investor information summary - geda guam economic ... · sources: guam visitors bureau, guam hotel...
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$146,450,000*
Guam Power Authority
Revenue Refunding Bonds
2017 Series A
Investor Information Summary
December 7, 2017
*Preliminary; subject to change.
Disclaimer
This presentation which you are about to view is provided as of December 7, 2017 for a proposed offering of the Guam Power Authority
Revenue Refunding Bonds, 2017 Series A, referred to as the “2017A Senior Bonds.” If you are viewing this presentation after that date,
events may have occurred that have a material adverse effect on the financial information presented. None of the Underwriters mentioned
in this presentation (the “Underwriters”), nor the Guam Power Authority (“GPA” or the “Authority”) have undertaken any obligation to update
this presentation. The information presented is not warranted as to completeness or accuracy and is subject to change without notice. You
agree not to duplicate, copy, download, screen capture, electronically store, or record this presentation, nor to produce, publish or distribute
this presentation in any form whatsoever.
This presentation is provided for your information and convenience only. Any investment decisions regarding the Bonds should be made
only after a careful review of the complete Preliminary Official Statement dated December 7, 2017.
The presentation does not constitute a recommendation or an offer or solicitation for the purchase or sale of any security or other financial
instrument or to adopt any investment strategy. Any offer or solicitation with respect to the Bonds will be made by means of a Preliminary
Official Statement or Official Statement that will describe the actual terms of the Bonds. In no event shall GPA or the Underwriters be liable
for any use by any party of, any decision made or action taken by any party in reliance on, any inaccuracies or errors in, or any omissions
from, the information contained herein and such information may not be relied upon by you in evaluating the merits of participating in any
transaction mentioned herein. These materials have not been prepared with a view toward public disclosure under applicable securities
laws or otherwise, are intended for the benefit and use of GPA, and may not be reproduced, disseminated, quoted or referred to, in whole or
in part. These materials may not reflect information known to other professionals in other business areas of the Underwriters and their
affiliates.
The Underwriters make no representations as to the legal, tax, or accounting treatment of any transactions mentioned herein, or any other
effects such transactions may have on you and your affiliates or any other parties to such transactions and their respective affiliates. You
should consult with your own advisors as to such matters. Nothing in these materials constitutes a commitment by the Underwriters or any
of their affiliates to enter into any transaction. No past performance is not indicative of future returns, which will vary. Transactions involving
the 2017A Senior Bonds may not be suitable for all investors. You should consult with your own advisors as to the suitability of such
securities or other financial instruments for your particular circumstances. Additional information is available upon request. Clients should
contact their salesperson at, and execute transactions through, the Underwriters or their affiliated entities qualified in their home jurisdiction
unless governing law permits otherwise.
Neither GPA nor the Underwriters or their affiliates provides tax advice. Any statements contained herein as to tax matters were neither
written nor intended to be used and cannot be used by any taxpayer for the purpose of avoiding tax penalties that may be imposed on such
taxpayer.
1
Presentation Participants
Guam Power
Authority
John Benavente, P.E.
General Manager
John J.E. Kim
Chief Financial Officer
Jay Rojas
Administrator
Guam Economic
Development
Authority
Barclays
Hiran Cantu
Director
Sean Keatts
Director
Joseph Duenas
Chairman
Consolidated
Commission on
Utilities
Office of the Governor
The Honorable Eddie Baza Calvo
Governor of Guam
2
Introduction to Guam
Guam is an unincorporated territory of the United States with a strategic U.S. military post in
the Western Pacific and a thriving tourism industry
General
Approximately 212 square miles
Guam’s population is approximately 163,000
Guam citizens are U.S. citizens
Location
Guam’s proximity to many major cities in Asia
and the South Pacific contributes to a diverse
population and tourism industry
3-5 hour flight from most major cities in
Asia
Provides U.S. military operations with significant
flexibility compared to other locations in the
Pacific and Asia.
Governance
Guam is governed by an elected Governor and
Lieutenant Governor, 15 senators, and a judicial
branch
3
Guam Economy
Guam’s economy continues to strengthen
Historical GDP Average Annual Individual Income
Civilian Employment by Sector*
___________________________ Sources: U.S. Bureau of Economic Analysis and Guam Bureau of Labor Statistics
0
1
2
3
4
5
6
7
2012 2013 2014 2015 2016
($ billions) CAGR: 2.2%
$20,000
$25,000
$30,000
$35,000
2005 2016
Construction 8.9% Manufacturing
2.3%
Transportation & Public Utilities
7.2%
Wholesale Trade 3.7%
Retail Trade 20.0%
FIRE 4.1%
Services 28.7%
Federal Government
6.2%
GovGuam 18.5%
CAGR: 1.9%
Unemployment Rate
10.9% 10.0%
7.6% 6.9%
5.4%
0%
3%
6%
9%
12%
15%
2012 2013 2014 2015* 2016
(Rates of September)
*Preliminary figures as of September 30, 2017 *Rate as of March 2015
4
Guam Tourism
Guam’s visitor arrivals reached their highest levels in 2017 and continue to diversify
72% 68% 62% 57% 50% 43%
28% 32% 38% 43% 50% 57%
1.3 mm 1.3 mm 1.3 mm 1.4 mm
1.5 mm 1.6 mm
0.0 mm
0.5 mm
1.0 mm
1.5 mm
2012 2013 2014 2015 2016 2017*
Japanese Arrivals Non-Japanese Arrivals
Visitor Arrivals Hotel Occupancy and Room Rates
81% 82% 83% 78% 80%
86%
$151 $162 $177
$186 $197 $205
$0
$50
$100
$150
$200
$250
$300
0%
20%
40%
60%
80%
100%
2012 2013 2014 2015 2016 2017**
Hotel Occupancy (LHS) Average Hotel Room Rate (RHS)
Japan 43.6%
South Korea 42%
U.S. 5%
Taiwan 2%
China 2%
Philippines 1%
CNMI 1% Others
3%
Shift in
Visitor Mix
FY 2012 Visitor Arrivals
Japanese arrivals accounted for 72% of all arrivals in FY12
FY 2017 Visitor Arrivals
Korean visitors and others have added visitor diversity
Japan 72%
South Korea 13%
U.S. 5%
Taiwan 4%
CNMI 1%
Micronesia 1%
Philippines 1%
China 1% Others
2%
___________________________ Sources: Guam Visitors Bureau, Guam Hotel & Restaurant Association.
FY CY
*Preliminary figures as of October 2017 *Preliminary figures as of August 2017
5
___________________________ Sources: Congress.gov and U.S. Bureau of Economic Analysis, 2015 Final Supplemental Environmental Impact Statement (SEIS), Guam and CNMI Military Relocation Report, The Committee on Armed Services, National Defense Authorization Acts ** Fiscal Year 2017 Military Construction Authorization for Guam, as passed by House Armed Services Committee (HASC)
Military Presence and Activity
Guam is an essential
component of the U.S.
military presence in the
Pacific
Guam has nearly 6,000
military personnel with over
7,000 military dependents
Imminent military build-up of
an additional 5,000 Marines
over the next 12 years
Substantial projects have
been completed or have
been authorized
The 2015 Record of Decision and the relocation of 5,000 Marines to Guam began the process
for significant military investment in Guam
0
2,000
4,000
6,000
8,000
10,000
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Estimated Total Population Increase (Not Cumulative)
$0M
$100M
$200M
$300M
$400M
$500M
2015 2016 2017 2018
Historical National Defense
Authorization Amounts
$0M
$100M
$200M
$300M
$400M
$500M
2012 2013 2014 2015 2016 2017**
Military Construction
Authorization
6
GPA Governance and Management
GPA is led by an experienced and diverse governing board and management team
Consolidated Commission on Utilities (CCU)
Guam Power Authority Senior Management
9 years of CCU experience
Former GPUC Chairman
Joseph T. Duenas Chairman
Former Senator
Long-time businessman
Francis Santos Vice Chairman
Former Senator
Former Chief of Staff to
Governor Camacho
J. George Bamba Secretary
3 years of CCU experience
Former senator
Judith T. Guthertz Treasurer
15 years of CCU experience
Previous CCU Chairman
Simon A. Sanchez, II Commissioner
33 years at GPA and CCU
Former GPA General Manager
Former CCU General Manager
John M. Benavente, P.E. General Manager
2 years at GPA
Former VP of Finance at GTA Teleguam
John Kim Chief Financial Officer
26 years at GPA
Melinda Mafnas, P. E. Assistant General Manager,
Operations
12 years at GPA
Graham Botha Legal Counsel
New to GPA
21 years in construction management
and legal compliance
Beatrice P. Limtiaco Assistant General Manager,
Administration 26 years at GPA
7 years at Hughes Aircraft company
John J. Cruz, Jr., P.E. Assistant General Manager,
Engineering & Technical Services
7
Guam Power Authority Overview
An electric utility that provides monopoly electric services
throughout Guam, including U.S. military bases
A component unit of the Government of Guam (GovGuam)
Our Business
Our Customers
Our Assets
Our Governance
Serves a population of approximately 163,000 with a 2017
peak demand of 261 MW and FY 2017 energy sales of 1.6
million MWh
Larger customers include the U.S. Navy, various
components of GovGuam, shopping and hotel industry
Power supply comes from various fuel-oil based generating
units with gross capacity of over 400 MW
Electric system also includes 29 substations, 189 miles of
transmission lines and over 1,608 miles of distribution lines
Governed by the Consolidated Commission on Utilities
(CCU), an elected five-member board
Rates subject to the regulations by the Guam Public
Utilities Commission (GPUC)
8
GPA has diverse customers with a growing residential base and modest but long-standing
concentration of U.S. military
Customer Overview
FY 2017 Largest Customers
FY 2017 Electric Revenue Composition ($) 2017 Energy Sales Composition (MWh)
Segment ($mm)
Residential $100.6
Small Commercial /
Government 88.5
Large Commercial /
Government 81.2
Independent Power Producers 0.2
Government /
Private Streetlight & Outdoor Lighting 5.7
Navy 54.9
Total $331.1
Residential 30%
Small Commercial/Government
27%
Large Commercial/Government
24% Navy 17%
GovGuam / Private
Streetlight & Outdoor Lighting
2%
Independent Power
Producers 0.1%
Customer Industry Sales
(GWh)
Sales
($mm)
% of
Revenues
1. Navy Military 318.6 $54.9 16.6%
2. Guam Waterworks Authority Utilities 52.8 12.1 3.7%
3. Department of Education Government Agency 46.3 11.7 3.5%
4. Guam International Airport Authority Transportation 25.8 5.2 1.6%
5. Pacific Islands Club Hotel 16.0 2.9 0.9%
6. Hyatt Regency Guam Hotel 11.5 2.1 0.6%
7. Guam Healthcare Development Inc. Hospital 11.2 2.1 0.6%
8. Guam Memorial Hospital Hospital 8.8 1.8 0.5%
9. Sheraton Laguna Guam Hotel 8.6 1.6 0.5%
10. Pacific Star Resort & Spa Hotel 8.5 1.5 0.5%
Total 29.0%
Residential 31%
Large Commercial/Government
24%
Small Commercial/Government
24% Navy 20%
GovGuam / Private
Streetlight & Outdoor Lighting
1%
Independent Power
Producers 0.1%
9
Customer Sales
Energy Sales by Fiscal Year
462 458 462 487 506
376 374 368 378 385
367 365 380 379 389
348 324 317 318 319
1,566 1,533 1,540 1,574 1,610
0
500
1,000
1,500
2,000
2013 2014 2015 2016 2017 Unaudited
(GWh)
Residential Small Comm/Gov Large Comm/Gov IPP GovGuam/PSOL Navy
Energy sales growth:
2.3% increase in FY 2017
2.3% increase in FY 2016
0.4% increase in FY 2015
Net metering customers have a
minimal impact on GPA
15.8 MW (in aggregate)
$2.8 million impact
Recently added customers
Dusit Thani Hotel
Guam Regional Medical City
Future large customers
New hotels
New military infrastructure
GPA sales have increased in the last three years, bolstered by increased residential base and
growing business activity
48.6 48.9 49.5 50.2 50.8
40
42
44
46
48
50
52
2013 2014 2015 2016 2017
Meters in Thousands
Customer Growth
Note: IPP = Independent Power Producer, PSOL = Private Streetlight & Outdoor Lighting; IPPs and PSOLs total less than
13GWh in any given year shown
10
Power Supply
GPA has over 400 MW of
generation capacity
GPA’s peak demand in 2017
was 261 MW
GPA has capacity reserves of
over 140 MW
GPA’s power resources are
100% fueled by fuel oil, except
for 25 MW of renewables
Power Supply
Primary Generating Units
On December 5, 2017,
ownership of the TEMES Unit 7,
(40 MW) was transferred to GPA
at no cost following the expiration
of 20-year capital lease
In January 2019, MEC 8 and
MEC 9 will transfer to GPA at no
cost following the expiration of
20-year capital lease
Unit Transfers to GPA
Unit
Capacity
Available (MW)
Cabras Unit 1 66.0
Cabras Unit 2 66.0
MEC - Piti Unit 8 44.2
MEC - Piti Unit 9 44.2
Capital Recovery Program
GPA implemented an effective recovery plan since the 2015 Cabras fire:
Established an interruptible load program
Installed Aggreko temporary unit
Rehabbed older units
Overhauled certain units to increase capacity
Long term plan involves installing up to 180 MW combined cycle units
Recovery plan has been funded with internal cash flow, cash reserves, and insurance claim advances; no impact
to GPA’s rates
11
New Combined Cycle Units
GPA is progressing with its proposed combined cycle units
Proposed combined cycle generation of 180 MW
(capacity size subject to PUC review and approval)
Dual fuel capabilities: ultra-low sulfur diesel (ULSD) and
natural gas
GPA has negotiated the site in Harmon; close proximity
to key transmission line, Harmon substation and GWA
wastewater plant
GPA’s preliminary estimate of project cost (generating
units, land transmission) is currently $350-450 million
GPA plans to utilize insurance claim funds to
offset costs
Combined Cycle Project
Timing
Location
Wastewater
Treatment Plant
Transmission
Line
Proposed
Combined
Cycle Units
Harmon
Substation
GPA
Headquarters In 2018, the PUC will review the procurement parameters
and GPA expects to distribute a bid for the developers
GPA’s management expects the units to be operational
by the end of 2021
12
Renewable Resources
25 MW Dandan solar farm
October 2015
Take-and-pay contract with NRG Energy
275 kW
Funded by USDOI grant
March 2016
Existing
Projects
Phase I Wind Project
GPA has made progress in expanding its renewable resources
Selected 4 x 30 MW contracts
Subject to PUC approval and Office of
Public Accountability review
Both awards involve designated
capacity and energy for load shifting to
evening
Take-and-pay contracts
Bids have been issued
37-40 MW of solar PV to be
constructed on Navy land
Storage in batteries and released at
night to reduce peak In Development
Phase II Phase III
13
EPA Compliance
GPA is not in compliance with RICE MACT, EGU MACT, and the mercury
and air toxic standards (“MATS”)
GPA recently retired the Tanguisson units and has a schedule to retire or
decommission other units upon completion of new combined cycle units
GPA plans to comply with these regulations through:
The installation of new combined cycle units
The retirement of older units
While the construction of the combined cycle units has taken more time
than originally expected, GPA has kept the EPA informed of developments
For several years, GPA has been working with the EPA to develop a consent decree and
schedule for compliance
14
GPA’s Transmission and Distribution System
Overview
GPA’s power delivery system includes
29 substations connected through 189 miles of transmission lines
Substations supply 67 distribution feeders with 1,600 miles of
distribution lines
GPA’s delivery system is managed through the Power System control
center and, in Q4 2018, through a SCADA system
GPA manages an island-wide power delivery system
System Resilience and Efficiency
For the past 15 years, GPA has strengthened its delivery system
Installing hardened poles
Nearly 32,000 of Guam’s 36,000 power line poles are steel or concrete
This is an ongoing program; 300 poles have been converted since
January 2017
Installing smart grid technology
GPA has installed new smart meters for customers in its system
The technology includes substation automation and broadband
communication
Placing vital power lines underground
Over 60% of system (key business areas and high density residential
regions) are served by underground systems
This process continues in key areas throughout Guam
Maintains a significant inventory of essential equipment on island
15
GPA Operating Initiatives
GPA has completed or is in progress with several programs to improve its system and reduce costs
Utility credit card rate $400,000 savings per year
Overtime reductions From $3.7 million in 2012 to $1.4 million in 2017
Headcount reductions $2 million per year, with 475 full-time employees in 2017
relative to 522 in 2012
End of capital lease on TEMES 7
(Completed Dec. 2017)
Estimated $5 million/year savings
End of capital lease on MEC 8 and 9
(Scheduled for Jan. 2019)
Estimated $18 million/year savings
New billing system
New print system
Smart grid infrastructure and analytics
Electric vehicles
Cost Savings Programs
Generating Unit Transfer Savings
Investments to Improve Operations
16
Effective
Date
Increase
Requested
Increase
Approved
3/1/2008 13.10% 8.53%
3/1/2010 11.20% 7.44%
5/1/2012 11.80% 6.00%
12/1/2012* -6.00% -6.00%
10/1/2013 7.30% 6.00%
GPA Rates
The GPUC has demonstrated support for GPA’s operational and financial goals
GPA’s rate structure consists of a
base rate and a Levelized Energy
Adjustment Clause rate
Base rates include fixed costs and
non-fuel O&M
LEAC rates include fuel expense and
carrying cost; also includes working
capital fund surcharge and renewables
LEAC rates are adjusted semiannually
GPA can petition for interim
adjustment feature that is triggered if
under recovery reaches $2 million
Used as needed, only 6 times
since 2006
0
5
10
15
20
25
2001 2003 2006 2009 2012 2014 2017
cents/kWh
Base Rate Petitions
LEAC Semi-Annual Adjustments
* Effective for 1 year reflecting some of the refunding savings from 2012 financing
GPA Rate Structure
17
$0
$20
$40
$60
$80
2017 2021 2025 2029 2033 2037 2041
Senior Lien DS Capital Leases
Debt Overview
No variable rate debt
No interest rate swaps
Interest Rate Mode Composition
100%
Fixed Rate Debt
Debt Service and Capital Lease Schedule ($mm)
Lien Structure ($mm)
100%
Senior Lien
Series Outstanding
2010 $150.4
2012 339.4
2014 75.2
Total $565.0
GPA maintains a conservative debt profile; recent reduction in debt service will support
financial margins and provide capacity for future capital projects
$0
$200
$400
$600
$800
2003 2007 2010 2012 2014 2016
Debt Capital Leases
FY
Outstanding Debt and Capital Leases ($mm)
18
Financial Metrics
Debt Service Coverage
3.4x 3.2x
3.6x 3.4x
2.8x
0.0x
1.0x
2.0x
3.0x
4.0x
2013 2014 2015 2016 2017*
GPA finances have improved and reflect strong operating margins and liquidity
GPA has modest capital expenditures over the next
several years
$177 million 2018-2022
Over $40 million of 2018 spending is related to
Energy Storage System expenditures
Funded from prior bond proceeds
Most of remaining spending will be funded by
internally generated funds
Capital Expenditures
DSC has been well above 1.3x Senior Indenture requirement
After incorporating subordinate capital lease payments as O&M, Aggregate
DSC has averaged over 2.0x in the last three years
2.2x 2.3x 2.6x 2.6x
2.0x
0.0x
1.0x
2.0x
3.0x
4.0x
2013 2014 2015 2016 2017*
*Unaudited
Liquidity
69.9
26.7 26.5 26.9 27.7
0
20
40
60
80
2018 2019 2020 2021 2022
Senior DSC: Indenture Aggregate DSC: Capital Leases as O&M As of FYE 2017, GPA had $82.8
million of liquidity (excluding
insurance claim funds)
This includes funds in the operating
fund, working capital fund, surplus
fund, and revenue fund
GPA also has a $35 million bank
facility for fuel payments
($ millions)
19
Additional Items
On August 31, 2015, a fire
occurred at Cabras units 3 and 4
GPA maintained a $300 million
insurance policy with Lloyds of
London on these units
In 2016, GPA hired an external
consultant to file and assist with
its claim
GPA has received $84 million
advance from Lloyds to date
GPA is working with Lloyds to
resolve this claim
Current and future insurance
funds are targeted to reduce
costs of proposed generation
additions
Insurance Claim
GPA has successfully reduced
non-performing accounts
Long-term government
receivables were eliminated in
2014
GovGuam is current on all
billings
Bad debt expense from GPA
customers have remained at
reduced levels for the past
several years
Receivables
GPA participates in the Guam
Retirement Fund
GPA has historically paid its
required pension payment
In 2017, GPA paid approximately
$7.6 million towards its pension
obligations
Pensions
Bad Debt Ratio**
0.3% 0.3%
0.0%
0.3% 0.3%
0.1%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
2012 2013 2014 2015 2016 2017*
Annual Pension Payments ($mm)
8.3 8.0 7.5 7.6
0.0
2.0
4.0
6.0
8.0
10.0
2014 2015 2016 2017
*Unaudited
** Bad debt ratio = Bad debt expense / Revenues
20
Transaction Overview
*Preliminary; subject to change.
2017A Senior Bonds
Issuer Guam Power Authority
Series 2017 Series A
Par Amount* $146,450,000
Ratings To come
Tax Status Exempt from federal income tax, the alternative
minimum tax, or taxation by any state or
territory or any political subdivision
Security GPA Net Revenues and funds established by
GPA’s Senior Indenture
Use of Proceeds To refund all or a portion of GPA’s 2010A
Bonds, and pay the cost of issuance related to
the issuance of the 2017 Series A Bonds
Interest Payment Dates April 1 and October 1, starting April 1, 2018
Optional Redemption To come
Pricing Date* Tuesday, December 12, 2017
Closing Date* Thursday, December 21, 2017
Senior Manager Barclays
Co-Senior Manager Citigroup
2017A Senior Bonds Amortization
Maturity October 1 Principal*
2018 135,000
2019 175,000
2020 -
2021 -
2022 245,000
2023 3,970,000
2024 4,165,000
2025 4,380,000
2026 4,595,000
2027 4,825,000
2028 5,065,000
2029 5,325,000
2030 5,585,000
2031 5,865,000
2032 6,160,000
2033 6,465,000
2034 6,790,000
2035 7,130,000
2036 13,675,000
2037 14,365,000
2038 15,080,000
2039 15,830,000
2040 16,625,000
2041 -
2042 -
2043 -
2044 -
Total 146,450,000
21
GPA bonds are secured with traditional bondholder security provisions
Bondholder Security Provisions
Select Indenture Provisions
Net revenues of Guam Power Authority
1.3x senior annual debt service
MADS of outstanding senior lien debt service
Fiscal year preceding issuance of additional bonds
must attain 1.3x MADS on senior bonds then
outstanding plus any additional bonds
Monthly deposit requirement (1/6th of upcoming
interest payment and 1/12th upcoming principal
payment)
1/12th of aggregate amount of budgeted maintenance
and operational expenses
The co-Trustee shall not exercise any remedy for
Subordinate Bondholders under the Subordinate
Indenture in a manner that is inconsistent with the
rights of the senior bonds
Security Pledge
Rate Covenant
Additional Bonds Test
Debt Service Fund Deposit
Lien Separation
Debt Service Reserve Fund
Working Capital Fund
Flow of Funds
Revenue Fund
Senior Lien Debt Service
Senior Bond Reserve Fund
(If Deficiency)
Working Capital Fund
(If Deficiency)
Subordinate Lien Debt Service
Subordinate Bond Reserve Fund
(If Deficiency)
22
Contact Information
Guam Power Authority
John Benavente
General Manager
(671) 648-3225
John J.E. Kim
Chief Financial Officer
(671) 648-3120
Senior Manager
Sean Keatts
(206) 344-5881
Hiran Cantu
(212) 526-8026
Guam Economic Development Authority
Jay Rojas
Administrator
(671) 647-4332 x120
Tina Garcia
Public Finance Manager
(671) 647-4327
Co-Senior Manager
Stephen Field
(206) 830-6002
Ben Selberg
(212) 723-2708
23