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<br />On July 10,2003 WESTERN submitted its second loan applicJtion for $5,88 million, A copy of
<br />this application is attached.
<br />
<br />in terest Rate
<br />
<br />Bec;;,.use of the unusual situation of loaning rnoncy to a federal entity~ the Board began discussing
<br />the interest rate issues smronnding a loan to WESTERN in July! 999, The Board decided that
<br />because fcder"l power customers eornprise municipalities and rural customers the most
<br />appropriate ,merest rate wonld he a blend of the Board's Agr-ieultuntl and Municipal Middle-,
<br />Income: rate,
<br />
<br />In 2001, when the loan was authorized, Ihe Agricultural mlc was 3,5 percent and Ihc Municipal
<br />tvriddlc~lncornc rate ,-vas ),5 percent. Sinlply blending these hvo rates resulted in an interest rate
<br />of 4,5 percent Ihal was applied to the loan,
<br />
<br />lfthis s;:m:lC rationale is applled to this loan application? the interest rate \\ilU be 3.25 percent (a
<br />blend of our 2,5 percent agr,culturill rate and our 4 perccnt Municipal Middle-income rate),
<br />
<br />Collateral and Other Terms
<br />
<br />The ban to WESTERN will be s,;cured by the filII liltth and credit ofUnitcd Slales government
<br />pursuant to -' 1 l),S.C.A, 3ln, that pledges that the federal government will pay its obligalions
<br />on public debt.
<br />
<br />Thc tern] of' the loan will be 30-years, lntct'est will begin accruing fram the date the flmds are
<br />disbursed, but no principal payment \viII be due unlil 20120 1t was agrt;cd that begimling
<br />repayment in 20]2 would mini,mlze the impact of rep{~yn1ent on po\vcr cw~tOlners, The accrued
<br />,nterest would bc added 10 the principal and tlw loan amortizcd over 30-years stRlling in 2012,
<br />WESTERN may elect to repay the eWCB in one lump sum at any time or make periodic
<br />f)uyrrlerHs. There \votdd be no prepayment penalties.
<br />
<br />Trl(~ pa.rties agreed dllring the process of drafting and passing the federal authorization that a
<br />,}Y'ovision should be included a1 future contracts that 1V0uld allow WESTERt"i to elect to !lol
<br />(emil,] loan payment lor the purpose ofminiminng the impact of loan repayment on SLCA-lP
<br />"ates, This provision shall specifY a date by which WESTERN must not.fv the CWCB of its
<br />intcnt to nOl. remit a loan payment and shaIl provide that interest shaIl continue to accrue, Latc
<br />charges would not apply,
<br />
<br />The contract ITlUst also recognize that \VESTERN's paynlcl1l,s arc contingent upon federal flmds
<br />being appropriated, budgeted, and otherwise madc available, This is standard term in all fedcral
<br />contracts, A [](m-payment would not reduce or eliminate WESTERN's ()blig~llions to repay
<br />principal and inferest.
<br />
<br />Recommendation
<br />
<br />\Ve rccomrncnd upproving a loan frorn the Colorado River Recovery Prognml Loan Fund in an
<br />amoant up to S5,9388 (S5,88 million for project costs and $58,800 for the one percent loan
<br />originatlon f:~e in accordance vvxth C\VCB Loan Policy #16) \0 the \Vesten1 Area Power
<br />,"-dministration Ii)!' the purpose of' constructing capital projects ll!1der the Upper Colorado and
<br />San Junn E.ndangered Fish Recol,icry Prograros in accordance \ViOl PI. 106-392.
<br />
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<br />
<br />tJ,S,C,A,3123.
<br />
<br />Cl~ll~r,1.do IN .W'l. Cnn$t-::-:-v:gjcn Hoard
<br />Floed Fra:-t:C1.ic~ 9 '"Vc-.iu PrGJect PL/!l\1iIlg and HJ}3.r.cirrg 6 SUl'cU11 ;l"d Llkc Frotecl!cJf1
<br />\,'it11Ci' S~~rrl)" Pf(.';t::c!icn 4<.CoflSft"(;-qierl Pb.rwing
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