-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vys/WGivQqxpbyCZysBtGc2ird3xqQK2qHC9yRhKmStEL+jXE95bDRW/Vjh68kSI s4piUYgxE3K/U7nXHExq2g== 0000878004-01-500012.txt : 20010516 0000878004-01-500012.hdr.sgml : 20010516 ACCESSION NUMBER: 0000878004-01-500012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHUGACH ELECTRIC ASSOCIATION INC CENTRAL INDEX KEY: 0000878004 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 920014224 STATE OF INCORPORATION: AK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-42125 FILM NUMBER: 1636525 BUSINESS ADDRESS: STREET 1: 5601 MINNESOTA DR STREET 2: PO BOX 196300 CITY: ANCHORAGE STATE: AK ZIP: 99518 BUSINESS PHONE: 9075637494 EX-3.2 1 ex32.txt BYLAWS OF THE REGISTRANT CHUGACH ELECTRIC ASSOCIATION, INC. BYLAWS ARTICLE I MEMBERSHIP SECTION 1. Requirements for Membership. Any person or other legally recognized entity, body politic, or subdivision thereof, shall become a member of CHUGACH ELECTRIC ASSOCIATION, INC. by: (a) Making a written application for membership therein; (b) Agreeing to purchase from the Association electric energy as hereinafter specified; (c) Agreeing to comply with, and be bound by, the articles of incorporation and bylaws of the Association, and any rules and regulations adopted by its board of directors; and (d) Paying the membership fee hereinafter specified. No person or entity may hold more than one membership in the Association, and no membership in the Association shall be transferable, except as provided in these bylaws. SECTION 2. Membership Certificates. Repealed April 30, 1998. SECTION 3. Joint Membership. A husband and wife may apply for a joint membership and, subject to the compliance with the requirements set forth in Section 1 of this Article, may be accepted for such membership. The term "member" as used in these bylaws shall be deemed to include a husband and wife holding a joint membership, and any provisions relating to the rights and liabilities of membership shall apply equally with respect to the holders of a joint membership. Without limiting the generality of the foregoing, the effect of the hereinafter specified actions by, or in respect to, the holders of a joint membership shall be as follows: (a) The presence at a meeting of either or both shall be regarded as the presence of one member and shall have the effect of constituting a joint waiver of notice of the meeting; (b) The vote of either separately, or both jointly, shall constitute one joint vote; (c) A waiver of notice signed by either or both shall constitute a joint waiver; (d) Notice to either shall constitute notice to both; (e) Expulsion of either shall terminate the joint membership; (f) Withdrawal of either shall terminate the joint membership; (g) Either, but not both, may be elected or appointed as an officer or director, provided that both meet the qualifications for such office. SECTION 4. Conversion of Membership. (a) A membership may be converted to a joint membership upon the written request of the holder thereof, and the agreement by such holder to comply with the articles of incorporation, bylaws, and rules and regulations adopted by the board of directors. The membership shall be reissued by the Association in such manner as shall indicate the changed membership status. (b) Upon the death of a married member the surviving spouse shall succeed to the membership. The membership shall be reissued in such manner as shall indicate the changed membership status; provided, however, that the estate of the deceased shall not be released from any debts due the Association. SECTION 5. Membership and Service Connection Fees. The non-refundable membership fee shall be five dollars. Payment of the membership fee and completion of a membership application are conditions of service. The board of directors may also, as a condition of service, require the payment of a consumer deposit or the furnishing of other acceptable security. SECTION 6. Purchase of Electric Energy. Each member may, as soon as electric energy shall be available, purchase from the Association all electric energy purchased for use on the premises specified in his application for membership, unless the member is an electric public utility purchasing electric energy for resale. Each member shall pay monthly at rates which shall from time to time be fixed by the board of directors. The board of directors may limit the amount of electric energy which the Association shall be required to furnish to its member(s). Each member shall pay to the Association such minimum amount per month, regardless of the electric energy consumed, as shall be fixed by the board of directors from time to time. Each member shall also pay all amounts owed by him to the Association as and when the same shall become due and payable. Production or use of electric energy on such premises, regardless of the source thereof, by means of facilities which shall be interconnected with the Association's facilities, shall be subject to appropriate regulations as shall be fixed from time to time by the Association. SECTION 7. Termination of Membership. (a) Any member of the Association may withdraw from membership with written notice. Additionally, the Association may expel any member who fails to comply with the Association's tariff and policies provided such policies are consistent with state law and applicable regulatory orders. Members subject to expulsion will be contacted in writing by the Association and will have ten (10) days to comply with the Association's tariff and policies. An expelled member may be reinstated by complying with the Association's tariff and policies. The Association may also cancel membership if the member: 1) has had a disconnect order active for thirty (30) days without signing a reconnect order; or 2) has been disconnected because of nonpayment of electric energy debts to the Association provided that this delinquency has continued for at least thirty (30) days after termination of service. (b) Upon the withdrawal, death, cessation of existence or expulsion of a member, the membership of such member shall thereupon terminate, except as provided in Article 1, Section 4. Termination of membership in any manner shall not release a member or his estate from any debts due the Association. ARTICLE II RIGHTS AND LIABILITIES OF MEMBERS SECTION 1. Property Interest of Members. Upon dissolution, after paying, or discharging, or adequately providing for the payment or discharge of all its debts, obligations and liabilities, other than those to patrons arising by reason of their patronage, the Association shall distribute any remaining sums, first to patrons for the pro rata return of all amounts standing to their credit by reason of their patronage, and second, to members for the pro rata repayment of membership fees. Any sums then remaining shall be distributed among its members and former members in proportion to their patronage, except as participation in such distribution may have been legally waived. In the event of the lawful liquidation, through transfer or sale of all the property and assets of the Association, the proceeds of such liquidation, transfer or sale shall be distributed in the same manner as hereinabove provided for in the case of dissolution. SECTION 2. Non-liability for Debts of the Association. The private property of the members shall be exempt from execution or other liability for the debts of the Association, and no members shall be liable or responsible for any debts or liabilities of the Association. ARTICLE III MEMBERS, MEETINGS AND ELECTIONS SECTION 1. Annual Meeting. The annual meeting of the members shall be held on such convenient date, on or after the 1st day of April, and on or before the 1st day of May of each year, at such place or building in the Municipality of Anchorage, State of Alaska, as shall be designated by the board of directors in the notice of meeting, for the purpose of electing directors, passing upon reports for the previous fiscal year, and transacting such other business as may come before the meeting. Failure to hold the annual meeting at the designated time shall not work a forfeiture or dissolution of the Association. SECTION 2. Special Meetings. Special meetings of the members may be called by resolution of the board of directors, or upon a written request signed by any four directors to the president, or by a written request made to the president and signed by not less than ten percent (10%) of the members. The resolution or request shall specify the purpose of the meeting. All signatures for a request of a special meeting by members shall be collected within the single ninety (90) calendar day period immediately preceding the date on which signed requests are first presented to the Association, and the board of directors shall establish such policies as may be necessary and convenient to ensure compliance with this provision. It shall thereupon be the duty of the secretary to cause notice of such meeting to be given as hereinafter provided. Special meetings of the members may be held at any place within the Municipality of Anchorage specified in the notice of the special meeting. SECTION 3. Notice of Members' Meetings. Written notice stating the place, day and hour and agenda of the annual meeting shall be delivered to each member not less than thirty (30) or more than sixty (60) days before the date of the meeting. Notice of a special meeting of the members, including but not limited to a meeting where a merger or dissolution of the Association, or sale, lease, or other disposition of more than fifteen percent (15%) of the Association's total assets, less depreciation, as reflected on the books of the Association at the time of the transaction, shall be delivered, together with notice of the purpose for which the meeting is called, not less than ninety (90) or more than one hundred twenty (120) days before the date of the meeting, with notice of a public hearing on the proposed action to be held not less than sixty (60) days before the meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the member at his address as it appears on the records of the Association, with postage thereon prepaid. The failure of any member to receive notice of an annual or special meeting of the members shall not invalidate any action which may be taken by the members at any such meeting. SECTION 4. Waiver of Notice. Repealed April 23, 1986. SECTION 5. Quorum. Seven and one-half percent (7 1/2%) of all members of the Association voting, including at least fifty (50) members present in person, shall constitute a quorum for a regular or special meeting of the members. No business shall be conducted at a regular or special meeting of the members lacking a quorum, except for counting marked ballots as specified in this Article III, Section 9(d) and announcing the results thereof. If a quorum is lacking with respect to any meeting of the members, a majority of those present in person may adjourn the meeting to another date and time no later than forty five (45) days after the adjourned meeting at a place within the Municipality of Anchorage, provided that the Secretary shall notify all members of the date, time and place of such meeting by delivering notice thereof no later than ten (10) days in advance of such meeting. At such meeting, the only business that may be conducted is business that could lawfully have been conducted at the originally scheduled meeting. SECTION 6. Voting. (a) Only members who have purchased electric energy or received other services from the Association within the six (6) months preceding the record date of the election shall be entitled to vote. Each such member shall have only one vote upon each matter submitted to a vote at a meeting of the members. (b) A non-natural member may designate an individual to vote on its behalf, in accordance with the member's own procedures. The election committee may require the designated individual to submit satisfactory written proof of his designation, prior to his voting. (c) Members may vote by official ballot on all matters on which a vote of the members is required or permitted under these bylaws. Voting may be in person, by mail, or by such other means as allowed by law and as established by the Association. (d) Except as otherwise required by law, the articles of incorporation, or these bylaws, all questions to be submitted to a vote of the members shall be decided by a vote of a majority of the members voting thereon at a meeting with respect to which a quorum exists. For purposes of these bylaws, a ballot validly returned by the deadline for return of ballots shall be considered to be a vote at the meeting to which it relates. (e) Directors shall be elected by the plurality vote of the members voting at a meeting with respect to which a quorum exists. Action to amend these bylaws or to remove a director pursuant to Article IV, Sections 7 and 8 of these bylaws may be taken only by the affirmative vote of a majority of those members voting at a meeting with respect to which a quorum exists. (f) Any sale, lease, or other disposition of more than fifteen percent (15%) of the Association's total assets, less depreciation, as reflected on the books of the Association at the time of the transaction, must be approved by the members pursuant to the provisions of Article IX, Section 1 of these bylaws. (g) A merger of the Association with any other cooperative, or with any other entity to the extent permitted by applicable law, must be approved by the affirmative vote of members constituting two-thirds (2/3) of the members voting at a meeting with respect to which a quorum exists. SECTION 7. Record Date. To determine the members entitled to notice of a meeting of the members or to vote on a matter that is to be submitted to a vote of the members, or for any other proper purpose, the board of directors may fix a date that occurs no more than thirty (30) days before the date of notice or distribution of ballots as the record date for the determination. If a record date is not fixed for the determination of members entitled to notice of a meeting or to vote on a matter, the date on which notice of the meeting is first transmitted shall be the record date. When a determination of members entitled to vote at a meeting is made, the determination applies until the meeting is adjourned sine die (without assigning a date for a future meeting). To determine whether a person is a member for purposes of deciding whether a sufficient number of members have signed a petition to hold a special meeting of members for any purpose, the board of directors may fix a record date that occurs no more than thirty (30) days before the date on which petitions are first received by the Association. The record date fixed for the original meeting shall be the record date for the adjourned meeting under Article III, Section 5. SECTION 8. Order of Business. (a) The order of business at the annual meeting of the members and, insofar as possible, at all other meetings of the members, shall be essentially as follows: 1) Report on the number of members present in person in order to determine the existence of a quorum. 2) Reading of the notice of the meeting and proof of the due publication thereof. 3) Reading of unapproved minutes of previous meetings of the members, making technical changes only to the minutes, and approval thereof. 4) Presentation and consideration of reports of officers, directors and committees. 5) Election of directors. 6) Unfinished business. 7) New business. 8) Adjournment. (b) Proposed amendments to the bylaws upon which voting is being conducted by ballot may be discussed at the annual meeting, but shall not be treated as being before the annual meeting for action, other than passage or defeat of the proposed amendments. They may not be further amended or tabled by action of the annual meeting. SECTION 9. Elections and Election Committee. (a) At the beginning of each calendar year, and not less than ninety (90) days prior to the annual meeting, the board of directors shall appoint an election committee, as provided for in Article XV of these bylaws. The committee shall consist of the master election judge, who shall chair the committee, and not more than twelve election judges. This committee shall have the responsibility for conducting all voting by secret ballot during the calendar year. The election committee shall devise such procedures, and adopt such rules and regulations, subject to the approval of the board of directors, as may be reasonably necessary or convenient to the discharge of the election committee's responsibilities. These responsibilities shall include, but are not limited to (1) the registration of members at the annual or special meeting, and (2) the obligation of insuring the fairness, impartiality, confidentiality, and integrity of the voting process. The master elec- tion judge and election judges shall be selected from the Association membership, with consideration for geographical representation. In case of a vacancy, the board of directors shall appoint an Association member to complete the unexpired term of the committee member. (b) The election committee shall cause the preparation of an official ballot containing the names of the candidates for the office of director and the proposed bylaw amendments. The ballot shall be designed with the position of names of the candidates changed as many times as there are candidates. As nearly as possible, an equal number of ballots shall be printed after each change. In making the changes of position, the name of the candidate shall be taken and placed at the bottom and the column moved up so that the name that before was second is first after the change. After the ballots are printed, they shall be placed in separate stacks, one stack for each change of position. The ballots shall then be gathered by taking one from each stack, the intention being that every other ballot in the accumulated stack of ballots shall have the names of the candidates in a different position. The ballot shall also include a brief description concerning the number of offices to be filled at the election and the time, place, and method of voting. At least thirty (30) days prior to the meeting, an official ballot shall be transmitted by the secretary to each member with 1) a statement of the number of directors' seats to be filled, 2) the candidates' names and election statements, 3) an explanation of any other matters to be voted on by ballot, the proposed changes to the bylaws, with the Bylaws Committee's comments and 4) a report covering the calendar year immediately preceding the annual meeting prepared by the General Manager setting forth the attendance record of directors at regular and special board meetings, together with a summary setting forth the agenda business items voted and the vote of each director. The candidates' statements: 1) Shall specify whether the candidate was nominated by the Nominating Committee or by petition. 2) Shall specify whether the candidate is: (i) A member, officer, director, or employee of any union local currently acting as a bargaining agent for Association employees. (ii) A person who has within the last two years had a financial interest in a bid, proposal, project, or contract with Chugach. (iii) A spouse, child, brother, sister, parent, stepparent, stepchild or stepsibling of: a) any person included in subparagraph (i) or (ii) above or b) an employee of the Association. 3) May include a photograph of the candidate, and a statement not to exceed 200 words. The election committee shall procure a post office box where all mail ballots shall be received. (c) A member may vote in person at the annual or special meeting or by such other means as allowed by law and established by the Association. All ballots not cast in person must be received by the Association or its designee by 12:00 Noon three (3) calendar days prior to the annual or special meeting. (d) The election committee shall make proper arrangements to secure all ballots before, during, and following the election. Marked ballots shall be counted as soon after the close of balloting as may be reasonable under the circumstances. The results thereof will be announced as soon as the count is completed. Marked ballots will be retained and secured for a period of ninety (90) days following the election, after which time they may be destroyed. (e) The election committee may employ such additional election clerks as may be required to register members at the annual or special meeting, to assist in the counting of the ballots and otherwise to ensure the efficient management of the meeting and balloting. Each candidate for the office of director may have a representative present during all times that ballots are being counted. The decision of a majority of the election committee shall be conclusive with respect to the eligibility of any person to vote and the validity of any ballot cast. (f) A recount of votes cast for a director's seat may only be requested by a candidate in that election. A request for a recount must be made in writing and received by the Election Committee within 10 days of the close of balloting. The recount will be done in the same manner as and by the same entity that performed the original vote count. If the recount indicates that the candidate requesting the recount has lost the election by more than 1 percent of the total votes cast, then the cost of the recount shall be borne by the candidate. If the recount indicates that the candidate requesting the recount has either won a seat or lost by a margin of 1 percent or less, then the cost of the recount shall be borne by the Association. A group of 10 or more members who voted in that election may request a recount of the ballots for a bylaws change or ballot question. A request for a recount must be made in writing and received by the Election Committee within 10 days of the close of balloting. The same provision for payment of the costs as provided above shall prevail, with the voters who requested the recount paying for the recount if the margin is greater than 1 percent, and the Association bearing the expense if the margin is 1 percent or less. (g) In the event of a tie for an election of a director, a bylaws change or a ballot question, a recount of the ballots shall be done. The Association shall bear the cost of recounts in the event of a tie. If the recount confirms the existence of a tie, then a run-off election shall be conducted by mail and by such other means as may be established by the Association within 60 days of the date the results of the recount are certified. The form and content of the ballots shall comply with this Article III, Section 9(b). The run-off election shall be conducted by the Election Committee. The provisions of this Article III, Section 9(d), (e) and (f) shall apply. ARTICLE IV DIRECTORS SECTION 1. General Powers. The management of the business and the affairs of the Association shall be vested in a board of seven (7) directors who shall exercise all of the powers of the Association, except such as are by law, the articles of incorporation, or by these bylaws conferred upon or reserved to the members. SECTION 2. Election and Tenure of Office. The persons named as directors in the articles of incorporation shall compose the board of directors until their successors shall have been elected and shall have qualified. Directors shall be elected by secret ballot either mailed or cast in person at annual or special meetings of the membership, by and from the members, to serve for a three-year term, not to exceed three consecutive three year terms, until their successors shall have been elected and qualify, provided that the terms of directors shall be staggered so that one-third of the directors, or a number as close to one-third as possible, shall be elected each year. The directors elected to fill vacancies as provided in Article IV, Section 8 of these bylaws, shall serve only for the unexpired portion of the term vacated. Where the remaining unexpired terms to be filled are of different lengths, the longest term shall be given to the director receiving the most votes. If the size of the board is subsequently increased, the initial terms of the directors to fill the newly created seat or seats shall be scheduled so that, as nearly as possible, an equal number of terms expire each year. At each annual or special meeting, members shall be elected to fill the seats on the board which become vacant as contemplated by Article IV, Section 8 of these bylaws. SECTION 3. Qualifications. (a) A person shall be eligible to serve as a director, who: 1) Has been a member and bona fide resident in the area served by the Association for 12 continuous months before appointment to the board, or the notice of the election; 2) Is not in any way employed by a competing enterprise, however, an employee of the Municipality of Anchorage who is not directly employed by Municipal Light and Power is eligible to serve if he or she has no fiduciary duties which in any way pertain to Municipal Light and Power; 3) Does not have a financial interest in a competing enterprise; 4) Is not a supplier, contractor, consultant, or other entity which does business with the Association or a person with more than a 10% ownership interest in a supplier, contractor, consultant, or other entity which does business with the Association, except for providers whose annual business with the Association does not exceed $25,000; 5) Is not an employee of the Association nor a member, officer, director, nor employee of any union local currently acting as a bargaining agent for Association employees; 6) Is not a person living in the same household with and financially interdependent upon any person included in paragraphs 2, 3, 4, and 5, above; and 7) Maintains i) his or her membership, ii) bona fide residency in the area served by the Association, and iii) a minimum of 12 continuous months of bona fide residency in the area served by the Association throughout his or her term of office. (b) An individual who is the authorized representative of a non-natural entity (corporation, association or partnership, for example) which itself is qualified under subsection (a) may become or remain a director if he is qualified under subsections (a)(1), (2), (3), (4), (5), (6) and (7). If the individual or the non-natural member fails to meet the prescribed qualifications, or if the non-natural member changes its authorized representative, the individual shall become subject to removal under subsection (c), and the director's position shall become vacant, without power of appointment by the non-natural member. (c) Upon establishment of the fact that a director is holding office in violation of any of the foregoing provisions including the disclosure provisions of Article III, Section 9(b), subsection (2), the board of directors shall remove such director from office unless the basis for disqualification is remedied within thirty (30) days of notice of disqualification by the board of directors. (d) Directors are ineligible for employment by the Association for a period of two (2) years after their term has expired. (e) "Bona fide resident" is hereby defined to mean: 1) a person whose primary residence is in the area served by the Association, and who actually lives at this primary residence with the intention to remain there permanently or indefinitely and 2) a non-natural entity who chooses as their authorized representative a person who is a "bona fide resident" as defined in 1). "Primary residence" shall mean the residence that is the chief or main residence of the person and where the person actually lives for the most substantial portion of the year. "Intention" shall mean the unequivocal intention of the person as evidenced by that person's acts and words and by the circumstances. Nothing contained in this section shall affect in any manner whatsoever the validity of any action taken at any meeting of the board of directors. SECTION 4. Nominations. (a) Nominating Committee. It shall be the duty of the board of directors to appoint, not less than one hundred and twenty days before the dates of a meeting of the members at which directors are to be elected, a committee on nominations, as provided for in Article XV of these bylaws. The committee shall consist of not less than five nor more than seven members, who shall be selected from different sections of the service area of the Association as to insure equitable representation. No member of the board of directors may serve on such committee. The committee shall seek qualified candidates, as well as screen potential nominees. Public notice for nominations shall be given ninety days prior to the meeting. The committee, keeping in mind the principle of geographical representation, shall approve, prepare and post at the principal office of the Association, at least seventy days before the meeting, a list of nominations for directors, which may include a greater number of candidates than are to be elected. (b) Petition. Any fifty or more members, acting together, may make other nominations by petition not less than sixty days prior to the election, and the secretary shall post such nominations at the same place where the list of nominations made by the committee is posted. SECTION 5. General Manager and Financial Advisor. The board of directors may appoint the following: (a) General Manager. The general manager may be but shall not be required to be a member of the Association. The general manager, together with such other staff, agents and employees as he may select shall perform such duties and shall exercise such authority as the board of directors may from time to time vest in him. (b) Financial Advisor. The Board, at its sole discretion, may engage the services of a financial advisor, which may be used to advise on any and all fiscal matters. The financial advisor shall report to the board. SECTION 6. Policy, Rules and Regulations. The board of directors shall have the power to make, adopt and enforce such policy, rules and regulations, not inconsistent with law, the articles of incorporation, or these bylaws, as it may deem advisable for the management of the affairs and business of the Association, for the protection of its investment, and for the interest and welfare of the members thereof. Such policy statements, rules and regulations shall be in writing and shall be made available for review by the members. SECTION 7. Removal of Directors by Members. Any member may bring charges against a director to remove such director for cause. "Cause" means that the director has committed an act or omission materially and adversely affecting the business of the Association, which amounts to criminal conduct, fraud, gross negligence, failure to perform prescribed duties, or gross misconduct in office. The charging member shall bring charges by filing with the secretary such charges in writing, together with a petition signed by at least two percent (2%) of members which requests the removal of such director by reason of the charges. The charges set forth in the petition must specifically allege grounds which, if true, would constitute cause for removal. The signatures of members on the petition shall be acceptable only when affixed to a sheet on which the petition and the relevant charges are fully set forth; and, provided further, that the person who solicited the signatures affixed to such petition shall acknowledge thereon before a person authorized to take acknowledgments of deeds that he had read the petition and the said charges against such director to each of the members prior to the latter subscribing their names thereto. All signatures on petitions to remove a director shall be collected within the single ninety (90) calendar day period immediately preceding the date on which petitions are first presented to the Association, and the board of directors shall establish such policies as may be necessary and convenient to ensure compliance with this provision. A director who is the subject of such charges shall be informed in writing of the charges promptly upon receipt of such petitions by the Association. The director shall have an opportunity at a special hearing on the proposed removal, to be heard in person, or by counsel, and to present evidence in respect to the charges, and the member or members bringing the charges against the director shall have the same opportunity. This special hearing to present evidence and testimony shall occur before ballots are transmitted to members for voting in connection with the special meeting at which the question of removal shall be considered and voted upon by the members. The question of the removal of such director shall be considered and voted upon at a meeting of the members conducted in accordance with procedures established for regular annual membership meetings. The question of removal shall be decided by the vote of a majority of the members voting thereon at a meeting with respect to which a quorum exists. SECTION 8. Vacancies. Any vacancy occurring in the board shall be filled by the affirmative vote of the majority of the remaining directors, and the member so appointed to the board shall serve until his successor has been elected. At such election following the existence of such vacancy, the members shall elect one of their number to serve as director during the unexpired portion of the term vacated, subject, however to provisions of Article IV, Section 2, 3 and 4 of these bylaws. SECTION 9. Compensation. (a) Directors shall not receive any salary for their services as directors, except that, by resolution of the board of directors, a fixed fee and expenses of attendance, if any, may be allowed for attendance at each meeting of the board of directors, or a meeting of a committee thereof, or when a director is otherwise representing the Association in an official capacity. No attendance other than regular or special board meetings shall be reimbursed unless authorized in advance by the majority vote of the board. The fixed fee shall not exceed $100.00 per meeting, and a director may not be compensated for more than two regular board meetings per month, and an additional 12 special board meetings per year. The total compensated meetings shall not exceed 70 meetings per year for a director, and 85 meetings per year for the president. The Association may not provide health insurance for directors or their families, or insurance for risks except those incurred in their capacity as directors. (b) Directors' expense reimbursement requests shall be reviewed and approved by the majority vote of the board. Directors may not receive salaries for their services as directors, and, except in emergencies, shall not receive salaries for their services in any other capacity without the approval of the members. ARTICLE V MEETINGS OF DIRECTORS SECTION 1. Regular Meeting. A regular meeting of the board of directors shall be held without notice immediately after, and at the same place as, the annual meeting of the members. A regular meeting of the board of directors shall also be held monthly at such time and place in the Municipality of Anchorage, State of Alaska, as the board of directors may provide by resolution. Such regular monthly meetings may be held without notice other than such resolution fixing the time and place thereof except that the board shall cause notice of the selection of the time and place of the regular meetings to be given to the members promptly after it is selected. SECTION 2. Special Meetings. Special Meetings of the board of directors may be called by the president, or by any three directors, and it shall thereupon be the duty of the secretary to cause notice of such meetings to be given as hereinafter provided. The president of the directors calling the meeting shall fix the time and place, which shall be in the Municipality of Anchorage, State of Alaska, for the holding of the meeting. Written notice of the time, place and purpose of any special meetings of the board of directors shall be delivered to each director not less than three days previous thereto, by or at the direction of the secretary, or upon default in duty by the secretary, by the president or the directors calling the meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the director at his address as it appears on the records of the Association, with postage thereon prepaid. SECTION 3. Quorum. A majority of the board of directors shall constitute a quorum; provided, that if less than a majority of the directors are present at said meeting, a majority of the directors present may adjourn the meeting from time to time; and provided further, that the secretary shall notify any absent directors of the time and place of such adjourned meeting. The act of the majority of the directors present at the meeting at which a quorum is present shall be the act of the board of directors. Each director present shall vote or abstain on each motion. Each director shall disclose any financial interest of the director or of a member of the director's immediate family in a matter before the board. SECTION 4. Director Attendance. If a director is absent from three consecutive regular board meetings or four regular board meetings, whether consecutive or not, or from 25% of all meetings, including regular and special meetings, board workshops, and committee meetings, in either of the two six month periods described below, the director shall be deemed to have resigned from the board of directors, and the vacancy thereby resulting will be filled as provided in Article IV, Section 8, of these bylaws. For purposes of compliance with this bylaw, attendance will be evaluated for two separate six month periods beginning May 1st and November 1st of each year. A director who is absent on Association business, including reasonable travel time to and from such business, shall not be counted absent, provided such travel and absence was approved in advance by the board. For purposes of this Section, an absence shall not be counted if it is excused by a vote of a majority of the members of the board not requesting the excuse at the next regular or special board meeting. However, no more than two absences per director may be excused by the board in either 6-month period. SECTION 5. Membership Attendance. (a) Regular meetings, special meetings and work sessions shall be open to all Association members. The notice of such meeting and an agenda shall be posted in a conspicuous place in the public places of business of the Association not later than three days prior to the meeting. The board of directors shall adopt a policy establishing additional means of providing public notice of meetings. (b) No closed or executive sessions shall be held except to discuss: 1) Matters the immediate knowledge of which would clearly have an adverse effect on the Association's finances; 2) Subjects that tend to prejudice the reputation and character of a person; however, that person may request a public discussion; 3) Matters discussed with an attorney for the Association, the immediate knowledge of which could have an adverse effect on the Association's legal position. SECTION 6. Minutes. Minutes will be kept for all regular and special meetings and shall include each director's vote on each matter voted upon by the board of directors. Copies of the minutes shall promptly be given to Association members upon request. The board of directors may prescribe a reasonable fee for such copies provided such fee shall not exceed the actual labor and material costs of reproduction. An electronic recording of all regular and special meetings shall also be made and kept for at least one year; Association members may request a transcription of the tape upon payment of the cost of transcription by a court reporter service; members shall also be permitted to listen to such tapes at the headquarters building. SECTION 7. Telephonic Board Meetings. For the purpose of the holding of any regular or special meeting, the Board of Directors can validly conduct such meeting by communicating with each other by means of conference telephones or similar communications equipment as allowed by law. Telephonic attendance by directors shall be permitted without limitation if the director is unable to attend in person due to Association business provided the absence was approved in advance by the board as provided under Article V, Section 4. Telephonic attendance for reasons other than Association business shall be limited to 25% of the meetings by any one director for the 6-month period beginning May 1 and the 6-month period beginning November 1. For attendance evaluation, a director is deemed absent from each meeting where the telephonic attendance limit was exceeded. The amendments to this Bylaw will take effect May 1, 1997. ARTICLE VI OFFICERS SECTION 1. Number. The officers of the Association shall be a president, vice-president, secretary and treasurer, and such other officers as may be determined by the board of directors from time to time. The offices of secretary and treasurer may be held by the same person. SECTION 2. Election and Term of Office. The officers shall be elected annually by ballot, by and from the board of directors, at the meeting of the board of directors held immediately after the annual meeting of the members. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as conveniently may be. Each officer shall hold office until the first meeting of the board of directors following the next succeeding annual meeting of the members, or until his successor shall have been elected and shall have qualified. A vacancy in any office shall be filled by the board of directors for the unexpired portion of the term. SECTION 3. Removal of Officers and Agents by Directors. Any officer or agent elected or appointed by the board of directors may be removed by the board of directors whenever in its judgement the best interests of the Association will be served thereby. SECTION 4. President. The president shall: (a) Be the principal executive officer of the Association and, unless otherwise determined by the members or the board of directors, shall preside at all meetings of the members and the board of directors; (b) Sign any deeds, mortgages, deeds of trust, notes, bonds, contracts or other instruments authorized by the board of directors to be executed, except in cases in which the signing and execution thereof shall be expressly delegated by the board of directors or these bylaws to some other officer or agent of the Association, or shall be required by law to be otherwise signed or executed; and (c) In general, perform all duties incident to the office of president and such other duties as may be prescribed by the board of directors from time to time. SECTION 5. Vice-President. In the absence of the president, or in the event of his inability or refusal to act, the vice-president shall perform the duties of the president, and when so acting, shall have all the powers of, and be subject to all the restrictions upon, the president. The vice-president shall also perform such duties as from time to time may be assigned to him by the board of directors. SECTION 6. Secretary. The secretary shall be responsible for: (a) Keeping the minutes of the meetings of the members and of the board of directors; (b) Seeing that all notices are given in accordance with these bylaws, or as required by law; (c) The safekeeping of the corporate records and seal of the Association, and affixing the seal of the Association to all documents, the execution of which on behalf of the Association under its seal is duly authorized in accordance with the provisions of these bylaws; (d) Keeping a register of the names and post office addresses of all members; (e) Keeping on file at all times a complete copy of the articles of incorporation and bylaws of the Association containing all amendments thereto, which copy shall always be open to the inspection of any members, and at the expense of the Association, forwarding a copy of the bylaws and of all amendments thereto to each member on request; and (f) In general, performing all duties incident to the office of secretary, and such other duties as from time to time may be assigned by the board of directors. SECTION 7. Treasurer. The treasurer shall be responsible for: (a) Custody of all funds and securities of the Association; (b) The receipt of, and the issuance of receipts for, all moneys due and payable to the Association, and for the deposit of all such moneys in the name of the Association in such bank or banks as shall be selected in accordance with the provisions of these bylaws; and (c) In general, performing all the duties incident to the office of treasurer and such other duties as from time to time may be assigned by the board of directors. SECTION 8. Delegation of Duties. In the absence of an officer, or in the event of his inability or refusal to act, the board of directors will appoint one of their number to perform the duties of his office; provided that the offices of president and vice-president may not be combined with any other office; and, provided further, nothing herein shall limit the right and duty of the vice-president to perform the duties of the president in the event that the president is absent, is unable to act, or refuses to act. The board of directors may provide for the delegation of one or more of the duties of the secretary and treasurer. SECTION 9. Bonds of Officers. The treasurer, and any other officer or agent of the Association charged with responsibility for the custody of any of its funds or property, shall give bond in such sum, and with such surety, as the board of directors shall determine. The board of directors, in its discretion, may also require any other officer, agent or employee of the Association to give bond in such amount and with such surety as it shall determine. SECTION 10. Budget. The Board of Directors shall review, revise and approve an annual operating budget prior to each fiscal year. SECTION 11. Reports. The officers of the Association shall submit, at each annual meeting of the members, reports covering the business of the Association for the previous fiscal year. Such reports shall set forth the condition of the Association at the close of such fiscal year. ARTICLE VII PATRONAGE CAPITAL SECTION 1. Patronage Capital. The Association shall at all times be operated on a cooperative, nonprofit basis for the mutual benefit of its patrons. The Association's operations shall be so conducted that all patrons, members and non-members alike, will through their patronage furnish capital for the Association, subject to the provisions for sinking funds and reserves as provided by Article VIII of these bylaws. In order to induce patronage and to assure that the Association will operate on a nonprofit basis, the Association is obliged to account on a patronage basis to all its patrons, members and non-members alike, for all amounts received from the furnishing of electric energy in excess of operating costs and expenses properly chargeable against the furnishing of electric energy. All such amounts in excess of operating costs and expenses are received with the understanding that they are furnished by the patrons, members and non-members alike, as capital. The Association is obligated to pay all such amounts in excess of operating costs and expenses to the patrons by credits to a capital account for each patron. The books and records of the Association shall be set up and kept in such a manner that at the end of each fiscal year the amount of capital, if any, so furnished by each patron, is clearly reflected and credited in an appropriate record to the capital account of each patron, and the Association shall within a reasonable time after the close of the fiscal year notify each patron of the amount of capital so credited to his account. All such amounts credited to the capital account of any patron shall have the same status as though they had been paid to the patron in cash in pursuance of a legal obligation to do so, and the patron had then furnished the Association corresponding amounts for capital. In the event of dissolution or liquidation of the Association, after all outstanding indebtedness of the Association shall have been paid, outstanding capital credits shall be retired without priority on a pro rata basis before any payments are made on account of property rights of members. If, at any time prior to dissolution or liquidation, the board of directors shall determine that the financial condition of the Association will not be impaired thereby, the capital then credited to patrons' accounts may be retired in full or in part, according to policies adopted by the board. Capital credited to the account of each patron shall be assignable only on the books of the Association pursuant to written instructions from the assignor, and only to successors in interest or successors in occupancy in all or a part of such patron's premises served by the Association, unless the board of directors, acting under policies of general application, shall determine otherwise. All other amounts received by the Association from its operations in excess of costs and expenses shall, insofar as permitted by law, be: (a) Used to offset any losses incurred during the current or any prior fiscal year; and (b) To the extent not needed for that purpose, allocated to its patrons on a patronage basis, and any amount so allocated shall be included as part of the capital credited to the accounts of patrons, as herein provided. Notwithstanding any other provisions of these bylaws, the board of directors, at its discretion, shall have the power at any time, upon the death of any patron, if the legal representative of his estate shall request in writing that the capital credited to any such patron be retired prior to the time such capital would otherwise be retired under the provisions of these bylaws, to retire capital credited to any such patron immediately upon such terms and conditions as the board of directors, acting under policies of general application, and the legal representative of such patron's estate shall agree upon, provided, however, that the financial condition of the Association will not be impaired thereby. ARTICLE VIII FISCAL MANAGEMENT AND ACCOUNTING SECTION 1. Revenues and Expenditures. The board of directors shall adopt and maintain a system of accounting for receipts and expenditures in conformance with the laws of the United States and of the State of Alaska applicable to cooperative associations and corporations, which system shall at all times provide the proper reserves for payments of interest and principal on outstanding indebtedness, reserves for taxes, insurance, depreciation, replacement of capital plant and facilities, and such other reserves and accounts as the board of directors shall deem proper. SECTION 2. Accounting System and Reports. The accounting system adopted and maintained by the board of directors shall conform to such rules and regulations applicable to accounting systems, their establishment and operation, and which may be established by any applicable laws, rules and regulations of the United States, the State of Alaska, or any regulatory agency thereof of competent jurisdiction. The board of directors shall also, after the close of each fiscal year, cause to be made a full, complete and independent audit of the accounts, books, and financial conditions of the Association as of the end of each fiscal year. A reasonably comprehensive and easily understood summary of the audit report shall be submitted to the members prior to each annual meeting. SECTION 3. Disclosure. Repealed April 25, 1996. ARTICLE IX DISPOSITION OF PROPERTY SECTION 1. Disposition of Property. (a) The board of directors shall have full power and authority to authorize the disposition of property of the Association, or to authorize the execution and delivery of a mortgage or mortgages, or a deed or deeds of trust, of any and all of the property, rights, privileges, licenses, franchises and permits of the Association, whether acquired or to be acquired, and wherever situated, as well as the revenues therefrom, all upon such terms and conditions as the board of directors shall determine, to secure any indebtedness of the Association. (b) The sale, lease, or other disposition of more than fifteen percent (15%) of the Association's total assets, less depreciation, as reflected on the books of the Association at the time of the transaction, must also be approved by the affirmative vote of members constituting not less than two-thirds (2/3) of the members voting where the number of members voting to approve the transaction also constitutes a majority of all of the members of the Association, except that if such a disposition is to another cooperative or to the State of Alaska pursuant to Alaska Statutes Section 10.25.400, such disposition must also be approved by a majority of those members voting on the issue in an election in which at least ten percent (10%) of the members vote. ARTICLE X SEAL The corporate seal of the Association shall be in the form of a circle and shall have inscribed thereon the name of the Association and the words "Corporate Seal, State of Alaska." ARTICLE XI FINANCIAL TRANSACTIONS SECTION 1. Contracts. Except as otherwise provided in these bylaws, the board of directors may authorize any officer or officers, agent or agents, to enter into any contract, or execute and deliver any instrument, in the name and on behalf of the Association, and such authority may be general or confined to specific instances. SECTION 2. Checks, Drafts, etc. All checks, drafts or other orders for the payment of money, and all notes, bonds or other evidences of indebtedness issued in the name of the Association, shall be signed by such officer or officers, agent or agents, employee or employees of the Association, and in such manner, as shall from time to time be determined by resolution of the board of directors. SECTION 3. Deposits. All funds of the Association shall be deposited from time to time to the credit of the Association in such bank or banks as the board of directors may select. SECTION 4. Fiscal Year. The fiscal year of the Association shall begin on the first day of January of each year and shall end on the thirty-first day of December of the same year. SECTION 5. Full and Open Competitive Bidding. It is deemed to be in the best interest of the Association: to encourage and require full and open competitive bidding of contracts; to take affirmative steps to insure that the Association selects the lowest responsible bidder for its requirements from among the broadest range of suppliers qualified by expertise and resources; and to insure that responsible bidders are not excluded. These requirements shall not apply in emergency matters, to professional service contracts, or (in the discretion of the Association) to contracts reasonably expected to be less than $50,000. The Directors shall require a review of the Association's bidding procedures and qualifications and shall take such actions as may be in the best interests of the Association as determined herein. Within thirty (30) months of the passage of this Section 5, the Board of Directors shall have fully implemented the provisions of this Section 5. ARTICLE XII MISCELLANEOUS SECTION 1. Membership in Other Organizations. The Association may, with the approval of the Board of Directors, become a partner, member, shareholder or holder of any other interest in any entity engaging in any lawful business. SECTION 2. Waiver of Notice. Any member or director may waive in writing any notice of a meeting required to be given by these bylaws. The attendance of a member or director at any meeting shall constitute a waiver of notice of the meeting, unless the person participates in the meeting solely for the express purpose of objecting to the transaction of any business on the ground that the meeting has not been lawfully called or convened. SECTION 3. Interpretation. Wherever the masculine gender is used in these bylaws it shall be construed also to refer to the feminine. ARTICLE XIII AMENDMENTS SECTION 1. Notice. These bylaws may be altered, amended or repealed by the members at any regular or special meeting, or by ballot as provided for in Article III, Section 9, provided the notice of such meeting shall have contained a copy of the proposed alteration, amendment or repeal. Notice to the membership shall be given ninety days prior to the annual meeting election for submission of recommended bylaw changes. SECTION 2. Bylaws Committee. It shall be the duty of the board of directors to appoint, not later than December 15th of each year, members to a committee on bylaws, as provided in Article XV of these bylaws. The committee shall consist of not less than five nor more than seven members, who shall be selected from different sections of the service area of the Association so as to insure equitable representation. No member of the board of directors may serve on such a committee. The committee shall review the bylaws of the Association, consider any recommendations for revisions thereof which may be made by the board of directors or any member, and report their recommendations concerning the bylaws to the annual membership meeting. Nothing herein shall be interpreted to limit the authority of the board of directors to propose changes in the bylaws, or the right of the members to call a special meeting for any proper purpose pursuant to Article III, Section 2, herein. ARTICLE XIV ADVISORY COUNCIL SECTION 1. Member Advisory Council. The board of directors shall create and establish a Member Advisory Council to advise the board. SECTION 2. General Duties. It shall be the duty of the board of directors to appoint members to the advisory council, as provided in Article XV. Members shall be selected from different sections of the service area to the Association so as to insure equitable representation. ARTICLE XV STANDING AND AD HOC COMMITTEES SECTION 1. General. This section shall apply to standing and ad hoc committees which may from time to time be appointed by the board. Standing committees include: the Election Committee, as provided for in Article III, Section 9; the Nominating Committee, as provided for in Article IV, Section 4; the Bylaws Committee, as provided for in Article XIII, Section 2; and the Member Advisory Council, as provided for in Article XIV. SECTION 2. Compensation. Members of standing and ad hoc committees shall receive no compensation or gratuity for their participation in the affairs of the Association. SECTION 3. Terms. The terms of standing committee members shall be for no more than three (3) years and be staggered so that, as nearly as possible, one-third shall expire each year. SECTION 4. Membership. In order to be fairly representative of the Association's diverse membership, it is preferable that standing and ad hoc committees be comprised of members who reflect that diversity. Toward that end, the selection process shall include consideration of the member's occupation, education, experience, geographical area in which service is provided by the Association, and type of service provided by the Association. A person is eligible to serve on such committees provided that such person is not: (a) an employee or director of the Association; (b) a director, officer or employee of any union local currently acting as a bargaining agent for Association employees; (c) a person employed by a competing enterprise, however, an employee of the Municipality of Anchorage who is not directly employed by Municipal Light and Power is eligible to serve if he or she has no fiduciary duties which in any way pertain to Municipal Light and Power; (d) a person having a financial interest in a competing enterprise; (e) a supplier, contractor, consultant or other entity which does business with the Association or a person with more than a 20% ownership interest in a supplier, contractor, consultant or other entity which does business with the Association except for providers whose actual business with the Association does not exceed $50,000; or (f) a person living in the same household with and financially interdependent upon any of the persons listed in (a) through (e), above. SECTION 5. Vacancy. In the case of a vacancy, the board of directors shall appoint an Association member in accordance with the provisions of this Article to complete the unexpired term of a committee member. ARTICLE XVI INDEMNIFICATION The Association shall indemnify and defend directors, officers, employees or agents of the Association who are, or are threatened to be made, parties to civil, criminal or administrative proceedings, for expenses (including attorneys' fees), judgments, fines and settlements, actually and reasonably incurred, if the acts complained of were performed within the scope of the director's, officer's, employee's or agent's duties, and the director, officer, employee or agent acted in good faith and in a manner he reasonably believed should be in, or not opposed to, the best interests of the Association, and, with respect to a criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The Association may purchase and maintain insurance to provide for such indemnification and defense. ARTICLE XVII MEMBER ACCESS TO INFORMATION SECTION 1. Access Rights. The rights of the members to examine and make copies of the books and records of the Association at a reasonable time and for a proper purpose in accordance with Alaska Statutes shall not be infringed. The following information is deemed to be requested for a proper purpose without any showing whatsoever and shall be made available to members on request of a member. (a) Names and mailing addresses of Association members when requested by a candidate running for election to the Association Board; (b) Salary, title, job classification and position description, benefits, leave accrued and cashed-in, and hours worked, but not employee name, for each employee position in the Association; (c) Collective bargaining agreements of any kind to which the Association is a party; (d) Published information which shall include: 1) Documents provided to any regulatory authority including, but not limited to the Regulatory Commission of Alaska (RCA), Federal Energy Regulatory Commission (FERC) and Securities and Exchange Commission (SEC) filings, 2) Documents provided in open session to the Board of Directors or Association committees, including but not limited to budget documents, feasibility studies, audits or cost effectiveness studies, correspondence between the Association and third parties and minutes of Board of Directors or Association committee meetings. SECTION 2. Charges. The Association may charge no more than the actual incremental cost of producing the above information. SECTION 3. Policies and Procedures. Nothing in this Article XVII prevents the Association from allowing for additional disclosure of Association information or from developing other rules for disclosure and payment therefor by policy or procedure provided that the policy or procedure shall in no way restrict the disclosure required in this Article XVII. EX-10.49 2 ex1049.txt CONFIRMATION FOR PARTIAL TERMINATION OF RATE LOCK Date: May 11, 2001 To: Chris Winters Chugach Electric Association, Inc 5601 Minnesota Drive Anchorage AK 995196300 Telephone: (310) 312-9507 Telecopier: (310) 312-9508 From: Lehman Brothers Financial Products Inc. 1 World Financial Center New York, NY 10285 Chris Fonte (Documentation Contact) Telephone: (646) 836-2016 Telecopier: (201) 524-2080 SUBJECT: Transaction Reference No: 168532 (22799/166793P) This is to confirm the termination of the Swap transaction between Lehman Brothers Financial Products Inc. ("Party A") and Chugach Electric Association, Inc ("Party B") entered into on March 17, 1999 with a Notional Amount of USD 18,700,000 and a Termination Date of February 13, 2002 (the "Swap Transaction"). 1. Notwithstanding anything to the contrary in the communication dated March 17, 1999 this will confirm our agreement on May 11, 2001 to terminate the Swap Transaction upon payment on May 15, 2001, (the "Effective Termination Date") by Party A to Party B in the amount of USD 10,000 (the "Termination Amount"). 2. Upon receipt of the Termination Amount by Party B the rights and obligations of Party A and Party B under the Swap Transaction shall be terminated, except in respect of any amounts which have become due and remain unpaid on the Effective Termination Date. 3. This Termination Agreement constitutes the entire agreement and understanding of the parties with respect to the termination of the Swap Transaction. 4. This Termination Agreement shall be governed by and construed in accordance with the laws of The State of New York, without reference to choice of law doctrine. Please confirm that the foregoing correctly sets forth the terms of our agreement with respect to this Transaction by signing in the space provided below and sending a copy of the executed Confirmation by fax (201-524-2080) to the Confirmation Group at Lehman Brothers Financial Products Inc. Yours faithfully Lehman Brothers Financial Products Inc. /s/ Diana Nottingham Diana Nottingham Authorized Signatory Agreed and accepted by: Chugach Electric Association, Inc By: /s/ Evan J. Griffith Name: Evan J. Griffith Title: Executive Manager, Finance & Energy Supply 10-Q 3 first2001.txt FORM 10Q QUARTER ENDED 03-31-01 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 - -------------------------------------------------------------------------------- FORM 10-Q - -------------------------------------------------------------------------------- QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 - -------------------------------------------------------------------------------- Commission file number 33-42125 CHUGACH ELECTRIC ASSOCIATION, INC. Incorporated pursuant to the Laws of Alaska State - -------------------------------------------------------------------------------- Internal Revenue Service - Employer Identification No. 92-0014224 5601 Minnesota Drive, Anchorage, AK 99518 (907) 563-7494 - -------------------------------------------------------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate the number of shares outstanding of each of the issuer's class of common stock, as of the latest practicable date. CLASS OUTSTANDING AT MAY 1, 2001 NONE NONE Page Number CAUTION REGARDING FORWARD-LOOKING STATEMENTS PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) 3 Balance Sheets, March 31, 2001 and December 31, 2000 4 Statements of Revenues, Expenses and Patronage Capital, Three Months Ended March 31, 2001 and 2000 6 Statements of Cash Flows, Three Months Ended March 31, 2001 and 2000 7 Notes to Financial Statements 8 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 1 1 Item 3. Quantitative and Qualitative Disclosures About Market Risk 1 5 PART II OTHER INFORMATION Item 1. Legal Proceedings 1 7 Item 2. Changes in Securities and Use of Proceeds 1 8 Item 3. Defaults Upon Senior Securities 1 8 Item 4. Submission of Matters to a Vote of Security Holders 1 8 Item 5. Other Information 1 8 Item 6. Exhibits and reports on Form 8-K 1 8 Signatures 1 9 Exhibits 2 0 CAUTION REGARDING FORWARD-LOOKING STATEMENTS Statements in this report that do not relate to historical facts, including statements relating to future plans, events or performance, are forward-looking statements that involve risks and uncertainties. Actual results, events or performance may differ materially. Readers are cautioned not to place undue reliance on these forward-looking statements, that speak only as of the date of this report and the accuracy of which is subject to inherent uncertainty. Chugach Electric Association, Inc. (Chugach or the Association) undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances that may occur after the date of this report or the effect of those events or circumstances on any of the forward-looking statements contained in this report, except as required by law. PART I FINANCIAL INFORMATION Item 1. Financial Statements The unaudited financial statements of Chugach for the quarter ended March 31, 2001 follow: CHUGACH ELECTRIC ASSOCIATION, INC. BALANCE SHEETS (Unaudited) Assets ------
March 31, 2001 December 31, 2000 -------------- ----------------- Utility plant Electric plant in service $ 683,903,374 $ 687,127,130 Construction work in progress 42,283,257 42,027,617 ---------- ---------- 726,186,631 729,154,747 Less accumulated depreciation (259,545,385) (259,999,872) ------------- ------------- Net utility plant 466,641,246 469,154,875 ----------- ----------- Other property and investments, at cost: Nonutility property 3,550 443,555 Investments in associated organizations 9,928,856 9,857,153 --------- --------- 9,932,406 10,300,708 --------- ---------- Current assets: Cash and cash equivalents 5,276,709 1,695,162 Cash-restricted construction funds 358,368 378,848 Special deposits 212,164 212,163 Accounts receivable, net 14,637,465 19,200,912 Fuel cost recovery 5,709,259 2,915,733 Materials and supplies 15,240,884 15,357,198 Prepayments 1,666,093 755,276 Other current assets 474,509 332,246 ------- ------- Total current assets 43,575,451 40,847,538 ---------- ---------- Deferred charges 25,008,541 19,442,859 ---------- ---------- $ 545,157,644 $ 539,745,980 ============= ============= See accompanying notes to financial statements.
Liabilities and Equities ------------------------
March 31, 2001 December 31, 2000 -------------- ----------------- Equities and margins: Memberships $ 1,020,308 $ 1,009,663 Patronage capital 126,376,024 122,925,253 Other 4,810,151 4,880,424 --------- --------- 132,206,483 128,815,340 ----------- ----------- Long-term obligations, excluding current Installments: Short-term borrowings refinanced 55,000,000 0 First Mortgage bonds payable 164,310,000 169,542,000 National Bank for Cooperatives bonds payable 142,500,000 142,677,945 ----------- ----------- 361,810,000 312,219,945 ----------- ----------- Current liabilities: Short-term borrowings 0 40,000,000 Current installments of long-term debt 5,580,267 6,430,350 Accounts payable 3,479,449 9,493,875 Consumer deposits 1,417,988 1,324,213 Accrued interest 1,753,088 5,861,390 Salaries, wages and benefits 4,677,164 4,586,407 Fuel 7,400,106 8,154,559 Estimated settlement of rate lock agreement 4,819,443 0 Other current liabilities 809,313 1,434,562 ------- --------- Total current liabilities 29,936,818 77,285,356 ---------- ---------- Deferred credits 21,204,343 21,425,339 ---------- ---------- $ 545,157,644 $ 539,745,980 ============= ============= See accompanying notes to financial statements.
CHUGACH ELECTRIC ASSOCIATION, INC. Statements of Revenues, Expenses and Patronage Capital (Unaudited)
Three-months ended March 31 2001 2000 ---- ---- Operating revenues $ 45,195,577 $40,871,074 Operating expenses: Power production 17,544,434 11,614,016 Purchased power 1,817,735 2,427,280 Transmission 1,065,422 969,735 Distribution 2,340,170 2,857,442 Consumer accounts/Information expense 1,324,858 1,286,755 Sales expense 130,564 275,760 Administrative, general and other 5,084,764 4,519,116 Depreciation and amortization 6,064,598 5,753,352 --------- --------- Total operating expenses 35,372,545 29,703,456 ---------- ---------- Interest: On long-term obligations 6,162,587 6,509,705 On short-term obligations 905,230 60,860 Charged to construction-credit (377,146) (429,704) --------- --------- Net interest expense 6,690,671 6,140,861 --------- --------- Net operating margins 3,132,361 5,026,757 --------- --------- Nonoperating margins: Interest income 153,574 191,837 Other 235,094 157,499 ------- ------- Total nonoperating margins 388,668 349,336 ------- ------- Assignable margins 3,521,029 5,376,093 ========= ========= Patronage capital at beginning of period 122,925,253 117,335,481 ----------- ----------- Retirement of capital credits and estate Payments (70,257) (58,431) -------- -------- Patronage capital at end of period $ 126,376,024 $ 116,435,644 ============= ============= See accompanying notes to financial statements.
CHUGACH ELECTRIC ASSOCIATION, INC. Statements of Cash Flows (Unaudited)
Three-months ended March 31 2001 2000 ---- ---- Cash flows from operating activities: Assignable margins $ 3,521,029 $ 5,376,093 ------------ ----------- Adjustments to reconcile assignable margins to net cash provided (used) by operating activities: Depreciation and amortization 6,064,598 5,753,352 Changes in assets and liabilities: (Increase) decrease in assets: Fuel cost recovery (2,793,526) 810,323 Accounts receivable 4,563,447 1,846,990 Prepayments (910,817) (463,532) Materials and supplies 116,314 (133,606) Deferred charges (746,239) (310,657) Other 318,220 (344,554) Increase (decrease) in liabilities: Accounts payable (6,014,426) (2,530,392) Consumer deposits 93,775 36,933 Accrued interest (4,108,302) (4,500,892) Deferred credits (220,996) (161,285) Other (1,288,945) (521,958) ----------- --------- Net cash provided (used) by operating activities (1,405,868) 4,856,814 ----------- --------- Cash flows from investing activities: Extension and replacement of plant (3,550,969) (3,866,228) Investments in associated organizations (71,703) (39,300) -------- -------- Net cash used in investing activities (3,622,672) (3,905,528) ----------- ----------- Cash flows from financing activities: Short-term borrowings, net 15,000,000 18,000,000 Repayments of long-term obligations (6,260,028) (14,716,362) Retirement of patronage capital (70,257) (58,431) Other (59,628) 3,973 -------- ----- Net cash provided by financing activities 8,610,087 3,229,180 --------- --------- Net increase in cash and cash equivalents 3,581,547 4,180,466 Cash and cash equivalents at beginning of period $ 1,695,162 $ 4,110,030 - ------------------------------------------------ ----------- ----------- Cash and cash equivalents at end of period $ 5,276,709 $ 8,290,496 - ------------------------------------------ =========== =========== Supplemental disclosure of cash flow information - interest 10,798,973 10,641,753 ========== ========== expense paid, net of amounts capitalized See accompanying notes to financial statements.
CHUGACH ELECTRIC ASSOCIATION, INC. Notes to Financial Statements (Unaudited) 1. Presentation of Financial Information During interim periods, Chugach follows the accounting policies set forth in its audited financial statements included in Form 10-K filed with the Securities and Exchange Commission, unless otherwise noted. Users of interim financial information are encouraged to refer to the footnotes contained in Chugach's Form 10-K when reviewing interim financial results. The accompanying unaudited interim financial statements reflect all adjustments, which are, in the opinion of management necessary to a fair statement of the results for the interim periods presented. Certain reclassifications have been made to the 2000 financial statements to conform to the 2001 presentation. 2. Refinancing 2001 Series A Bonds On April 17, 2001, Chugach issued $150,000,000 of 2001 Series A Bonds, for the purpose of retiring indebtedness outstanding under existing lines of credit and outstanding bonds, for capital expenditures and for general working capital. The lines of credit had an aggregate outstanding principal balance of $55,000,000, as of March 31, 2001, are renewable annually and bore interest at variable annual rates ranging from 7.70% to 8.05% as of March 31, 2001, and 7.55% to 7.80% at April 17, 2001. The variable-rate bonds retired had an aggregate outstanding principal balance of $72,500,000, as of March 31, 2001, would have matured in 2002 and bore interest at a variable rate that was 7.70% as of March 31, 2001 and 7.55% on April 17, 2001. The $55,000,000 of short-term borrowings has been reflected as long-term obligations due to the refinancing in April 2001 discussed above. The 2001 Series A Bonds will mature on March 15, 2011 and bear interest at 6.55% per annum. Interest will be paid semi-annually on March 15 and September 15 of each year commencing with September 15, 2001. The 2001 Series A Bonds are secured by a first lien on substantially all of Chugach's assets. The first lien will be automatically released when all bonds issued by Chugach prior to April 1, 2001 cease to be outstanding or their holders consent to conversion to unsecured status. Thereafter, the 2001 Series A Bonds will be unsecured obligations, ranking equally with Chugach's other unsecured and unsubordinated obligations. 1991 Series A Bonds In May 2001, Chugach reacquired $10,000,000 of its Series A 2022 Bonds at a price of 111%. Total transaction cost, including accrued interest and premium, was $11,242,178. The premium paid will be reflected as a regulatory asset. 3. Lines of credit Chugach maintains a line of credit of $35 million with CoBank, ACB, (CoBank). The CoBank line of credit expires August 1, 2001 but is subject to annual renewal. At March 31, 2001, $35 million was outstanding on this line of credit at an interest rate of 7.70%. In addition, the Association has an annual line of credit of $50 million available at the National Rural Utilities Cooperative Finance Corporation (NRUCFC). At March 31, 2001, there was $20 million outstanding on this line of credit at an interest rate of 8.05%. The outstanding balance was repaid in April 2001. The NRUCFC line of credit expires October 14, 2002, but is subject to annual renewal. 4. Changes in Accounting Principles Chugach entered into a US Treasury Rate Lock Agreement consisting of notional amount of $196 million 10-year and of $18.7 million 30-year U.S. Treasury, on March 17, 1999 with Lehman Brothers Financial Products Inc. (Lehman) for the purpose of taking advantage of favorable interest rates in anticipation of the probable refinancing of our Series A Bonds due 2022 on their first call date of March 15, 2002. The Series A bonds are callable at a 9.14% premium. As of January 1, 2001 and March 31, 2001, the aggregate principal amount of the Series A Bonds was $164,310,000. Under the US Treasury Rate Lock Agreement, we will receive a lump-sum payment on March 15, 2002, if the yield on 10 and 30 year Treasury bonds as of mid-February 2002, exceeds a specified target level (5.653% and 5.838%, respectively.) Conversely, on the same date, we will be required to make a payment if the yield on the 10 and 30 Treasury bond falls below the target yields. Chugach adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 138, effective January 1, 2001. This new standard requires all derivative financial instruments to be reflected on the balance sheet. As of January 1, 2001 and March 31, 2001, we have established a regulatory asset of $8.6 million and $4.8 million, respectively, and a liability for the same amount. The regulatory asset and liability will be adjusted for changes in the estimated value of the US Treasury Rate Lock Agreement entered into by us. Management believes it is probable the regulatory asset will be recovered through rates. On May 11, 2001, Chugach terminated the $18.7 million U.S. Treasury portion of the U.S. Treasury Rate Lock Agreement in receipt of payment of $10,000 by Lehman. 5. Environmental Matters Chugach discovered polychlorinated biphenyls ("PCBs") in paint caulk and grease at the Cooper Lake Hydroelectric Plant during initial phases of a turbine overhaul. We are implementing a plan approved by the Environmental Protection Agency to remediate the PCBs in the plant. Chugach is conducting an investigation to determine whether any PCBs released from the plant are present in Kenai Lake. We do not have an estimate at this time of the potential costs involved in the investigation and we do not know whether any additional remediation will be required. Management believes costs of this endeavor will be recoverable through rates and therefore will have no material impact on the financial condition or results of operations. 6. Segment Reporting The Association had divided its operations into two reportable segments: Energy and Internet service. The energy segment derives its revenues from sales of electricity to residential, commercial and wholesale customers, while the Internet segment derives its revenues from provision of residential and commercial internet services and products. Management evaluates a segment's performance based upon profit or loss from operations. The Internet segment was sold on March 20, 2001. The following is a tabulation of business segment information year to date as of March 31, 2001 and 2000: Operating Revenues 2001 2000 ------------------ ---- ---- Internet $196,074 $315,534 Energy $44,999,503 $40,555,540 ----------- ----------- Total operating revenues $45,195,577 $40,871,074 =========== =========== Assignable Margins Internet ($167,310) ($192,418) Energy $3,688,339 $5,568,511 ---------- ---------- Total assignable margins $3,521,029 $5,376,093 ========== ========== Assets Internet $0 $680,964 Energy $545,157,644 $518,602,253 ------------ ------------ Total assets $545,157,644 $519,283,217 ============ ============ Capital Expenditures Internet $0 $135,377 Energy $3,550,969 $3,730,851 ---------- ---------- Total capital expenditures $3,550,969 $3,866,228 ========== ========== 7. Legal Proceedings On July 7, 1999, Matanuska Electric Association, Inc. (MEA) filed a complaint against Chugach asserting that Chugach violated the parties' Power Supply Agreement in several different matters. Chugach and MEA each have filed various motions in the case. A hearing is scheduled for June 1, 2001, at which time the court proposes to set a trial date. Discovery in this matter is still in its preliminary stages. While a trial date has not yet been set offically, the parties seek a trial in February 2002. Because of the preliminary nature of the case, we are not able to estimate the costs of our participation. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Reference is made to the information contained under the caption "CAUTION REGARDING FORWARD-LOOKING STATEMENTS" at the beginning of this Report. For certain information concerning a U.S. Treasury Rate Lock transaction entered into by Chugach in March 1999, reference is made to information appearing in Part I, Item 3 "Quantitative and Qualitative Disclosures about Market Risk - Interest Rate Risk." of this Report. RESULTS OF OPERATIONS Current Year Quarter Versus Prior Year Quarter Operating revenues, which include sales of electric energy to retail, wholesale and economy energy customers and other miscellaneous revenues, increased by $4.3 million, or 11%, for the quarter ended March 31, 2001 over the same quarter in 2000. The increase in revenues was due to increased fuel prices, resulting in increased revenue collected through the fuel surcharge mechanism. Economy energy sales were lower due to decreased sales to Golden Valley Electric Association, (GVEA). Increased fuel prices has made it more economical for GVEA to produce their own power, rather than purchase it from Chugach. An increase in other miscellaneous revenue from first quarter 2000 to first quarter 2001 was attributed to new business venture revenues, as well as increased wheeling revenue from Municipal Light and Power, (ML&P). Retail demand and energy rates did not change in the first quarter of 2001 compared to the first quarter of 2000. Over this same period, the wholesale demand and energy rates charged to Homer Electric Association, (HEA) and Matanuska Electric Association, (MEA) decreased by 0.7 percent and 0.8 percent, respectively. Wholesale demand and energy rates charged to Seward Electric System, (SES) did not change in this quarter compared to the same quarter last year. In February 2001, Chugach submitted a request with the Regulatory Commission of Alaska, (RCA) to extend the power sales agreement between Chugach and the City of Seward scheduled to terminate September 1, 2001 to January 31, 2006. In April 2001, the Regulatory Commission of Alaska conditionally approved the extension. The agreement is currently being finalized, in conformity with those conditions, with final RCA approval expected in the near future. In April 2001, Chugach received final regulatory approval of its 1997 revenue requirement filing, which indicated that no refunds were required. Chugach submitted its 1998 test year revenue requirement filing to the Regulatory Commission of Alaska in February 2001. A hearing to resolve the outstanding issues associated with the filing was scheduled for May 2001 but that hearing date has been vacated and the parties are awaiting a new hearing date. Management believes the resolution of the issues will not have a material effect on Chugach. Chugach will be submitting a general rate case, based on the 2000 test year, to the Regulatory Commission of Alaska at the end of second quarter, 2001. The results of this filing, when adjudicated may result in a modest rate increase. Power production expense increased by $5.9 million, or 51%, from the first quarter 2000 to the first quarter 2001 due to an increase in fuel prices and maintenance. Purchased power expense decreased by $610 thousand, or 26%, for the quarter ended March 31, 2001, compared to the same period in 2000 due to less purchases from the Nikiski Power Plant, as the Nikiski Power Plant was offline. Distribution maintenance expense decreased by $517 thousand, or 19%, in this period compared to the same period last year, due to damage and outages caused by avalanches in the first quarter of 2000. Administrative, general and other expenses increased by $566 thousand, or 13%, for the three-month period ended March 31, 2001 as a result of increased labor costs associated with new labor contracts and an increase in pension costs. Interest on long-term debt decreased due to lower interest rates in the first quarter of 2001 compared to the first quarter of 2000. Interest charged to construction saw a minimal decrease in the first quarter of 2001 compared to the same period in 2000 due to the capitalization of the majority of the construction work in progress added during 2000. Other interest expense increased by $844 thousand, from the first quarter of 2000 to the first quarter of 2001 due to higher outstanding balances on the lines of credit in 2001. Other nonoperating margins were higher for the quarter ended March 31, 2001, compared to the same period in 2000 due to patronage capital credits received from CoBank in the first quarter of 2001. This, however, was offset by the decrease in Allowance for Funds Used During Construction (AFUDC) during the first quarter 2001 compared to the same quarter last year, due to the lower CWIP balances in 2001. Sale of a Segment As of March 20, 2001, Chugach sold to GCI Communication Corporation the bulk of our internet service provider assets related to dial-up services (excluding DSL services). The aggregate purchase price was $759,049 at closing, with a potential for additional amounts, not to exceed $85,850, based on the number of subscriber accounts retained during the ninety-day transition period following closing. Chugach is also to receive service fees for technical and other transition services during such period billed on a time-and-materials basis. The transaction resulted in a minimal gain. Financial Condition Total assets increased by $5.4 million, or 1%, from December 31, 2000 to March 31, 2001. This increase was due to a $5.6 million, or 29%, increase in deferred charges, attributed in part to the recording of the estimated regulatory asset associated with the liability established for the rate lock agreement. There was also a $3.6 million increase to cash and cash equivalents. This was associated with the increased borrowing activity in the first quarter of 2001, which left a higher balance at March 31, 2001. There was also a $2.8 million, or 96%, increase in fuel cost recovery caused by higher than anticipated generation at Bernice Lake due to unanticipated maintenance at the Beluga Power Plant. There was also an increase in prepayments of $911 thousand, or 121%, due in part to increased insurance renewals. These increases were partially offset by a $4.6 million, or 24%, decrease in accounts receivable caused by the payment of wholesale power bills that were accrued but not paid at December 31, 2000. Net utility plant decreased by $2.5 million due to the retirement of plant, along with the accumulated depreciation, associated with the Beluga Unit #6 upgrade. Notable changes to total liabilities include the $4.8 million recording of the estimated settlement value of the rate lock agreement, in compliance with FASB 133, as well as an increase of $15 million in short-term borrowings, which has been reflected on the balance sheet as long-term obligations due to the refinancing in April 2001. This was offset by the decrease of $5.2 million in first mortgage bonds resulting from the March bond payment. There was also a decrease of $6.0 million in accounts payable due to the payment of year end accruals and the decrease of $4.1 million in accrued interest due to the March semi-annual bond payment. Liquidity and Capital Resources Chugach has satisfied its operational and capital cash requirements primarily through internally generated funds, an annual $50 million line of credit from NRUCFC and a $35 million line of credit with CoBank. At March 31, 2001, there was $20 million outstanding with NRUCFC, which carried an interest rate of 8.05% as of March 31, 2001. This was re-priced on April 1, 2001 to 7.80%. The balance was paid in full with proceeds from the $150 million bond offering on April 17, 2001. At March 31, 2001, there was $35 million outstanding under the CoBank line of credit, which carried an interest rate of 7.70% as of March 31, 2001. This was re-priced on April 7, 2001 to 7.55%. The balance was also paid in full with proceeds from the $150 million bond offering on April 17, 2001. Chugach has negotiated a supplemental indenture (Seventh Supplemental Indenture of Trust) that eliminated the maximum aggregate amounts of bonds the Association may issue under the agreement. At March 31, 2001, Chugach had the following bonds outstanding under this financing arrangement.
Interest rate at Principal Payment Bond Principal balance March 31, 2001 Maturity Date Dates CoBank 1 $348,267 8.95% 2002 2001 - 2002 CoBank 2 $10,000,000 7.76% 2005 2005 CoBank 3 $21,500,000 5.60% 2022 2003 - 2022 CoBank 4 $23,500,000 5.60% 2022 2003 - 2022 CoBank 5 $15,000,000 5.60% 2012 2002 - 2012 CoBank 6 $42,500,000 7.70%* 2002 2002 CoBank 7 $30,000,000 7.70%* 2002 2002 Total $142,848,267 *Indicates variable interest rate
Additionally, Chugach has negotiated a similar supplemental indenture (Fifth Supplemental Indenture of Trust) with NRUCFC for $80 million. At March 31, 2001 there was no amounts outstanding under this financing arrangement. Capital construction in 2001 is estimated at $36.3 million. At March 31, 2001, approximately $3.6 million had been expended. Capital improvement expenditures are expected to increase in the upcoming second and third quarters as the construction season begins in April and extends into October. On April 17, 2001, Chugach issued $150 million of bonds in a public offering. The CoBank 6 and CoBank 7 Bonds were redeemed in full with a portion of the proceeds from this offering. For additional information, refer to Part I, Item I - Notes to Financial Statements (Unaudited) - Refinancing. Chugach is a party to a U.S. Treasury Rate Lock Agreement with respect to the probable refinancing of a portion of the 1991 Series A Bonds. The settlement date of this contract is March 15, 2002. At March 31, 2001, the U.S. Treasury Rate Lock Agreement had an estimated value of ($4.8) million. At May 4, 2001, the agreement had an estimated value of ($6.6) million. On May 11, 2001, Chugach terminated a portion of the agreement in receipt of payment of $10,000. See Item 3 "Quantitative and Qualitative Disclosures about Market Risk - Interest Rate Risk." Chugach management continues to expect that cash flows from operations and external funding sources will be sufficient to cover operational and capital funding requirements in 2001 and thereafter. OUTLOOK Electric industry deregulation has suffered a major setback with the industry deterioration in California. The competitive marketplace, in Alaska, now seems quite distant and there is no movement in that direction. In the recent past Chugach has been active at the Alaska Legislature in support of the customer's right to choose their electric power provider. Virtually all Alaska utilities opposed Chugach's efforts to develop competition and no movement in that direction currently exists. To insure readiness for competition and to build organizational experience and expertise in competitive-type business, Chugach operates with three divisions: Finance and Energy Supply, Transmission and Distribution Network Services and Retail Services. Chugach also operates a key account program for larger customers and has developed several new services to enhance existing customer satisfaction. ENVIRONMENTAL MATTERS Compliance with Environmental Standards Chugach's operations are subject to certain federal, state and local environmental laws that Chugach monitors to ensure compliance. The costs associated with environmental compliance are included as a component of both the operating and capital budget processes. Chugach accrues for costs associated with environmental remediation obligations when such costs are probable and reasonably estimable. Environmental Matters Chugach discovered polychlorinated biphenyls ("PCBs") in paint caulk and grease at the Cooper Lake Hydroelectric Plant during initial phases of a turbine overhaul. We are implementing a plan approved by the Environmental Protection Agency to remediate the PCBs in the plant. We are also conducting an investigation to determine whether any PCBs released from the plant are present in Kenai Lake. We do not have an estimate at this time of the potential costs involved in the investigation and we do not know whether any additional remediation will be required. Management believes costs of this endeavor will be recoverable through rates and therefore will have no material impact on the financial condition or results of operations. Item 3. Quantitative and Qualitative Disclosures About Market Risk Chugach is exposed to a variety of risks, including changes in interest rates and changes in commodity prices due to repricing mechanisms inherent in gas supply contracts. In the normal course of our business, we manage our exposure to these risks as described below. Chugach does not engage in trading market risk-sensitive instruments for speculative purposes. Interest Rate Risk As of March 31, 2001, except for two bonds issued to CoBank carrying variable interest rates that were periodically re-priced and subsequently paid in full with proceeds from the $150 million public bond offering on April 17, 2001, all of our outstanding long-term borrowings were at fixed interest rates with varying maturity dates. The following table provides information regarding cash flows for principal payments on total debt by maturity date (dollars in thousands) as of March 31, 2001.
- --------------------- ---------- ---------- --------- -------- ----------- ------------- ----------- ----------- Fair 2001 2002 2003 2004 2005 Thereafter Total Value ---- ---- ---- ---- ---- ---------- ----- ----- Total Debt* - --------------------- ---------- ---------- --------- -------- ----------- ------------- ----------- ----------- - --------------------- ---------- ---------- --------- -------- ----------- ------------- ----------- ----------- - --------------------- ---------- ---------- --------- -------- ----------- ------------- ----------- ----------- - --------------------- ---------- ---------- --------- -------- ----------- ------------- ----------- ----------- Fixed rate $170 $10,410 $5,907 $6,447 $17,036 $199,920 $239,890 $258,588 - --------------------- ---------- ---------- --------- -------- ----------- ------------- ----------- ----------- - --------------------- ---------- ---------- --------- -------- ----------- ------------- ----------- ----------- - --------------------- ---------- ---------- --------- -------- ----------- ------------- ----------- ----------- - --------------------- ---------- ---------- --------- -------- ----------- ------------- ----------- ----------- Average interest rate 8.95% 6.90% 8.62% 8.62% 8.12% 8.22% 8.17% - --------------------- ---------- ---------- --------- -------- ----------- ------------- ----------- ----------- - --------------------- ---------- ---------- --------- -------- ----------- ------------- ----------- ----------- - --------------------- ---------- ---------- --------- -------- ----------- ------------- ----------- ----------- - --------------------- ---------- ---------- --------- -------- ----------- ------------- ----------- ----------- Variable rate** $55,000 $72,500 $0 $0 $0 $0 $127,500 $127,500 - --------------------- ---------- ---------- --------- -------- ----------- ------------- ----------- ----------- - --------------------- ---------- ---------- --------- -------- ----------- ------------- ----------- ----------- - --------------------- ---------- ---------- --------- -------- ----------- ------------- ----------- ----------- - --------------------- ---------- ---------- --------- -------- ----------- ------------- ----------- ----------- Average 7.83% 7.70% 7.75% interest rate - --------------------- ---------- ---------- --------- -------- ----------- ------------- ----------- ----------- * Includes current portion ** All variable-rate debt was refinanced on April 17, 2001 with a portion of the proceeds from Chugach's issuance of $150 million of 6.55% interest-only bonds due in 2011.
On March 17, 1999, Chugach entered into a U.S. Treasury Rate Lock Agreement, consisting of notional amount of $196 million 10-year and of $18.7 million 30-year U.S. Treasury, with Lehman Brothers Financial Products Inc. (Lehman Brothers) for the purpose of taking advantage of favorable market interest rates in anticipation of refinancing Chugach's Series A Bonds Due 2022 on their first call date (March 15, 2002). As of March 31, 2001, the aggregate principal amount of Series A Bonds due 2022 was $164,310,000. Under the Treasury rate lock contract, Chugach will receive a lump-sum payment from Lehman Brothers on March 15, 2002, if the yield on 10- or 30-year Treasury bonds as of mid-February, 2002, exceeds a specified target level (5.653% and 5.838%, respectively). Conversely, on the same date, Chugach will be required to make a payment to Lehman Brothers if the yield on the 10- or 30-year Treasury bonds falls below its stated target yield. The fair value of the treasury rate lock agreement on May 4, 2001, approximated $(6,647,262). A 10 basis-point change (up or down) in the prevailing yield on both 10-year and 30-year Treasury bonds would change the value of the rate lock agreement (up or down) by approximately $1.7 million. On May 11, 2001, Chugach terminated the $18.7 million U.S. Treasury portion of the U.S. Treasury Rate Lock Agreement in receipt of payment of $10,000 by Lehman Brothers. Commodity Price Risk Our gas contracts provide for adjustments to gas prices bases on fluctuations of certain commodity prices and indices. Because purchased power costs are passed directly to our wholesale and retail customers through a fuel surcharge, fluctuations in the price paid for gas pursuant to long-term gas supply contracts do not normally impact margins. The fuel surcharge mechanism mitigates the commodity price risk related to market fluctuations in the price of purchased power. PART II OTHER INFORMATION Item 1. Legal Proceedings Matanuska Electric Association, Inc. v. Chugach Electric Association, Inc. 3AN-99-8152 (Omnibus case) On July 7, 1999, Matanuska Electric Association, Inc., (MEA) filed a complaint against Chugach Electric Association, Inc., (Chugach) in Alaska Superior Court in Anchorage, asserting that Chugach violated the parties' Power Supply Agreement, (Agreement) in failing to provide MEA with information about several different matters that MEA asserts could affect the cost of the power MEA purchases from Chugach. MEA also asserted that Chugach violated the Agreement in the management of its long-term bond indebtedness, violated Alaska statutes and Chugach's bylaws in the manner in which it conducted a special meeting in 1999, and violated the Agreement in failing to follow a certain procedure prior to filing its 2000 test year general rate case. Chugach has filed several motions for partial summary judgment that have been granted, eliminating MEA's claims relating to Chugach's 1999 special meeting, holding that a certain Arthur Andersen report was properly withheld, and holding that certain matters considered by Chugach's Board in executive session were properly withheld. On March 5, 2001, Chugach filed a Motion for Partial Summary Judgement seeking dismissal of MEA's financial mismanagement claim, on the grounds that there is no genuine issue of material fact regarding whether Chugach properly managed its long-term bond indebtedness. Chugach relied substantially on the fact that MEA's financial experts did not opine that Chugach had acted unreasonably. On March 13, 2001, MEA filed a motion asking the court to deny Chugach's Motion for Partial Summary Judgment and instead reopen expert witness discovery so it could add additional experts. MEA's motion has been scheduled for oral argument on June 1, 2001, at which time the court also proposes to set a trial date. Discovery in this matter is still in its preliminary stages. While a trial date has not yet been set officially, the parties seek a trial in February 2002. Because of the preliminary nature of the case, we are not able to estimate the costs of our participation. For additional information, refer to the discussion of this matter in Part I, Item 3 - Legal Proceedings, Matanuska Electric Association, Inc., v. Chugach Electric Association, Inc., 3AN 99-8152CI of the Form 10-K filed by Chugach with respect to the annual report period ended December 31, 2000. Item 2. Changes in Securities and Use of Proceeds Not applicable Item 3. Defaults Upon Senior Securities Not applicable Item 4. Submission of Matters to a Vote of Security Holders Not applicable Item 5. Other Information On April 26, 2001, the Bylaws and the Articles of Incorporation of the Registrant were amended. Article I, Section 1 of the Bylaws and Article III, Section 2 of the Articles of Incorporation were changed to simplify existing language and clarify that any legally recognized entity is eligible to become a member of Chugach. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Bylaws of the Registrant (as amended April 26, 2001). Confirmation for partial termination of U.S. dollar Treasury rate lock transaction to be subject to 1992 Master Agreement between the Registrant and Lehman Brothers Financial Products, Inc. dated May 11, 2001. (b) Reports on Form 8-K: No reports on Form 8-K were filed for the quarter ended March 31, 2001 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CHUGACH ELECTRIC ASSOCIATION, INC. By: /s/ Lee Thibert for Eugene N. Bjornstad Eugene N. Bjornstad General Manager Date: May 14, 2001 By: /s/ Evan J. Griffith Evan J. Griffith Executive Manager, Finance & Energy Supply Date: May 14, 2001 EXHIBITS Listed below are the exhibits which are filed as part of this Report:
Exhibit Number Description Page 3.2 Bylaws of the Registrant (as amended April 26, 2001) 21 10.49 Confirmation for partial termination of U.S. dollar Treasury 36 rate-lock transaction to be subject to 1992 Master Agreement between the Registrant and Lehman Brothers Financial Products Inc. dated May 11, 2001.
-----END PRIVACY-ENHANCED MESSAGE-----