5.1 ERMUSR 07-10-2018 - Laserfiche WebLink

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AUTHORITY: Statutory Authority: The Bonds are being issued pursuant to Minnesota Statutes, Chapters 453 and 475. Parity Debt: In addition to the Bonds, the Utility has three other outstanding issues payable from net revenues of its electric utility system(the"Electric System"): • Electric Revenue Refunding Bonds, Series 2014A (the "Series 2014A Bonds"), today outstanding in the aggregate principal amount of$420,000 with a final maturity of August 1, 2018 • Electric Revenue Bonds, Series 2016A (the "Series 2016A Bonds"), today outstanding in the aggregate principal amount of$9,755,000 with a final maturity of February 1, 2036 • Electric Revenue Refunding Bonds, Series 2016B (the "Series 2016B Bonds"), today outstanding in the aggregate principal amount of$930,000 with a final maturity of February 1, 2022 As of the closing of the Bonds on September 26, 2018, only the Series 2016A Bonds and the Series 2016B Bonds will be outstanding (the Series 2016A Bonds and Series 2016B Bonds are together referred to as the"Parity Bonds"). Rate Covenant: The Utility has pledged to establish user rates and charges for the Electric System so that annual net revenues shall not be less than 110%of the average annual debt service on the Bonds,the Parity Bonds and any additional parity bonds. Additional Bonds: Additional bonds may be issued on a parity of lien with the Parity Bonds so long as the net revenues of the Electric System for the audited fiscal year immediately preceding the issuance of such additional bonds are not less than 125% of the average annual principal and interest due on all outstanding parity bonds and the additional bonds to be issued, during the remaining term of the outstanding bonds. A coverage ratio of about 510% is projected based on the December31, 2017 Electric Fund audited financial statements and the projected average annual principal and interest payment on the Parity Bonds and the Bonds of$1,013,600(see table below). The issuance of additional bonds requires that the balance in the Reserve Account be adjusted to equal the Reserve Requirement, which may require additional money to be deposited into the Reserve Account from bond proceeds or any other available funds of the Utility. Debt Service Reserve Account: The Utility will maintain a Debt Service Reserve Account (the"Reserve Account") in the amount of the Reserve Requirement. "Reserve Requirement" means, as of the date of issuance of a series of bonds, an amount equal to the least of (i) 10%of the original principal amount of the outstanding bonds and Additional Bonds, or (ii)the maximum amount of principal and interest payable during the then current Fiscal Year or any future Fiscal Year on all outstanding bonds and Additional Bonds as of the date of issuance of a series of bonds, or (iii) 125%of the average annual principal and interest payable on all outstanding bonds and Additional Bonds as of the date of issuance of a series of bonds. Springsted Page 3 52