Guam § 8113 - [Untitled Section].

§ 8113. [Untitled Section].

(a) Legislative Findings and Intent.

(1) I Liheslaturan Guåhan finds that § 8203 of Title 12 of the Guam Code Annotated provides

that the Guam Power Authority (GPA) is authorized to incur indebtedness by the issuance of revenue

bonds with the approval of I Maga’håga/Maga’låhi to raise funds for the purpose of establishing the

electric power system of GPA, or of acquiring lands for the system, or of acquiring, constructing,

improving, equipping, maintaining, repairing, renewing, replacing, reconstructing or insuring the

system, or any part thereof, or for the purpose of refunding any such bonds, or for any combination of

such purposes.

(2) Section 12004 of Title 12 of the Guam Code Annotated provides that GPA shall not enter into

any contractual agreements or obligations (including bonds) that could increase rates and charges prior

to the written approval of the Guam Public Utilities Commission (the GPUC).

(3) Section 50103 of Title 12 of the Guam Code Annotated provides that public corporations of

the government of Guam, including GPA, shall issue bonds and other obligations only by means of,

and through the agency of the Guam Economic Development Authority (GEDA), and that GEDA shall

not sell any bond without the approval by I Liheslaturan Guåhan of the terms and conditions of the

bonds.

(4) The Consolidated Commission on Utilities (CCU) has been exploring opportunities to reduce

debt service costs for nearly a decade and the primary point of focus has been the Marianas Energy

Corporation (MEC) plant contract which is financed over a twenty (20) year period even though the

useful life of the plant is estimated to be forty (40) years. This short-term financing has placed a high

burden on existing ratepayers to repay this debt faster than usual, with the highest debt payments

emerging between 2012 and 2018.

(5) While the CCU has concluded that the MEC contract cannot be refinanced on terms beneficial

to GPA customers, GPA has developed an alternative finance strategy to accomplish the same

purposes as the savings from an MEC refinancing wherein GPA would refinance and restructure its

currently outstanding bonds in order to reduce debt service costs by approximately $8 Million Dollars

per year through 2018, at which time the Independent Power Producer contracts, including the MEC

contract, will terminate.

(6) This estimated $8 Million Dollars annual savings would provide current relief to ratepayers

when they need it most, and significantly reduce the impact of current rate increases on GPA

customers. The GPUC recently approved a May 1 base rate increase that would yield an estimated

$9.1 Million Dollars per year in revenues to GPA. The proposed refinancing and restructuring

contemplated by this legislation would effectively roll back nearly all of the recently approved rate

hike.

(7) Based on historic low interest rates and current market conditions, GPA expects to be able to

refinance certain maturities of its outstanding 1993 Series A and 1999 Series A revenue bonds for debt

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service savings, but in any event desires to refinance certain maturities of such bonds in order to

restructure debt service in a manner that results in more level total payments for capital costs, taking

into account GPA’s current contract with Marianas Energy Company, which requires much higher

capital payments through January, 2019.

(8) GPA entered into forward delivery agreements with Lehman Brothers and Bank of America

for the investment of certain funds relating to its outstanding 1993 Series A and 1999 Series A revenue

bonds, and it is necessary and desirable to terminate and retire one (1) or more of those agreements in

connection with such refinancing and restructuring of the outstanding 1993 Series A and 1999 Series

A revenue bonds.

(9) As a result of the potential savings to ratepayers, on June 5, 2012, the Consolidated

Commission on Utilities (the CCU) adopted a resolution relative to (1) approving the issuance of

additional senior revenue bonds to refund all or a portion of the outstanding Guam Power Authority

Revenue Bonds 1993 Series A and 1999 Series A, and (2) approving the issuance of subordinate

revenue bonds to terminate and retire all or a portion of the outstanding GPA obligations under the

forward delivery agreements.

(10) In order to benefit ratepayers, I Liheslaturan Guåhan has determined to approve the issuance

of revenue bonds by GPA for the purposes described in subparagraph (1) of the preceding paragraph

and the issuance of subordinate revenue bonds by GPA for the purpose described in subparagraph (2)

of the preceding paragraph, all subject to approval by I Maga’hågan/Maga’lahen Guåhan, the GPUC

and the Board of Directors of GEDA in accordance with law.

(b) Approval of the Terms and Conditions of GPA Refunding Bonds. I Liheslaturan Guåhan, pursuant

to § 50103(k) of Title 12 of the Guam Code Annotated, hereby approves the terms and conditions of the

issuance of senior revenue bonds by GPA for the purpose of refunding all or a portion of GPA’s outstanding

1993 Series A and 1999 Series A revenue bonds (all or such portion of such revenue bonds being referred

to herein as the “prior bonds”) in accordance with the following requirements, limitations, terms and

conditions:

(1) The aggregate principal amount of the refunding bonds shall not exceed the sum of (i) the

amount determined in accordance with § 8229 of Title 12 of the Guam Code Annotated, plus (ii) any

additional amount needed to provide for a deposit to the debt service reserve in connection with the

issuance of the refunding bonds.

(2) All obligation of GPA to pay debt service on, and the redemption price of, the prior bonds

shall be discharged concurrently with the issuance of the refunding bonds. Thereafter, the prior bonds

shall be payable solely from and secured solely by an escrow established for such purpose in

accordance with GPA’s existing bond indenture.

(3) The final maturity of the refunding bonds shall not be greater than the final maturity of the

1999 Series A revenue bonds.

(4) Such bonds shall be issued and sold pursuant to GPA’s existing bond indenture, shall be held

by the Trustees of the existing bonds and shall be in compliance with the provisions of Chapter 8 of

Title 12 of the Guam Code Annotated, including approval by the CCU and by I

Maga’hågan/Maga’låhen Guåhan as provided therein.

(5) The sale of the bonds shall be approved by the Board of Directors of GEDA as provided by

Chapter 50 of Title 12 of the Guam Code Annotated and the terms and conditions of the issuance of

the bonds shall be approved by the GPUC as provided by Chapter 12 of Title 12 of the Guam Code

Annotated.

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(6) GPA’s outstanding 1993 Series A and 1999 Series A revenue bonds maturing in calendar

years 2012 through 2018, inclusive, may be refinanced with a portion of the proceeds of the bonds

approved in this Section, provided that such refinancing results in GPA’s ability to petition the GPUC

to reduce rates during the years of the maturities being refinanced without such rate reduction resulting

in the violation of any bond indenture covenants.

(7) Any of GPA’s outstanding 1993 Series A and 1999 Series A revenue bonds may be refinanced

with a portion of the proceeds of the bonds approved in this Section, provided that the present value

of debt service for each maturity of such refinancing bonds shall not exceed the present value of debt

service for each maturity of such refinanced bonds, using the yield on the refinancing bonds as the

discount rate.

(c) Approval of the Terms and Conditions of GPA Subordinate Revenue Bonds to Terminate and

Retire the Obligations of GPA under Certain Forward Delivery Agreements.

(1) I Liheslaturan Guåhan, pursuant to § 50103(k) of Title 12 of the Guam Code Annotated,

hereby approves the terms and conditions of GPA subordinate revenue bonds in a principal amount

not to exceed Twenty Million Dollars ($20,000,000) for the purposes listed in Subsection (3) of this

Section, provided, that such bonds have a final maturity not later than October 1, 2027, bear interest

at such rate or rates and are sold for such price or prices as shall result in a net interest cost not

exceeding the limitation provided by § 8214 of Chapter 8 of Title 12 of the Guam Code Annotated, as

amended, are issued and sold in accordance with the provisions of Chapter 8 of Title 12 of the Guam

Code Annotated, including approval by the CCU and by I Maga’hågan/Maga’låhen Guåhan as

provided therein.

(2) The sale of the subordinate bonds shall be approved by the Board of Directors of GEDA as

provided by Chapter 50 of Title 12 of the Guam Code Annotated and the subordinate bonds shall be

approved by the GPUC as provided by Chapter 12 of Title 12 of the Guam Code Annotated.

(3) The proceeds of the subordinate bonds may be applied to pay for the costs of issuance of the

subordinate bonds, for credit enhancement therefore, to provide for reserves and to pay the costs of

terminating and retiring GPA’s obligations under the forward delivery agreements for the investment

of certain funds relating to its outstanding 1993 Series A and 1999 Series A revenue bonds, subject in

each case to approval by the GPUC of such purpose in accordance with Chapter 12 of Title 12 of the

Guam Code Annotated.

(d) Prompt Ratepayer Relief. Within thirty (30) days after the issuance of the bonds approved by this

Section, GPA shall petition the PUC for a resetting of GPA’s revenue requirement that takes into account

the savings in debt service which results from the refunding. The intention of the I Liheslatura is to provide

prompt ratepayer relief that takes into account the savings resulting from the refunding.