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Grand Valley Water Users Association Agenda Item 14c November 16-17, 2016 Board Meeting (Updated November 17, 2016) Page 4 of 5 increase "water-to-wire" efficiency from 54% to 82.5% and the maximum generation output from 2.5 MW to 4.1 MW without requiring additional flows. The cost associated with this alternative is $5,200,000 as shown in Table 2. The Association and District have a current PPA with Xcel Energy at a rate of $0.04 per kWh up to a production level of 3.5 MW. The PPA is set to expire on December 31, 2020 though it is hoped the PPA can be renegotiated and extended prior to expiration. The current avoided cost rate for Xcel is $0.03 per kWh and this lower value was conservatively used to analyze the economic feasibility for year 2021 onward, though at the higher 4.1 MW production level. TABLE 2: PROJECT COST Task Cost Phase 1 75% Engineering Design $540,000 Phase 2 100% Engineering Design Equipment Order $2,075,000 Rewind Generators Substation/Electrical Work Phase 3 Penstocks $1,980,000 Equipment Install Equipment Startup Xcel Energy Review Cost $50,000 Subtotal $4,645,000 Contingency $555,000 TOTAL $5,200,000 Permitting: The GVPP is permitted through an existing Lease of Power Privilege (LOPP) between Reclamation and the Association and District. Reclamation owns the GVPP and the underlying land and will thus take the lead to ensure compliance with the National Environmental Policy Act (NEPA), National historic Preservation Act (NHPA), and Endangered Species Act (ESA). Compliance issues are not anticipated as this is a plant rebuild. Schedule: Phase 1 is scheduled to be completed by January 2017, Phase 2 by January 2018, and Phase 3, with GVPP being fully operational, by July 2018. Financial Analysis The Project qualifies for the hydroelectric interest rate of 2.0% for a 30-year term. The Association is requesting a loan to cover 92% of its share of Project cost that are not otherwise covered by alternate sources of funds. Currently, the Association and District have secured $1,500,000 in alternate funds composed of a grant commitment from the Upper Colorado River Recovery Program. The Association and District are seeking to secure a CWCB loan for the remaining construction cost to ensure the Project is fully funded, but will continue to seek additional sources of grant funds to reduce the final loan amount. Other sources of funds that will be explored include: a WSRF grant from the CWCB, a Species Conservation Trust Fund grant from CWCB ($400k currently approved but not yet contracted), a