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HomeMy Public PortalAboutExhibit MIEC 44F Attachment MSD-MIEC 1-12aAttachment MSD-MIEC 1-12a Page 1 of 43 Exhibit MIEC 44F Municipal Utilities - Revenue Bond Summary Midwest Region Line 1 Municipal ILLINOIS City of Springfield KANSAS 2 Unified Government of Wyandotte County - KC BPU 3 Unified Government of Wyandotte County - KC BPU 4 5 6 7 NEBRASKA Nebraska Public Power District Omaha Public Power District TENNESSEE Knoxville Utilities Board Memphis Light, Gas & Water Division 8 Metropolitan Sewer District ' Currently there's no Standard & Poor's rating for this utility. Sources: Various municipal web sites. 8/8/2011 Date Issued 2008 Series 2004-B Series 2010-A Series 2011 Series A 2011 Series A 2010 2010 Amount $103,230,000 $115,535,000 $32,190,000 $61,440,000 $143,375,000 $55,000,000 $460,050 Attachment MSD-MIEC 1-12a Page 2 of 43 Interest Rate Range 3.0% to 5.0% 3.0% to 5.0% 2.0% to 5.0% 2012- 1.5% to 2017 - 5.0% 2014 - 3.0% to 2024 - 5.0% 2.0% to 6.5% 2.5% to 5.0% 8/8/2011 Attachment MSD-MIEC 1-12a Page 3 of 43 STANDARD &POOR'S Global Credit Porta Rath <<t May Wyandotte County / Kansas City Unified Government, Kansas; Appropriations; General Obligation; Note Primary Credit Analyst: Kate Choban, Dallas (1) 214-871-1420; kate_choban@standardandpoors.com Secondary Contact Russell Bryce, Dallas (1) 214-871-1419; russell_bryce@standardandpoors.com Table of Contents Rationale Outlook Economy: Steadily Expanding, Diversifying Financial Management Assessment: 'Good' Related Criteria And Research www.stan dardandpoors.com/ratingsdi rect 1 Attachment MSD-MIEC 1-12a Page 4 of 43 Wyandotte County / Kansas City Unified Government, Kansas; Appropriations; General Obligation; Note Credit Profile US$4.34 mil taxable Muni temp nts ser 2011=111 due 05/0`1'/2013 Short Term Rating. . SP -1+ Wyandotte Cnty:/ Kansas City Unif Govt (Recovery Zone Fac Bnds Parking Projs) Long Term Rating _ 'AA -/Stable Wyandotte Cnty/Kansas City Unif Govt GO Unenhanced Rating .AA(SPUR)/Stable Affirmed Rationale Standard 8c Poor's Ratings Services assigned its 'SP -1+' short-term rating to Wyandotte County/Kansas City Unified Government, Kan.'s series 2011 -III taxable municipal temporary notes. At the same time, Standard & Poor's affirmed its 'AA' long-term and underlying rating (SPUR) on the unified government's existing general obligation (GO) debt and its 'AA-' long-term rating and SPUR on the united government's existing appropriation debt. The outlook on the GO and appropriation bonds is stable. Finally, Standard 8c Poor's affirmed its 'SP -1+' short-term rating on the unified government's outstanding short-term debt. Although all past and current debt issues and additional issuances remain a GO of the unified government, the property tax base, subject to an unlimited -tax pledge, will vary because the unified government might issue as a city, applying to the former Kansas City, Kan., property tax base, or as a county, applying to the slightly larger county -wide property tax base. Standard 8c Poor's does not differentiate between the two pledges. Underlying credit factors continue to include our opinion of the unified government's: • Stable and diversifying economy that participates in the Kansas City metropolitan statistical area (MSA); • Sizable government sector that provides economic base stability; and • Sound unified financial performance of both city and county governments, with additional revenue raising flexibility. Offsetting factors include our view of the unified government's: • High overall debt burden with additional bonding plans, and • Adequate, but below average, income and wealth levels. The series 2011411 notes are secured by a full faith and credit pledge of the unified government. Management indicates note proceeds will be used to finance an economic development project. Wyandotte County's economy continues to expand. Its location near Kansas International Speedway, which had its inaugural season in 2001, and Village West, which added its anchor tenants of Cabela's Inc. in August 2002 and Standard 8c Poor's I RatingsDirect on the Global Credit Portal 1 May 16, 2011 2 Attachment MSD-MIEC 1-12a Pa•e5of43 Wyandotte County / Kansas City Unified Government, Kansas; Appropriations; General Obligation; Note Primary Credit Analyst: Kate Choban, Dallas (1) 214-871-1420; kate_choban@standardandpoors.com Secondary Contact: Russell Bryce, Dallas (1) 214-871-1419; russell_bryce@standardandpoors.com Table Of Contents Rationale Outlook Economy: Steadily Expanding, Diversifying Financial Management Assessment: 'Good' Related Criteria And Research standardandpoors,com/ratingsdirect 1 Attachment MSD-MIEC 1-12a Page 6 of 43 Wyandotte County / Kansas City Unified Government, Kansas; Appropriations; General Obligation; Note Credit Profile tJS$4 34 rnll taxable muni temp nts ser 2011 Ill: due 45 /"2078. ShertTerm 7afing Wyandotte -6)N;/ Kansas=City Unif:.Govt (Recovery Zone Pac Bnds-Parking Pros) tong Terrn Rating AA -/Stable Wyandotte;Cnty/Kansas City Unit Govt G0 Unenhanced Rating . Rationale AA(SPUR)/Stable Standard & Poor's Ratings Services assigned its 'SP -1+' short-term rating to Wyandotte County/Kansas City Unified Government, Kan.'s series 2011 -III taxable municipal temporary notes. At the same time, Standard & Poor's affirmed its 'AA' long-term and underlying rating (SPUR) on the unified government's existing general obligation (GO) debt and its 'AA-' long-term rating and SPUR on the united government's existing appropriation debt. The outlook on the GO and appropriation bonds is stable. Finally, Standard & Poor's affirmed its 'SP -1+' short-term rating on the unified government's outstanding short-term debt. Although all past and current debt issues and additional issuances remain a GO of the unified government, the property tax base, subject to an unlimited -tax pledge, will vary because the unified government might issue as a city, applying to the former Kansas City, Kan., property tax base, or as a county, applying to the slightly larger county -wide property tax base. Standard & Poor's does not differentiate between the two pledges. Underlying credit factors continue to include our opinion of the unified government's: • Stable and diversifying economy that participates in the Kansas City metropolitan statistical area (MSA); • Sizable government sector that provides economic base stability; and • Sound unified financial performance of both city and county governments, with additional revenue raising flexibility. Offsetting factors include our view of the unified government's: • High overall debt burden with additional bonding plans, and • Adequate, but below average, income and wealth levels. The series 2011 -III notes are secured by a full faith and credit pledge of the unified government. Management indicates note proceeds will be used to finance an economic development project. Wyandotte County's economy continues to expand. Its location near Kansas International Speedway, which had its inaugural season in 2001, and Village West, which added its anchor tenants of Cabela's Inc. in August 2002 and Standard & Poor's 1 RatingsDirect on the Global Credit Portal I May 16, 2011 2 Attachment MSD-MIEC 1-12a Page 7 of 43 Wyandotte County / Kansas City Unified Government, Kansas; Appropriations; General Obligation; Note Nebraska Furniture Mart in August 2003, fuel the economy's development. The current population of about 157,505 has stabilized from steady contractions in the 1980s and 1990s. The county's total property tax base has steadily increased to nearly $1.4 billion in fiscal 2008, up by 25% since 2001, accounting for roughly $8.5 billion of actual value. However, due to a decline in property values, and the state's implementation of a machinery and equipment tax exemption, the county's assessed value (AV) dropped in fiscal 2010, and AV declined again in fiscal 2011 to $1.2 billion or a true market value of $7.3 billion. We believe that the tax base is very diverse with the 10 leading taxpayers accounting for about 10.9% of total AV. General Motors (GM), the leading taxpayer, accounts for about 4.0% of total AV and more than 3,500 jobs in the county. The city's and county's individual financial performances within the unified government remained sound throughout the consolidation of both their governments. The unified government reported a $14.9 million unreserved general fund balance, or what we consider to be a strong 8.7% of expenditures, and a total $16.1 million general fund balance, or a strong 9.4% of expenditures, at fiscal year-end Dec. 31, 2009. Management is expecting a $2.4 million drawdown in the general fund for fiscal 2010 to maintain current service levels and to offset a decline in revenues. To balance the budget for fiscal 2011, management implemented several cost-cutting and revenue generating actions including: a hiring and salary freeze; reducing capital needs; reducing funding of outside agencies; and implementing and raising user fees in some areas. Partly due to revenue challenges in out -years, the county commissioners' increased the county's total mill levy to 34.144 mills in fiscal 2011 from 30.889 mills in fiscal 2010. The city's mill levy remained unchanged from the prior year for fiscal 2011 at 40.808 mills, resulting in a total mill levy of 74.952 for the unified government. Property taxes remain the unified government's leading revenue source, followed by sales taxes and other service charges. In addition, the community passed a sales tax referendum, whose proceeds are dedicated to public safety and will offset public works expenses, which became effective July 1, 2010; officials estimate the sales tax will generate $5.4 million annually in additional revenues starting in fiscal 2011. Due to the implemented cost -saving measures and increase in the unified government's millage rate, management is expecting to end fiscal 2011 with a general fund operating surplus of approximately $1.5 million to $2.0 million. Standard & Poor's deems the unified government's management practices "good" under its Financial Management Assessment (FMA) methodology, indicating financial practices exist in most areas but that not all practices might be formalized or that governance officials might not monitor them regularly. We believe that overall net debt remains high at about 10.4% of the unified government's market value and $4,906 per capita. Debt service carrying charges were high in fiscal 2009 at 17.8%. Amortization is fairly average: 55% of principal is due to be retired in 10 years, and 97% of principal is due to be retired in 20 years. The unified government is considering the issuance of additional debt within the next 12 months for capital and development projects. Outlook The stable outlook reflects our expectation that given the unified government's revenue raising flexibility, management will take the steps necessary to return to balanced operations and maintain adequate reserves. Failure to do so could lead to downward pressure on the rating. In our view, the unified government's high overall debt burden and lagging economic characteristics, with below -average wealth and high unemployment rates preclude a higher rating. www.standardandpoors.com/ratingsdirect 3 Attachment MSD-MIEC 1-12a Page 8 of 43 Wyandotte County / Kansas City Unified Government, Kansas; Appropriations; General Obligation; Note Economy: Steadily Expanding, Diversifying Management expects further property tax base and economic growth as unified government officials continue to issue residential permits, although at a slower pace than in years past, partly due to the national housing slowdown. Kansas City issued 521 permits in 2005, which was its eight -year high. Since 2005, permit issuance has slowed, with 140 and 101 permits issued in 2008 and 2009, respectively. Through September 2010, the city issued 75 permits. The commercial and retail sector continues to expand, with ongoing developments at: • Village West: The center currently features: Cabela's 195,500 -square -foot facility; Nebraska Furniture Mart's 1,075,000 -square -foot facility; and Great Wolf Lodge and Resort, which features 281 rooms and 40,000 square -foot indoor water park. • The Legend's at Village West Shopping Center: The center includes nearly 855,000 square feet of retail, dining, and entertainment valued at more than $230 million. As of December 2009, Village West comprised 114 businesses, including 28 restaurants, employed nearly 5,700 people, and generated $11 million in real and personal property tax levies. • Schlitterbahn Vacation Village: Management estimates the water park's $750 million facility will include a river walk, water park, marine park, lodging, and retail. • Stadium complex: Design and construction has begun on an 18,000 seat stadium complex that will be the permanent home of the Sporting Kansas City, a Major League Soccer team. The stadium is scheduled to open in 2012. • Google: In March 2011, Google executives named Kansas City the first site for its ultra -fast broadband network, which will bring homes and offices gigabit -speed data (about 100 times faster than most Americans now have). United government officials feel this announcement will also fuel continued economic development, and attract new businesses . Unified government residents have access to jobs throughout the county, including Kansas School District No. 500, University of Kansas Hospital and Medical Center, and Burlington Northern Sante Fe, which combined employ more than 13,000. Despite access to a diverse economic base, wealth and income levels remain only adequate in our opinion: Median household effective buying income is just 76% of the national average. Market value, an indication of wealth, is also only adequate at $46,144 per capita. Through March 2011, the county's average annual unemployment rate stood at 10.8%, which was higher than both the state and national averages of 7.2% and 9.5%, respectively. Financial Management Assessment: 'Good' Standard 8c Poor's deems the unified government's management practices "good" under its FMA methodology, indicating financial practices exist in most areas but that not all practices might be formalized or that governance officials might not monitor them regularly. "Good" practices include our view of the government's: • Use of extensive planning and analysis to devise revenue and expenditure assumptions based on historical trend analysis; • Five-year, annually updated capital improvement plan (CIP) that addresses projected needs and resources; Standard & Poor's I RatingsDirect on the Global Credit Portal I May 16, 2011 4 +fifuF 1300 ..'3 x732 Attachment MSD-MIEC 1-12a Page 9 of 43 Wyandotte County / Kansas City Unified Government, Kansas; Appropriations; General Obligation; Note • Formal investment management policy that parallels state regulations and calls for quarterly reporting to elected officials; and • Reserve policy that is equal to 10% of expenditures in the general fund, although the unified government's reserves are currently below this level. Related Criteria And Research • USPF Criteria: GO Debt, Oct. 12, 2006 • USPF Criteria: Appropriation -Backed Obligations, June 13, 2007 • USPF Criteria: Short -Term Debt, June 15, 2007 Wyandotte Cnty / Kansas -City Unif :Govt: GO Long Term:Rating Wyandotte Cnty:/ Kansas City Unif Govt GO (ASSURED GTY). Unenhenced Rating Wyandotte Cnty/ Kansas City Unif Govt Note. : Long Tenn Rating Short Term. Rating,. Wyandotte Cnty / Kansa's CityUnif;Govt Note Long Tenn Rating Short Tenn Rating Kansas City: GO :Unenhenced.Ratmg AA(SPUR)/Stable AA/5tabig- AA(sPUn)/Stable Wyandotte.Cnty/Kansas:City Unif Govt[Cntywide-•sales& RedevProj Area B)sales tax (lnenhanced Rating qq-0V13)/Stable Many issues are enhanced by bond insurance. www.standardandpoors.com/ratingsdirect Affirred Affirmed. Affirmed.. Affirmed ,•` 5 Attachment MSD-MIEC 1-12a Page 10 of 43 Copyright © 2011 by Standard & Poors Financial Services LLC (S&P), a subsidiary of The McGraw-Hill Companies, Inc. All rights reserved. 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Standard 8c Poor's I RatingsDirect on the Global Credit Portal I May 16, 2011 6 i'ii' I30'e:±u722 Attachment MSD-MIEC 1-12a Pa • e 11 of 43 Wyandotte County Unified Government, Kansas; Combined Utility Primary Credit Analyst: Peter V Murphy, New York (1) 212-438-2065; peter_murphy®standardandpoors.com Secondary Contact Scott D Garrigan, Chicago (1) 312-233-7014; scott garriganastandardandpoors.com Table Of Contents Rationale Outlook Markets Economy Is Still Expanding And Diversifying Operations Related Criteria And Research www.standardandpoors.com/ratingsdirect 1 i225r i ;oG3i+RA1 Attachment MSD-MIEC 1-12a Page 12 of 43 Wyandotte County Unified Government, Kansas; Combined Utility Credit Profile US$89885mi1=util sys tmp & rfdg rev:bnds.ser2f111-Adueb9/C1/2036: A+/Stable tow TannRating , llityandotte Cnty/ Karisas:City Unif G;oyt combutil tong lelm;R tiog ' . A+/S#able, Affirmed „` Wyandotte C'nty/Kansas City Unit Govt ttil sys imp.tev bntlsser 2000.13dtd 11/30/`2000. due:09/0`/2005-2007 290p2019 2021.2023-202 2032 Uhe?hhancad Raring A+(SPiJR)/Stable Affirmed. Wyandotte•Cnty/Kansas City Unif..Govt (Wyandotte Cnty Brd of Pub {ltil) util sys'reirbndsser 1998`dtd 1Zfo1/1998 due' 09/01/2002-2014 2018 2028 i Unenhanced Rating A+(SPUR)/Stable Affirmed Rationale Standard & Poor's Ratings Services has assigned its 'A+' rating to Wyandotte County Unified Government Board of Public Utilities (BPU), Kan.'s utility system refunding revenue bonds, series 2011A. At the same time, Standard & Poor's affirmed its 'A+' underlying rating on existing parity debt. The outlook is stable. The 'A+' rating reflects our view of the following factors: • Good financial performance, with, management's policies relating to debt service coverage and liquidity and flexible rate design; • A stable service area with potential for growth from significant commercial development, which continues despite the economic slump; and • Good system operations, including ownership of relatively low-cost coal-fired base load power plants, and adequate water treatment capacity. Sizable capital needs related to generation capacity and retrofits, and a somewhat concentrated customer base limit these strengths, in our opinion. We have assigned a business profile score of '4' (on our scale of '1' to '10', '1' being the least risk), reflecting our view of good management, competitive rates, sound operations, and some concentration among the system's largest users. The bonds are payable from the combined water and electric utility systems' net revenue. They will fund major environmental upgrades at coal-fired electric plants and advanced meters for both water and electric customers; and partially refund series 1998 bonds. BPU provides electric and water service within Wyandotte County to about 65,000 electric and more than 51,000 water accounts. The service area economy is relatively diverse, in our opinion, with significant manufacturing-, government-, and transportation -related sectors. Most of the job growth in the past five years has occurred in Standard & Poor's I RatingsDirect on the Global Credit Portal I April 21, 2011 2 Attachment MSD-MIEC 1-12a Page 13 of 43 Wyandotte County Unified Government, Kansas; Combined Utility services and retail trade, offsetting decline in other areas. However, we believe customer concentration is fairly significant, with the 10 leading electric customers accounting for about 18% of system revenues. The county also benefits from its participation in the Kansas City metropolitan area economy. Despite the economic slowdown, Wyandotte has continued to see business investment across various sectors, with several large-scale developments ongoing and planned for 2012. However, we believe unemployment rates for the county remain high, at about 11% as of February 2011. Electric operations provide the majority of revenues, at 85%, and water operations provide the balance. The utility is capable of meeting its own energy requirements and selling excess base load capacity occasionally. The utility purchases additional power when cost—effective, to meet seasonal demands. On the water side, BPU has shifted its water treatment process of surface water from the Missouri River to underground well water filtration in conjunction with its latest water treatment facility. The effect of this shift has been lower treatment costs, and has eliminated drought -related supply concerns. Fiscal 2010 financial performance was in line with long-term trends, as debt service coverage rebounded from a dip in fiscal 2009 related to deferred fuel revenue. Unaudited 2010 figures indicate debt service coverage of 2.6x, up from 1.8x in 2009, if adjusted for deferred revenues collected in 2009 but recognized in 2010. Liquidity is historically adequate, in our view, in the one -to -two months' expenditures range, including almost $12 million in rate -stabilization reserves as of fiscal year-end 2010. After adjusting for deferred revenues, fixed charge coverage, which includes capacity payments associated with certain power purchases, was strong, in our opinion, at 1.6x in fiscal 2010, up from 1.1x in 2009. Due to rising operating and future debt service costs, the board adopted a series of annual rate increases in 2010 covering fiscals 2011-2013. We expect these to increase combined revenues more than 7% annually, and that the additional revenues will let the board maintain sound coverage levels, even with the slight increase in annual debt service related to the new money portion of the 2011A bonds. In addition, the board has approved a new rate rider linked to state and federal environmental mandates which is designed to offset any debt service on projects related to such mandates. The board expects to issue $100 million in 2013, mainly for power generation projects. Outlook The stable outlook reflects our expectation that the good financial margins and liquidity will continue at adequate levels as management copes with growth -related and other capital pressures that might arise from regulatory changes. Rating stability also depends on management's ability to meet its load requirements in the near term without placing pressure on coverage and cash levels due to its ability to continue adopting the necessary revenue enhancements. Markets BPU provides electric service to all of the territory of the unified government except for the territory limits of the cities of Bonner Springs, Edwardsville, Lake Quivira, and a small unincorporated area south of Bonner Springs, Kan. In addition, the utility also provides wholesale power, under contract, to the Kansas Municipal Energy Agency (KMEA) and the city of Columbia, Mo. BPU has wholesale power sales agreements with KMEA through 2022 and Columbia through 2023. Each is obligated to pay a demand charge for megawatt (MW) of capacity contracted to be www.standardandpoors.com/ratingsdirect 3 xwn•;^; ....: 1 ] ..iJil:;iti i:" Attachment MSD-MIEC 1-12a Page 14 of 43 Wyandotte County Unified Government, Kansas; Combined Utility purchased, kilowatt-hour (kWh) purchased, a fuel charge, operation and maintenance charges, and their share of payments in lieu of taxes for their respective power sales. BPU's primary electric customers are residential (89%); however, the commercial and industrial classes account for the majority of kWh sales and revenues. These account for about 60% of energy sales but only SS% of electric system revenues, indicating a slight preference in rates for those two classes, which are key to the local economy. The 10 leading retail electric customers account for 18.0% of electric system revenues, including General Motors Corp. (GM) at 3.9%. Economy Is Still Expanding And Diversifying Wyandotte County's economy continues to expand, and has attracted several large retail, commercial, and entertainment projects in the past decade to the western part of its service territory. These include Kansas International Speedway, which had its inaugural season in 2001; and Village West, a mall with anchor tenants of Cabela's Inc. and Nebraska Furniture Mart. Recent developments in Village West include two sports stadiums, and a planned casino, expected to open in 2012, and ultimately a hotel. In addition, Google Inc. announced in March 2011 that it plans to launch a super -fast internet network throughout Kansas City, Kan. Board officials expect that the service will provide the city with a competitive advantage in attracting economic growth. Anchoring the county's sizable industrial base, GM recently added a third shift at its plant, which assembles the Chevy Malibu and Buick Lacrosse, and is the utilities' largest customer. Additional large employers within the county, all of which employ more than 1,000 combined include: • Unified School District No. 500 • University of Kansas Hospital and University of Kansas Medical Center • BNSF Railway Co. • Providence Medical Center Residents also have access to employment elsewhere in the Kansas City area, which covers parts of Missouri and Kansas. Despite access to what we consider a diverse economic base, wealth and income levels remain below average. Median household effective buying income is just 84%, 82%, and 75% of state, national, and metropolitan statistical area averages, respectively. Unemployment, which was 7.4% in 2008, has risen to more than 10.0% in the past two years, and is currently 11.4%. Operations Electric system The utility has three electric power generating stations and with power purchase agreements has ample power to meet its peak demand (501 MW in fiscal 2010). The board's generating assets are predominantly coal-fired. It also has gas- and oil -fueled units, as well as hydro resources from the Southwestern Power Administration (38.6 MW) under contract through July 2020, and renewable energy from Trade Wind Energy (25 MW) under contract through 2026, providing what we view as good fuel diversity among the board's peak and baseload resources. BPU has wholesale power sales agreements with KMEA and the City of Columbia, Mo. for the sale of 38 MW and 20 MW, respectively, of output from the Nearman Station Unit No. 1. The KMEA agreement expires in 2022, and Standard 8c Poor's 1 RatingsDirect on the Global Credit Portal ( April 21, 2011 4 Attachment MSD-MIEC 1-12a Page 15 of 43 Wyandotte County Unified Government, Kansas; Combined Utility the Columbia one terminates on the earlier of 2023 or deactivation of Nearman Station Unit No. 1. Each is obligated to pay a demand charge for MW of capacity contracted to be purchased, kWh purchased, a fuel charge, operation and maintenance charges, and their share of payments in lieu of taxes for their respective power sales. Water system The utility provides water service to 51,000 customers in all areas within the territory of the Unified Government, excluding Bonner Springs and Lake Quivira; wholesale water service is also provided to LanDel Water District, Suburban Water District of Leavenworth County, the cities of Bonner Springs and Tonganoxie, Kans., and Consolidated Water District No.1. The 10 leading customers account for 23% of water by volume and about 10% of water revenues. Like the electric system, residential customers account for the bulk of the total customer base, but commercial and industrial customers account for the bulk of water sales. Water comes from the Missouri River, which reduces treatment costs relative to ground water. The board's strategy is to be a major regional supplier, and it sells water to five interconnected water utilities under contracts of various lengths, some as long as 20 years. These wholesale sales enable the board to maximize use of its treatment and delivery capabilities to keep retail rates affordable. Related Criteria And Research USPF Criteria: Electric Utility Ratings, June 15, 2007 Wyandotta Cnty/ Kansas City 'unit Govt comb -aril BHAC► UnenhancedRating A+(SPUR►/Stable Wyandotte Cnty / Kansas City Unif Govt comb util (wrap of insured).(AMBAC & AGM) (SEC MKT) Uneihaneed Rating `; A+(SPUR►/Stable • Wyandotte:Gnty /'Kansas City Unif•Govt comb aril (wrap of insured) (AMBAC, AGM &BHAC) (SEC MKT) . Unenhanced Rating A+(SPUR)/Stable' Wyandotte;Cnty/Kansas City Unit Govtutil rev Uneohanced'Rating Many issues are enhanced by bond insurance. www.standardandpoors.com/ratingsdirect Affirmed Affirmed A+(SPUR)/$tahle Affirmed 5 jx, z„r,!3QD <t3'i Attachment MSD-MIEC 1-12a Page 16 of 43 Copyright ® 2011 by Standard & Poors Financial Services LLC (S&P), a subsidiary of The McGraw-Hill Companies, Inc. All rights reserved. No content (including ratings, credit -related analyses and data, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of S&P. The Content shall not be used for any unlawful or unauthorized purposes. 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S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription), and may be distributed through other means, including via S&P publications and third -party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees. Standard & Poor's 1 RatingsDirect on the Global Credit Portal I April 21, 2011 The AtcGraw•Hilf Companies 6 r:$22'35 l 301)9V311 211 Kansas St gretary of State - Kansas Register Attachment MSD-MIEC 1-12a Page 17 of 43 Page 1 of 1 Home About Us Business Filing Center Elections & Legislative Publications Directories Legal Publications Regulations Statutes Kansas Register Session Laws Bill/Chapter List Handbooks Newsletters Finance Rates Public Comment Filings & Forms Other Services Contact Us ite Map Help 2010 `J KANSAS SECRETARY OF STATE Horne . Publications y Legal Publications . Kansas Register KANSAS REGISTER Facebook Submit Q Twitter ® YouTube The Kansas Register is the official state newspaper. This publication provides a wide range of information such as proposed and adopted administrative regulations, new state laws, bond sales and redemptions, notice of open meetings, state contracts offered for bid, attorney general opinions, and many other public notices. For more information on how to submit information or the cost to subscribe, check out the FAQ page. For additional information contact Nancy Reddy at (785) 296- 3489 or kansasregister@sos.ks.gov. Select the Kansas Register year to be displayed. 12011 GOI Vol_30_No_27 July_7 2011_p 929-968 Val 30 No_26June_30 2011_p_901-928 Vol_30 No_25_June_23 2011_p_873-900 Vol 30_No 24 June 16_2011_p_857-872 Vol 30 No_23 June 92011_p_715-856 Vol 30_No_22_June_2_2011 _687-714 Vol 30_No_21 May26_2011_p_627-666 Vol_30_No 20_May_19_2011_p_565-626 Vol_30_No_19_May_12_2011_p_545-564 Vol 30 No_18 May_5_2011_p_511-544 Vo1_30_No_17_April_28 2011 471-510 Vol 30_No 16_April_21_2011_p 447-470 Vol_30 No_15 Aprit_i4_2011__p_393-446 Vol_30_No_14_April_7 2011 _379-392 Vol 30 No_13_March_31_2011_p_345-378 Vol_30_No_12_March 24_2011_p_321-344 Vol_30_N o_11 _March_17_2011 _p_269-320 Vol _30_No_t0_March_10_2011_p 221-268 Voi_30_No 09_March_3_2011_p181-220 Vol_30_No_08 February_242011_p_153-180 Vol 30_No 07_February17_2011_p 121-152 VoI30_No_06_February_10_2011_p101-120 Vol_30_No 05_February_3 2011_p_73-100 Vol_30_No 04_January_27 2011_p 57-72 Vol 30_No_03_January 20_2011_p 37-56 Vol__30_No 02 January_13_2011 p_17-38 Vol_30_No 01_January_6 2011_p1-16 Website Policies { Site Map I Contact Us j Help http://www.kssos.org/pubs/pubs_kansas register.asp 7/12/2011 Attachment MSD-MIEC 1-12a Page 18 of 43 Bond Sale Kansas Register 65 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 80,000 85,000 90,000 100,000 105,000 110,000 115,000 125,000 65,000 70,000 70,000 75,000 80,000 The bonds will bear interest from the dated date at rates to be determined when the bonds are sold as provided in the notice of sale. Interest on the bonds will be payable semiannually on June 1 and December 1 in each year, beginning December 1, 2010. Principal Amounts Subject to Change The city reserves the right to increase or decrease the total principal amount of each series of bonds and the principal amount of any maturity in order to properly size a bond issue, including adjustments based on net bond proceeds received by the city as a result of any pre- mium bid. Adjustments, if required, will be made pro- portionately to each maturity as permitted by the au- thorized denominations of such series of bonds. The successful bidder may not withdraw its bid or change the interest rates bid as a result of any changes made to the principal amount of a series of bonds as described. If there is an adjustment in the final aggregate principal amount of a series of bonds or the schedule of principal payments as described above, any premium bid on such series of bonds will be proportionately adjusted. At the request of the city, each successful bidder agrees to resize the ap- plicable bond issue, adjust the premium and provide a revised maturity schedule to the city promptly after re- ceipt of notification of such a request by the city. Paying Agent and Bond Registrar Kansas State Treasurer, Topeka, Kansas. Good Faith Deposit Each bid for each series of bonds shall be accompanied by a cashier's or certified check drawn on a bank located in the United States or a financial surety bond in a form that complies with the requirements set forth in the notice of sale in an amount equal to 2 percent of the principal amount of the applicable series of bonds for which the bid is submitted. Delivery The city will pay for preparation of the bonds and will deliver the same properly prepared, executed and regis- tered without cost to the successful bidder(s) on or about March 4, 2010, at the offices of the Depository Trust Com- pany, New York, New York. Assessed Valuation and Indebtedness The equalized assessed tangible valuation for compu- tation of bonded debt limitations is $3,547,637,000. The total general obligation indebtedness of the city as of the date of the bonds, including the bonds, is $716,545,862. Approval of Bonds The bonds will be sold subject to the legal opinion of Kutak Rock LLP, Kansas City, Missouri, bond counsel, whose approving legal opinion as to the validity of each series of bonds will be furnished and paid for by the city and delivered to the successful bidder(s) when the bonds are delivered. Additional Information Additional information regarding the bonds may be obtained from the city's Department of Finance, City Hall, 12th Floor, 455 N. Main, Wichita, KS 67202-1679 (Catherine Gilley, Debt Coordinator), (316) 268-4143: or from bond counsel, Kutak Rock LLP, 1010 Grand Blvd., Suite 500, Kansas City, MO 64106-2220, (816) 960-0090, Attention: Dorothea Riley. Dated January 12, 2010. City of Wichita, Kansas By: Karen Sublett, City Clerk City Hall, 13th Floor 455 N. Main Wichita, KS 67202-1679 (316) 268-4529 * Subject to change. Doc. No. 037937 (Published in the Kansas Register January 21, 2010.) Summary Notice of Sale Unified Government of Wyandotte County/ Kansas City, Kansas $55,230,000* General Obligation Improvement Bonds Series 2010-A $10,780,000* Taxable General Obligation Improvement Bonds Series 2010-B $7,810,000* General Obligation Improvement Bonds Series 2010-C $19,535,000* General Obligation Improvement Bonds Series 2010-D (General obligations payable from unlimited ad valorem taxes) Bids Subject to the notices of sale dated December 17, 2009, written and electronic bids for the purchase of the above - referenced bonds of the Unified Government of Wyan- dotte County/Kansas City, Kansas (the issuer), will be re- ceived on behalf of the issuer by the issuer's financial advisor, in the case of written bids, at the address here- inafter set forth, and in the case of electronic bids, via PARITY, until 10:30 a.m. for the Series 2010-A Bonds and the Series 2010-B Bonds, and until 11 a.m. for the Series 2010-C Bonds and the Series 2010-D Bonds, on February 4, 2010 (the sale date). No bid for less than 98.80 percent of the Series 2010-A Bonds, 98.60 percent of the Series (continued) Vol. 29, No. 3, January 21, 2010 © Kansas Secretary of State 2010 Attachment MSD-MIEC 1-12a Page 19 of 43 NEW ISSUE - BOOK ENTRY ONLY FINAL OFFICIAL STATEMENT DATED JANUARY 21, 2010 Ratings: Moody's Investors Service: A2 Standard & Poor's Ratings Services: A+ Fitch Ratings: A+ In the opinion of Gilmore & Bell, P.C., Bond Counsel, under existing law and assuming continued compliance with certain requirements of the Internal Revenue Code of 1986, as amended, the interest on the 2010 Bonds (including any original issue discount properly allocable to an owner thereof) is excludable from gross federal income for income tax purposes, except as described in this Official Statement, and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. The interest on the 2010 Bonds is excluded from computation of Kansas adjusted gross income. The Bonds have not been designated as "qualified tax-exempt obligations" within the meaning of Section 265 (b)(3) of the Internal Revenue Code of 1986, as amended. See "TAX EXEMPTION" in this Official Statement. UNIFIED GOVERNMENT OF WYANDO'1"1'E COUNTY/KANSAS CITY, KANSAS BOARD OF PUBLIC UTILITIES $32,190,000 Utility System Refunding Revenue Bonds, Series 2010-A (Book Entry Only) Dated Date: Date of Issuance Maturity: Due September 1, as shown on the inside front cover of this Official Statement The 2010 Bonds will be issued as registered Bonds and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), New York, New York, which will act as securities depository for the 2010 Bonds. Individual purchases will be made in book -entry -only form. Purchasers will not receive physical certificates representing their interest in the Bonds purchased. Principal of the 2010 Bonds will be payable at the corporate trust office of Security Bank of Kansas City, Kansas City, Kansas, the Trustee and Paying Agent, and interest on the 2010 Bonds will be payable on March 1 and September 1, commencing on September 1, 2010 to the registered owners of such Bonds as of the record date. So long as DTC or its nominee is the registered owner of the 2010 Bonds, payments of the principal of, premium, if any, and interest on the 2010 Bonds will be made directly to DTC. Disbursements of such payments to DTC Participants is the responsibility of DTC and disbursements of such payments to the beneficial owners is the responsibility of DTC Participants and Indirect Participants. See "THE 2010 BONDS —Book -Entry Only System." The 2010 Bonds are subject to redemption prior to maturity as described herein. The 2010 Bonds are being issued (i) to refund certain maturities of the Unified Government's outstanding Utility System improvement revenue bonds; and (ii) to pay the costs of issuance. See "THE 2010 -BONDS - Purpose for the Bonds." The 2010 Bonds will be payable from the Net Revenues of the Unified Government's Utility System, on a parity with the Unified Government's outstanding Utility System revenue bonds. See "The 2010 Bonds - Security for the Bonds." The 2010 Bonds are limited obligations of the Unified Government, payable solely from, and secured as to the payment of principal and interest by, a lien on the Net Revenues derived by the Unified Government from the operation of its Utility System, including Net Revenues derived from extensions and improvements to the Utility System hereafter constructed or acquired by the Unified Government. The taxing power of the Unified Government is not pledged to the payment of the 2010 Bonds. The 2010 Bonds are offered when, as and if issued and received by the Underwriters, and subject to the approval of legality by Gilmore & Bell, P.C., Kansas City, Missouri, Bond Counsel. Certain legal matters will be passed on for the Unified Government by Harold T. Walker, Esq., Chief Counsel of the Unified Government and for the Underwriters by Fulbright & Jaworski L.L.P., New York, New York. It is expected that the 2010 Bonds in definitive form will be ready for delivery through the facilities of DTC on or about February 4, 2010. Goldman, Sachs & Co. George K. Baum & Company Oppenheimer & Co.. Inc. Attachment MSD-MIEC 1-12a Page 20 of 43 Maturity Schedules Unified Government of Wyandotte County/Kansas City, Kansas Utility System Revenue Refunding Bonds, Series 2010-A Maturity Principal Interest CUSIP Maturity Principal Interest CUSIP September 1 Amount Rate Yield Number(a) September Amount Rate Yield Number(a) 1 2011 $2,145,000 4.00% 1.22% 982674 ET 6 2016 $3,510,000 3.00% 3.13% 982674 EY 5 2012 $2,265,000 2.00% 1.54% 982674 EU 3 2017 $2,875,000 3.50% 3.42% 982674 EZ 2 2013 $2,285,000 5.00% 1.86% 982674 EV 1 2018 $2,980,000 4.00% 3.68% 982674 FA 6 2014 $2,410,000 5.00% 2.27% 982674 EW 9 2019 $ 825,000 4.00% 3.85% 982674 FB 4 2015 $3,330,000 5.00% 2.70% 982674 EX 7 2020 $ 890,000 4.00% 3,92%(b) 982674 FC 2 $2,880,000 4.25% Term Bond due September 1, 2023 at 4.40% 982674 FD 0 $5,795,000 4.50% Term Bond due September 1, 2028 at 4.72% 982674 FE 8 (a) (b) The CUSIP numbers shown above have been assigned to this issue by an organization not affiliated with the Unified Government and are included for the convenience of the owners of the 2010 Bonds only. The Unified Government shall not be responsible for the selection of the CUSIP numbers, nor any representation made as to the correctness on the Bonds or as indicated herein. Priced to the first optional call date of March 1, 2020. FitchRatings Attachment MSD-MIEC 1-12a Page 21 of 43 FITCH RATES KANSAS CITY BOARD OF PUBLIC UTILS, (KS) $90MM UTIL SYS REVS 'A+'; OUTLOOK TO STABLE Fitch Ratings -New York -18 April 2011: Fitch Ratings assigns an 'A+' rating to the $90 million Unified Government of Wyandotte County/Kansas City (UG), Kansas City Board of Public Utility's (BPU) system improvement and refunding revenue bonds series 2011-A. The bonds are expected to sell on May 4, 2011. In addition Fitch affirms the following parity revenue bond ratings: —$343.5 million outstanding BPU electric revenue bonds at 'A+.' The Outlook is revised to Stable from Negative. Note that the above does not include $32.7 million outstanding subordinate debt which Fitch does not rate although it is factored into our analysis. RATING RATIONALE: --The Stable Outlook reflects BPU's strengthened financial metrics as evidenced by higher debt service coverage and liquidity, a commitment to rate adjustment in order to preserve fmancial strength and a rebound in sales in 2010 as a result of the economic recovery. --The 'A+' rating takes into account the service area's large commercial and industrial customer base and below -average wealth indicators. However, this has historically been offset by BPU's relatively stable financial metrics which are supported by the combined system's effective cost -recovery mechanisms. Financial performance has improved in 2010 despite increasing contributions to the Unified Government of Wyandotte County (UG). --Following a cost -of -service study, the utility is implementing a multi -year rate increase. Fitch notes that BPU has already implemented two rate increases over the last one year out of the four planned through 2013. While the increase should strengthen margins and liquidity, it is equally important to reduce payment in lieu of taxes (PILOT) to its historic level in conjunction with the rate increases. --Though not unique to the BPU the recently proposed regulations by the Environmental Protection Agency (EPA) may require additional capital expenditure on the coal plants. Favorably, the recent implementation of an environmental surcharge in the rate structure provides an effective mechanism to recoup these costs. --Following several years of flat to negative growth electric sales increased in 2010. The recent negative trend may have relieved some of the pressure associated with the utility's capital plan; however, Fitch notes that a long-term negative growth pattern has the potential to adversely impact financial margins. KEY RATING DRIVERS: --Contributions to the UG, including PILOT payments and free services comprise about 12% to 15% of total revenue and are above average for the current rating, Adherence to the plan to reduce PILOT payment to its historic level is important. --The revision to a Stable Outlook reflects Fitch's expectation that the approved future rate increases will be implemented. --The recently improved and projected financial metrics are predicated on rate increases. Attainment of the same will be a key driver. The current rating assumes a clear movement in the BPU's cash position towards management's stated goal of 60 days. SECURITY: The bonds are secured by net revenues of the combined water and electric system. Net Revenue as defined in the series 1985 indenture consists of gross revenues of the combined utility system minus Attachment MSD-MIEC 1-12a operation and maintenance (O&M) expenses. Note that PILOT paymentrgileA $lc` ded in O&M expenses for calculation of debt service coverage under the indenture. CREDIT SUMMARY: BPU is a combined electric and water utility system serving approximately 65,000 electric and 51,000 water customers. The utility is an integrated system which owns generation, transmission and distribution assets. Approximately 85% of BPU's revenue is derived from the electric system with the balance coming from the water system. Sales to commercial and industrial customers account for about 60% of the electric system revenue with residential customers accounting for about 20%. BPU's board recently approved a multi year electric and water rate adjustment plan thru 2013 where electric rates will be increased 7% annually while water rates will be increased approximately 7.75% annually through 2013. BPU's financial performance has fluctuated over the last couple of years. Given the share of commercial and industrial customers in the utility's revenue mix BPU was affected by the recession of 2008 and 2009. However, sales for 2010 increased by nearly 6% due to weather related consumption and the economic recovery. While BPU is exempt from federal and state income taxes and local property taxes, it is required to make a PILOT payment to the UG between 5% and 15% of gross revenues. BPU also contributes to the UG in the form of free services. Taken together, the free services and PILOT payment range from 12% to 15% of total revenue which is high for the rating category. While coverage was low in 2009 it improved in 2010 as a result of increased sales and the mid year rate increase. The utility is forecasting debt service coverage of between 1.72 times (x) and 2.12x after payment of PILOT. Liquidity is forecasted to increase from 44 days as of December 2010 to 60 days by 2013. Contact: Primary Analyst Bhala Mehendale Director +1-212-908-0520 Fitch, Inc. One State Street Plaza New York, NY 10004 Secondary Analyst Chris Jumper Senior Director +1-212-908-0594 Committee Chairperson Dennis Pidherny Senior Director +1-212-908-0738 Media Relations: Cindy Stoller, New York, Tel: +1 212 908 0526, Email: cindy.stoller@fitchratings.com. Additional information is available at 'www.fitchratings.com'. In addition to the sources of information identified in Fitch's Revenue -Supported Rating Criteria, this action was additionally informed by information from Creditscope. Applicable Criteria and Related Research: --Revenue-Supported Rating Criteria', Oct. 8, 2010; --Public Power Rating Criteria', March 28, 2011. Attachment MSD-MIEC 1-12a Applicable Criteria and Related Research: Page 23 of 43 Revenue -Supported Rating Criteria http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt id=564565 U.S. Public Power Rating Criteria http://www.fitchratings.com/creditdesk/reports/report_frame.cfin?rpt id=613065 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDII'RATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. 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Click Here Make this my Start page Entity/Obligor : Wyandotte Cnty / Kansas City Unif Govt Issue : US$20.355 mil GO Imp bnds ser 2011A dtd 02/24/2011 due 0810112012-2031 982671ZA0 CREDIT RATINGS Current History Recent Research Date ..a Description .. . 16 -May -2011 Summary; Wyandotte County 1 Kansas City Ungled Government, Kansas; Appropriations; General Obligation; Note 16 -May -2011 ; Wyandotte County/ Kansas City Unified Government, Kansas; Appropriations; General obligation; Note 02 -Feb -2011 Summary: Wyandotte County 1 Kansas City Unified Government, Kansas; General Obligation; Note Motu ittea 2011A 2011A 201IA 1 2011A 12011A 2011A 2011A `: 2011A 2011A 2011A 2011A 12011A 2011A 12011A 201IA .12011A 2011A 2011A 2011A 2011A Maturity Date 01 -Aug -2012 01 -Aug -2013 01 -Aug -2014 01 -Aug -2015 01 -Aug -2016 O1 -Aug -2017 01 -Aug -2018 01 -Aug -2019 01 -Aug -2020 01 -Aug -2021 01 -Aug -2022 01 -Aug -2023 01 -Aug -2024 01 -Aug -2025 01 -Aug -2026 01 -Aug -2027 01 -Aug -2028 01 -Aug -2029 01 -Aug -2030 01 -Aug -2031 Rating Type Long -Term LongTenn Long -Term Long -Term Long -Ter, Long -Term Long -Tern Long -Term Long -Term Long -Term Lang -Term Long -Tenn Long -Term Long -Term Long -Term Long -Term Long -Term Long -Tenn Long -Tern Long -Term Rating Date 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 .02 -Feb -2011 •02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 .02 -Feb -2011 02 -Feb -2011 '02 -Feb -2011 i Rating I AA AA IAA M AA IAA IAA 'AA AA AA M AA M iM AA AA M IAA AA Source S&P Ratings S&P Ratings I S&P Ratings CreditWatch/Outbok Credt WatchiOutlookDate ._.Stable Stable Stable Stable Stable Stable Stable • Stable Stable Stable Stable Stable Stable Stable Stable Stable !Stable Stable Stable Stable 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 02 -Feb -2011 PROFILE Security Profile Participants Sector: Subsector. Category: Security. Governments Public Finance (LS.) TaxSecured General Obligation S&P RATINGODIRECCT RESEARCH AN Research Anatyses Rating Actions News Commentaries Criteria Dane ' Type 16 -May -2011 Summar/Analysis 16 -May -2011 02 -Feb -2011 26 -Jan -2011 03-Deo-2010 Fut Analysis Summary Analysis Summary Analysis Summary Analysis 17 -Nov -2010 Summary Analysis _1Z-Nov-2IliIl..............EuLAnaivals......... .... 1 1 Page'!.... of.2 0 01 t Description Sours Related Summary: Wyandotte County 1 Kansas City Unified Government Kansas; Appropriations; General S&P Ratitgs Obligation; Note Wyandotte County 1 Kansas City Unified Government, Kansas; Appropriations; General Obligation; S&P Ratings Note Summary: Wyandotte County) Kansas City Unified Government, Kansas; General Obligation; Note S&P Ratings Summary: Wyandotte County/Kansas City Unified Government, Kansas; Appropriations; General Obligation; Note Summary; Wyandotte County/Kansas City Unified Government, Kansas; Appropriations; General Obligation Summary: Wyandotte County 1 Kansas City tingled Government, Kansas; General Obligation Wvandolte.Guwntx.f.Kansas.Oltv.Unifietl.Gn emment,JSansas;GaearnLRNlnation . S&P Ratings S&P. Ratitgs S&P Ratings Displaying 1- 20 of 25 l SECURITY STRUCTURE 1 Copyright G 2011 Standard & Poor'e Financial Services LLC, a subsidiary of The McGraw-Hill Companies: Inc. All dgins reserved. Privacy Notes Reproduction and distribution of this information in any form is prohibited except with the Poor written per!niseion. of Standard & Poona. Standard & Poor§ does not guarantee the accuracy, oornplreness; timeliness or avaiiabtlky °Tarty information, including ratings, and Is not responsible for any errors or omla*Icns tnogtgent or ethelweu), regardtemi of the oacee, or far the results obtained from the use of such information. STANDARD & POOR'S GIVES NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NC'r LIMITED TO, ANY WARRANTIES OF MERCHANTABILF Y OR El TN_SS SCR A PARTICULAR PURPOSE OR USE. STANDARD & POOR'S shall not be liable for any direct, Inraran, irekdental, exemplary. compensatory, ?snake, special or roneeauental damages, oasts, expenses. toga tees, or losses {Including lost Income or profits end opportunity costa) in oonnectionwith any use of THIS information, INCLUDING ratings. Standard & Door's ratings are statements of opinions and are not statements of fact or remmmendatiore to purchase, hold or Belt securities. They do not address the market value of eeeurioas or the suilaa,ay of aeouri:iea for investment purposes, and should nct be retied on as investment advice.Pbease read air complete discWmer ere. https://www.globalcreditportal.corn/ratingsdireetfshowlnstr unent.do?rand=vVcHbaRLu9&instrumentld=... 7/12/2011 Attachment MSD-MIEC 1-12a Page 25 of 43 CITY OF SPRINGFIELD, ILLINOIS NOTES TO FINANCIAL. STATEMENTS February 28, 2010. 10. LONG-TERM DEBT Continued Revenue Bonds The government alsoissues bonds where the. government pledges income derived from the acquired orr constructed assets to pay debt service. The amount outstanding at the. end of the current fiscal year totaled $692,724,069. Balances Balances Due Within March 1 Additions Retirements February 28 One Year (a) $ 27,385,000 $ - $ ..8,645,000 $ 18,740,000 $ 9,120,000 (b) 314,810,000. - 314,810,000 (c) 198,080,000 - - 198,080,000. - (d) 103,230,000 1,290,000 101,940,000 2,325,000 (e) 9,740,000 - 1,195,000 8,545,000 1,250,000 (f) 10,550,000 - 235,000 10,315,000 245,000. (g) 22,140,000 - - 22,140,000 - (h) 2,645,000 480,000 2,165,000 505,000 (i) 436,000 . _ - . 215,000 221,000 221,000 Revenue Bond Principal Payable 689,016,000 12,060,000 676,956,000 13,666,000. Unamortized Debt Premium 18,849,839 . .1,743,472 .17,106,367 . . . . . . - Unamortized Debt Discount (485,954) (36,962) (448,992). Deferred Loss on Refunding (1,160,084) .. ..(270,778) (889,306). Total Revenue Bonds Debt $ 706,219,801. $ - $.13,495,732 $ 692,724,069. $ 13,666,000. 67 Attachment MSD-MIEC 1-12a Page 26 of 43 CITY OF SPRINGFIELD, ILLINOIS NOTES TO FINANCIAL STATEMENTS February 28, 2010 10. LONG-TERM DEBT - Continued Electric Light and. Power (a) $78,410,000; Electric Revenue Bonds (Senior Lien), Series of 2001; final payment due March 1, 2015; interest rate 4.0 percent to 5.5 percent; interest payable March 1 and September 1; principal payable March 1; to be repaid by net revenues of the Electric Light and Power Fund. See also (b) below for portion refunded. (b) $314,810,000; Electric Revenue Bonds (Senior Lien), Series of 2006; final payment due March 1, 2035; interest 3.625 to 5 percent; interest payable March 1 and September 1; principal payable March 1; to be repaid by net revenues of the Electric Light and Power Fund. A portion of the proceeds were used to retire $44,065,000 of Electric Revenue Bonds (Senior Lien), Series of 2001. (c) $198,080,000; Electric Revenue Bonds (Senior Lien), Series of 2007; final payment due March 1, 2035; interest 4 percent to 5 percent; interest payable March 1 and September 1; principal payable March 1; to be repaid by net revenues of the Electric Light and Power Fund. (d) $103,230,000; Electric Revenue Bonds (Senior Lien), Series of 2008; final payment due March 1, 2037; interest 3 percent to 5 percent; interest payable March 1 and September 1; principal payable March 1; to be repaid by net revenues of the Electric Light and Power Fund. A portion of the proceeds were used to retire the Electric Revenue Bond Subordinate Lien Series 2000 and 2002. Water (e) $18,755,000; Water Revenue Bonds, Series of 1997; final payment due March 1, 2015; interest 4.5 percent to 5.4 percent; interest payable March 1 and September 1; principal payable March 1; to be repaid by net revenue of Water Fund. (f) $10,550,000; Water Revenue Bonds, Series of 2004; initial principal payment due March 1, 2009; final payment due March 1, 2019; interest 3.40 percent to 5.25 percent; interest payable March 1 and September 1; principal payable March 1; to be repaid by net revenue of Water Fund. 68 Attachment MSD-MIEC 1-12a Page 27 of 43 CITY OF SPRINGFIELD, ILLINOIS NOTES TO FINANCIAL STATEMENTS February 28, 2010 10. LONG-TERM DEBT - Continued Water. -. continued (g) $22,140,000; Water. Revenue Bonds, Series of 2008; initial principal payment due March 1, 2011; final payment due March 1, 2032; interest 4 percent to 5.5 percent; interest payable March 1 and September 1; principal payable March 1; to be repaid by net revenue of Water Fund. Sewer (h) $6,460,000; Sewer Revenue Refunding Bonds, Series of 1998 due June 1, 2013; interest at 3.9 percent to 4.75 percent; interest payable June 1 and December 1; principal payable June 1; to be repaid by net revenue of the Sewer Fund. Motor Vehicle Parking (i) $9,245,000; General Obligation Refunding Bonds, Series 2002A; Current Interest Bonds due November 15, 2011; interest 3.00 percent to 4.10 percent; interest payable May 15 and November 15; to be repaid by property taxes. The Motor Vehicle Parking System Fund's proportionate share of the new debt due to the 2002A G.O. Debt Service Fund has been reported as a Long Term Liability of $221,000 as of February 28, 2010; proportionate share to be repaid by net revenue of the Motor Vehicle Parking Fund. Revenue bond debt service requirements to maturity are as follows: Business -Type Activities Fiscal Year Ending 2011 2012 2013 2014 2015 2016-2020 2021-2025 2026-2030 2031-2035 2036-2038 Total Revenue Bonds Principal Revenue Bonds Interest Total Revenue Bonds $ 13,666,000 14,620,000 15,785,000 15,990,000 16,110,000 91,400,000 102,350,000 125,775,000 161,820,000 119,440,000. $ ...676,956,000. $ 32,994,569 32,291,907 32,523,174 32,458,911 31,114,773. 138,792,074 114,617,558 85,368,649 48,881,340 8,571,313.. $ . 557,614,268. $ . 46,660,569 46,911,907 48,308,174 48,448,911 .47,224,773 230,192,074 216,967,558 211,143,649 210,701,340 .. . .. . . . ..128,011,313 $ .1,234,570,268 69 Attachment MSD-MIEC 1-12a Page 28 of 43 NEW ISSUE BOOK -ENTRY -ONLY In the opinion of Bond Counsel,. under existing law, and assuming compliance with the tax covenant described herein,. interest on the. 2011. Series. A Bonds is excluded,. pursuant to section 103(a). of the Internal Revenue Code of 1986,. from. the gross income of the owners thereof for federal and State of Nebraska income tax purposes and is not an item of tax preference. for purposes of the federal alternative minimum tax.. See,. however, "FEDERAL AND STATE INCOME TAXES" herein for a description of certain other tax considerations.. Nebraska Public Power District $61,440,000 General Revenue Bonds, 2011 Series A Dated: Date of Delivery Due: January 1, as shown below The 2011 Series A Bonds will be issued as registered bonds and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository. Tnist Company. ("DTC"), New York, New. York, which will act as securities depository. for the 2011. Series A Bonds. Individual purchases will be made. in book -entry -only form. Purchasers will not receive certificates representing their interest in the 2011 Series A Bonds purchased. Principal of the 2011. Series A Bonds will be payable at the designated corporate trust operations office of The Bank of New York Mellon Trust Company, National Association, in East Syracuse, New York, the Trustee and Paying Agent, and interest on the 2011. Series A Bonds will be payable on January 1 and July 1 of each year, commencing January 1, 2012, to the registered owners of such Bonds as of the 15th day of the calendar month preceding the next interest payment date. So. long as DTC or its nominee is the registered owner of the 2011 Series A Bonds, payments of the principal and interest on the 2011 Series A Bonds will be made directly to DTC. Disbursements of such payments to DTC Participants are the responsibility of DTC and disbursements of such payments to the beneficial owners is the responsibility of DTC Participants and Indirect Participants. See "DESCRIPTION OF THE 2011 SERIES. A BONDS —Book -Entry -Only System." The 2011 Series A Bonds are not subject to redemption prior to. maturity. The 2011 Series A Bonds are being issued for the principal purpose of refinancing the cost of nuclear fuel, making a deposit to the Primary Account in the Debt Service. Reserve Fund, and paying costs of issuance_ See "APPLICATION OF THE 2011 SERIES A BOND PROCEEDS." The 2011 Series A Bonds will be payable from the Net Revenues of the District's System on a parity with the outstanding General Bonds. See "TILE DISTRICT —Additional Obligations" and "SECURITY FOR THE GENERAL BONDS." The 2011 Series A Bonds are not an obligation of the State of Nebraska, and said State is prohibited from pledging its credit or funds for the payment of the 2011 Series A Bonds. The principal of and interest on the 2011 Series A Bonds are special obligations of the District payable from revenues pledged therefor pursuant to the District's General Resolution, as defined herein. The District has no taxing power. Principal Interest Price or CUSIP* Principal Interest Price or cusir Year Amount Rate Yield Number Year Amount Rate Yield Number 2012 $. 9,645,000. 1.50% 0.32%. 63968ASD8 2016 $ 1,395,000 3.00% 1.81% 63968ASH9 2013 .13,350,000 4.00 . 0.73 63968ASE6 2016 7,305,000 5.00 1.81 63968ASL0 2014 .11,850,000 4.00. 1.23. 63968ASF3 2017 2,265,000 2.50 ' 2.21 . 63968ASJ5. 2015 . 4,495,000 2.00 1.57 . 63968ASG1 2017 4,850,000 5.00 2.21 63968ASM8 2015 6,285,000. 4.00 1.57 63968ASK2 The 2011 Series A Bonds are offered when, as. and if issued and received by the Underwriters, and subject to the approval of legality. by Fulbright & Jaworski L.L.P.,. New York, New York, Bond Counsel, and John C.. McClure, Esq., General Counsel to. the.. District. Certain legal matters will be passed upon for the Underwriters. by Nixon Peabody LLP,. New York,. New. York. It is expected that the 2011 Series A Bonds in definitive form will be ready for delivery through the facilities of DTC in New York New. York on or about May 26, 2011. Wells Fargo Securities Barclays Capital BMO Capital Markets. J.P.Morgan Morgan Stanley Ramirez & Co., Inc, Ameritas Investment Corp. Piper Jaffray & Co. Dated: May 10, 2011 D.A. Davidson & Co. Smith Hayes Financial Services Corp. Goldman, Sachs & Co. RBC Capital Markets Edward D. Jones & Co., L.P. U.S. Bancorp The CUSIP. numbers shown above have been assigned to this issue by an organization not affiliated with the District and are included for the convenience of the 2011. Series A Bondowners only. The District shall not be. responsible for the selection of CUSIP numbers, nor is any representation made as to their correctness on the 2011 Series A Bonds or as indicated herein. Attachment MSD-MIEC 1-12a Page 29 of 43 Revenue bonds consist of the following (000's except interest rates): December 31, Interest Rate 2010 2009 General Revenue Bonds: 1999 Series A Serial Bonds 2010-2011 4.70% - 5.00% $ 165 $ 715 2002 Series B: Serial Bonds 2010-2025 5.00% 43,030 48,505 Term Bonds 2026-2032 5.00% 22,885 22,885 2003 Series A: Serial Bonds 2010-2026 3.50% - 5.00% 91,900 95,945 Term Bonds 2027-2034 5.00% 86,095 86,095 2004 Series B Serial Bonds 2010-2013 4.25% - 5.00% 117,395 149,030 2005 Series A Serial Bonds 2010-2025 3.00% - 5.25% 85,105 88,985 2005 Series B-1 Serial Bonds 2010-2015 5.00% 65,570 75,335 2005 Series B-2 Serial Bonds 2010-2016 4.00% - 5.00% 52,815 62,225 2005 Series C: Serial Bonds 2010-2025, 2040 3.50% - 5.125% 73,030 74,385 Term Bonds 2026-2029 5.00% 11,765 11,765 2030-2034 4.75% 18,240 18,240 2035-2040 5.00% 27,500 27,500 2006 Series A: Serial Bonds 2010-2025 3.75% - 5.00% 73,855 76,535 Term Bonds 2026-2030 5.00% 18,680 18,680 2031-2035 5.00% 23,840 23,840 2036-2040 4.375% 400 400 2036-2040 5.00% 30,020 30,020 2007 Series B: Serial Bonds 2010-2026 4.00% - 5.00% 222,795 241,890 Term Bonds 2027-2031 4.65% 36,140 36,140 2032-2036 5.00% 19,270 19,270 2008 Series A Taxable Term Bonds 2013 5.14% 137,765 137,765 2008 Series B: Serial Bonds 2010-2029 3.00% 5.00% 230,790 238,815 Term Bonds 2030-2032 5.00% 32,390 32,390 2033-2037 5.00% 50,880 50,880 2038-2040 5.00% 7,180 7,180 2009 Series A Taxable Build America Bonds: Term Bonds 2019-2025 6.606% 17,465 17,465 2026-2034 7.399% 32,890 32,890 2009 Series B Taxable: Term Bonds 2012 4.135% 29,180 29,180 2013 4.85% 70,820 70,820 2009 Series C Serial Bonds 2010-2019 2.00% - 4.25% 15,585 17,245 2010 Series A Taxable Build America Bonds: Serial Bonds 2019-2024 3.98% - 4.73% 31,875 Term Bonds 2025-2029 5.323% 27,985 — 2030-2042 5.423% 54,190 — 2010 Series B Taxable Serial Bonds 2010-2020 1.03% 4.18% 8,220 — 2010 Series C: Serial Bonds 2010-2025 1.00% 5.00% 125,475 Term Bonds 2026-2030 4.00% 6,165 2026-2030 5.00% 14,180 Total par amount of revenue bonds Unamortized premium net of discount Less - current maturities of revenue bonds Total revenue bonds $ 2,013, 530 1,843,015 41,343 29,347 2,054,873 1,872,362 (111,145) (97,575) 1,943,728 $ 1,774,787 A -I4 Attachment MSD-MIEC 1-12a Page 30 of 43 NEW ISSUE — FULL BOOK -ENTRY ONLY Ratings: Moody's: Aa1 Standard & Poor's: AA (See "RATINGS" herein.) In the opinion of Bond Counsel, assuming continuing compliance with certain requirements described herein, under laws, regulations, rulings and judicial decisions existing as of the date hereof interest on the 2011 Bonds is not includable in gross income for federal income tax purposes. Such interest is also exempt from all present State of Nebraska personal income taxes. In the opinion of Bond Counsel, interest on the 2011 Bonds does not constitute an item, of tax preference for purposes of determining the federal alternative minimum tax for individuals and corporations. See "TAX MATTERS" herein for a discussion of additional federal and State of Nebraska tax law considerations. $143,375,000 OMAHA PUBLIC POWER DISTRICT (NEBRASKA) Electric System Revenue Bonds, 2011 Series A Dated: Date of Delivery Due: February 1, as shown on the inside cover page The Electric System Revenue Bonds, 2011 Series A ("2011 Bonds") will be issued in fully registered form in the minimum denomination of $5,000 and any integral multiple of $5,000 in excess thereof. Interest on the 2011 Bonds will be payable August 1, 2011 and each August 1 and February 1 thereafter. The 2011 Bonds are subject to optional redemption prior to maturity as described herein. The 2011 Bonds are issued for valid corporate purposes of the District, including the advance refunding of portions of the District's outstanding 2002 Series B Bonds and 2005 Series A Bonds and paying the costs and expenses incurred in the issuance of the 2011 Bonds. The 2011 Bonds, when issued, will be registered in the name of Cede & Co., as Bondholder and nominee for The Depository Trust Company ("DTC"), New York, New York. Purchases of beneficial interests in the 2011 Bonds will be made in book -entry only form. Accordingly, principal of and interest on the 2011 Bonds will be paid by the Bond Fund Trustee acting as Paying Agent directly to DTC as the Bondholder thereof. Disbursement of such payments to DTC's Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners is the responsibility of the Participants, as more fully described herein. Any purchaser as a Beneficial Owner of a 2011 Bond must maintain an account with a broker or dealer who is, or acts through, a Participant to receive payment of the principal of and interest on such 2011 Bonds. See "BOOK -ENTRY SYSTEM." Principal of and interest on the 2011 Bonds will be payable on a parity with the other Electric System Revenue Bonds of the District in the outstanding principal amount of $1,055,200,000 and any other Additional Bonds which hereafter may be issued under Resolution No. 1788, and will be payable from and secured by a pledge of and lien upon the revenues, income, receipts and profits of the Electric System, subject to the prior payment therefrom of the operations and maintenance expenses of the Electric System. The 2011 Bonds shall not be obligations of the State of Nebraska or of any of its political subdivisions, other than the District, nor shall said State or any of its political subdivisions, other than the District, be liable for the payment of the principal of and interest on the 2011 Bonds. The District has no taxing power. MATURITY SCHEDULE — See Inside Front Cover Page The 2011 Bonds are offered when, as and if issued and received by the Underwriters, subject to the approval of legality of Kutak Rock LLP, Bond Counsel. Certain legal matters will be passed upon for the District by Fraser Stryker PC LLO, Omaha, Nebraska, General Counsel to the District, and for the Underwriters by Squire, Sanders & Dempsey (US) LLP, Counsel to the Underwriters. It is expected that the 2011 Bondsin definitive form will be ready for delivery through the DTC book -entry system on or about June 15, 2011. Goldman, Sachs & Co. BofA Merrill Lynch Ameritas Investment Corp. Citi Edward Jones J.P. Morgan Morgan Stanley RBC Capital Markets Wells Fargo Securities June 2, 2011, except as supplemented by the attached Supplement dated June 8, 2011. Attachment MSD-MIEC 1-12a Page 31 of 43 $143,375,000 Electric System Revenue Bonds, 2011 Series A Maturity Schedule Due Principal February 1 Amount Rate Yield Price CUSIPM 2014 $10,715,000 3.000% 0.860% 105.547 6817934S1 2014 3,640,000 4.000 0.860 108.140 6817934Y8 2015 18,715,000 4.000 1.220 109.834 6817934Z5 2015 14,945,000 5.000 1.220 113.372 6817935F8 2016 10,400,000 4.000 1.450 111.372 6817935A9 2016 25,865,000 5.000 1.450 115.832 6817935G6 2017 11,460,000 4.000 1.810 111.666 6817935B7 2017 9,415,000 5.000 1.810 116.993 6817935H4 2018 6,245,000 4.000 2.140 111.434 6817935C5 2019 6,370,000 5.000 2.430 117.792 6817934T9 2020 1,840,000 4.000 2.660 110.267 6817934U6 2020 4,590,000 5.000 2.660 117.930 6817935D3 2021 1,570,000 4.000 2.860 109.532 6817934V4 2021 5,470,000 5.000 2.860 117.895 6817935E1 2023 880,000 3.125 3.200 99.274 6817934W2 2023 5,185,000 5.000 3.200(2) 114.809 6817935J0 2024 795,000 3.375 3.380 99.946 6817934X0 2024 5,275,000 5.000 3.380(2) 113.215 6817935K7 (1)CUSIP is a registered trademark of the American Bankers Association. CUSIP data contained herein is provided by Standard & Poor's, CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a substitution for the CUSIP. Neither the District nor the Underwriters take any responsibility for the accuracy of CUSIP numbers herein, which are included solely for the convenience of owners of the 2011 Bonds. (2)Yield to first optional call date. Attachment MSD-MIEC 1-12a Page 32 of 43 The following ratings at December 31, 2010, are indicative of OPPD's solid finandal strength. 56rP Moody's Electric System Revenue Bonds AA Aa1 Electric System Subordinated Revenue Bonds (induding PIBs) * AA- Aa2 Electric Revenue Notes - Commercial Paper Series A-1+ P-1 Minibonds * AA- Aa2 NC2 Separate Electric System Revenue Bonds (2005A, 2006A) * A Al NC2 Separate Electric System Revenue Bonds (2008A) A Al * Payment of the principal and interest on the Electric System Subordinated Revenue Bonds, Minibonds and NC2 Separate Electric System Revenue Bonds 2005 Series A and 2006 Series A, when due, is insured by financial guaranty bond insurance policies. PIBs are Periodically Issued Bonds, which are another type of Electric System Subordinated Revenue Bond. Cash Flows There was a net increase in cash of $14,552,000 during 2010, a net decrease in cash of $18,551,000 during 2009 and a net increase in cash of $285,000 during 2008. The following table illustrates the cash flows by activities for the years ended December 31 (in thousands). Cash Flows from Operating Activities $267,156 Cash Flows from Capital and Related Financing Activities (222,256) Cash Flows from Investing Activities (30,348) Change in Cash and Cash Equivalents $ 14,552 $200,237 (290,003) 71,215 $ (18,551) $194,793 (350,829) 156,321 $ 285 Cash flows from operating activities consist of transactions involving changes in current assets, current liabilities and other transactions that affect operating income. • Cash flows for 2010 increased $66,919,000 over 2009 primarily due to higher retail prices and retail sales volume resulting in an increase in cash received from customers. This increase was partially offset by higher payments for operating expenses. • Cash flows for 2009 increased $5,444,000 over 2008 primarily due to higher retail prices resulting in an increase in cash received from customers. This increase was mostly offset by higher payments for operating expenses. Cash flows from capital and related financing activities consist of transactions involving long-term debt and the acquisition and construction of capital assets. • Cash flows used for 2010 decreased $67,747,000 from 2009 primarily due to the proceeds from the issuance of additional debt. • Cash flows used for 2009 decreased $60,826,000 from 2008 primarily due to fewer capital expenditures. Cash flows from investing activities consist of transactions involving purchases and maturities of investment securities and investment income. • Cash flows for 2010 decreased $101,563,000 from 2009 due to a decrease in the purchases of investments, a decrease in the maturities and sales of investments and lower rates of return on investments. • Cash flows for 2009 decreased $85,106,000 from 2008 primarily due to an increase in the purchases of investments and a decrease in the maturities and sales of investments. 9 0 w Financial Highlights KUB's change In net assets, or earnings, for fiscal year En 2010 was $29.4 million, representing an increase of CO $6.3 millon, or 27.2 percent compared to last year. The 2 M rise in earnings was the re sult of several factors, inclu ding a$4.7 mIon Increase in margin on sales, a $71 million p decline in opera ting expense s (excluding purchased E re) energy), a $1.4 million reduction in interest Income, and M a $2. 7 million increase in interest expense. Electric sales Qmargin Increased $3. 4 million or 3,9 percent, the result of • to a $2 mlllon reduction in bad debt expense and a warme r Q O than normal fourth quarter. Gas sales margin increased $2. 2 million or 5,3 percent, primariy due to an 11.4 percent rise in sales volumes compared to the previou s fiscal year. Operating expenses (excluding pu rchased energy) decreased $7. 1 nvtilon or 3. 9 percent compared to last year. O&M e xpenditures were do wn $5.4 min or 4. 9 percent, due to a $3.9 milion reduction in contributions to fund future post -employment benefit expenses and a $0. 9 million declin e in labor -related expenses. Depreciation expense fed $1. 9 million or 4 percent. T axes and tax equivalent payments increased $0.2 milton or 1 percent, largely due to a rise in plant values and sales margin in the previous fiscal year. Interest income was $2.3 million for th e year, representing a decrease of $1.4 million compared to last year, the result of lower interest rates. Management Repo rt Interest expen se increased $2.7 million or 10.4 percent as a result of revenue bonds issued during the fiscal year. As of June 30, 2010, KUB had $647. 1 million in debt outstanding (ncluding the current portion of revenue bonds and n otes) co mpared to $604.6 million last year, an incr ease of $42.5 million or 7 percent. During fiscal year 2010, $55 millio n in lo ng-term bonds we re issued to finance capital improvements in the Waste water an d Water Divisions. KUB's weighted average cost of debt as of June 30, 2010, was 4. 4 percent. KUB's outstarxfing debt is rated by Standard & Poor's and Moody's In vesto rs Service. As of June 30, 2010, Stan dard and Poor's rated the re venue bo nds of the Electric, Water, and Wastewater Divisions AA+ and the revenue bo nds of the Gas Division AA. During the course of fiscal year 2010, Moody's Rating Agency recalibrated its credit ratings for municipalities, resulting in an increase in KUB's credit ratings fro m Aa3 to Aa2 for all four divisions. Lo ng-term debt represented 45.3 percent of KUB's capital structure , compa red to 44.6 percent last yea r, Capital structure equals long-term debt (including the current portion of revenue bonds and notes, as applicable, due to be retired next fiscal year), plus net assets. Other Informatio n In February 2005, a Consent Decree was entered in to federal court regarding the operation of KUB's wa ste wa ter system. Under the terms of the Consent Decree, the remediation of identified sanitary sewer overflows (SSOs) on KUB's wa stewater system must be completed by June 30, 2016. KUB anticipates Management Report c ontin ued on page 20 15 Co nso lidated Statements of Ne t Assets Ye ars e nded June 30, 2010, and 2009 (in Thousands) Restricted assets: Bond fund Other funds Unused bond proceeds Total restricted assets 2010 17.723 203 14.24$ 2009 15,535 308 4 .015 $ 32,174 3 19 .853 Plant lnsen doe 51,668,208 $ 1,598,307 Less accumulated depreclatlon (571 .2281 (536 .4861 1,097,030 1,061,841 899 798 111,587 78.007 &1209.516 51.140.640 Retirement In progress Con stru ction •1 progress Net plant in service r ass01' q Term . a• 'O' ' 'To view a complete set or KUB's audited financial statements, visit w'ew .kub.org. 2010 2009 Cu rront 0ab0i0as: Cu rrent po rtion of rev enue b onds and revenue notes $ 16,370 $ 12,410 Current portion of c apital leas e o bligatons ■ Sales tax coltection s Payable 1,065 Accounts payable 48,010 Acc need expenses 15,267 Cust omer deposit s pl us accrued Interest thereon 12,559 11,020 Over recovered gas costs 3,517 4,294 Accrued iterest on revenue bends 9 .58Q 8.790 Total a rrest 6abittles $ 106.272 R R t14g Long -farm d ebt R evenino bonds Total long-term debt Tot al liabilities 20 1,026 45,503 10,076 630 .69Q 592 195 $ 630.690 9 592.180 5 755.851 $ 703,321 19 Re tirement in progress Construction in pro gmes Net plant In service 22 Sta te me nt of Net A sse ts Years en ded June 30, 2010, and 2009 (In Thousan ds) Reahicted assets: Bond hind Otherfunds Unused band proceeds Total mslricted assets Electric Div ision 2010 2009 7,453 7,151 93 144 • 2.849 7. 548 10.144 Plant in service 619,647 592,765 Less accumulated depreciation 1298. 946) 1284.724) 320,701 308,061 335 343 16970 16675 337, 956 325229 Gas Divisio n 2010 2009 2,593 2,591 39 61 ■ ■ 2.632 2.652 253,596 245,888 174. 8041 107 409) 178,792 178,479 171 171 14 753 10.967 193.715 189.617 Water Divisio n 2010 2009 2,013 1,677 40 54 14.246 1. 161 16 301 7. 5.97 254,078 240,451 178 0071 172. 939) 175,271 166,512 151 113 14. 917 13.209 190.339 179. 834 Wa stewater Dlvlslon 2010 2009 5,684 31 ■ 4,116 49 ■ 5. 895 4165 540,937 519,183 1118 6711 1110 394) 422,266 242 84.997 408,789 171 37. 005 487.565 445,986 Capitalization and Lia bilities Years en ded June 30, 2010, and 2009 an Thousands) Electric Division 2010 2009 Other lia bilities: 1VA conserva tion pro gra m 6,432 5,215 Accrued compensated absences 3,937 3,927 Customer advances for construction 696 807 Supplemen tal en viro nmental project ■ Other 1.49x1 Total o tter liabilities 12.544 Net assets: Invested In capital assets, net of related d ebt Resblcted for . Debt service Other Unrestricted Total net assets Total liabilities and net assets ■ 1 537 11.400 195,749 178,915 4,355 4,185 93 144 68 .271 74.342 268.468 257.585 $ 480,619 71 1 G as DMston 2010 2009 ■ • 799 406 2 .584 2.319 109,264 101,799 1.503 1,246 39 61 44.570 44.502 155 .376 147 002 $ 25e I�1 $ 2 4.719 Water Division 2010 2009 ■ ■ 1,650 1,864 ■ 18 ■ ■ (51 17 1 64.4 1.894 105,292 117,710 842 40 33.028 139 .205 3 231 ,390 760 54 18,250 136,754 S 205 .470 Wastewater Division 2010 2009 • ■ 1,650 1,661 ■ ■ 300 500 88 128 2016 2.289 154,656 140 ,714 1,443 563 31 49 62 .063 68 .606 218.193 209.932 S 569.639 S 527.840 23 Statements of Cash Flo ws Years e nded June 30, 2010, and2009 (in Thousands) Electric Division 2010 2009 Gas Division 2010 2009 Water Divisio n 2010 2009 Waste water Division 2010 2009 Cash flows from capital and related fin ancing activities: Net proceeds tom line of credit • ■ • 13.000 ■ ■ ■ ■ N et proceeds from bond Issuance • 40,730 • if 25,044 • 29,740 46,120 Principal paid on re venue bands and notes payable (4,185) (4.040) (3,720) (15,570) (2,250) (2,185) (2,255) (2,255) (Increase) decrease in unused band proceeds 2,849 (2,849) • 1,859 (13,084) 14,018 • ■ Interest pa id an revenue bonds and notes payable Ac quisition and construction of plant (30,924) (32,340) (13,469) (13,176) (16,535) (12,582) (53,210) (52,402) Charge in restricted fu nds (303) (663) (2) • (337) (4) (1,947) (557) Customer advances for construction (112) 91 (94) 104 (18) • • (89) Pro ceeds received on disposal of plant 99 236 • ■ • 1 • • Principal and interest paid on capital lea se obligations Gash reeeNed from devebpers and Individu als for ca pital purposes 2.726 2.294 1. 157 671 632 498 454 556 Net cash used in capita l and related financing activities 136.038) (1. 661) 120. 386) (18. 4071 (9.693) 0.106) 141. 089) (21.306) (6,178) (5,120) (4,254) (4292) (3,142) (2,666) (14,261) (12,678) (10) (0) (4) (3) (3) (3) (3) (3) State me nts of Cash Flows (cont'd) Years e nded June 30, 2010, and 2009 (n Thousands) Elec tdc Div ision 2010 2009 Re conciliation of operating Income to net cash provided by o pera ting activities Operating income $ 13,181 $ 5,831 Adjustments to reconcile operating income to net cash pro vided by opera ting a ctivities: Depreolatian and amortization expense 21,496 Changes in operating asset s and tablllties: Accounts receivable (4,021) Inventories 95 Prepaid expenses 19 TVA conservation program receivable (1 ,252) Outer assets (2,301) Sales tax collections payable 22 Accounts payable and accrued expenses 4,381 Under recovered gas costs • Customer deposes pis accrued interest thereon 1,244 TVA conservation program payable 1,218 Other liabilities Net c ash provided by operating activities 22,749 (609) (1,041) 3 (1,092) 640 ■ 1,160 ■ 757 1,096 ■ S 34.982 ; 29.484 + .031 Gas Division Water Division Wastewater IXvisbtt 2010 2000 2010 2000 2010 2009 $ 11,707 $ 10,152 $ 5,252 $ 728 $ 22,138 $ 23,747 8,204 8,820 5,971 6,423 11,565 11,421 (708) (617) ( 478) ■ 303 (131) 137 185 (72) (323) ■ (3) 3,423 1,910 19 6 6 6 8 ■ ■ 8 (591) 356 (468) 716 23 (9) 8 • 1,235 (4,184) (17) 173 • ■ 10 1621 05 $ 34.700 $ 31 .811 26 27 Attachment MSD-MIEC 1-12a Page 36 of 43 CITY OF KNOXVILLE BILL HASLAM, MAYOR making XnoxvilT .America's Premier City j IN WHICH TO LIVE, WORK AND RAISE A FAMILY COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR ENDING JUNE 30, 2010 KNOXVILLE, TENNESSEE WWW.CITYOFKNOXVILLE,ORG Attachment MSD-MIEC 1-12a Page 37 of 43 CITY OF KNOXVILLE, TENNESSEE Notes to Financial Statements (Continued) June 30, 2010 NOTE 9 - LONG-TERM DEBT (Continued) P venue Component Units: Bonds Knoxvile Utilities Board: Electric Revenue Bonds Seres T to Y, maturing through 2032 at varying rates of interest ranging from 2.0% to 5.12% Water Revenue Bonds Series Q to V maturing through 2045 at varying rates of interest ranging from 20% to 5.5% Gas Reverie Bonds Series K to 0, maturingthrough 2045 at varying rates of interest ranging from 2.0% to 5.0% Waste Water Revenue Bonds Series 2004A 2005 A8B, 2007, 2008, 2010, 2010B maturng through 2045 at varying rates of interest rangirrg from 20% to 6.5% Metropolitan Knoxville Airport Authority: $ 142,620,000 85,675,000 84,760,000 334,005,000 $ 647,060,000 Local Govemment Public improvement Bonds, 2000 Series II -0-1 maturing through 2026. The remaining principal bears interest at 529% $ 14,435,000 Local Government Public Improvement Bonds, 2008 Series V A-1 maturing tlrrough2028. $39,830,000 bears interest ate synthetic rate of 3.137%. The remaining principal bears interest at avariablerate ( .35%atJune 30, 2010). 79,400,000 $ 93,835,000 Each of the Divisions of the Knoxville Utilities Board have pledged sufficient revenue, after deduction of all current operating expenses (exclusive of tax equivalents), to meet bond principal and interest payments of revenue bonds when due. Such bond requirements are being met through monthly deposits to the bond funds as required by the bond covenants. As of June 30, 2010, these requirements had been satisfied. -56- Attachment MSD-MIEC 1-12a Page 38 of 43 CITY OF KNOXVILLE, TENNESSEE Notes to Financial Statements (Continued) June 30, 2010 NOTE 9 - LONG-TERM DEBT (Continued) Rollover Risk - The Authority is exposed to rollover risk on the swap associated with the Series V -A-1 bonds, as the termination date (June 1, 2021) does not extend to the maturity date (May 25, 2028) of associated bonds. Once the swap is terminated, the Authority will not realize the synthetic rate offered by the swaps on the underlying bond issues. Advance and Current Refundings Primary government The City refunded Bond Series 1999 111-F with Bond Series 2009 VI -L-1 in December 2009. The refunding was undertaken to remove the insurance attachment. The interest rate swap associated with III -F was detached and continued with the VI -L-1 issuance without any changes to the interest rate terms or the swap termination date. Component units Knoxville Utilities Board KUB's Electric Division issued Series T 2001 bonds in part to retire certain existing debt and fund electric system capital improvements. Concurrent with the issuance of these bonds, KUB transferred funds to an irrevocable trust to pay the remaining maturities of principal and interest on 1993 Series Q Revenue bonds and 1995 Series R Revenue bonds, as such amounts mature. In fiscal year 2001, KUB's Electric Division issued Series U 2001 bonds to fund electric system capital improvements. During fiscal year 2004, KUB issued Series V 2004 bonds in part to retire certain existing debt and to fund electric system capital improvements. Concurrent with issuance of these bonds, KUB transferred funds to an irrevocable trust to pay a portion of the Series S 1998 revenue bonds as such amounts mature. During fiscal year 2006, KUB's Electric Division issued Series W 2005 bonds in part to retire certain existing debt and fund electric system capital improvements. Concurrent with the issuance of these bonds, KUB transferred funds to an irrevocable trust to pay a portion of the Series U 2001 bonds, as such amounts mature. KUB's Electric Division also issued Series X 2006 bonds in part to retire certain existing debt and to fund electric system capital improvements. Concurrent with the issuance of these bonds, KUB transferred funds to an irrevocable trust to pay the remaining maturities of principal and interest on the Series S 1998 revenue bonds. During fiscal year 2009, KUB's Electric Division issued Series Y 2009 bonds to fund electric system capital improvements. The outstanding principal balances on defeased bond issues were $74.1 million at June 30, 2010. KUB's Gas Division issued the issued Series 12001 bonds in part to retire certain existing debt. Concurrent with issuance of these bonds, KUB transferred funds to an irrevocable trust to pay a portion of the 1993 Series F Revenue bonds and 1997 Series G Revenue bonds, as such amounts mature. During fiscal year 2010, Series 12001 was defeased with the issuance of Series 0 2010 bonds. During fiscal year 2002, KUB's Gas division issued Series J 2001 bonds to fund capital improvements. During fiscal year 2004, KUB issued Series K 2004 bonds in part to retire certain existing debt. Concurrent with the issuance of these bonds, KUB transferred funds to an irrevocable trust to pay a portion of the Series H 1998 revenue bonds as such amounts mature. During fiscal year 2006, KUB's Gas Division issued Series L 2005 bonds in part to retire certain existing debt. Concurrent with the issuance of these bonds, KUB transferred funds to an irrevocable trust to pay a portion of the Series J 2001 bonds, as such amounts mature. KUB's Gas Division also issued Series M 2006 bonds in part to retire certain existing debt and to fund capital improvements. Concurrent with the issuance of these bonds, KUB transferred funds to an irrevocable trust to pay the remaining maturities of principal and interest on the Series H 1998 revenue bonds. During fiscal year 2008, KUB issued Series N-2007 to fund gas system capital improvements. During fiscal year 2010, KUB issued Series 0 2010 bonds to retire Series 12001 bonds. The outstanding principal balances on defeased bond issues were $60.7 million at June 30, 2010. - 62 Attachment MSD-MIEC 1-12a Page 39 of 43 CITY OF KNOXVILLE, TENNESSEE Notes to Financial Statements (Continued) June 30, 2010 NOTE 9 - LONG-TERM DEBT (Continued) KUB's Water Division issued the Series 0 2001 bonds to retire certain existing debt. Concurrent with issuance of these bonds, KUB transferred funds to an irrevocable trust to pay a portion of the 1992 Series L Revenue bonds and 1993 Series M Revenue bonds, as such amounts mature. During fiscal year 2010, Series 0 2001 was defeased with the issuance of Series V 2010 bonds. During fiscal year 2001, KUB's Water division issued Series P 2001 bonds to fund capital improvements. During fiscal year 2004, KUB issued Series Q 2004 bonds in part to retire certain existing debt. Concurrent with the issuance of these bonds, KUB transferred funds to an irrevocable trust to pay the remaining maturities of principal and interest on the Series N 1998 revenue bonds as such amounts mature. During fiscal year 2006, KUB's Water Division issued Series R 2005 for the purpose of funding improvements and extensions to the water system. KUB's Water Division also issued Series S 2005 in part to retire certain existing debt. Concurrent with the issuance of these bonds, KUB transferred funds to an irrevocable trust to pay a portion of the Series P 2001 bonds, as such amounts mature. During fiscal year 2008, KUB issued Series T 2007 bonds to fund water system capital improvements. During fiscal year 2010, KUB issued Series U 2009 bonds to fund water system capital improvements. KUB's Water Division also issued Series V 2010 bonds to retire Series 0 2001 bonds. The outstanding principal balances on defeased bond issues were $18.7 million at June 30, 2010. During fiscal year 2002, KUB's Wastewater Division issued the Series 2001 bonds in part to retire certain existing debt. Concurrent with the issuance of these bonds, KUB transferred funds to an irrevocable trust to pay a portion of the 1993 Series Q revenue bonds as such amounts mature. During fiscal year 2010, Series 2001 was defeased with the issuance of Series 2010B. KUB's Wastewater Division also issued Series 2001A to fund capital improvements to the wastewater system. During fiscal year 2004, the Wastewater Division issued Series 2004A bonds to fund Wastewater capital improvements. During fiscal year 2006, KUB's Wastewater Division issued Series 2005A for the purpose of funding improvements and extensions to the wastewater system and to pay off a previously issued $30 million revenue anticipation note (line of credit), which was used to fund capital improvements to the wastewater system. KUB's Wastewater Division also issued Series 2005B in part to retire certain existing debt. Concurrent with the issuance of these bonds, KUB transferred funds to an irrevocable trust to pay a portion of the Series 1998 bonds and Series 2001A bonds, as such amounts mature. During fiscal year 2008, KUB's Wastewater Division issued Series 2007 bonds in part to pay off the outstanding balance on a previously issued line of credit, and to fund Wastewater capital improvements. During fiscal year 2009, KUB's Wastewater Division issued Series 2008 bonds to fund wastewater system capital improvements. During fiscal year 2010, the Wastewater Division issued Series 2010 bonds to fund capital improvements. These bonds were issued as federally taxable Build America Bonds with a 35 percent interest payment rebate to be received from the United States Government for each interest payment. KUB's Wastewater Division also issued Series 2010B bonds to retire Series 2001 bonds. The outstanding principal balances on defeased bond issues were $31 million at June 30, 2010. Metropolitan Knoxville Airport Authority During 2009 the Authority issued Series V -A-1 bonds. Proceeds totaling $83,880,000 were used to refund the remaining balance of the Series III -A bonds, resulting in a loss of $1,214,365 on the refunding, which has been deferred and is being amortized over the remaining lives of the respective refunded bonds. The remaining proceeds were used to pay bond issue costs of $765,000, which are being amortized over the life of the bonds. In connection with the Series V -A-1 bonds, the Authority has entered into a Reimbursement Agreement with Branch Banking and Trust Company who has issued an irrevocable letter of credit in an amount not to exceed $85,758,140 set to expire March 2013. -63- Attachment MSD-MIEC 1-12a • • Just a flick afc switch... 2010 .lnn(IA Report Memphis Light, Gas and Water DiIision Attachment MSD-MIEC 1-12a Page 41 of 43 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2010 AND 2009 (Dollars in Thousands) (Continued) 8. Debt (continued) During 2010, the Electric Division issued $460,050 of Series 2010 bonds to advance refund a portion of the outstanding Electric System Subordinate Revenue Bonds, Series 2003A, and to pay certain costs of issuance of the Series 2010 Bonds. The refunding was undertaken to reduce total future debt service payments. The 2010 Series Bonds have a net present value benefit of $16,541, with a cash savings of $18,809 over the life of the bonds. The first principal payment is to be made December 1, 2014 and thereafter annually with a final maturity date of December 1, 2018. The Series 2010 Bonds bear interest at annual fixed rates ranging from 2.50% to 5.00%. The Series 2010 Bonds are not subject to optional redemption, but will be subject to extraordinary redemption prior to maturity. See Note 10. During 2008, the Electric Division issued $96,930 in revenue bonds to refund $100,000 of Series 2003B revenue bonds. The refunding was undertaken to convert the 2003B auction rate securities into fixed rate securities of the same maturity. The Series 2008 revenue bonds bear interest at annual fixed rates ranging from 4.00% to 5.00%. During 2003, the Electric Division issued $1,292,170 of Series 2003A and $100,000 of Series 2003B revenue bonds to prepay future power purchases from TVA under the Supplement. See Note 10. The Series 2003A revenue bonds bear interest at annual fixed rates ranging from 2.00% to 5.00%. The Series 2003B revenue bonds were auction rate securities, and bore interest for 35 -day auction periods. The Series 2003B revenue bonds were refunded in 2008, as discussed above. During 2002, the Electric Division issued $41,625 in revenue bonds to refund $41,905 of Series 1993 revenue bonds. The refunding was undertaken to reduce total future debt service payments. The reacquisition price exceeded the net carrying value of the old debt by $462. This amount is netted against the carrying value of the new debt and is being amortized over the life of the new debt, which was shorter than the life of the refunded debt. MLGW's Electric Division bond covenants require that for Series 2002 Bonds, the ratio of net revenues available for debt service to the maximum amount of principal and interest for any fiscal year ("electric coverage") must not be less than 1.20. For Series 2003A, 2008, and 2010 Bonds, the ratio of net revenues to maximum amount of principal and interest for any fiscal year must not be less than 1.00. The composite electric coverage as of December 31, 2010, was 1.91. The Water Division bond covenant requires that the ratio of net revenues available for debt service to the maximum amount of principal and interest for any fiscal year ("water coverage") must not be less than 1.20. Water coverage as of December 31, 2010, was 8.24. MLGW buys and stores natural gas during the off-season (summer) to use in the upcoming winter months. In July 2009, the Gas Division issued a revenue anticipation note in the amount of $15,000 with a yield rate of 1.25% to provide funds for the purchase of gas and related storage. The note was repaid in full on March 31, 2010. N-32 Attachment MSD-MIEC 1-12a Page 42 of 43 MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 The following management discussion and analysis (MD&A) for Memphis Light, Gas and Water Division ("MLGW") is intended as an introduction and should be read in conjunction with the financial statements and the notes that follow this section. Overview of the Financial Statements MLGW's financial statements are comprised of the Balance Sheets; the Statements of Revenues, Expenses and Changes in Net Assets; the Statements of Cash Flows; and the accompanying Notes. This report also contains required supplementary information in addition to the basic financial statements. The Balance Sheets report the assets (resources) and liabilities (obligations), with the difference being the net assets. Over time, increases or decreases in net assets may serve as an indicator of whether the financial position is improving or declining. The Statements of Revenues, Expenses and Changes in Net Assets show how net assets changed during the year based on revenues and expenses. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. The Statements of Cash Flows report changes in cash and cash equivalents summarized by net changes from operating, capital, and related financing and investing activities. The Notes provide additional. detailed information to support the financial statements. The statements present the current year and preceding year for comparison. MLGW is an Enterprise Fund of the City of Memphis, Tennessee. MLGW's statements are provided to the City of Memphis and reformatted to conform to the City's format for Enterprise Funds. The City of Memphis incorporates MLGW's statements ending December 31 into its statements ending June 30. By Charter, MLGW is required to account separately for its electric, gas and water divisions. Costs are allocated to the three divisions in a manner that ensures results of operations and changes in financial position are presented fairly and consistently from year to year. Bond Ratings In March 2010, MLGW refunded the entire portion of the callable 2003A Electric System Revenue bonds. During this process, MLGW received credit upgrades from Fitch Ratings ("Fitch"). Fitch raised its credit ratings on all MLGW outstanding debt which included the 2002, 2003A and 2008 series bonds from AA to AA+. Subsequently in April 2010, MLGW was recalibrated to an AAA rating by Fitch. Moody's Investor Service ("Moody's") and Standard & Poor's ("S&P") reaffirmed their respective ratings on all outstanding electric system revenue bonds. The Water Division continues to hold the highest possible bond ratings which are Aaa from Moody's and AAA from S&P. The Gas Division currently has no debt that is credit rated. When issuing bond ratings, agencies typically look at financial operations, management practices, rates, and debt ratios. Higher ratings result in the ability to issue and refinance debt at favorable rates compared to companies with lower ratings. M-1 Attachment MSD-MIEC 1-12a Page 43 of 43 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2010 AND 2009 (Dollars in Thousands) (Continued) 8. Debt Long-term debt as of December 31, 2010 and 2009 consists of the following: Interest Rates Electric Division: Electric System Revenue Bonds: Series 2002, due serially 2009-2010 Series 2003A, due serially 2009-2018 Series 2008, due serially 2009-2018 Series 2010, due serially 2014-2018 Premium. on revenue bonds Unamortized deferred cost on bond refunding Total Note payable with bank, due serially through 2010 Less: current portion of bonds and notes payable Water Division: Revenue Refunding Bonds: Series 1998, due serially 2009-2012 Premium on revenue bonds Unamortized deferred cost on bond refunding Less: current portion of bonds and notes payable 4.00-5.00% 3.00-5.00% 4.00-5.00% 2.50-5.00% 7.58% 4.15-5.25% 2010 291,325 96,930 460,050 70,961 (21,559) 2009 $ 5,855 849,380 96,930 49,930 (56) 897,707 1,002,039 - 1,499 897,707 1,003,538 (90,420) (93,848) $ 807,287 $ 909,690 $ 1,625 $ 3,165 2 7 (15) (45) 1,612 3,127 $ 1,612 $ 3,127 Principal payments on bonds are due annually on January 1 or December 1. Debt service requirements, including notes payable, as of December 31, 2010, are as follows: 2011 2012 2013 2014 2015 2016-2018 Total Electric Division Principal Interest 90,420 95,190 99,700 102,765 107,775 352,455 Water Division Principal Interest 41,462 43 37,027 1,625 43 32,290 27,431 22,417 34,483 $ 848,305 $ 195,110 $ 1,625 $ 86 MLGW, at its option, may redeem bonds prior to maturity at premiums and prices specified in the indentures. The Series 2003A and Series 2008 bonds are subject to mandatory redemption upon early termination of the Supplement to the Power Contract ("Supplement") with TVA as discussed in Note 10. Bonds are secured by the pledge of the respective division's revenues, by funds established by the bond resolutions and, in certain circumstances, proceeds from the sale of certain division assets. N-31