FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
----------------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 33-42125
Chugach Electric Association, Inc.
(Exact name of registrant as specified in its charter)
Alaska 92-0014224
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5601 Minnesota Drive Anchorage, Alaska 99518
(Address of principal executive offices) (Zip Code)
(907) 563-7494
(Registrant's telephone number, including area code)
None
(Former name,former address and former fiscal year,if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT MAY 1, 1999
NONE NONE
<PAGE>
CHUGACH ELECTRIC ASSOCIATION, INC.
INDEX
Page Number
CAUTION REGARDING FORWARD-LOOKING STATEMENTS 3
PART I FINANCIAL INFORMATION
Item 1. Financial Statements 3
Balance Sheets, March 31, 1999 (Unaudited) and December 31, 1998 4
Statements of Revenues, Expenses and Patronage Capital, Three Months Ended
March 31, 1999 and 1998 (Unaudited) 6
Statements of Cash Flows, Three Months Ended March 31, 1999 and 1998
(Unaudited) 7
Notes to Financial Statements (Unaudited) 8
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition (Unaudited) 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
PART II OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and reports on Form 8-K 20
Signatures 21
Exhibits 22
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CAUTION REGARDING FORWARD-LOOKING STATEMENTS
Statements in this report that do not relate to historical facts, including
statements relating to future plans, events or performance, are forward-looking
statements that involve risks and uncertainties. Actual results, events or
performance may differ materially. Readers are cautioned not to place undue
reliance on these forward-looking statements, that speak only as of the date of
this report and the accuracy of which is subject to inherent uncertainty.
Chugach Electric Association, Inc. (Chugach or the Association) undertakes no
obligation to publicly release any revisions to these forward-looking statements
to reflect events or circumstances that may occur after the date of this report
or the affect of those events or circumstances on any of the forward-looking
statements contained in this report.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited financial statements of Chugach for the quarter ended March 31,
1999 follow:
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CHUGACH ELECTRIC ASSOCIATION, INC.
Balance Sheets
Assets
<TABLE>
March 31, 1999 December 31, 1998
-------------- -----------------
(Unaudited)
<S> <C> <C>
Utility plant:
Electric plant in service $ 622,256,622 $ 620,216,818
Construction work in progress 24,875,332 30,405,736
------------ ------------
647,131,954 650,622,554
Less accumulated depreciation 233,153,441 233,981,397
------------ ------------
Net utility plant 413,978,513 416,641,157
------------ ------------
Other property and investments, at cost:
Nonutility property 3,550 3,550
Investments in associated organizations8,357,281 8,356,364
------------ ------------
8,360,831 8,359,914
------------ ------------
Current assets:
Cash and cash equivalents 7,748,553 2,312,574
Cash - restricted construction fund286,669 177,366
Special deposits 121,163 121,164
Accounts receivable, net 12,881,051 17,243,266
Materials and supplies, at avera17,121,734 15,963,434
Prepayments 1,230,842 917,381
Other current assets 456,003 349,030
------------- -------------
Total current assets39,846,015 37,084,215
------------ ------------
Deferred charges 22,740,024 19,006,164
------------ ------------
$ 484,925,383 $ 481,091,450
------------ ------------
</TABLE>
See accompanying notes to unaudited financial statements.
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CHUGACH ELECTRIC ASSOCIATION, INC.
Balance Sheets
Liabilities and Equities
<TABLE>
March 31, 1999 December 31, 1998
-------------- -----------------
(Unaudited)
<S> <C> <C>
Equities and margins:
Memberships $ 921,963 $ 911,253
Patronage capital 116,435,644 109,622,996
Other 3,774,162 3,489,047
------------ -------------
121,131,769 114,023,296
------------ ------------
Long-term obligations, excluding current installments:
First mortgage bonds payable 194,139,000 235,101,000
National Bank for Cooperatives bonds
payable 113,167,339 70,816,699
------------ ------------
307,306,339 305,917,699
------------ ------------
Current liabilities:
Notes payable 7,500,000 -
Current installments of long-term d6,359,323 6,088,802
Accounts payable 6,744,992 8,838,757
Consumer deposits 1,016,138 993,616
Accrued interest 1,335,065 6,722,325
Salaries, wages and benefits 3,640,910 3,755,837
Fuel 4,610,575 5,362,713
Other 750,780 1,318,947
------------- ------------
Total current liabilities 31,957,783 33,080,997
------------ ------------
Deferred credits 24,529,492 28,069,458
------------ ------------
$ 484,925,383 $ 481,091,450
------------ ------------
</TABLE>
See accompanying notes to unaudited financial statements.
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CHUGACH ELECTRIC ASSOCIATION, INC.
Statements of Revenues, Expenses and Patronage Capital
<TABLE>
Three months ended March 31
1999 1998
---- ----
(Unaudited)
<S> <C>
Operating revenues $ 39,424,237 $ 39,024,214
------------ ------------
Operating expenses:
Production 10,763,127 11,845,378
Purchased power 1,868,522 2,237,195
Transmission 672,493 620,854
Distribution 2,014,368 2,162,668
Consumer accounts 1,028,746 988,879
Sales expense 347,238 99,358
Administrative, general and other 4,755,495 3,844,636
Depreciation and amortization 5,171,884 5,722,186
------------ ------------
Total operating expenses 26,621,873 27,521,154
------------ ------------
Interest:
On long-term debt 5,925,943 6,379,258
Other 210,070 26,447
Charged to construction - credit (4,605) (179,765)
------------- ------------
Net interest expense 6,131,408 6,225,940
------------ ------------
Net operating margins 6,670,956 5,277,120
------------ ------------
Nonoperating margins:
Interest income 146,350 185,344
Other 8,985 299,005
------------- ------------
Total nonoperating margins 155,335 484,349
------------ ------------
Assignable margins 6,826,291 5,761,469
Patronage capital at beginning of per109,622,996 104,800,092
Retirement of capital credits and
estate payments (13,643) (31,917)
------------- -------------
Patronage capital at end of period $ 116,435,644 $ 110,529,644
------------ ------------
</TABLE>
See accompanying notes to unaudited financial statements.
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CHUGACH ELECTRIC ASSOCIATION, INC.
Statements of Cash Flows
<TABLE>
Three months ended March 31
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Assignable margins $ 6,826,291 $ 5,761,469
------------ ------------
Adjustments to reconcile assignable margins to net cash provided (used) by
operating activities:
Depreciation and amortization 5,171,884 5,722,186
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 4,362,215 6,631,691
Prepayments (313,461) (961,577)
Materials and supplies (1,158,300) 20,711
Deferred charges (3,733,860) (1,091,769)
Other (216,277) (88,962)
Increase (decrease) in liabilities:
Accounts payable (2,093,765) (2,263,492)
Consumer deposits 22,522 (77,532)
Accrued interest (5,387,259) (5,550,755)
Deferred credits (3,539,965) (334,920)
Other (1,435,233) (4,454,169)
------------ ------------
Total adjustments (8,321,499) (2,448,588)
------------- -------------
Net cash provided (used) by
operating activities (1,495,208) 3,312,881
Cash flows from investing activities:
Extension and replacement of plant (2,509,240) (2,306,289)
Investments in associated organizations (917) (139,452)
------------- -------------
Net cash used in investing activities (2,510,157) (2,445,741)
------------- -------------
Cash flows from financing activities:
Short-term borrowings, net 7,500,000 8,500,000
Proceeds from long-term debt 42,500,000 -
Repayments of long-term debt (40,840,838) (5,780,399)
Retirement of patronage capital (13,643) (31,917)
Other 295,825 6,196
------------ -------------
Net cash provided by 9,441,344 2,693,880
------------ ------------
financing activities
Net increase in cash
and cash equivalents 5,435,979 3,561,020
Cash and cash equivalents at beginning of period 2,312,574 5,224,529
----------- -----------
Cash and cash equivalents at end of period $ 7,748,553 $ 8,785,549
----------- -----------
</TABLE>
See accompanying notes to unaudited financial statements.
7
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CHUGACH ELECTRIC ASSOCIATION, INC.
Notes to Financial Statements
March 31, 1999
(Unaudited)
1. Presentation of Financial Information
During interim periods, Chugach follows the accounting policies set forth
in its audited financial statements included in Form 10-K filed with the
Securities and Exchange Commission. Users of interim financial information
are encouraged to refer to the footnotes contained in Chugach's Form 10-K
when reviewing interim financial results. Management believes that the
accompanying interim financial statements reflect all adjustments which are
necessary for a fair statement of the results of the interim period
presented. All adjustments made in the accompanying interim financial
statements are of a normal recurring nature.
Certain reclassifications have been made to the 1998 financial statements
to conform to the 1999 presentation.
2. Lines of Credit
Chugach maintains a line of credit of $35 million with National Bank for
Cooperatives (CoBank). The CoBank line of credit expires August 1, 1999 but
carries an annual automatic renewal clause. At March 31, 1999 there was no
outstanding balance on this line of credit. In addition, the Association
has an annual line of credit of $50 million available at the National Rural
Utilities Cooperative Finance Corporation (NRUCFC). At March 31, 1999, $7.5
million was outstanding on this line of credit at an interest rate of
5.90%. The NRUCFC line of credit expires October 14, 2002.
3. Change in Accounting Policy
Effective January 1998, Chugach changed its accounting policy for
depreciation of general plant (excluding buildings, leasehold improvements
and vehicles). Under the new vintage group method the assets are amortized
over their service lives and retired as a group at the end of the
amortization period. The amortization periods were developed as part of the
recent depreciation study update. At January 1, 1998, the affected asset
group made up 2.8% of Electric Plant in Service. In conjunction with
adoption of the new depreciation methodology, Chugach wrote off
approximately $19 million of plant considered to be fully depreciated.
Depreciation expense for the affected asset groups is estimated to be
$700,000 lower annually. Buildings, leasehold improvements and vehicles
will continue to be depreciated over their estimated useful lives based on
rates developed in periodic depreciation studies.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
(Unaudited)
Reference is made to the information contained under the caption "CAUTION
REGARDING FORWARD-LOOKING STATEMENTS" at the beginning of this Report. Reference
is also made to the information contained in Item 5 of Part II with respect to
the Matanuska Electric Association, Inc. (MEA) proposal.
For certain information concerning a Treasury rate-lock transaction entered into
by Chugach in March 1999, reference is made to information appearing under the
caption "Additional Information Regarding Treasury Rate-Lock" in Item 5 of Part
II of this report.
RESULTS OF OPERATIONS
Current Year Quarter Versus Prior Year Quarter
Operating revenues, which include sales of electric energy to retail, wholesale
and economy energy customers and other miscellaneous revenues, increased by 1.0%
for the quarter ended March 31, 1999 over the same quarter in 1998. The increase
in revenues is primarily attributable to higher kWh sales to retail and the
three wholesale customer classes. The increase in revenue also was attributable
to lower fuel and purchased power costs.
Retail and the wholesale demand and energy rates of Homer Electric Association,
Inc. (HEA) did not change from the first quarter of 1998 to the same period in
1999. Wholesale demand and energy rates charged to MEA declined 0.20% effective
November 1998. Wholesale demand and energy rates charged to Seward declined
approximately 15%. In 1998, Chugach and the City of Seward signed a new ten-year
power sales agreement. The new power sales agreement, which is currently before
the Alaska Public Utilities Commission (APUC) under docket U-98-70, contains a
provision that allows Chugach to interrupt Seward at certain times during the
year. A hearing was held in March 1999 and a final decision from the APUC is
pending. The APUC has already approved the contract on an interim-refundable
basis. As a result of this new power sales agreement, revenues derived from
sales to Seward will decline about $350,000 annually.
Pursuant to a Settlement Agreement with AEG&T/MEA/Homer, Chugach may be required
to grant a refund to AEG&T/MEA/Homer retroactive to January 1, 1997 (based on
the 1996 test year filing). A provision for wholesale rate refund of
approximately $980,000 and $993,000 was recorded at December 31, 1997 and
December 1998, respectively, to accommodate certain rate adjustment clauses
contained in the Settlement Agreement. Year-to-date March 1999 provisions total
approximately $295,000. Determination of the final refund amounts awaits APUC
approval of the 1996 test year rate filing, which was filed with the APUC in
April 1999.
Lower fuel prices were the primary reason for the decrease in production expense
for the quarter ended March 31, 1999 compared to the same period in 1998.
Purchased power expense
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was lower for the quarter ended March 31, 1999 compared to the same period in
1998 as a result of a substantial decrease in purchases from Soldotna Unit #1
due to decreased economy energy sales and favorable fuel prices during first
quarter 1999 compared to the same period last year. Transmission expenses for
quarter ended March 31, 1999 were higher compared to 1998 as a result of a shift
in load dispatch labor from a distribution focus in 1998 to a transmission focus
in 1999. In addition, the wheeling charge for Eklutna power that had been
treated as a production expense in first quarter 1998 was treated as a
transmission expense in first quarter 1999. These variances were slightly offset
by lower transmission line clearing costs for quarter ended March 31, 1999,
compared to the same period last year. Distribution costs were lower in the
first quarter of 1999 compared to 1998. This was a result of reduced substation
maintenance costs due to the adoption of a reliability-centered maintenance
program. Consumer accounts and sales expense increased for the quarter ended
March 31, 1999. This was primarily due to increased customer service and
advertising costs related to the addition of new business ventures in the first
quarter of 1999. Administrative, general and other expenses increased for the
three-month period ended March 31, 1999. This increase was substantially due to
the costs associated with the unsolicited acquisition proposal by MEA referenced
in Item 5 of Part II and the amortization of the costs related to the
implementation of Year 2000 (Y2K) compliant financial software that was
completed in 1998.
Depreciation expense was lower for the quarter ended March 31, 1999 compared to
the same period in 1998 due to an adjustment done in the first quarter of 1999
as a result of the unitization of a capital project that was completed in 1997.
Interest expense decreased in the current period due to the refinancing of
long-term debt during the first quarter of 1999.
Other nonoperating margins were lower for the quarter ended March 31, 1999
compared to the same period in 1998. This difference was due to patronage
capital credits received from CoBank in the first quarter of 1998.
Financial Condition
Total assets increased by 0.8% from December 31, 1998 to March 31, 1999. The
increase was due primarily to an increase in cash from short-term borrowings and
deferred charges. The increase in deferred charges is attributable to
refinancing activities associated with the purchase of the Series A 1991 First
Mortgage bonds. These increases were partially offset by the retirement of $4.2
million of fully depreciated generation plant in the first quarter. A decline in
accounts receivable was caused by the payment of wholesale power bills that were
accrued but not paid at December 31, 1998. Notable changes to total liabilities
include the decrease in first mortgage bonds resulting from the March bond
payment and Chugach's purchase of first mortgage bonds. Offsetting the decrease
in first mortgage bonds was the increase in CoBank bonds resulting from the
issuance of CoBank 6 in the amount of $42.5 million on March 30, 1999. Accrued
interest also decreased due to the March semi-annual bond payment.
Liquidity and Capital Resources
Chugach has satisfied its operational and capital cash requirements primarily
through internally generated funds, an annual $50 million line of credit from
NRUCFC and a $35 million line of credit with CoBank. At March 31, 1999, there
was no balance outstanding with CoBank; $7.5
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million was outstanding on the NRUCFC line at March 31, 1999 which carried an
interest rate of 5.90%.
Capital construction in 1999 is estimated at $33.9 million. At March 31, 1999
approximately $3.78 million has been expended. Capital improvement expenditures
are expected to increase in the upcoming second and third quarters as the
construction season begins in April and extends into October.
In 1998 Chugach negotiated a supplemental indenture (Third Supplemental
Indenture of Trust) with CoBank that previously allowed up to $80 million in
future bond financing. Chugach finalized an amendment to the Third Supplemental
Indenture of Trust (Seventh Supplemental Indenture of Trust) that eliminated the
maximum aggregate amount of bonds the Company may issue under the agreement. At
March 31, 1999, Chugach had bonds in the amount of $113.6 million outstanding
under this financing arrangement. The balance is comprised of a $1.01 million
bond (CoBank 1) which carries an interest rate of 8.95% maturing in 2002, a $10
million bond (CoBank 2) priced at 7.76% due in 2005, a $21.5 million bond
(CoBank 3), priced at 5.60%, a $23.5 million bond (CoBank 4) priced at 5.60% and
a $15 million bond (CoBank 5) priced at 5.60% due in 2002, 2007 and 2012
respectively. On March 30, 1999 a $42.5 million bond (CoBank 6) was issued with
a variable interest rate currently priced at 5.65%. CoBank 6 matures March 15,
2002. Principal payments on the CoBank 3 and 4 bonds commence in 2003 and
continue through 2022. Additionally, Chugach has negotiated a similar
supplemental indenture (Fifth Supplemental Indenture of Trust) with NRUCFC for
$80 million. At March 31, 1999 there were no amounts outstanding under this
financing arrangement.
Chugach management continues to expect that cash flows from operations and
external funding sources will be sufficient to cover operational and capital
funding requirements in 1999 and thereafter.
YEAR 2000
Readiness Information
Chugach has recognized the need to investigate, test and remediate, if
necessary, the critical systems and equipment under its control which could
cause power and business disruptions in conjunction with what are collectively
called Y2K dates. Chugach has an active program underway that should be
completed by the summer of 1999.
Chugach expects to fund its Y2K project internally and estimates it will incur
between $9 and $11 million of incremental costs through March 1, 2000,
associated with making the necessary modifications identified to date to
applications and embedded devices. This projection includes contingencies and
replacement systems that may be required. Chugach has incurred costs of
approximately $8.8 million for Y2K projects through March 31, 1999, all of which
has been capitalized.
Chugach's Y2K Project is divided into three primary phases. The first phase is
"inventory and assessment" during which applications (both internally developed
and vendor supplied) and devices (in the generation plants, substations,
telecommunications and facilities) are identified
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and criticality to the business is determined. The second phase, "testing and
remediation" occurs during the replacement or remediation of the systems and/or
devices. The final phase is "contingency planning" during which specific backup
plans will be developed for all "mission-critical" applications, devices and
systems. Chugach is also participating in the Y2K activities of several
organizations including the North American Electric Reliability Council (NERC),
Electric Power Research Institute (EPRI) and the National Rural Electric
Cooperative Association (NRECA) who are developing a network to verify the risks
and costs nationally, in the State and at Chugach.
Chugach's Y2K readiness program is divided along functional lines (real time and
business systems) and each area is at a different point of completion. System
testing at Chugach's four power plants is underway and will be complete by June
1999. In the transmission and distribution area, inventory and assessment
activities are underway for the Supervisory and Control and Data Acquisition
(SCADA) system, telecommunication, relaying and system protection assets.
Testing and remediation are scheduled to be completed in June, 1999. Testing and
remediation is between 73% and 89% complete for each of these systems.
Chugach business systems Y2K readiness activities were complete by year-end
1998. General Ledger, Accounts Payable, Payroll, Materials Management, Project
Costing and Human Resources subsystems to the Financial Information System were
converted by the end of 1998. Additionally, the Customer Billing System was
updated to be Year 2000 compliant. The total cost of these conversions was $8.7
million. Remaining, non-critical financial subsystems needing to be converted in
1999 are the Budget Preparation subsystem (to be completed by September 1, 1999)
and Fixed Assets system. We are also updating our Work Management subsystems.
Finally, all the hardware connected to Chugach's business systems area-wide
network have been tested and found to be Y2K ready.
The business systems team is currently developing contingency plans in the event
of any failure. These plans will be complete by August 1999.
The Purchasing Department asked every vendor for a statement regarding their Y2K
readiness. All responses were due by the end of April 1999. Review of each
individual vendor's response is in progress. If after review, it is determined
that the vendor will not be Y2K compliant by year-end, Chugach will determine if
it will continue its relationship with that vendor. This task is currently 25%
complete.
It is Chugach's goal that all Y2K readiness projects be complete by the summer
of 1999 and no Chugach customers lose power for an extended time due to a Y2K
problem. Based on the progress to date, Chugach believes the goals will be
achieved.
Contingency planning is in progress and currently 35% complete. The reasonably
worst case scenario has not been determined at this time. Although contingency
planning is by its nature speculative, the Y2K contingency plan will reduce the
risk of material impacts on Chugach's operations due to Y2K problems.
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OUTLOOK
Nationwide, the electric utility industry is entering a period of unprecedented
competition. Electric utilities in Alaska will not be immune from these
competitive forces. Chugach has taken several steps to be more effectively
positioned to meet the challenge of a competitive market for electricity.
Chugach participates in national benchmarking projects to improve system
operations. The most recent studies have focused on mailroom operations,
remittance processing, new service connections, system reliability and power
production. As a result of these studies, Chugach has been able to make these
processes more efficient which has led to lower costs. The Association is
committed to continue reviewing all areas of its operations and to serve its
customers in a way that maintains high reliability while containing the cost of
electricity.
In addition to participation in benchmarking studies, Chugach has also
implemented strategic alliances in the purchasing and warehousing areas. These
alliances are designed to improve efficiency and thus, contribute to lower
operating costs. In 1997, Chugach was able to lower inventory unit costs,
increase inventory turns and decrease project cost by furnishing materials to
contractors as a direct result of these strategic alliances. Chugach will
continue to explore other areas for strategic alliance opportunities.
During 1998, Chugach updated its strategic plan. In this plan, priority issues
are identified that are critical to the Company's success. Updated key result
area targets were developed that track the most important measures of Chugach's
performance.
Chugach has been active at the State Legislature in support of the customer's
right to choose their electric power supplier. Virtually all Alaskan utilities
have opposed Chugach's efforts to develop competition and are attempting to
create exclusive service territories. At this time no bill relating to customer
choice has moved out of legislative committee. Thus, it is not possible to
predict the outcome of this legislative process.
In 1997 Chugach made organizational changes in preparation for competition.
Recognizing that the new marketplace will probably be "unbundled" along the
functional lines of generation, transmission and distribution, and retail
services, Chugach's organizational structure reflects these functions. Operating
with three divisions: Finance and Energy Supply, Transmission and Distribution
Network Services, and Retail Services, Chugach has positioned itself to meet
competition in the electric industry. Chugach's Marketing Department continues
to operate a key account program for larger customers and is developing new
services to enhance existing customers' satisfaction.
Chugach commenced operation as an internet service provider (ISP) in February
1999. Also in 1999, Chugach began selling spare microwave bandwidth to
industrial customers.
Chugach has three collective bargaining agreements with the International
Brotherhood of Electrical Workers (IBEW) that are currently open
for negotiation. Although each of the contracts had an expiration date of
January 31, 1998, the parties have agreed that the contracts shall
continue in effect until new contracts are put in place. If the parties cannot
agree on the terms of new agreements, all outstanding issues will
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be decided through binding interest arbitration. The IBEW cannot strike and
Chugach cannot lockout under the continuing agreement.
ENVIRONMENTAL MATTERS
Compliance with Environmental Standards
Chugach's operations are subject to certain federal, state and local
environmental laws that Chugach monitors to ensure compliance. The costs
associated with environmental compliance are included as a component of both the
operating and capital budget processes. Chugach accrues for costs associated
with environmental remediation obligations when such costs are probable and
reasonably estimable.
Environmental Matters
Refer to Part II, Item 1 for an update on the status of the Standard Steel
Salvage Yard Site litigation.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Chugach is exposed to a variety of risks, including changes in interest rates
and changes in commodity prices due to repricing mechanisms inherent in gas
supply contracts. In the normal course of its business, Chugach manages its
exposure to these risks as described below. Chugach does not engage in trading
market risk sensitive instruments for speculative purposes, nor are any
derivative instruments outstanding at March 31, 1999.
Chugach does not hold or issue derivative financial instruments for trading
purposes. Chugach uses derivative financial instruments to manage its exposure
to fluctuations in interest rates. Neither the aggregate value of these
financial instruments nor the market risk posed by them is material to the
Company.
Interest rate risk - As of March 31, 1999, except for CoBank 6 which carries a
variable interest rate that is periodically repriced, Chugach's outstanding
borrowings were at fixed interest rates. The following table provides
information regarding cash flows and related weighted average interest rates by
expected maturity dates for Chugach's debt obligations (dollars in thousands):
<TABLE>
Fair
1999 2000 2001 2002 2003 Thereafter Total Value
---- ---- ---- ---- ---- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-term debt,
including current portion $ 143 $6,372 $6,430 $52,910 $5,907 $241,904 $313,666 $340,895
</TABLE>
Commodity price risk - Chugach's gas contracts provide for adjustments to gas
prices based on fluctuations of certain commodity prices and indices. Purchased
power costs are passed directly to Chugach's wholesale and retail customers
through a fuel surcharge, therefore, fluctuations in the price paid for gas
pursuant to long-term gas supply contracts does not normally impact margins. The
fuel surcharge mechanism mitigates the commodity price risk related to market
fluctuations in the price of purchased power.
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PART II OTHER INFORMATION
Item 1. Legal Proceedings
Standard Steel Salvage Yard Site (the Site)
The full investigation and cleanup (remedial action) of the Site was
substantially completed as of September 30, 1998. A relatively minor amount of
additional Site work and additional reporting will be performed in 1999 to
complete the remedial action. Although the costs of the 1999 work as well as the
total oversight costs of EPA and other federal agencies are not yet known,
Chugach has pre-funded these costs and, based on estimates for 1999, it is not
anticipated that Chugach will be required to make any further payments relating
to the remedial action at the Site.
Four of Chugach's insurance carriers have been paying, under a reservation of
rights, Chugach's costs of defense for the Site. By agreement dated May 15,
1998, these four insurance carriers agreed to pay the majority of Chugach's
costs relating to the Site, including investigation and remedial action costs,
EPA oversight costs and attorneys' fees. This settlement preserves Chugach's
potential claim for natural resource damages and is anticipated to result in
Chugach paying no more than $500,000 for all Site costs. Management believes
that the latter amount would be fully recoverable in rates and therefore would
have no impact on Chugach's financial condition or results of operations.
Matanuska Electric Association, Inc. v. Chugach Electric Association, Inc.
U-98-180
Reference is made to Item 5 (Other Information) with respect to the unsolicited
acquisition proposal by MEA. On December 2, 1998, MEA filed a complaint with the
APUC. In the Matter of the Formal Complaint filed by MATANUSKA ELECTRIC
ASSOCIATION, INC. Against CHUGACH ELECTRIC ASSOCIATION, INC., U-98-180. MEA
alleges that Chugach has engaged in "unreasonable management practices" in the
management of the Series A Bonds. The complaint asks the APUC to issue an order
instituting an investigation into the reasonableness and propriety of the
continuing decision of Chugach not to defease such Bonds, which order would
include convening a public hearing to take evidence as to whether Chugach's
decision not to defease said Bonds constitutes an unreasonable management
decision, and awarding MEA such additional relief as the APUC may find just and
equitable. Chugach has filed an answer denying the material allegations of MEA's
complaint, asserting that its management of the Series A Bonds has been
reasonable and sound, and contending that defeasance of such Bonds would not be
a prudent course of action. The answer also asserts that the APUC should not
open an investigation on the grounds that MEA's allegations do not implicate the
kinds of management decision into which it is appropriate for the APUC to
inquire. MEA has filed a reply to Chugach's answer, which Chugach has moved to
strike on the basis that such reply asserts new claims going beyond the core
allegations in the complaint relating to Chugach's decision not to defease the
Series A Bonds and relies on new factual allegations not contained in the
complaint. Each party has filed additional motions regarding the pleadings of
the other party.
16
<PAGE>
To date, the APUC has not taken any action in this matter except to convene an
informal status conference on April 30, 1999. If the APUC authorizes an
investigation, Chugach will vigorously defend its financial management. Because
of the preliminary nature of the case, Chugach has not been able to estimate the
costs of its participation in the case should the case proceed.
Item 2. Changes in Securities and Use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Additional Information Regarding Treasury Rate-Lock
On March 17, 1999, Chugach entered into a Treasury rate-lock transaction with
Lehman Brothers Financial Products Inc. (Lehman Brothers) for the purpose of
taking advantage of favorable current market interest rates in anticipation of
refinancing Chugach's Series A Bonds Due 2022 on their first call date (March
15, 2002). Under the Treasury rate-lock contract, Chugach will receive a
lump-sum payment from Lehman Brothers on March 15, 2002, if the yield on 10- or
30-year Treasury bonds as of mid-February, 2002, exceeds a specified target
level (5.653% and 5.838%, respectively). Conversely, Chugach will on the same
date be required to make a payment to Lehman Brothers. If the yield on the 10-
or 30-year Treasury bonds falls below its stated target yield. The amount of the
payment will increase as the difference between the actual yield and the target
yield increases. For each basis point (0.01% per annum) by which the yield on
10-year or 30-year Treasury bonds deviates from the stated target level, Chugach
will receive (if the Treasury yield exceeds the target yield) or make (if the
Treasury yield falls short of the target yield) a payment equal to the product
obtained by multiplying (i) the amount of deviation (expressed in basis points)
by (ii) the changes in the prices of $196 million (in the case of 10-year
Treasury bonds) and $18.7 million (in the case of the 30-year Treasury bonds) of
Treasury bonds, given a one basis point change in their respective yields
(determined with reference to the Bloomberg Financial Market's Government Yield
Analysis Page). In this way, Chugach intends that higher interest costs
resulting from increases in market interest rates prior to refinancing of
Chugach's long-term debt would be mitigated by a lump-sum, up-front payment to
Chugach at the time of the refinancing.
Unsolicited Acquisition Proposal by Matanuska Electric Association, Inc.
In October 1998, MEA, Chugach's largest wholesale customer, presented to the
Board of Directors of Chugach (the Board) an unsolicited proposal (the MEA
Proposal) to acquire
17
<PAGE>
substantially all of Chugach's assets in exchange for the assumption of
Chugach's liabilities. Although MEA has not provided many details of the MEA
Proposal, it has stated that the generation and transmission assets of Chugach
would be transferred to a subsidiary of MEA, the assets comprising Chugach's
distribution system would be transferred to MEA itself, and Chugach's members
would become members of MEA. MEA has also stated that, at the time of the
acquisition, it would borrow enough money to defease (i.e. to purchase a pool of
U.S. government or U.S. government-backed securities that would generate
sufficient cash flow to make scheduled debt service payments during the
remaining life of the defeased obligations) or refinance Chugach's outstanding
Series A Bonds and to repay Chugach's outstanding CoBank bonds plus an
additional $42.5 million that would be distributed in cash to the members of the
post-acquisition MEA. On November 2, 1998, citing uncertainty over whether MEA
would be successful in its bid to acquire Chugach's assets, Standard & Poor's
Rating Service placed its single "A" rating on the Series A Bonds on "Credit
Watch with developing implications", meaning the rating may be raised, lowered
or affirmed.
After evaluating information provided by MEA and analyses of the MEA Proposal
presented by Chugach's staff and independent financial advisors, on November 12,
1998, the Board rejected the MEA Proposal. Thereafter, MEA withdrew the
provision of the MEA Proposal which contemplated that the Board of Directors of
MEA, following the consummation of the MEA Proposal, would include minority
representation from among the members of the Board. MEA also stated that MEA's
future communications on this matter would be directed to Chugach's membership
rather than the Board or Chugach's staff and MEA began circulating petitions to
gather a sufficient number of signatures from Chugach's members to force a
special meeting of Chugach's members for the purpose of considering the MEA
Proposal. Under the Alaska Electric & Telephone Cooperative Act, a special
meeting of the members of Chugach may be called by 10% of Chugach's members.
On April 28, 1999, MEA delivered documents to Chugach which MEA stated, in its
transmittal letter, constituted petitions requesting a special meeting of the
members of Chugach for the purpose identified in the petitions. The form of
petition used by MEA in soliciting sufficient signatures from Chugach members to
meet the 10% test referred to above states that the petition requests a special
meeting of the members of Chugach to be held at the earliest possible date to
consider and vote upon the sale of all or substantially all of the assets of
Chugach to a wholly-owned subsidiary of MEA; that a summary of the proposed sale
was printed on the back of the petition; and that the official ballot to be used
in conjunction with the special meeting shall set forth the terms and conditions
of the sale as specified by the Board of Directors of MEA. The form of official
ballot that MEA intends to seek to have Chugach send to its members has not to
date been furnished to Chugach. The summary of the proposed sale printed on the
back of the petition reads (in relevant part) as follows:
18
<PAGE>
"Summary of Proposed Sale of the Assets of
Chugach Electric Association, Inc.
1. Chugach Electric Association, Inc. (CEA) will sell all of its assets to
a wholly owned subsidiary of Matanuska Electric Association, Inc. (MEA), which
will pay for these assets by assuming all of CEA's liabilities, including CEA's
responsibility to pay capital credits to its members.
2. Concurrently with the sale of CEA's assets, MEA's subsidiary will sell
all of the distribution assets it acquires from CEA to MEA. As partial
consideration for the purchase of these assets, MEA will assume the
responsibility to pay the capital credits of CEA's former members.
3. All of CEA's current members will be eligible to become members of MEA.
4. All terms and conditions of the proposed sale are contingent on
compliance with all statutory and regulatory requirements of the State of
Alaska, including approval of the Alaska Public Utilities Commission."
In response to MEA's April 28, 1999 letter and enclosures referred to above,
Chugach advised MEA on April 29, 1999 that, in light of the pendency of an
advisory vote of MEA's members on the MEA proposal scheduled for that day,
Chugach did not think it would be prudent to incur any costs or utilize any
resources in connection with the documents delivered to Chugach. In addition,
Chugach advised MEA that: (i) whatever the outcome of the MEA members' advisory
vote, and whatever MEA decided to do in light of it, it remained Chugach's
position that the MEA proposal is fundamentally flawed and not in the best
interests of Chugach members; and (ii) as discussed below, it remains Chugach's
position that the proposed acquisition cannot legally be accomplished without
the approval of Chugach's Board of Directors. In addition, Chugach advised MEA
that, while Chugach does not agree that MEA or any other member of Chugach has
the ability to dictate ballot language, it was necessary for MEA to provide its
specific proposed ballot language as well as the information that Chugach had
requested about the MEA proposal in earlier correspondence, in order for Chugach
to make decisions on whether to call a special meeting, and if so, on other
issues related to such a meeting. In addition, Chugach notified MEA that the
petitions were being held by Chugach's contractor for signature verification
action if and when such action became appropriate and that, if and when the
signatures were verified, the petitions would be treated as having been received
by Chugach on April 28, 1999.
At the annual meeting of members of Chugach held on April 29, 1999, the members,
among other things, approved an amendment to the bylaws of Chugach which limits
the amount of time in which petitions may be gathered for the purpose of
requesting a special meeting of members. Under this amendment, such signatures
must be collected within one consecutive 90 calendar day time period and the
Board of Directors shall establish such policies as may be necessary and
convenient to ensure compliance with this limit. The amended text of the bylaws
of Chugach, reflecting this amendment as well as certain other amendments
approved by members at the April 29, 1999 meeting, is filed as Exhibit 3 (ii) of
this report and is incorporated herein by reference.
19
<PAGE>
According to information publicly released by MEA, at its annual meeting of
members held on April 29, 1999, its members voted in favor of "the MEA Board of
Directors continuing to prepare MEA for deregulation and competition through the
acquisition of Chugach" by a vote of 4,915 to 3,485, or 59% to 41%, and members
also voted 5,776 to 2,472, or 70% to 30%, in favor of increasing the number of
directors on MEA's Board through a districting process if MEA successfully
acquires Chugach. Both of these votes were stated on the ballot to be advisory.
The MEA annual meeting was recessed pending the outcome of an election on
whether to recall the Board of MEA, in accordance with a ruling of the Alaska
Supreme Court.
Alaska law prohibits Chugach from disposing of a substantial portion of its
assets unless the disposition is approved by a majority of the members of
Chugach and by at least two-thirds of those actually voting on the proposal,
except that the Board may authorize Chugach to sell its assets to another
cooperative if the transaction is approved by a majority of those voting in an
election in which a much smaller percentage of the membership votes and the
purchaser expressly agrees to assume Chugach's obligations under collective
bargaining agreements. MEA has taken the position that the Board would be
compelled to approve the sale of Chugach's assets to MEA if two-thirds of
Chugach's members voting at a special meeting of the members approved the
transaction and those voting in favor of the transaction constituted a majority
of all of the members. Chugach believes that, although member approval clearly
is a prerequisite to any sale to MEA, no such sale could legally occur unless
the Board also approves the sale in the exercise of its independent judgment.
It is unclear whether a special meeting of Chugach's members will be called to
consider the MEA Proposal, whether Chugach's members would approve the MEA
Proposal by a supermajority vote if it were submitted at a special meeting of
members, what legal effect (if any) approval by a supermajority of Chugach's
members would have in light of the rejection of the MEA Proposal by the Board,
and whether any acquisition - even if approved by Chugach - would be approved by
the APUC. It is, therefore, not possible to determine at this time the outcome
of the MEA Proposal. However, in view of numerous uncertainties associated with
the consummation of the MEA Proposal, including those referred to above, Chugach
believes that there is not a material likelihood that the MEA Proposal will be
consummated. Accordingly, while Chugach has publicly stated its belief that the
consummation of the MEA Proposal (including the additional borrowing that would
be associated therewith) would adversely affect the financial condition, results
of operations, capital resources and liquidity of Chugach, Chugach does not
believe that there is a material likelihood that these consequences will occur.
On May 6, 1999, MEA responded, by letter, to Chugach's letter of April 29, 1999.
MEA's letter stated (among other things) that: (i) MEA considers its members to
have advised it that it should continue its efforts to prepare MEA for
deregulation and competition through the acquisition of Chugach; (ii) MEA agrees
to Chugach's suggestion to hold in abeyance until after May 25, 1999, the
counting of the petitions turned in by MEA, under Chugach's assurance that they
would be treated as having been received by Chugach on April 28, 1999; (iii)
following the recall election relating to the MEA Board, MEA will present
Chugach with additional information requested by Chugach on the special meeting
of Chugach's members being sought by MEA; and (iv) MEA suggests that the Board
of MEA and Chugach engage in dialogue with regard to a possible combination of
the two organizations on a non-adversarial basis.
20
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Bylaws of the Registrant (as amended April 29, 1999).
Confirmation for U.S. dollar Treasury rate-lock transaction to be
subject to 1992 Master Agreement, dated March 17, 1999, between Lehman
Brothers Financial Products Inc.and Chugach Electric Association, Inc
Closing documents dated March 30, 1999 First Mortgage Bond, CoBank
Series (CoBank-6), Due March 15, 2002 pursuant to the Third
Supplemental Indenture of Trust
Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed for the quarter ended March 31, 1999.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHUGACH ELECTRIC ASSOCIATION, INC.
By: /s/ Eugene N. Bjornstad
Eugene N. Bjornstad, General Manager
Date: May 13, 1999
By: /s/ Evan J. Griffith, Jr.
Evan J. Griffith, Jr.
Executive Manager, Finance & Energy
Supply
Date: May 13, 1999
22
<PAGE>
EXHIBITS
Listed below are the exhibits which are filed as part of this Report:
Exhibit
number Description Page
3 (ii) Bylaws of the Registrant (as amended April 29, 1999). 23
10.68 Confirmation for U.S. dollar Treasury rate-lock 39
transaction to be subject to 1992 Master Agreement,
dated March 17, 1999 between Lehman Brothers Financial
Products Inc. and Chugach Electric Association, Inc.
10.69 Closing documents dated March 30, 1999 First Mortgage 43
Bond,CoBank Series (CoBank-6), Due March 15, 2002 pursuant
to the Third Supplemental Indenture of Trust
27 Financial Data Schedule **
** Filed Electronically
23
Chugach Electric Association, Inc. is a
cooperative owned by its more than 55,000
members. These bylaws are the framework of
the organization.
As a member, you are entitled to vote for the
directors who oversee Chugach. Directors are
elected each spring in conjunction with the
cooperative's annual meeting. At the same time,
members vote on any proposed changes to these
bylaws.
Proposed bylaw amendments
may be submitted to:
Bylaws Committee
c/o Chugach General Counsel
P. O. Box 196300
5601 Minnesota Drive
Anchorage, Alaska 99519-6300
Visit Chugach Electric's home page on the
Internet at www.chugachelectric.com
<PAGE>
CHUGACH ELECTRIC ASSOCIATION, INC.
BYLAWS
(As Amended April 29, 1999)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I MEMBERSHIP Page
Section 1 Requirements for Membership......................................................................................1
Section 2 Membership Certificates..........................................................................................1
Section 3 Joint Membership.................................................................................................1
Section 4 Conversion of Membership.........................................................................................2
Section 5 Membership and Service Connection Fees...........................................................................2
Section 6 Purchase of Electric Energy......................................................................................2
Section 7 Termination of Membership........................................................................................3
ARTICLE II RIGHTS AND LIABILITIES OF
MEMBERS
Section 1 Property Interest of Members.....................................................................................3
Section 2 Non-liability for Debts of the Association.......................................................................4
ARTICLE III MEMBERS, MEETINGS AND ELEC
TIONS
Section 1 Annual Meeting...................................................................................................4
Section 2 Special Meetings.................................................................................................4
Section 3 Notice of Members' Meetings......................................................................................5
Section 4 Waiver of Notice.................................................................................................5
Section 5 Quorum...........................................................................................................5
Section 6 Voting...........................................................................................................5
Section 7 Order of Business................................................................................................6
Section 8 Elections and Election Committee.................................................................................7
ARTICLE IV DIRECTORS
Section 1 General Powers.................................................................................................. 9
Section 2 Election and Tenure of Office....................................................................................9
Section 3 Qualifications..................................................................................................10
Section 4 Nominations.................................................................................................... 11
Section 5 General Manager and Financial Advisor...........................................................................12
Section 6 Policy, Rules and Regulations...................................................................................12
Section 7 Removal of Directors by Members.................................................................................12
Section 8 Vacancies.......................................................................................................13
Section 9 Compensation....................................................................................................13
ARTICLE V MEETINGS OF DIRECTORS
Section 1 Regular Meeting ................................................................................................14
Section 2 Special Meetings ...............................................................................................14
Section 3 Quorum .........................................................................................................14
Section 4 Director Attendance ............................................................................................15
Section 5 Membership Attendance ..........................................................................................15
Section 6 Minutes ........................................................................................................16
Section 7 Telephonic Board Meetings.......................................................................................16
<PAGE>
ARTICLE VI OFFICERS
Section 1 Number .........................................................................................................16
Section 2 Election and Term of Office ....................................................................................16
Section 3 Removal of Officers and Agents by
Directors...................................................................................................17
Section 4 President.......................................................................................................17
Section 5 Vice-President .................................................................................................18
Section 6 Secretary ......................................................................................................18
Section 7 Treasurer ......................................................................................................18
Section 8 Delegation of Duties ...........................................................................................19
Section 9 Bonds of Officers...............................................................................................19
Section 10 Budget .........................................................................................................19
Section 11 Reports.........................................................................................................19
ARTICLE VII PATRONAGE CAPITAL
Section 1 Patronage Capital ..............................................................................................19
ARTICLE VIII FISCAL MANAGEMENT AND
ACCOUNTING
Section 1 Revenues and Expenditures ......................................................................................21
Section 2 Accounting System and Reports ..................................................................................21
Section 3 Disclosure .....................................................................................................21
ARTICLE IX DISPOSITION OF PROPERTY
Section 1 Disposition of Property ........................................................................................22
ARTICLE X SEAL ...........................................................................................................22
ARTICLE XI FINANCIAL TRANSACTIONS
Section 1 Contracts ......................................................................................................22
Section 2 Checks, Drafts, etc. ...........................................................................................22
Section 3 Deposits .......................................................................................................23
Section 4 Fiscal Year ....................................................................................................23
Section 5 Full and Open Competitive Bidding...............................................................................23
ARTICLE XII MISCELLANEOUS
Section 1 Membership in Other Organizations...............................................................................23
Section 2 Waiver of Notice................................................................................................23
Section 3 Interpretation..................................................................................................24
ARTICLE XIII AMENDMENTS
Section 1 Notice..........................................................................................................24
<PAGE>
Section 2 Bylaws Committee................................................................................................24
ARTICLE XIV ADVISORY COUNCIL
Section 1 Member Advisory Council.........................................................................................24
Section 2 General Duties..................................................................................................24
ARTICLE XV STANDING AND AD HOC
COMMITTEES
Section 1 General.........................................................................................................25
Section 2 Compensation....................................................................................................25
Section 3 Terms...........................................................................................................25
Section 4 Membership......................................................................................................25
Section 5 Vacancy.........................................................................................................26
ARTICLE XVI INDEMNIFICATION ................................................................................................26
ARTICLE XVII MEMBER ACCESS TO INFORMATION
Section 1 Access Rights...................................................................................................26
Section 2 Charges.........................................................................................................27
Section 3 Policies and Procedures.........................................................................................27
</TABLE>
<PAGE>
CHUGACH ELECTRIC ASSOCIATION, INC.
BYLAWS
ARTICLE I
MEMBERSHIP
SECTION 1. Requirements for Membership. Any
person, firm, association, corporation, or body politic, or
subdivision thereof, shall become a member of CHUGACH
ELECTRIC ASSOCIATION, INC. by:
(a) Making a written application for membership therein;
(b) Agreeing to purchase from the Association electric
energy as hereinafter specified;
(c) Agreeing to comply with, and be bound by, the
articles of incorporation and bylaws of the
Association, and any rules and regulations adopted by
its board of directors; and
(d) Paying the membership fee hereinafter specified.
No person may hold more than one membership in the
Association, and no membership in the Association shall be
transferable, except as provided in these bylaws.
SECTION 2. Membership Certificates. Repealed April
30, 1998.
SECTION 3. Joint Membership. A husband and wife
may apply for a joint membership and, subject to the
compliance with the requirements set forth in Section 1 of this
Article, may be accepted for such membership. The term
"member" as used in these bylaws shall be deemed to include a
husband and wife holding a joint membership, and any
provisions relating to the rights and liabilities of membership
shall apply equally with respect to the holders of a joint
membership. Without limiting the generality of the foregoing,
the effect of the hereinafter specified actions by, or in respect to,
the holders of a joint membership shall be as follows:
(a) The presence at a meeting of either or both shall be
regarded as the presence of one member and shall
have the effect of constituting a joint waiver of notice
of the meeting;
(b) The vote of either separately, or both jointly, shall
constitute one joint vote;
<PAGE>
(c) A waiver of notice signed by either or both shall
constitute a joint waiver;
(d) Notice to either shall constitute notice to both;
(e) Expulsion of either shall terminate the joint
membership;
(f) Withdrawal of either shall terminate the joint
membership;
(g) Either, but not both, may be elected or appointed as
an officer or director, provided that both meet the
qualifications for such office.
SECTION 4. Conversion of Membership. (a) A
membership may be converted to a joint membership upon the
written request of the holder thereof, and the agreement by such
holder to comply with the articles of incorporation, bylaws, and
rules and regulations adopted by the board of directors. The
membership shall be reissued by the Association in such manner
as shall indicate the changed membership status.
(b) Upon the death of a married member the surviving
spouse shall succeed to the membership. The membership shall
be reissued in such manner as shall indicate the changed
membership status; provided, however, that the estate of the
deceased shall not be released from any debts due the
Association.
SECTION 5. Membership and Service Connection
Fees. The non-refundable membership fee shall be five dollars.
Payment of the membership fee and completion of a
membership application are conditions of service. The board of
directors may also, as a condition of service, require the
payment of a consumer deposit or the furnishing of other
acceptable security.
SECTION 6. Purchase of Electric Energy. Each
member may, as soon as electric energy shall be available,
purchase from the Association all electric energy purchased for
use on the premises specified in his application for membership,
unless the member is an electric public utility purchasing electric
energy for resale. Each member shall pay monthly at rates
which shall from time to time be fixed by the board of directors.
The board of directors may limit the amount of electric energy
which the Association shall be required to furnish to its
member(s). Each member shall pay to the Association such
minimum amount per month, regardless of the electric energy
consumed, as shall be fixed by the board of directors from time
to time. Each member shall also pay all amounts owed by him
to the Association as and when the same shall become due and
payable. Production or use of electric energy on such premises,
<PAGE>
regardless of the source thereof, by means of facilities which
shall be interconnected with the Association's facilities, shall be
subject to appropriate regulations as shall be fixed from time to
time by the Association.
SECTION 7. Termination of Membership. (a) Any
member of the Association may withdraw from membership
with written notice. Additionally, the board, by at least a two-
thirds vote of all members of the board, may expel any member
who fails to comply with Association regulations. Members
subject to expulsion will be contacted in writing by the
Association and will have ten (10) days to comply with
Association regulations. An expelled member may be reinstated
by a majority vote of the board or by a vote of the members at
any annual or special meeting. The board may also cancel
membership if the member:
1) has not purchased electric energy for six (6) months;
2) has had a disconnect order active for thirty (30) days
without signing a reconnect order; or
3) has been disconnected because of nonpayment of
electric energy debts to the Association provided that
this delinquency has continued for at least thirty (30)
days after termination of service.
(b) Upon the withdrawal, death, cessation of existence or
expulsion of a member, the membership of such member shall
thereupon terminate, except as provided in Article 1, Section 4.
Termination of membership in any manner shall not release a
member or his estate from any debts due the Association.
ARTICLE II
RIGHTS AND LIABILITIES OF MEMBERS
SECTION 1. Property Interest of Members. Upon
dissolution, after paying, or discharging, or adequately providing
for the payment or discharge of all its debts, obligations and
liabilities, other than those to patrons arising by reason of their
patronage, the Association shall distribute any remaining sums,
first to patrons for the pro rata return of all amounts standing to
their credit by reason of their patronage, and second, to
members for the pro rata repayment of membership fees. Any
sums then remaining shall be distributed among its members
and former members in proportion to their patronage, except as
participation in such distribution may have been legally waived.
In the event of the lawful liquidation, through transfer or sale of
all the property and assets of the Association, the proceeds of
<PAGE>
such liquidation, transfer or sale shall be distributed in the same
manner as hereinabove provided for in the case of dissolution.
SECTION 2. Non-liability for Debts of the
Association. The private property of the members shall be
exempt from execution or other liability for the debts of the
Association, and no members shall be liable or responsible for
any debts or liabilities of the Association.
ARTICLE III
MEMBERS, MEETINGS AND ELECTIONS
SECTION 1. Annual Meeting. The annual meeting of
the members shall be held on such convenient date, on or after
the 1st day of April, and on or before the 1st day of May of each
year, at such place or building in the Municipality of Anchorage,
State of Alaska, as shall be designated by the board of directors
in the notice of meeting, for the purpose of electing directors,
passing upon reports for the previous fiscal year, and transacting
such other business as may come before the meeting. Failure to
hold the annual meeting at the designated time shall not work
a forfeiture or dissolution of the Association.
SECTION 2. Special Meetings. Special meetings of the
members may be called by resolution of the board of directors,
or upon a written request signed by any four directors to the
president, or by a written request made to the president and
signed by not less than ten percent (10%) of the members. The
resolution and request shall specify the purpose of the meeting.
Signatures for a request of a special meeting by members shall
be collected within one consecutive ninety (90) calendar day
time period and the board of directors shall establish such
policies as may be necessary and convenient to ensure
compliance with this limit. It shall thereupon be the duty of the
secretary to cause notice of such meeting to be given as
hereinafter provided. Special meetings of the members may be
held at any place within the Municipality of Anchorage specified
in the notice of the special meeting.
SECTION 3. Notice of Members' Meetings. Written
notice stating the place, day and hour and agenda of the annual
meeting shall be delivered by mail to each member not less than
thirty (30) or more than sixty (60) days before the date of the
meeting. Notice of a special meeting of the members, including
but not limited to a meeting where a merger or dissolution of the
Association, or sale, transfer or other disposal of all or a
substantial portion of the assets of the Association is to be voted
on, shall be delivered, together with notice of the purpose for
which the meeting is called, not less than ninety (90) or more
than 120 days before the date of the meeting, with notice of a
<PAGE>
public hearing on the proposed action to be held not less than
sixty (60) days before the meeting. If mailed, such notice shall
be deemed to be delivered when deposited in the United States
mail, addressed to the member at his address as it appears on the
records of the Association, with postage thereon prepaid. The
failure of any member to receive notice of an annual or special
meeting of the members shall not invalidate any action which
may be taken by the members at any such meeting.
SECTION 4. Waiver of Notice. Repealed April 23,
1986.
SECTION 5. Quorum. Fifty (50) members present in
person shall constitute a quorum for a regular or special meeting
of the members. No business shall be conducted at a regular or
special meeting of the members lacking a quorum, except for
counting marked ballots as specified in this Article III, Section
8(d) and announcing the results thereof. If less than a quorum
is present at any meeting of the members, a majority of those
present may adjourn the meeting to another date and time no
later than 90 days after the adjourned meeting at a place within
the Municipality of Anchorage, provided that the Secretary shall
notify all members of the date, time and place of such adjourned
meeting by delivering notice thereof no later than ten days in
advance of such meeting.
SECTION 6. Voting. (a) Each member who has
purchased electric energy or receives other services from the
Association within the six months preceding the record date of
the election shall be entitled to only one vote upon each matter
submitted to a vote at a meeting of the members. All questions
shall be decided by a vote of a majority of the members voting
thereon in person, except as otherwise provided by law, the
articles of incorporation, or these bylaws.
(b) A non-natural member may designate an individual to
vote on its behalf, in accordance with the member's own
procedures. The election committee may require the designated
individual to submit satisfactory written proof of his designation,
prior to his voting.
(c) Members may vote by a mailed official ballot on all
matters on which a vote of the members is required or permitted
under these bylaws.
(d) A minimum of five hundred valid ballots must be cast
by mail or in person to constitute a valid election of directors or
to approve amendments to the bylaws. Directors shall be elected
by the plurality vote of the members. A minimum of five
hundred ballots must be cast to constitute a valid removal of a
director or directors. See Article IV, Sections 7 and 8.
(e) An affirmative vote by ballot of at least 10 percent of
the number of members as of the date of the notice of the
election is required to authorize disposition of all or a substantial
<PAGE>
portion of the Association's property to another cooperative,
pursuant to Article IX, Section (1)(b).
(f) A merger of the Association must be approved by a
majority of those members voting, but in no event can the
affirmative vote be less than 10 percent of the number of
members, as of the date of notice of the election.
(g) An affirmative vote by ballot of not less than the
majority of the number of members as of the date of the notice
of the election is required to authorize the Association to sell,
lease, or otherwise dispose of all or a substantial portion of the
Association's property, as provided in Article IX, Section 1(b).
SECTION 7. Order of Business. (a) The order of
business at the annual meeting of the members and, insofar as
possible, at all other meetings of the members, shall be
essentially as follows:
1) Report on the number of members present in person
in order to determine the existence of a quorum.
2) Reading of the notice of the meeting and proof of the
due publication or mailing thereof.
3) Reading of unapproved minutes of previous meetings
of the members, making technical changes only to
the minutes, and approval thereof.
4) Presentation and consideration of reports of officers,
directors and committees.
5) Election of directors.
6) Unfinished business.
7) New business.
8) Adjournment.
(b) Proposed amendments to the bylaws upon which
voting is being conducted by ballot may be discussed at the
annual meeting, but shall not be treated as being before the
annual meeting for action, other than passage or defeat of the
proposed amendments. They may not be further amended or
tabled by action of the annual meeting.
SECTION 8. Elections and Election Committee. (a) At
the beginning of each calendar year, and not less than ninety
(90) days prior to the annual meeting, the board of directors
shall appoint an election committee, as provided for in Article
XV of these bylaws. The committee shall consist of the master
election judge, who shall chair the committee, and not more
than twelve election judges. This committee shall have the
responsibility for conducting all voting by secret ballot during
the calendar year. The election committee shall devise such
<PAGE>
procedures, and adopt such rules and regulations, subject to the
approval of the board of directors, as may be reasonably
necessary or convenient to the discharge of the election
committee's responsibilities. These responsibilities shall include,
but are not limited to (1) the registration of members at the
annual or special meeting, and (2) the obligation of insuring the
fairness, impartiality, confidentiality, and integrity of the voting
process. The master election judge and election judges shall be
selected from the Association membership, with consideration
for geographical representation. In case of a vacancy, the board
of directors shall appoint an Association member to complete
the unexpired term of the committee member.
(b) The election committee shall cause the preparation of
an official ballot containing the names of the candidates for the
office of director and the proposed bylaw amendments. The
ballot shall be designed with the position of names of the
candidates changed as many times as there are candidates. As
nearly as possible, an equal number of ballots shall be printed
after each change. In making the changes of position, the name
of the candidate shall be taken and placed at the bottom and the
column moved up so that the name that before was second is
first after the change. After the ballots are printed, they shall be
placed in separate stacks, one stack for each change of position.
The ballots shall then be gathered by taking one from each
stack, the intention being that every other ballot in the
accumulated stack of ballots shall have the names of the
candidates in a different position. The ballot shall also include
a brief description concerning the number of offices to be filled
at the election and the time, place, and method of voting. At
least thirty (30) days prior to the meeting, an official ballot shall
be mailed by the secretary to each member with 1) a statement
of the number of directors' seats to be filled, 2) the candidates'
names and election statements, 3) an explanation of any other
matters to be voted on by mail, the proposed changes to the
bylaws, with the Bylaws Committee's comments and 4) a report
covering the calendar year immediately preceding the annual
meeting prepared by the General Manager setting forth the
attendance record of directors at regular and special board
meetings, together with a summary setting forth the agenda
business items voted and the vote of each director. The
candidates' statements:
1) Shall specify whether the candidate was nominated
by the Nominating Committee or by petition.
2) Shall specify whether the candidate is:
(i) A member, officer, director, or employee
of any union local currently acting as a
bargaining agent for Association
employees.
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(ii) A person who has within the last two
years had a financial interest in a bid,
proposal, project, or contract with
Chugach.
(iii) A spouse, child, brother, sister, parent,
stepparent, stepchild or stepsibling of: a)
any person included in subparagraph (i) or
(ii) above or b) an employee of the
Association.
3) May include a photograph of the candidate, and a
statement not to exceed 200 words.
The election committee shall procure a post office box where all
ballots shall be received.
(c) Mailed ballots, to be valid, must be received in the
designated post office box by 12:00 Noon three (3) calendar
days prior to the annual meeting or special meeting. In lieu of
casting a ballot by mail, a member may register a vote by special
ballot at the meeting.
(d) The election committee shall make proper
arrangements to secure all ballots before, during, and following
the election. Marked ballots shall be counted as soon after the
close of balloting as may be reasonable under the circumstances.
The results thereof will be announced as soon as the count is
completed. Marked ballots will be retained and secured for a
period of ninety (90) days following the election, after which
time they may be destroyed.
(e) The election committee may employ such additional
election clerks as may be required to register members at the
annual or special meeting, to assist in the counting of the ballots
and otherwise to ensure the efficient management of the
meeting and balloting. Each candidate for the office of director
may have a representative present during all times that ballots
are being counted. The decision of a majority of the election
committee shall be conclusive with respect to the eligibility of
any person to vote and the validity of any ballot cast.
(f) A recount of votes cast for a director's seat may only be
requested by a candidate in that election. A request for a recount
must be made in writing and received by the Election
Committee within 10 days of the close of balloting. The recount
will be done in the same manner as and by the same entity that
performed the original vote count. If the recount indicates that
the candidate requesting the recount has lost the election by
more than 1 percent of the total votes cast, then the cost of the
recount shall be borne by the candidate. If the recount indicates
that the candidate requesting the recount has either won a seat
or lost by a margin of 1 percent or less, then the cost of the
recount shall be borne by the Association.
A group of 10 or more members who voted in that election
may request a recount of the ballots for a bylaws change or
<PAGE>
ballot question. A request for a recount must be made in writing
and received by the Election Committee within 10 days of the
close of balloting. The same provision for payment of the costs
as provided above shall prevail, with the voters who requested
the recount paying for the recount if the margin is greater than
1 percent, and the Association bearing the expense if the margin
is 1 percent or less.
(g) In the event of a tie for an election of a director, a
bylaws change or a ballot question, a recount of the ballots shall
be done. The Association shall bear the cost of recounts in the
event of a tie. If the recount confirms the existence of a tie, then
a run-off election shall be conducted by mail within 60 days of
the date the results of the recount are certified. The form and
content of the ballots shall comply with this Article III, Section
8(b). The run-off election shall be conducted by the Election
Committee. The provisions of this Article III, Section 8(d), (e)
and (f) shall apply.
ARTICLE IV
DIRECTORS
SECTION 1. General Powers. The management of the
business and the affairs of the Association shall be vested in a
board of seven directors who shall exercise all of the powers of
the Association, except such as are by law, the articles of
incorporation, or by these bylaws conferred upon or reserved to
the members.
SECTION 2. Election and Tenure of Office. The
persons named as directors in the articles of incorporation shall
compose the board of directors until their successors shall have
been elected and shall have qualified. Directors shall be elected
by secret ballot either mailed or cast in person at annual or
special meetings of the membership, by and from the members,
to serve for a three-year term, not to exceed three consecutive
three year terms, until their successors shall have been elected
and qualify, provided that the directors elected to fill vacancies
as provided in Article IV, Section 8 of these bylaws, shall serve
only for the unexpired portion of the term vacated. Where the
terms to be filled are of different lengths, the longest term shall
be given to the director receiving the most votes. If the size of
the board is subsequently increased, the initial terms of the
directors to fill the newly created seat or seats shall be scheduled
so that, as nearly as possible, an equal number of terms expire
each year. At each annual or special meeting, members shall be
elected to fill the seats on the board which become vacant as
contemplated by Article IV, Section 8 of these bylaws.
SECTION 3. Qualifications. (a) A person shall be
eligible to serve as a director, who:
<PAGE>
1) Has been a member and bona fide resident in the area
served by the Association for 12 continuous months
before appointment to the board, or the notice of the
election;
2) Is not in any way employed by a competing
enterprise, however, an employee of the Municipality
of Anchorage who is not directly employed by
Municipal Light and Power is eligible to serve if he
or she has no fiduciary duties which in any way
pertain to Municipal Light and Power;
3) Does not have a financial interest in a competing
enterprise;
4) Is not a supplier, contractor, consultant, or other
entity which does business with the Association or a
person with more than a 10% ownership interest in
a supplier, contractor, consultant, or other entity
which does business with the Association, except for
providers whose annual business with the
Association does not exceed $25,000;
5) Is not an employee of the Association nor a member,
officer, director, nor employee of any union local
currently acting as a bargaining agent for Association
employees;
6) Is not a person living in the same household with and
financially interdependent upon any person included
in paragraphs 2, 3, 4, and 5, above; and
7) Maintains i) his or her membership, ii) bona fide
residency in the area served by the Association, and
iii) a minimum of 12 continuous months of bona fide
residency in the area served by the Association
throughout his or her term of office.
(b) An individual who is the authorized representative of
a non-natural entity (corporation, association or partnership, for
example) which itself is qualified under subsection (a) may
become or remain a director if he is qualified under subsections
(a)(1), (2), (3), (4), (5), (6) and (7). If the individual or the non-
natural member fails to meet the prescribed qualifications, or if
the non-natural member changes its authorized representative,
the individual shall become subject to removal under subsection
(c), and the director's position shall become vacant, without
power of appointment by the non-natural member.
(c) Upon establishment of the fact that a director is holding
office in violation of any of the foregoing provisions including
the disclosure provisions of Article III, Section 8(b), subsection
(2), the board of directors shall remove such director from office
<PAGE>
unless the basis for disqualification is remedied within thirty
(30) days of notice of disqualification by the board of directors.
(d) Directors are ineligible for employment by the
Association for a period of two (2) years after their term has
expired.
(e)"Bona fide resident" is hereby defined to mean: 1) a
person whose primary residence is in the area served by the
Association, and who actually lives at this primary residence
with the intention to remain there permanently or indefinitely
and 2) a non-natural entity who chooses as their authorized
representative a person who is a "bona fide resident" as defined
in 1).
"Primary residence" shall mean the residence that is the
chief or main residence of the person and where the person
actually lives for the most substantial portion of the year.
"Intention" shall mean the unequivocal intention of the person
as evidenced by that person's acts and words and by the
circumstances.
Nothing contained in this section shall affect in any
manner whatsoever the validity of any action taken at any
meeting of the board of directors.
SECTION 4. Nominations. (a) Nominating Committee.
It shall be the duty of the board of directors to appoint, not less
than one hundred and twenty days before the dates of a meeting
of the members at which directors are to be elected, a committee
on nominations, as provided for in Article XV of these bylaws.
The committee shall consist of not less than five nor more than
seven members, who shall be selected from different sections of
the service area of the Association as to insure equitable
representation. No member of the board of directors may serve
on such committee. The committee shall seek qualified
candidates, as well as screen potential nominees. Public notice
for nominations shall be given ninety days prior to the meeting.
The committee, keeping in mind the principle of geographical
representation, shall approve, prepare and post at the principal
office of the Association, at least seventy days before the
meeting, a list of nominations for directors, which may include
a greater number of candidates than are to be elected.
(b) Petition. Any fifty or more members, acting together,
may make other nominations by petition not less than sixty days
prior to the election, and the secretary shall post such
nominations at the same place where the list of nominations
made by the committee is posted.
SECTION 5. General Manager and Financial
Advisor. The board of directors may appoint the following:
(a) General Manager. The general manager may be but
shall not be required to be a member of the
Association. The general manager, together with
<PAGE>
such other staff, agents and employees as he may
select shall perform such duties and shall exercise
such authority as the board of directors may from
time to time vest in him.
(b) Financial Advisor. The Board, at its sole discretion,
may engage the services of a financial advisor, which
may be used to advise on any and all fiscal matters.
The financial advisor shall report to the board.
SECTION 6. Policy, Rules and Regulations. The board
of directors shall have the power to make, adopt and enforce
such policy, rules and regulations, not inconsistent with law, the
articles of incorporation, or these bylaws, as it may deem
advisable for the management of the affairs and business of the
Association, for the protection of its investment, and for the
interest and welfare of the members thereof. Such policy
statements, rules and regulations shall be in writing and shall be
made available for review by the members.
SECTION 7. Removal of Directors by Members. Any
member may bring charges against a director and, by filing with
the secretary such charges in writing, together with a petition
signed by at least 300 members, request the removal of such
director by reason thereof, provided, however, that the
signatures of members shall be acceptable only when affixed to
a sheet on which the petition therein is fully set forth; and,
provided further, that the person who solicited the signatures
affixed to such petition shall acknowledge thereon before a
person authorized to take acknowledgments of deeds that he
had read the petition and the said charges against such director
to each of the members prior to the latter subscribing their
names thereto. Signatures shall be collected within one
consecutive ninety (90) calendar day time period. Such director
shall be informed in writing of the charges at least ten days prior
to a meeting of the members at which the charges are to be
considered, and shall have an opportunity at the meeting to be
heard in person, or by counsel, and to present evidence in
respect to the charges; and the person or persons bringing the
charges against him shall have the same opportunity. This
meeting shall occur before ballots are sent to members for
voting by mail. The question of the removal of such director
shall be considered and voted upon at a meeting of the members
conducted in accordance with procedures established for regular
annual membership meetings. A minimum of five hundred
valid ballots must be cast with a majority in favor of removal for
such removal to be effective.
SECTION 8. Vacancies. Any vacancy occurring in the
board shall be filled by the affirmative vote of the majority of the
remaining directors, and the member so appointed to the board
shall serve until his successor has been elected. At such election
<PAGE>
following the existence of such vacancy, the members shall
elect one of their number to serve as director during the
unexpired portion of the term vacated, subject, however to
provisions of Article IV, Section 2, 3 and 4 of these bylaws.
SECTION 9. Compensation. (a) Directors shall not
receive any salary for their services as directors, except that, by
resolution of the board of directors, a fixed fee and expenses of
attendance, if any, may be allowed for attendance at each
meeting of the board of directors, or a meeting of a committee
thereof, or when a director is otherwise representing the
Association in an official capacity. No attendance other than
regular or special board meetings shall be reimbursed unless
authorized in advance by the majority vote of the board. The
fixed fee shall not exceed $100.00 per meeting, and a director
may not be compensated for more than two regular board
meetings per month, and an additional 12 special board
meetings per year. The total compensated meetings shall not
exceed 70 meetings per year for a director, and 85 meetings per
year for the president. The Association may not provide health
insurance for directors or their families, or insurance for risks
except those incurred in their capacity as directors.
(b) Directors' expense reimbursement requests shall be
reviewed and approved by the majority vote of the board.
Directors may not receive salaries for their services as directors,
and, except in emergencies, shall not receive salaries for their
services in any other capacity without the approval of the
members.
ARTICLE V
MEETINGS OF DIRECTORS
SECTION 1. Regular Meeting. A regular meeting of the
board of directors shall be held without notice immediately after,
and at the same place as, the annual meeting of the members. A
regular meeting of the board of directors shall also be held
monthly at such time and place in the Municipality of
Anchorage, State of Alaska, as the board of directors may
provide by resolution. Such regular monthly meetings may be
held without notice other than such resolution fixing the time
and place thereof except that the board shall cause notice of the
selection of the time and place of the regular meetings to be
given to the members promptly after it is selected.
SECTION 2. Special Meetings. Special Meetings of the
board of directors may be called by the president, or by any
three directors, and it shall thereupon be the duty of the
secretary to cause notice of such meetings to be given as
hereinafter provided. The president of the directors calling the
meeting shall fix the time and place, which shall be in the
<PAGE>
Municipality of Anchorage, State of Alaska, for the holding of
the meeting.
Written notice of the time, place and purpose of any special
meetings of the board of directors shall be delivered to each
director not less than three days previous thereto, either
personally or by mail, by or at the direction of the secretary, or
upon default in duty by the secretary, by the president or the
directors calling the meeting. If mailed, such notice shall be
deemed to be delivered when deposited in the United States
mail, addressed to the director at his address as it appears on the
records of the Association, with postage thereon prepaid.
SECTION 3. Quorum. A majority of the board of
directors shall constitute a quorum; provided, that if less than a
majority of the directors are present at said meeting, a majority
of the directors present may adjourn the meeting from time to
time; and provided further, that the secretary shall notify any
absent directors of the time and place of such adjourned
meeting. The act of the majority of the directors present at the
meeting at which a quorum is present shall be the act of the
board of directors. Each director present shall vote or abstain on
each motion. Each director shall disclose any financial interest
of the director or of a member of the director's immediate family
in a matter before the board.
SECTION 4. Director Attendance. If a director is
absent from three consecutive regular board meetings or four
regular board meetings, whether consecutive or not, or from
25% of all meetings, including regular and special meetings,
board workshops, and committee meetings, in either of the two
six month periods described below, the director shall be deemed
to have resigned from the board of directors, and the vacancy
thereby resulting will be filled as provided in Article IV, Section
8, of these bylaws. For purposes of compliance with this bylaw,
attendance will be evaluated for two separate six month periods
beginning May 1st and November 1st of each year. A director
who is absent on Association business, including reasonable
travel time to and from such business, shall not be counted
absent, provided such travel and absence was approved in
advance by the board. For purposes of this Section, an absence
shall not be counted if it is excused by a vote of a majority of the
members of the board not requesting the excuse at the next
regular or special board meeting. However, no more than two
absences per director may be excused by the board in either 6-
month period.
SECTION 5. Membership Attendance. (a) Regular
meetings, special meetings and work sessions shall be open to
all Association members. The notice of such meeting and an
agenda shall be posted in a conspicuous place in the public
places of business of the Association not later than three days
prior to the meeting. The board of directors shall adopt a policy
<PAGE>
establishing additional means of providing public notice of
meetings.
(b) No closed or executive sessions shall be held except to
discuss:
1) Matters the immediate knowledge of which would
clearly have an adverse effect on the Association's
finances;
2) Subjects that tend to prejudice the reputation and
character of a person; however, that person may
request a public discussion;
3) Matters discussed with an attorney for the
Association, the immediate knowledge of which
could have an adverse effect on the Association's
legal position.
SECTION 6. Minutes. Minutes will be kept for all
regular and special meetings and shall include each director's
vote on each matter voted upon by the board of directors.
Copies of the minutes shall promptly be given to Association
members upon request. The board of directors may prescribe a
reasonable fee for such copies provided such fee shall not
exceed the actual labor and material costs of reproduction. An
electronic recording of all regular and special meetings shall also
be made and kept for at least one year; Association members
may request a transcription of the tape upon payment of the cost
of transcription by a court reporter service; members shall also
be permitted to listen to such tapes at the headquarters building.
SECTION 7. Telephonic Board Meetings. For the
purpose of the holding of any regular or special meeting, the
Board of Directors can validly conduct such meeting by
communicating with each other by means of conference
telephones or similar communications equipment as allowed by
law. Telephonic attendance by directors shall be permitted
without limitation if the director is unable to attend in person
due to Association business provided the absence was approved
in advance by the board as provided under Article V, Section 4.
Telephonic attendance for reasons other than Association
business shall be limited to 25% of the meetings by any one
director for the 6-month period beginning May 1 and the 6-
month period beginning November 1. For attendance
evaluation, a director is deemed absent from each meeting
where the telephonic attendance limit was exceeded.
The amendments to this Bylaw will take effect May 1, 1997.
ARTICLE VI
OFFICERS
<PAGE>
SECTION 1. Number. The officers of the Association
shall be a president, vice-president, secretary and treasurer, and
such other officers as may be determined by the board of
directors from time to time. The offices of secretary and
treasurer may be held by the same person.
SECTION 2. Election and Term of Office. The officers
shall be elected annually by ballot, by and from the board of
directors, at the meeting of the board of directors held
immediately after the annual meeting of the members. If the
election of officers shall not be held at such meeting, such
election shall be held as soon thereafter as conveniently may be.
Each officer shall hold office until the first meeting of the board
of directors following the next succeeding annual meeting of the
members, or until his successor shall have been elected and
shall have qualified. A vacancy in any office shall be filled by
the board of directors for the unexpired portion of the term.
SECTION 3. Removal of Officers and Agents by
Directors. Any officer or agent elected or appointed by the
board of directors may be removed by the board of directors
whenever in its judgement the best interests of the Association
will be served thereby. In addition, any member of the
Association may bring charges against an officer and, by filing
with the secretary such charges in writing, together with a
petition signed by at least a sufficient number of members to
constitute a quorum as defined in Section 5, Article III, may
request the removal of such officer by reason thereof; provided,
however, that the signatures of the members shall be acceptable
only when affixed to a sheet on which petition therein is fully
set forth; and provided further, that the person who solicited the
signature affixed to such petition shall acknowledge thereon
before a person authorized to take acknowledgments of deeds
that he had read the petition and the said charges against such
officer to each of the members prior to the latter subscribing
their names thereto. The officer against whom such charges
have been brought shall be informed in writing of the charges
at least ten days prior to the board meeting at which the charges
are to be considered and shall have an opportunity at the
meeting to be heard in person, or by counsel, and to present
evidence in respect of the charges; and the person or persons
bringing the charges against him shall have the same
opportunity. In the event the board does not remove the officer,
the question of his removal shall be considered and voted upon
at the next meeting of the members.
SECTION 4. President. The president shall:
(a) Be the principal executive officer of the Association
and, unless otherwise determined by the members or
the board of directors, shall preside at all meetings of
the members and the board of directors;
<PAGE>
(b) Sign any deeds, mortgages, deeds of trust, notes,
bonds, contracts or other instruments authorized by
the board of directors to be executed, except in cases
in which the signing and execution thereof shall be
expressly delegated by the board of directors or these
bylaws to some other officer or agent of the
Association, or shall be required by law to be
otherwise signed or executed; and
(c) In general, perform all duties incident to the office of
president and such other duties as may be prescribed
by the board of directors from time to time.
SECTION 5. Vice-President. In the absence of the
president, or in the event of his inability or refusal to act, the
vice-president shall perform the duties of the president, and
when so acting, shall have all the powers of, and be subject to
all the restrictions upon, the president. The vice-president shall
also perform such duties as from time to time may be assigned
to him by the board of directors.
SECTION 6. Secretary. The secretary shall be
responsible for:
(a) Keeping the minutes of the meetings of the members
and of the board of directors;
(b) Seeing that all notices are given in accordance with
these bylaws, or as required by law;
(c) The safekeeping of the corporate records and seal of
the Association, and affixing the seal of the
Association to all documents, the execution of which
on behalf of the Association under its seal is duly
authorized in accordance with the provisions of these
bylaws;
(d) Keeping a register of the names and post office
addresses of all members;
(e) Keeping on file at all times a complete copy of the
articles of incorporation and bylaws of the
Association containing all amendments thereto,
which copy shall always be open to the inspection of
any members, and at the expense of the Association,
forwarding a copy of the bylaws and of all
amendments thereto to each member on request; and
(f) In general, performing all duties incident to the office
of secretary, and such other duties as from time to
time may be assigned by the board of directors.
<PAGE>
SECTION 7. Treasurer. The treasurer shall be
responsible for:
(a) Custody of all funds and securities of the
Association;
(b) The receipt of, and the issuance of receipts for, all
moneys due and payable to the Association, and for
the deposit of all such moneys in the name of the
Association in such bank or banks as shall be selected
in accordance with the provisions of these bylaws;
and
(c) In general, performing all the duties incident to the
office of treasurer and such other duties as from time
to time may be assigned by the board of directors.
SECTION 8. Delegation of Duties. In the absence of an
officer, or in the event of his inability or refusal to act, the board
of directors will appoint one of their number to perform the
duties of his office; provided that the offices of president and
vice-president may not be combined with any other office; and,
provided further, nothing herein shall limit the right and duty of
the vice-president to perform the duties of the president in the
event that the president is absent, is unable to act, or refuses to
act. The board of directors may provide for the delegation of one
or more of the duties of the secretary and treasurer.
SECTION 9. Bonds of Officers. The treasurer, and any
other officer or agent of the Association charged with
responsibility for the custody of any of its funds or property,
shall give bond in such sum, and with such surety, as the board
of directors shall determine. The board of directors, in its
discretion, may also require any other officer, agent or employee
of the Association to give bond in such amount and with such
surety as it shall determine.
SECTION 10. Budget. The Board of Directors shall
review, revise and approve an annual operating budget prior to
each fiscal year.
SECTION 11. Reports. The officers of the Association
shall submit, at each annual meeting of the members, reports
covering the business of the Association for the previous fiscal
year. Such reports shall set forth the condition of the
Association at the close of such fiscal year.
ARTICLE VII
PATRONAGE CAPITAL
<PAGE>
SECTION 1. Patronage Capital. The Association shall
at all times be operated on a cooperative, nonprofit basis for the
mutual benefit of its patrons. The Association's operations shall
be so conducted that all patrons, members and non-members
alike, will through their patronage furnish capital for the
Association, subject to the provisions for sinking funds and
reserves as provided by Article VIII of these bylaws.
In order to induce patronage and to assure that the
Association will operate on a nonprofit basis, the Association is
obliged to account on a patronage basis to all its patrons,
members and non-members alike, for all amounts received from
the furnishing of electric energy in excess of operating costs and
expenses properly chargeable against the furnishing of electric
energy. All such amounts in excess of operating costs and
expenses are received with the understanding that they are
furnished by the patrons, members and non-members alike, as
capital. The Association is obligated to pay all such amounts in
excess of operating costs and expenses to the patrons by credits
to a capital account for each patron. The books and records of
the Association shall be set up and kept in such a manner that
at the end of each fiscal year the amount of capital, if any, so
furnished by each patron, is clearly reflected and credited in an
appropriate record to the capital account of each patron, and the
Association shall within a reasonable time after the close of the
fiscal year notify each patron of the amount of capital so
credited to his account. All such amounts credited to the capital
account of any patron shall have the same status as though they
had been paid to the patron in cash in pursuance of a legal
obligation to do so, and the patron had then furnished the
Association corresponding amounts for capital. In the event of
dissolution or liquidation of the Association, after all
outstanding indebtedness of the Association shall have been
paid, outstanding capital credits shall be retired without priority
on a pro rata basis before any payments are made on account of
property rights of members. If, at any time prior to dissolution
or liquidation, the board of directors shall determine that the
financial condition of the Association will not be impaired
thereby, the capital then credited to patrons' accounts may be
retired in full or in part, according to policies adopted by the
board. Capital credited to the account of each patron shall be
assignable only on the books of the Association pursuant to
written instructions from the assignor, and only to successors in
interest or successors in occupancy in all or a part of such
patron's premises served by the Association, unless the board of
directors, acting under policies of general application, shall
determine otherwise. All other amounts received by the
Association from its operations in excess of costs and expenses
shall, insofar as permitted by law, be:
(a) Used to offset any losses incurred during the current
or any prior fiscal year; and
<PAGE>
(b) To the extent not needed for that purpose, allocated
to its patrons on a patronage basis, and any amount
so allocated shall be included as part of the capital
credited to the accounts of patrons, as herein
provided.
Notwithstanding any other provisions of these bylaws, the
board of directors, at its discretion, shall have the power at any
time, upon the death of any patron, if the legal representative of
his estate shall request in writing that the capital credited to any
such patron be retired prior to the time such capital would
otherwise be retired under the provisions of these bylaws, to
retire capital credited to any such patron immediately upon such
terms and conditions as the board of directors, acting under
policies of general application, and the legal representative of
such patron's estate shall agree upon, provided, however, that
the financial condition of the Association will not be impaired
thereby.
ARTICLE VIII
FISCAL MANAGEMENT AND ACCOUNTING
SECTION 1. Revenues and Expenditures. The board
of directors shall adopt and maintain a system of accounting for
receipts and expenditures in conformance with the laws of the
United States and of the State of Alaska applicable to
cooperative associations and corporations, which system shall
at all times provide the proper reserves for payments of interest
and principal on outstanding indebtedness, reserves for taxes,
insurance, depreciation, replacement of capital plant and
facilities, and such other reserves and accounts as the board of
directors shall deem proper.
SECTION 2. Accounting System and Reports. The
accounting system adopted and maintained by the board of
directors shall conform to such rules and regulations applicable
to accounting systems, their establishment and operation, and
which may be established by any applicable laws, rules and
regulations of the United States, the State of Alaska, or any
regulatory agency thereof of competent jurisdiction. The board
of directors shall also, after the close of each fiscal year, cause
to be made a full, complete and independent audit of the
accounts, books, and financial conditions of the Association as
of the end of each fiscal year. A reasonably comprehensive and
easily understood summary of the audit report shall be
submitted to the members prior to each annual meeting.
SECTION 3. Disclosure. Repealed April 25, 1996.
<PAGE>
ARTICLE IX
DISPOSITION OF PROPERTY
SECTION 1. Disposition of Property. (a) The board of
directors shall have full power and authority to authorize the
execution and delivery of a mortgage or mortgages, or a deed or
deeds of trust, of any and all of the property, rights, privileges,
licenses, franchises and permits of the Association, whether
acquired or to be acquired, and wherever situated, as well as the
revenues therefrom, all upon such terms and conditions as the
board of directors shall determine, to secure any indebtedness of
the Association.
(b) The Association may not sell, lease, or otherwise
dispose of all or a substantial portion of the Association's
property unless such sale, lease, or other disposition is
authorized by the affirmative vote of not less than the majority
of all the members of the cooperative. However, the board of
directors may sell, lease, or otherwise dispose of all or a
substantial portion of its property to another cooperative, if
authorized by a majority of those members of the Association
voting, but in no event can the affirmative vote be less than
10% of the members as of the date of notice of the election.
ARTICLE X
SEAL
The corporate seal of the Association shall be in the form
of a circle and shall have inscribed thereon the name of the
Association and the words "Corporate Seal, State of Alaska."
ARTICLE XI
FINANCIAL TRANSACTIONS
SECTION 1. Contracts. Except as otherwise provided in
these bylaws, the board of directors may authorize any officer
or officers, agent or agents, to enter into any contract, or execute
and deliver any instrument, in the name and on behalf of the
Association, and such authority may be general or confined to
specific instances.
SECTION 2. Checks, Drafts, etc. All checks, drafts or
other orders for the payment of money, and all notes, bonds or
other evidences of indebtedness issued in the name of the
Association, shall be signed by such officer or officers, agent or
agents, employee or employees of the Association, and in such
manner, as shall from time to time be determined by resolution
of the board of directors.
<PAGE>
SECTION 3. Deposits. All funds of the Association shall
be deposited from time to time to the credit of the Association
in such bank or banks as the board of directors may select.
SECTION 4. Fiscal Year. The fiscal year of the
Association shall begin on the first day of January of each year
and shall end on the thirty-first day of December of the same
year.
SECTION 5. Full and Open Competitive Bidding. It is
deemed to be in the best interest of the Association: to
encourage and require full and open competitive bidding of
contracts; to take affirmative steps to insure that the Association
selects the lowest responsible bidder for its requirements from
among the broadest range of suppliers qualified by expertise and
resources; and to insure that responsible bidders are not
excluded. These requirements shall not apply in emergency
matters, to professional service contracts, or (in the discretion of
the Association) to contracts reasonably expected to be less than
$50,000. The Directors shall require a review of the
Association's bidding procedures and qualifications and shall
take such actions as may be in the best interests of the
Association as determined herein.
Within thirty (30) months of the passage of this Section 5, the
Board of Directors shall have fully implemented the provisions
of this Section 5.
ARTICLE XII
MISCELLANEOUS
SECTION 1. Membership in Other Organizations.
The Association may, with the approval of the Board of
Directors, become a partner, member, shareholder or holder of
any other interest in any entity engaging in any lawful business.
SECTION 2. Waiver of Notice. Any member or director
may waive in writing any notice of a meeting required to be
given by these bylaws. The attendance of a member or director
at any meeting shall constitute a waiver of notice of the meeting,
unless the person participates in the meeting solely for the
express purpose of objecting to the transaction of any business
on the ground that the meeting has not been lawfully called or
convened.
SECTION 3. Interpretation. Wherever the masculine
gender is used in these bylaws it shall be construed also to refer
to the feminine.
<PAGE>
ARTICLE XIII
AMENDMENTS
SECTION 1. Notice. These bylaws may be altered,
amended or repealed by the members at any regular or special
meeting, or by ballot as provided for in Article III, Section 8,
provided the notice of such meeting shall have contained a copy
of the proposed alteration, amendment or repeal. Notice to the
membership shall be given ninety days prior to the annual
meeting election for submission of recommended bylaw
changes.
SECTION 2. Bylaws Committee. It shall be the duty of
the board of directors to appoint, not later than December 15th
of each year, members to a committee on bylaws, as provided
in Article XV of these bylaws. The committee shall consist of
not less than five nor more than seven members, who shall be
selected from different sections of the service area of the
Association so as to insure equitable representation. No member
of the board of directors may serve on such a committee. The
committee shall review the bylaws of the Association, consider
any recommendations for revisions thereof which may be made
by the board of directors or any member, and report their
recommendations concerning the bylaws to the annual
membership meeting. Nothing herein shall be interpreted to
limit the authority of the board of directors to propose changes
in the bylaws, or the right of the members to call a special
meeting for any proper purpose pursuant to Article III, Section
2, herein.
ARTICLE XIV
ADVISORY COUNCIL
SECTION 1. Member Advisory Council. The board of
directors shall create and establish a Member Advisory Council
to advise the board.
SECTION 2. General Duties. It shall be the duty of the
board of directors to appoint members to the advisory council,
as provided in Article XV. Members shall be selected from
different sections of the service area to the Association so as to
insure equitable representation.
ARTICLE XV
STANDING AND AD HOC COMMITTEES
<PAGE>
SECTION 1. General. This section shall apply to
standing and ad hoc committees which may from time to time
be appointed by the board. Standing committees include: the
Election Committee, as provided for in Article III, Section 8; the
Nominating Committee, as provided for in Article IV, Section
4; the Bylaws Committee, as provided for in Article XIII,
Section 2; and the Member Advisory Council, as provided for
in Article XIV.
SECTION 2. Compensation. Members of standing and
ad hoc committees shall receive no compensation or gratuity for
their participation in the affairs of the Association.
SECTION 3. Terms. The terms of standing committee
members shall be for no more than three (3) years and be
staggered so that, as nearly as possible, one-third shall expire
each year.
SECTION 4. Membership. In order to be fairly
representative of the Association's diverse membership, it is
preferable that standing and ad hoc committees be comprised of
members who reflect that diversity. Toward that end, the
selection process shall include consideration of the member's
occupation, education, experience, geographical area in which
service is provided by the Association, and type of service
provided by the Association. A person is eligible to serve on
such committees provided that such person is not:
(a) an employee or director of the Association;
(b) a director, officer or employee of any union local currently
acting as a bargaining agent for Association employees;
(c) a person employed by a competing enterprise, however, an
employee of the Municipality of Anchorage who is not
directly employed by Municipal Light and Power is eligible
to serve if he or she has no fiduciary duties which in any
way pertain to Municipal Light and Power;
(d) a person having a financial interest in a competing
enterprise;
(e) a supplier, contractor, consultant or other entity which
does business with the Association or a person with more
than a 20% ownership interest in a supplier, contractor,
consultant or other entity which does business with the
Association except for providers whose actual business
with the Association does not exceed $50,000; or
(f) a person living in the same household with and financially
interdependent upon any of the persons listed in (a)
through (e), above.
<PAGE>
SECTION 5. Vacancy. In the case of a vacancy, the
board of directors shall appoint an Association member in
accordance with the provisions of this Article to complete the
unexpired term of a committee member.
ARTICLE XVI
INDEMNIFICATION
The Association shall indemnify and defend directors,
officers, employees or agents of the Association who are, or are
threatened to be made, parties to civil, criminal or administrative
proceedings, for expenses (including attorneys' fees), judgments,
fines and settlements, actually and reasonably incurred, if the
acts complained of were performed within the scope of the
director's, officer's, employee's or agent's duties, and the director,
officer, employee or agent acted in good faith and in a manner
he reasonably believed should be in, or not opposed to, the best
interests of the Association, and, with respect to a criminal
action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The Association may purchase and
maintain insurance to provide for such indemnification and
defense.
ARTICLE XVII
MEMBER ACCESS TO INFORMATION
SECTION 1. Access Rights. The rights of the members
to examine and make copies of the books and records of the
Association at a reasonable time and for a proper purpose in
accordance with Alaska Statutes shall not be infringed. The
following information is deemed to be requested for a proper
purpose without any showing whatsoever and shall be made
available to members on request of a member.
(a) Names and mailing addresses of Association members
when requested by a candidate running for election to the
Association Board;
(b) Salary, title, job classification and position description,
benefits, leave accrued and cashed-in, and hours worked, but
not employee name, for each employee position in the
Association;
(c) Collective bargaining agreements of any kind to which
the Association is a party;
(d) Published information which shall include:
<PAGE>
1) Documents provided to any regulatory authority
including, but not limited to Alaska Public Utilities
Commission (APUC), Federal Energy Regulatory
Commission (FERC) and Securities and Exchange
Commission (SEC) filings,
2) Documents provided in open session to the Board of
Directors or Association committees, including but
not limited to budget documents, feasibility studies,
audits or cost effectiveness studies, correspondence
between the Association and third parties and
minutes of Board of Directors or Association
committee meetings.
SECTION 2. Charges. The Association may charge no
more than the actual incremental cost of producing the above
information.
SECTION 3. Policies and Procedures. Nothing in this
Article XVII prevents the Association from allowing for
additional disclosure of Association information or from
developing other rules for disclosure and payment therefor by
policy or procedure provided that the policy or procedure shall
in no way restrict the disclosure required in this Article XVII.
CONFIRMATION FOR U.S. DOLLAR TREASURY RATE-LOCK TRANSACTION TO BE
SUBJECT TO 1992 MASTER AGREEMENT
TO: Chugach Electric Association, Inc.
5601 Minnesota Drive
Anchorage, AK 99519-6300
ATTN: Evan J. Griffith, Jr.
FAX: (907) 762-4514
FROM: Lehman Brothers Financial Products Inc.
(the "Treasury Rate-Lock Provider")
DATE: March 17, 1999
Our Reference No. _________________
The purpose of this letter agreement is to confirm the terms and conditions
of the treasury rate lock transaction ("Treasury Rate Lock Transaction")
entered into between us on the Trade Date specified below.
This letter agreement constitutes a "Confirmation" as referred to in the
1992 Master Agreement specified below.
1. The definitions and provisions contained in the 1991 ISDA
Definitions as published by the International Swaps and Derivatives
Association, Inc. (the "Definitions") are incorporated into this
Confirmation. In the event of any inconsistency between the Definitions
and this Confirmation, this Confirmation will govern. Each party
represents and warrants to the other that (i) it is duly authorized to
enter into this Treasury Rate Lock Transaction and to perform its
obligations hereunderand (ii) the person executing this Confirmation is duly
authorized to execute and deliver it.
2. This Confirmation supplements, forms part of, and is subject to,
the 1992 Master Agreement dated as of March 17, 1999 (including the related
Schedule thereto (the "Schedule")) as amended and supplemented from time to
time (the "Agreement"), between Chugach Electric Association, Inc.
("Counterparty") and the undersigned Treasury Rate-Lock Provider.
All provisions contained in the Agreement shall govern this Confirmation
except as expressly modified below.
The terms of the Treasury Rate-Lock Transaction to which this Confirmation
relates are as follows:
Notional Amount: 10 year U.S. Treasury: $196,000,000
30 year U.S. Treasury: $18,700,000
Trade Date: March 17, 1999
Relavant Time: If the Transaction terminates on February 13, 2002,
the "Relevant Time" will be 1:00 PM New York Time.
Base Treasury
Securities: As of the Determination Date, the then current
10 year and 30 year U.S.Treasury Bond
Base Treasury
Rates: For each Base Treasury Security: the yield to
maturity of such Base Treasury Security on the
Determination Date (at the Relevant Time) as
shown on the Bloomberg Yield Analysis page
(street convention) If this page is no longer
available, then the Telerate 500 (offer price) on
the Determination Date and at the Relevant Time
shall be used.
Dollar Value of
an .01:
("DVBP") As of the Determination Date, the change in the
U.S. dollar price of one million dollars of the
Base Treasury Securities underlying the Treasury
Lock Transaction given a one basis point (.01%)
change in their respective yields to maturity,
determined separately for each Base Treasury
Security. The dollar amount per one million face
value will be determined by multiplying the relevant
Dollar Value of an .01 field on Bloomberg
Financial Market's Government Yield Analysis Page on
the Determination Date at the Relevant Time
by 10,000. If no Dollar Value of an .01 for the Base
Treasury Securities is available on the Bloomberg
Financial Market's Government Yield Analysis Page
(for either (or both) Base Treasury Securities),
the Treasury Rate-Lock Provider shall determine
the Dollar Value of an .01 for the affected Base
Treasury Security (ies) on the Determination Date
and at the Relevant Time on a basis consistent with
the manner in which it would determine the Dollar
Value of an .01 for a transaction in which it held no
financial interest.
Determination
Date: On or before (as determined by Chugach Electric
Association, Inc.) February 13, 2002.
Locked-In Treasury
Rates: 10 year: 5.653%
30 year: 5.838%
Early
Termination: This agreement shall be subject to early
termination (other than upon the occurrence of an
Early Termination Date under Section 6 of the ISDA
Master Agreement) only at the option of Chugach
Electric Association, Inc., upon at least one New
York Banking Day's notice. Any notice of termination
sent after 5:00 PM New York Time shall be deemed to
have been sent on the next succeeding New York
Banking Day.
New York
Banking Day: Any day other than a Saturday, a Sunday or a day on
which commercial banks in New York City are required
or authorized to be closed.
Payment Date: The first New York Banking Day 30 days after the
Determination Date (or, if an Early Termination
Event occurs, the date provided in Section 6(d)(ii)
of the Agreement).
Adjustment
Amount: If the Determination Date is February 13, 2002, the
Adjustment Amount will be determined as follows:
1) multiply (a) the DVBP for 10 year Treasury
Bonds, times (b) the Notional Amount applicable
to 10 year Treasury Bonds (expressed in
millions of dollars), times (c) the difference
in basis points of yield between the relevant
Base Treasury Rate and Locked-In Treasury Rate
(expressed as a positive number if the relevant
Base Treasury Rate exceeds the relevant
Locked-In Treasury Rate and as a negative number
otherwise);
2) multiply (a) the DVBP for 30 year Treasury
Bonds, times (b) the Notional Amount applicable
to 30 year Treasury Bonds (expressed in
millions of dollars), times (c) the difference
in basis points of yield between the relevant
Base Treasury Rate and Locked-In Treasury Rate
(expressed as a positive number if the relevant
Base Treasury Rate exceeds the relevant
Locked-In Treasury Rate and as a negative number
otherwise); and
3) add the results of the preceding calculations.
If the total is a negative number, the absolute
value of that number is the Adjustment Amount, and
shall be paid by Chugach to the Counterparty. If
the total is a positive number, that number is the
Adjustment Amount, and shall be paid by the
Counterparty to Chugach. If the total is zero,
then no payment shall be made by or to any party.
If the Determination Date is any date before
February 13, 2002 (for any reason whatsoever), the
Adjustment Amount shall be determined in accordance
with Part 4(d) of the Schedule.
Payment of Adjustment
Amount: Payment of the Adjustment Amount will be made on the
Payment Date.
Assignment: No assignment without the prior written consent of
the other party except as permitted by Section 7 of
the ISDA Master Agreement and except as provided in
the Schedule under the heading "Credit Assignment
Event".
Governing Law: New York.
Payment Instructions:
Chugach Electric Association, Inc.:as from time to time provided in
writing by Chugach Electric
Association, Inc.
Treasury Rate-Lock Provider: as from time to time provided in
writing by the Treasury Rate-
Lock Provider.
Placement Fee: Each of Chugach Electric Association, Inc. and the
Treasury Rate-Lock Provider acknowledges that the
Treasury Rate-Lock Provider is paying Feld Winters a
fee of $1,386,116.00 in connection with the parties'
entry into the Treasury Rate-Lock Transaction
Each of the parties represents to the other as follows:
Its entry into the Treasury Rate-Lock Transaction has been duly
authorized by all necessary corporate action and does not violate any
law applicable to it or the terms of any agreement to which it is a
party;
It is not relying on the other party in connection with its decision
to enter into the Treasury Rate-Lock Transaction; and the other party
is not acting as an advisor to or fiduciary of such party in
connection with the Treasury Rate-Lock Transaction, regardless of
whether the other party has provided, or provides, it with market
information or the other party's views with respect to any aspect of the
Treasury Rate-Lock Transaction;
It understands the risks of the Treasury Rate-Lock Transaction and any
legal, regulatory, tax, accounting and economic consequences resulting
therefrom;
It has determined, based upon its own judgment and upon any advice
received from such of its own professional advisors as it has deemed
necessary to consult in connection with the Treasury Rate-Lock
Transaction, that entering into the Treasury Rate-Lock Transaction is
appropriate for it in light of its financial capabilities and objectives;
and
This Confirmation, when executed and delivered by such party, will
constitute a legal, valid and binding obligation of such party,
enforceable in accordance with its terms, subject to applicable
bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and subject, as to
enforceability, to equitable principles of general application
(regardless of whether enforcement is sought in a proceeding in equity or
at law).
Please confirm that the foregoing correctly sets forth the terms and
conditions of our agreement by responding within three (3) Business Days by
returning via telecopier an executed copy of this Confirmation to the
attention of Sean Largotta.
Failure to respond within such period shall not affect the validity or
enforceability of this letter agreement, and shall be deemed to be an
affirmation of the terms and conditions contained herein, absent manifest error.
Yours Sincerely,
LEHMAN BROTHERS FINANCIAL PRODUCTS INC.
By: /s/Sherri Venokur
Authorized Signatory
Confirmed as of the date first written above:
CHUGACH ELECTRIC ASSOCIATION, INC.
By:/s/ Evan J. Griffith, Jr.
Evan J. Griffith, Jr.
Authorized Signatory
March 19, 1999
Ms. Diana Woodard, CCTS
Relationship Specialist
US Bank - Corporate Trust Services
601 Union Street, Suite 2120
Seattle, WA 98101
Subject: Request for Execution and Delivery of CoBank-6 Bond
Dear Ms. Woodard:
Enclosed are the following original documents, including attachments, in
connection with the CoBank-6 bond in the amount of $42,500,000:
Opinion of Counsel,
Board Resolution,
First Mortgage Bond,
Certificate as to Bondable Additions No. 6,
Available Margins Certificate, and
Officers Certificate.
I have also enclosed a set of these documents for your files. Please execute
the bond anddeliver it to the attention of John McFarlane at CoBank, P.O. Box
5110, Denver, Colorado 80217. Would you also please provide Chugach a copy of
the executed bond for our files.
Thank you for your assistance in this transaction.
Sincerely,
/s/ Evan J. Griffith, Jr.
Evan J. Griffith, Jr.
Executive Manager, Finance & Energy Supply
Enclosures
<PAGE>
March 19, 1999
U.S.Bank Trust, National Association
601 Union Street, Suite 2120
Seattle, Washington 98101
Attention: Diana Woodard
Re: Opinion of Counsel and Title Evidence in connection
with issuance of First Mortgage Bond, CoBank Series
Ladies and Gentlemen:
This letter constitutes the opinion of General Counsel for Chugach Electric
Association, Inc.("Chugach") pursuant to Sections 5.01C, 5.01E, 5.02(5),
5.02(6), 5.02(7) and 5.03D of the Indenture of Trust dated as of
September 15, 1991 between Chugach and U.S.Bank Trust, National Association,
successor-in-interest to First Trust National Association,
successor-in-interest to Security Pacific Bank Washington, N.A., as Trustee
(the "Trustee") (as amended by the First, Second, Third, Fourth, Fifth, Sixth,
Seventh and Eighth Supplemental Indentures thereto, dated March 17, 1993,
May 19, 1994, June 29, 1994, March 1, 1995, September 6, 1995, April 3, 1996,
June 1, 1997, and February 4, 1998 respectively, the "Indenture of Trust")
and the terms used in this opinion shall have the meanings established therein.
I have based my opinion on my review of the following records and documents
associated with the issuance of a First Mortgage Bond, CoBank Series, No.
CoBank-6, in the original principal amount of $42,500,000 Dollars (the "Bond")
pursuant to the Third Supplemental Indenture of Trust dated June 29, 1994 as
amended by the Seventh Supplemental Indenture of Trust dated as of June 1, 1997
(the "CoBank Supplemental Indenture"), which review is in my opinion sufficient
to enable me to express an informed opinion on the matters discussed in this
letter:
The Bond;
Indenture of Trust;
Credit Agreement between Chugach and National Bank for Cooperatives
(predecessor to CoBank, ACB)("CoBank") dated June 22, 1994 as amended
by Amendment No. 1 to National Bank for Cooperatives Credit Agreement
dated June 1, 1997;
<PAGE>
U.S. Bank, N.A., as Trustee
March 19, 1999
Page 2
Board Resolution dated March 19, 1999, authorizing the issuance of a
First Mortgage Bond to CoBank pursuant to the CoBank Supplemental
Indenture;
Officers' Certificate dated March 19, 1999, signed by the General
Manager and the Executive Manager, Finance and Planning;
Available Margins Certificate dated March 19, 1999;
Certificate as to Bondable Additions No. 6 dated March 19, 1999;
The articles of incorporation of Chugach (including all amendments
thereto); and
The bylaws of Chugach as in effect on the date hereof.
Based on my review of the above records and my knowledge of Chugach as General
Counsel, I am of the opinion that:
(1) no tax, recording or filing law requirements apply to the
issuance of the Bond;
(2) no authorization, approval or consent by any Federal, state
or other governmental regulatory agency is required for the issuance of the
Bond;
(3) all conditions precedent provided for in the Indenture of
Trust relating to the authentication and delivery of the Bond to CoBank have
been complied with;
(4) the Bond, when executed by Chugach and authenticated and
delivered by the Trustee and when issued by Chugach will be the legal, valid and
binding obligation of Chugach enforceablein accordance with its terms and the
terms of the Indenture of Trust (subject to bankruptcy,insolvency, fraudulent
transfer, reorganization, moratorium and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles) and
entitled to the benefits of and secured by the lien of the Indenture of Trust
equally and ratably with all other Outstanding Secured Bonds;
(5) none of the Trust Estate is subject to any Prior Lien other
than Prior Liens permitted by Section 14.06 of the Indenture of Trust;
(6) Except as noted below, no instruments, other than the
Indenture of Trust, are necessary to vest in the Trustee as a part of the Trust
Estate all right, title and interest of Chugach in and to all Property Additions
to which the Certificate as to Bondable Additions refers. Chugach will prepare
a Supplemental Indenture of Trust, the purpose of which is to provide record
notice of
<PAGE>
U.S. Bank, N.A., as Trustee
March 19, 1999
Page 3
the application of the lien of the Indenture to two parcels of real property
acquired January 31, 1999 and February 1, 1999 for $7,500 each. Chugach intends
to submit the Supplemental Indenture ofTrust and a resolution approving it to
its Board of Directors during 1999. Chugach will record it inthe necessary
Recording Districts after execution. In addition, Chugach sold a parcel of real
property December 23, 1998 for $9,920 for which it will seek release from the
lien of the Indenture;
(7) with respect to all Property Additions to which the
Certificate as to Bondable Additions refers that are located or constructed on,
over or under public highways, rivers, waters or other public property, Chugach
has the lawful right under permits or franchises granted by a governmental body
having jurisdiction in the premises or by law to maintain and operate such
Property Additions for an unlimited, indeterminate or indefinite period of time
or for the period, if any, specified in such permit, franchise or law, and to
remove such property at the expiration of the period covered by such permit,
franchise or law, or the terms of such permit, franchise or law require any
public authority having the right to take over such property to pay fair
consideration therefor.
(8) Chugach has corporate power to own and operate all Property
Additions to which the Certificate as to Bondable Additions refers;
(9) the Indenture of Trust is a lien upon all Property Additions
described in the Certificate as to Bondable Additions (except such as have been
Retired) free and clear of any Prior Liens except to the extent otherwise
provided in Section 6.02D(2) of the Indenture of Trust;
(10) the documents which have been or are herewith delivered to the
Trustee conform to the requirements of the Indenture of Trust for an
Application for the authentication and delivery of the Bond and, upon the basis
of the Application, all conditions precedent provided for in the Indenture of
Trust relating to authentication and delivery of the Bond have been complied
with;
(11) Chugach has title to the Property Additions described in the
Certificate as to Bondable Additions (except as have been Retired), free and
clear of any Prior Liens (except to the extent otherwise permitted by the
proviso to Section 6.02D(2) of the Indenture of Trust and except for Permitted
Encumbrances), and Chugach has duly obtained any easements or rights-of-way
which are described in the Certificate as to Bondable Additions, subject only to
Permitted Encumbrances; and,
(12) to the extent Chugach's Application for authentication and
delivery of the Bond is based on satisfaction of the conditions described in
Section 5.03 of the Indenture of Trust, the evidence of repurchase of Bonds that
has been delivered to the Trustee conforms to the requirements of the Indenture
of Trust and, upon the basis of the relevant Application, the conditions
precedent to authentication and delivery of the Bond under Article Five of the
Indenture of Trust have been satisfied.
<PAGE>
U.S. Bank, N.A., as Trustee
March 19, 1999
Page 4
Pursuant to the definition of "Title Evidence" contained in Section 1.01 of the
Indenture of Trust, each of the foregoing opinions to the effect that Chugach
has title to any portion of the Trust Estate shall be deemed to be an opinion
only that Chugach has such title as in my opinion is satisfactory for the use
thereof in connection with its operations and is qualified by and subject to any
irregularity or deficiency in the record evidence of title which, in my
opinion, can be cured by proceedings within the power of Chugach or does not
substantially impair the usefulness of such property for the purposes of
Chugach.
This opinion is limited to the federal laws of the United States of America and
the laws of the State of Alaska, and I disclaim any opinion as to the laws of
any other jurisdiction.
This opinion is rendered to you in connection with the issuance of the Bond and
is solely for your benefit. This opinion may not be relied upon by any other
person, firm, corporation or other entity without my prior written consent.
I disclaim any obligation to advise you of any change of law that occurs, or any
facts of which I become aware, after the date of this opinion.
Sincerely,
CHUGACH ELECTRIC ASSOCIATION, INC.
/s/ Donald W. Edwards
Donald W. Edwards
General Counsel
I:\cobnk425.ltr
<PAGE>
WHEREAS, the Board of Directors has previously approved and Chugach
Electric Association, Inc. ("Chugach") has entered into a Third Supplemental
Indenture of Trust dated as of June 29, 1994 between Chugach and Seattle-First
National Bank ("Third Supplemental Indenture") amending and supplementing that
Indenture of Trust dated as of September 15, 1991 (as heretofore amended, the
"Indenture") and establishing a new series of bonds to be designated First
Mortgage Bonds, CoBank Series, to be issued to Cobank, ACB (successor by merger
to National Bank for Cooperatives ("CoBank") pursuant to a Credit Agreement
dated June 22, 1994, as amended by Amendment No. 1 to National Bank for
Cooperatives Credit Agreement dated June 1, 1997, from time to time to secure
advances made by CoBank, and the Third Supplemental Indenture has been amended
by the Seventh Supplemental Indenture of Trust dated as of June 1, 1997 (the
Third Supplemental Indenture as so amended, the "CoBank Supplemental
Indenture");
WHEREAS, it is in the best interest of Chugach for the Board of
Directors to authorize the issuance of a bond to CoBank under the CoBank
Supplemental Indenture for the purpose of securing indebtedness for
$42,500,000.00.
NOW THEREFORE BE IT RESOLVED, that the Board of Directors hereby
requests the authentication and delivery of a First Mortgage Bond, CoBank
Series (designated CoBank-6), in the principal amount of $42,500,000.00,
under Sections 5.02 and 5.03 of the Indenture;
BE IT FURTHER RESOLVED, that the President, Vice President, Treasurer,
Secretary, General Manager and Executive Managers of Chugach, or any of them
(the "Officers and Managers") are and each of them hereby is, authorized,
empowered and directed, for and on behalf of Chugach, to execute and deliver,
1) the First Mortgage Bond, CoBank Series, No. CoBank-6, in the amount of
$42,500,000.00, to bear interest at the CoBank Fixed Rate Option
in substantially the form attached hereto, and 2) any Company Request,
Application, Company Order or other document or instrument that such person
deems necessary or desirable in connection with the issuance of such bond;
BE IT FURTHER RESOLVED, that the execution by such Officers and
Managers of the said Bond, instrument or other document and the doing by them of
any act in connection with the foregoing matters shall conclusively establish
their authority therefor from Chugach.
CERTIFICATION
I, Pat Jasper, do hereby certify that I am President of Chugach
Electric Association, Inc., an electric non-profit cooperative membership
corporation organized and existing under the laws of the State of Alaska; that
the foregoing is a complete and correct copy of a resolution adopted at a
meeting of the Board of Directors of this corporation, duly and properly called
and held on the 17th day of March, 1999, that a quorum was present at the
meeting; that the resolution is set forth in the minutes of the meeting and has
not been rescinded or modified.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of this corporation this 19th day of March, 1999.
(SEAL)
/s/ Patricia B. Jasper
President
<PAGE>
THIS FIRST MORTGAGE BOND, CoBANK SERIES, HAS NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED WITHOUT
REGISTRATION UNDER SUCH ACT OR IN RELIANCE UPON AN APPLICABLE
EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
Chugach Electric Association, Inc.
First Mortgage Bond, CoBank Series, Due 3/15/2002
No. CoBank-6 $42,500,000.00
Chugach Electric Association, Inc., an Alaska electric cooperative
(herein called the "Company", which term includes any successor corporation
under the Indenture hereinafter referred to), for value received, hereby
promises to pay to CoBank (the "Lender"), or registered assigns, (1) the
principal sum of $42,500,000.00 Dollars, (2) interest (computed on the basis of
a 360 day year) thereon, from the date of issuance, at the rate or rates
hereafter provided for, which interest shall be payable on each Regular Interest
Payment Date with respect to the principal balance Outstanding from time to
time during the calendar month most recently ended prior to such Regular
Interest Payment Date, and (3) a Redemption Premium in the amounts (if any)
hereinafter provided. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture
described on the reverse hereof, be paid to the Person in whose name this Bond
(or one or more predecessor Bonds) is registered at the close of business on the
Regular Record Date (as defined below) for such interest. Any such interest not
so punctually paid or duly provided for will forthwith cease to be payable to
the Holder on such Regular Record Date and may be paid to the Person in whose
name this Bond (or one or more Predecessor Bonds) is registered at the close of
business on a Special Record Date for the payment of such defaulted interest
to be fixed by the Trustee, notice whereof shall be given to Holders of Bonds of
this series not less than 10 days prior to such Special Record Date.
Payments of the principal of (and premium, if any) and interest on this
Bond shall be made to the Holder hereof by wire transfer of immediately
available funds. Wire transfers will be made to ABA #307088754 for advice to and
credit of CoBank (or to such other account as the Holder hereof may designate
by notice) and shall be in time to be received prior to 1:00 p.m., Alaska time,
on the date each payment is due.
This Bond will mature on the dates stated above. Interest only shall be
due until the first Principal Payment Date. The principal amount of this Bond
shall be repaid in accordance with the following amortization schedule:
Date 03/15/2002 Principal Amount Due $42,500,000
Reference is hereby made to the further provisions of this Bond set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Bond
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for anypurpose.
IN WITNESS WHEREOF, the Company has caused this Bond to be duly
executed.
Dated: March 19, 1999 CHUGACH ELECTRIC ASSOCIATION, INC.
Attest:/s/ Patricia B. Jasper By:/s/ Eugene N. Bjornstad
President Authorized Officer
<PAGE>
This Bond is one of a duly authorized issue of Bonds of the Company
designated as its "First Mortgage Bonds" (herein called the "Bonds"), issued and
to be issued in one or more series under, all equally and ratably secured by,
an Indenture of Trust, dated as of September 15, 1991, (herein together with the
First Supplemental Indenture of Trust, dated as of March 17, 1993, the Second
Supplemental Indenture of Trust dated as of May 19, 1994, the Third Supplemental
Indenture of Trust dated as of June 29, 1994, the Fourth Supplemental Indenture
of Trust dated as of March 1, 1995, the Fifth Supplemental Indenture of Trust
dated as of September 6, 1995, the Sixth Supplemental Indenture of Trust dated
as of April 3, 1996, the Seventh Supplemental Indenture of Trust dated as of
June 1, 1997, and the Eighth Supplemental Indenture of Trust dated as of
February 4, 1998, called the "Indenture"), between the Company and U.S.Bank
Trust, National Association (successor-in-interest to First Trust National
Association, successor-in-interest to Security Pacific Bank Washington, N.A.),
as trustee (herein called the "Trustee", which term includes any successor
trustee under the Indenture), to which Indenture reference is hereby made for a
statement of the description of the properties thereby mortgaged, pledged and
assigned, the nature and extent of the security and the respective rights,
limitations of rights, duties and immunities thereunder of the Company, the
Trustee and the Holders of the Bonds and of the terms upon which the Bonds are,
and are to be, authenticated and delivered. This Bond is one of the series and
maturity designated on the face hereof.
This Bond is subject to redemption at any time, upon at least twenty
(20) Business Days (as hereinafter defined) notice to the Holder hereof, as a
whole or in part in multiples of $1,000, at the election of the Company, at a
Redemption Price equal to 100% of the principal amount being redeemed plus the
Redemption Premium (as defined below), if any, with respect to the principal
amount hereof being redeemed, together with accrued interest to the Redemption
Date on the principal amount being redeemed, but interest installments whose
Stated Maturity is on or prior to such Redemption Date will be payable to the
Holder of this Bond, or one or more Predecessor Bonds, of record at the close of
business on the relevant Record Dates.
The Company has selected the Fixed Rate Option set forth in (B) below
for an initial period of 30 days at an interest rate of ______ % per annum:
(A) Variable Rate Option. Except as provided below, the
unpaid principal balance of this CoBank Bond shall bear interest at a rate per
annum equal at all times to the National Variable Rate (as hereinafter defined)
plus 25 basis points. For purposes hereof, the National Variable Rate shall
mean the rate of interest established by CoBank from time to time as its
National Variable Rate. The National Variable Rate is intended by CoBank to be a
reference rate, and CoBank may charge other borrowers rates at, above, or below
that rate. Any change in the National Variable Rate shall take effect on the
date established by CoBank as the effective date of such change, and CoBank
agrees to notify the Company promptly after any change in the rate.
(B) Fixed Rate Option. From time to time at the request of
the Company, the rate of interest charged on this CoBank Bond may be fixed at a
rate to be quoted by CoBank in its sole and absolute discretion. Under this
option, individual amounts may be fixed for periods ranging from thirty (30)
days to the life of the CoBank Bond, and the minimum aggregate principal amount
of CoBank Bonds on which the interest rate may be fixed at any one time shall
be $100,000. However, rates may only be fixed for periods which expire on a
Business Day, and shall take into account repayments of principal in accordance
with the amortization schedule. Upon the expiration of any fixed rate period,
interest shall automatically accrue at the rate set forth in (A) above, unless
the amount fixed is repaid or the Company fixes the rate for an additional
period.
Until the principal hereof is completely repaid whether by reason of
maturity or redemption, interest on this Bond not theretofore paid shall be
payable, in arrears, on each Interest Payment Date with respect to the principal
balance outstanding from time to time during the Interest Period to which such
Interest Payment date relates. Interest shall be calculated on the actual number
of days this Bond is outstanding on the basis of a year consisting of 360 days.
In calculating interest, the first day of each period for which interest is
calculated shall be included and the day on which interest is paid shall be
excluded.
If prior to maturity of this Bond the Company fails to make any payment
required to be made hereunder or under the terms of the Credit Agreement, then
at the Holder's option in each instance, such payment shall bear interest from
the date due to the date such amount is paid in full at the Default Rate (as
hereafter defined). After maturity, whether by reason of acceleration or
otherwise, the entire indebtedness under this Bond shall automatically bear
interest at the Default Rate. All interest provided for in this provision shall
be payable on demand.
If an Event of Default with respect to the Bonds shall occur and be
continuing, the principal of the Bonds may be declared due and payable in the
manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of Bonds under the Indenture at any time
by the Company with the consent of the Holders of a majority in aggregate
principal amount of Bonds of all series at the time outstanding affected by such
modification. The Indenture also contains provisions permitting the Holders of
a majority in principal amount of Bonds at the time Outstanding, on behalf of
the Holders of all Bonds to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Bond shall
be conclusive and binding upon such Holder and upon all future Holders of this
Bond and of any bond issued upon the registration of transfer hereof or in
exchange hereof or in lieu hereof, whether or not notation of such consent or
waiver is made upon this Bond.
No reference herein to the Indenture and no provisions of this Bond or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Bond at the times, places and rates, and in the coin or
currency, herein provided.
Pursuant to Section 34.20.160 of the Alaska Statutes, notice is hereby
given that the Company is personally obligated and fully liable for the amount
due under this Bond and the Holder of this
Bond has the right to sue on this Bond and obtain a personal judgment against
the Company for satisfaction of the amount due hereunder either before or after
a judicial foreclosure of the lien of the Indenture under Sections 09.45.170
through 09.45.220 of Alaska Statutes.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Bond is registrable in the Bond Register. Upon
surrender of this Bond for registration of transfer at the office or agency of
the company in Anchorage, Alaska, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Bond
Registrar duly executed by the Holder hereof or the Holder's attorney duly
authorized in writing, one or more new Bonds of this series, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
The Bonds of this series are issuable only in registered form without
coupons in denomination of $1,000 and any integral multiple thereof. As provided
in the Indenture and subject to certain limitations therein set forth, Bonds of
this series are exchangeable for a like aggregate principal amount of Bonds of
this series of a different authorized denomination, but of the same maturity and
interest rate or interest rate formula, as requested by the Holder surrendering
the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Bond for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Bond is registered as the owner hereof for all
purposes, whether or not this Bond is overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
As used herein, the term:
"Business Day" means any day on which CoBank and the Trustee are open
for business.
"CoBank" means CoBank, ACB (as successor to National Bank for
Cooperatives by virtue of merger).
"CoBank Bond" means a First Mortgage Bond, CoBank Series.
"Credit Agreement" means that Credit Agreement secured hereby dated as
of June 22, 1994, as amended by Amendment No. 1 to National Bank for
Cooperatives Credit Agreement dated June 1, 1997 between CoBank and
the Company, as the same may be amended from time to time, or such
other Credit Agreement as may hereafter exist between CoBank and the
Company relating to the issuance of CoBank Bonds.
"Default Rate" means 4% per annum in excess of the rate or rates that
would otherwise be in effect.
"Interest Payment Date" with respect to any CoBank Bond means a Regular
Interest Payment Date with respect to such Bond.
"Interest Period" means a calendar month.
"Maturity Date" with respect to this CoBank Bond means the due date set
forth on the face hereof.
"National Variable Rate" shall mean the rate of interest established by
CoBank from time to time as its National Variable Rate. The National
Variable Rate is intended by CoBank to be a reference rate, and CoBank
may charge other borrowers rates at, above, or below that rate.
"Principal Payment Date" with respect to this CoBank Bond means each
date on which a payment of principal is required to be made on this
CoBank Bond pursuant to the amortization schedule set forth on the
face hereof.
"Redemption Premium" with respect to this CoBank Bond means the premium
due upon the redemption or repricing of any portion of this CoBank
Bond then subject to a fixed rate of interest calculated by CoBank in
accordance with its methodology and equal to the present value of the
difference between: (A) the amount of interest which would have
accrued on such portion during the remainder of the applicable fixed
rate period; less (B) the amount of interest that CoBank would earn if
such portion were reinvested for the remaining fixed rate period in
U.S. Treasury obligations having a weighted average life approximately
equal to the remaining fixed rate period. For the purpose of
calculating present value, the discount rate will be the rate of
interest accruing on the U.S. Treasury obligations selected in (B)
above.
"Regular Interest Payment Date" with respect to this CoBank Bond means
the 20th day of each calendar month.
"Regular Record Date" for the payment of interest on this CoBank Bond
payable, and punctually paid or duly provided for, on any Interest
Payment Date means the last day (whether or not a Business Day) of the
calendar month next preceding such Interest Payment Date.
All other capitalized terms used in this Bond shall have the meanings
assigned to them in the Indenture.
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
FOR CoBANK BONDS
This is one of the Bonds of the series designated therein referred to
in the within-mentioned Indenture.
U.S.BANK TRUST, National Association,
as Trustee
By:/s/ Dawnita Brown
Authorized Signatory
<PAGE>
CERTIFICATE AS TO BONDABLE ADDITIONS NO. 6
(Re Application for Authentication and Delivery of Bond CoBank-6)
Pursuant to Section 5.02 of the Indenture of Trust dated as
of September 15, 1991 from Chugach Electric Association, Inc.
(the "Company") to Security Pacific Bank Washington, N.A., as
trustee, as modified and supplemented by Supplemental Indentures
No. 1, 2, 3, 4, 5, 6 and 7 thereto dated March 17, 1993, May 19,
1994, June 29, 1994, March 1, 1995, September 6, 1995, April 3,
1996 and June 1, 1997, respectively (the "Indenture"), and in
connection with the Company's request for authentication and
delivery of an additional Bond No. CoBank-6, the undersigned
hereby make this Certificate of Bondable Additions. Capitalized
terms not otherwise defined herein have the meanings assigned to
them in the Indenture.
(a) The balance of Bondable Additions stated in item 9 of the
most recent (September 30, 1997) Summary of Certificate as
to Bondable Additions heretofore filed with the Trustee as
the balance of Bondable Additions to remain after the action
then applied for, is $59,412,585 (item 1 in the Summary of
Certificate as to Bondable Additions set forth below (the
"Summary")).
(b) The Amount (item 2 in the Summary) of Property Additions,
not described in any previous Certificate as to Bondable
Additions, acquired during the period from October 1, 1997
through January 31, 1999, is $16,045,300. Such Property
Additions are described in reasonable detail on Attachment 1
hereto, and:
i) have not been included in any previous Certificate as
to Bondable Additions;
ii) do not include Acquired Facilities or assets acquired
and paid for in whole or in part through the transfer
or delivery of securities or other property; and
iii) are listed in Attachment 1 at Cost, which in the
opinion of the undersigned is equal to their Fair Value
to the Company.
(c) The aggregate amount (item 3 in the Summary) of all
Retirements during the period from October 1, 1997, through
January 31, 1999, is $4,465,823.
(d) There are no credits (item 4 of the Summary) against
Retirements.
(e) The excess (item 6 in the Summary) of the Amount of Property
Additions shown in (b) above (item 2 of the Summary) over
the net amount of Retirements (item 5 of the Summary) is
$11,579,477, which is the amount of the net Bondable
Additions now being certified.
(f) The sum (item 7 of the Summary) of the amount shown pursuant
to clause (a) above (item 1) and the net amount of Bondable
<PAGE>
Additions now being certified shown in clause (e) (item 6)
above is $70,992,062.
(g) The total amount (item 8 in the Summary) of Bondable
Additions being used in connection with authentication and
delivery of the additional Bond whose authentication and
delivery are now being applied for under Section 5.02 of the
Indenture is calculated as the bonds currently being applied
for times 110% or $42,500,000 x 110% = $46,750,000.
(h) The balance (item 9 in the Summary) of the Bondable
Additions that will remain after the granting of the
Application now being made is $24,242,062.
(i) With respect to the Property Additions described in this
Certificate:
i) such Property Additions are desirable in the conduct of
the business of the Company;
ii) the allocation of the Cost to the Company of such
Property Additions to each account is, in the opinion
of the undersigned, proper; and
iii) the balance of the Bondable Additions to remain after
the action applied for plus the Cost to the Company or
the Fair Value to the Company, whichever is less, of
uncertified Property Additions is at least equal to the
aggregate amount of uncertified Retirements.
(j) The allowances or charges (if any) for interest, taxes,
engineering, legal expenses, superintendence, insurance,
casualties and other items during construction (or in
connection with the acquisition of Property Additions) which
are included in the Cost to the Company of such of the
Property Additions described in this Certificate as were
constructed or acquired by or for the Company have been
charged and are properly chargeable to fixed plant accounts
in accordance with Accounting Requirements and are, in the
opinion of the signers, proper in respect of the Property
Additions specified;
(k) No portion of the Cost to the Company of the Property
Additions described in this Certificate should properly have
been charged to maintenance or repairs and no expenditures
are included in this Certificate which under Accounting
Requirements are not properly chargeable to fixed plant
accounts.
(l) The terms used in this Certificate which are defined in the
Indenture are used as defined in the Indenture.
<PAGE>
Summary of Certificate as to Bondable Additions No. 6
The undersigned certify the following to be a true summary
of this Certificate:
Start with:
1. The balance of Bondable Additions
remaining after the action applied for
in the previous Certificate (Certificate
No.5)......................................................$59,412,585
Then take the new gross Property Additions as
shown in item 2 below:
2. Amount of additional Property Additions
now certified, being the Amount of all
or some Property Additions in the period
from October 1, 1997 through January 31,
1999 (none of which has been certified
in any previous Certificate as to
Bondable Additions).........................................$16,045,300
Then determine the deductions for Retirements
by deducting item 4 below from item 3 below
to produce item 5:
3. The aggregate amount of all Retirements.....................$ 4,465,823
4. The sum of the credits against
Retirements..........................................................$0
5. The net amount of Retirements to be
deducted....................................................$ 4,465,823
Then determine the net Bondable Additions now
being certified by deducting item 5 from item
2 to produce item 6:
6. Net Bondable Additions now being
certified...................................................$11,579,477
Then add item 1 and item 6 to produce item 7:
7. Total Bondable additions available for
the action applied for......................................$70,992,062
Deduct item 8 from item 7 to produce item 9:
8. Bondable Additions now being used...........................$46,750,000
9. Balance of Bondable Additions to remain
after the action applied for. . . . . ......................$24,242,062
<PAGE>
Dated March 19, 1999
/s/Michael R. Cunningham
Michael R. Cunningham
Title: Principal Accounting Officer
(Accountant)
/s/Evan J. Griffith, Jr.
Evan J. Griffith, Jr.
Title: Principal Financial Officer
/s/ Eugene N. Bjornstad
Eugene N. Bjornstad
Title: General Manager
(Engineer)
<PAGE>
Chugach Electric Association, Inc.
Available Margins Certificate
Eugene N. Bjornstad, General Manager; Evan J. Griffith, Jr., Executive
Manager, Finance and Planning (Principal Financial Officer); and Michael R.
Cunningham, Controller (Principal Accounting Officer) of Chugach Electric
Association, Inc. each hereby certifies that (1) the Margins for Interest for
any 12 consecutive calendar months during the period of 18 calendar months
immediately preceding the first day of thecalendar month in which this
application for authentication and delivery of Additional Bonds under Section
5.02 of the Indenture described below is made are not less than 1.20 times the
Interest Charges during such 12-month period; (2) the sum of (i) Margins for
Interest for any 12 consecutive calendar months during the period of 18 calendar
months immediately preceding the first day of the calendar month in which this
Application for authentication and delivery of additional Bonds under Section
5.02 is made and (ii) Incremental Interest with respect to such 12-month period,
is not less than 1.20 times the sum of Interest Charges during such 12-month
period plus Incremental Interest with respect to such 12-month period; and (3)
the Margins for Interest have been calculated in accordance with the definition
contained in Section 1.01 of that Indenture of Trust dated September 15, 1991
(as heretofore amended by the First, Second, Third, Fourth, Fifth, Sixth and
Seventh Supplemental Indentures, thereto dated March 17, 1993, May 19, 1994,
June 29, 1994 and March 1, 1995, September 6, 1995, April 3, 1996 and June 1,
1997 respectively (the "Indenture") and such calculations are set forth in the
Attachment 1 hereto.
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture.
IN WITNESS WHEREOF, we have hereunto signed our names.
Dated: March 19, 1999
/s/ Eugene N. Bjornstad /s/ Michael R. Cunningham
Eugene N. Bjornstad Michael R. Cunningham
Title: General Manager Title: Controller
Principal Accounting Officer
/s/ Evan J. Griffith, Jr.
Evan J. Griffith, Jr.
Title: Executive Manager,
Finance and Energy Supply
Principal Financial Officer
<PAGE>
<TABLE>
AVAILABLE MARGINS
COBANK 6
Plus:
CoBank
Bond Adjusted
L/T S/T Tot. at 5.75% Interest Adjusted 12 month
Month Margins Int. Exp. Int. Exp Int.Exp. per yr. Expense MFI/ I MFI/ I
Ending
<S> <C> <C> <C> <C> <C> <C> <C>
July, 1997 -1,354,990 2,059,097 193,733 2,252,830 201,250 2,454,080 0.4479
August, 1,001,234 2,059,085 43,905 2,102,990 201,250 2,304,240 1.4345
1997
September, 250,242 2,052,511 55,016 2,107,527 201,250 2,308,777 1.1084
1997
October, 264,390 2,060,074 86,552 2,146,626 201,250 2,347,876 1.1126
1997
November, 3,173,572 2,068,776 69,800 2,138,576 201,250 2,339,826 2.3563
1997
December, 597,397 2,142,071 0 2,142,071 201,250 2,343,321 1.2549
1997
January, 2,422,415 2,141,703 0 2,141,703 201,250 2,342,953 2.0339
1998
February, 1,314,188 2,115,570 0 2,115,570 201,250 2,316,820 1.5672
1998
March, 2,024,866 2,121,985 26,447 2,148,432 201,250 2,349,682 1.8618
1998
April, 562,552 2,096,600 33,550 2,130,150 201,250 2,331,400 1.2413
1998
May, 1998 -363,277 2,105,539 10,267 2,115,806 201,250 2,317,056 0.8432 1.3841
June, 1998 639,439 2,099,371 0 2,099,371 201,250 2,300,621 1.2779 1.3754
July, 1998 -1,557,225 2,105,539 0 2,105,539 201,250 2,306,789 0.3249 1.3701
August, 742,991 2,105,539 0 2,105,539 201,250 2,306,789 1.3221 1.3608
1998
September, 593,694 2,093,309 14,778 2,108,087 201,250 2,309,337 1.2571 1.3731
1998
October, 279,300 2,071,029 25,028 2,096,057 201,250 2,297,307 1.1216 1.3743
1998
November, 1,823,297 2,053,196 12,875 2,066,071 201,250 2,267,321 1.8042 1.3267
1998
December, 248,165 2,050,280 7,201 2,057,481 201,250 2,258,731 1.1099 1.3151
1998
January, 2,921,817 2,052,849 0 2,052,849 201,250 2,254,099 2.2962 1.3342
1999
</TABLE>
<PAGE>
Chugach Electric Association, Inc.
Officers' Certificate
Eugene N. Bjornstad, General Manager, and Evan J. Griffith, Jr.,
Executive Manager, Finance and Planning of Chugach Electric Association, Inc.
("Chugach") each hereby certifies that: 1) he has read the conditions and
covenants and definitions related thereto in the Indenture of Trust dated as of
September 15, 1991 (as heretofore amended, the "Trust Indenture"); 2) the below
opinions are based on the above review and on his knowledge of Chugach in the
above capacity; 3) he has, in his opinion, made such examination or
investigation as is necessary to enable him to express an informed opinion as to
the opinions expressed below; and 4) in accordance with Sections 5.01 B and
5.03 C of the Trust Indenture:
(i) No Event of Default exists;
(ii) None of the Trust Estate is subject to any Prior Lien other
than Prior Liens permitted by Section 14.06 of the Trust
Indenture;
(iii) In his opinion, all conditions precedent provided for in the
Trust Indenture relating to the authentication and delivery of
the First Mortgage Bond, CoBank Series No. CoBank-6
("CoBank-6 Bond") in the principal amount of $42,500,000.00,
have been complied with;
Capitalized terms not otherwise defined in this Certificate have the meanings
assigned to them in the Trust Indenture.
IN WITNESS WHEREOF, we have hereunto signed our names.
Dated: March 19, 1999
/s/ Eugene N. Bjornstad
Eugene N. Bjornstad
Title: General Manager
/s/ Evan J. Griffith,Jr.
Evan J. Griffith, Jr.
Title: Executive Manager
Finance and Energy Supply
Page 1 of 1 Principal Financial Officer
<PAGE>
<TABLE>
CHUGACH ELECTRIC ASSOCIATION, INC.
ATTACHMENT 1 TO CERTIFICATE AS TO BONDABLE ADDITIONS NO. 6
NET CHANGES TO ELECTRIC PLANT
FOR THE PERIOD OCTOBER, 1997 THROUGH JANUARY, 1999
<S> <C> <C> <C> <C> <C> <C> <C>
10/01/97 10/01/97 ADJ FOR GEN
PLANT
BALANCE 01/31/99 01/31/99 CONVERSION 1/31/99
TO
ACCOUNT DESCRIPTION 9/30/97 ADDITIONS RETIREMENTS BALANCE
AMORTIZATION
(1)
- ----------------------------------------------------------------------------------------------------------------------------
PRODUCTION
PLANT
31100 626 STM - STRC & IMPR/BELUGA./OTHR/G&A. 7,349,213 0 0 0 7,349,213
31200 626 STM - BLR PLT EQP/BELUGA./OTHR/G&A. 24,850,704 0 0 0 24,850,704
31400 626 STM - TURBOGENR../BELUGA./OTHR/G&A. 20,716,146 0 0 0 20,716,146
31500 626 STM - ACC ELEC EQ/BELUGA./OTHR/G&A. 6,932,778 0 0 0 6,932,778
31600 626 STM -MISC PWR PLT/BELUGA./OTHR/G&A. 544,029 0 0 0 544,029
33100 621 HYD - STRC & IMPR/GENERAL/OTHR/G&A. 690,040 0 0 0 690,040
33200 621 HYD - RESV-DM-WW./GENERAL/OTHR/G&A. 5,698,534 0 0 0 5,698,534
33300 621 HYD - WTWL-TR-GN./GENERAL/OTHR/G&A. 1,047,402 0 0 0 1,047,402
33400 621 HYD - ACC ELEC EQ/GENERAL/OTHR/G&A. 371,914 0 0 0 371,914
33500 621 HYD - MISC PW PLT/GENERAL/OTHR/G&A. 97,706 0 0 0 97,706
33600 621 HYD - RESV-DM-WW./GENERAL/OTHR/G&A. 893,099 0 0 0 893,099
34000 626 OTH - LAND&RIGHTS/BELUGA./OTHR/G&A. 422,664 0 0 0 422,664
34100 622 OTH - STRC & IMPR/INTNATL/OTHR/G&A. 346,045 0 0 0 346,045
34100 624 OTH - STRC & IMPR/BERNLKE/OTHR/G&A. 1,778,752 0 0 0 1,778,752
34100 626 OTH - STRC & IMPR/BELUGA./OTHR/G&A. 20,862,174 0 0 0 20,862,174
34200 622 OTH - FL HLDR-PRS/INTNATL/OTHR/G&A. 152,868 0 0 0 152,868
34200 624 OTH - FL HLDR-PRS/BERNLKE/OTHR/G&A. 471,850 0 0 0 471,850
34200 626 OTH - FL HLDR-PRS/BELUGA./OTHR/G&A. 3,040,258 0 0 0 3,040,258
34300 622 OTH - PRIME MOVER/INTNATL/OTHR/G&A. 3,647,259 0 0 0 3,647,259
34300 624 OTH - PRIME MOVER/BERNLKE/OTHR/G&A. 8,862,659 0 0 0 8,862,659
34300 626 OTH - PRIME MOVER/BELUGA./OTHR/G&A. 49,308,663 3,826,541 2,721,375 0 50,413,829
34400 622 OTH - GENERATORS./INTNATL/OTHR/G&A. 779,742 0 0 0 779,742
34400 624 OTH - GENERATORS./BERNLKE/OTHR/G&A. 2,643,899 0 0 0 2,643,899
34400 626 OTH - GENERATORS./BELUGA./OTHR/G&A. 8,941,743 0 0 0 8,941,743
34500 622 OTH - ACC ELEC EQ/INTNATL/OTHR/G&A. 479,560 7,789 27,461 0 459,888
34500 624 OTH - ACC ELEC EQ/BERNLKE/OTHR/G&A. 784,574 0 0 0 784,574
34500 626 OTH - ACC ELEC EQ/BELUGA./OTHR/G&A. 3,661,137 0 0 0 3,661,137
34600 622 OTH -MISC PWR PLT/INTNATL/OTHR/G&A. 19,465 0 0 0 19,465
34600 624 OTH -MISC PWR PLT/BERNLKE/OTHR/G&A. 1,539 0 0 0 1,539
34600 626 OTH -MISC PWR PLT/BELUGA./OTHR/G&A. 1,862,815 0 0 0 1,862,815
=========================================================================
TOTAL 177,259,231 3,834,330 2,748,836 0 178,344,725
PRODUCTION
PLANT
=========================================================================
TRANSMISSION
PLANT
35000 000 TRN - LD & LDRITS/GENERAL/OTHR/G&A. 454,983 0 0 0 454,983
35200 000 TRN - STRC & IMPR/GENERAL/OTHR/G&A. 847,631 0 0 0 847,631
35200 626 TRN - STRC & IMPR/BELUGA./OTHR/G&A. 428,664 0 0 0 428,664
35300 000 TRN - STATION EQP/GENERAL/OTHR/G&A. 31,514,118 0 0 0 31,514,118
35300 304 TRN - STATION EQP/LDSRVMT/OTHR/G&A. 196,977 0 0 0 196,977
35300 626 TRN - STATION EQP/BELUGA./OTHR/G&A. 38,649,029 0 0 0 38,649,029
35400 000 TRN - TWR & FXTRS/GENERAL/OTHR/G&A. 5,378,824 0 0 0 5,378,824
35400 626 TRN - TWR & FXTRS/BELUGA./OTHR/G&A. 26,890,112 0 0 0 26,890,112
35500 000 TRN - POLES & FIX/GENERAL/OTHR/G&A. 8,953,051 9,479 364 0 8,962,166
35500 626 TRN - POLES & FIX/BELUGA./OTHR/G&A. 1,074,661 0 0 0 1,074,661
35600 000 TRN -OH CND & DVS/GENERAL/OTHR/G&A. 6,477,186 5,633 1,071 0 6,481,748
35600 626 TRN -OH CND & DVS/BELUGA./OTHR/G&A. 7,836,678 0 0 0 7,836,678
35700 000 TRN - UG CONDUIT./GENERAL/OTHR/G&A. 2,152,235 0 0 0 2,152,235
35800 000 TRN - UG CND & DV/GENERAL/OTHR/G&A. 6,093,269 0 0 0 6,093,269
35800 328 TRN - UG CND & DV/NSUBCBL/OTHR/G&A. 40,700,570 0 0 0 40,700,570
35800 329 TRN - UG CND & DV/SSUBCBL/OTHR/G&A. 14,295,122 0 0 0 14,295,122
35900 626 TRN-RDS & TRL-BLG/BELUGA./OTHR/G&A. 4,000 0 0 0 4,000
=========================================================================
TOTAL 191,947,110 15,112 1,435 0 191,960,787
TRANSMISSION
PLANT
=========================================================================
DISTRIBUTION
PLANT
36000 000 DIS - LD & LDRITS/GENERAL/OTHR/G&A. 805,759 12,782 0 0 818,541
36100 000 DIS - STRUC & IMP/GENERAL/OTHR/G&A. 1,817,354 0 0 0 1,817,354
36200 000 DIS - STATION EQP/GENERAL/OTHR/G&A. 18,995,342 0 175,111 0 18,820,231
36400 000 DIS - POLES-TW&FX/GENERAL/OTHR/G&A. 15,828,326 766,568 106,328 0 16,488,566
36500 000 DIS - OH CND & DV/GENERAL/OTHR/G&A. 9,593,180 411,473 87,448 0 9,917,205
36600 000 DIS - UG CONDUIT./GENERAL/OTHR/G&A. 9,194,175 2,352,796 288 0 11,546,683
36700 000 DIS - UG CND & DV/GENERAL/OTHR/G&A. 35,962,270 1,971,469 448,348 0 37,485,391
36800 000 DIS - LINE TRNSFR/GENERAL/OTHR/G&A. 20,065,088 1,511,423 267,656 0 21,308,855
36900 000 DIS - SERVICES.../GENERAL/OTHR/G&A. 20,281,602 3,236,907 299,874 0 23,218,635
37000 000 DIS - METERS...../GENERAL/OTHR/G&A. 6,858,288 529,752 233,846 0 7,154,194
37100 000 DIS-INSTL CUS PRM/GENERAL/OTHR/G&A. 331,356 0 0 0 331,356
37300 000 DIS-ST LTS & SIGN/GENERAL/OTHR/G&A. 8,058,451 102,461 25,878 0 8,135,034
=========================================================================
TOTAL 147,791,191 10,895,631 1,644,777 0 157,042,045
DISTRIBUTION
PLANT
=========================================================================
GENERAL
PLANT
38900 000 GEN - LD & LDRITS/GENERAL/OTHR/G&A. 127,063 0 0 0 127,063
38910 000 GEN - LD IMPROVMT/GENERAL/OTHR/G&A. 65,097 0 0 0 65,097
39000 000 GEN - STRC & IMPR/GENERAL/OTHR/G&A. 19,231,916 6,197 67,953 0 19,170,160
39000 310 GEN - STRC & IMPR/LSHLDIM/OTHR/G&A. 198,601 15,408 0 0 214,009
39000 311 GEN - STRC & IMPR/S&VSTRU/OTHR/G&A. 89,605 0 0 0 89,605
39100 000 GEN-OFC FURN & EQ/GENERAL/OTHR/G&A. 1,964,146 182,322 0 988,278 1,158,190
39100 321 GEN-OFC FURN & EQ/DPEQUIP/OTHR/G&A. 5,142,151 752,294 0 3,047,999 2,846,446
39200 000 GEN - TRANSP EQMT/GENERAL/OTHR/G&A. 4,964,321 507,153 173,436 0 5,298,038
39300 000 GEN - STORES EQMT/GENERAL/OTHR/G&A. 1,204,354 684 0 59,553 1,145,485
39400 000 GEN -TL-SHP & GAR/GENERAL/OTHR/G&A. 1,352,526 106,733 0 123,673 1,335,586
39500 000 GEN - LAB EQUIPMT/GENERAL/OTHR/G&A. 2,137,280 118,139 0 132,337 2,123,082
39600 000 GEN - PWR OP EQMT/GENERAL/OTHR/G&A. 1,252,293 44,532 30,530 0 1,266,295
39600 323 GEN - PWR OP EQMT/GENTRAN/OTHR/G&A. 804,423 0 596 0 803,827
39800 000 GEN - MISC EQUIPT/GENERAL/OTHR/G&A. 1,195,480 29,248 0 323,212 901,516
=========================================================================
TOTAL 39,729,256 1,762,710 272,515 4,675,052 36,544,399
GENERAL
PLANT
=========================================================================
COMMUNICATION
PLANT
39700 000 GEN - COMM EQUIPT/GENERAL/OTHR/G&A. 2,818,613 98,539 0 728,686 2,188,466
39700 330 GEN - COMM EQUIPT/MICROWV/OTHR/G&A. 6,535,561 2,822 2822 5,142,442 1,393,119
39700 331 GEN - COMM EQUIPT/SCADA../OTHR/G&A. 3,021,229 17,412 0 600,276 2,438,365
39700 333 GEN - COMM EQUIPT/TELESYS/OTHR/G&A. 1,442,324 0 0 8,013 1,434,311
39700 338 GEN - COMM EQUIPT/ORSCADA/OTHR/G&A. 8,875,262 0 0 8,843,087 32,175
=========================================================================
TOTAL 22,692,989 118,773 2,822 15,322,504 7,486,436
COMMUNICATION
PLANT
=========================================================================
TOTAL 579,419,777 16,626,556 4,670,385 19,997,556 571,378,392
PLANT
=========================================================================
LESS
EXCLUDABLE
PLANT
39200 000 GEN - TRANSP EQMT/GENERAL/OTHR/G&A. 4,964,321 507,153 173,436 0 5,298,038
39600 000 GEN - PWR OP EQMT/GENERAL/OTHR/G&A. 1,252,293 44,532 30,530 0 1,266,295
39600 323 GEN - PWR OP EQMT/GENTRAN/OTHR/G&A. 804,423 0 596 0 803,827
39800 000 GEN - MISC EQUIPT/GENERAL/OTHR/G&A. 1,195,480 29,248 0 323,212 901,516
=========================================================================
TOTAL 8,216,517 580,933 204,562 323,212 8,269,676
EXCLUDABLE
PLANT
=========================================================================
TOTAL 571,203,260 16,045,623 4,465,823 19,674,344 563,108,716
INCLUDABLE
PLANT
=========================================================================
</TABLE>
(1) Reductions in book values of property recorded in the Company's fixed plant
accounts due to change in accounting policy from depreciation to
amortization of certain general plant accounts. These reductions are not
considered Retirements in accordance with the definition of Retirements
on page 22 of the Indenture of Trust dated as of September 15, 1991.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> MAR-31-1999
<CASH> 8,035,222
<SECURITIES> 0
<RECEIVABLES> 14,009,952
<ALLOWANCES> (556,801)
<INVENTORY> 17,121,734
<CURRENT-ASSETS> 39,846,015
<PP&E> 647,131,954
<DEPRECIATION> (233,153,441)
<TOTAL-ASSETS> 484,925,383
<CURRENT-LIABILITIES> 31,957,783
<BONDS> 307,306,339
0
0
<COMMON> 0
<OTHER-SE> 121,131,769
<TOTAL-LIABILITY-AND-EQUITY> 484,925,383
<SALES> 39,424,237
<TOTAL-REVENUES> 39,424,237
<CGS> 0
<TOTAL-COSTS> 26,621,873
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,131,408
<INCOME-PRETAX> 6,670,956
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,670,956
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,670,956
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
