aidea rating agency update- march 2013

Alaska Industrial Development and Export Authority

March 12-13, 2013

Revolving Fund Credit Update and Strategic Outlook

1

Table of Contents

I. Introduction and Strategic Outlook

II. Revolving Fund Credit Foundations

III. Increasing Development Project Activity

IV. Conclusion

2

Participants

Alaska Industrial

Development and

Export Authority

Ted Leonard, Executive Director

Valorie Walker, Deputy Director – Finance

James Hemsath, Deputy Director – Project Development and Asset Management

Brenda Applegate, Controller

Western Financial

Group Pat Clancy, Financial Advisor

I. Introduction and Strategic Outlook

4

Management and Organizational Update

Introduction and Strategic Outlook

Deputy Director,

Commercial

Finance Chris Anderson

Deputy Director,

Infrastructure

Development Mark Davis

Deputy Director,

Project Dev. and

Asset Mngmt James Hemsath

Deputy Director,

Finance Valorie Walker

Business

Development

Officer Michael Catsi

Human

Resources

Manager Aaron Rhoades

Executive

Director Ted Leonard

Current AIDEA Organization Chart

Changes During 2013

Recently added a new “Deputy Director – Infrastructure Development” position

— Taking the lead on infrastructure development projects and innovative investment alternatives

Valorie Walker retiring at the end of May 2013

Hired Michael Lamb as the new “Deputy Director – Finance and Operations”

— Michael has been the CFO of the Fairbanks North Star Borough for the last 14 years

— New position will be responsible for:

– Management and coordination of the internal operations of the Authority

– Accounting and funds management for AIDEA & AEA assets

– Managing the Finance Division which includes investments, accounting, procurement, budgeting, and bonding

5

Revolving Fund: Summary Credit Update

1 Excluding restricted assets and assets related to the Snettisham Hydroelectric Project. 2 Includes government sponsored securities and securities explicitly guaranteed by the U.S. government.

³ Originated number does not include funding for Valley Utilities loan, but the dollar figure includes the portion allocable to 2012. 4 Comprised of $17.67 million in minimum receipts and $7.33 million in tonnage sensitive payments and the zinc price escalator. 5 Excludes Snettisham Hydroelectric Project.


Revolving Fund

Bond Security

Investment

Portfolio

Loan

Program

Development

Projects

Continued Financial

Strength of Revolving

Fund

AIDEA’s principal fund for core business activities: development projects, substantial investment

portfolio and loan program

Each core activity produces substantial cash flow

Secured by full faith and credit pledge of the revenues and assets of the Revolving Fund1

FY 2012 Debt Service Coverage 7.70x (covenant coverage)

30-Jun-2012 Ratio of Cash and Investments to Outstanding Debt is 4.11x5

Professionally managed with a focus on safety, liquidity and return

67% in AA or above investments²

Weighted average duration of 3.6 years

99.9% current (less than 90 days past due) as of 30-Jun-2012

Continued conservative underwriting practices drive strong performance

Originated 17 loans for $38.2mm in FY2012³

Diverse portfolio in terms of sector, geography, banks and borrowers

DMTS revenues remain strong and stable at $25mm in FY20124

Exploring ways to expand or continue use of other existing projects

Plans to grow development project portfolio

6

AIDEA’s strategic plan envisions increased activity across a range of businesses

— Expansion of loan participation program, including into energy projects

— Proactive solicitation and management of project opportunities

— Participation in high priority state resource development opportunities

— Develop new approaches to participate in projects (direct loans and LLC investments)

— Potential increased leverage in Revolving Fund to accommodate growing asset portfolio

— Potential to develop new credits beyond the Revolving Fund

The Governor and Legislature have provided AIDEA with several new tools to support its mission

— Ability to make direct loans and provide loan / bond guarantees from the Revolving Fund to facilitate New Markets

Tax Credit financings

— Ability to own a portion of an LLC

— Creation of Sustainable Energy Transmission and Supply Fund (“SETS”), separate from the Revolving Fund, to

invest in energy projects by making loan / bond guarantees and direct loans

AIDEA is also exploring enhancements and expansions to its existing tools

— Ability to make direct loans for development projects (HB74 / SB23)

— AIDEA as ‘clearinghouse’ for innovative investment alternatives and funding arrangements

— Potential creation of an Infrastructure Fund, managed by AIDEA

— Increasing capitalization and initiation of programs in the SETS Fund

AIDEA’s Strategic Plan and Recent

Developments

The State is encouraging AIDEA to take a proactive role in projects through additional capitalization

and other tools


7

AIDEA is Formalizing and Enhancing its Existing

Financial Management Approach

AIDEA has a history of careful and prudent financial decision making

— Debt

— Investment Portfolio

— Loans and Projects

As AIDEA contemplates increased project activity, growing its balance sheet, and the use of new tools, it is

carefully reviewing policies and practices to manage the growth in a responsible manner

— AIDEA will continue to manage its programs to maintain the highest possible ratings

Examples of policy reviews being undertaken include:

— Overall funding objectives and use of available funding tools

— Investment portfolio policies and review process

— Loan participation objectives, standards and performance monitoring

— Development program investment standards, project review process and portfolio analysis

— Equity investment parameters

— Loan / bond guarantee parameters and credit standards

— Debt and funding objectives and policies

AIDEA also remains committed to proactive communication with the rating agencies and investors


II. Revolving Fund Credit Foundations

9

Summary of Revolving Fund Bond Security

Investment Portfolio

30-Jun-2012 Cash and Investment

Securities: $364.1 million

Conservative investment policy in

place

Portfolio focus on quality and liquidity

Investment policy change allows non-

U.S. dollar denominated investments

Historical Coverage Components (FYE 30-Jun)

6.06x9.30x

9.00x

8.96x 7.70x

0

2

4

6

8

10

$0

$50

$100

$150

2008 2009 2010 2011 2012

Millions

Loan Principal & Interest Investment Earnings Development Project Receipts

Loan Program

30-Jun-2012 Loans Outstanding:

$468.8 million

Conservative credit criteria

Portfolio quality is a key focus

99.9% of loans are current (less than

90 days past due)

Development Projects

30-Jun-2012 Total Net Book Value:

$329.6 million

Cash Receipts FY ending

30-Jun-2012

— Red Dog $25.0 million

— Fed Ex $3.0 million

Revolving Fund Credit Foundations

The Revolving Fund Bonds are secured by a full faith and credit pledge of the revenues and assets of the

Revolving Fund

Debt S

erv

ice C

overa

ge

10

AIDEA’s Revolving Fund Bond Security is

Bolstered by a Strong Legal Framework

General obligation, full faith and credit pledge of Revolving Fund

AIDEA Coverage Covenant: Shall not borrow, make loans or expend any funds (other than necessary O&M or

principal and interest on Revolving Fund Bonds) if it would:

AIDEA Liquidity Covenant: Maintain, in the Revolving Fund, cash equivalents1 maturing within one year in an amount

at least equal to the lesser of $50,000,000 or 25% of Revolving Fund Indebtedness Outstanding

— Revolving Fund cash & cash equivalents were $51.2 million as of 30-Jun-20122

(Including $15 million held in actively managed portfolios)

Additional Bonds Test: Must show 1.50x MADS to issue new money bonds

State Law Non-Impairment Covenant – In AS 44.88.130, State has pledged and agreed not to limit the Authority’s

powers to fulfill the terms of the resolution nor will the State impair the rights of Bondholders

1 As defined in the Revolving Fund Bond Resolution. 2 25% of outstanding debt as of FY E2012 represents $22 million.


Key Security Provisions

As of 30-Jun-2012

— Cause Revolving Fund coverage to fall below 1.50x 7.70x

— Cause unrestricted Revolving Fund surplus to be below lesser

of $200,000,000 or total outstanding Revolving Fund Bonds

and in no event less than $100,000,000

$1,039 million

11

AIDEA’s Cash & Investment Portfolio Carefully and Professionally Managed

Overview

Total FYE 2012 Cash & Investment Portfolio: $364.1 million

Fund management balance between external and internal

External goals: Safety and return

Internal goals: Safety and liquidity

Investment Policy – Internal Funds

Debt instruments issued or guaranteed by the U.S.

government, its agencies and instrumentalities and

Government-sponsored enterprises (GSEs)

Money market funds and repurchase agreements

collateralized by U.S. Treasury and agency securities

Other investments specifically approved by the Board of

Directors

Investment Policy - External Funds

Debt instruments issued or guaranteed by the U.S.

government, its agencies and instrumentalities and GSEs

Dollar-denominated debt instruments that have been issued

by domestic and nondomestic entities

Mortgage-backed securities issued or guaranteed by Federal

agencies or GSEs

Asset-backed securities, including collateralized mortgage

backed securities and collateralized mortgage obligations

(CMOs). CMOs are limited to the more stable classes;

prohibited CMO classes include those where principal and

interest components are separated or where leverage is

employed

Certificates of deposit and term deposits of United States

domestic financial institutions provided the institutions meet

guidelines set forth in the Resolution

Other money market instruments described in the Investment

Policy Resolution

Non-U.S. dollar denominated investments, provided the

greater of $200 mm or 60% of the externally managed

investment portfolios in aggregate are invested in U.S. dollar

denominated investments. Restrictions apply to limit the

portfolio amount of certain types of non-U.S. dollar

denominated investments


12

Internal17%

Alaska Permanent

Capital

42%

Dodge & Cox41%

Cash & Investment Portfolio on 30-Jun-2012:

$364.1 mm1

Credit Quality

Management

Instruments

Duration in Years

Internal External

Money Market 0.09 0.12

U.S. Treasuries 0.78 6.12

U.S. Agencies & GSEs – 4.46

Corporates – 5.51

Mortgage Backed – 1.76

Asset Backed – 1.25

Municipal Bonds – 10.36

Weighted Average 0.44 4.27

1 Excludes $9.7 million related to the Snettisham Hydroelectric Project. 2 U.S. Treasury securities and securities of agencies or corporations explicitly guaranteed by the U.S. government are not considered to have credit risk. 3 Not rated.


AAA17%

AA4%A

15%

BBB17%

BB1%

Government Sponsored Securities³

26%

No Credit Exposure2

20%

U.S. Treasuries

20%

U.S. Agencies and

GSEs4%

Corporates36%

Cash and Cash

Equivalents8%

Mortgage Backed

29%Asset Backed

1%

Municipal Bonds

2%

13

Conservative Credit and Underwriting Practices

Drive Strong Loan Portfolio Performance

Underwriting Practices

Potential applicants contact one of AIDEA’s eligible financial institutions

The financial institution independently reviews the loan request

Financial institution, after loan approval, applies to AIDEA for participation

Application of loan is reviewed by AIDEA staff

AIDEA Credit Committee initially reviews and provides final approval for participations

— Executive Director

— Deputy Director-Project Development/Asset Management

— Deputy Director-Infrastructure Development

AIDEA Board must approve individual loan participations equal to or greater than $3.0 million, and loan

participations that in aggregate are greater than $5.0 million

Review incorporates both individual loan and portfolio impacts

AIDEA staff conducts regular reviews of portfolio performance and any issues related to specific loans

Limitations on Participations

Participations limited to the lesser of (a) $20 million, or (b) 90% of total loan

Maximum loan-to-value of 75%


14

46 40 33 30 18 11 17

38

17

$79$66 $61 $57 $48

$30 $38

$117

$38

$0

$50

$100

$150

2004 2005 2006 2007 2008 2009 2010 2011 2012

Number Value ($)

Loan Portfolio on 30-Jun-2012: $468.8 mm

Portfolio Statistics:

— Average loan balance on 30-Jun-2012: $1.6mm

— Pending loan commitments on 30-Jun-2012: $9.2mm

Loans current (less than 90 days past due)

— FYE 2012: 99.9%

— Average since 2004: 99.7%

— Average for Alaska Commercial Banks: 97.8%

AIDEA’s loan history and pricing produce adequate margins

for both borrowing and bad debt allowance

— AIDEA has no charge-offs from 2008-2012

— Loan pricing is computed as

– For internally funded loans: an index plus the cost of

providing loans3

– For loans funded with bond proceeds: the cost of

funds plus the cost of providing loans3

¹ OREO refers to Other Real Estate Owned. 2 2011 funding number includes Valley Utilities loan, dollars funded spanned 2011 and 2012. Originations include only those loans funded with cash. Does not include 2005 loan for

Mark Air property ($260,000) or $23.5 million funding of ASI. Both were OREO properties whose sale was financed by AIDEA. 3 Cost of providing loans includes salaries, allowance for loan losses and other out of pocket costs.


Loan Composition

AIDEA’s Revolving Fund Loan Portfolio is comprised primarily of Loan Participations

Loans Originated by Year2 ($ in mm)

FYE Loans Outstanding ($ in mm)

$278$332 $361 $385 $382 $368 $378

$481 $469

$0

$100

$200

$300

$400

$500

2004 2005 2006 2007 2008 2009 2010 2011 2012

Loan Participations

91%

OREO & Other Loans¹

15

Loan Portfolio Analysis As of 30-Jun-2012

Loans by Industrial Sector ($ value)

Participating Bank Exposures

Geographic Distribution of Loans ($ value)

Top Exposures by Borrower and Related Entities

Anchorage Community Development, LLC $20,499,000

3000 C Street, LLC 19,309,520

Allen Marine Tours, Inc. 15,747,628

Valley Utilities, LLC 14,571,024

Kupreanof, LLC 12,637,737

UMED Hotel, LLC 12,017,652

Ketchikan Dock Company, LLC 10,854,903

Pike's Waterfront Lodge, LLC 10,712,463

VDG-OPA, LLC 9,513,917

City of Sitka (purchased1) 8,535,498

1 Purchased loans include buy-back provision and are therefore no risk to the Authority 2 Includes: Equipment, Laundromat, Manufacturing, Restaurant, Multifamily Dwelling 3 Includes: Aircraft, Vessel, Hangar/Terminal 4 Includes: OREO and Appropriated Loans

AIDEA’s loan portfolio is diverse in terms of sector, geography and exposure to banks and borrowers


Purchased1

4%

AIDEA⁴8%

Alaska Pacific Bank6%

KeyBank4% First Bank

2%

Sterling Savings

3%

Alaska USA5%

Denali State<1%Mt. McKinley

<1%Mat Valley FCU

<1%

FNBA35%

Wells Fargo19%

Northrim12%

Purchased1

4%

Anchorage54%

Interior6%

Northern1%

Mat Su10%

Gulf Coast5%

Southeast19%

Southwest1%

Purchased1

4%Office/Warehouse

12%

Office/Business Condo17%

Other2

3%Healthcare

4%

Transportation3

8%

Car Wash3%

Recreation3%

Warehouse/Shop5%

Tourism19%

Retail19%

Wastewater Facility3%

16

Current AIDEA Development Projects

Project Type of Business Project Update

DeLong Mountain

Transportation System Public Port and Road

Annual revenues remain strong and stable

Exploring use by another mining company

Fed Ex Facility Hangar & Maintenance Facility Currently analyzing options for lease of facility after

expiration in 2015

Healy Clean Coal

Project Electric Power Plant

Currently maintaining in custodial status

In 2009, AIDEA agreed to sell the Healy Project to Tri-VEC, a

wholly-owned subsidiary of GVEA, with plans to restart the

Project

Negotiations with GVEA ongoing

Skagway Ore Terminal Ore Concentrate

Export Facility

Legislature authorized $65 million AIDEA bonding for

expansion

In conversations with four potential users of terminal

Ketchikan Shipyard Marine Dry-dock Facility

New operator: Vigor Industrial, LLC

Completed new ship assembly hall

Currently constructing a new panel shop


17

Historical Debt Service Coverage for Revolving

Fund Bonds

($ in thousands)

Year Ended 30-Jun

2008 2009 2010 2011 2012

Loan Principal and Interest Payments $76,851 $67,243 $51,092 $59,584 $72,001

Investment Earnings¹ 19,558 13,806 14,107 15,854 12,813

Development Project Receipts² 24,862 27,599 31,833 43,602 27,998

Other Revenues 4,290 5,496 6,294 9,046 9,375

Total Receipts $125,561 $114,144 $103,326 $128,086 $122,187

Operating & Maintenance Expenses 12,111 12,641 13,140 13,509 16,199

Net Income Available for Debt Service $113,450 $101,503 $90,186 $114,577 $105,988

Annual Debt Service³ 18,732 10,911 10,022 12,787 13,770

Debt Service Coverage 6.06x 9.30x 9.00x 8.96x 7.70x

Note: Excludes income, expenses and debt service related to the Snettisham Hydroelectric Project.

¹ Excludes a level amortization of the net book value of Unrestricted Investment Securities that the Revolving Fund Bond Resolution includes for projected future debt service

coverage.

² Receipts for the DMTS and FedEx projects include the scheduled payments due each year. Actual date of July 1 payment receipts may have been the preceding June.

³ Excludes optional redemption of general obligation debt and payment on bonds issued to finance the Snettisham Hydroelectric Project.


Loan principal and interest payments increased in 2012 primarily due to an increase in loan payoffs, scheduled

payments and interest receipts

Development project receipts decreased in 2012 due to the 2011 early payoff of the Skagway Ore Terminal direct

financing lease

O&M increased in 2012 due to increased cost of personnel and the addition of new personnel

III. Increasing Development Project Activity

19

AIDEA Has Made Recent Strategic Investments

and is Exploring Several More

Recent investments

— Kenai Offshore Ventures: Invested $24 million in an LLC which has brought a drilling rig to Cook Inlet to explore

for natural gas

— Mustang Road: Investing $20 million in an LLC which will own a 4.5 mile road and production pad on the North

Slope to connect the existing Tarn road to the proposed Mustang Field development

— DMVA: Investing up to $15 million to construct an expansion of the existing National Guard Armory on Joint Base

Elmendorf – Richardson (“JBER”)

A number of other development projects are under review and consideration

— Skagway Ore Terminal expansion

— Mustang Production Facility

— Central Alaska Energy Fuel Storage

— Port Projects: Arctic Slope, Ward Cove

— Ambler Mining District Access Road

— Fairbanks / North Slope LNG

Project timing, development and funding sources are early stage; projects may be funded through the

Revolving Fund or may be separately secured

— AIDEA will stay in close contact with the rating agencies and will clearly communicate its project development and

funding strategies as projects move forward

Increasing Development Project Activity

20

Map of AIDEA Development Projects

1 New projects.


INTERIOR

DeLong Mountain

Transportation System (DMTS)

Location: Northwest Arctic Borough

Federal Express

Maintenance Facility

Location: Anchorage

Kenai Offshore Ventures

Location: Cook Inlet

Mustang Road1

Location: North Slope

Skagway Ore Terminal

Location: Skagway

Ketchikan Shipyard

Location: Ketchikan

DMVA1

Location: JBER Anchorage

Mat Su

Anchorage

21

AIDEA Has a Rigorous, Documented Review and

Negotiation Process for New Projects


Phase 1 Phase 2 Phase 3 Phase 4

Project

Suitability Assessment Feasibility Analysis

Deal Structuring

& Due Diligence Finalization & Closing

Project

Sponsor

Submittals

Proposal information

Sponsor information

Estimated costs and timeline

Business and financing plan

Preliminary schedule

Execution/development plan

Final execution plans

Final financing plan

Joint work with AIDEA to

prepare contracts, financial &

security commitments, & other

as needed

AIDEA

Process

Is project consistent with AIDEA

Initiatives?

What is project feasibility?

What is the proponent’s

experience & capability?

Is AIDEA right source for

financing?

Is there a complete and

attainable business and

financing plan?

Is there public support?

What is the timing & status on

project?

What are the risks?

Test business case, technical

aspects, management, and

financial approach

Finalize finance plan

Complete due diligence

Prepare draft agreements

Final review & refinement of all

documents

Confirmation of assumptions

from previous phases

Output Project Information Form

Suitability Report

Reimbursement Agreement

Term Sheet

Risk Analysis

Financing documents

Ownership & Operating

Agreements

Due Diligence Checklist

Board Report & Resolution

Final documents

AIDEA

Decision

Making

Project Evaluation

Committee

Authorization to go to Feasibility

Analysis

Investment Committee

Authorization to go to Deal

Structuring & Due Diligence

AIDEA Board

Approve Reimbursement

Agreement

AIDEA Board

Acceptance of report

Approval of documents

substantially in form

Adoption of resolution delegating

authority

AIDEA Executive Director

Final review

Document execution

Closing

Project

Proceeds

To Funding,

Final Design,

Construction

& Operation

No Go Go No Go Go No Go Go No Go Go

22

Kenai Offshore Ventures, LLC


Business Case & Financing Project Overview

Mission Suitability / Economic Development Impact

AIDEA participates in an LLC for the purpose of owning a jack-up

rig with appropriate design for Cook Inlet and Alaskan operations

Drill rig Endeavour (previous Adriatic XI) originally designed for

operation in the cold waters of the North Sea, providing sufficient

toughness for operations in Alaskan waters

300 foot water depth capacity allows for use in all of the Cook Inlet

Original estimated cost to purchase and refurbish was $85 million;

actual cost is approximately $120 million

Rig was recently valued at $127 million

Kenai Offshore Ventures (KOV) LLC created to own and charter rig

Via a bareboat charter, to be operated by Kenai Drilling (Buccaneer)

and Spartan Offshore, with a guaranteed day rate paid to KOV

Buccaneer Alaska has a number of holdings in Cook Inlet that the rig

will be used to explore

Risk Mitigation

AIDEA partnered with three organizations to create KOV, LLC

— Buccaneer Energy

— Ezion Holdings Limited

— Oversea Chinese Banking Corporation (OCBC)

AIDEA contributed a total of $23.6 million

Oversea China Bank Corporation (OCBC) loaned $66 million to

KOV guaranteed by the common members

Buccaneer / Ezion have contributed approximately $30.4 million

Bareboat charter pays approximately $27 million/year

Revenues flow through KOV, paying OCBC debt first and AIDEA

second as preferred owner

Structure

— AIDEA preferred ownership will be repurchased in six annual

payments generated from cash flow from the bareboat charter

— AIDEA to receive fixed annual dividend of 8% of balance

— Common members responsible for all cost over runs

Minimum of 4 well guarantee

AIDEA holds a 3.5% overriding royalty (ORRI) on Buccaneer Texas

and Alaskan properties

Potential Risks Mitigation

Cost over runs on

refurbishment of rig

Common members responsible for all cost

over runs

Buccaneer

financing

In part mitigated by ACES credits in Cook Inlet

Overall default risk AIDEA can replace manager and lease to other

companies

Sales value of rig, ORRI’s in operating fields

Summary of Investment

Supports legislative incentives to explore in Cook Inlet

Cook Inlet in danger of running out of natural gas which would create

tremendous economic hardships in the State’s largest population

AIDEA’s involvement accelerates the development of Cook Inlet Oil

and Gas and helps secure and advance the region’s economy

Alaska jobs (service companies, operations, maintenance)

— 108 direct jobs

— 90 support jobs

— 317 indirect jobs (1.6x multiplier)

Rig can be used to support OCS exploration

23

Mustang Road


Mission Suitability / Economic Development Impact

Business Case & Financing Project Overview

Investment: LLC with expected capitalization of $25mm; AIDEA

preferred member investment limited to $20mm with balance from

common members

LLC entered into an operating agreement with Brooks Range

Petroleum Company (“BRPC”) to build and operate the project

4.5 mile access road and production pad for Brooks Range

Petroleum drill site and production facility

Provides access to Brooks Range Petroleum Company Mustang

Field (Southern Miluveach Unit), adjacent company holdings, other

working interest party holdings and service contractor access

Supports immediate development of the $180mm production facility

Road construction to begin in March 2013 and is expected to be

ready for use in the Fall of 2013

Risk Mitigation

Roads to resources

Contributes to filling TAPS

Added North Slope Borough property tax – approx. $55 million

Alaska jobs (service companies, engineering, construction)

— 30 Road Construction

— 250 Production Facility Fabrication and Installation

— 25 Full time operations

Opportunities for additional field development

State potential revenues from Royalties, ACES, etc., estimated at

$1.2 billion for the life of the field

Repaid through redemption payments and fixed dividend

15 year amortization for redemption and 8.0% of remaining balance

will be received as guaranteed payment

AIDEA security interest in BRPC holdings

A 1% carried working interest was assigned to LLC, making the LLC

eligible for ACES credits

Common members responsible for all costs over $20mm

(approximately $5mm)

ACES credits will be used to pay down AIDEA investment with a

re-amortization of the remaining principal after receipt of credits

Potential Risks Mitigation

BRPC Financial Capacity Lien on BRPC working interest, potential additional

parties

Road Technology /

Construction

Proven design and experienced local contractors

Production Technology /

Fabrication

Proven design, no new technology required,

truckable modules

Oil Price Declines Breakeven point between $30 - $40/barrel,

restrictions on cash distributions

Summary of Investment

24

North Slope LNG to Fairbanks Project Under

Discussion at Legislative Level


Project

Natural gas liquefied on the North Slope and trucked to Interior Alaska

Liquefaction facility could be moved when larger pipeline is built

LNG temporarily stored and re-gasified in Interior Alaska

Natural gas distribution system with storage to supply natural gas for heating (privates and local utilities)

Goals

Provide lowest cost energy to most Interior Alaska consumers as soon as possible

Get gas first to Interior Alaska while assuring long-term access to gas from liquefaction plant

Utilize private sector mechanisms as much as possible

AIDEA

Role

AIDEA is developing the financing of the project

— Examine finance options and commercial structure in collaboration with private party participants

— Utilize available finance tools to meet project goals

Funding

Plan

$50 million State General Fund appropriation

$150 million AIDEA SETS fund project revenue bonds, with State moral-obligation backstop

$125 million loan out of SETS fund, capitalized by State appropriation

$325 million total State package

$30 million natural gas storage credit

Timing Currently in pre-feasibility analysis phase

May know private sector partners soon

IV. Conclusion

26

Credit Summary Review

Strategic Role

in Alaska

AIDEA maintains an active and central role in economic development across the State

Governor and Legislature tasking AIDEA to be proactive across a range of sectors and

providing new tools and credits

Strategic plan outlines broad and proactive approach to fostering economic activity

AIDEA Moving Forward

from Position of

Strength

Security arising from diverse sources – Projects, Loans and Investments

Strong balance sheet

Strong cash flows and liquidity

Strong Security

Provisions in

Resolution

Restrictive financial covenants

Statutory non-impairment covenant of State

Conservative Additional Bonds Test

Proactive and

Conservative Financial

Management Approach

Thorough review process and guidelines for project and loan participations

Judicious approach to use of new tools

Enhancing credit and financial framework as activities expand

Conclusion

aidea rating agency update- march 2013

Economy & Finance