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AND <br /> <br />2200 FIRST NATIONAL BANK BUILDING <br />332 MINNESOTA STREET <br /> <br /> SAINT PAUL, MINNESOTA 5510! <br /> TELEPHONE (612) 923-6600 <br /> FACSIMILE (61:2) 223-6450 <br /> <br />~ ~OFESSIONAL ASSOCIATION <br /> <br />October 8, 1998 <br /> <br />WRITER'S DIRECT DIAL <br /> <br /> (651) 223-6420 <br /> WRITER'S E-MAIL <br /> <br />VIA TELECOPY & U.S. MAII, <br /> <br />Bryan C. Adams, P.E. <br />General Manager <br />Elk River Municipal Utilities <br />322 King Avenue <br />Elk River, Minnesota 55330 <br /> <br />Re: Proposed ERMU/UPA Gas Turbine Project <br /> <br />Dear Bryan: <br /> <br /> You've asked me to confirm in writing some of the preliminary opinions I've expressed to <br />you by phone on this. <br /> <br /> The proposal is that United Power Association (UPA) and the Elk River Municipal Utilities <br />(ERMU), through joint and cooperative action and contractual arrangements yet to be developed, <br />would acquire a $15,000,000 gas turbine electric generator (35-45mw) which would be owned by <br />ERMU/City of Elk River and sited on its property with convenient natural gas and transmission grid <br />access. I am in receipt of a draft letter of intent prepared by UPA, dated August 5, 1998, outlining <br />other aspects of the proposed arrangement. UPA would be the agent for the acquisition of this <br />project and would provide most of the services and costs regarding its installation and operation. <br />This peak load generator would operate on a handful of occasions throughout any given year, as <br />demand requires. The benefits to ERMU include greatly enhanced capacity against the growing <br />electricity needs of the City and the uncertainties of national electricity capacity as a whole. <br /> <br /> The project would be financed by ERMU/City issuance of electric utility revenue bonds; <br />however, these bonds would not be payable from the general revenues of ERMU but solely from the <br />revenues derived by ERMU from its contract with UPA, and quite possibly a security interest in <br />and/or mortgage on the project. In other words, the primary security for payment of these revenue <br />bonds would be the creditworthiness of UPA and of its contractual promises to ERMU to pay the <br />debt service on the bonds. Based on this structure, we believe the interest on these bonds would not <br />be tax-exempt. <br /> <br />988880.1 <br /> <br /> MINNEAPOLIS OFFICE · IDS CENTER · WW~.BRIGGS.COM <br />MEMBER -- LEX MUNDI, A GLOBAL ASSOCIATION OF INDEPENDENT LAW FIRMS <br /> <br /> <br />