C150064 approval letter - Laserfiche WebLink

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� Interest Rate The Board discussed interest rate issues surrounding a future loan to WESTERN in July 1999. The Board discussed the fact that federai power customers are a mixture of municipalities and rural customers and therefore the most appropriate interest rate would be a blend of the Board's Agricultural and Municipal Middle-Income rate. In 1999, the Agricultural rate was 3.75 percent and the Municipal Middle-Income rate was 4.75 percent. A blend of these two rates would have resulted in an interest rate of 4.25 percent. In 2001, the Agricultural rate is 3.5 percent and the Municipal Middle-Income rate is 5.5 percent. Simply blending these two rates will result in an interest rate of 4.5 percent. The 4.5 percent interest rate is higher than power customers anticipated based on the 1999 Board discussion. As a result, members of the Colorado River Energy Distributors Association may consider preparing an analysis to demonstrate that rural users predominate over municipal users and therefore a lower rate is justified. Collateral The loan to WESTERN will be secured by the full faith and credit of United States government pursuant to 31 U.S.C.A. 3123, that p(ed�es that the federal government will pay its obligations on public debt. Term � Based on discussions with power customers, their preference is a loan with a 30-year term. Interest could begin accruing from the date the funds are disbursed, but no principal payment would be due until 2012. The accrued interest would be added to the principal and the loan amortized over 30- years starting in 2012. WESTERN may elect to repay the CWCB in one lump sum at any time or make periodic payments. There would be no prepayment penalties. A provision in the contract shall also be included that will allow WESTERN to elect to not remit a loan payment for the purpose of minimizing the impact of loan repayment on SLCA- IP rates. This provision shall specify a date by which WESTERN must notify the CWCB of its intent to not remit a loan payment and shall provide that interest shall continue to accrue. Late charges would not apply. The contract must also recognize that WESTERN's payments are contingent upon federal funds being appropriated, budgeted, and otherwise made available. A non-payment would not reduce or eliminate WESTERN's obligations to repay principal and interest. Recommendation We recommend approving a loan not to exceed $5.5 million to the Western Area Power Administration for the purpose of constructing capital projects under the Upper Colorado and San Juan Endangered Fish Recovery Programs in accordance with PL 106-392. We recommend a term of 30-years commencing on an agreed upon date in 2012. Interest shall accrue until 2012 and be included in the principal. This amount shall then be amortized � over 30-years, with a payment being due each year. Fiood Protection • Water Project Planning and Financing • Stream and Lake Protection Water Supply Protection • Conservation Planning