Debt Structure

1

Attachment III

Draft
Debt Structure May 1, 2003
2
Funding Mechanisms
Draft

• Annual Appropriations - Until 1974, BPA was
  funded by annual appropriations. BPA reimburses
  the U.S. Treasury throughout the life of these
  projects. The Corps of Engineers and Bureau of
  Reclamation continue to receive appropriations
  for investments in fish facilities. BPA repays
  the power portion of these investments.
• Borrowing Authority - After 1974, the U.S.
  Treasury established a fund similar to a
  revolving fund that made BPA self-financing.
• Third Party Financing - In 1980, BPA gained
  access to third party financing, allowing BPA
  contracts to pay debt service on debt issued on
  the open market by third parties.

3
FCRPS Debt Outstanding FY 2002 (in millions)
Draft
Generation
Transmission
Bonds Issued to Treasury 2,071 Wtd. Avg. Int
6.3
Energy Northwest 5,898 Wtd. Avg. Int. 5.5
Corps of Engineers Appropriations 2,201 Wtd.
Avg. Int. 6.9
Lower Snake Fish and Wildlife 231 Wtd. Avg. Int.
7.0
Bureau of Reclamation Appropriations 627 Wtd.
Avg. Int. 6.8
Other Non-Federal Projects 304 Wtd Avg. Int.
5.9
BPA Appropriations 907 Wtd. Avg. Int. 7.1
Bonds Issued to Treasury 700 Wtd. Avg. Int. 5.9
1/ Irrigation assistance liability not included
(770 million at zero percent interest). 2/
Appropriation amounts exclude appropriations for
work still in progress. 3/ Lower Snake Fish and
Wildife was previously included with Corps of
Engineers
4
Borrowing Authority Basics
Draft

• The US Treasury is BPAs sole source of direct
  borrowing and Congress has authorized BPA a
  maximum of 4.45 billion in borrowing authority.
• Use of BPAs borrowing authority works very much
  like a revolving line of credit.
• As of the end of FY2002, BPA had 2.77 billion of
  Treasury bonds outstanding.

5
Remaining Borrowing Authority
Draft

• Recently BPA received 700 million in additional
  borrowing authority.
• Based on estimated capital spending forecast, BPA
  will run out of borrowing authority in
• 3 years (FY2006) w/o debt optimization savings
  from ENW refinancings through FY03 or FY03
  scheduled repayment
• 4 years (FY2007) with scheduled repayment
• 7 years (FY2010) with debt optimization savings
  from ENW refinancings through FY03 scheduled
  repayment

6
Third-Party Financing Mechanisms
Draft

• Energy Northwest
• Expense funding through net billing
• Capital funding through revenues and issuance of
  BPA backed debt
• Other Third-Party Debt
• Trojan (EWEB)
• Cowlitz Falls Hydroelectric Project
• Northern Wasco
• Tacoma
• Conservation and Renewable Energy System (CARES)

7
Debt Optimization Purpose, Objectives, and
Results
Draft

• In the course of actively managing its debt
  portfolio, BPA has been engaged in a Debt
  Optimization Program with Energy Northwest to
• Extend the Energy Northwest debt, thereby
  reducing net-billing budgets and increasing cash
  flows to the Bonneville Fund.
• Apply the proceeds from this program to prepay
  higher cost Federal debt, thereby reducing
  overall costs of BPAs debt to Regional
  ratepayers and reducing pressure on BPAs
  Treasury borrowing authority.
• The expected results of the program are to
• Replenish Treasury borrowing authority by about
  3 billion between 2001-2012.
• Produce a changed debt portfolio that has less
  high cost Treasury debt and more lower cost ENW
  debt, with no significant change in total debt
  outstanding.
• Reduce overall costs of BPAs debt portfolio to
  Regional ratepayers.
• As of 9-30-02, the net cash flow from all of
  BPAs debt management actions totals 450
  million, all of which has been applied to prepay
  Federal debt.
• As part of the recent 2003 refinancings,
  approximately 239 million was extended from
  maturity of 2003 into the 2013-18 timeframe and
  will be available to prepay Federal debt in
  accordance with BPA's on-going Debt Optimization
  Program.
• An additional 76 million will be applied to
  Federal debt this year from prior years ENW
  refinancings.

8
BPA Debt PortfolioBefore Debt Restructuring
Draft
FCRPS OUTSTANDING PRINCIPAL
9
FCRPS Debt Outstanding FY02-22ENW Debt Extension
Results to Date
Draft

• Does not include assumed replacements for
  Columbia Generating Station.
• Assumes Federal principal pre-payment for all ENW
  bonds extended to-date.

10
Estimated BPA Total Annual Interest Expense
Savings Due to Debt Optimization
Draft

• Reduce BPAs total interest expense by an average
  of about 20 million per year through 2018.
• At its peak, Debt Optimization allows BPA to
  recognize about 40 million per year in interest
  savings.
• Savings to date have been minimal because savings
  ramp-up over time.
• If the program was stopped, BPA would not
  recognize approximately 350 million in interest
  savings.