# Presentation: 267442

**Debt Structure**
***May 1, 2003***

***Draft***

***Attachment  III***

##  Funding Mechanisms

**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.

***Draft***

- w:\kgs\99rtcase\FERC_12-99.ppt

## FCRPS Debt Outstanding FY 2002 (in $ millions)

- Corps of Engineers
- Appropriations $2,201
- Wtd. Avg. Int. 6.9%

- Energy Northwest $5,898
- Wtd. Avg. Int. 5.5%

- Bureau of Reclamation Appropriations $627
- Wtd. Avg. Int. 6.8%

_**Generation**_

_**Transmission**_

- Bonds Issued to Treasury $2,071
- Wtd. Avg. Int  6.3%

- BPA Appropriations $907
- Wtd. Avg. Int. 7.1%

- Other Non-Federal
- Projects $304
- 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

- Lower Snake Fish and Wildlife $231
- Wtd. Avg. Int. 7.0%

- Bonds Issued to
- Treasury $700
- Wtd. Avg. Int. 5.9%

***FCRPS Debt Outstanding FY 2002 (in $ millions)***

***Draft***

- w:\kgs\99rtcase\FERC_12-99.ppt

## Borrowing Authority Basics

- The US Treasury is BPA’s sole source of _direct_ borrowing and Congress has authorized BPA a maximum of $4.45 billion in borrowing authority.
- Use of BPA’s 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.

***Draft***

- w:\kgs\99rtcase\FERC_12-99.ppt

##  Remaining  Borrowing Authority 

- 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

***Draft***

- w:\kgs\99rtcase\FERC_12-99.ppt

## Third-Party Financing Mechanisms  

_**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)

***Draft***

- w:\kgs\99rtcase\FERC_12-99.ppt

## Debt Optimization – Purpose, Objectives, and Results

- 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 BPA’s debt to Regional ratepayers and reducing pressure on BPA’s 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 BPA’s debt portfolio to Regional ratepayers.
- As of 9-30-02, the net cash flow from all of BPA’s 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.

***Draft***

- w:\kgs\99rtcase\FERC_12-99.ppt

## Draft

**BPA Debt Portfolio****Before Debt Restructuring**

**FCRPS OUTSTANDING PRINCIPAL**

- w:\kgs\99rtcase\FERC_12-99.ppt

## FCRPS Debt Outstanding FY02-22ENW Debt Extension Results to Date 

**FCRPS Debt Outstanding FY02-22****ENW 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.***

- w:\kgs\99rtcase\FERC_12-99.ppt

## Estimated BPA Total Annual Interest Expense Savings Due to Debt Optimization

- Reduce BPA’s 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.

**Estimated BPA Total Annual Interest Expense Savings**** Due to Debt Optimization**

***Draft***

- w:\kgs\99rtcase\FERC_12-99.ppt