capitalization of $25mm; AIDEA
preferred member investment limited to $20mm with balance from
common members
LLC entered into an operating agreement with Brooks Range
Petroleum Company (“BRPC”) to build and operate the project
4.5 mile access road and production pad for Brooks Range
Petroleum drill site and production facility
Provides access to Brooks Range Petroleum Company Mustang
Field (Southern Miluveach Unit), adjacent company holdings, other
working interest party holdings and service contractor access
Supports immediate development of the $180mm production facility
Road construction to begin in March 2013 and is expected to be
ready for use in the Fall of 2013
Risk Mitigation
Roads to resources
Contributes to filling TAPS
Added North Slope Borough property tax – approx. $55 million
Alaska jobs (service companies, engineering, construction)
— 30 Road Construction
— 250 Production Facility Fabrication and Installation
— 25 Full time operations
Opportunities for additional field development
State potential revenues from Royalties, ACES, etc., estimated at
$1.2 billion for the life of the field
Repaid through redemption payments and fixed dividend
15 year amortization for redemption and 8.0% of remaining balance
will be received as guaranteed payment
AIDEA security interest in BRPC holdings
A 1% carried working interest was assigned to LLC, making the LLC
eligible for ACES credits
Common members responsible for all costs over $20mm
(approximately $5mm)
ACES credits will be used to pay down AIDEA investment with a
re-amortization of the remaining principal after receipt of credits
Potential Risks Mitigation
BRPC Financial Capacity Lien on BRPC working interest, potential additional
parties
Road Technology /
Construction
Proven design and experienced local contractors
Production Technology /
Fabrication
Proven design, no new technology required,
truckable modules
Oil Price Declines Breakeven point between $30 - $40/barrel,
restrictions on cash distributions
Summary of Investment
24
North Slope LNG to Fairbanks Project Under
Discussion at Legislative Level
Increasing Development Project Activity
Project
Natural gas liquefied on the North Slope and trucked to Interior Alaska
Liquefaction facility could be moved when larger pipeline is built
LNG temporarily stored and re-gasified in Interior Alaska
Natural gas distribution system with storage to supply natural gas for heating (privates and local utilities)
Goals
Provide lowest cost energy to most Interior Alaska consumers as soon as possible
Get gas first to Interior Alaska while assuring long-term access to gas from liquefaction plant
Utilize private sector mechanisms as much as possible
AIDEA
Role
AIDEA is developing the financing of the project
— Examine finance options and commercial structure in collaboration with private party participants
— Utilize available finance tools to meet project goals
Funding
Plan
$50 million State General Fund appropriation
$150 million AIDEA SETS fund project revenue bonds, with State moral-obligation backstop
$125 million loan out of SETS fund, capitalized by State appropriation
$325 million total State package
$30 million natural gas storage credit
Timing Currently in pre-feasibility analysis phase
May know private sector partners soon
IV. Conclusion
26
Credit Summary Review
Strategic Role
in Alaska
AIDEA maintains an active and central role in economic development across the State
Governor and Legislature tasking AIDEA to be proactive across a range of sectors and
providing new tools and credits
Strategic plan outlines broad and proactive approach to fostering economic activity
AIDEA Moving Forward
from Position of
Strength
Security arising from diverse sources – Projects, Loans and Investments
Strong balance sheet
Strong cash flows and liquidity
Strong Security
Provisions in
Resolution
Restrictive financial covenants
Statutory non-impairment covenant of State
Conservative Additional Bonds Test
Proactive and
Conservative Financial
Management Approach
Thorough review process and guidelines for project and loan participations
Judicious approach to use of new tools
Enhancing credit and financial framework as activities expand
Conclusion