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Home My WebLink AboutIDA Corp Continues EXHIBIT A [FORM OF CERTIFICATE OF PARTICIPATION] TRUCKEE-DONNER PUBLIC UTILITY DISTRICT REVENUE CERTIFICATE OF PARTICIPATION, SERIES 2003A [TAXABLE SERIES 2003B] Evidencing an Interest of the Owner Hereof in Installment Payments to be Made by the TRUCKEE-DONNER PUBLIC UTILITY DISTRICT CERTIFICATE INTEREST RATE PAYMENT DATE DATED CUSIP —% , 2003 REGISTERED OWNER: PRINCIPAL AMOUNT: AND NO1100 DOLLARS THIS IS TO CERTIFY that the Registered Owner (specified above) of this Certificate of Participation (herein called the "Certificate") is the owner of an undivided interest in the right to receive certain Installment Payments (as that term is defined in the Trust Agreement hereinafter mentioned) under that certain Installment Purchase Agreement (the "Installment Purchase Agreement'), dated as of March 1, 2003, by and between Truckee-Donner Public Utility District Financing Corporation (the "Corporation") and the Truckee-Donner Public Utility District (the "District'). The Installment Payments to be made thereunder have been assigned to BNY Western Trust Company, as trustee (the "Trustee"), having a corporate trust office in Los Angeles, California. The Trustee has executed and delivered $ aggregate principal amount of Certificates. The Registered Owner of this Certificate is entitled to receive, subject to the terms of the Installment Purchase Agreement and the Trust Agreement, dated as of March 1, 2003, by and among the Trustee, the Corporation and the District (the "Trust Agreement") on the Certificate Payment Date (specified above) the Principal Amount (specified above) representing a portion of the Installment Payments designated as principal coming due on the Certificate Payment Date, and to receive an interest component on such principal component at the interest rate per annum specified above, from the Interest Payment Date (as hereinafter defined)preceding the date of execution hereof by the Trustee, unless such date of execution is after a Record Date (as hereinafter defined)and on or before the succeeding Interest Payment Date, in which case interest shall be payable from such Interest Payment Date, or unless such date of execution is on or before the first Record Date, in which case interest shall be payable from 2003; provided, however, that if, as shown by the records of the Trustee, interest represented by this Certificate is in default, Certificates executed in exchange for this Certificate surrendered for transfer or exchange shall represent interest from the last date to which interest has been paid in full or duly provided for with respect to this Certificate, or, if no interest has been paid or duly provided for with respect to this Certificate, from , 2003. i DOCSSF\35478v4\22925.0006 Interest with respect to this Certificate shall be paid on January 1 and July 1 in each year, commencing July 1, 2003 (each, an "Interest Payment Date"), and continuing to and including the Certificate Payment Date or the date of prior prepayment hereof, whichever is earlier. Interest with respect to this Certificate shall be calculated on the basis of a 360-day year of twelve 30-day months. The principal with respect hereto and prepayment premiums, if any, are payable in lawful money of the United States of America upon presentation and surrender at the principal corporate trust office of the Trustee in Los Angeles, California or such other office as the Trustee may from time to time designate in writing to the District, the Corporation and the registered owners (the "Principal Corporate Trust Office"). Interest with respect hereto is payable by check or draft of the Trustee mailed by first class mail on each Interest Payment Date to the Registered Owner hereof as of the close of business on the fifteenth day of the calendar month prior to such Interest Payment Date (the "Record Date") at the address shown on the books maintained by the Trustee or, upon the written request received by the Trustee of an Owner of at least $1,000,000 in aggregate principal amount of Certificates, by wire transfer of immediately available funds to an account in the United States designated by such Owner prior to the applicable Record Date, except, in each case that, if and to the extent that there is a default in the payment of the interest due on such Interest Payment Date, such defaulted interest shall be paid to the owner in whose name this Certificate is registered at the close of business on a special record date as determined by the Trustee. This Certificate has been executed by the Trustee pursuant to the terms of the Trust Agreement. Copies of the Trust Agreement and the Installment Purchase Agreement are on file at the corporate trust office of the Trustee in Los Angeles, California, and reference is made to the Trust Agreement and the Installment Purchase Agreement and any and all amendments thereto for a description of the pledges and covenants securing the Certificates, the nature, extent and manner of enforcement of such pledges, the rights and remedies of the registered owners of the Certificates with respect thereto and the other terms and conditions upon which the Certificates are delivered thereunder. The Certificates are payable from Installment Payments payable by the District and other amounts on deposit in certain funds and accounts held under the Trust Agreement, including but not limited to the Reserve Fund, all in accordance therewith. All Revenues and all amounts on deposit in the Revenue Fund (as such terms are defined in the Installment Purchase Agreement) are irrevocably pledged to the payment of the Installment Payments and the Revenues shall not be used for any other purpose while any of the Installment Payments remain unpaid; provided that out of Revenues there may be apportioned such sums for such purposes as are expressly permitted in the Installment Purchase Agreement. This pledge, together with the pledge created by all other Contracts and Bonds (as such terms are defined in the Installment Purchase Agreement) constitutes a first lien on Revenues, subject to application of Revenues and all amounts on deposit in the Revenue Fund as permitted in the Installment Purchase Agreement, and the Revenue Fund for the payment of the Installment Payments and all other Contracts and Bonds in accordance with the terms of the Installment Purchase Agreement. The obligation of the District to make Installment Payments is a special obligation of the District payable solely from Net Revenues (as defined in the Installment Purchase Agreement) on a parity with certain outstanding Contracts as described in the Installment Purchase Agreement and does not constitute a debt of the District or of the State of California or of any political subdivision thereof in contravention of any constitutional or statutory debt limitation or restriction. The District may at any time incur Contracts or issue Bonds, the payments of which are on a parity with the ii DOCSS F135478v4122925.0006 Installment Payments and which are secured by a pledge of and lien on the Revenues in accordance with the Installment Purchase Agreement. The Certificates are authorized to be executed and delivered in the form of fully registered Certificates in the denomination of $5,000 each or any integral multiple thereof, provided that no Certificate shall have principal represented thereby maturing in more than one year. Subject to the limitations and conditions and upon payment of the taxes and governmental charges provided in the Trust Agreement, Certificates may be exchanged for a like aggregate principal amount of Certificates of the same Certificate Payment Date of other authorized denominations at the Principal Corporate Trust Office of the Trustee. This Certificate is transferable by the Registered Owner hereof, in person or by such person's duly authorized attorney, but only in the manner, subject to the limitations and conditions and upon payment of the taxes and governmental charges provided in the Trust Agreement, and upon surrender of this Certificate for cancellation at the Principal Corporate Trust Office of the Trustee, accompanied by delivery of a duly executed written instrument of transfer, in a form approved by the Trustee. Upon such transfer a new Certificate or Certificates of the same Certificate Payment Date and of authorized denomination or denominations, for a like aggregate principal amount will be delivered to the transferee in exchange herefor. The Trustee may treat the Registered Owner hereof as the absolute owner hereof for all purposes, and the Trustee shall not be affected by any notice to the contrary. The Trustee shall not be required to register the transfer or exchange of any Certificate (i) within 15 days preceding selection of Certificates for prepayment or(ii) selected for prepayment. The Certificates are subject to prepayment prior to their respective stated maturities, as a whole or in part on any date in the order of maturity as directed by the District in a written request to the Trustee and by lot within each maturity in integral multiples of$5,000, from prepaid Installment Payments made by the District from Net Proceeds (as defined in the Installment Purchase Agreement), under the circumstances and upon the terms prescribed in the Trust Agreement and the Installment Purchase Agreement, at a prepayment price equal to the principal amount thereof plus accrued interest evidenced and represented thereby to the date fixed for prepayment, without premium. As provided in the Trust Agreement, notice of prepayment hereof shall be mailed, first class postage prepaid, not less than 30 days nor more than 60 days prior to the prepayment date, to the Registered Owner of this Certificate at the address thereof appearing on the Certificate registration books. If this Certificate is called for prepayment and payment is duly provided therefor as specified in the Trust Agreement, interest represented hereby shall cease to accrue from and after the date fixed for prepayment. Any defect in the notice or the mailing thereof will not affect the validity of the prepayment of this Certificate. To the extent and in the manner permitted by the terms of the Trust Agreement and the Installment Purchase Agreement, as the case may be, the Trust Agreement and the rights and obligations of the District and of the registered owners of the Certificates and of the Trustee or the Installment Purchase Agreement and the rights and obligations of the Corporation and the District and the registered owners of the Certificates and the Trustee, respectively, may be modified or amended with the written consents of the registered owners of a majority in aggregate principal DOCSSF\35478v4\22925.0006 amount of the Certificates then outstanding, but no such modification or amendment shall (1) extend the stated maturities of the Certificates, or reduce the rate of interest or yield-to-maturity represented thereby; or extend the time of payment of interest, or reduce the amount of principal represented thereby, or reduce any premium payable on the prepayment thereof, without the consent of the registered owner of each Certificate so affected,or(2) reduce the percentage of registered owners of Certificates whose consent is required for the execution of any amendment or modification of the Trust Agreement or the Installment Purchase Agreement, or (3) modify any of the rights or obligations of the Trustee or the Corporation without its written consent thereto. To the extent and in the manner permitted by the terms of the Trust Agreement and the Installment Purchase Agreement, as the case may be, the Trust Agreement and the rights and obligations of the Corporation and the District and of the registered obligations of the Corporation and the District and of the registered owners of the Certificates or the Installment Purchase Agreement and the rights and obligations of the Corporation and the District also be modified or amended, without the consent of the registered owners of any Certificates, but only to the extent permitted by law and only for any one or more of the following purposes- - (1) to add to the covenants and agreements of the Corporation or the District contained in the Trust Agreement or the Installment Purchase Agreement other covenants and agreements thereafter to be observed or to surrender any right or power in the Trust Agreement or the Installment Purchase Agreement reserved to or conferred upon the Corporation or the District, and which shall not adversely affect the interests of the registered owners of the Certificates; (2) to cure; correct or supplement any ambiguous or defective provision contained in the Trust Agreement or the Installment Purchase Agreement or in regard to questions arising under the Trust Agreement or the Installment Purchase Agreement, as the Corporation or the District may deem necessary or desirable and which shall not adversely affect the interests of the registered owners of the Certificates;and (3) to make such other amendments or modifications as may be in the best interests of the registered owners of Certificates. Upon acceleration, the Installment Payments and the Certificates shaft become due and payable immediately from the sources described in the Installment Purchase Agreement and the Trust Agreement, respectively: The Trustee has no obligation or liability to the registered owners of the Certificates for the payment of interest, principal or prepayment premium, if any, with respect to the Certificates out of the Trustee's own funds;the Trustee's sole obligations are those described in the Trust Agreement. The recitals of facts herein shall be taken as statements of the District and the Corporation and the Trustee does not have any responsibility for the accuracy thereof. The District has certified that all acts, conditions and things required by the Constitution and statutes of the State of California and the Trust Agreement to exist, to have happened and to have been performed precedent to and in the delivery of this Certificate, do exist, have happened and have been performed in due time, form and manner as required by law. iv DOCSSF\35478v4122925.0006 ................... __ . _ ___ IN WITNESS WHEREOF, this Certificate has been executed by the manual signature of an authorized signatory of the Trustee, all as of the date set forth below. Execution date: BNY WESTERN TRUST COMPANY, as Trustee By: Authorized Signatory [FORM OF STATEMENT OF INSURANCE] v nocssF\3547av4v22925.000e [FORM OF ASSIGNMENT] ASSIGNMENT For value received the undersigned do(es) hereby sell, assign and transfer unto the within mentioned Certificate and hereby irrevocably constitute(s) and appoint(s) attorney, to transfer the same on the Certificate register of the Trustee with full power of substitution in the premises. Dated: Note: The signature(s) to this Assignment must correspond with the name(s) as written on the face of the within Certificate in every particular, without alteration or enlargement or any change whatsoever. Signature Guaranteed: Note: Signature(s) must be guaranteed by an eligible guarantor institution. vi DOCSS F135478v4\22925.0006 Table of Contents Paee ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION; CONTENTS OF CERTIFICATES AND OPINIONS; RECITALS SectionLI. Definitions .................................................................................................................... 1 Section 1.2. Rules of Construction...................................................................................................5 Section 1.3. Content of Statements and Opinions........................................... .................................5 Section1.4. Recitals..........................................................................................................................6 ARTICLE II CERTIFICATES; TERMS AND PROVISIONS Section 2.1. Preparation of Certificates............................................................................................7 Section 2.2. Denominations; Medium and Place of Payment; Dating....... ........__.................. .......7 Section 2.3. Payment of Principal and Interest with Respect to Certificates....................................8 Section2.4. Form of Certificates......................................................................................................8 Section2.5. Execution......................................................................................................................8 Section 2.6. Transfer of Certificates.................................................................................................8 Section 2.7. Exchange of Certificates............................................ ................. .....................9 Section 2.8. Certificate Registration Books......................................................................................9 Section 2.9. Certificates Mutilated, Lost, Destroyed or Stolen ........................................................9 Section2.10. Book-Entry System.......................__..................... ................_................... ............ 10 ARTICLE III DELIVERY OF CERTIFICATES; DELIVERY COST FUND Section 3.1. Delivery of Certificates............................................................................................... 12 Section 3.2. Application of Proceeds of Certificates and Certain Other Moneys...........................12 Section 3.3. Validity of Certificates................................................................................................ 13 Section3.4. Delivery Cost Fund..................................................................................................... 13 ARTICLE IV PREPAYMENT OF CERTIFICATES Section 4.1. Terms of Prepayment.................................................................................................. 13 Section 4.2. Selection of Certificates for Prepayment.................................................................... 13 Section 4.3. Notice of Prepayment................................................................................................. 13 Section 4.4. Partial Prepayment of Certificate................................................................................ 14 Section 4.5. Effect of Prepayment.................................................................................................. 14 i DOCSSF\35478v4\22925.0006 Table of Contents (continued) Page ARTICLE V INSTALLMENT PAYMENTS Section 5.1. Pledge and Deposit of Installment Payments............................. ................................ 14 Section 5.2. Certificate Payment Fund........................................................................................... 15 Section 5.3. Investment of Moneys in Special Funds..................................................................... 16 Section5.4. Reserve Fund.............................................................................................................. 16 Section 5.5. Pledge of Moneys in Funds......................................................................................... 17 Section5.6. Rebate Fund................................................................................................................ 17 Section 5.7. Payments under the Bond Insurance Policy................................................................ 19 ARTICLE VI COVENANTS Section 6.1. Corporation and District to Perform Under Installment Purchase Agreement........... 19 Section6.2. Budgets ....................................................................................................................... 19 Section6.3. Tax Covenants ............................................................................................................ 19 Section 6.4. Accounting Records and Reports................................................................................20 Section 6.5. Compliance with Trust Agreement.............................................................................20 Section 6.6. Observance of Laws and Regulations.........................................................................20 Section 6.7. Compliance with Contracts.............................. ....... ................................... ....21 Section 6.8. Prosecution and Defense of Suits ...............................................................................21 Section 6.9. Recordation and Filing.... 21 Section6.10. Eminent Domain..........................._............................................................................22 Section 6.11. Further Assurances .....................................................................................................22 Section 6.12. Continuing Disclosure ................................................................................................22 ARTICLE VII DEFAULT AND LIMITATION OF LIABILITY Section 7.1. Notice of Non-Payment..............................................................................................22 Section 7.2. Action on Default or Termination...............................................................................22 Section 7.3. Other Remedies of the Trustee ...................................................................................23 Section7.4. Non-Waiver................................................................................................................23 Section 7.5. Remedies Not Exclusive.............................................................................................23 Section 7.6. No Obligation by the District to Owners....................................................................23 Section 7.7. Trustee Appointed Agent for Certificate-owners: Direction of Proceedings ............23 Section 7.8. Power of Trustee to Control Proceedings...................................................................24 Section 7.9. Limitation on Certificate-owners' Right to Sue..........................................................24 Section 7.10. No Obligation with Respect to Performance by Trustee............................................25 Section 7.11. No Liability to Owners for Payment...........................................................................25 Section 7.12. No Responsibility for Sufficient 25 ii DOCSSF\35478v4\22925.0006 ..^ ---- Table of Contents (continued) y^oc 2� ! Sot|ion7J3. lodtoo��ou\�)ovfTruu\ec-..~.-.-..^.'.-..-.-..-~-~~-~.-.-~-~ i � � � ARTICLE\/Il � THE TRUSTEE � 25 Sociiou8l Employment of� � 26 Section vF -.-~-^'~''~~-~-.-^.~^~_^._^,_^,_^_^� v � � '`",~r..�`~ --'z-,--�� 76 Oeo�ooS3 1�uu�cc� I)n��ty, /<no\ovx}xnd ^.^.-.-^.-~.-.~-~.~._~-.-- � � � ~ 2h Sotiivu84 <�on�p�oyu�iouof1hoTru��c�.-.-.-.~^.~.~..-.-^.-.~~......^..'..^.' � � 26 Sec1ivnk5 Protection of� � ` ~-..2& Section Merger or .-^.-.-~-~~.--^'^~-~-...~._~,_^,. ARTICLE IX AMENDMENT UF TRUST AGREEMENT � 28 3xtdoo9l /\ououdozxn�oPtoo)11td.-�.'�.......-.-..-.'~-...~~-~.-.......~,-.~~....^ � � f(� ��ou\� /\Acr�uoon6n��otor8opp)�o��o1 29 8ottionA2 Endorsement or Certificates �� SuoiiuoV.3. Amendment ofParticular Certificates ....................... ............ .'.~...... ........-.-.'29 ARTICLE l}BFEASANCt 30 Soo\iool0l I}�u�bar�� o�tnunt/l�putnutn1_��.'��...�-_.-....~-.^..-~-...-~.-..'..-. � � � lV Section \)�noo�o[&4outyo« 8tcu�1iosn�thIruoteo..-..-'-.-'~-.'^.''..~~~. v"u � � - '^ �1 8oc�mul0.l Unclaimed .-~-~,~,~,,^,-'^,_,-^_^,_,,_^,_,,,_,_^,_,_. ARTICLE XI MISCELLANEOUS � 3l Soc\ioolll Benefits of tuyu|1�e^��..-~'��~'.......~.........~'~. � � 3l 8ct�oull � Bot�*ouorI)nro�c�loclodo� �ud� l�r{�n�ncco\vYrcdnctaovr..-.._~.-._'-. � � 3l Sot1imull3 �xton�ouofl)oxuo`cu�ohv (}vvuuro'.-.-.-~-..-~-~-^~-..-..^..-~� ` � ' 32 Stcboull.4 �6unn»��od(��d�O�u�oo-..-.-.~.'..~.~.-.-~.-.-~.-^.,-~_^_.,^. � �--- 32 Scction )} 5 YVaivcrvf9trmonxlI.�ubU/ ..-.-..^.'.-.-..'..-.-^.-^.~-.-..-.-.. � � � ' � � Destruction f<��f�tu�uo �2 Bot|imull6 /\r4ois��ouof[cnLi�tu\to6v (b�I)/uU�ci� o .^^.~..~.- � � ' ^^-.-~.'.32 Scc�oull7 f\tmdzo�x ..-..-^,~,_,_,_,_,_'~'~,.~,,_,,^~,_ � � -~'- 3� Sutti*ullS Funds and� � �3� Soc1�n� ll0 �urbul ~._^,_,_^,~,_,_~_.~_,,,^,_,,_,,_^,_,,,~_,_ � � ^��~~~^v � ]� Scdivul\ |0 Californiaxvv ..-.-..-.^..^~.^._~~.~-~'~,-~~_,,,_,,_,_^_,. � � ' .....3� Section llll lVoboto . ..-^..~.'-,_,'~-~_',_,-^~_^,^~,_,,_,,_,_ � � -^^ ' ~_,_..-]} Stotiooll]2. }�xecut/mnzu(�ountcrpmza..-.-.-.-.-.-.-~-~-.^-..-^.-' - m oocSarn5478v4\22925u006 � o m SAB&W LLP ro � Draft of 2B/2003 v m 5 a a o PRELIMINARY OFFICIAL STATEMENT DATED ,2003 o c " 2 NEW ISSUE-FULL BOOK-ENTRY ONLY Ratings:See"RATINGS"herein. E In the opinion ofStrod(tng Yocca Carlson&Routh,a Professional Corporation,San Francisco,California("Special Counsel),under existing statutes, m5`Eb regulations,rulings and judieiai decisions,and assuming certain representations and compliance with certain covenants and requirements described herein,the portion of each Series A Installment Payment constituting interest is excluded from gross income for federal income tax purposes and is not an item of tax 8 preferenceforpurposes of-calculating thefederal alternative minimum tax imposed on individuals and corporations. In the further opinion of'Special Counsel,the 'o ,o portion of each Series A Installment Payment constituting interest is exempt from State of California personal income tax. In addition,the difference between the 0 a issue price ofa 2003A Certificate(the first price at which a substantial amount of the 2003A Certificates of a maturity is to be sold to the public)and the stated 'c redemption price at maturity with respect to the 2003A Certificates constitutes original issue discount,and the amount at original issue discount thatacerues to The owner ofa 2003A Certificate is excZudedfrom gross income of such orvnerforfederal income tax purposes,is Wotan ilemQ(taxprefereneeforpurposes ofthe .c federal abernatne minimum tax imposed on individuals and corporations, In the opinion of.Special Counsel, the portion of Series A Installment Payment and Series B Installment Payment constituting interest is exernptfrom State of California personal income tax. See `TAX MATTERS"herein. a ° REVENUE CERTIFICATES OF PARTICIPATION,SERIES 2003 3 Evidencing the Interests of the Owners Thereof in Installment Payments to be Made by the ro TRUCKEE-DONNER PUBLIC UTILITY DISTRICT S >r $ E Y Series 2003A Taxable Series 2003B Z V .� o Dated:Date of Delivery Due:January 1,as set forth on the inside cover °c This coverpage contains certain informationfor general reference only. It is not intended to be a summary at the security or terms of this issue. Investors m o are advised to read the entire Official Statement to obtain information essential to the making of an informed investment decision. Capitalized terms used on this rover page not otherwise defined shall have the meanings set forth herein. 0 c'. The Revenue Certificates of Participation,Series 2003A(the"2003A Certificates`)and Taxable Series 2003B(the"2003B Certificates-and collectively with the 2003A Certificates,the"2003 Certificates")evidence the interests of the registered owners thereof(the"Owners")in the Series A Installment Payments E-e and the Series B Installment Payments(collectively,the"Installment Payments')to be made by the Truckee-Donner Public Utility District(the"District')under is the terms of an Installment Purchase Agreement,dated as of_ ,2003(the"Installment Purchase Agreement'),between the District and the Truckee- Donner Public Utility District Financing Corporation(the"Corporation"). Pursuant to the Installment Purchase Agreement,the District is obligated to make the m o Installment Payments to the Corporation from Net Revenues of the District's Electric System. See"SECURITY AND SOURCES OF PAYMENT FOR THE 2003 CERTIFICATES"herein. c _ The 2003 Certificates are being sold to provide funds(i)to pay a termination payment to be made by the District in connection with the termination of a ,2 `E power purchase agreement, as described herein, fill to fund a deposit to a reserve fund for the 2003 Certificates, and(iii)to pay costs of delivery of the 2003 om Certificates. See"THE TRANSACTION"herein- . u E The 2003 Certificates are being executed and delivered pursuant to a Trust Agreement,dated as of 1,2003 (the"I'mst Agreement"),by and among the District,the Corporation and BNY Western Trust Company,as trustee(the"Trustee"). The 2003 Certificates will be delivered in fully registered form, .2 and, when executed and delivered, will be registered in the name of Cede& Co., as nominee of The Depository Trust Company("DTC). DTC will act as securities depository for the 2003 Certificates. Purchasers of interests in the 2003 Certificates will not receive securities certificates representing their interests in is Z v, the 2003 Certificates purchased. Principal and interest evidenced by the 2003 Certificates are payable by the Trustee to DTC,which is obligated in turn to remit u such principal and interest to its DI C participants for subsequent disbursement to the beneficial owners of the 2003 Certificates,as described herein. The 2003 Certificates are deliverable in denominations of S5,000 or any integral multiple thereof, Interest evidenced by the 2003 Certificates will be payable semiannually 2 0 on January I and July I of each year,commencing July 1,2003. m The 2003 Certificates are not subject to optional or mandatory prepayment prior to their stated maturity dates. The 2003 Certificates are subject 5� to extraordinary prepayment prior to their stated maturity dates, as more fully described herein. See "THE 2003 CERTIFICATES—Prepayment "m Provisions"herein. Payment of the principal of and interest evidenced by the 2003 Certificates when due(not including acceleration or prepayment)will be insured under o separate municipal bond insurance policies to be issued by simultaneously with the delivery of the 2003 Certificates. " ilnsurerlogol The obligation of the District to make the Installment Payments is a special obligation of the District payable solely from Net Revenues of the District's m Electric System, The District may incur other obligations payable from Net Revenues on a parity with the Installment Payments,subject to the terms of the `c o Installment Purchase Agreement,as described herein. The obligation of the District to make the Installment Payments does not constitute a debt of the District or of the State of California or of any political subdivision thereof in contravention of any constitution or statutory debt limitation or restriction. R� o 0 C 3 E w Maturity Schedule* o (See Inside Cover) w 0 The 2003 Certificates are offered when, as and if executed and delivered to the Underwriter, subject to the approval of legality by Stripling Yocca p m Carlson&Routh,a Professional Corporation,San Francisco,California Special Counsel,and certain other conditions. Certain legal matters will be passed upon for the Underwriter by Sidley Austin Brown&Wood LLP,Los Angeles,California,and for the Dish au and the Corporation by Porter Simon,Tmekee,California, c o General Counsel to the District. It is expected that the 2003 Certificates in definitive form will be available for delivery in New York,New York through the DTC m N book-entry system on mahout.April _,2003. a= BEAR,STEARNS&CO. INC. � 8 � Dated: ,2003 *Preliminary,subject to change, SFI 1329861,8 MATURITY SCHEDULES* $ *2003A Certificates (Base CUSIP Number Maturity Principal Interest CUSIP Maturity Principal Interest CUSIP (January 1) Amount Rate Yield Number (January 1) Amount Rate Yield Number $ *2003B Certificates (Base CUSIP Number_) Maturity Principal Interest CUSIP Maturity Principal Interest CUSIP (January l) Amoanl Rate Price Number (Jamary l) Anoint Rate Price Number SFI 1329861,8 TRUCKEE-DONNER PUBLIC UTILITY DISTRICT Board of Directors Joseph R. Aguera J. Ron Hemig James A. Maass Patricia S. Sutton Nelson Van Gordy District Officials Peter L. Holzmeister,General Manager Stephen Hollabaugh, Assistant General Manager and Electric Utility Manager Raymond Edward Taylor, Water Utility Director Mary Chapman,Administrative Services Manager and Treasurer Kathleen Neus,Support Services Manager Joseph Horvath, District Electrical Engineer TRUCKEE-DONNER PUBLIC UTILITY DISTRICT FINANCING CORPORATION Board of Directors Joseph R. Aguera J. Ron Hemig James A. Maass Patricia S. Sutton Nelson Van Gandy SPECIAL SERVICES Stradling Yocca Carlson&Rauth, BNY Western Trust Company A Professional Corporation San Francisco, California San Francisco,California Trustee Special Counsel McDonald Partners Porter Simon Alamo,California Truckee, California Financial Advisor District Counsel KPMG LLP Sacramento,California Independent Accountants SH 1329861v8 No dealer, broker, salesperson or other person has been authorized by the District or the Underwriter to give any information or to make any representations other than those contained herein and, if given or made, such other information or representation must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy,nor shall there be any sale of the 2003 Certificates by a person in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. Statements contained in this Official Statement that include forecasts, estimates or matters of opinion, whether or not expressly stated as such, are intended solely as such and are not to be construed as representations of fact. The information set forth herein has been furnished by the District and by other sources that are believed to be reliable, but is not guaranteed as to accuracy or completeness, and is not to be construed as representations by the Underwriter. The information and expressions of opinions herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall create, under any circumstances, any implication that there has been no change in affairs of the District since the date hereof. This Official Statement, including any supplement or amendment hereto, is intended to be deposited with one or more repositories. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction,but the Underwriter does not guarantee the accuracy or completeness of such information. IN CONNECTION WITH THE OFFERING OF THE 2003 CERTIFICATES, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS THAT MAY STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH 2O03 CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED,MAY BE DISCONTINUED AT ANY TIME. CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS IN THIS OFFICIAL STATEMENT Certain statements included or incorporated by reference in this Official Statement constitute "forward- looking statements." Such statements are generally identifiable by the terminology used such as "plan," "expect," "estimate,""budget"or other similar words. Such forward-looking statements include, but are not limited to,certain statements contained in the information under the captions "THE DISTRICT'S ELECTRIC SYSTEM—Power Supply Resources—Future Power Supply Resources" and "—Summary of Historical Net Revenues and Balance Sheet Information—Management's Discussion of Operating Results," "DEVELOPMENTS IN THE CALIFORNIA AND RELATED ENERGY MARKETS"and"RATE REGULATION"in this Official Statement. Forward looking statements in this Official Statement are subject to risks and uncertainties, including particularly those relating to competition and electric industry restructuring,and to the economy of the District's service area. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The District does not plan to issue any updates or revisions to those forward-looking statements if or when its expectations or events, conditions or circumstances on which such statements are based occur. Sri 132986M TABLE 000NTENTS Page INTRODUCTION.... ............. .............. ........... ........ ..........~ ................ ............ ............ ...... � ~--~.--~^�' Purpose....... ............... .......— ............ .................. .............^`.......... .................. ........... ..................... 3 The District............. ........... . ................... ...........................................~............. ......................................... ' � The 2003Coddfico/eo----.--..------.---^..----^~----~^---~---~--^^---. Security and Sources of Payment for the 2A03 Certificates............................................................................—3 RateCovenant............................ .................. .......... ............... ............... ....................... .............—...... .....4 4 Kuoen/e Fund---..----,---.---^---'----.-----~—'—~—~---~~--''--~--. CertificateInsurance................. ................................ ............................. ............................... ...... .............*` ContinuingDisclosure............... ............................ .........................— ................ ............. ........~ ........ .......4 OtherMatters........... ......... ... .......... . ........ ........ ............ .............. .............,.........~,....... .......~ ......., � THE Tk/\NS&CTl0N.----..----.---.--~---~.----.'--------'^---^.--~---~ � C8Yl�8ATBD SOURCES AND USES 0F FUND8.---.----..--~—~~----.------^—~—^~— THE2AA9 CERTIFICATES.......... ........... ............................... ................. ............... .......................................... General......... ........... ............. .......... ......... .......... ...............~.............. ........... .---^---.--^~—'" � �^^o 6 Prepayment Provisions SECURITY AND SOURCES 0fYAYK�2NTF0K THE 2V03CERTQlCA?C3—.---...--~.--~---^.» InstallmentPayments .............. ~................... ........... ............... .............~............... ............ ......... ...... ~—"8 DefinedTerms........ ..................................... ....................... ...............~............................~--^~--'---., l0 P|*b�vfN�Revenues .-----------^--^~.----.----~.--------~--^.---. Bu \0 Reserve m C^vnuum—.----..--—.------^---^'-----'----~----.---~---`--- �� Pond..---..---..--.^--^~--~.---^^.'----^'----^---.--~.---^— &ppbc� �000fRevenues I xu --.-------.---~---^~--^--~----^`.--'.---'--^ .—' � \Z (�o(}utNmoNnKyuhty()hU�u/oo, . --.---.---.----~~----^^---~^~-----^----. \1 &d'bbouNPmi/y()higubou»'.---.--..--^.---.^-----~----.--^^~--~---.—. |2 LJmitadouonken�cd�o,----.--.---`---.---.~-----~---- .---~--~----' \} 1bxYo CERTIFICATE l[�SUk&NC8--..---.------~----'---~—^^----..--. ---~--^~-- l� Uoy.....---..---'^--^`--~~--~-----~~---~~---^^---~--~--~^ THE DISTRICT 13 fUo ..-----.---..--~—.—^'--~.---~.~----~----^_---,--^'—^—''� i} Governance...xv7._----~--^—.'---~---~---^---~'--~—~-----^-------~--~~~—. � --..l4 ..----.----.---.---.---^~----.----^~----^---.--. ' l� b�uuugeo�eot--..----..---.------------~~---^~'----~'-------^--~---' Employees......q '..,---..----.---'--~---^.----^^----~^----^,------~---.. /000ruucv .--.,--l6 ..--- .----.---~---~--'.—~^—~-----^---_,,—_~^~--' �cy 16 luvnouooutyo/ ..---.---..-----~^- -~^~----~----^^----^---^ --~.--' }7 DudA��my Process---.----.---.--~---~'.---^~----~~---^---~''--.---.' � �oo \7 Si�u�brmd/��counhoQyoim .--.---.--'----'.-----~----^.---^.--^.--~-- l? TO�D}STKlCJ'�Cl8C?81C5YSYDK1--..---,--'.----^.`---'~ ----^---^^--~---- }? Gcomal—.~----..----.------._--^~—__^—_____~____ ~___, __^,__~,_- Power Supply Resources 18 --..------.---.--~~-----'~---^.---''--.------ � � �eo |9 /u�o��000�choo�*odDi*hh"000PndUd --..----.----------~-------~---'--. 0 9utuoCupikdBxpeodhmvs------..--.---~----~^-----`---^.---'--~.—~~' 0 KWmo and Charges.----..------^,------~~----'..---~'----'--~------. TDUCKCtD0N0EK PUBLIC UTILITY DISTRICT Al3T0KY0[ELECTRIC SERVICE CHARGES... .........20 22 BUbogand C^DeobunProcedures---.-------.----~.-----^----.---.--~---~ %2 Cuuumeo, Sdno, Revenues and Demand--.---.---------~ .----'.--~~--^---'—. � Largest Cuouozem—.----.---.--~^--~~---^.----..----~---~---.---.-- �on» 23 [mm,audin&b\ocbi,Gyx*:m0h ��Qxu —.---.----^----~~----^.'--~~--'--~--- Summary of Historical Net Revenues and Balance Sheet Information....... ' ............. ......... ........ ..... ......23 2� DBVC[OY&1[MlvlN THE ENERGY��&KK]ETS.--.---- .-----~.---~.--. ~--..--^.—' � 2� �Judko DorcQuubou and�eEnergy Cdms..---.---.----~~.---~.---^~--^---.-- 27 E�em*"f8xmruc,udoQvo the[imdu'»Power Uupyy..-----.---------.---.---_--^ Likely Effects^f Restructuring oo the District's Future Costs and Power Supply .................. .......................27 i o,/ /evx /vo _.. _ _ _. _ ,. .... . . I —-- _.. . _ . _ OTHER FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY...........................................................28 Proposed Federal Deregulation and Tax Legislation.........................................................................................28 OtherFactors.......................................... ......................................................._...............................................28 RATEREGULATION................................................................................................................................................29 CONTINUING DISCLOSURE..................................................................................................................................29 THECORPORATION.......... ...................................................................................... _......................................30 CONSTITUTIONAL LIMITATIONS ON TAXES AND APPROPRIATIONS.......................................................30 California Constitution Article XIIIB.............................................._...........-...-..............................................30 Constitutional Changes in California................................................................................................................30 TAXMATTERS........ .................................................................................................__..........................................30 2003ACertificates.........................................,..............................__.................................................................30 2003BCertificates.............................................................................................................................................32 ABSENCE OF LITIGATION....................................................................................._.......,......................................32 APPROVALOF LEGALITY.....................................................................................................................................32 RATINGS....................................................................................................................................................................32 FINANCIALADVISOR.............................................................................................................................................33 UNDERWRITING......................................................................................................................................................33 EXECUTION AND DELIVERY................................................................................................................................33 APPENDIX A - AUDITED FINANCIAL STATEMENTS OF THE DISTRICT AS OF DECEMBER 31,2001 AND 2000......................................................___.............................A-1 APPENDIX B - UNAUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED DECEMBER 31,2002......................................................................................B-1 APPENDIX C - GENERAL INFORMATION: DISTRICT SERVICE AREA....................... .......___.............C-1 APPENDIX D - BOOK-ENTRY ONLY SYSTEM..............................................................................................D-1 APPENDIX E - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.............................................................E-1 APPENDIX F - PROPOSED FORM OF CONTINUING DISCLOSURE AGREEMENT..................................F-I APPENDIX G - PROPOSED FORM OF OPINION OF SPECIAL COUNSEL.... .................................. ..........G-1 [APPENDIX H - SPECIMEN MUNICIPAL BOND INSURANCE POLICY ..........._..........................._...........H-11 ii SH 1329861v8 OFFICIAL STATEMENT Relating to REVENUE CERTIFICATES OF PARTICIPATION,SERIES 2003 Evidencing the Interests of the Owners Thereof in Installment Payments to be Made by the District TRUCKEE-DONNER PUBLIC UTILITY DISTRICT Series 2003A Taxable Series 2003B INTRODUCTION This Introduction is qualified in its entirety by reference to the more detailed Information included and referred to elsewhere in this Official Statement. The offering of the 2003 Certificates to potential investors is made only by means of the entire Of Statement. Terms used in this Introduction and not otherwise defined shall have the respective meanings assigned to them elsewhere in this Official Statement. See 'APPENDIX E--SUMMARYOF PRINCIPAL LEGAL DOCUMENTS—CERTAIN DEFINITIONS"herein. Purpose The purpose of this Official Statement(which includes the cover page and the appendices attached hereto) is to provide certain information concerning the sale and delivery of S * aggregate principal amount of Revenue Certificates of Participation, Series 2003A(the "2003A Certificates") and $ s aggregate principal amount of Revenue Certificates of Participation, Taxable Series 2003B (the "2003B Certificates" and collectively with the 2003A Certificates, the "2003 Certificates"). The 2003 Certificates evidence the interests of the registered owners (the "Owners") thereof in Series A installment Payments and Series B Installment Payments (collectively, the "Installment Payments") to be made by the Truckee-Donner Public Utility District (the "District') under the terms of an installment Purchase Agreement, dated as of 1, 2003 (the "Installment Purchase Agreement'), between the District and the Truckee-Donner Public Utility District Financing Corporation (the "Corporation'). The District has sold certain assets and facilities comprising its Electric System to the Corporation pursuant to the Installment Purchase Agreement to be purchased back by the District from the Corporation in accordance with the terms thereof. The District The District is a public utility district, formed in 1927, pursuant to the Public Utility District Act of the State of California (being Division 7 of the Public Utilities Code of the State) (the "Act'). The District provides water and electric service within its boundaries, an area of approximately 45.5 square miles, located in the Sierra Nevada Mountains. See"THE DISTRICT"herein. The 2003 Certificates The 2003 Certificates are being executed and delivered pursuant to a Trust Agreement, dated as of 2003 (the"Trust Agreement'), by and among the District, the Corporation and BNY Western Trust Company, as trustee thereunder (the "Trustee'). The 2003 Certificates are being sold to provide funds (i)to pay a termination payment to be made by the District in connection with the termination of a power purchase agreement (see "THE TRANSACTION" herein), (ii)to fund a deposit to a reserve fund for the 2003 Certificates, and (in)to pay costs of delivery of the 2003 Certificates. See"ESTIMATED SOURCES AND USES OF FUNDS"herein. Security and Sources of Payment For the 2003 Certificates The obligation of the District to make the Installment Payments pursuant to the Installment Purchase Agreement is a special obligation payable solely from and secured solely by Net Revenues of the District's Electric System. The District may incur additional obligations payable from and secured by the Net Revenues of the Electric Sri 132966M System on a parity with the Installment Payments, subject to the terms of the Installment Purchase Agreement. See "SECURITY AND SOURCES OF PAYMENT FOR THE 2003 CERTIFICATES"herein. The obligation of the District to make the Installment Payments does not constitute a debt of the District or of the State of California or of any political subdivision thereof in contravention of any constitution or statutory debt limitation or restriction. Rate Covenant The District covenants pursuant to the Installment Purchase Agreement, that it will, at all times fix, prescribe and collect rates and charges for the electricity distribution service (the `Electricity Service") made available or provided by the Electric System which will be at least sufficient to yield Adjusted Net Revenues for such Fiscal Year equal to at least 120% of the Debt Service for such Fiscal Year, See "SECURITY AND SOURCES OF PAYMENT FOR THE 2003 CERTIFICATES—Rate Covenant'herein. Reserve Fund A Reserve Fund is established with the Trustee pursuant to the Trust Agreement in an amount equal to the Reserve Requirement(as defined in the Trust Agreement). Amounts on deposit in the Reserve Fund will be applied to pay principal of and/or interest evidenced by the 2003 Certificates in the event amounts on deposit in the Certificate Payment Fund are insufficient therefor. The District may substitute a municipal bond debt service reserve policy or a surety bond or a letter of credit(a"Reserve Insurance Policy") for money or substitute money for any Reserve Insurance Policy held by the Trustee in the Reserve Fund in accordance with the terms of the Trust Agreement. See "SECURITY AND SOURCES OF PAYMENT FOR THE 2003 CERTIFICATES—Reserve Fund"herein. Certificate Insurance Payment of the principal of and interest evidenced by the 2003 Certificates when due (not including acceleration or prepayment) will be insured by respective municipal bond insurance policies (collectively, the "Policy") to be issued by the (the "Insurer") simultaneously with the delivery of the 2003A Certificates and the 2003B Certificates. See"CERTIFICATE INSURANCE"herein. Continuing Disclosure The District has covenanted for the benefit of the Owners and beneficial owners of the 2003 Certificates to provide certain financial information and operating data relating to the District and the Electric System annually, and to provide notices of the occurrence of certain enumerated events, if material. See"CONTINUING DISCLOSURE" herein. Other Matters This Official Statement speaks only as of its date, and the information and expressions of opinions contained herein are subject to change without notice. Neither delivery of this Official Statement nor any sale made hereunder, under any circumstances, shall create any implication that there has been no change in the affairs of the District or the Electric System since the date hereof. This Official Statement, including any supplement or amendment hereto,is intended to be deposited with one or more repositories. The summaries of and references to documents,statutes, reports and other instruments referred to herein do not purport to be complete, comprehensive or definitive, and each such summary and reference is qualified in its entirety by reference to each document, statute, report or instrument. The capitalization of any word not conventionally capitalized or otherwise defined herein indicates that such word is defined in a particular agreement or other document and, as used herein, has the meaning given it in such agreement or document. See "APPENDIX E—SUMMARY OF PRINCIPAL LEGAL DOCUMENTS"herein. 4 Sri 1329861v8 I Copies of the Trust Agreement and the Installment Purchase Agreement are available for inspection at the offices of the District in Truckee, California, and will be available from the Trustee upon request and payment of duplication costs. THE TRANSACTION The 2003 Certificates are being executed and delivered to provide funds(i)to pay a termination payment to be made by the District in connection with the termination of a power purchase agreement, (ii)to fund a deposit to the Reserve Fund for the 2003 Certificates,and(iii)to pay costs of delivery of the 2003 Certificates. Effective July 1, 1997, the District entered into an Agreement for the Sale and Purchase of Firm Capacity and Energy (the "Original Agreement") with Idaho Power Company ("Idaho Power"). During the period January 1999 through March 2001, the District entered into a series of amendments to the Original Agreement and certain transactions thereunder, including transactions which were assigned to IDACORP Energy L.P. (collectively, the"Prior Agreements")providing for the delivery of a block of 25 M W of power through December 31,2009. The Prior Agreements were executed by the District in order to assure the District an adequate supply of energy to satisfy the expected load requirement of the Electric System,in light of the then existing conditions in the California energy markets, as well as to provide certain surplus power to be sold into the market. See"DEVELOPMENTS IN THE CALIFORNIA ENERGY MARKETS"herein. In 2002, certain disputes regarding the Prior Agreements arose between the District and IDACORP Energy L.P., resulting in litigation (judicial and regulatory proceedings)between the parties. Effective January 3, 2003,the District, Idaho Power and IDACORP Energy L.P. entered into a Mutual Release and Settlement Agreement (the "Settlement Agreement") in order to settle and resolve all claims against each other relating to the Prior Agreements, which claims have all been dismissed as of the date hereof. Pursuant to the Settlement Agreement, IDACORP Energy L.P. agreed to terminate the Prior Agreements effective January 3, 2003 and the District agreed to make payment to IDACORP Energy L.P. (or its designee) of a termination payment evidenced by a promissory note of the District (the "Settlement Obligation") in connection therewith. A portion of the proceeds of the 2003 Certificates will be applied to satisfy the District's obligation to pay the Settlement Obligation pursuant to the Settlement Agreement. Concurrent with the negotiation of the Settlement Agreement, IDACORP Energy L.P. and the District additionally agreed to the terms of an Interim Power Supply Agreement for the delivery of energy to the District through March 31,2003. See"THE ELECTRIC SYSTEM—Power Supply Resources"herein. 5 SFI 1329861,8 ESTIMATED SOURCES AND USES OF FUNDS The estimated sources and uses of funds with respect to the 2003 Certificates are as follows: Sources: Principal Amount of 2003 Certificates........................... .......................... $ Original Issue Premium(Discount)........................................................... Total................................................................................................... $ Uses: Payment of Settlement Obligation.......-... .............................-................ $ Deposit to Reserve Fund(') ....... ............................................................... Underwriter's Discount............................................................................. Costs of Issuance(2)...... ....................................................................... ....... Total................................................................................................... $ o> Represents Reserve Requirement for the 2003 Certificates. See"SECURITY AND SOURCES OF PAYMENT FOR THE 2003 CERTIFICATES—Reserve Fund"herein. cat Includes legal, financing and consulting fees, Trustee's fees, printing costs, rating agency fees, bond insurance premium and other costs incurred in connection with the delivery of the 2003 Certificates. THE 2003 CERTIFICATES General The 2003 Certificates will be executed and delivered in the aggregate principal amount of$ comprised of $ aggregate principal amount of 2003A Certificates and $ aggregate principal amount of 2003B Certificates. The 2003 Certificates will be prepared as one fully registered securities certificate for each maturity of each Series of the 2003 Certificates and will be registered in the name of Cede& Co., as nominee for The Depository Trust Company,New York, New York("DTC'). DTC will act as securities depository for the 2003 Certificates. Principal and interest evidenced by the 2003 Certificates are payable by the Trustee to DTC, which is obligated in turn to remit such principal and interest to its DTC Participants for subsequent disbursement to the beneficial owners of the 2003 Certificates. See "APPENDIX D—BOOK-ENTRY ONLY SYSTEM"herein. The 2003 Certificates will be delivered in authorized denominations of $5,000 or any integral multiple thereof. Interest represented by the 2003 Certificates is payable on July 1, 2003 and semiannually thereafter, on each January 1 and July 1 (each, an `Interest Payment Date" for the 2003 Certificates), computed on the basis of a 360-day year comprised of twelve 30-day months. The 2003 Certificates will be dated the date of delivery thereof, will mature on the dates and in the principal amounts and will evidence interest at the rates, all as set forth on the front cover of this Official Statement. Prepayment Provisions The 2003 Certificates are not subject to optional or mandatory prepayment prior to their stated maturity dates. *Preliminary, subject to change. 6 SF1 132986M Extraordinary Prepayment The 2003 Certificates are subject to extraordinary prepayment prior to their respective stated maturities, as a whole or in part on any date, in the order of maturity as directed by the District and by lot within each maturity, in integral multiples of$5,000, from prepaid Installment Payments made by the District from the proceeds of casualty insurance and condemnation awards remaining after payment of all expenses incurred in the collection of such proceeds ("Net Proceeds"), at a prepayment price equal to the principal amount thereof plus accrued interest evidenced thereby to the date fixed for prepayment,without premium. Notice of Prepayment Notice of prepayment shall be mailed, first class postage prepaid, to the respective Owners of any 2003 Certificates designated for prepayment at their addresses appearing on the registration books required to be maintained by the Trustee for the 2003 Certificates and to the Information Services and by registered or certified or overnight mail to the Securities Depositories at least 30 days but not more than 60 days prior to the prepayment date. Each notice of prepayment shall state the date of notice, the prepayment date, the place or places of prepayment and the prepayment price, shall designate the maturities, CUSIP numbers, if any, and, if less than all 2003 Certificates of any such maturity are to be prepaid, the serial numbers of the 2003 Certificates of such maturity to be prepaid by giving the individual number of each 2003 Certificate or by stating that all 2003 Certificates between two stated numbers,both inclusive,have been called for prepayment and, in the case of 2003 Certificates to be prepaid in part only, the portions thereof to be prepaid. Each such notice shall also state that on said date there will become due and payable on each of said 2003 Certificates the prepayment price thereof or of said specified portion of the principal represented thereby in the case of a 2003 Certificate to be prepaid in part only,together with interest accrued to the prepayment date, and that (provided that moneys for prepayment have been deposited with the Trustee)from and after such prepayment date interest with respect thereto shall cease to accrue, and shall require that such 2003 Certificates be then surrendered to the Trustee. Any defect in the notice or the mailing thereof will not affect the validity of the prepayment of any 2003 Certificate. Unless the book-entry only system shall have been discontinued, the Corporation, the District and the Trustee will recognize only DTC or its nominee as an Owner. Conveyance of notices and other communications by DTC to DTC Participants and by DTC Participants to beneficial owners will be governed by arrangements between them, subject to any statutory and regulatory requirements as may be in effect from time to time. Selection of 2003 Certificates for Prepayment Whenever less than all of the Outstanding 2003 Certificates of any Series are called for prepayment, the Trustee shall select the 2003 Certificates of such Series or portions thereof to be prepaid as described under `Extraordinary Prepayment"above and in a manner which the Trustee deems to be fair. Effect of Prepayment When notice of prepayment has been duly given as aforesaid, and moneys for the payment of the prepayment price of, together with interest accrued to the prepayment date with respect to, the 2003 Certificates(or portions thereof) so called for prepayment are held by the Trustee, the 2003 Certificates (or portions thereof) so called for prepayment shall, on the prepayment date designated in such notice, become due and payable, and from and after the prepayment date so designated,interest represented by the 2003 Certificates so called for prepayment shall cease to accrue, such 2003 Certificates(or portions thereof) shall cease to be entitled to any benefit or security under the Trust Agreement, and the Owners of such 2003 Certificates shall have no rights in respect thereof except to receive payment of the prepayment price thereof and accrued interest. 7 SH 1329861vg } { SECURITY AND SOURCES OF PAYMENT FOR THE 2003 CERTIFICATES Installment Payments Pursuant to the Installment Purchase Agreement, in consideration for the Corporation's assistance in financing the Settlement Obligation (see"THE TRANSACTION" herein), the District sells to the Corporation and the Corporation purchases from the District certain assets and facilities comprising the Electric System (excluding the District Administration Building) of the District(the "Property") to be purchased back by the District from the Corporation pursuant to the Installment Purchase Agreement. All right, title and interest in each component of the Property is to be vested in the District upon execution and delivery of the Installment Purchase Agreement. The District is obligated to make the Installment Payments to be paid by it under the Installment Purchase Agreement as payment of the purchase price for the Property being purchased by the District from the Corporation thereunder. The 2003A Certificates evidence the interests of the Owners thereof in the Series A Installment Payments to be made by the District pursuant to the Installment Purchase Agreement and the 2003B Certificates evidence the interests of the Owners in the Series B Installment Payments pursuant to the Installment Purchase Agreement. The Installment Purchase Agreement provides that the District's obligation to pay the Installment Payments is absolute and unconditional, and, until such time as the Installment Payments shall have been paid in full (or provision for the payment thereof shall have been made pursuant to the Installment Purchase Agreement), the District will not discontinue or suspend any Installment Payments required to be paid by the District under the Installment Purchase Agreement when due, whether or not the Electric System or any part thereof is operating or operable, or its use is suspended, interfered with,reduced or curtailed or terminated in whole or in part,and such Installment Payments are not subject to reduction, whether by offset or otherwise, and not conditional upon the performance or nonperformance by any party of any agreement or for any other cause whatsoever. Notwithstanding anything contained in the Installment Purchase Agreement, the District shall not be required to advance any moneys derived from any source of income other than the Net Revenues and the Reserve Fund for the payment of the Installment Payments or for the performance of any agreements or covenants required to be performed by it contained in the Agreement. The District may, however, advance moneys for any such purpose so long as such moneys are derived from a source legally available for such purpose and may be legally used by the District for such purpose. The District has from time to time entered into certain power purchase agreements. The District's obligations under power purchase agreements constitute Operation and Maintenance Costs payable prior to the Installment Payments. Generally, the District has entered into such power purchase agreements solely or primarily for use within its own Electric System. However, the District is not prohibited from entering into purchases of power in amounts which are in excess of its system requirements, which surplus power may be made available for resale(at prices above or below its costs of purchase). Pursuant to an Assignment Agreement,dated as of ,2003 (the"Assignment Agreement"),by and between the Corporation and the Trustee, the Corporation sells, assigns and transfers over to the Trustee, for the benefit of the Owners of the 2003 Certificates, all of its rights, title and interest in the Installment Purchase Agreement, including the right to receive all Installment Payments from the District under the Installment Purchase Agreement(but not including the right to be indemnified and the right to receive notices pursuant to the Installment Purchase Agreement),together with any and all of the other rights of the Corporation under the Installment Purchase Agreement as may be necessary to enforce payment of such Installment Payments when due or to otherwise protect the interests of the Owners of the 2003Certificates. The District consents to such assignment in the Installment Purchase Agreement and agrees to make payments of the Installment Payments directly to the Trustee. The Trust Agreement provides that the Installment Payments collected or received by the Corporation shall be deposited by the Corporation within one business day after the receipt thereof. The Trustee also shall, subject to the provisions of the Trust Agreement, record, register, file, renew,refile and re-record all documents, including financing statements, as to maintain a security interest in the Trust Agreement and to preserve,protect and perfect the security of the Owners of the 2003 Certificates and the rights and security interests of the Trustee. The Trust Agreement provides that all of the Installment Payments received by the Trustee shall be deposited in the Certificate Payment Fund. All moneys at any time deposited in the Certificate Payment Fund shall be held by the Trustee in trust for the benefit of the Owners of the 2003 Certificates but shall be disbursed,allocated and applied solely for the uses and purposes provided in the Trust Agreement. 8 Sri 1329861v8 Defined Terms Set forth below are definitions of certain terms as provided pursuant to the Trust Agreement and the Installment Purchase Agreement and used herein. For definitions of additional terms used in the Installment Purchase Agreement and the Trust Agreement, see "APPENDIX E—SUMMARY OF PRINCIPAL LEGAL DOCUMENTS--CERTAIN DEFINITIONS"herein. "Adjusted Net Revenues" is defined to mean, for any Fiscal Year, the Adjusted Revenues for such Fiscal Year less the Operation and Maintenance Costs for such Fiscal Year. "Adjusted Revenues" is defined to mean, for any Fiscal Year, the Revenues during such Fiscal Year,less, for purposes of determining compliance with the District's Rate Covenant set forth in the Installment Purchase Agreement and conditions for the execution of Bonds or Contracts, any Payment Agreement Receipts taken into account in calculating Debt Service pursuant to the definition thereof, plus, for the purposes of determining compliance with the District's Rate Covenant set forth in the Installment Purchase Agreement, the amounts which the District has authorized to be deposited in the Revenue Fund from the Rate Stabilization Fund not later than days following the end of such Fiscal Year or twelve-moth period to pay Operation and Maintenance Costs and/or Debt Service. "Bonds" is defined to mean all bonds, notes or similar obligations (but not including Contracts) of the District, the principal of and interest on which are payable from Net Revenues on a parity with the Installment Payments. "Contracts" is defined to mean, the Installment Purchase Agreement and all contracts of the District the installment payments under which are payable from Net Revenues on a parity with the obligations of the District to make payments under the Installment Purchase Agreement excluding contracts entered into for operation and maintenance of the Electric System. "Electric System"is defined to mean all properties and assets, real and personal, tangible and intangible, of the District now or hereafter existing, used or pertaining to the acquisition, transmission, distribution and sale of electricity, including all additions, extensions, expansions, improvements and betterments thereto; provided, however, that to the extent the District is not the sole owner of an asset or property or to the extent that an asset or property is used in part for the above described purposes, only the District's ownership interest in such asset or property or only the part of the asset or property so used for such purposes shall be considered to be part of the Electric System. "Net Revenues" is defined to mean, for any Fiscal Year, the Revenues for such Fiscal Year less the Operation and Maintenance Costs for such Fiscal Year. "Operation and Maintenance Costs" is defined to mean (1)costs spent or incurred for maintenance and operation of the Electric System calculated in accordance with generally accepted accounting principles, including (among other things) Purchased Power Costs, fuel expenses, the expenses of management and repair and other expenses necessary to maintain and preserve the Electric System in good repair and working order, and including administrative costs of the District, salaries and wages of employees, payments to the retirement system for the District employees, overhead, insurance, taxes (if any), fees of auditors, accountants, attorneys or engineers and insurance premiums, and (2)all other reasonable and necessary costs of the District or charges (other than Debt Service) required to be paid by it to comply with the terms of the Installment Purchase Agreement or any other Contract or of any resolution or indenture authorizing the issuance of any Bonds or of such Bonds, but excluding in all cases(a)depreciation, replacement and obsolescence charges or reserves therefor, (b) amortization of intangibles or other bookkeeping entries of a similar nature, (c)costs of capital additions, replacements, betterments, extensions or improvements to the Electric System which under generally accepted accounting principles are chargeable to a capital account or to a reserve for depreciation,and(d)charges for the payment of Bonds or Contracts. "Purchased Power Costs" is defined to mean (1)costs associated with any power purchase contract for capacity and/or energy, (2)all costs associated with the transmission of energy to the District's Electric System, 9 SFI 132986M 5 (3)all costs to schedule energy and (4)net payments due under any hedging contract executed by the District to reduce energy or fuel price risk. Termination payments due or received pursuant to any hedging contract or power purchase contract shall not be included in Purchased Power Costs. "Revenues" is defined to mean all income, rents, rates, fees, charges and other moneys derived from the ownership or operation of the Electric System, including, without limiting the generality of the foregoing, (1)all income, rents, rates, fees, charges or other moneys derived from the sale, distribution, furnishing and supplying of electricity or other services, facilities, and commodities sold, furnished or supplied through the facilities of the Electric System including standby charges and facilities fees allocable to the Electric System, plus(2)except as set forth in(z) below, taxes or assessments, if any, the imposition of which is permitted by law, (3)the earnings on and income derived from the investment of the amounts described in clauses(1) and (2) above, the Rate Stabilization Fund and the general unrestricted funds of the District, and (4)Payment Agreement Receipts; but excluding in all cases(x)connection charges;(y)customers' deposits or any other deposits subject to refund until such deposits have become the property of the District, and (z)reserves, taxes or assessments specifically pledged to the payment of debt service with respect to notes,bonds or other obligations of the District and which reserves,taxes or assessment are not available for any other purpose of the District. Pledge of Net Revenues Pursuant to the Installment Purchase Agreement, all Net Revenues of the Electric System and all moneys on deposit in the Revenue Fund are irrevocably pledged to the payment of the Installment Payments and the Net Revenues shall not be used for any other purpose while any of the Installment Payments due remain unpaid; provided that out of the Net Revenues there may be apportioned such sums for such purposes as are expressly permitted as the Installment Purchase Agreement. The Installment Purchase Agreement provides that such pledge, together with the pledge created by all other Contracts and Bonds, constitutes a first lien upon the Net Revenues of the Electric System and, subject to application of Net Revenues and all amounts on deposit in the Revenue Fund as permitted in the Installment Purchase Agreement,the Revenue Fund. Rate Covenant Pursuant to the Installment Purchase Agreement, the District covenants (the "Rate Covenant") that it will fix,prescribe and collect rates and charges for the Electricity Service which will be at least sufficient to yield during each Fiscal Year Adjusted Net Revenues equal to 120% of the Debt Service for such Fiscal Year, The Installment Purchase Agreement provides that the District may make adjustments from time to time in such rates and charges and may make such classification thereof as it deems necessary, but may not reduce the rates and charges then in effect unless the Adjusted Net Revenues from such reduced rates and charges will at all times be sufficient to meet the requirements described in the preceding sentence. Reserve Fund Pursuant to the Trust Agreement,the Reserve Fund is to be held by the Trustee so long as any Installment Payments remain unpaid. Amounts on deposit in the Reserve Fund are pledged to the payment of the 2003 Certificates. The Reserve Fund is required to be maintained in an amount equal to, initially $ and thereafter, the lesser of such amount and the maximum annual Installment Payments in the current or any future Fiscal Year (the "Reserve Requirement"). Moneys on deposit in the Reserve Fund shall be transferred by the Trustee to the Certificate Payment Fund to pay principal of and/or interest evidenced by the 2003 Certificates on each date such principal and/or interest is due and payable in the event amounts on deposit therein are insufficient for such purposes. The Reserve Fund is not available for the payment of any other Contracts or Bonds of the District nor is any other reserve fund relating to any other Contracts or Bonds available for the payment of any insufficiency with respect to the Installment Payments. Any money in the Reserve Fund in excess of the Reserve Requirement shall be withdrawn from the Reserve Fund and be deposited in the Certificate Payment Fund semiannually on or before each Interest Payment Date so long as the District is not then in default under the Installment Purchase Agreement. In addition,the Trustee shall, on the date all or any portion of the 2003 Certificates are discharged in accordance with the Trust Agreement, value the Reserve Fund and withdraw the excess, if any, on deposit in the Reserve Fund and transfer such amount to 10 Sri 132986M s5 $3 { f or in accordance with the written direction of the District. Except for such withdrawals, all moneys in the Reserve {{ 3 Fund shall be used and withdrawn by the Trustee solely for the purpose of paying principal, prepayment price and interest with respect to the 2003 Certificates in the event that no other moneys of the District are available therefor. For the purpose of determining the amount in the Reserve Fund, all Permitted Investments credited to the Reserve Fund shall be valued at the lower of cost(inclusive of all interest accrued but not paid),or market value. The District may substitute a municipal bond debt service reserve fund policy or a surety bond or a letter he of f credit (a "Reserve Insurance Policy") for money or substitute money for any Reserve Insurance Policy held by the s Trustee in the Reserve Fund; provided, that(i)in the case of a municipal bond debt service reserve fund policy or a r surety bond, bonds which are insured by the issuer thereof are rated in the highest rating category by Standard& Poor's Ratings Group and Moody's Investors Service(collectively, the "Rating Agencies"), or, in the case of a letter of credit, the unsecured debt obligations of the issuing bank thereof are rated in the highest short-term rating category by the Rating Agencies; (it)the sum of the money and face amount of any Reserve Insurance Policy in i . effect after such substitution will be equal to the Reserve Requirement; and(it.)m the case of the substitution of a new Reserve Insurance Policy for money or an existing Reserve Insurance Policy, the Trustee receives an opinion of Special Counsel to the effect that such substitution will not adversely affect the exclusion from gross income for federal income tax purposes of interest with respect to the 2003 Certificates. Application of Revenues The District agrees and covenants in the Installment Purchase Agreement that all Revenues it receives will be deposited when and as received in the Revenue Fund, which the District established and which the District agrees to maintain separate and apart from other moneys of the District so long as any Contracts or Bonds remain unpaid, and all money on deposit in the Revenue Fund shall be applied and used only as provided in the Installment Purchase Agreement. The Installment Purchase Agreement provides that the District is to pay all operation and Maintenance Costs(including amounts reasonably required to be set aside in contingency reserves for Operation and Maintenance Costs the payment of which is not then immediately required) from the Revenue Fund as they become due and payable and all remaining money in the Electric Revenue Fund shall be set aside and deposited by the District at the following times in the following order of priority: (a) Installment Payments. Not later than the fifth day prior to each Interest Payment Date(an "Installment Payment Date"), the District shall, from the moneys in the Revenue Fund, transfer to the Trustee the Installment Payment due and payable on that Installment Payment Date. Not later than each Parity Installment Payment Date, the District shall, from moneys in the Revenue Fund, transfer to the applicable trustee the Parity Installment Payment due and payable on that Parity Installment Payment Date. The District shall also, from the moneys in the Revenue Fund, transfer to the applicable trustee for deposit in the respective payment fund, without preference or priority, and in the event of any insufficiency of such moneys ratably without any discrimination or preference, any other Debt Service in accordance with the provisions of any Bond or Contract. (b) Reserve Funds. On or before each Installment Payment Date, the District shall, from the remaining moneys in the Revenue Fund, thereafter, without preference or priority and in the event of any insufficiency of such moneys ratably without any discrimination or preference, transfer to the Trustee for deposit in the Reserve Fund and to the applicable trustee for such other reserve funds and/or accounts, if any, as may have been established in connection with Bonds or Contracts other than the Installment Purchase Agreement, that sum, if any, necessary to restore the Reserve Fund to an amount equal to the Reserve Requirement; provided, however, that the District may provide for the Reserve Fund by means other than cash and Permitted Investments pursuant to the Trust Agreement. (c) _So us. Moneys on deposit in the Revenue Fund on each Installment Payment Date not necessary to make any of the payments described above may be expended by the District at any time for any purpose permitted by law. Il Sri 132986M No Outstanding Parity Obligations Upon the delivery of the 2003 Certificates, the District will have no outstanding long-term indebtedness payable from Net Revenues of the District's Electric System on a parity with the payment of the Installment Payments. See"THE ELECTRIC SYSTEM—Outstanding Electric System Obligations"herein. Additional Parity Obligations Pursuant to the Installment Purchase Agreement, the District may at any time execute any Contract or issue any Bonds,as the case may be,in accordance with the Installment Purchase Agreement;provided: (a) The Adjusted Net Revenues for the most recent audited Fiscal Year preceding the date of adoption by the Board of Directors of the District of the resolution authorizing the issuance of such Bonds or the date of the execution of such Contract, as the cave may be, as evidenced by both a calculation prepared by the District and a special report prepared by an Independent Certified Public Accountant or an Independent Financial Consultant on such calculation on file with the District, shall have produced a sum equal to at least one hundred twenty percent(120%) of the Debt Service for such Fiscal Year plus the Debt Service which would have accrued on any Contracts executed or Bonds issued since the end of such Fiscal Year assuming such Contracts had been executed or Bonds had been issued at the beginning of such Fiscal Year plus the Debt Service which would have accrued had such Contract been executed or Bonds been issued at the beginning of such Fiscal Year;or (b) The estimated Adjusted Net Revenues for the then current Fiscal Year and for each Fiscal Year thereafter to and including the first complete Fiscal Year after the latest Date of Operation of any uncompleted additions, betterments, extensions or improvements to the Electric System, the acquisition and construction of which is to be paid for with the proceeds of any Contracts or Bonds(a`Parity Project") to be financed from proceeds of such Contracts or Bonds, as evidenced by a certificate of the General Manager of the District on file with the District, including(after giving effect to the completion of all such uncompleted Parity Projects) an allowance for estimated Net Revenues for each of such Fiscal Years arising from any increase in the income, rents, fees, rates and charges estimated to be fixed, prescribed or received for Electricity Service and which are economically feasible and reasonably considered necessary based on projected operations for such period, as evidenced by a certificate of the General Manager of the District on file with the District, shall produce a sum equal to at least one hundred twenty percent(120%) of the estimated Debt Service for each of such Fiscal Years, after giving effect to the execution of all Contracts and the issuance of all Bonds estimated to be required to be executed or issued to pay the costs of completing all uncompleted Parity Projects within such Fiscal Years, assuming that all such Contracts and Bonds have maturities, interest rates and proportionate principal repayment provisions similar to the Contract last executed or then being executed or the Bonds last issued or then being issued for the purpose of acquiring and constructing any of such uncompleted Parity Projects. Notwithstanding the foregoing, Bonds or Contracts may be issued or incurred to refund outstanding Bonds or Contracts if, after giving effect to the application of the proceeds thereof, total Debt Service will not be increased in any Fiscal Year in which Bonds or Contracts(outstanding on the date of issuance or incurrence of such refunding Bonds or Contracts, but excluding such refunding Bonds or Contracts) not being refunded are outstanding. In addition, nothing in the Installment Purchase Agreement shall preclude the District from issuing any Bonds or executing and delivering any Contracts the payments under which are subordinate to any Bonds or Contracts of the District. Limitation on Remedies In addition to the limitations on remedies contained in the Trust Agreement and the Installment Purchase Agreement, the rights and remedies provided in the Trust Agreement and the Installment Purchase Agreement may be limited by and are subject to bankruptcy, insolvency, reorganization,moratorium and other similar laws affecting creditors' rights, to the application of equitable principles and to the exercise of judicial discretion in appropriate cases. 12 sri 11298eM a r CERTIFICATE INSURANCE The following information has been furnished by the insurer for use in this Official Statement Such information has not been independently confirmed or verified by the District. No representation is made herein by the District as to the accuracy or adequacy of such information subsequent to the date hereof, or that the information contained and incorporated herein by reference is correct. Reference is made to Appendix H for a specimen of the insurer's financial guaranty insurance policy(the 'Policy'). The Policy [To Come] THE DISTRICT History The District was formed in 1927, pursuant to the Act. The District has the powers under the Act to, among other things, provide water service and engage in the transmission, distribution, sale and delivery of electric power and energy. Headquartered in Truckee, California, the District is situated in the Sierra Nevada Mountains, ISO miles northeast of San Francisco, 32 miles west of Reno, Nevada, and 12 miles north of Lake Tahoe. Its boundaries are comprised of approximately 44 square miles in eastern Nevada County, California and approximately 1.5 square miles of adjacent Placer County, California. The District's service area includes the Town of Truckee. Incorporated in 1993, the Town of Truckee was originally established in 1862 and became an important location on the Central Pacific Railroad,forming the first transcontinental railroad in 1869. The District is owned and controlled by registered voters residing in the area. The District was formed following a five-year drought as a result of which the Truckee River flow was insufficient to turn the water wheel for Truckee Electric Company's private generator and area voters petitioned for the formation of a special public utility district. Thereafter, the.District was able to buy power from the downstream generators of Sierra Pacific Power Company, a more reliable power supply,and sell it to local residents. For the first 20 years of operation,the District, with a staff of four part-time employees,served a few dozen houses and shops in the downtown area, while Sierra Pacific Power Company maintained the electric lines on a contract basis. In the 1940's, as the community grew, the District bought some of the private water companies that provided the town with fresh water from underground springs. The land, acquired with the springs, was sold for development,and the proceeds were used to drill wells,install more power lines and hire maintenance crews. In the 1960's, the District expanded its services, provided public school sites and helped to develop organized recreation for the community by building a golf course, now known as the Ponderosa Golf Course. The golf course was later sold to a private party, and residents voted to form a separate recreation and park district. During this time,the District built the Truckee substation, purchased Donner Lake distribution facilities from Sierra Pacific Power Company and expanded its electric system. In the 1980's, the District expanded its service area to include Tahoe Donner and Hirschdale, developed a water master plan, adopted an electric master plan and implemented many electric and water improvements. In the 1990's, the District acquired transmission access, enabling it to purchase power on the open market. In 2000 and 2001,the District water service area grew to include Glenshire and Donner Lake. At the east end of Donner Pass,the Town of Truckee has remained an important transportation center as the gateway to the mountain pass leading to the west and San Francisco. The Town of Truckee's close proximity to surrounding ski areas and Lake Tahoe resorts has made it a growing center of tourism as well. It is currently 13 sei 13298e1,8 s estimated that approximately 57% of the dwelling units in the District's service area are maintained by second homes. Growth in the District's service has averaged about 300 new residential customers a year over the last six years. Much of the growth has been additional concentration in existing developed areas. For example, Tahoe Donner has 6,110 parcels, of which 1,650 are currently unimproved. In addition, there are a number of new developments in which residential construction has commenced or is scheduled to begin within the next three years. These developments include Old Greenwood-298 residential units plus commercial facilities, Gray's Crossing- 600 new residential units plus commercial facilities, Pine Forest-118 new residential home sites, River View Townhomes-60 new residential units and The Boulders-180 residential units. Some of these developments are phased over a number of years. The District presently serves over 11,600 electric customers and 10,900 water customers. The District's water system is operated and accounted for separately from the Electric System. Governance The District is governed by a Board of Directors(the "Board") composed of five persons elected at large, there are no divisions in the District, all voters within the District vote for all candidates. A General Manager, appointed by the Board, directs four departments: Administration, Electric, Water and Support Services. Each Department is supervised by a Department Manager. The Board appoints an outside legal firm to provide legal services. All engineering, operations, maintenance and finance services are provided by the District staff supplemented by outside firms as needed. The following are the members of the District's Board and their background: JOSEPH R. AGUERA, was originally appointed to the Board in June 1987, elected to the Board in November 1987 and has served a continuous 16 years. Mr. Aguera attended the College of Mortuary Science in Los Angeles, Ca. He moved to the Truckee area 34 years ago and established the Truckee-Tahoe Mortuary. He has been president of the Truckee Lions Cub, past master of the Truckee Masonic Lodge#200 and a member of the Truckee Rotary Club and the Truckee Donner Chamber of Commerce. He was a fire commissioner with the Truckee Fire Protection District for 10 years and a board member of the Truckee Cemetery District for 10 years. J. RON HEM1G, was originally elected to the Board in November 1994 and re-elected in 1998 and 2002. Mr. Hemig was a co-founder of a publishing company and has extensive experience in business management and organization development. He holds a Bachelor of Science Degree in Business. Mr. Hemig is a co-owner of the real estate firm of Hemig& Erie. He was past member of several Town of Truckee standing committees and presently serves on the Sierra County Economic Development Committee. Mr. Hemig is serving as the 2003 District Board President. JAMES A. MAASS, was elected to the Board in March 1977 and has served a continuous 26 years. Mr. Maass has been a high school government and economics teacher for many years and is currently a member of the management team of the Tahoe Truckee Unified School District, holding the position of Technology Coordinator. He is a member of the governing board of the Northern California Power Agency where he has served on the Executive Committee. PATRICIA S. SUTTON, was elected to the Board in November 1973, re-elected a number of times; serving a total of 26 years with the District. Ms. Sutton has been a Truckee resident for 37 years and is the co-owner of a licensed general engineering contractor business, which specializes in paving and sealing. Ms. Sutton served as a County Supervisor in 1981 and is active in professional organizations and the community. NELSON VAN GUNDY, was appointed by the Board to fill a vacancy in June 2000 and elected to the Board in November2000. Mr,Van Gandy has an A.B. in history from Kansas State University and Masters of Divinity from San Francisco Theological Seminary. He has been Broker/Owner of the RE/MAX North Sierra (previously North Sierra Investment Properties) for over 20 years. Mr.Van Gandy has been president of both the Truckee Rotary and the Tahoe Sierra Board of Realtors. He has been an active member on the boards of Camp 14 Sri 132986M s 1 Signshine for the Hearing Impaired, Donner Lake Village Home Owner's Association, Truckee Donner Railroad Society and has been involved in various musical and community activities. Management The management of the District is under the direction of Mr.Peter L. Holzmeister, General Manager, who serves at the discretion of the Board. The following are members of the District's management staff and their background. PETER L. HOLZMEISTER, was named General Manager in April 1984. He received a Bachelor's Degree from Fairfield University and a Masters Degree in Public Administration from the University of Hartford. Prior to joining the District, Mr. Holzmeister was Municipal Services Consultant with the Connecticut Public Expenditure council, Assistant Town Manager of Wilmington, Massachusetts and City Manager of Grove City, Pennsylvania. He is active in the Truckee Rotary Club and serves on the board of Governors of the California Municipal Utilities Association. STEPHEN HOLLABAUGH, Assistant General Manager and Electric Utility Manager,joined the District in April 1994 as District Electrical Engineer. Mr. Hollabaugh received a Bachelor of Science degree in Electrical Engineering from California Polytechnic State University in 1985 after which he was employed by the Pacific Gas and Electric Company for nine years. He is a registered professional electrical engineer in the State of California. Since 1996, his duties at the District included development of Truckee's power supply and transmission arrangements. In addition, he held increasingly responsible positions in electric operations, distribution facilities and power supply resources. In 1997. Mr.Hollabaugh was promoted to Power Supply Engineer, and in September 2000,he was named Assistant General Manager and Electric Utility Manager. RAYMOND EDWARD TAYLOR, Water Utility Director, has been with the District since March 1997. Mr.Taylor has had twenty-six years of public works management experience. He is licensed in California, Ohio and Colorado for water treatment and water system operations. He prepares budgets and capital improvement plans for review of the General Manager. He develops methods and procedures for efficient operation, sets departmental goals and review progress of those engaged in water system operations,repairs,maintenance and new construction. MARY CHAPMAN, Administrative Services Manager and Treasurer, was hired by the District in 1974 as the District's bookkeeper. She was promoted to Office Manager in 1978. Ms.Chapman was later appointed to the position of Administrative Services Manager and District Treasurer. She has been responsible for the District's accounting system for most of the period from 1974 to present. Ms. Chapman received her Bachelor of Arts degree in General Studies with an emphasis in business management from the University of Nevada, Reno. She is an active member and current treasurer of the Soroptimist International of Truckee Donner. KATHLEEN NEUS, Support Services Manager, was hired by the District in April 1989 as a meter reader, worked on the water crew for one year and was promoted to her current position of Support Services Manager in 199. She is responsible for management of the District's building and grounds, vehicles, purchasing and warehousing. Ms. Neus is continuing her education in mechanical engineering at University of Nevada, Reno. She was past president of Soroptimist International of Truckee Donner and is a current active member. JOSEPH HORVATH, District Electrical Engineer, has been with the District since December 1997. Mr. Horvath designs primary line extensions, prepares construction standards and equipment specifications, and supervises the preparation of design drawings and construction cost estimates. Mr. Horvath received a Bachelor of Science in Electrical Engineering degree from the University of Washington in 1984 and is a registered professional engineer. Prior to joining the District,he was a senior engineer for eleven years at the Seattle office of R.W. Beek,a consulting engineering firm. Employees As of December 31, 2002, the District had 57 full-time employees (of which 33 were assigned to the Electric System). All of the non-management/exempt District personnel are represented by the International 15 Sri 112986M t f- Brotherhood of Electrical Workers (`9BEW"). The current Memorandum of Understanding with the 1BEW expired on December 31,2002 and negotiations on a successor contract are underway. There have been no strikes or other union work stoppages at the District. F Retirement benefits to the District bargaining unit employees are provided through the District's single employer pension plan. The District's contribution rate is determined by periodic actuarial calculations based on the benefit formula and the number of employees and their respective salary schedules. The District's cost for the year ended December 31,2002 was $258,071 which must be paid by September 15,2003 and which includes the amortization of the unfunded actuarial accrued liability over a remaining period of 5 years. As of December 31,2001,the District's unfunded pension benefit obligation was$479,614. During 2000, the District Board of Directors approved a 401(a) defined contribution plan for District management and exempt staff(effective August 1, 2000) and bargaining unit employees(effective January 1, 2000). Contributions are made by the District on the employees' behalf and employees are immediately vested in the 401(a) plan. The District contributed 10%of earnings on behalf of management and exempt employees in each of the years 2000, 2001, and 2002 as part of the management 401(a) plan and 3% of earnings for employees in the bargaining unit 401(a) plan in 2000, 4% of earnings in 2001 and 5% of earnings in 2002. At December 31, 2001, the 401(a) Plan assets were $131,805 and $109,032 for the management and bargaining unit, respectively. At December 31, 2002, the 401(a) Plan assets were $202,570.23 and $218,373.99 for the management and bargaining unit, respectively. The District also maintains a deferred compensation plan for certain employees. The amount deferred and held in trust was$2,137,657 and$2.390,621 at December 31, 2002 and 2001,respectively. The District began providing post-employment health care on January 1, 2000 to all employees, and their qualified dependents, who retire from the District on or after attaining age 60 with service of at least 20 years. For years worked less than 20 years, the benefit is reduced 5%for each year. For retirement prior to age 60, the benefit is reduced by 2%for each year. The cost of post employment health care benefits was$19,397 and$9,717 for years 2002 and 2001,respectively. See Note 7 to the District's audited financial statements for the fiscal year ended December 31, 2001 included in APPENDIX A hereto. Insurance The District maintains commercial insurance for property damage, casualty loss and other customary risks. A blanket fire policy covering the full current value of all buildings of the District is currently maintained. The District also maintains $9,428,641 coverage on its substations and other personal property owned by the Electric System. The District maintains umbrella liability coverage in the amount of $10,000,000 subject to a $10,000 deductible. Underlying this policy, the District maintains $2,000,000 in general liability coverage, subject to a $5 000 deductible per occurrence and$2,000,000 auto liability coverage with a$1001$500 deductible. Investment Policy The Revenue Fund, into which all revenues of the Electric System are initially deposited, and the Certificate Payment Fund, from which the 2003 Certificates are to be paid, are required to be invested in certain Permitted Investments. See "APPENDIX E—SUMMARY OF PRINCIPAL LEGAL DOCUMENTS" herein. All funds of the District however, are invested by the District in accordance with the investment guidelines of the California Government Code(Sections 53601 and 53635) and the District's Investment Policy,which provides that the General Manager and District Treasurer shall invest surplus funds,both restricted and general,in either the Local Agency Investment Fund, certificates of deposit, or other major banking investments which are allowable by law and approved by the Board of Directors. The Investment Policy may be changed at any time at the discretion of the District Board of Directors (subject to the State of California law provisions relating to authorized investments). There can be no assurance, 16 Sri 1329861v8 therefore,that the State of California law and/or the Investment Policy will not be amended in the future to allow for investments which are currently not permitted under such State law or the Investment Policy, or that the objectives of the District with respect to investments will not change. All investments, including the Permitted Investments and those authorized by law from time to time for investments by public agencies, contain a certain degree of risk. Such risks include, but are not limited to, a lower rate of return than expected and loss or delayed receipt of principal. The occurrence of these events with respect to amounts held under the Trust Agreement and Installment Purchase Agreement, or other amounts held by the District, could have a material adverse effect on the District's finances. Budgetary Process The District's operating budget, in the form of a one-year financial plan, is adopted in its entirety by the Board of Directors. The budgetary process begins each year by Labor Day, with a first draft presented to the Board of Directors in November. The final budget is adopted in December, to take effect on January 1 of each calendar year. Significant Accounting Policies The District's annual financial statements for the Fiscal Years ended December 31, 2001 and 2000 were audited by Arthur Anderson LLP in accordance with generally accepted auditing standards as set forth in their report thereon. The report includes certain notes to the financial statements. Such notes constitute an integral part of the audited financial statements. See "APPENDIX A—AUDITED FINANCIAL STATEMENTS OF THE DISTRICT AS OF DECEMBER 31,2001 AND 2000"herein. No review or investigation with respect to subsequent events has been undertaken by Arthur Anderson LLP in connection with such financial statements. The District has not obtained Arthur Anderson LLP's consent to include the attached financial statements in this Official Statement. Unaudited financial statements of the District for the Fiscal Year ended December 31, 2002 are attached as APPENDIX B hereto. Beginning with the Fiscal Year ended December 31,2001 the District's financial statements will be audited by KPMG LLP. Copies of these reports when available can be obtained upon request to the District's Administrative Services Manager and Treasurer, Truckee-Donner Public Utility District, P.O. Box 309, Truckee, California 96160. The accounting policies of the District conform to generally accepted accounting principles (GAAP). The accounting treatment of the Settlement Obligation incurred in connection with the termination of the Prior Agreement for the District's power supply, as described under "THE TRANSACTION" above, materially adversely impacted the District's financial results for the Fiscal Year ended December 31, 2002. See "THE DISTRICT'S ELECTRIC SYSTEM — Summary of Historical Net Revenues and Balance Sheet Information—Management's Discussion of operating Results"herein. THE DISTRICT'S ELECTRIC SYSTEM General The District's service area is comprised of approximately 44 square miles in eastern Nevada County and approximately 1.5 square miles in adjacent Placer County. The Electric System serves the entire area of the District and has more than 157 miles of 12.47 kV distribution lines, including about 21 miles of underground distribution cables. The District is a transmission-dependent utility located within the control area of Sierra Pacific Power Company(hereinafter"Sierra Pacific"),and is not interconnected with any utility other than Sierra Pacific. During the Fiscal Year ended December 31, 2002,the Electric System served 11.697 customers,comprised of 10,424 residential customers, and 1,273 commercial and other customers. During such period, the Electric System supplied 126,878,783 kWh of energy and had a peak demand of 30,245 kW. 17 Sri 1329861,8 Power Supply Resources General The District does not independently own any generation facilities. The District purchases all of its energy through bilateral contracts with entities outside the District's service area. Effective July 1, 1997, the District entered into the Original Agreement with Idaho Power to provide for its power requirements. See "THE TRANSACTION" herein. In 1997 and 1998, due to transmission constraints, the District's power requirements were supplied by Sierra Pacific (which had provided the District's full requirements prior to such time) and by Idaho Power, Since 1999, the District has purchased all of its power requirements from Idaho Power or its affiliates, including IDACORP Energy L.P. The District has a transmission service agreement with Sierra Pacific pursuant to which power purchased by the District is transmitted to the District's Electric System for distribution to the District's electric customers. See "Transmission Service and Dispatch/Scheduling Arrangements" below. The District is a member of the Northern California Power Agency("NCPA"),a joint exercise of powers agency,and the Utah Associated Municipal Power Systems ("UAMPS"), a governmental agency that provides comprehensive wholesale electric energy, on a nonprofit basis, to community-owned power systems throughout the Intermountain West. Pursuant to a letter of agreement, NCPA provides dispatch and scheduling services to the District. See "Transmission Service and Dispatch/Scheduling Arrangements" below. LAMPS has transmission access to Sierra Pacific's transmission system and can provide wholesale power to the District's Electric System when necessary. Power Supply Arrangements IDACORP Interim Power Supply Agreement. As noted above, the District has purchased primarily all of its power requirements from Idaho Power or its affiliates since 1999 pursuant to the Prior Agreements. See "THE TRANSACTION" herein. In connection with termination of the Prior Agreements, the District and IDACORP Energy L.P. entered into an Interim Power Supply Agreement(the "IDACORP Interim Power Supply Agreement") pursuant to which IDACORP Energy L.P. will provide firm energy to meet the District's full energy requirements not to exceed 35 MW per hour at a price of$41.62 per MWh for the period December 1,2002 through March 31, 2003. [ Power Supply Agreement. In order to provide for its power supply resources needs following termination of the IDACORP Interim Power Supply Agreement on March 31, 2003, the District issued a Request for Proposals("RFP")in January 2003. The REP was structured to solicit a power supply arrangement for capacity and energy that will satisfy nearly all of the District's energy requirements with little or no exposure to the spot market. The District received seven responses. After thorough evaluation and extended negotiations with the low cost alternatives,the District selected the following resource alternative: [TO BE FINALIZED AFTER SELECTION OF CONTRACT.] On__, the District entered into a five year fixed-rate contract with for capacity and firm energy. Monthly contract quantities are specified for high load hours, low load hours and high load hours on Sundays and Holidays. The contract quantities are set at a level to meet the District's average projected load for each month. High load quantities range from a low of 15 MW in May of 2003 to a high of 23 MW in December of 2007. Low load quantities range from a low of 11 MW in May of 2003 to a high of 18 MW in December of 2007. High load quantities for Sundays and Holidays range from a low of 2 MW in April of 2003 to a high of 5 MW in December of 2007. Deliveries are scheduled to begin on April 1, 2003 and will extend to December 31, 2007. The cost of delivered power under the agreement is $_per MWh. The District has arranged for _ to perform hourly shaping to meet actual load requirements. In accordance with the terms of the District's transmission service agreement with Sierra Pacific, pre-schedules must be submitted to Sierra Pacific in round MW which may require the purchase of additional energy or sale of contracted energy on an hourly basis. Net hourly purchase and sales are expected to be less than 2%of the District's annual energy requirements 18 SH 1329861,8 Future Power Supply Resources Western Contract on October 27,2000,the District signed a 20-year agreement(the"Western Contract") with Western Area Power Administration ("Western") for the purchase of hydroelectricity from the Central Valley Project ("CVP"). The CVP, for which Western serves as marketing agency, is a series of federal hydroelectric facilities in Northern California operated by the United States Bureau of Reclamation. Service under the Western Contract will begin on January 1, 2005 and continue through December 31,2024, with the District receiving a"slice of the system" allocation from Western. The District's allocation is 0.220% of the CVP output. Under current projections, this is expected to equate to a base resource during normal hydrologic years of 2.20 MW, and ranging from 1.10 MW during a dry year to 3.30 MW during a wet year depending upon the hydrology of the CVP. Western has not yet announced pricing for CVP output under this contract but it will be cost-based. Power provided to the District under the Western Contract will be on a take-or-pay basis; the District is obligated to pay its share of Western costs whether or not it uses its full entitlement under the Western Contract. The combination of the amounts to be purchased under the_ Power Purchase Agreement and the Western Contract is expected to provide the District with sufficient capacity resources through December 31, 2007. These resources will accommodate the projected growth in the District's load of 2%per year. The District plans to evaluate new generation resources that UAMPS and NCPA are currently investigating to meet some, or all of its long-term resource needs. The cost of meeting the District's energy requirements will vary depending on such factors as the availability of generating resources in the region,cost of fuel and weather conditions. Transmission Service and Dispatch/Scheduling Arrangements Sierra Pacific Transmission Service Agreement. In September 1999, the District entered into a service agreement for network integration transmission service (the "Sierra Pacific Transmission Service Agreement") with Sierra Pacific. Pursuant to the Sierra Pacific Transmission Service Agreement, Sierra Pacific grants the District import rights into Sierra Pacific's transmission control area and transmission service within the Sierra Pacific transmission control area for the District's full load requirements through December 31, 2027 at FERC-approved tariff rates. Delivery of power under the IDACorp Interim Power Supply Agreement is made to the District within the Sierra Pacific control area and transmitted to the District pursuant to the Sierra Pacific Transmission Service Agreement [The Sierra Pacific Transmission Service Agreement will be modified to accommodate the delivery of power under the Power Purchase Agreement at the delivery points to be specified by the District.] NCPA Dispatch and Scheduling Services. The District has executed a letter of agreement for dispatch and scheduling services with NCPA. Pursuant to the letter agreement, NCPA provides pre-scheduling and real-time scheduling services to the District for all of the Districts power deliveries. Interconnections and Distribution Facilities The District's Electric System is interconnected with the system of Sierra Pacific at five locations (four substations and one distribution meter at various voltages (one at 120kV, three at 60kV and one at 14.4kV). The District owns facilities for the distribution of electric power within the service area of the District, which consist of four substations and approximately 157 miles of 12.47 kV distribution lines, including about 21 miles of underground distribution cables. 19 SH 1329s6M _ . . Future Capital Expenditures In July 2002, the District approved an Electric System Master Plan for capital improvement projects for the District's Electric System planned improvements will provide for projected load growth over a 15-year planning period from 2003 to 2017. The capital improvements contemplated by the Electric System Master Plan have an estimated cost, in 2002 dollars,of$9,390,400 over the 15-year period. The average cost to the District to implement the proposed capital improvements is estimated to be approximately $626,000 per year. Improvements include various distribution system and substation improvements. The timing of projects is contingent upon the rate and location of development within the District. If development occurs differently than assumed in the Electric System Master Plan, the timing of individual capital projects may shift from year to year. The capital improvements are expected to be funded primarily from Electric System facilities fees. See"Rates and Charges"below. Rates and Charges The District has the exclusive jurisdiction to set electric rates within its service area. These rates are not subject to review by any state or federal agency. For the Fiscal Year ended December 31, 2002, the District's average rate per kWh for residential service was 11.14 cents. The District's average rate for commercial service was 11.27 cents per kWh. The current electric rates were established by District Ordinance No. 2002-06, adopted on December 18, 2002 and took effect in January 2003. These rates represented an 9.10/,, average increase over prior rates. The following table presents a recent history of the District's electric rates. Truckee Donner Public Utility District History of Electric Service Charges February August January February January 1995 2001 2002 2002 2003 Domestic Electric Rates: Permanent Residents Customer Charge: per month 54,00 54.00 54.00 $4.00 $4,50 Energy Charge per kilowatt-hour 50.06811 $0.08037 $0.09263 50.09963 $0.10869 Domestic Electric Rates: Non-Permanent Resident Customer Charge: per month $4.00 $4.00 $4,00 S4o0 $4.50 Energy Charge per kilowatt-hour $0.08196 $0.09422 $0.10649 $0,11348 $0.12381 Small Commercial Rates: Commercial Customers with monthly demand less than 50 kilowatts Customer Charge: per month 58.00 $8.00 58.00 58.00 58.73 Energy Charge per kilowatt-hour Sf o8821 50.10047 $0.11273 50.11973 $0.13062 Medium Commercial Rates: Commercial Customers with monthly demand greater than 50kW and less than 200kW Customer Charge: per month $Woo 58200 580.00 $80uo SST25 Energy Charge per kilowatt-hour $0,03990 $0.05216 $0.06476 $0.07176 $0.07729 Demand Charge per kilowatt of demand 59,77 $9.77 $9.77 $9.77 S10.58 Large Commercial Rates: Commercial Customers with monthly demand greater than 200 kilowatts Customer Charge: per month 5350.00 $350,00 $350.00 5350.00 $382.00 Energy Charge per kilowatt-hour $O.04139 $0.05365 $0.06591 50.07291 $0,07954 Demand Charge per kilowatt of demand 59.27 $9.27 $9.27 $U7 $10,11 The Board of Directors reviews electric system rates periodically and makes adjustments as necessary. There are no special contracts with customers. 20 SFI 1329861v8 r f t S S Beginning in January 1998,the District credited back to electric customers an I I%wholesale energy credit reflecting the refund to its customers of the savings obtained by the District as a result of its ability to reduce its power supply costs after obtaining transmission access to additional markets. In January 2000, this credit was eliminated from customers billings. See "DEVELOPMENTS IN THE ENERGY MARKETS — Effects of Restructuring on the District's Power Supply"herein. AB 1890 requires that the District spend approximately 2.85% of gross operating revenues per year on public benefit programs. It is the policy of the District that a public benefits program be developed each year as part of the annual operating budget. Each element of the program is designed to promote one or more of the following benefits: energy conservation; the use of renewable energy resources; research, development or demonstration of a new electric energy technology;or assistance to low-income persons. In addition to the electric rates described above, the District also imposes standby charges, connection charges and facilities fees. Standby Charges. Any local agency which is authorized by law to provide electric service and which is providing such service within its jurisdiction, may fix pursuant to Government Code Section 54984 et. seq., a standby charge on land to which electric services are available,whether or not the services are actually used. Since 1975, the District has levied a standby charge for the availability of electric service to undeveloped property. The annual standby charge for electric service is $10.00 per parcel for parcels less than one acre and$20.00 per parcel for parcels one acre or larger. Standby charges are accounted for as Revenues of the Electric System when billed. Connection Charges. The District imposes a connection charge based on the actual cost of connecting new service lines to the Electric System. The connection charges do not constitute the Revenues of the Electric System. They are applied to pay the District's capital costs in making such connection. Facilities Fees. Each new electric service customer of the District is charged a facilities fee. The facilities fee is made by the District to cover the pro rata share of the cost of any expansions or additions to the Electric System which are required to serve the additional demand. The cost of future facilities are included in the facilities fee in order to maintain an equitable distribution of benefits received between present and future service connections. The facilities fees constitute Revenues of the Electric System (in the form of contributed capital) during the year in which they are collected. The following table lists the current Electric System connection charges and facilities fees. Connection Size and Type of Service Charge Facilities Fee Three Wire Overhead -Temporary Actual Cost -Permanent connection to structure $1,100 $200 -Temporary connection to pole and transfer to structure $1,350 Three Wire Underground(overhead transformer) -Permanent connection to structure $1,100 $200 -Temporary connection to pole and transfer to structure $1,350 Three Wire Underground(padmount transformer) - Permanent connection to structure $1,100 $200 -Temporary connection to pole and transfer to structure $1,350 21 SH 1329861v8 Billing and Collection Procedures Customers are billed for electric services on a monthly basis. All electric bills are due and payable on the date of billing and become delinquent 19 days thereafter. If such bills remain unpaid on the 301"day after billing, all electric services are assessed a late payment fee and are subject to termination pursuant to the District's disconnect procedures. Over the last five fiscal years, delinquencies for monthly electric service have averaged less than 0.08 of one percent of total billings for the year. Standby charges are collected twice annually with ad valorem property tax bills by the Counties of Nevada and Placer. Like property taxes, standby charges are due twice a year on November I"and February I"of the year. If unpaid, these standby charges become delinquent on December 10`" and April 10"', respectively. Property taxes are not considered paid in full unless standby charges are also paid. Connection charges and facilities fees are collected by the District at the time a property is developed. Electric service is not initiated by the District until these amounts are paid in full. Customers,Sales, Revenues and Demand The average number of customers, kWh sales, revenues derived from sales by classification of service and peak demand during the past five Fiscal Years are listed below. TRUCKEE-DONNER PUBLIC UTILITY DISTRICT Electric System Customers,Sales,Revenues and Demand Fiscal Years Ended December 31, 1998 1999 2000 2001 2002t" Number of Customers: Residential 9,080 9,352 9,623 10,238 10,424 Commercial and Other 1,110 1,182 1,204 1,203 1,273 Total Customers 10,190 10,534 10,827 11,441 11,697 Kilowatt-Hour(kWh)Sales: Residential 65,335,576 66,981,022 67,439,920 65,014,735 65,041,548 Commercial and Other 52,075,197 55,786,416 58,761,003 57,467,440 58,837,235 Total kWh sales 117,410,773 122,767,438 126,200,923 122,482,175 126,878,783 Revenues from Sale of Energy: Residential S 4,709,622 S 4,838,767 $ 4,872,323 $ 5,522,632 $ 7,579,083 Commercial and Other 3,636,056 3,881,162 4,047,453 4,672,587 6,337,757 Total Revenues from Sale of Energy: S 8,345,678 S 8,719,929 S 8,919,776 $ 10,195,219 $ 13,916,840 Peak Demand(kW) 28,815 28,591 28,277 29,040 30,245 tp Preliminary estimates,unaudited. Source: Truckee-Donner Public Utility District. Largest Customers The five largest customers of the District's Electric System in terms of kWh sales, as of December 31, 2002, accounted for 19% of total kWh sales and 17%of revenues. The largest customer accounted for 8% of total kWh sales and 7% of total revenues. The five largest electricity purchasers in the District for the 12-month billing period ended December 31,2002 are set forth below. 22 SH 1329861,8 TRUCKEE-DONNER PUBLIC UTILITY DISTRICT Largest Electric Customers (as of December 31,2002) 12 Months Customer Type of Business kWh Sold Electrical Billings District Water Department')"2' Water Utility 10,590,125 $1,086,928 Tahoe Truckee Sanitation Agency'' Sewer Plant 5,492,416 504,224 Tahoe Forest Hospital''' Hospital 3,590,115 348,649 Safeway Stores,Inc. Grocery Store 2,247.000 200,238 Teichert&Son Aggregate Plant 2,207,700 277.006 °1 Represents pumping charges incurred by District water system. ¢) Denotes customer with multiple meters and service locations. The kWh sold and electrical billings are a sum of all of customer's meter locations. Source: Truckee-Donner Public Utility District. Outstanding Electric System Obligations As of December 31,2002, the District had outstanding $2.030,000 principal amount of Refunding Certificates of Participation (Headquarters Complex Prqject) (the"1993 Electric Certificates"). The lease payments represented by the 1993 Electric Certificates were payable from Net Revenues of the District's Electric System. On March 3,2003, the District prepaid the outstanding 1993 Electric Certificates from available funds of the District. As of the date hereof, the District has no outstanding long-term indebtedness payable from revenues of the Electric System. Summary of Historical Net Revenues and Balance Sheet Information A summary of Net Revenues of the District's Electric System for the five Fiscal Years ended December 31. 1998 through December 31, 2002 is shown in the following table. The Net Revenues shown in the following table have been calculated in accordance with the terms of the Installment Purchase Agreement. Also included in the table is selected balance sheet information as of December 31, 2002 and the four prior year-ends. The financial results for the Fiscal Years ended December 31, 1998 through 2001 were prepared by the District from audited annual financial reports. The financial results for the Fiscal Year ended December 31, 2002 were prepared by the District on the basis of unaudited financial information. 23 SH I329861v8 TRUCKEE-DONNER PUBLIC UTILITY DISTRICT Electric System Summary of Historical Net Revenues and Balance Sheet Information (Fiscal Year Ending December 31) 1998 1999 2000 2001 2002"131 RevenuesM: Sales to Customers S8,862,727 S9,069,361 $9,334,548 S 9,759,286 $12,891,095 Consumer Electric Reftmd"�1 (962,806) (991,001) (931,032) 0 0 Intereivisional Sales(3) 655,809 799,165 787,366 923,640 1,424,288 Standby Charges 33,433 31259 28,957 39,333 24,015 Facilities Fees"41 62,466 106,763 98,372 77,694 126,377 Other0, 245,224 224,398 258,500 172,188 167,232 Income from Investments 225,805 224,115 239,045 158,809 173,796 Total Revenues S9,122,658 $9,464,060 S9,815,756 $11,130,950 $14,806,803 Rate Stabilization Fund Transfer"' 0 0 0 0 2,024,062 a Total Adjusted Revenues $9,122,658 $9,464,060 $9,815,756 $11,130,950 $76,830,8651A7 Operation and Maintenance Costs(,): ns/ Power Purchases $4,895,065 $4,385,928 S4,683.112 $3,986,550 $11,093,289 Operation and Maintenance 1,090,358 1,218,950 1,460,439 1,501,714 1,975,435 Administrative and General 1,347,737 1,266,990 1,334,514 1,612,485 1,937,247 Consumer Services"R/ 327,813 351,095 504,916 599,315 483,969 Interest Expense(9) 40 297 56,174 32,236 35,282 43,202 Total Operation and Maintenance Costs $7,701,270 $7,279,137 $8,015,217 $7,735,346 $15,533,142 Adjusted Net Revenues/Funds Available for Debt Service $1.421.388 $2,184,923 $1,800,534 $3,395,604 $1,297,723 Debt Service"107 260,076 264,395 258,462 266,543 255,225 Debt Service Coverage"11) 5.47 8.26 6.97 12.74 5.08 Selected Balance Sheet Information Fund Balances(December 3 If: System Fund Balance S1,236,010 S 670,346 $ 844,250 S 225,829 $2,017,068 Rate Stabilization Fund Balance 573,940 596,584 641,790 1448,281 424,219 Total Fund Balances $t,809,950 $1,266,930 $1,486,040 $2,674,110 $2,441,287 Net Plant in Service $11,857,265 $11,986,890 $13,004,380 S13,288,280 $12,625,751 Construction Work in Progress 324,327 1,461,373 1,584,186 1,844,911 3,579,044 Net Electric Utility Planf'22 S12,181,592 S13,448,263 $14,588,566 $15,133,191 $16,204,795 71 Excludes Connection Charges. See"Rates and Charges"above. "I Represents an I I%credit to customers discontinued in 2000. See"Rates and Charges"above. t3) Represents pumping charges to District water system and interdepartmental rent charged to the water department for use of the District Administrative Building which was financed by the Electric System. Facilities Fees are charged to applicants for new service to cover the costs of infrastructure needed to meet the additional system demand. See"Rates and Charges"above. Represents service transfer charges,late payment fees,building roan rentals and miscellaneous receipts. 161 The Rate Stabilization Fund is used to mitigate rate increases. Pursuant to the Installment Purchase Agreement,Adjusted Revenues for coverage purposes include the amounts the District has authorized to be deposited in the Revenue Fund from the Rate Stabilization Fund to pay Operation and Maintenance Costs and/or Debt Service. See "SECURITY AND SOURCES OF PAYMENT FOR THE 2003 CERTIFICATES-Deflned'Fenrns"and"-Rate Covenant'herein. 171 Excludes depreciation and amortization. a, Includes all customer service.billing activity and customer information expenses. �9) Excludes interest on the 1993 Electric Certificates which is shown under Debt Service below_ 110i Represents Debt Service on the District's 1993 Electric Certificates which were retired as of March 3,2003. See"Outstanding Electric System Obligations"above. 01 Adjusted Net Revenues divided by Debt Service. Prior to 2001eontributed capital was applied to reduce the cost of the assets funded and booked either as a reduction of Plant Serving Customers or Funds Received for Construction of Facilities. Beginning in 2001 such amounts are treated as revenues and new plant is recorded as an asset in the amount of the full acquisition cost. Unaudited. 031 The District funded a portion of its Electric System expenses from the Rate Stabilization Fund in 2002, Additional rate increases have been implemented for 2003. See"Rates and Charges"above. t11 Exclusive of $26 million Settlement Obligation which is a one-time oxpense relating to the termination of the Prior Agreements(see"THE TRANSACTION"herein)which was accrued as of December 31,2002 but will be funded from proceeds of the 2003 Certificates in fiscal year 2003. 24 Sri 1329861v8 Management's Discussion of Operating Results. The District's Electric System operating results for the Fiscal Year ended December 31. 2002 were substantially affected by lingering effects of the California power crisis. The District's Electric System posted a loss in 2002 of$27,353,737,compared to a gain in 2001 of$2.728,868. During 2001, the District determined that the wholesale power market turmoil would have a negative impact on its operations going forward. In March 2001 the District entered into a fixed price contract with IDACORP Energy to hedge future power costs and began to implement a series of rate increases. The rate increases were intended to improve cash flow through 2002 and to achieve a more stable position in 2003. The first rate increase occurred in August 2001. This rate increase, coupled with a very favorable wholesale power contract in 2001, allowed the District to deposit $1,806,491 into a Rate Stabilization Fund for use in 2002. The District ended 2001, an extraordinary year in western power markets,with the operating gain of$2.7 million. In Fiscal Year 2002,the District increased retail rates in January, February and December. Funds in the amount of$2,024,062 were transferred from the Rate Stabilization Fund to the electric general fund to pay for operations. In 2002, the District experiences an increase in operation and maintenance costs of$473,721. The 31.5% increase was primarily due to the cost of restoring power service Lost during two major snowstorms in December. The District recorded an operating loss of$1.35 million, prior to adjustments for extraordinary losses associated with the termination of the power contract,in 2002. In 2002, the District negotiated the Settlement Agreement and the termination of the existing wholesale power supply arrangement with Idaho Power and IDACORP Energy L.P. (see "THE TRANSACTION" herein) to mitigate the negative impact the Prior Agreements were anticipated to have on the District's finances between 2003 and 2009 In early December 2002,the District agreed to pay the $26 million Settlement Obligation to terminate the contract. As a result, the District was required to record an incremental $26 million cost for purchased power in the Fiscal Year 2002. The expense was a non-cash item in Fiscal Year 2002 (and is not reflected in the table above)and will be paid out of the proceeds of the 2003 Certificates. On March _ 2003, the District executed a new power supply contract that the District believes will better fit the District's load requirements and minimize market exposure through 2007. District management believes the District's operating results in 2003 and beyond will return to .greater stability and further operating losses are not expected. DEVELOPMENTS IN THE ENERGY MARKETS Market Deregulation and the Energy Crisis Background. Following FERC actions in the 1990s to allow suppliers of wholesale electric generation services to make sales of capacity and energy at negotiated "market-based" rates and the enactment by FERC (in 1996) of Order No. 888 requiring the provision of open access transmission services on a non-discriminatory basis by jurisdictional utilities (which, by definition, does not include municipal entities like the District), the State of California attempted to establish a more competitive electric energy market. By September 1996, State Legislative Assembly Bill 1890 ("AB 1890") had become effective, which established a framework for the deregulation of the California electric energy market. AB 1890 mandated the organization of an Independent System Operator, or "ISO", to regulate non-discriminatory access to transmission facilities, consistent with FERC-approved tariffs, and an independent power exchange, or "PX," to provide a spot market for the purchase of output of the IOUs' generating assets and for the sale of electricity to meet the IOU's power requirements. Although AB 1890 applied primarily to the California IOUs, municipal utilities were encouraged to participate in the competitive framework by gradually providing open access to competitive energy providers. In mid-2000, wholesale electricity prices in California began to rise, swiftly and dramatically. Retail electricity rates permitted to be charged by the three major IOUs in California, Pacific Gas& Electric Company ("PG&E"), San Diego Gas& Electric Co. ("SDG&E") and Southern California Edison ("Edison"), at the time were frozen by California law (pursuant to provisions of AB 1890). Although SDG&E satisfied the statutory condition which permitted it to "unfreeze" its rates, PG&E and Edison continued to be subject to the rate freeze and their 25 sn 1329861,9 financial condition deteriorated rapidly. An emergency, 30% rate increase by the CPUC in March 2001 proved insufficient to stem the losses. On April 6, 2001, PG&E filed for bankruptcy protection. PG&E remains in bankruptcy today. In order to avert a second bankruptcy, the State, in October 2001, announced a settlement with Edison allowing Edison to recover from ratepayers a substantial portion of its accumulated debts. The settlement between Edison and the CPUC was approved by the district court over the objections of The Utility Reform Network("TURN"), a nonprofit consumer organization. TURN appealed the stipulated judgment resulting from the settlement. The Ninth Circuit Court of Appeals affirmed the decision of the district court as to certain questions arising under federal law,but certified to the California Supreme Court certain questions relating to the validity of the settlement agreement under California law. The potential impacts of further proceedings relating to this suit on the creditworthiness of Edison are uncertain. At the same time, the creditworthiness of the ISO and the PX, which was directly tied to creditworthiness of the IOUs, also deteriorated. On December 15, 2000, the PX had functionally ceased operation and filed for bankruptcy protection shortly thereafter,and the ISO was effectively frozen out of the energy market. State Intervention. In response to the chaotic energy situation and the reluctance of energy providers to engage in transactions with the State's two largest IOUs, the Governor of the State of California declared a state of emergency and ordered the State's Department of Water Resources ("DWR") to begin buying power for the IOUs. Shortly thereafter, the State formally authorized DWR's power purchase program by enacting Assembly Bill 1X ("AB 1X"). AB I authorized DWR to enter into power supply contracts in order to supply the shortfall (the "net short")between each IOU's power needs and its own retained generation. AB IX also required the IOUs to deliver DWR's energy to the IOU customers, and authorized.DWR to collect a charge from the IOU customers to allow DWR to recover its costs, including repayment of over $11 billion of revenue bonds issued by DWR in November 2002. DWR's contracting power expired on December 31, 2002, although DWR continues to supply power to the IOUs under contracts entered into prior to this date. On January 1,2003 the IOUs, under the auspices of the CPUC resumed responsibility for the provision of the residual net short and the administration of DWR contracts although for the foreseeable future DWR will remain the named contractual party to the contracts. AB I also required the CPUC to suspend the right of retail customers of the IOUs to purchase electricity from suppliers other than DWR and the IOUs(i.e.,direct access) until DWR is no longer a supplier of electricity. In March 2002, the CPUC adopted a decision suspending, as of September20, 2001, any new direct access. In a subsequent decision, the CPUC established a surcharge mechanism under which direct access customers were made responsible for paying costs incurred by DWR and by the IOUs during the energy crisis. The decision adopted an initial interim cap of 2.7 cents/kWh, in response to concerns that the surcharges might cause direct access to become uneconomic. Bundled (IOU) customers will finance any undereollection resulting from the cap, and they will be repaid with interest over a reasonable period. The cap is subject to adjustment as determined in further proceedings ordered in the decision. FERC Price Mitigation and Other FERC Actions. Beginning in late 2000, FERC took several steps to address the spiraling cost of energy in the California markets, including the implementation of cost-based price mitigation in the spot electricity markets. In July 2002 FERC replaced the previous formula for calculating the price cap with a hard cap of$91.87 per M Wb, effective through September 30,2002. FERC subsequently issued an order establishing a hard price cap of$250 per MW h effective October 1,2002 which remains in place. FERC indicated it established the price cap at this level to promote further development of new generating resources in California. The CPUC and the California Electricity Oversight Board have each brought action (which actions have been consolidated) at FERC against all sellers of energy under long-term contracts to DWR. These actions seek rescission of, or in the alternative, a reduction in the rates charged under the long-term contracts on the basis that such rates are unjust and unreasonable. In April 2002, FERC required that the parties first engage in mediation to attempt to achieve resolution through settlement prior to the matter going to hearing. As a result of the mediation process, the CPUC and the California Electricity Oversight Board have withdrawn their complaints against certain of the generators with whom negotiations have resulted in renegotiated contracts. On December 17, 2002, FERC directed that a number of the contracts be granted expedited treatment with briefs to be filed directly with FERC. 26 Sri 1329861,8 On January 16,2003, the Administrative Law Judge issued a decision on the standard of review to be applied to the remaining contracts and certified the record to FERC for a decision on the remaining issues. Effects of Restructuring on the District's Power Supply Although the District is located in California, it is not part of the California electric grid or market. The District is within the transmission service area of Sierra Pacific Power Company ("Sierra Pacific"), which covers much of northern Nevada and a small portion of Califomia in the Lake Tahoe area. The District is not interconnected with any other utility besides Sierra Pacific. Sierra Pacific's control area is recognized as a "load pocket." The generation resources within the Sierra Pacific control area are insufficient to meet the total load within the control area, and the ability to serve load within the control area from generating resources located outside of it (which are generally lower-priced than those located within it) is severely limited by transmission import constraints. As discussed herein (see "THE TRANSACTION"), for many years before July 1, 1997, the District purchased its full power and energy requirements from Sierra Pacific while attempting to get transmission access to be able to reach outside suppliers. In July 1997, the District entered into the Original Agreement with Idaho Power. The rates for such service were based each month on market prices reflected in the Mid-Columbia Index, plus an adder; however, the District also had the right to switch from the indexed energy rate to a fixed energy rate from time to time for periods of its choosing. For the first year and a half of the three-year contract term, Sierra's refusal to allow the District to use more than a load-ratio share (4 MW) of Sierra's import capacity prevented the District from obtaining the full benefits of the Original Agreement. The District finally succeeded in getting import capacity sufficient to meet its entire load in late 1998,as the result of a settlement with Sierra Pacific. When the District began purchasing its full requirements from Idaho Power in the late 1990s, the restructured wholesale markets in California and throughout the West were in their relatively early development stages. Generating capacity was ample, and the ready availability of low-cost hydroelectric power in particular led to favorable wholesale market prices in the region and on the Mid-Columbia Index specifically. The District's ability to obtain a power supply priced on the basis of this competitive market resulted in significant savings to the District by comparison to continued purchases from generation within the Sierra Pacific Toad pocket. The District used the resulting savings to provide a refund to its customers (see "THE ELECTRIC SYSTEM—Rates and Charges"above)and to build up rate stabilization funds. As described above, in mid-2000, wholesale electricity prices in California began to rise dramatically, and the market disruptions in California soon spread throughout the region. Massive price volatility and sustained price increases, in both spot and forward markets throughout California and the northwestern United States, and in particular the Mid Columbia Index, lasted well into 2001. The District's prices under its existing agreement with Idaho Power increased significantly as market prices rose. Moreover, the District was faced with the prospect of having to acquire future capacity and energy supplies in a drastically volatile, high-priced market. As a result, in March 2001, the District sought to hedge its exposure to such market forces and entered into the additional Prior Agreements with Idaho Power that have now been terminated(see"THE TRANSACTION"). In late 2000, FERC took initial steps to address the spiraling cost of energy in the California markets, but its initial orders were largely ineffective to curb prices in California. Further, FERC expressly denied requests to impose mitigation measures for markets outside California,leaving those markets unconstrained. Subsequent to the District's execution of the Prior Agreements, FERC did order and implement effective cost-based price mitigation in the spot electricity markets for California and the rest of the Western Systems Coordinating Council (as described under"FERC Price Mitigation and Other FERC Actions"above). This action significantly reduced both spot power and long-term prices in the western United States beginning in June 2001. Likely Effects of Restructuring on the District's Future Costs and Power Supply Through the Settlement Agreement with Idaho Power, the District has attempted to mitigate the effects on its customers of the 2000-2001 market dysfunctions. In addition, the District is in the process of developing new power-supply arrangements, which it will attempt to structure in a manner that will reasonably protect the District against adverse market influences. (See "THE DISTRICT'S ELECTRIC SYSTEM—Power Supply Resources- 27 Sri 1329861,8 Y 1 } } 5 Power Supply Arrangements" herein). Nonetheless, there are a number of factors beyond the District's control that may affect the District's costs and power supplies. Such uncertainties involve transmission availability and pricing, as well as wholesale generation market conditions. The District's current transmission service agreement with Sierra Pacific entitles it to import its entire load requirements from outside of the Sierra control area, subject only to certain caps on load growth, through 2027. However, it is possible that certain FERC developments may adversely affect the District's transmission rights and/or impose higher costs on the District's use of its import rights. On December 20, 1999, in Order 2000, FERC issued a rulemaking encouraging the voluntary formation of regional transmission organizations ("RTOs") that are to operate independently of owners of generation and other market participants and provide transmission access on a non-discriminatory basis to buyers and sellers of power. Sierra Pacific has committed to join the RTO West in compliance with Order 2000. RTO West has proposed, and FERC has accepted, certain provisions (regarding "Catalogued Transmission Rights") that should largely preserve the value of the District's import rights as they exist under the current transmission service agreement with Sierra Pacific. Furthermore, FERC has stated that it will not require these provisions to be revised in the near future to conform with FERC's forthcoming Standard Market Design, which is still in the rulemaking process. Notwithstanding these rulings, it is possible that as a result of future actions by RTO West, FERC, and/or the courts or legislative bodies, the District's import fights may be . eroded Further, there may be other impacts on the District (and virtually every other participant in wholesale electric markets)from FERC's eventual adoption of a final Standard Market Design rule. In addition, even with the District's existing import fights, Sierra Pacific's total transmission import limitations may adversely impact power prices under the District's new contract (and possibly beyond) by limiting the number of suppliers that can reach Sierra Pacific's interfaces at competitive prices. In this regard, the development of RTO West may eventually be a mitigating factor. Once RTO West begins operations,it will charge a single rate for use of the entire regional grid. Through the elimination of"pancaking" of separate transmission charges assessed by individual transmission owners between a source of supply and the load it serves, more resources may be able to reach the Sierra Pacific control area on an economical basis. Such availability will, however, depend on many other factors, including the adequacy of transmission infrastructure throughout RTO West and thus the number and degree of constraints within the regional transmission grid that could increase the costs of moving power to the Sierra Pacific control area even after pancaking is eliminated. OTHER FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY Proposed Federal Deregulation and Tax Legislation Many bills have been introduced in the United States House of Representatives and the United States Senate to deregulate the electric utility industry on the federal or state level. Many of the bills provide for open competition in the furnishing of electricity to all retail customers (i.e., retail wheeling). In addition, various bills have been introduced which would impact the issuance of tax-exempt bonds for transmission and generation facilities. No prediction can be made by the District as to whether any of these bills or any similar federal bills proposed in the future will become law or, if they become law,what their final form or effect would be. Such effect, however,could be material to the District. However,the Internal Revenue Service has recently issued new rules that will, preserve the tax-exempt status of bonds issued to finance transmission facilities, where control is turned over to an Independent System Operator or Regional Transmission Organization, subject to certain conditions. Other Factors The electric utility industry in general has been, or in the future may be, affected by a number of other factors which could impact the financial condition and competitiveness of many electric utilities and the level of utilization of generating and transmission facilities. In addition to the factors discussed above, such factors include, among others, (a)effects of compliance with rapidly changing environmental, safety, licensing, regulatory and legislative requirements other than those described above, (b)changes resulting from conservation and demand-side management programs on the timing and use of electric energy, (c)changes resulting from a national energy policy, (d)effects of competition from other electric utilities (including increased competition resulting from mergers, acquisitions, and "strategic alliances" of competing electric and natural gas utilities and from competitors 28 SFI 1329861v8 transmitting less expensive electricity from much greater distances over an interconnected system) and new methods of, and new facilities for, producing low-cost electricity, (e)the proposed repeal of certain federal statutes that would have the effect of increasing the competitiveness of many IOUs, (f)increased competition from independent power producers and marketers, brokers and federal power marketing agencies, (g)"self-generation" or"distributed generation" (such as microturbines and fuel cells) by industrial and commercial customers and others, (h)issues relating to the ability to issue tax-exempt obligations, including severe restrictions on the ability to sell to nongovernmental entities electricity from generation projects and transmission service from transmission line projects financed with outstanding tax-exempt obligations, (i)effects of inflation on the operating and maintenance costs of an electric utility and its facilities,0)changes from projected future load requirements, (k)increases in costs and uncertain availability of capital, (1)shifts in the availability and relative costs of different fuels (including the cost of natural gas),(m) sudden and dramatic increases in the price of energy purchased on the open market that may occur in times of high peak demand in an area of the country experiencing such high peak demand, such as has occurred in California, (n)inadequate risk management procedures and practices with respect to, among other things, the purchase and sale of energy and transmission capacity, (o)other legislative changes, voter initiatives, referenda and statewide propositions, (p)effects of changes in the economy, (q)effects of the filing by Enron Corporation for bankruptcy protection under Chapter I I of the federal Bankruptcy Code and (r)effects of possible manipulation of electric markets. Any of these factors(as well as other factors)could have an adverse effect on the financial condition of any given electric utility and likely will affect individual utilities in different ways. The District cannot predict what effects such factors will have on the business operations and financial condition of the District, but the effects could be significant. The foregoing is a brief discussion of certain of these factors. This discussion does not purport to be comprehensive or definitive, and these matters are subject to change subsequent to the date hereof. Extensive information on the electric utility industry is, and will be, available from the legislative and regulatory bodies and other sources in the public domain, and potential purchasers of the 2003 Certificates should obtain and review such information. RATE REGULATION The District sets rates, fees and charges for electric service provided at retail within its boundaries. The authority of the District to impose and collect rates and charges for electric power and energy sold and delivered at retail within its city boundaries is not subject to the general regulatory jurisdiction of the CPUC. Currently neither the CPUC nor any other regulatory authority of the State of California nor FERC reviews such rates and charges. It is possible that future Constitutional, legislative, and/or regulatory changes could subject such rates and/or service area of the District to the jurisdiction of the CPUC or to other limitations or requirements under Federal or state law. The California Energy Commission is authorized to evaluate rate policies for electric energy as related to the goals of the Energy Resources Conservation and Development Act and to make recommendations to the Governor,the Legislature and publicly owned electric utilities. CONTINUING DISCLOSURE The District has agreed pursuant to a Continuing Disclosure Agreement, between the District and the Trustee, to provide certain financial information and operating data relating to the District by not later than six months following the end of the District's Fiscal Year, which Fiscal Year presently ends December 31 (the"Annual Report"), commencing with the Annual Report for the Fiscal Year ended December 31. 2003 (provided, however that the District will provide the audited financial statements of the District for the Fiscal Year ended December 31, 2002 within 30 business days after such audited financial statements are available), and to provide notices of the occurrence of certain enumerated events, if material, under federal securities law. The Annual Report will be filed by the Trustee, as Dissemination Agent on behalf of the District, with each nationally recognized municipal securities information repository and with the appropriate State repository, if any(collectively, the"Repositories"). The notices of material events will be filed by the Trustee,as Dissemination Agent on behalf of the District,with the Municipal Securities Rulemaking Board and the Repositories. The specific nature of the information to be contained in the Annual Report and the notices of material events are set forth in "APPENDIX F—PROPOSED FORM OF CONTINUING DISCLOSURE AGREEMENT" herein. These covenants have been made to assist the 29 Sri 1329861,8 Underwriter in complying with Rule 15c2-12 of the Securities and Exchange Commission (the "Rule"). As of the date hereof, the District has never failed to comply in any material respect with any previous undertakings with regard to the provision of annual reports or material events notices as required by the Rule. THE CORPORATION The Corporation was incorporated under the Nonprofit Public Benefit Corporation Law of the State of California. The Corporation was organized as a nonprofit corporation for the purpose,among others, of assisting the District in the acquisition, construction and financing of public improvements which are of public benefit to the District. Members of the District Board of Director serve on the Board of Directors of the Corporation. CONSTITUTIONAL LIMITATIONS ON TAXES AND APPROPRIATIONS California Constitution Article XIIIB Under Article XIIIB of the California Constitution, state and local government entities have an annual "appropriations limit" which limits their ability to spend certain moneys called"appropriations subject to limitation" (which consist of tax revenues, certain state subventions and certain other moneys). Article XIIIB does not affect the appropriations of monies which are excluded from the definition of "appropriations subject to limitation." Among the exclusions are"appropriations of any special district which existed on January 1, 1978 and which did not as of the 1977/78 fiscal year levy an ad valorem tax on property in excess of 12.5 cents per$100 of assessed value." In the opinion of the District's General Counsel, the appropriations of the District are excluded from the limitations of Article XIIIB under this clause. Constitutional Changes in California Proposition 218, a State ballot initiative known as the "Right to Vote on Taxes Act," was approved by the voters of the State of California on November 5, 1996, Proposition 218 added Articles XIIIC and XIIID to the State Constitution. Article XIIID creates additional requirements for the imposition by most local governments(including the District) of general taxes, special taxes, assessments and "property-related" fees and charges. Article XIIID explicitly exempts fees for the provision of electric service from the provisions of such article. In the opinion of the District's General Counsel, the District's electric charges, electric standby charges, connection charges and facilities fees are exempt from the provisions of Article XIIID pursuant to this provision. Article XIIIC expressly extends the people's initiative power to reduce or repeal previously authorized local taxes,assessments, and fees and charges. Since the terms"fees and charges"are not defined in Article XIIIC, the initiative powers may affect more than "property-related" fees and charges, as defined in Article XIIID. Additionally, in the case of Bock v City Council of Lompoc, 109 Cal.App.3d (1980), the Court of Appeal determined that electric rates are subject to the initiative power. Thus, even electric service charges (which are expressly exempted from the provisions of Article XIIID) might be subject to the initiative provision of Article XIIIC, thereby subjecting such fees and charges imposed by the District to reduction by the electorate. The District believes that, even if the electric rates of the District are subject to the initiative power, under Article XIIIC or otherwise,the electorate of the District would be precluded from reducing electric rates and charges in a manner adversely affecting the payment of the 2003 Certificates by virtue of the"impairments clause" of the United States and California Constitutions. TAX MATTERS 2003A Certificates In the opinion of Stradling Yocca Carlson&Rauth, a Professional Corporation, San Francisco, California, Special Counsel, based on existing statutes, regulations, rulings and judicial decisions, the portion of each Series A 30 SH 1329861,8 f F { { Installment Payment constituting interest is excluded from gross income for federal income tax purposes, and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Special Counsel, the portion of each Series A Installment Payment constituting interest is exempt from State of California personal income tax. Special Counsel notes that, with respect to corporations,the portion of each Series A Installment Payment constituting interest may be included as an adjustment in the calculation of alternative minimum taxable income which may affect the alternative minimum tax liability of such corporations. In addition, the difference between the issue price of a 2003A Certificate (the first price at which a substantial amount of the 2003A Certificates of a maturity is to be sold to the public) and the stated redemption price at maturity with respect to the 2003A Certificates constitutes original issue discount, and the amount of original issue discount that accrues to the owner of a 2003A Certificate is excluded from gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations,and is exempt from State of California personal income tax. Special Counsel's opinion as to the exclusion from gross income of the portion of each Series A Installment Payment constituting interest (and original issue discount) is based upon certain representation of fact and certifications made by the District and others and subject to the condition that the District complies with all requirements of the Internal Revenue Code of 1986, as amended (the"Code") that must be satisfied subsequent to the execution and delivery of the 2003A Certificates to assure that the portion of each Series A Installment Payment constituting interest(and original issue discount) will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause the portion of each Series A Installment Payment constituting interest (and original issue discount) to be included in gross income for federal income tax purposes retroactive to the date of execution and delivery of the 2003A Certificates. The District has covenanted to comply with all such requirements. Special Counsel's opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Special Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Trust Agreement and the Tax Certificate permit certain actions to be taken or to be omitted if a favorable opinion of Special Counsel is provided with respect thereto. Special Counsel expresses no opinion as to the exclusion from gross income of the portion of each Series A Installment Payment constituting interest (and original issue discount) for federal income tax purposes with respect to any 2003A Certificate if any such action is taken or omitted based upon the advise of counsel other than Stradling Yocca Carlson& Rauth. Although Special Counsel has rendered an opinion that the portion of the Series A Installment Payments constituting interest (and original issue discount) is excluded from gross income for federal income tax purposes provided that the District continues to comply with certain requirements of the Code, the ownership of the 2003A Certificates may otherwise affect the tax liability of certain persons. Special Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the 2003A Certificates, all potential purchasers should consult their tax advisers with respect to collateral tax consequences with respect to 2003A Certificates. In the further opinion of Special Counsel, the portion of each Series A Installment Payment due under the Installment Purchase Agreement designated as and comprising interest with respect to the 2003A Certificates is not treated as an item of tax preference in calculating the federal alternative minimum taxable income of individuals and corporations. Such portion of each Series A Installment Payment, however, is included as an adjustment in the calculation of federal corporate alternative minimum taxable income and may therefore affect a corporation's alternative minimum tax and environmental tax liabilities. Ownership of, or the receipt of interest on, tax-exempt obligations may result in collateral tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, certain foreign corporations doing business in the United States, certain S corporations with excess passive income, individual recipients of Social Security or Railroad Retirement benefits, taxpayers that may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations and taxpayers who may be eligible for the earned income tax credit. Special Counsel expresses no opinion with respect to any collateral tax consequences and, accordingly,prospective purchasers of the 2003A Certificates should consult their tax advisors as to the applicability of any collateral tax consequences. 31 SH 1129861,8 } S. 1 F Certain requirements and procedures contained or referred to in the Trust Agreement and other documents relating to the 2003A Certificates may be changed, and certain actions may be taken, under the circumstances and s subject to the terms and conditions set forth in such documents, upon the advice or with the approving opinion of counsel nationally recognized in the area of tax-exempt obligations. Special Counsel expresses no opinion as to the r exclusion of the portion of each Series A Installment Payment due under the Installment Purchase Agreement designated as and comprising interest with respect to the 2003A Certificates from gross income for federal income tax purposes on and after the date on which any such change occurs or action is taken upon the advice or approval of counsel other than Stradling Yocca Carlson&Rauth.a Professional Corporation. In the further opinion of Special Counsel, the portion of each Series A Installment Payment due under the Installment Purchase Agreement designated as and comprising interest with respect to the 2003A Certificates is exempt from personal income taxes imposed by the State of California. 2003B Certificates In the opinion of Special Counsel,based on existing statutes, regulations, rulings and judicial decisions,the portion of each Series B Installment Payment designated as and comprising interest with respect to the 2003B Certificates is exempt from personal income taxes imposed by the State of California but are not excluded from gross income for federal income tax purposes. The form of legal opinion is attached hereto as APPENDIX G. ABSENCE OF LITIGATION To the knowledge of the District, there is no controversy or litigation of any nature now pending or threatened restraining or enjoining the execution and delivery of the 2003 Certificates or in any way contesting or affecting the validity of the 2003 Certificates or any proceedings of the District or the Corporation taken with respect to the execution and delivery thereof. In addition,to the knowledge of the District, there is no litigation pending or threatened against the District or the Corporation that, in the opinion of the District's General Counsel, would materially adversely affect the Electric System or the sources of payment for the 2003 Certificates. APPROVAL OF LEGALITY The execution and delivery of the 2003 Certificates is subject to the approving opinion of Stradling Yocca Carlson& Rauth, A Professional Corporation, San Francisco, California, Special Counsel, substantially in the form set forth as Appendix G. Certain legal matters will be passed upon for the Underwriter by Sidley Austin Brown& Wood UP, Los Angeles, California, and for the District and the Corporation by Porter Simon, Truckee, California, General Counsel to the District. RATINGS Moody's Investors Service("Moody's") is expected to assign the 2003 Certificates the long-term ratings of [upon the delivery by the Insurer of a policy insuring the payment of the principal and interest represented by the 2003 Certificates when due]. The rating reflects only the views of the rating agency, and any explanation of the significance of such rating may be obtained only from such rating agency as follows: Moody's Investors Service, 99 Church Street, New York, New York 90017, The District and the Insurer furnished to the rating agency certain information and materials concerning the 2003 Certificates and themselves. Generally, rating agencies base their ratings on information and materials furnished to them and on investigations, studies and assumptions by the rating agency. There is no assurance that the rating will remain in effect for any given period of time or that it will not be revised downward or withdrawn entirely by such rating agency, if, in its judgment, circumstances so warrant. The 32 sn 13298eivs tot y District undertakes no responsibility to oppose any such revision or withdrawal, Any downward revision or withdrawal of such rating may have an adverse effect on the market price of the 2003 Certificates. 3 S 3 FINANCIAL ADVISOR } McDonald Partners (the "Financial Advisor') has assisted the District with various matters relating to the planning, structuring and delivery of the 2003 Certificates. The Financial Advisor is a financial advisory firm and is not engaged in the business of underwriting or distributing municipal securities or any other public securities. The Financial Advisor assumes no responsibility for the accuracy, completeness or fairness of this Official Statement. UNDERWRITING The Underwriter has agreed, subject to certain conditions, to purchase the 2003A Certificates at a price of $ (representing the aggregate principal amount of the 2003A Certificates plus $ original issue premium and less Underwriter's discount) and the 2003B Certificates at a price of $ (representing the aggregate principal amount of the 2003E Certificates plus$ original issue premium and less $ Underwriter's discount). The Purchase Contract for the 2003 Certificates provides that the Underwriter will purchase all the 2003 Certificates, if any are purchased. The 2003 Certificates may be offered and sold by the Underwriter to certain dealers and others at prices lower than such public offering price stated on the cover page of this Official Statement, and such public offering price may be changed, from time to time, by the Underwriter. EXECUTION AND DELIVERY The execution and delivery of this Official Statement has been duly authorized by the District. TRUCKEE-DONNER PUBLIC UTILITY DISTRICT By: General Manager 33 SH 432986M i f APPENDIX A AUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED DECEMBER 31,2001 A-I SH 1329861,8 i APPENDIX B UNAUDITED FINANCIAL STATEMENTS OF THE DISTRICT FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002 B-1 SFl 1329961,8 r x F } APPENDIX C 4 GENERAL INFORMATION: DISTRICT SERVICE AREA C-1 SH 1329861,8 APPENDIX D } a BOOK-ENTRY ONLY SYSTEM General The 2003 Certificates will be delivered in book-entry only form. DTC will act as securities depository for the 2003 Certificates. The 2003 Certificates will be issued as fully-registered certificates registered in the name of # Cede& Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered 2003 Certificate will be delivered for each maturity of each Series of the 2003 Certificates,in the aggregate principal amount of such maturity,and will be deposited with DTC. DTC is a limited purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC holds securities that its participants (the "Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations ("Direct Participants"). DTC is owned by a number of its Direct Participants and by the New York Stock Exchange,Inc., the American Stock Exchange, LLC and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly("Indirect Participants"). The Rules applicable to DTC and its Direct and Indirect Participants (collectively, "Participants") are on file with the Securities and Exchange Commission. Purchases of the 2003 Certificates under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2003 Certificates on DTC's records. The ownership interest of each actual purchaser of each 2003 Certificate (`Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the 2003 Certificates are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the 2003 Certificates, except in the event that use of the book- entry system for the 2003 Certificates is discontinued. To facilitate subsequent transfers, all 2003 Certificates deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede& Co, or such other name as may be requested by an authorized representatives of DTC. The deposit of 2003 Certificates with DTC and their registration in the name of Cede& Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the 2003 Certificates; DTC's records reflect only the identity of the Direct Participants to whose accounts such securities are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. The District, the Corporation and the Trustee will not have any responsibility or obligation to such DTC Participants or the persons for whom they act as nominees with respect to the 2003 Certificates. D-1 While the 2003 Certificates are in the book-entry-only system, prepayment and tender notices shall be sent to Cede& Co. if less than all of the 2003 Certificates are being prepaid, DTC's practice is to determine by lot the amount of the interest of each Direct DTC Participant in such issue to be prepaid. Neither DTC nor Cede&Co. (nor such other DTC nominee) will consent or vote with respect to the 2003 Certificates. Under its usual procedures, DTC will mail an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede Co.'s consenting or voting rights to those Direct Participants to whose accounts the 2003 Certificates are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal,premium, if any, and interest payments with respect to the 2003 Certificates will be made to DTC or its nominee. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the District or the Trustee, on each payment date in accordance with their respective holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on the date payable. Payments by Participants to Beneficial Owner will be governed by standing instructions and customer practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such participant and not of DTC, the Trustee,the Corporation or the District, subject to any statutory or regulatory requirements as may be in effect fiom time to time. Payment of principal and interest to DTC is the responsibility of the District or the Trustee, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the 2003 Certificates at any time by giving reasonable notice to the District or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, 2003 Certificates are required to be printed and delivered as described in the Trust Agreement. The District,the Corporation and the Trustee cannot and do not give any assurance that DTC, DTC Participants or others will distribute payments of principal,interest or any premium with respect to the 2003 Certificates paid to DTC or its nominee as the registered owner, or any prepayment or other notices, to the Beneficial Owner, or that they will do so on a timely basis or will serve and act in the manner described in this Official Statement. The District, the Corporation and the Trustee are not responsible or liable for the failure of DTC or any DTC Participant to make any payment or give any notice to a Beneficial Owner with respect to the 2003 Certificates or any error or delay relating thereto. The foregoing description of the procedures and record-keeping with respect to beneficial ownership interest in the 2003 Certificates, payment of principal, premium, if any, interest and other payments on the 2003 Certificates to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interests in such 2003 Certificates and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly,no representations can be made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be. Discontinuance of DTC Services In the event that(a) DTC determines not to continue to act as securities depository for the 2003 Certificates or(b)the District determines to remove DTC from its functions as a depository, DTC's role as securities depository for the 2003 Certificates and use of the book-entry system will be discontinued. If the District fails to select a qualified securities depository to replace DTC, the District will cause the Trustee to execute and deliver new 2003 Certificates in fully registered form in such denominations and numbered in the manner determined by the Trustee and registered in the names of such persons as are requested in a written request of the District. The Trustee shall not be required to deliver such new 2003 Certificates within a period of less than 60 days from the date of receipt of such written request of the District. Upon such registration, such persons in whose names the 2003 Certificates are registered will become the registered owners of the 2003 Certificates for all purposes. D-2 Sri 1329861,8 In the event that the book-entry system is discontinued,the following provisions would also apply: (a)2003 Certificates may be exchanged at the principal corporate trust office of the Trustee for a like aggregate principal amount of such 2003 Certificates of other authorized denominations and of the same maturity; (b)2003 Certificates may be transferred on the registration books maintained by the Trustee under the Trust Agreement for such purpose by the person in whose name it is registered, in person or by such person's duly authorized attorney,upon surrender of such 2003 Certificate for cancellation at the principal corporate trust office of the Trustee accompanied by a duly executed written instrument of transfer in a form approved by the Trustee; (c) for every exchange or transfer of 2003 Certificates, the Trustee may require the payment by any Owner requesting such transfer or exchange of any tax or other governmental charge required to be paid with respect to such exchange or registration of transfer; (d)the Trustee shall not be required to register the exchange or transfer of any 2003 Certificate within 15 days preceding the selection of 2003 Certificates for prepayment, or of any 2003 Certificate that has been selected for prepayment; (e)all interest payments on the 2003 Certificates will be made by check or draft mailed by first-class mail on each interest payment dates therefor as provided in the Trust Agreement to the respective Owners of record thereof as of the close of business on the 15"day of the calendar month preceding such interest payment date (the "Record Date"), or upon written request received by the Trustee of an Owner of at least $1,000,000 in aggregate principal amount of 2003 Certificates,by wire transfer of immediately available funds to an account in the United States; and (f)all payments of principal and any prepayment price of the 2003 Certificates, will be made upon presentation and surrender thereof at the principal corporate trust office of the Trustee. D-3 Sri I329861v8 APPENDIX E SUMMARY OF PRINCIPAL LEGAL DOCUMENTS E-1 SH 1329861,8 ................ ....... ....... APPENDIX F PROPOSED FORM OF CONTINUING DISCLOSURE AGREEMENT F-1 SH 1329861v8 APPENDIX G PROPOSED FORM OF OPINION OF SPECIAL COUNSEL G- SH 1329861,8 } APPENDIX H s i SPECIMEN MUNICIPAL BOND INSURANCE POLICY H-1 Sep iszvasi,s