Bonneville Power Administration BPA Debt Restructuring Presentation to the Energy Northwest Board Audit, Legal, and Finance Committee March 28, 2002

Bonneville Power Administration 2 Refresher on Debt Restructuring Debt Restructuring Program resulted from the examination of Federal and non-Federal debt as single portfolio to be optimized in terms of cost and access to capital. The heart of the program is to: 1.Extend the tax-exempt Energy Northwest (ENW) debt to the period. 2.Use the cash savings from the lower ENW amortization to advance amortize Treasury bonds. 3.Issue short maturity Treasury bonds for new capital to allow advance amortization and avoid costly call premiums. The results of the program, if carried out to the maximum potential, will be to: 1.Replenish Treasury borrowing authority by up to $3.3 billion between Reduce BPA’s total interest expense by an average of over $20 million per year through 2018, a net present value savings of over $240 million (using a 6.5% discount rate).

Bonneville Power Administration 3 Program Objectives as of June, 2000 BPA is proposing to undertake a program of prudent debt management that: 1.Reduces total debt service costs of BPA and lowers rates to ratepayers, 2.Sustains delivery capability of capital programs, and 3.Allows more variable rate debt as recommended by Energy Northwest.

Bonneville Power Administration 4 Potential Program Magnitude as of June 2001 Maximum size of program is $1-2 billion, if Federal amortization opportunities are limited to Power. If Debt Optimization proceeds can be applied to Transmission amortization, the program could expand to $2- 3 billion. Given uncertainties about other sources of funding, BPA would like to preserve all cash flow opportunities in the near-term.

Bonneville Power Administration 5 Results Update Four bond sales have been completed to date. Approximately $950 million of cash flow from the Energy Northwest debt extensions to date will be used to amortize additional Federal debt. $183 million of additional Federal amortization has been made (FY 2000/01) to alleviate the pressure on borrowing authority. A public process on inter-business line transactions (“interfunctional loan”) is planned to test the use of debt extension proceeds for transmission investments, which would allow the potential of the program to increase to the $3.3 billion level.

Bonneville Power Administration 6 What We Have Achieved So Far (Dollars in Millions)

Bonneville Power Administration 7 Energy Northwest Extension - To Date BPA Capacity

Bonneville Power Administration 8 Transmission Infrastructure plan reflects an additional $775 million over BPA’s current expenditure plan of $1.3 billion. Estimated use of the new facilities is expected to be high enough to generate sufficient revenue to recover the costs without rate increase. Power Infrastructure plan reflects an additional $600 million over BPA’s current expenditure plan of $670 million. Major investment categories include generation enhancements, reliability investments and hydro optimization. Conservation and Energy Web Funding capital requirements are $300 million over currently planned FY expenditures. Infrastructure Project

Bonneville Power Administration 9 Infrastructure Has a Significant Effect on Remaining Borrowing Authority

Bonneville Power Administration 10 Effect of Debt Restructuring on Remaining Borrowing Authority Projected capital spending for FY02-12 from FY03 budget submittal and projected by staff for FY Before Debt Restructuring After Debt Restructuring

Bonneville Power Administration 11 Before Debt Optimization

Bonneville Power Administration 12 Debt Optimization To-Date

Bonneville Power Administration 13 Maximum Debt Optimization