Board of Directors Annual Meeting. February 25, 2016

Transcription

1 Board of Directors Annual Meeting February 25, 2016

2 2015 Operations and Financial Year In Review Board of Directors Meeting February 25, 2016

3 2015 Lost Time Accidents 2015 Goal Actual 1 5 Five-Year Trend # of Accidents

4 Significant Events in 2015 Planned major maintenance outage of Rawhide Unit 1 successfully completed. Installed the Emerson Ovation DCS process control computer system with high performance graphics and analytics. Rolled out new Rawhide controls network to improve cyber security and reliability. Completed the tripper deck dust collection project. Completed the variable frequency drive project at Rawhide pump station to increase energy efficiency while improving water utilization.

5 Significant Events in 2015 Reorganized the Power Delivery division to better align employee strengths with business needs. Re-filed a new version of Joint Dispatch (JDA) with FERC to create a long term market opportunity for our excess generation. Experienced a soft energy market throughout the year, resulting in extremely low gas and surplus sales pricing. Municipal demand and energy were close to budget. Entered into a purchase power agreement (PPA) for 30 megawatts of solar at Rawhide Flats Solar Facility. First full year of Spring Canyon wind (60 MW).

6 Major Accomplishments in 2015 Rawhide Unit 1 achieved 393 consecutive days of operation, shattering the previous continuous run record of 292. Completed the major outage with over 34,000 labor hours and zero lost time accidents. Procured all purchased energy needed to cover Rawhide and Craig outages well below 2015 purchased power budget prices. Received a successful NATF peer review and NERC audit. Began to self-supply reserves during low market times, which has and will continue to reduce costs. Several new fiber and water lease agreements, resulting in increased revenues for Platte River and the cities. Negotiated an extension of the Rawhide coal contract, securing the highest BTU and lowest sulfur coal available in the Powder River Basin through 2022.

7 2015 Operational Results Category 2015 Variance Indicator Municipal Demand (1.3%) Municipal Energy (0.0%) Baseload Generation (5.1%) Wind Generation (7.8%) Surplus Sales Volume (16.5%) Surplus Sales Price (21.0%) Dispatch Cost 2.6% > 2% +\- 2% of budget < -2%

8 System Resources Total System Resources (4,066 GWh) 2015 variance: (1.1%) Purchases 6% Wind 7% CTs 1% Hydro 15% Rawhide 48% Craig 23%

9 Delivered Energy Total System Deliveries (4,066 GWh) 2015 variance: (1.1%) Surplus Shortterm 17% Losses & Other 4% Munis 79%

10 Municipal Delivered Energy Total Municipal Deliveries (3,201 GWh) 2015 variance: (0.0%) Wind 10% Purchases 7% CTs 1% Craig 9% Rawhide 54% Hydro 19%

11 Equivalent Availability Trend* 100% 95% 90% 85% 80% 75% Rawhide 2015 variance: (0.7%) Craig 2015 variance: (4.5%) Rawhide Craig Industry Average 70% 65% 60% 55% Water induction Black plant 50% *Data normalized for planned outages

12 Net Capacity Factor Trend* Rawhide 2015 variance: (1.3%) Craig 2015 variance: (9.3%) 100% Rawhide Craig Industry Average 95% 90% 85% 80% 75% 70% 65% 60% 55% 50% *Data normalized for planned outages

13 Rawhide Emissions Trend NOx & SO2 (lb/mbtu) Hg (lb/gwh) NOx Actual NOx Limit SO2 Actual SO2 Limit Voluntary Reduction Actual Limit

14 Surplus Sales vs. Gas Pricing Surplus Sales Pricing $/MWh $/MBtu Gas Pricing

15 Surplus Sales Sales Mix (713,449 MWhs) 2015 blended sales price: $ variance (21.0%) Contracts 12% $31.53/MWh CTs 2% $54.64/MWh Real Time 45% $24.64/MWh Preschedule 41% $22.27/MWh

16 Surplus Sales Volume 2015 variance: (16.5%) 1, Budget Actual MWh (000 s)

17 Dispatch Cost 2015 variance 2.6% Budget 2015 Actual 2015 Blended Cost $ $/MWh Rawhide CRSP Craig LAP Wind Purchases CTs

18 Dispatch Cost Trend 35 Blended Dispatch Cost $/MWh Water induction Black plant

19 2015 Financial Summary All Strategic Financial Plan targets were exceeded. AA credit rating affirmed. Strategic Financial Plan Net Income (In Millions) Debt Service Coverage Days Cash On Hand Debt to Capitalization Target 3 Yr Avg > $6 Million $10.9 $6.8 $16.6 $9.3 > 1.5X > 200 Days < 50% 31% 29% 31% 34%

20 Significant Events Municipal loads were very close to projections Surplus sales pricing and energy lower than expected Planned maintenance outages of Rawhide Unit 1 and Craig Unit 2 Full year of 60 MW of wind purchase power agreement Lower wage expense due to vacancy savings Water lease extended Forced outage exchange agreement payout Pension liability of $6.8 million Board contingency transfers of $6.6 million

21 2015 Financial Results Category Variance from Budget (in millions) Indicator Net Income ($3.1) Revenues ($10.6) Operating Expenses $8.5 Capital Expenditures $4.7 > 2% +\- 2% of budget < -2%

22 Net Income Variance from 2015 Budget: ($3.1M) 18 Income SFP Target $ $11.4 $11.4 $/Millions 10 8 $9.3 $

23 Debt Coverage Variance from 2015 Budget: (.09x) Debt Coverage SFP Target Times

24 Revenues vs. Expenditures 250 Operating Expenses Debt Expenses Capital Additions Revenues 200 $194.0 $176.7 $189.9 $198.4 $219.1 $/Millions

25 Revenues Variance from 2015 Budget: ($10.6M) $176.6 $ Budget 2015 Actual $/Millions $33.6 $23.4 $1.5 $1.7 Municipal Sales Surplus Sales & Other Other Revenue

26 2015 Municipal Demand Variance from 2015 Budget: (1.3%) or ($0.6M) 700 Peak Municipal Demand Budget MW Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

27 Delivered Energy Variance from 2015 Budget: At Budget 3,500 3,182 3,192 3,196 3,154 3,201 3,000 2,500 GWh 2,000 1,500 1,

28 Surplus Sales Variance from 2015 Budget: ($10.2M) 35 Short-term Wheeling Contract 30 $30.9 $ $23.0 $25.6 $23.4 $/Millions

29 Other Revenues Variance from 2015 Budget: $0.2M 2.5 Other Income Interest Income 2.0 $1.9 $2.0 $1.7 $/Millions 1.5 $1.2 $

30 Operating Expenses Variance from 2015 Budget: $8.5M Budget 2015 Actual 50 $51.8 $50.0 $51.1 $ $/Millions 30 $33.3 $ $16.3 $15.7 $13.3 $ Production Fuel Purchased Power A&G Transmission

31 Production Expenses Variance from 2015 Budget: $1.8M $36.2 $ Budget 2015 Actual 30 $/Millions $10.7 $9.5 $3.3 $3.0 $1.6 Rawhide Craig Power Operations CTs $ $41.9 $42.9 Rawhide Yampa Power Operations CTs Wind $45.0 $46.7 $50.0 $/Millions

32 Fuel Expenses Variance from 2015 Budget: $4.7M Budget 2015 Actual 30.0 $28.8 $27.3 $/Millions $21.3 $ Rawhide Craig Combustion Turbines $1.0 $ $43.0 $44.4 Rawhide Craig Combustion Turbines $52.6 $50.0 $ $/Millions

33 Purchased Power Expenses Variance from 2015 Budget: $0.8M $/Millions $17.9 $ Budget 2015 Actual $9.8 $8.8 $2.8 $3.2 $2.8 $2.5 Hydro Renewables Other Purchased Reserves 35 Hydro Renewables Purchased Reserves Other $ $28.0 $22.3 $23.8 $26.9 $/Millions

34 A&G Expenses Variance from 2015 Budget: $0.6M 18 Operations Energy Efficiency $/Millions $11.4 $11.7 $12.3 $14.3 $

35 Transmission Expenses Variance from 2015 Budget: $0.6M 14 Wheeling O&M $ $/Millions $5.8 $6.2 $7.4 $

36 Capital Expenditures Variance from 2015 Budget: $ Production Transmission General $34.8 $33.1 $/Millions $16.3 $16.2 $

37 2015 Financial and Operating Results 2015 NET INCOME Budget: $9.9 million Actual: $6.8 million Variance: 33% Rawhide Unit 1 Generation Below-budget capacity factor by 1.3% (10-day extended outage) Craig Units Generation Below-budget capacity factor by 11.6% (surplus sales market conditions and extended Craig 2 scheduled outage) Municipal Sales Short Term Surplus Sales Below-budget demand (1.3%) At budget energy Below-budget energy 19% Below-budget price 25% Operating Expenses Capital Expenses

38 Questions

39 Board of Directors Meeting February 25, 2016

40 Operational Summary Category January Variance Municipal Demand (6.0%) Municipal Energy (0.8%) Baseload Generation (21.1%) Wind Generation 6.2% Surplus Sales Volume (49.7%) Surplus Sales Price (11.4%) Dispatch Cost (1.5%) > 2% +\- 2% of budget < -2%

41 $/mmbtu $/mmbtu CIG Natural Gas Spot Price* $8.0 $7.0 $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 January December 2015 $7.23 $4.25 $3.35 Average $1.80 $1.93 $- 1/11 4/11 7/11 10/11 1/12 4/12 7/1210/121/13 4/13 7/1310/131/14 4/14 7/1410/141/15 4/15 7/1510/15 $4.0 January February 2016 $3.5 $3.0 $2.5 $2.78 $2.65 $2.35 Average $2.0 $1.5 $1.81 $1.0 1/15 2/15 3/15 4/15 5/15 6/15 7/15 8/15 9/15 10/15 11/15 12/15 1/16 2/16 *Source: CIG Historic Spot Px (Bloomberg)

42 Board of Directors Meeting February 25, 2016

43 Financial Summary Category January Variance from Budget ($ in milions) Net Income $0.2 Debt Coverage 0.01x Revenues ($1.8) Operating Expenses $2.0 Capital Additions $1.5 > 2% +\- 2% of budget < -2%

44 Board of Directors Meeting February 25, 2016

45 Debt Financing Overview Series JJ Bonds February 25, 2016

46 Agenda Overview of Financing Capital Projects Reimbursement Resolution General Timeline Issuing the Debt Market Update Bond Sale Process Bond Sale Participants Structuring the Bond Issue Rating Agencies Board Approvals Authorizing Resolution

47 Why Issue Bonds? Platte River s five-year capital plan totals $225 million. A portion of the power production and transmission projects will be funded by a $60 million bond issue in early Platte River intends to issue approximately $74 million of bonds in 2017 to help pay for the Windy Gap Firming project and headquarters facilities master plan. SFP days cash on hand target 200 days, as of 12/31/ days. ($ in thousands) Power Production $21,129 $18,606 $27,233 $11,119 $8,296 Transmission 14,384 7,936 3,372 6,761 10,713 General 2,224 5,860 5,184 2,537 1,582 Facilities Master Plan - Headquarters 2,547 25, Windy Gap Firming Project 1, , Total Capital Projects $42,030 $58,205 $83,805 $20,430 $20,604

48 Projects Funded by Series JJ Bonds Major Production Projects Major Transmission Projects Project Project Costs Project Project Costs RH Unit 1 DSC replacement/expansion $7.7M LaPorte substation 230kV expansion $7.1M Superheater tube replacement $7.0M Boyd 115/230kV substation transformer $7.0M Dust collection system upgrades $3.1M Foothills substation $4.1M Condenser tube replacement $3.0M Generation availability transformer RH $1.7M Coal dust pneumatic conveying system $1.8M Solar interconnection transformer RH $1.0M Soldier Canyon 10 line modifications $1.4M Miscellaneous transmission projects $7.1M Air heater basket replacement $1.3M Total Transmission Project Costs $28.0M HVMCC switchgear replacement $1.1M Miscellaneous production projects $5.6M Total Production Project Costs $32.0M

49 Reimbursement Resolution Reimbursement Resolution approved by the Board in October Enables Platte River to issue up to $60M in bonds for transmission and production projects. Through 12/31/15, Platte River has spent $15.6M on identified projects, which will be reimbursed from Series JJ bond proceeds.

50 Series HH Refunding Opportunity Series HH bonds are advance refundable with a call date of June 1, 2019 Outstanding bonds available for refunding total $105.4M Outstanding bonds have coupon rates of 5%, and today s rates are significantly lower Maturity dates range from 2020 through 2029 Under current market conditions, savings of over $11M on a PV basis Average annual savings of approximately $950k to 2029 Very interest-rate sensitive If interest rates were to rise 0.25%, PV savings would be reduced by approximately $2M. Continue to monitor the change in PV savings with PFM Have up to 48 hours before pricing to finalize the refunding decision.

51 General Timeline January and February: Draft Preliminary Official Statement (POS) Update financing plan Draft Notice of Sale (NOS) and Resolution March: Rating agency meetings Finalize POS and NOS Board meeting to approve authorizing resolution April: Marketing of the bonds Competitive sale of the bonds Bond closing Board meeting review bond transaction

52 Public Financial Management Financial Advisor: Dan Hartman

53 Tax-Exempt Interest Rates Although rates are at levels slightly higher than the all-time lows reached at the end of November 2012, interest rates are still far below their long-term averages 30 Year AAA MMD Rate Position (February 12, 1986 to February 11, 2016) MMD Range Current MMD Average MMD 10.00% 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% 1 Year 2 Year 3 Year 4 Year 5 Year 7 Year 10 Year 15 Year 20 Year 25 Year 30 Year Summary of February 11, 2016 vs. 30 Year Historical MMD Rates Statistic 1 Year 2 Year 3 Year 4 Year 5 Year 7 Year 10 Year 15 Year 20 Year 25 Year 30 Year 2/11/ % 0.52% 0.61% 0.69% 0.79% 1.11% 1.56% 2.03% 2.32% 2.58% 2.63% Average 2.61% 2.91% 3.13% 3.32% 3.50% 3.84% 4.22% 4.69% 4.96% 5.09% 5.13% Spread to Avg % -2.39% -2.52% -2.63% -2.71% -2.73% -2.66% -2.66% -2.64% -2.51% -2.50% Minimum 0.11% 0.27% 0.36% 0.47% 0.64% 0.93% 1.54% 1.90% 2.20% 2.49% 2.54% Spread to Min. 0.27% 0.25% 0.25% 0.22% 0.15% 0.18% 0.02% 0.13% 0.12% 0.09% 0.09% Maximum 6.80% 6.80% 6.85% 6.95% 7.20% 7.60% 8.00% 8.50% 8.85% 8.90% 8.95% Spread to Max % -6.28% -6.24% -6.26% -6.41% -6.49% -6.44% -6.47% -6.53% -6.32% -6.32%

54 Benchmark Tax-Exempt Interest Rate Progression After trending rising throughout the first half of 2015, benchmark tax-exempt rates have decreased considerably and are now near all-time lows Since the start of June 2015, the 20-Year AAA MMD rate has decreased 77 bps, with 60 bps of the decrease occurring since November 20-Year AAA MMD Rate History (June 1, 1981 Inception to February 11, 2016) (January 1, 2015 to February 11, 2016) 20-Year AAA MMD 14.00% 3.50% Decrease from Previous Day (Right Axis) Increase from Previous Day (Right Axis) % 10.00% 3.00% 2.50% % 6.00% 2.00% 1.50% % 2.00% 0.00% 1.00% 0.50% 0.00%

55 Interest Rate Forecasts On December 16, 2015 the FOMC established a new target range for the federal funds rate of ¼ to ½ percent, up from 0 to ¼ percent, where it was set on December 16, The Federal Reserve (Fed) also raised the interest rate it pays banks on excess reserves deposited with the Fed ( interest on excess reserves or IOER ) from ¼ percent to ½ percent Fed governors have urged investors NOT to look to history for guidance on the pace of tightening or the final resting point for overnight rates. In the past three tightening cycles, the end-point was 3.75% to 5.25%. Amidst the uncertainty regarding how high and how fast long-term interest rates will go, the consensus amongst economists is that short-term rates will increase more and faster than long-term rates The Street's Interest Rate Forecast (As of February 10, 2016) Average Forecasts Current Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q Year UST 2.53% 3.03% 3.17% 3.26% 3.34% 3.43% 3.54% 10-Year UST 1.70% 2.09% 2.29% 2.44% 2.60% 2.74% 2.99% 2-Year UST 0.70% 0.93% 1.15% 1.37% 1.56% 1.74% 2.09% 3M LIBOR 0.62% 0.69% 0.84% 1.03% 1.19% 1.41% 1.77% Fed Funds Target Rate (Upper) Fed Funds Target Rate (Lower) 0.50% 0.60% 0.80% 0.95% 1.15% 1.35% 1.70% 0.25% 0.30% 0.50% 0.67% 0.89% 1.10% 1.43%

56 Bond Sale Process Plan of Finance Select the team Determine project cost and timing Identify source of repayment Size and structure the bonds Determine method of sale Legal Framework Adopt Authorizing Resolution Tax analysis & due diligence Prepare disclosure document (official statement) Marketing Obtain ratings Underwriter & investor out reach Sell & price the bonds Administration Closing/money transfer Invest bond proceeds Begin project & track progress Make principal & interest payments Monitor for refinancing opportunities Comply with Arbitrage Rebate Regulations (IRS/Tax Code) On-going disclosure by complying with SEC Rule 15( c)2-12

57 Bond Sale Participants Financing Participant Firm Role Financial Advisor PFM Provide bond structuring and market related advice Bond and Special Counsel Sherman & Howard LLC Provision of key legal and tax documentation and opinions Trustee/Escrow Agent Wells Fargo Bank, NA Hold bond and escrow funds Underwriter TBD via competitive bid Purchaser of the bonds Consulting Engineer Black & Veatch Provides calculations for new bonds per Power Bond Resolution Accountant BKD, LLP Inclusion of audited financials Verification Agent (if including a refunding) Causey, Demgen & Moore Inc. Verify that bond cashflows are correct Rating Agencies S&P, Fitch Provide ratings on the bonds

58 Structuring the Bond Issue

59 Estimated Sources and Uses Estimated Sources of Funds New Money Refunding Total Par Amount $ 52,635,000 $ 99,860,000 $152,495,000 Premium on Bonds 7,771,032 19,862,112 27,633,143 Release of Bond fund money - 2,123,444 2,123,444 Total $ 60,406,032 $121,845,556 $182,251,588 Estimated Uses of Funds New Money Refunding Total Project Fund $ 60,000,000 $ - $ 60,000,000 Refinancing Escrow - 121,079, ,079,937 Cost of Issuance 142, , ,176 Underwriter s Discount 263, , ,475 Total $ 60,406,032 $121,845,556 $182,251,588

60 Structure of the Series JJ Bonds Tax-exempt Long-term bonds (final maturities greater than 10 years) Fixed rate, current interest, serial bonds Optional redemption: par call bonds within 10 years Competitive sale process

61 Competitive or Negotiated Sale? Competitive Sale: Sale process that includes the advertising of the bonds with the sale date, time and place where bids will be taken. The bids are then evaluated and the bonds are awarded to the underwriter providing a bid resulting in the lowest true interest cost or net interest cost. Negotiated Sale: Sale process in which the issuer, prior to the public sale date, selects a qualified underwriter to act as book running senior manager. The issuer often selects other underwriting firms to act as co-managers. The managers, acting together as a syndicate, make an offer to purchase the bonds from the issuer at a negotiated price that will both produce the lowest interest cost to the issuer and sell the bonds to investors.

62 Competitive or Negotiated Sale? Attribute Competitive Sale Negotiated Sale Issuer Credit Quality Market Conditions Debt Structure Marketing Cost General purpose government Regular issuer A or better with stable outlook General obligation or lease revenue Stable, predictable market Strong investor demand Tax-exempt, no concerns Traditional serial, term, and coupon Broad market participation Limited need for pre-marketing Historically, spreads have been lower for competitive Independent authority, Infrequent issuer Below A - non-stable outlook Project supported revenues Volatile or declining market Oversold market, heavy supply Taxable Innovative bond structuring Ability to direct to local firms Wide distribution including retail Equal or higher spreads than competitive The Series JJ Bonds are expected to be straight-forward, fixed rate, tax-exempt bonds with a traditional year structure. Currently, the bond market is stable. Given these factors, we recommend using a competitive sale process.

63 Platte River Refunding Economics Series HH bonds are advance refundable with a call date on June 1, 2019 Under current market conditions, savings of over $11 million on a PV basis could be achieved by refunding approximately $105.4 million of callable Series HH bonds Average annual savings of approximately $950k through 2029 Some flexibility to structure savings in certain fiscal years if desired If rates were to rise 0.25%, PV savings would be reduced by approximately $2 million

64 Refunding Economics, cont. PRPA Refunding Screen Series HH Candidate Individual PV Savings Cumulative PV Savings New Yield Component Maturity Par Coupon Call Date $ % $ % Negative Arbitrage Escrow Efficiency PV Savings as % of Option Value Serial 6/1/2020 $8,385, % 6/1/ % $241, % $241, % ($27,462) 89.78% 89.10% Serial 6/1/2021 $8,800, % 6/1/ % $524, % $765, % ($68,857) 88.39% 87.96% Serial 6/1/2022 $9,240, % 6/1/ % $759, % $1,525, % ($135,100) 84.91% 84.18% Serial 6/1/2023 $9,705, % 6/1/ % $976, % $2,502, % ($204,219) 82.70% 81.65% Serial 6/1/2024 $10,190, % 6/1/ % $1,172, % $3,674, % ($276,178) 80.94% 79.53% Serial 6/1/2025 $10,700, % 6/1/ % $1,369, % $5,044, % ($344,245) 79.91% 78.21% Serial 6/1/2026 $11,235, % 6/1/ % $1,587, % $6,632, % ($404,014) 79.72% 77.80% Serial 6/1/2027 $11,795, % 6/1/ % $1,592, % $8,224, % ($453,782) 77.82% 70.28% Serial 6/1/2028 $12,385, % 6/1/ % $1,562, % $9,786, % ($515,302) 75.19% 63.36% Serial 6/1/2029 $13,005, % 6/1/ % $1,533, % $11,320, % ($577,673) 72.64% 57.56% As of February 11, > 5% Savings and 50% Escrow Efficiency Positive Savings and >50% Escrow Efficiency Positive Savings Negative Savings $105,440,000 $11,320,603 ($3,006,833) 79.01% 72.44%

65 Refunding Economics, cont. Refunding to capture interest rate savings (high-to-low) PV savings is the concept which takes into account the time value of money Date Prior Debt Service Prior Receipts Prior Net Cash Flow Refunding Debt Service Savings Present Value to % 6/1/2016 $ 2,636, $ 2,123, $ 673, $ 618, $ 54, $ 49, /1/2017 5,272, ,272, ,344, , , /1/2018 5,272, ,272, ,344, , , /1/2019 5,272, ,272, ,344, , , /1/ ,447, ,447, ,480, , , /1/ ,432, ,432, ,465, , , /1/ ,421, ,421, ,457, , , /1/ ,413, ,413, ,449, , , /1/ ,400, ,400, ,438, , , /1/ ,388, ,388, ,425, , , /1/ ,375, ,375, ,411, , , /1/ ,359, ,359, ,396, , , /1/ ,344, ,344, ,380, , , /1/ ,330, ,330, ,367, , , $ 155,001, $ 2,123, $ 152,878, $ 139,897, $ 12,981, $ 11,315,791.51

66 Rating Agencies

67 Rating Agencies Three major ratings agencies are Moody s Investors Service, Inc. ( Moody s ), Standard and Poor s ( S&P ), and Fitch Ratings ( Fitch ) Municipal market generally requires two ratings, although PRPA currently maintains ratings from all three Credit rating agencies are firms that analyze the probability of the debt instrument returning all of the principal to the investor Municipal credit ratings are opinions of the investment quality of issuers and issues in the municipal and tax-exempt markets Underwriters and investors rely upon the credit quality judgment made by the rating agencies The municipal bond market has slightly different rating criteria from the corporate debt market owing to the unique characteristics inherent in public debt Municipal public power ratings are generally driven by: Revenue/Expenses and debt coverage Generation portfolio both cost of power and compliance with environmental regulations Competitive position and rates Management strength and strategic planning efforts

68 Non-Investment Grade Investment Grade What is a Rating? Long-Term Municipal Ratings An alphabetic and/or numeric symbol used to give relative indications of credit quality. Measures the risk to the investor that issuer will default, both the willingness and ability to pay. Independent, objective & relative assessments of both qualitative & quantitative factors. Moody s S&P Fitch Aaa AAA AAA Aa AA AA A A A Baa BBB BBB Ba BB BB B B B Caa CCC CCC Ca CC CC C C C Note: Moody s ratings within certain categories are modified by number (1, 2 and 3) while S&P and Fitch are modified by + and - symbols.

69 Current Rating Agency Views Summary of Rating Agency Views Moody s Investors Service Richard Donner / Chee Mee Hu Aa2 Stable Outlook Sales to highly creditworthy participants with weighted Aa2/Aa3 ratings under long-term all requirements contract Take and pay contracts that extend to 2050 Autonomous rate setting ability Very competitive wholesale rates Robust financial metrics, with very low debt ratio Maintenance of conservative financial policies Significant concentration in coal generation Managing growth within the service territory Meeting future environmental compliance requirements, including recently released Clean Power Plan Lack of a debt service reserve fund Standard & Poor s Paul Dyson / Peter Murphy AA Stable Outlook Strengths Continued strong fixed charge coverage at no less than 1.5x historically and projected at 1.3x-2.1x Strong liquidity at approximately nine months of operations Strong financial and operating policies Efficient, low cost generating resources that enable PRPA to maintain competitive rates Low debt burden at 31% debt to capitalization Concerns Risks related to increasingly stringent emissions standards for coal-fired generation, which represented 81% of total energy in 2014 Plans to additional $130 million of bonds in which could put pressure on coverage metrics Fitch Ratings Stacey Mawson / Lina Santoro AA Stable Outlook Low cost provider, with very competitive rates for the region Sound and stable financial metrics, which compare favorably to AA medians Court-validated all requirements contracts that extend through 2050 Diverse retail customer base and a stable economy in the service territory Strong management of rates, including raising rates for wholesale sales uncertainty Environmental standards that have the potential to be costly Variability in off-system market pricing Ongoing environmental laws and regulations that will affect coal generation, notwithstanding that PRPA assets appear well positioned to comply with most recent standards Debt service coverage has dipped below AA medians, but expected to rebound

70 March Board Meeting Board Approvals

71 Basic Documents To be reviewed and approved at the March Board meeting: Eleventh Supplemental Power Bond Resolution Official Notice of Sale Preliminary Official Statement (POS) Refunding Trust and Escrow Agreement Continuing Disclosure Certificate

72 Questions / Discussion

73 Board of Directors Meeting February 25, 2016

74 Community Solar Pilot Board of Directors Meeting February 2016

75 Purpose Today Review motivations for a system-wide community solar pilot (all four municipalities) Introduce draft pilot program model concepts Consider key unknowns / uncertainties Next steps

76 Reasons to Offer Community Solar Municipality Interest in a New Solar Offering WHAT WE VE HEARD Stakeholder pressure Customer interest in expanded choice Current offerings not enough Voluntary premium (wind) Increasing renewable supply in overall mix (utility scale) Position as a utility that offers solar Marketing / public relations benefits Collaborate to gain economy of scale Business Strategy (Positioning for the Future) Reduce revenue erosion retail and wholesale Mitigate excessive net metering payments (vs. cost of service / value) Transition toward improved solar cost allocation (less subsidy) Chain of title considerations Operations coordination (metering / scheduling) Expand utility learning / experience Balance market messages to customers

77 Solar Cost Trend DOE Sun Shot / NREL August 2015 Photovoltaic System Pricing Trends: Historical, Recent and Near-Term Projections, 2105 Edition 77

78 Cumulative Capacity Installed (kw dc) Solar Growth in Four Municipalities 4,500 4,000 3,500 3,000 2,500 2,000 Cumulative Net Metered Solar Installed (excludes Community Solar and Feed-in Tariff Solar) Average annual growth ~ 40%/yr Capacity doubling every 2-3 years (all third party marketers) Solar Investment Tax Credit extended Full value through 2019 Ramping down through ,500 1,

79 System Level Pilot Program Concepts ~ 1 MW pilot solar project size Residential market focus Approx. 300 to 400 customers Single site Location & specs TBD Counterparty collaboration: Solar developer/operator Solar program administration (promotion / enrollment / billing data) Could be one turn-key provider Buy all, sell all model: Not net metered Participants continue to buy all energy at existing Municipal retail rates Participants own kw shares Sell all energy from solar share to utility Pay capital costs / own generation Solar energy payment & share pricing TBD Adequate to encourage participation and compete with solar marketers

80 Energy Payment Possible Financial Perspectives Marginal System Benefits Wholesale Rate Central Station Solar Value of solar to system Fuel savings (coal & gas) The competition Already losing revenue to marketers of rooftop solar at wholesale rate Comparable offering Support community solar to same level as central station (Rawhide Flats) Variable O&M reduction Surplus sales impact Reserve cost impact Capital investment delay Support community solar to same level for our product Energy payment at wholesale rate Energy payment at contract price for Rawhide solar CO 2 cost Energy payment at net value to the system Still gathering input from other utilities Working with rate consultant Visiting with solar program providers (some may have no value today) 80

81 Project Related Activities Joint Municipal / Platte River team engagement Program concepts / planning / coordination Site identification / review Draft project charter being circulated Defining project scope / schedule / resources Conceptual discussions with Utility Directors Gathering input on Financial Perspectives Drives approach for program incentive levels Gathering additional market information Customer perspectives / other utility experience / vendors Evaluating potential grant funding for low income participants Continued communications with Board of Directors

82 Next Steps / Future Communications Ongoing team collaboration (Municipalities & Platte River) March Utility Director & Board meetings: Discuss financial metrics & incentive estimates Introduce IGA concepts April Utility Director & Board meetings: Financial recommendations IGA approval March to May RFP issuance / proposals / review May to June City Councils/Town Board IGA approval July Authorizing resolution for Community Solar Pilot

83 Questions / Discussion?

84 Board of Directors Meeting February 25, 2016

85 Headquarters Campus February 25, 2016

86 Headquarters Campus Project Agenda Purpose of today s meeting Review alternatives Review cost and evaluation criteria Staff recommendation 2016 Timeline Design & input process Next steps No decision is being requested from the Board in February

87 Four Alternates Evaluated Alternate A Fix existing and add additional space Alternate B Teardown and rebuild Alternate C Greenfield site Alternate D Greenfield site, Lease Allows for growth Access critical Inefficient layout Limited Innovation Opportunities Allows for growth Access critical Business continuity Efficient design Right sized Sustainable Innovative Efficient layout Right sized Sustainable Innovative Efficient layout

88 Cumulative dollars (Millions) Cumulative Costs for each Alternate $120 $100 $80 $60 $40 $20 $ Fiscal year Alt. A Alt. B Alt. C Alt. D

89 Comparing the Alternates A: Renovate Existing Site B: Rebuild on Existing Site C: New Site D: New Site, Lease Option Safety Business Disruption Long-Term Cost Energy Efficiency & Innovation Physical Security Code Compliance

90 Feedback What we ve heard from Board members Recognition of the need for a new HQ facility Questions about: Location Travel patterns Investment in technology and innovation What does Platte River staff want and need in a new facility Staff recommendation and discussion

91 August September October November December January February March April May June July August September November December Initial Timeline Present to Board/Site Tours CH2M Hill Recommendation Follow up with Utility Directors Recommendation to Board Develop Design RFP Board updates Pre-Design & Programming with Board Input Schematic Design Phase Present Budget to Board Present to Utility Directors Follow up with Utility Directors Board Selects Alternate Award Design Contract Regular design review with project stakeholders and Board

92 Design & Input Process Architect Selection Pre-Design & Programming Schematic Design Phase User Groups Project Team Stakeholders $2.5M Design Development Phase Construction Document Phase General Contractor RFP Construction Phase Review Input

93 Wrap Up What additional information does the Board need to move forward with a decision to select Alternate A, B, C or D in March? The Board s decision to select Alternate A, B, C or D is necessary for staff to proceed with developing an RFP to select a design firm, award the design contract, and begin the design process Board input will be built into the design phase and coordinated by the design team at multiple milestones once initial direction is provided No construction activity associated with Alternates B, C or D will occur without final Board approval and authorization

94 Wrap Up Scope clarification Work to date has focused on replacing existing facilities with new structures to accommodate current and future growth projections with a basic/mid range investment and business as usual Additional campus design options (a menu of choices) and the inclusion of potential technology and innovation concepts will be built into the pre design and programming phase for Board consideration and approval prior to any final design or construction commitment once the preferred alternate is selected Final budgeting and construction costs can be affected, influenced, and driven by such design options This process will be facilitated and managed throughout by the design team

95 Next Steps Direction from BOD at March Meeting Initiate 2016 Budgeted Activities

96 Board of Directors Meeting February 25, 2016