AIDEA Rating Agency Update- March 2013

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This is AIDEA's presentation to the Ratings Agencies in March 2013 - updating them on AIDEA's activities and programs.

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AIDEA Rating Agency Update- March 2013

  1. 1. Alaska Industrial Development and Export AuthorityRevolving Fund Credit Update and Strategic OutlookMarch 12-13, 2013
  2. 2. Table of ContentsI. Introduction and Strategic OutlookII. Revolving Fund Credit FoundationsIII. Increasing Development Project ActivityIV. Conclusion 1
  3. 3. Participants Ted Leonard, Executive Director Valorie Walker, Deputy Director – FinanceAlaska IndustrialDevelopment andExport Authority James Hemsath, Deputy Director – Project Development and Asset Management Brenda Applegate, ControllerWestern Financial Pat Clancy, Financial Advisor Group 2
  4. 4. I. Introduction and Strategic Outlook
  5. 5. Management and Organizational Update Current AIDEA Organization Chart Executive Director Ted Leonard Deputy Director, Deputy Director, Human Deputy Director, Deputy Director, Business Commercial Infrastructure Resources Project Dev. and Finance Development Finance Development Manager Asset Mngmt Valorie Walker Officer Chris Anderson Mark Davis Aaron Rhoades James Hemsath Michael Catsi 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 bondingIntroduction and Strategic Outlook 4
  6. 6. Revolving Fund: Summary Credit Update  AIDEA’s principal fund for core business activities: development projects, substantial investment portfolio and loan program Revolving Fund Bond Security  Each core activity produces substantial cash flow  Secured by full faith and credit pledge of the revenues and assets of the Revolving Fund1  Professionally managed with a focus on safety, liquidity and return Investment  67% in AA or above investments² Portfolio  Weighted average duration of 3.6 years  99.9% current (less than 90 days past due) as of 30-Jun-2012 Loan  Continued conservative underwriting practices drive strong performance Program  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 Development  Exploring ways to expand or continue use of other existing projects Projects  Plans to grow development project portfolio  FY 2012 Debt Service Coverage 7.70x (covenant coverage) Continued Financial  30-Jun-2012 Ratio of Cash and Investments to Outstanding Debt is 4.11x5 Strength of Revolving Fund 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 5
  7. 7. 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  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 FundIntroduction and Strategic Outlook 6
  8. 8. 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 investorsIntroduction and Strategic Outlook 7
  9. 9. II. Revolving Fund Credit Foundations
  10. 10. Summary of Revolving Fund Bond Security The Revolving Fund Bonds are secured by a full faith and credit pledge of the revenues and assets of the Revolving Fund Investment Portfolio Loan Program Development Projects  30-Jun-2012 Cash and Investment  30-Jun-2012 Loans Outstanding:  30-Jun-2012 Total Net Book Value: Securities: $364.1 million $468.8 million $329.6 million  Conservative investment policy in  Conservative credit criteria  Cash Receipts FY ending place 30-Jun-2012  Portfolio quality is a key focus  Portfolio focus on quality and liquidity — Red Dog $25.0 million  99.9% of loans are current (less than — Fed Ex $3.0 million  Investment policy change allows non- 90 days past due) U.S. dollar denominated investments Historical Coverage Components (FYE 30-Jun) Millions $150 10 Debt Service Coverage 6.06x 8.96x 7.70x 9.30x 8 9.00x $100 6 4 $50 2 $0 0 2008 2009 2010 2011 2012 Loan Principal & Interest Investment Earnings Development Project ReceiptsRevolving Fund Credit Foundations 9
  11. 11. AIDEA’s Revolving Fund Bond Security is Bolstered by a Strong Legal Framework Key Security Provisions  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: 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 $1,039 million and in no event less than $100,000,000  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 10
  12. 12. AIDEA’s Cash & Investment Portfolio Carefully and Professionally Managed Overview Investment Policy - External Funds  Total FYE 2012 Cash & Investment Portfolio: $364.1 million  Debt instruments issued or guaranteed by the U.S. government, its agencies and instrumentalities and GSEs  Fund management balance between external and internal  Dollar-denominated debt instruments that have been issued  External goals: Safety and return by domestic and nondomestic entities  Internal goals: Safety and liquidity  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 Investment Policy – Internal Funds employed  Debt instruments issued or guaranteed by the U.S.  Certificates of deposit and term deposits of United States government, its agencies and instrumentalities and domestic financial institutions provided the institutions meet Government-sponsored enterprises (GSEs) guidelines set forth in the Resolution  Money market funds and repurchase agreements  Other money market instruments described in the Investment collateralized by U.S. Treasury and agency securities Policy Resolution  Other investments specifically approved by the Board of  Non-U.S. dollar denominated investments, provided the Directors 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 investmentsRevolving Fund Credit Foundations 11
  13. 13. Cash & Investment Portfolio on 30-Jun-2012: $364.1 mm1 Credit Quality Instruments U.S. Agencies and GSEs No Credit Municipal U.S. 4% Exposure2 AAA Bonds 20% 17% 2% Treasuries 20% Corporates 36% Government AA Sponsored A 4% Securities³ 15% Mortgage 26% Asset Backed Backed BBB 1% 29% Cash and 17% Cash BB 1% Equivalents 8% Management Duration in Years Internal External Money Market 0.09 0.12 Internal U.S. Treasuries 0.78 6.12 17% Dodge & U.S. Agencies & GSEs – 4.46 Cox 41% Alaska Corporates – 5.51 Permanent Mortgage Backed – 1.76 Capital 42% 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 12
  14. 14. 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 13
  15. 15. Loan Portfolio on 30-Jun-2012: $468.8 mm AIDEA’s Revolving Fund Loan Portfolio is comprised primarily of Loan Participations Loan Composition OREO & Other  Portfolio Statistics: Loans¹ — Average loan balance on 30-Jun-2012: $1.6mm — Pending loan commitments on 30-Jun-2012: $9.2mm Loan Participations 91%  Loans current (less than 90 days past due) Loans Originated by Year2 ($ in mm) — FYE 2012: 99.9% $150 $117 — Average since 2004: 99.7% $100 $79 $66 — Average for Alaska Commercial Banks: 97.8% $61 $57 $48 46 40 $30 $38 38 $38 $50 33 30 18 11 17 17 $0  AIDEA’s loan history and pricing produce adequate margins 2004 2005 2006 2007 2008 2009 2010 2011 2012 for both borrowing and bad debt allowance Number Value ($) — AIDEA has no charge-offs from 2008-2012 FYE Loans Outstanding ($ in mm) — Loan pricing is computed as $500 $481 $469 $361 $385 $382 $368 $378 $400 $332 – For internally funded loans: an index plus the cost of $278 $300 providing loans3 $200 – For loans funded with bond proceeds: the cost of $100 $0 funds plus the cost of providing loans3 2004 2005 2006 2007 2008 2009 2010 2011 2012 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 $23.5 million funding of ASI. Both were OREO properties whose sale was financed by AIDEA. 3 Cost of providing loans includes salaries, allowance for loan losses and other out of pocket costs.Revolving Fund Credit Foundations 14
  16. 16. Loan Portfolio Analysis As of 30-Jun-2012 AIDEA’s loan portfolio is diverse in terms of sector, geography and exposure to banks and borrowers Loans by Industrial Sector ($ value) Geographic Distribution of Loans ($ value) 1 Southwest Wastewater Facility Purchased Purchased1 3% 4% 1% 4% Office/Warehouse 12% Retail Office/Business Condo Southeast 19% 17% 19% Warehouse/Shop Gulf Coast 5% Other Transportation3 2 5% Tourism 3% 8% Mat Su Anchorage 19% Healthcare Northern 10% 54% 4% 1% Interior 6% Recreation Car Wash 3% 3% Participating Bank Exposures Top Exposures by Borrower and Related Entities AIDEA⁴ Alaska Pacific Anchorage Community Development, LLC $20,499,000 Purchased1 Bank KeyBank 8% 4% 6% 4% First Bank 3000 C Street, LLC 19,309,520 2% Allen Marine Tours, Inc. 15,747,628 Sterling Savings Valley Utilities, LLC 14,571,024 Northrim Wells 12% Fargo 3% Kupreanof, LLC 12,637,737 19% Alaska USA UMED Hotel, LLC 12,017,652 5% FNBA Ketchikan Dock Company, LLC 10,854,903 35% Denali State Pikes Waterfront Lodge, LLC 10,712,463 Mat Valley FCU Mt. McKinley <1% <1% <1% 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 LoansRevolving Fund Credit Foundations 15
  17. 17. Current AIDEA Development Projects Project Type of Business Project Update DeLong Mountain  Annual revenues remain strong and stable Public Port and Road Transportation System  Exploring use by another mining company  Currently analyzing options for lease of facility after Fed Ex Facility Hangar & Maintenance Facility expiration in 2015  Currently maintaining in custodial status  In 2009, AIDEA agreed to sell the Healy Project to Tri-VEC, a Healy Clean Coal Electric Power Plant wholly-owned subsidiary of GVEA, with plans to restart the Project Project  Negotiations with GVEA ongoing  Legislature authorized $65 million AIDEA bonding for Ore Concentrate Skagway Ore Terminal expansion Export Facility  In conversations with four potential users of terminal  New operator: Vigor Industrial, LLC Ketchikan Shipyard Marine Dry-dock Facility  Completed new ship assembly hall  Currently constructing a new panel shopRevolving Fund Credit Foundations 16
  18. 18. Historical Debt Service Coverage for Revolving Fund Bonds ($ 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  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 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 17
  19. 19. III. Increasing Development Project Activity
  20. 20. 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 forwardIncreasing Development Project Activity 19
  21. 21. Map of AIDEA Development Projects Mustang Road1 Location: North Slope DeLong Mountain Transportation System (DMTS) Location: Northwest Arctic Borough INTERIOR Skagway Ore Terminal Location: Skagway Mat Su Ketchikan Shipyard Location: Ketchikan Anchorage Federal Express Maintenance Facility Location: Anchorage Kenai Offshore Ventures Location: Cook Inlet DMVA1 Location: JBER Anchorage 1 New projects.Increasing Development Project Activity 20
  22. 22. AIDEA Has a Rigorous, Documented Review and Negotiation Process for New Projects Phase 1 Phase 2 Phase 3 Phase 4 Project Deal Structuring Feasibility Analysis Finalization & Closing Suitability Assessment & Due Diligence Project  Proposal information  Business and financing plan  Final execution plans  Joint work with AIDEA to Sponsor  Sponsor information  Preliminary schedule  Final financing plan prepare contracts, financial & Submittals  Estimated costs and timeline  Execution/development plan security commitments, & other as needed AIDEA  Is project consistent with AIDEA  Is there a complete and  Test business case, technical  Final review & refinement of all Process Initiatives? attainable business and aspects, management, and documents  What is project feasibility? financing plan? financial approach  Confirmation of assumptions  What is the proponent’s  Is there public support?  Finalize finance plan from previous phases experience & capability?  What is the timing & status on  Complete due diligence  Is AIDEA right source for project?  Prepare draft agreements financing?  What are the risks? Output  Project Information Form  Reimbursement Agreement  Financing documents  Final documents  Suitability Report  Term Sheet  Ownership & Operating  Risk Analysis Agreements  Due Diligence Checklist  Board Report & Resolution AIDEA Project Evaluation Investment Committee AIDEA Board AIDEA Executive Director Decision Committee  Authorization to go to Deal  Acceptance of report  Final review Making  Authorization to go to Feasibility Structuring & Due Diligence  Approval of documents  Document execution Analysis AIDEA Board substantially in form  Closing  Approve Reimbursement  Adoption of resolution delegating Agreement authority No Go Go No Go Go No Go Go No Go Go Project Proceeds To Funding, Final Design, Construction & OperationIncreasing Development Project Activity 21
  23. 23. Kenai Offshore Ventures, LLC Summary of Investment Project Overview Business Case & Financing  AIDEA participates in an LLC for the purpose of owning a jack-up  AIDEA partnered with three organizations to create KOV, LLC rig with appropriate design for Cook Inlet and Alaskan operations — Buccaneer Energy  Drill rig Endeavour (previous Adriatic XI) originally designed for — Ezion Holdings Limited operation in the cold waters of the North Sea, providing sufficient — Oversea Chinese Banking Corporation (OCBC) toughness for operations in Alaskan waters  AIDEA contributed a total of $23.6 million  300 foot water depth capacity allows for use in all of the Cook Inlet  Oversea China Bank Corporation (OCBC) loaned $66 million to  Original estimated cost to purchase and refurbish was $85 million; KOV guaranteed by the common members actual cost is approximately $120 million  Buccaneer / Ezion have contributed approximately $30.4 million  Rig was recently valued at $127 million  Bareboat charter pays approximately $27 million/year  Kenai Offshore Ventures (KOV) LLC created to own and charter rig  Revenues flow through KOV, paying OCBC debt first and AIDEA  Via a bareboat charter, to be operated by Kenai Drilling (Buccaneer) second as preferred owner and Spartan Offshore, with a guaranteed day rate paid to KOV  Structure  Buccaneer Alaska has a number of holdings in Cook Inlet that the rig — AIDEA preferred ownership will be repurchased in six annual will be used to explore 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 Mission Suitability / Economic Development Impact and Alaskan properties  Supports legislative incentives to explore in Cook Inlet Risk Mitigation  Cook Inlet in danger of running out of natural gas which would create tremendous economic hardships in the State’s largest population Potential Risks Mitigation  AIDEA’s involvement accelerates the development of Cook Inlet Oil Cost over runs on  Common members responsible for all cost and Gas and helps secure and advance the region’s economy refurbishment of rig over runs  Alaska jobs (service companies, operations, maintenance) Buccaneer  In part mitigated by ACES credits in Cook Inlet — 108 direct jobs financing — 90 support jobs Overall default risk  AIDEA can replace manager and lease to other — 317 indirect jobs (1.6x multiplier) companies  Rig can be used to support OCS exploration  Sales value of rig, ORRI’s in operating fieldsIncreasing Development Project Activity 22
  24. 24. Mustang Road Summary of Investment Project Overview Business Case & Financing  Investment: LLC with expected capitalization of $25mm; AIDEA  Repaid through redemption payments and fixed dividend preferred member investment limited to $20mm with balance from  15 year amortization for redemption and 8.0% of remaining balance common members will be received as guaranteed payment  LLC entered into an operating agreement with Brooks Range  AIDEA security interest in BRPC holdings Petroleum Company (“BRPC”) to build and operate the project  A 1% carried working interest was assigned to LLC, making the LLC  4.5 mile access road and production pad for Brooks Range eligible for ACES credits Petroleum drill site and production facility  Provides access to Brooks Range Petroleum Company Mustang  Common members responsible for all costs over $20mm Field (Southern Miluveach Unit), adjacent company holdings, other (approximately $5mm) working interest party holdings and service contractor access  ACES credits will be used to pay down AIDEA investment with a  Supports immediate development of the $180mm production facility re-amortization of the remaining principal after receipt of credits  Road construction to begin in March 2013 and is expected to be ready for use in the Fall of 2013 Mission Suitability / Economic Development Impact Risk Mitigation  Roads to resources Potential Risks Mitigation  Contributes to filling TAPS BRPC Financial Capacity Lien on BRPC working interest, potential additional parties  Added North Slope Borough property tax – approx. $55 million Road Technology / Proven design and experienced local contractors  Alaska jobs (service companies, engineering, construction) Construction — 30 Road Construction Production Technology / Proven design, no new technology required, Fabrication truckable modules — 250 Production Facility Fabrication and Installation Oil Price Declines Breakeven point between $30 - $40/barrel, — 25 Full time operations restrictions on cash distributions  Opportunities for additional field development  State potential revenues from Royalties, ACES, etc., estimated at $1.2 billion for the life of the fieldIncreasing Development Project Activity 23
  25. 25. North Slope LNG to Fairbanks Project Under Discussion at Legislative Level  Natural gas liquefied on the North Slope and trucked to Interior Alaska  Liquefaction facility could be moved when larger pipeline is built Project  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)  Provide lowest cost energy to most Interior Alaska consumers as soon as possible Goals  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 is developing the financing of the project AIDEA — Examine finance options and commercial structure in collaboration with private party participants Role — Utilize available finance tools to meet project goals  $50 million State General Fund appropriation  $150 million AIDEA SETS fund project revenue bonds, with State moral-obligation backstop Funding  $125 million loan out of SETS fund, capitalized by State appropriation Plan  $325 million total State package  $30 million natural gas storage credit  Currently in pre-feasibility analysis phase Timing  May know private sector partners soonIncreasing Development Project Activity 24
  26. 26. IV. Conclusion
  27. 27. Credit Summary Review  AIDEA maintains an active and central role in economic development across the State Strategic Role  Governor and Legislature tasking AIDEA to be proactive across a range of sectors and in Alaska providing new tools and credits  Strategic plan outlines broad and proactive approach to fostering economic activity  Security arising from diverse sources – Projects, Loans and Investments AIDEA Moving Forward from Position of  Strong balance sheet Strength  Strong cash flows and liquidity  Restrictive financial covenants Strong Security Provisions in  Statutory non-impairment covenant of State Resolution  Conservative Additional Bonds Test  Thorough review process and guidelines for project and loan participations Proactive and Conservative Financial  Judicious approach to use of new tools Management Approach  Enhancing credit and financial framework as activities expandConclusion 26

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