NEW ISSUE - BOOK-ENTRY ONLY
RATINGS: See "RATINGS" herein
In the opinion of Co-Bond Counsel, assuming compliance by OUC with certain covenants, under existing statutes, regulations and judicial decisions, the
interest on the Series 2015A Bonds will be excluded from gross income of the holders thereof for federal income tax purposes and will not be an item of tax preference
for purposes of the federal alternative minimum tax imposed on individuals and corporations. Interest on the Series 2015A Bonds will, however, be taken into account
in computing an adjustment made in determining a corporate Bondholder's adjusted current earnings for purposes of computing the alternative minimum tax on
corporations. See "TAX MATTERS" herein for a description of other tax consequences to owners of the Series 2015A Bonds.
$94,905,000
ORLANDO UTILITIES COMMISSION
UTILITY SYSTEM REVENUE BONDS,
SERIES 2015A
Dated: Date of Delivery
Due: October 1, as shown on the inside cover.
This Official Statement relates to the issuance by the Orlando Utilities Commission ("OUC") of $94,905,000 in aggregate principal amount of its Utility
System Revenue Bonds, Series 2015A (the "Series 2015A Bonds") pursuant to that certain Second Amended and Restated General Bond Resolution, adopted on
October 11, 2011, as previously amended and supplemented (the "General Bond Resolution") and particularly as supplemented by the series resolution of OUC adopted
on March 10, 2015, relating to the Series 2015A Bonds (the "Series 2015A Resolution" and together with the General Bond Resolution, the "Bond Resolution"). See
"APPENDIX B – GENERAL BOND RESOLUTION" and "APPENDIX C – SERIES 2015A RESOLUTION" attached hereto. Unless otherwise defined herein,
certain capitalized terms used in this Official Statement shall have the meanings specified in the Bond Resolution.
The Series 2015A Bonds are being issued by OUC to provide funds which will be used, together with other legally available funds, for the purpose of
(i) financing all or a portion of the cost of the Series 2015A Project (as defined herein), and (ii) paying certain costs in connection with the issuance and delivery of the
Series 2015A Bonds. See "PURPOSE OF THE SERIES 2015A BONDS," "ESTIMATED SOURCES AND USES OF FUNDS," and "ORLANDO UTILITIES
COMMISSION – Future Capital Needs" herein.
The Series 2015A Bonds are being issued as fully registered bonds, without coupons, in denominations of $5,000 or any integral multiple thereof and
initially will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"). Purchases of beneficial
ownership interests in the Series 2015A Bonds will be made in book-entry form only and purchasers of beneficial interests in the Series 2015A Bonds will not receive
physical delivery of bond certificates. See "BOOK-ENTRY ONLY SYSTEM" herein. Payments of principal of, and interest on, any Series 2015A Bond will be made
to Cede & Co., as nominee for DTC as registered owner of the Series 2015A Bonds, by The Bank of New York Mellon Trust Company, N.A., registrar and paying
agent, to be subsequently disbursed to the beneficial owners of the Series 2015A Bonds. Interest on the Series 2015A Bonds will be payable semiannually on
April 1 and October 1 of each year, commencing October 1, 2015. The Series 2015A Bonds will bear interest at the rates set forth on the inside front cover of this
Official Statement. See "DESCRIPTION OF THE SERIES 2015A BONDS – General" herein.
The Series 2015A Bonds are subject to redemption prior to maturity as set forth herein. See "DESCRIPTION OF THE SERIES 2015A BONDS –
Redemption Provisions" herein.
The Series 2015A Bonds are being issued as Bonds under the Bond Resolution, payable from and secured equally and ratably by a lien on and pledge of the
Pledged Revenues, which primarily consist of (a) Net Revenues derived by OUC from the operation of the System and (b) moneys in the funds and accounts established
under the General Bond Resolution or under a related Series Resolution, subject to the application thereof as provided in the General Bond Resolution or related Series
Resolution, on a parity with the Outstanding Bonds (as defined herein) issued or deemed issued under the General Bond Resolution and with any pari passu additional
Bonds which OUC may hereafter issue or incur under the General Bond Resolution and Parity Contract Obligations. Such lien on and pledge of the Pledged Revenues
does not constitute a lien on and pledge of the System or any part thereof or, except as described herein, upon any other property of OUC or the City of Orlando, Florida
(the "City"). See "SECURITY FOR THE SERIES 2015A BONDS" herein.
THE SERIES 2015A BONDS DO NOT AND SHALL NOT CONSTITUTE INDEBTEDNESS OF THE CITY, ORANGE COUNTY, FLORIDA
(THE "COUNTY"), OUC, THE STATE OF FLORIDA (THE "STATE") OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF
ANY CONSTITUTIONAL, STATUTORY OR CHARTER PROVISIONS OR LIMITATIONS, BUT SHALL BE PAYABLE SOLELY FROM THE
PLEDGED REVENUES ON A PARITY WITH THE OUTSTANDING BONDS ISSUED OR DEEMED ISSUED UNDER THE GENERAL BOND
RESOLUTION, ANY PARI PASSU ADDITIONAL BONDS THAT OUC MAY HEREAFTER ISSUE OR INCUR UNDER THE GENERAL BOND
RESOLUTION, AND PARITY CONTRACT OBLIGATIONS. NO HOLDER OF ANY SERIES 2015A BOND SHALL EVER HAVE THE RIGHT TO
COMPEL THE EXERCISE OF THE AD VALOREM TAXING POWER OF THE CITY, THE COUNTY, THE STATE OR ANY POLITICAL
SUBDIVISION THEREOF, OR TAXATION IN ANY FORM OR THE APPLICATION OF ANY OTHER FUNDS OF OUC OR THE CITY FOR THE
PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE SERIES 2015A BONDS OR THE MAKING OF ANY MANDATORY AMORTIZATION
PAYMENTS AND OTHER PAYMENTS PROVIDED FOR UNDER THE BOND RESOLUTION. OUC HAS NO TAXING POWER.
SEE INSIDE COVER PAGE FOR MATURITIES, INTEREST RATES, PRICES, YIELDS, AND INITIAL CUSIP NUMBERS OF THE SERIES
2015A BONDS.
This cover page contains limited information for quick reference only. It is not, and is not intended to be, a summary of the matters relating to the Series
2015A Bonds. Potential investors must read the entire Official Statement (including the cover page and all appendices attached hereto) to obtain information essential
to the making of an informed investment decision.
The Series 2015A Bonds are offered for delivery when, as and if issued by OUC and received by the Underwriter, subject to the approving opinions of
Bryant Miller Olive P.A., Orlando, Florida and Marchena & Graham, P.A., Orlando, Florida, as Co-Bond Counsel. Certain legal matters will be passed upon by the
General Counsel to OUC, W. Christopher Browder, Esquire. Certain legal matters in connection with the Series 2015A Bonds will be passed upon for OUC by
Greenberg Traurig, P.A., Orlando, Florida and Ronald C. Nesbitt, P.A., Orlando, Florida, as Co-Disclosure Counsel. Public Financial Management, Inc. is serving as
Financial Advisor to OUC. It is expected that the Series 2015A Bonds will be delivered to the Underwriter in book-entry only form through the facilities of DTC in New
York, New York, on or about April 28, 2015.
Dated: March 31, 2015
MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES, PRICES, YIELDS,
AND INITIAL CUSIP NUMBERS + OF SERIES 2015A BONDS
$94,905,000
ORLANDO UTILITIES COMMISSION
UTILITY SYSTEM REVENUE BONDS,
SERIES 2015A
+
(c)
Maturity
(October 1)
Principal
Amount
2028
2029
2030
2031
2032
2033
2034
2035
$ 7,250,000
8,050,000
8,890,000
9,770,000
10,700,000
11,670,000
18,595,000
19,980,000
Interest
Rate
5.000%
5.000
5.000
5.000
5.000
5.000
5.000
5.000
Yield
(c)
2.550%
2.630
2.700
2.760
2.810
2.850
2.890
2.920
Price
Initial CUSIP
Numbers+
121.361
120.582
119.905
119.329
118.851
118.470
118.091
117.807
686507GC2
686507GD0
686507GE8
686507GF5
686507GG3
686507GH1
686507GJ7
686507GK4
CUSIP numbers have been assigned to the Series 2015A Bonds by an organization not affiliated with OUC and
are included solely for the convenience of the owners of the Series 2015A Bonds. Neither OUC nor the
Underwriter are responsible for the selection, use or accuracy of the CUSIP numbers, nor is any representation
made with respect thereto.
Yield for all Series 2015A Bonds calculated to the first optional redemption date of April 1, 2025.
ORLANDO UTILITIES COMMISSION
100 West Anderson Street
Orlando, Florida 32802
(407) 423-9100
COMMISSION
President
First Vice President
Second Vice President
Immediate Past President
Mayor/Commissioner
Linda Ferrone
Gregory D. Lee
Maylen Dominguez
Dan Kirby, AIA, AICP
Buddy H. Dyer
MANAGEMENT
General Manager, Chief Executive Officer & Secretary
Vice President, Financial & Support Services & Chief Financial
Officer
Vice President, Office of the General Counsel & General Counsel
Vice President, Energy & Water Production
Vice President, Energy & Water Delivery
Vice President, Marketing, Communications & Community
Relations Department
Vice President, Customer & Sustainable Services Department
Vice President, Legislative, Regulatory & Compliance
Vice President, Information Technology & Chief Information
Officer
Kenneth P. Ksionek
John E. Hearn
W. Christopher Browder, Esq.
Jan C. Aspuru
Clint Bullock
Roseann E. Harrington
Byron A. Knibbs
Lee F. ("Chip") Merriam
Jerry Sullivan
FINANCIAL ADVISOR
Public Financial Management, Inc.
Orlando, Florida
CO-BOND COUNSEL
Bryant Miller Olive, P.A.
Orlando, Florida
Marchena & Graham, P.A.
Orlando, Florida
CO-DISCLOSURE COUNSEL
Greenberg Traurig, P.A.
Orlando, Florida
Ronald C. Nesbitt, P.A.
Orlando, Florida
NO DEALER, BROKER, SALESMAN OR ANY OTHER PERSON HAS BEEN
AUTHORIZED BY OUC TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION, OTHER THAN THOSE CONTAINED IN THIS OFFICIAL
STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE FOREGOING. THIS OFFICIAL STATEMENT DOES NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY THE SERIES 2015A
BONDS AND THERE SHALL BE NO OFFER, SOLICITATION OR SALE OF THE SERIES
2015A BONDS BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL
FOR SUCH PERSON TO MAKE SUCH OFFER, SOLICITATION OR SALE.
THIS OFFICIAL STATEMENT IS NOT TO BE CONSTRUED AS A CONTRACT
WITH THE PURCHASERS OF THE SERIES 2015A BONDS. STATEMENTS CONTAINED
IN THIS OFFICIAL STATEMENT WHICH INVOLVE ESTIMATES, FORECASTS OR
MATTERS OF OPINION, WHETHER OR NOT EXPRESSLY SO DESCRIBED IN THIS
OFFICIAL STATEMENT, ARE INTENDED SOLELY AS SUCH AND ARE NOT TO BE
CONSTRUED AS REPRESENTATIONS OF FACTS.
THE SERIES 2015A BONDS HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, NOR HAS THE BOND RESOLUTION BEEN QUALIFIED UNDER THE
TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON EXEMPTIONS
CONTAINED IN SUCH ACTS. THE REGISTRATION OR QUALIFICATION OF THE
SERIES 2015A BONDS IN ACCORDANCE WITH APPLICABLE PROVISIONS OF THE
SECURITIES LAWS OF THE STATES, IF ANY, IN WHICH THE SERIES 2015A BONDS
HAVE BEEN REGISTERED OR QUALIFIED, IF ANY, AND THE EXEMPTION FROM
REGISTRATION OR QUALIFICATION IN CERTAIN OTHER STATES CANNOT BE
REGARDED AS A RECOMMENDATION THEREOF. NEITHER THESE STATES NOR
ANY OF THEIR AGENCIES HAVE PASSED UPON THE MERITS OF THE SERIES 2015A
BONDS OR THE ACCURACY OR COMPLETENESS OF THIS OFFICIAL STATEMENT.
ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE.
IN CONNECTION WITH THIS OFFERING OF THE SERIES 2015A BONDS, THE
UNDERWRITER MAY OVER ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE
OR MAINTAIN THE MARKET PRICE OF THE SERIES 2015A BONDS AT A LEVEL
ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT HAS BEEN
COMPILED OR PREPARED FROM INFORMATION OBTAINED FROM OUC, PUBLICLY
AVAILABLE DOCUMENTS AND OTHER SOURCES DEEMED TO BE RELIABLE AND,
WHILE NOT GUARANTEED AS TO COMPLETENESS OR ACCURACY, IS BELIEVED
TO BE CORRECT AS OF THIS DATE. THE INFORMATION AND EXPRESSIONS OF
OPINION HEREIN ARE SUBJECT TO CHANGE WITHOUT NOTICE AND NEITHER THE
DELIVERY OF THIS OFFICIAL STATEMENT NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE THE IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE MATTERS DESCRIBED HEREIN SINCE THE DATE
HEREOF.
REFERENCES TO WEBSITE ADDRESSES PRESENTED HEREIN, INCLUDING
OUC'S WEBSITE OR ANY OTHER WEBSITE CONTAINING INFORMATION ABOUT
THE OUC, ARE FOR INFORMATIONAL PURPOSES ONLY AND MAY BE IN THE FORM
OF A HYPERLINK SOLELY FOR THE READER'S CONVENIENCE. UNLESS SPECIFIED
OTHERWISE, SUCH WEBSITES AND THE INFORMATION OR LINKS CONTAINED
THEREIN ARE NOT INCORPORATED INTO, AND ARE NOT PART OF, THIS OFFICIAL
STATEMENT FOR ANY PURPOSE INCLUDING FOR PURPOSES OF RULE 15C2-12
PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION.
THIS OFFICIAL STATEMENT IS BEING PROVIDED TO PROSPECTIVE
PURCHASERS IN EITHER BOUND OR PRINTED FORMAT ("ORIGINAL BOUND
FORMAT"), OR IN ELECTRONIC FORMAT ON THE FOLLOWING WEBSITE:
WWW.I-DEALPROSPECTUS.COM. PROSPECTIVE PURCHASERS MAY RELY ON THE
INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT IN THE ORIGINAL
BOUND FORMAT OR IN ELECTRONIC FORMAT; PROVIDED, HOWEVER, THAT
PROSPECTIVE PURCHASERS MUST READ THE ENTIRE OFFICIAL STATEMENT
(INCLUDING THE COVER PAGE AND ALL APPENDICES ATTACHED HERETO) TO
OBTAIN ALL OF THE INFORMATION ESSENTIAL TO THE MAKING OF AN
INFORMED INVESTMENT DECISION.
THE UNDERWRITERS HAVE PROVIDED THE FOLLOWING SENTENCE FOR
INCLUSION IN THIS OFFICIAL STATEMENT.
THE UNDERWRITERS HAVE
REVIEWED THE INFORMATION IN THIS OFFICIAL STATEMENT IN ACCORDANCE
WITH, AND AS PART OF, THEIR RESPONSIBILITIES TO INVESTORS UNDER
FEDERAL SECURITIES LAWS AS APPLIED TO THE FACTS AND CIRCUMSTANCES
OF THIS TRANSACTION, BUT THE UNDERWRITERS DO NOT GUARANTEE THE
ACCURACY OR COMPLETENESS OF SUCH INFORMATION.
TABLE OF CONTENTS
Page
INTRODUCTION .......................................................................................................................... 1
Orlando Utilities Commission ............................................................................................ 1
Authority for Issuance......................................................................................................... 1
Purpose of the Series 2015A Bonds.................................................................................... 2
Security for the Series 2015A Bonds .................................................................................. 2
Consent to Proposed Amendments to General Bond Resolution ....................................... 2
Description of the Series 2015A Bonds .............................................................................. 3
Continuing Disclosure ........................................................................................................ 3
Other Information ............................................................................................................... 3
PURPOSE OF THE SERIES 2015A BONDS ............................................................................... 4
ESTIMATED SOURCES AND USES OF FUNDS ...................................................................... 5
DESCRIPTION OF THE SERIES 2015A BONDS ....................................................................... 5
General ................................................................................................................................ 5
Registration and Transfer of Series 2015A Bonds ............................................................. 5
Redemption Provisions ....................................................................................................... 6
BOOK-ENTRY ONLY SYSTEM.................................................................................................. 8
SECURITY FOR THE SERIES 2015A BONDS ......................................................................... 10
General .............................................................................................................................. 10
Pledged Revenues ............................................................................................................. 12
No Pledge of Faith and Credit or Taxing Power............................................................... 13
Additional Bonds, Parity Contract Obligations and Subordinated Debt .......................... 13
Rate Covenant ................................................................................................................... 14
PROPOSED AMENDMENTS TO GENERAL BOND RESOLUTION; BONDHOLDER
CONSENT BY ACCEPTANCE .................................................................................................. 14
DEBT SERVICE REQUIREMENTS AND COVERAGE .......................................................... 17
General .............................................................................................................................. 17
Outstanding Bonds ............................................................................................................ 18
Variable Rate Debt Exposure............................................................................................ 19
Interest Rate Exchange Agreements ................................................................................. 20
Debt Service Requirements............................................................................................... 21
Debt Service Coverage ..................................................................................................... 23
ORLANDO UTILITIES COMMISSION..................................................................................... 24
General .............................................................................................................................. 24
City of Orlando, Florida and Orange County, Florida ...................................................... 24
Management and Employees ............................................................................................ 24
System Overview .............................................................................................................. 28
Future Capital Needs......................................................................................................... 28
ELECTRIC SYSTEM ................................................................................................................... 29
(i)
General .............................................................................................................................. 29
Electric Service Territory.................................................................................................. 29
Power Supply .................................................................................................................... 31
Electric Sales ..................................................................................................................... 32
Participation Agreements .................................................................................................. 32
Florida Municipal Power Pool .......................................................................................... 34
Fuel Supply ....................................................................................................................... 34
Nuclear Energy ................................................................................................................. 35
Renewable Energy Program ............................................................................................. 37
Existing Transmission Facilities ....................................................................................... 38
Reliability.......................................................................................................................... 38
Electric Rates .................................................................................................................... 41
CERTAIN FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY ........................ 43
General .............................................................................................................................. 43
Federal Initiatives under the Energy Policy Act of 1992 .................................................. 43
Energy Policy Act of 2005 ................................................................................................ 46
Florida Energy Regulation ................................................................................................ 46
Retail Wheeling ................................................................................................................ 48
OTHER REGULATORY MATTERS ......................................................................................... 49
Florida Public Service Commission.................................................................................. 49
Other Climate Change Issues ............................................................................................ 49
Future Legislation or Regulations ..................................................................................... 50
Environmental, Conservation and Other Regulations and Permitting Requirements....... 50
Nuclear Liability Insurance............................................................................................... 53
Nuclear Power Generating Industry.................................................................................. 54
WATER SYSTEM........................................................................................................................ 55
Water System .................................................................................................................... 55
Consumptive Use Permit and Other Regulation ............................................................... 55
Water Rates ....................................................................................................................... 56
CERTAIN FACTORS AFFECTING THE WATER UTILITY INDUSTRY ............................. 57
General .............................................................................................................................. 57
Environmental Requirements Affecting Water Treatment ............................................... 57
Environmental Requirements Affecting Water Supply .................................................... 58
Central Florida Water Initiative ........................................................................................ 59
OTHER OUC SERVICE DIVISIONS ......................................................................................... 60
Chilled Water Service Division ........................................................................................ 60
Lighting Services Division ............................................................................................... 60
SELECTED FINANCIAL INFORMATION ............................................................................... 61
Historical Operating Data ................................................................................................. 61
Management Discussion and Analysis of First Quarter Fiscal Year 2015 Results .......... 63
Pension Plans and Post-Employment Benefits ................................................................. 63
(ii)
Dividend Payment to City of Orlando .............................................................................. 64
Payment to Orange County ............................................................................................... 64
TREASURY POLICY .................................................................................................................. 64
Investments ....................................................................................................................... 65
Debt ................................................................................................................................... 65
Derivatives ........................................................................................................................ 65
EMERGENCY RESPONSE AND SECURITY MEASURES .................................................... 66
LITIGATION ................................................................................................................................ 66
UNDERWRITING ....................................................................................................................... 67
TAX MATTERS ........................................................................................................................... 67
General .............................................................................................................................. 67
Information Reporting and Backup Withholding ............................................................. 69
Other Tax Matters ............................................................................................................. 69
Tax Treatment of Bond Premium ..................................................................................... 69
RATINGS ..................................................................................................................................... 70
DISCLOSURE REQUIRED BY SECTION 517.051(1), FLORIDA STATUTES ..................... 70
CONTINUING DISCLOSURE .................................................................................................... 70
INDEPENDENT AUDITORS...................................................................................................... 71
FINANCIAL ADVISOR .............................................................................................................. 71
LEGAL MATTERS ...................................................................................................................... 72
CONTINGENCY OF FEES ......................................................................................................... 72
MISCELLANEOUS ..................................................................................................................... 73
AUTHORIZATION OF AND CERTIFICATION CONCERNING OFFICIAL
STATEMENT ............................................................................................................................... 74
APPENDIX A
APPENDIX B
APPENDIX C
APPENDIX D
APPENDIX E
APPENDIX F
AUDITED FINANCIAL STATEMENTS FOR FISCAL YEARS ENDED
SEPTEMBER 30, 2014 AND 2013
GENERAL BOND RESOLUTION
SERIES 2015A RESOLUTION
SUPPLEMENTAL INFORMATION REGARDING THE CITY OF
ORLANDO, FLORIDA AND ORANGE COUNTY, FLORIDA
FORM OF CONTINUING DISCLOSURE AGREEMENT
FORM OF CO-BOND COUNSEL OPINION FOR SERIES 2015A
BONDS
(iii)
OFFICIAL STATEMENT
relating to
$94,905,000
ORLANDO UTILITIES COMMISSION
UTILITY SYSTEM REVENUE BONDS,
SERIES 2015A
INTRODUCTION
The purpose of this Official Statement, which includes the cover page and the appendices
attached hereto, is to provide certain information concerning the issuance and sale by the
Orlando Utilities Commission ("OUC") of $94,905,000 in aggregate principal amount of its
Utility System Revenue Bonds, Series 2015A (the "Series 2015A Bonds").
This introduction is not a summary of this Official Statement and is intended only for
quick reference. It is only a brief description of and guide to, and is qualified in its entirety by
reference to, the more complete and detailed information contained in the entire Official
Statement, including the cover page and the appendices attached hereto, and the documents
summarized or described herein. A full review should be made of the entire Official Statement
and of the documents summarized or described herein, if necessary. The offering of the Series
2015A Bonds to potential investors is made only by means of the entire Official Statement,
including the appendices attached hereto. No person is authorized to detach this Introduction
from the Official Statement or to otherwise use it without the entire Official Statement including
the appendices attached hereto.
Orlando Utilities Commission
OUC was created pursuant Chapter 9861, Laws of Florida, Special Acts of 1923, as
amended and supplemented (the "Act"). The Act allows OUC to undertake the construction,
operation and maintenance of electric generation, transmission and distribution systems as well
as water production, transmission and distribution systems in Orange County, Florida (the
"County") and portions of Osceola County, Florida.
See "ORLANDO UTILITIES
COMMISSION" herein.
Authority for Issuance
The Series 2015A Bonds are being issued by OUC pursuant to (a) that certain Second
Amended and Restated General Bond Resolution as adopted by OUC on October 11, 2011, as
previously amended and supplemented (the "General Bond Resolution") and particularly as
supplemented by the series resolution of OUC adopted on March 10, 2015, relating to the Series
2015A Bonds (the "Series 2015A Resolution" and together with the General Bond Resolution,
the "Bond Resolution"); and (b) the Act and other applicable provisions of law. All capitalized
terms used and not otherwise defined herein shall have the meanings assigned thereto in the
Bond Resolution.
See "APPENDIX B – GENERAL BOND RESOLUTION" and
"APPENDIX C – SERIES 2015A RESOLUTION" attached hereto.
Purpose of the Series 2015A Bonds
The Series 2015A Bonds are being issued by OUC to provide funds which will be used,
together with other legally available funds, for the purpose of (i) financing all or a portion of the
cost of the Series 2015A Project (as defined herein), and (ii) paying certain costs in connection
with the issuance and delivery of the Series 2015A Bonds. See "PURPOSE OF THE SERIES
2015A BONDS," "ESTIMATED SOURCES AND USES OF FUNDS," and "ORLANDO
UTILITIES COMMISSION – Future Capital Needs" herein.
Security for the Series 2015A Bonds
The Series 2015A Bonds are being issued as Bonds under the Bond Resolution, payable
from and secured equally and ratably by a lien on and pledge of the Pledged Revenues, which
primarily consist of (a) Net Revenues derived by OUC from the operation of the System and (b)
moneys in the funds and accounts established under the General Bond Resolution or under a
related Series Resolution, subject to the application thereof as provided in the General Bond
Resolution or related Series Resolution, on a parity with the Outstanding Bonds (as defined
herein) issued or deemed issued under the General Bond Resolution and with any pari passu
additional Bonds which OUC may hereafter issue or incur under the General Bond Resolution
and Parity Contract Obligations. Such lien on and pledge of the Pledged Revenues does not
constitute a lien on and pledge of the System or any part thereof or, except as described herein,
upon any other property of OUC or the City of Orlando, Florida (the "City"). See "SECURITY
FOR THE SERIES 2015A BONDS" herein.
THE SERIES 2015A BONDS DO NOT AND SHALL NOT CONSTITUTE
INDEBTEDNESS OF THE CITY, THE COUNTY, OUC, THE STATE OF FLORIDA (THE
"STATE") OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF
ANY CONSTITUTIONAL, STATUTORY OR CHARTER PROVISIONS OR LIMITATIONS,
BUT SHALL BE PAYABLE SOLELY FROM THE PLEDGED REVENUES ON A PARITY
WITH THE OUTSTANDING BONDS ISSUED OR DEEMED ISSUED UNDER THE
GENERAL BOND RESOLUTION, ANY PARI PASSU ADDITIONAL BONDS THAT OUC
MAY HEREAFTER ISSUE OR INCUR UNDER THE GENERAL BOND RESOLUTION,
AND PARITY CONTRACT OBLIGATIONS. NO HOLDER OF ANY SERIES 2015A BOND
SHALL EVER HAVE THE RIGHT TO COMPEL THE EXERCISE OF THE AD VALOREM
TAXING POWER OF THE CITY, THE COUNTY, THE STATE OR ANY POLITICAL
SUBDIVISION THEREOF, OR TAXATION IN ANY FORM OR THE APPLICATION OF
ANY OTHER FUNDS OF OUC OR THE CITY FOR THE PAYMENT OF THE PRINCIPAL
OF OR INTEREST ON THE SERIES 2015A BONDS OR THE MAKING OF ANY
MANDATORY AMORTIZATION PAYMENTS AND OTHER PAYMENTS PROVIDED
FOR UNDER THE BOND RESOLUTION. OUC HAS NO TAXING POWER.
Consent to Proposed Amendments to General Bond Resolution
By acceptance of a Series 2015A Bond, the Holder thereof will be deemed to have
consented to certain amendments to the General Bond Resolution. See "PROPOSED
AMENDMENTS TO GENERAL BOND RESOLUTION; BONDHOLDER CONSENT BY
ACCEPTANCE" herein for a discussion of additional proposed amendments to the General
2
Bond Resolution that require the written consent of Holders of not less than 51% in principal
amount of Bonds of each Series so affected and then Outstanding to become effective.
Description of the Series 2015A Bonds
The Series 2015A Bonds are being issued as fully registered bonds, without coupons, in
denominations of $5,000 or any integral multiple thereof and initially will be registered in the
name of Cede & Co., as nominee of The Depository Trust Company, New York, New York
("DTC"). Purchases of beneficial ownership interests in the Series 2015A Bonds will be made in
book-entry form only and purchasers of beneficial interests in the Series 2015A Bonds will not
receive physical delivery of bond certificates. See "BOOK-ENTRY ONLY SYSTEM" herein.
Payments of principal of, and interest on, any Series 2015A Bond will be made to Cede & Co.,
as nominee for DTC as registered owner of the Series 2015A Bonds, by The Bank of New York
Mellon Trust Company, N.A., registrar and paying agent (the "Registrar" or "Paying Agent"), to
be subsequently disbursed to the Beneficial Owners (as defined herein). Interest on the Series
2015A Bonds will be payable semiannually on April 1 and October 1 of each year, commencing
October 1, 2015. The Series 2015A Bonds will bear interest at the rates set forth on the inside
front cover of this Official Statement and are subject to optional and mandatory redemption prior
to maturity as set forth herein. See "DESCRIPTION OF THE SERIES 2015A BONDS –
General" herein.
Continuing Disclosure
In order to assist the Underwriter (as defined herein) in complying with Rule
15c2-12(b)(5) of the Securities and Exchange Commission ("SEC") promulgated pursuant to the
Securities Exchange Act of 1934, as in effect on the date hereof (the "Rule"), simultaneously
with the issuance of the Series 2015A Bonds, OUC will enter into a Continuing Disclosure
Agreement (the "Continuing Disclosure Agreement"). See "CONTINUING DISCLOSURE"
herein and "APPENDIX E – FORM OF CONTINUING DISCLOSURE AGREEMENT"
attached hereto for more information regarding the Continuing Disclosure Agreement and the
information to be provided.
Other Information
This Official Statement speaks only as of its date, and the information contained herein is
subject to change. This Official Statement contains brief descriptions of, among other matters,
OUC, the System, the Series 2015A Bonds, and the security and sources of payment for the
Series 2015A Bonds. The General Bond Resolution, the Series 2015A Resolution and the
Continuing Disclosure Agreement are attached as appendices hereto. References herein to the
Series 2015A Bonds are qualified in their entirety to the form thereof included in the Series
2015A Resolution. Summaries of the Act and various constitutional provisions, statutes, and
other documents are intended as summaries only and are qualified in their entirety by reference
to such documents. To the extent not provided as an appendix hereto, copies of the Act and other
documents referred to herein may be obtained upon written request and payment of any
applicable charge for copying, mailing and handling, from the Office of the Chief Financial
Officer, 100 West Anderson Street, Orlando, Florida 32802.
3
PURPOSE OF THE SERIES 2015A BONDS
The Series 2015A Bonds are being issued by OUC to provide funds which will be used,
together with other legally available funds, for the purpose of (i) financing all or a portion of the
cost of the Series 2015A Project (as defined herein), and (ii) paying certain costs in connection
with the issuance and delivery of the Series 2015A Bonds.
The "Series 2015A Project" is comprised of board approved capital projects for the
System in conjunction with OUC's 2015 Five-Year Capital Plan (as defined herein), including
reimbursing certain prior expenditures with respect thereto. A portion of the proceeds of the
Series 2015A Bonds will be deposited into the Series 2015A Account of the Construction Fund
and applied by OUC, in accordance with the provisions of the Bond Resolution, to fund the
Series 2015A Project. See "ESTIMATED SOURCES AND USES OF FUNDS," and
"ORLANDO UTILITIES COMMISSION – Future Capital Needs" herein for more information
regarding the 2015 Five-Year Capital Plan.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
4
ESTIMATED SOURCES AND USES OF FUNDS
below:
The proceeds of the Series 2015A Bonds and the estimated uses of such funds are shown
SOURCES:
Principal Amount of Series 2015A Bonds
Plus Bond Premium
TOTAL SOURCES
$ 94,905,000.00
17,957,887.35
$112,862,887.35
USES:
Deposit to Construction Fund
Costs of Issuance(1)
Underwriter's Discount
TOTAL USES
$112,100,138.81
475,000.00
287,748.54
$112,862,887.35
_______________________________________________________
(1)
Includes, among other things, legal, financial and administrative expenses and other consultant fees, initial
fees of the Registrar and Paying Agent, rating agency fees, printing costs and other miscellaneous fees and
costs.
DESCRIPTION OF THE SERIES 2015A BONDS
General
The Series 2015A Bonds are issuable as fully registered bonds in denominations of
$5,000 or any integral multiple thereof. The Series 2015A Bonds will be dated the date of their
delivery, shall mature on October 1 in the years and in the amounts, and shall bear interest,
payable on April 1 and October 1 of each year, commencing October 1, 2015, from their dated
date to their maturity date at the rates per annum, set forth on the inside cover page of this
Official Statement, subject to redemption as set forth below.
The Series 2015A Bonds will initially be issued in fully registered form in denominations
equal to the principal amount of each maturity shown on the inside cover page in book-entry
only form as described herein under "BOOK-ENTRY ONLY SYSTEM." So long as
Cede & Co., as nominee of DTC, is the registered owner of the Series 2015A Bonds, references
herein to the owners or holders of the Series 2015A Bonds (other than such references under the
caption "TAX MATTERS" herein) shall mean Cede & Co. and shall not mean the Beneficial
Owners.
Registration and Transfer of Series 2015A Bonds
The Registrar will keep books for the registration of and for the registration of transfers
of the Series 2015A Bonds. The registration of the Series 2015A Bonds may be transferred upon
the registration books by delivery to the principal corporate trust office of the Registrar,
accompanied by a written instrument or instruments of transfer in form and with guaranty of
signature satisfactory to the Registrar, duly executed by the Registered Holder or by his
attorney-in-fact or legal representative, containing written instructions as to the details of transfer
5
of such Series 2015A Bonds, along with the social security number or federal employer
identification number of such transferee. In all cases of a transfer of a Series 2015A Bond, the
Registrar will at the earliest practical time in accordance with the provisions of the Series 2015A
Resolution enter the transfer of ownership in the registration books and (unless uncertificated
registration will be requested and OUC has a registration system that will accommodate
uncertificated registration) will deliver in the name of the new transferee or transferees a new
fully registered Series 2015A Bond or Series 2015A Bonds of the same series, maturity and
interest rate and of Authorized Denominations, for the same aggregate principal amount and
payable from the same sources of funds.
Neither OUC nor the Registrar will be required to register the transfer of any Series
2015A Bond during the 25 days next preceding an interest payment date on the Series 2015A
Bonds or, in the case of any proposed redemption of Series 2015A Bonds, after such Series
2015A Bonds or any portion thereof has been selected for redemption. OUC and the Registrar
may charge the owner of such Series 2015A Bond for the registration of every such transfer of a
Series 2015A Bond an amount sufficient to reimburse them for any tax, fee or any other
governmental charge required (other than by OUC) to be paid with respect to the registration of
such transfer, and may require that such amounts be paid before any such new Series 2015A
Bond will be delivered. All Series 2015A Bonds surrendered in any such exchange or
registration of transfer will be canceled by the Registrar.
Redemption Provisions
Optional Redemption
The Series 2015A Bonds may be redeemed prior to their maturity, at the option of OUC,
on any date on or after April 1, 2025, in whole or in part, from time to time, in the order of
maturity determined by OUC, and by lot or as OUC may determine within a maturity if less than
all, at a redemption price of 100% of the principal amount of the Series 2015A Bonds to be
redeemed, plus accrued interest to the redemption date.
Redemption in Part
In the event of redemption of less than all of the Series 2015A Bonds, OUC may
designate the order and maturity of the Series 2015A Bonds or portions thereof to be redeemed
and such Series 2015A Bonds shall thereafter be selected by the Paying Agent by lot within a
maturity (and OUC may, in its discretion, treat Amortization Installments as a maturity), in such
manner as the Paying Agent in its discretion may determine; provided, however, that the Series
2015A Bonds to be redeemed shall be in Authorized Denominations. New Series 2015A Bonds
of the same Series representing the unredeemed balance of the principal amount of any partially
redeemed Series 2015A Bonds, and bearing the same interest rate and maturity shall be issued to
the Holders thereof, without charge therefor. Any new Series 2015A Bond issued pursuant to
the Bond Resolution shall be executed by OUC and authenticated by the Paying Agent and shall
be in any Authorized Denominations in an aggregate unpaid principal amount equal to the
unredeemed portion of such Series 2015A Bond surrendered.
6
Notice of Redemption
Unless waived by any Holder of Series 2015A Bonds to be redeemed, official notice of
any such redemption shall be given by the Paying Agent on behalf of OUC by mailing a copy of
an official redemption notice by first class mail, at least 20 days prior to the Redemption Date for
Series 2015A Bonds, to each Holder of the Series 2015A Bonds to be redeemed at the address
shown on the bond registration books. Any notice mailed as provided in this manner shall be
conclusively presumed to have been duly given and shall become effective upon mailing,
whether or not any Holder receives such notice.
All official notices of redemption shall be dated and shall state: (A) the Redemption
Date; (B) the Redemption Price; (C) the principal amount (and, in the case of partial redemption,
the respective principal amounts, identification numbers, maturity date and subseries) of the
Series 2015A Bonds to be redeemed; (D) that on the Redemption Date the Redemption Price,
with accrued interest to the Redemption Date, will become due and payable upon each such
Series 2015A Bond or portion thereof called for redemption, and that interest thereon shall cease
to accrue from and after said date; and (E) the place where the Series 2015A Bonds to be
redeemed are to be surrendered for payment of the Redemption Price, which place of payment
shall be the designated payment office of the Paying Agent.
The failure of any Holder of Series 2015A Bonds to receive such notice, or any defect
therein, shall not affect the validity of any proceedings for the redemption of any Series 2015A
Bonds.
So long as DTC is the registered owner of all of the Series 2015A Bonds, the Paying
Agent shall provide the notices specified above only to DTC and shall post such notices on the
Municipal Securities Rulemaking Board's Electronic Municipal Market Access system
("EMMA") or any successor information repository authorized to serve in that capacity by the
Securities and Exchange Commission, provided that the failure to provide such notices shall not
affect the validity of any proceedings for the redemption of the Series 2015A Bonds. It is
expected that DTC shall, in turn, notify its participants and that the participants, in turn, will
notify or cause to be notified the beneficial owners. Any failure on the part of DTC or a
participant or a nominee of a beneficial owner of a Series 2015A Bond to notify the beneficial
owner of the Series 2015A Bond so affected, shall not affect the validity of the redemption of
such Series 2015A Bond.
Conditional Notice of Redemption Permitted
Any notice of optional redemption may state that it is conditional upon receipt by the
Paying Agent of moneys sufficient to pay the Redemption Price, plus interest accrued to the
Redemption Date, or upon the satisfaction of any other condition, or that it may be rescinded
upon the occurrence or non-occurrence of any other event, and any conditional notice so given
may be rescinded by OUC at any time before payment of such Redemption Price and accrued
interest if any such condition so specified is not satisfied or if any such other event occurs and
the failure of OUC to provide such funds, in whole or in part, by the Redemption Date, or to
meet any other such conditions shall not be an event of default under the Bond Resolution.
Notice of such rescission shall be given by the Paying Agent to affected Holders of Series 2015A
7
Bonds as promptly as practicable upon the failure of such condition or the occurrence of such
other event.
BOOK-ENTRY ONLY SYSTEM
THE INFORMATION IN THIS SECTION CONCERNING DTC AND DTC's BOOKENTRY SYSTEM HAS BEEN OBTAINED FROM SOURCES THAT OUC BELIEVES TO
BE RELIABLE, BUT OUC TAKES NO RESPONSIBILITY FOR THE ACCURACY
THEREOF.
DTC will act as securities depository for the Series 2015A Bonds. The Series 2015A
Bonds will be issued as fully registered securities 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 Series 2015A Bond certificate will be issued for each maturity of the
Series 2015A Bonds, each in the aggregate principal amount of such maturity, and will be
deposited with DTC.
DTC, the world's largest securities depository, 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.
DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non U.S. equity
issues, corporate and municipal debt issues, and money market instruments (from over 100
countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates
the post trade settlement among Direct Participants of sales and other securities transactions in
deposited securities, through electronic computerized book-entry transfers and pledges between
Direct Participants' accounts. This eliminates the need for physical movement of securities
certificates. Direct Participants include both U.S. and non U.S. securities brokers and dealers,
banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly
owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the
holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing
Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its
regulated subsidiaries. Access to the DTC system is also available to others such as both U.S.
and non U.S. securities brokers and dealers, banks, trust companies, and clearing corporations
that clear through or maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). DTC has a Standard & Poor's rating of AA+. The DTC
Rules applicable to its Participants are on file with the Securities and Exchange Commission.
More information about DTC can be found at www.dtcc.com.
Purchases of Series 2015A Bonds under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Series 2015A Bonds on DTC's records.
The ownership interest of each actual purchaser of each Series 2015A Bond ("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. Beneficial Owners
are, however, expected to receive written confirmations providing details of the transaction, as
8
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
Series 2015A Bonds are to be accomplished by entries made on the books of Direct and Indirect
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in Series 2015A Bonds, except in the event that
use of the book-entry system for the Series 2015A Bonds is discontinued.
To facilitate subsequent transfers, all Series 2015A Bonds deposited by Direct
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 representative of DTC. The deposit of the
Series 2015A Bonds with DTC and their registration in the name of Cede & Co. or such other
DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the
actual Beneficial Owners; DTC's records reflect only the identity of the Direct Participants to
whose accounts such Series 2015A Bonds are credited, which may or may not be the Beneficial
Owners. The Direct and Indirect 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. Beneficial Owners may wish to
take certain steps to augment the transmission to them of notices of significant events with
respect to the Series 2015A Bonds, such as redemptions, defaults, and proposed amendments to
the Bond Resolution. For example, Beneficial Owners may wish to ascertain that the nominee
holding the Series 2015A Bonds for their benefit has agreed to obtain and transmit notices to
Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and
addresses to the Registrar and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Series 2015A Bonds
within an issue are being redeemed, DTC's practice is to determine by lot the amount of the
interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with
respect to the Series 2015A Bonds unless authorized by a Direct Participant in accordance with
DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to OUC 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 Series 2015A Bonds are credited on
the record date (identified in a listing attached to the Omnibus Proxy).
Payment of the principal of, redemption premium, if any, and interest on the Series
2015A Bonds will be made to Cede & Co., or such other nominee as may be requested by an
authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon
DTC's receipt of funds and corresponding detail information from OUC or the Paying Agent, on
the payable date in accordance with their respective holdings shown on DTC's records.
Payments by Participants to Beneficial Owners will be governed by standing instructions and
customary 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
9
DTC, the Paying Agent or OUC, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of the principal of, redemption premium, if any, and interest
on the Series 2015A Bonds to Cede & Co. (or such other nominee as may be requested by an
authorized representative of DTC) is the responsibility of OUC and/or the Paying Agent,
disbursement of such payments to Direct Participants will be the responsibility of DTC, and
disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and
Indirect Participants.
DTC may discontinue providing its services as depository with respect to the Series
2015A Bonds at any time by giving reasonable notice to OUC and/or the Paying Agent. Under
such circumstances, in the event that a successor depository is not obtained, Series 2015A Bond
certificates are required to be printed and delivered.
OUC may decide to discontinue use of the system of book-entry-only transfers through
DTC (or a successor securities depository). In that event, certificates for Series 2015A Bonds
will be printed and delivered to DTC.
NEITHER OUC NOR THE REGISTRAR OR PAYING AGENT WILL HAVE
ANY RESPONSIBILITY OR OBLIGATION TO ANY DTC PARTICIPANT, TO ANY
BENEFICIAL OWNER, OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES
WITH RESPECT TO THE SERIES 2015A BONDS IN RESPECT OF THE ACCURACY
OF ANY RECORDS MAINTAINED BY DTC OR ANY DTC PARTICIPANT, THE
PAYMENT BY DTC OR ANY DTC PARTICIPANT OF ANY AMOUNT IN RESPECT
OF THE PRINCIPAL OF OR INTEREST ON THE SERIES 2015A BONDS, ANY
NOTICE WHICH IS PERMITTED OR REQUIRED TO BE GIVEN TO HOLDERS OF
SERIES 2015A BONDS UNDER THE BOND RESOLUTION, THE SELECTION BY
DTC OR ANY DTC PARTICIPANT OR ANY PERSON TO RECEIVE PAYMENT IN
THE EVENT OF A PARTIAL REDEMPTION OF THE SERIES 2015A BONDS, OR
ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS BONDHOLDER.
SECURITY FOR THE SERIES 2015A BONDS
General
The information provided in this section, "SECURITY FOR THE SERIES 2015A
BONDS," is a brief description of the security and sources of payment of the Series 2015A
Bonds and certain other provisions of the General Bond Resolution and the Series 2015A
Resolution. The description provided herein is qualified in its entirety by reference to the
provisions of the Bond Resolution. See "APPENDIX B – GENERAL BOND RESOLUTION"
and "APPENDIX C – SERIES 2015A RESOLUTION" attached hereto.
The following are certain definitions of terms used herein relevant to the security and
sources of payment of the Series 2015A Bonds and certain other provisions of the Bond
Resolution.
"Cost of Operation and Maintenance" means the current expenses, paid or accrued, of
operation, maintenance and ordinary current repairs of the System and its facilities and shall
10
include, without limiting the generality of the foregoing, insurance premiums, administrative
expenses of OUC relating solely to the System (including any payments made pursuant to
Supply/Service Obligations, other than any such contract or portion thereof that is designated by
OUC in accordance with the General Bond Resolution as either a Subordinated Contract
Obligation or a Parity Contract Obligation) and such other reasonable current expenses related to
the System. "Cost of Operation and Maintenance" of the System shall not include any expenses
or allowances for decommissioning costs of any portion of any nuclear power plant not
otherwise provided for, any reserves for renewals and replacements, extraordinary repairs, any
allowance for renewals, replacements, depreciation and amortization or Transfers to
Governmental Units. To the extent not specifically addressed above, "Cost of Operation and
Maintenance" shall be calculated in accordance with generally accepted accounting principles
unless such principles conflict with the requirements of any regulatory agency having
jurisdiction over OUC, in which case the requirements of the latter may prevail.
"Debt Service Requirement" means for any Bond Year, at any time, the amount required
to be used each Bond Year to pay principal, interest and redemption premium, if any, on the
Bonds and including, without double counting, any parity Reimbursement Obligations and any
payment obligations on any Parity Contract Obligations, as provided in the General Bond
Resolution, subject, however, to more specific assumptions set forth in the General Bond
Resolution for calculating the Debt Service Requirement with respect to Designated Maturity
Obligations, Variable Rate Bonds, Option Bonds, Commercial Paper Obligations and amounts
payable on a Capital Appreciation Bond.
"Gross Revenues" or "Revenues" means (i) all revenues, income, and rents by OUC from
or attributable to the ownership and operation of the System, including Connection Charges and
including all revenues attributable to the System or to the payment of the costs thereof received
by OUC under any contract for the sale of power, water, energy, transmission or other service
from the System or any part thereof or any contractual arrangement with respect to the use of the
System or any portion thereof or the services, output or capacity thereof, (ii) the proceeds of any
insurance covering business interruption loss relating to the System, (iii) interest received on any
moneys or securities held pursuant to the Bond Resolution and paid or required to be paid into
the Revenue Fund, and (iv) Qualified Hedge Receipts. "Gross Revenues" or "Revenues" shall
not include Contributions in Aid of Construction, or impact fees or any revenues from a
Separately Financed Project.
OUC may pledge Contributions in Aid of Construction or impact fees to any Series of
Bonds but has not elected to do so with respect to the Series 2015A Bonds.
"Net Revenues" means Revenues remaining after the deduction of the Cost of Operation
and Maintenance (including without limitation the cost of any Supply/Service Obligations, other
than any such contract or portion thereof that is designated by OUC as either a Subordinated
Contract Obligation or a Parity Contract Obligation in accordance with the General Bond
Resolution.
"Parity Contract Obligation" means any Supply/Service Obligations, Capital Leases or
Qualified Agreements (i) to the extent OUC has secured such obligation with a lien on or
security interest in Revenues and (ii) to the extent such obligation is not designated as a
11
Subordinate Contract Obligation or is not payable as a Cost of Operation and Maintenance
pursuant to Section 5.5 of the General Bond Resolution. Parity Contract Obligation with respect
to a Qualified Agreement shall include those obligations described in Section 5.7 of the General
Bond Resolution and shall include Qualified Hedge Payments. Parity Contract Obligation shall
also include Guaranteed Debt; provided, however, that for purposes of the definition of "Debt
Service Requirement," Parity Contract Obligation with respect to Guaranteed Debt shall only
include Exposure on Guaranteed Debt.
"Pledged Revenues" means: (a) the proceeds of the sale of any Series of Bonds, subject to
application thereof as provided in the Bond Resolution, (b) moneys in all funds and accounts
established under the Bond Resolution, subject to application thereof as provided in the General
Bond Resolution or the applicable Series Resolution, and (c) the Net Revenues of the System.
"Supply/Service Obligation" means any obligation of OUC and designated as a
Supply/Service Obligation under a contract to make payments for fuel, power, energy, water or
other services or products whether or not such fuel, power, energy, water or other services or
products are made available to or for the benefit of OUC, or swaps, options and other derivatives
entered into for the purpose of mitigating pricing volatility and risk with respect to such supplies
or services.
Pledged Revenues
The Series 2015A Bonds are being issued as Bonds under the Bond Resolution, payable
from and secured equally and ratably by a lien on and pledge of the Pledged Revenues, on a
parity with the Outstanding Bonds issued or deemed issued under the General Bond Resolution
and with any pari passu additional Bonds which OUC may hereafter issue or incur under the
General Bond Resolution and Parity Contract Obligations. The pledge of the Pledged
Revenues does not constitute a lien upon the System or any part thereof or any other
property of OUC, the City, the County, the State or any political subdivision thereof.
As of the date hereof, other than the payment due under its outstanding interest rate
exchange agreements (excluding termination payments, collateral posting requirements and
fees), OUC does not have any Parity Contract Obligations outstanding. Parity Contract
Obligations are secured by a lien on and pledge of the Net Revenues on a parity with that granted
to the Holders of the Outstanding Bonds under the General Bond Resolution. See "DEBT
SERVICE REQUIREMENTS AND COVERAGE — Interest Rate Exchange Agreements"
herein for a discussion of the parity lien on the Pledged Revenues securing OUC's obligations to
its counterparties under outstanding interest rate exchange agreements. OUC's obligations under
its fuel related derivatives are treated as a Cost of Operation and Maintenance. See Note M in
"APPENDIX A – AUDITED FINANCIAL STATEMENTS FOR FISCAL YEARS ENDED
SEPTEMBER 30, 2014 AND 2013" attached hereto.
The Bond Resolution provides that the provisions thereof and of the Series 2015A Bonds
shall be deemed to be and constitute a contract with Holders of the Series 2015A Bonds and in
accordance with and subject to the limitations contained in the Bond Resolution, the Holders of
the Series 2015A Bonds or any trustee acting for such Holders may, either at law or in equity, by
mandamus or otherwise seek to enforce the payment of principal of, premium, if any, and
12
interest on the Series 2015A Bonds or to remedy any Event of Default. The enforcement of such
remedies may not be readily available or may be limited. See "ENFORCEABILITY OF
REMEDIES" herein.
No Pledge of Faith and Credit or Taxing Power
THE SERIES 2015A BONDS DO NOT AND SHALL NOT CONSTITUTE
INDEBTEDNESS OF THE CITY, THE COUNTY, OUC, THE STATE OR ANY POLITICAL
SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL,
STATUTORY OR CHARTER PROVISIONS OR LIMITATIONS, BUT SHALL BE
PAYABLE SOLELY FROM THE PLEDGED REVENUES ON A PARITY WITH THE
OUTSTANDING BONDS ISSUED OR DEEMED ISSUED UNDER THE GENERAL BOND
RESOLUTION, ANY PARI PASSU ADDITIONAL BONDS THAT OUC MAY HEREAFTER
ISSUE OR INCUR UNDER THE GENERAL BOND RESOLUTION, AND PARITY
CONTRACT OBLIGATIONS. NO HOLDER OF ANY SERIES 2015A BOND SHALL EVER
HAVE THE RIGHT TO COMPEL THE EXERCISE OF THE AD VALOREM TAXING
POWER OF THE CITY, THE COUNTY, THE STATE OR ANY POLITICAL SUBDIVISION
THEREOF, OR TAXATION IN ANY FORM OR THE APPLICATION OF ANY OTHER
FUNDS OF OUC OR THE CITY FOR THE PAYMENT OF THE PRINCIPAL OF OR
INTEREST ON THE SERIES 2015A BONDS OR THE MAKING OF ANY MANDATORY
AMORTIZATION PAYMENTS AND OTHER PAYMENTS PROVIDED FOR UNDER THE
BOND RESOLUTION. OUC HAS NO TAXING POWER.
Additional Bonds, Parity Contract Obligations and Subordinated Debt
Subject and pursuant to the provisions of the General Bond Resolution, OUC is
authorized to issue various series of additional Bonds, for purposes of paying all or a part of
Project Costs or refunding any or all Refunded Bonds, or enter into Parity Contract Obligations
in accordance with the terms, conditions and limitations set forth in the General Bond
Resolution, which Bonds and Parity Contract Obligations shall be of equal rank and without
preference, priority or distinction over any other Bonds or Parity Contract Obligations as to their
lien on Net Revenues, except as expressly provided therein.
To issue additional Bonds or enter into Parity Contract Obligations, OUC may not be in
default under the Bond Resolution unless such default will be cured through the application of
the proceeds of such additional Bonds. In addition, unless such additional Bonds are refunding
bonds, OUC must obtain a certificate from certain of its officers certifying that OUC has been in
compliance with the requirements of the rate covenant set forth in the General Bond Resolution
(and described below under " – Rate Covenant") during any 12 of the 24 months immediately
preceding the issuance of such Additional Bonds or the incurrence of such Parity Contract
Obligations, and setting forth their belief that the issuance of such additional Bonds or the
incurrence of such Parity Contract Obligations will not adversely affect OUC's ability to comply
with such rate covenant. See "APPENDIX B – GENERAL BOND RESOLUTION" attached
hereto.
OUC may also issue Subordinated Debt under the General Bond Resolution for any
lawful purpose, payable out of, and which may be secured by a security interest in and pledge
13
and assignment of the Pledged Revenues, as may from time to time be available for the purpose
of payment thereof; provided, however, that any security interest and pledge and assignment
shall be, and shall be expressed to be, subordinate in all respects to the security interest in and
pledge and assignment of the Pledged Revenues set forth under the General Bond Resolution as
security for the Series 2015A Bonds, the Outstanding Bonds and Parity Contract Obligations.
See "APPENDIX B – GENERAL BOND RESOLUTION" attached hereto.
OUC may consider additional financings for future capital projects. See "ORLANDO
UTILITIES COMMISSION — Future Capital Needs."
Rate Covenant
The General Bond Resolution requires OUC to fix, establish and maintain such rates,
tolls, rents and other fees and charges for the use of the System and revise the same from time to
time as will always provide (i) Net Revenues (without taking into account Qualified Hedge
Receipts) in each Fiscal Year sufficient to pay 100% of the total Debt Service Requirement on all
Outstanding Bonds and Parity Contract Obligations or (ii) Net Revenues (without taking into
account Qualified Hedge Receipts) in each Fiscal Year, together with Available Funds, sufficient
to pay 125% of the total Debt Service Requirement on all Outstanding Bonds. The General
Bond Resolution also requires that Net Revenues in each Fiscal Year will be adequate to pay
100% of all payments and allocations and applications of Revenues required by the General
Bond Resolution or pursuant to a Series Resolution including payments to be made on
Subordinate Debt. See "APPENDIX B – GENERAL BOND RESOLUTION" attached hereto.
PROPOSED AMENDMENTS TO GENERAL BOND RESOLUTION; BONDHOLDER
CONSENT BY ACCEPTANCE
On December 8, 2009, pursuant to the provisions of Sections 12.1(i) and 12.2 of the
General Bond Resolution, OUC adopted a resolution to amend Sections 2.1 and 12.1(k) of the
General Bond Resolution as follows, such amendments to become effective only upon the
written consent of Holders of not less than 51% in aggregate principal amount of all affected
Series of Outstanding Bonds, it being the intent of OUC, following the effective date of such
amendments, to include in the calculation of Debt Service Requirement only that portion of
interest on Direct Subsidy Bonds that are not reimbursed by Direct Pay Subsidies, in each case as
those terms are defined below:
(a)
To amend Section 2.1 of the General Bond Resolution by adding the
following new definitions in the applicable alphabetical order:
"Direct Subsidy Bonds" shall mean any Series of Bonds designated
by OUC as "Build America Bonds" under and pursuant to the authority
provided for in the American Recovery and Reinvestment Act of 2009,
enacted on February 17, 2009, and in accordance with the guidance
included in the Internal Revenue Service's Notice 2009-26, published on
April 3, 2009, as that act and implementing regulations may be extended
and expanded from time to time.
14
"Direct Pay Subsidies" shall mean payments received by OUC
from the United States Treasury or the Internal Revenue Service with
respect to Direct Subsidy Bonds pursuant to Section 54AA or 6431 of the
Code (as such Sections were added by Section 1531 of the Recovery Act),
as such Sections may be expanded or modified from time to time.
(b)
To amend the definition of "Gross Revenues" or "Revenues" contained in
Section 2.1 of the General Bond Resolution by adding the following sentence at the end
thereof:
Notwithstanding the foregoing, unless specifically pledged by
OUC as security for all Outstanding Bonds, "Gross Revenues" shall not
include (i) Direct Pay Subsidies, the proceeds of which have been
expressly pledged in the applicable Series Resolution of OUC to the
Direct Subsidy Bonds to which they pertain and (ii) any other subsidy,
incentives or rebate payments from the United States Treasury, the
Department of Energy, or other governmental entities related to renewable
energy programs, carbon emission reduction programs or (iii) any other
payments, receipts or credits under so called "cap and trade" legislation, or
any other environmental attributes (as those terms may be defined from
time to time under any applicable federal or state law, rule or regulation or
by any market or otherwise).
(c)
To amend the definition of "Debt Service Requirement" contained in
Section 2.1 of the General Bond Resolution by adding the following sentence at the end
thereof:
Notwithstanding the foregoing, interest on Direct Subsidy Bonds
shall be included in the Debt Service Requirement only on a net basis,
after taking into account Direct Pay Subsidies expected to be received on
such Direct Subsidy Bonds on each respective interest payment date.
(d)
To amend Section 12.1(k) of the General Bond Resolution in its entirety to
read as follows:
(k)
To make any other changes or modifications to or to
otherwise amend or supplement this Resolution in any manner that, in the
reasonable judgment of OUC in consultation with its financial advisors
and Bond Counsel, do not materially adversely affect the interests or rights
of any of the Holders of the Bonds issued pursuant to the terms hereof and
then Outstanding.
The above-described amendments to the General Bond Resolution are not yet effective.
BY ACCEPTANCE OF A SERIES 2015A BOND, THE HOLDER THEREOF
CONSENTS TO THE ABOVE-DESCRIBED AMENDMENTS. Section 2.01 of the Series
Resolution relating to OUC's Utility System Revenue Bonds, Series 2010A (Federally Taxable
Build America Bonds — Direct Payment) (the "Series 2010A Bonds") provides that if these
15
above-described amendments become effective, the subsidy payments thereafter received from
the United States Department of the Treasury with respect to the Series 2010A Bonds will be
pledged solely to the Holders thereof and to any Direct Subsidy Bonds hereafter issued by OUC.
Upon the issuance and delivery of the Series 2015A Bonds, OUC will have received
consent of the owners of all Series of Outstanding Bonds other than the Series 2003T Bonds, the
Series 2006 Bonds, the Series 2007 Bonds, the Series 2008 Bonds, the Series 2009A Bonds, the
Series 2009B Bonds and the Series 2009C Bonds (each as hereinafter defined). OUC intends to
obtain the consent of the owners of any Series of Bonds issued in the future. However, OUC
does not intend to solicit consent of the owners of the Series 2003T Bonds, the Series 2006
Bonds, the Series 2007 Bonds, the Series 2008 Bonds, the Series 2009A Bonds, the Series
2009B Bonds and the Series 2009C Bonds to such amendments. Accordingly, it is not
anticipated that the above amendments will become effective until the Series 2003T Bonds, the
Series 2006 Bonds, the Series 2007 Bonds, the Series 2008 Bonds, the Series 2009A Bonds, the
Series 2009B Bonds and the Series 2009C Bonds are retired or defeased in full.
Additionally, pursuant to the Series 2015A Resolution, each holder of the
Series 2015A Bonds further consents, by acceptance of a Series 2015A Bond, to an
amendment to the General Bond Resolution to permit amendments to the General Bond
Resolution or any resolution amendatory or supplemental thereto to be made effective upon the
consent of the owners of 51% or more in principal amount of Bonds affected by such
amendments, rather than requiring the consent of owners of 51% or more in principal amount of
each Outstanding Series of Bonds affected by such amendment; provided, however, that an
amendment may not permit any of the changes described in subsections (i)-(ii) of Section 12.2 of
the General Bond Resolution without the consent of the Holder or Holders of all the Bonds so
affected and then Outstanding. See "APPENDIX C – SERIES 2015A RESOLUTION" attached
hereto.
The amendment described in the preceding paragraph has been approved by the Holders
of the Series 2011C Bonds, the Series 2012A Bonds and the Series 2013A Bonds. OUC intends
to obtain the consent of the owners of any Series of Bonds issued in the future. Holders of the
Series 2003T Bonds, the Series 2006 Bonds, the Series 2007 Bonds, the Series 2008 Bonds, the
Series 2009A Bonds, the Series 2009B Bonds, the Series 2009C Bonds, the Series 2010A Bonds,
the Series 2010B Bonds, and the Series 2011B Bonds have not consented to such amendment.
OUC does not intend to solicit consent of the owners of the Series 2003T Bonds, the Series 2006
Bonds, the Series 2007 Bonds, the Series 2008 Bonds, the Series 2009A Bonds, the Series
2009B Bonds, the Series 2009C Bonds, the Series 2010A Bonds, the Series 2010B Bonds, and
the Series 2011B Bonds to such amendment. Accordingly, it is not anticipated that such
amendment will become effective until the Series 2003T Bonds, the Series 2006 Bonds, the
Series 2007 Bonds, the Series 2008 Bonds, the Series 2009A Bonds, the Series 2009B Bonds,
the Series 2009C Bonds, the Series 2010A Bonds, the Series 2010B Bonds, and the Series 2011B
Bonds have been retired or defeased in full. BY ACCEPTANCE OF A SERIES 2015A
BOND, THE HOLDER THEREOF CONSENTS TO THE ABOVE-DESCRIBED
AMENDMENT.
16
DEBT SERVICE REQUIREMENTS AND COVERAGE
General
The following is a brief description of the Outstanding Bonds, the interest rate exchange
agreements which OUC has in place with respect to certain of the Outstanding Bonds, the debt
service requirements for the Outstanding Bonds and the historical debt service coverage for
OUC's Outstanding Bonds and Parity Contract Obligations for Fiscal Years 2010 through 2014.
As of the date hereof, other than the payments due under its outstanding interest rate
exchange agreements (excluding termination payments, collateral posting requirements and
fees), OUC does not have any outstanding Parity Contract Obligations. Parity Contract
Obligations are secured by a lien on and pledge of the Net Revenues on a parity with that granted
to the Holders of the Series 2015A Bonds and the Outstanding Bonds under the General Bond
Resolution. See "SECURITY FOR THE SERIES 2015A BONDS – Additional Bonds, Parity
Contract Obligations and Subordinated Debt" herein and "DEBT SERVICE REQUIREMENTS
AND COVERAGE - Interest Rate Exchange Agreements" below.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
Outstanding Bonds
The following table depicts all Bonds issued and currently Outstanding under the General
Bond Resolution (the "Outstanding Bonds"), which are secured by a lien on the Net Revenues on
a parity with the Series 2015A Bonds and Parity Contract Obligations.
Outstanding Bonds
Prior to Issuance of the Series 2015A Bonds
(Dollars in Thousands)
Name of Issue
Water and Electric Taxable Revenue Bonds,
Series 2003T (the "Series 2003T Bonds")
Utility System Revenue Refunding Bonds,
Series 2006 (the "Series 2006 Bonds")
Utility System Revenue Bonds,
Series 2007 (the "Series 2007 Bonds")
Utility System Revenue Bonds,
Series 2008 (the "Series 2008 Bonds")
Utility System Revenue Bonds,
Series 2009A (the "Series 2009A Bonds")
Utility System Revenue Refunding Bonds,
Series 2009B (the "Series 2009B Bonds")
Utility System Revenue Refunding Bonds,
Series 2009C (the "Series 2009C Bonds")
Utility System Revenue Bonds,
Series 2010A (the "Series 2010A Bonds")
Utility System Revenue Bonds,
Series 2010C (the "Series 2010C Bonds")
Utility System Revenue Bonds,
Series 2011A (the "Series 2011A Bonds")(2)
Utility System Revenue Bonds,
Series 2011B (the "Series 2011B Bonds")
Utility System Revenue Refunding Bonds,
Series 2011C (the "Series 2011C Bonds")
Utility System Revenue Refunding Bonds,
Series 2012A (the "Series 2012A Bonds")
Utility System Revenue Refunding Bonds,
Series 2013A (the "Series 2013A Bonds")
TOTAL
Interest Rates(1)
2018
5.07-5.29%
$ 18,580
2023
4.50-5.00
121,715
2016
Variable Rate
36,015
2033
Variable Rate
200,000
2039
5.25
100,000
2033
5.00
114,125
2017
3.50-5.00
54,790
2040
5.662
200,000
2022
3.00-5.25
69,990
2027
Variable Rate
98,360
2023
3.00-5.00
69,675
2027
4.00-5.00
86,450
2027
3.00-5.00
52,935
2025
3.00-5.00
235,375
$1,458,010
_________________________________________
(1)
(2)
Outstanding Principal
Amount
Final Maturity
See "DEBT SERVICE REQUIREMENTS AND COVERAGE — Variable Rate Debt Exposure" for a discussion of
OUC's Outstanding variable rate Bonds and "DEBT SERVICE REQUIREMENTS AND COVERAGE — Interest Rate
Exchange Agreements" for a description of OUC's currently outstanding interest rate exchange agreements.
The Series 2011A Bonds currently bear interest in a Windows Interest Rate mode. See "DEBT SERVICE
REQUIREMENTS AND COVERAGE — Variable Rate Debt Exposure" herein for a discussion of the calculation of
the applicable variable interest rate in the Windows Interest Rate mode. An interest rate exchange agreement is in
place with respect to the Series 2011A Bonds. See "DEBT SERVICE REQUIREMENTS AND COVERAGE —
Interest Rate Exchange Agreements" for a description of OUC's currently outstanding interest rate exchange
agreements.
18
Variable Rate Debt Exposure
Series 2008 Bonds. The Series 2008 Bonds are currently outstanding in the aggregate
principal amount of $200,000,000. The Series 2008 Bonds currently bear interest at a weekly
rate and are subject to tender for purchase from time to time at the option of the owners thereof
and are subject to mandatory tender for purchase in certain events. Goldman, Sachs & Co. and
Jefferies & Company, Inc. currently serve as Remarketing Agents for the Series 2008 Bonds. To
provide funds for the payment of the purchase price of the Series 2008 Bonds tendered or
deemed tendered for purchase, OUC, The Bank of New York Mellon Trust Company, N.A., in
its capacity as tender agent, and JPMorgan Chase Bank, National Association ("JPMorgan")
entered into a certain Standby Bond Purchase Agreement (the "2008 Liquidity Facility") dated as
of April 7, 2011, as supplemented and amended from time to time. The 2008 Liquidity Facility
has a stated termination date of April 7, 2017. The Series 2008 Bonds have a final maturity of
October 1, 2033.
Pursuant to the 2008 Liquidity Facility, in the event any of the Series 2008 Bonds are not
remarketed and JPMorgan is required to provide a liquidity advance to purchase such Series
2008 Bonds tendered or deemed tendered for purchase, said liquidity advance shall bear interest
at the Bank Rate (as such term is defined in the 2008 Liquidity Facility) until repaid by OUC,
which can be as high as 6.5%. See "DEBT SERVICE REQUIREMENTS AND COVERAGE
— Debt Service Requirements," including footnote (1) thereof, for a description of the
calculation of interest on the Series 2008 Bonds used therein.
The 2008 Liquidity Facility requires that OUC repay the unpaid principal amount of each
liquidity advance in equal semi-annual installments (payable on the first business day of each
sixth calendar month occurring 90 days after any liquidity advance), subject to earlier repayment
in the event of any redemption, cancellation, or remarketing of the Bonds, and subject to earlier
repayment in the event of certain defaults of OUC under the 2008 Liquidity Facility.
JPMorgan may terminate or suspend its obligations under the 2008 Liquidity Facility
without prior notice upon the occurrence of certain events specified in the 2008 Liquidity
Facility. In that event, unless OUC has sufficient liquidity to pay the Series 2008 Bonds that are
not remarketed, an event of default may occur under the Bond Resolution.
A copy of the 2008 Liquidity Facility has been filed on EMMA.
Series 2011A Bonds. The Series 2011A Bonds are currently outstanding in the aggregate
principal amount of $98,360,000. The Series 2011A Bonds currently bear interest in a Windows
Interest Rate mode (which is calculated as a stated Windows Spread, which is subject to
adjustment from time to time, above the current "SIFMA Index" published by the Securities
Industry and Financial Markets Association, which SIFMA Index is determined on the basis of
the seven day high grade market index of tax-exempt variable rate demand obligations). The
Windows Interest Rate is currently reset weekly. The Series 2011A Bonds are subject to tender
for purchase from time to time at the option of the owners thereof, and are subject to mandatory
tender for purchase 180 days after the occurrence of certain events and following a 30-day
remarketing period. There is no third-party liquidity support for the payment of the purchase
price of any Series 2011A Bonds subject to any such mandatory tender. Therefore, if the Series
19
2011A Bonds become subject to any such mandatory tender, such Series 2011A Bonds must be
purchased or redeemed from proceeds of a remarketing or refunding of the Series 2011A Bonds
or from funds provided by OUC. The failure to pay the tender price of the Series 2011A Bonds
when due and payable would constitute an event of default under the Bond Resolution. An
interest rate exchange agreement is in place with respect to the Series 2011A Bonds. See "DEBT
SERVICE REQUIREMENTS AND COVERAGE – Interest Rate Exchange Agreements"
herein. See "SELECTED FINANCIAL INFORMATION" herein for a discussion of OUC's
cash, cash equivalents and investments which may be available to pay the purchase price of any
Series 2011A Bonds subject to any such mandatory tender.
Series 2007 Bonds. Although the 2015 and 2016 maturities of the Series 2007 Bonds
bear interest at a variable rate, the debt service thereon is calculated and presented herein based
on the fixed rate payable by OUC under the 2007 interest rate exchange agreements with
Goldman Sachs Bank USA at rates of 3.64% and 3.66%, respectively, for the 2015 and 2016
maturities of such Series 2007 Bonds. See the table under "DEBT SERVICE REQUIREMENTS
AND COVERAGE — Debt Service Requirements," including footnote (1) thereof, and "DEBT
SERVICE REQUIREMENTS AND COVERAGE – Interest Rate Exchange Agreements"
herein, for a description of the interest rate exchange agreements in place with respect to the
Series 2007 Bonds.
Interest Rate Exchange Agreements
The following table depicts OUC's currently outstanding interest rate exchange
agreements. OUC may enter into additional interest rate exchange agreements, or amend or
terminate one or more of its currently outstanding interest rate exchange agreements, in the
future to assist in managing exposure to fluctuations in interest rates. The obligations of OUC to
the counterparties under all such interest rate exchange agreements, other than with respect to
termination payments, collateral posting requirements or fees, are secured by a lien on and
pledge of the Net Revenues on a parity with that granted to the Holders of the Bonds and Parity
Contract Obligations under the General Bond Resolution. See "SECURITY FOR THE SERIES
2015A BONDS – Additional Bonds, Parity Contract Obligations and Subordinated Debt" herein
and "DEBT SERVICE REQUIREMENTS AND COVERAGE" herein.
Upon the occurrence of certain events provided in the interest rate exchange agreements,
such agreements may be terminated prior to their stated termination dates, requiring OUC to
make, or entitling OUC to receive, a termination payment, based upon the market value of the
terminated interest rate exchange agreement at the time of termination. Any such termination
payment shall be secured by and payable from a pledge of and lien on the Net Revenues junior
and subordinate to the pledge thereof and lien thereon securing the Bonds and Parity Contract
Obligations under the General Bond Resolution. Although a termination of an interest rate
exchange agreement may result in OUC's making or receiving a termination payment, pursuant
to its policy with respect to derivatives, OUC only enters into these agreements with financial
institutions with either investment grade credit ratings or agreements to collateralize their net
position.
See "TREASURY POLICY" herein.
Therefore, OUC does not anticipate
nonperformance by a counterparty. For information about OUC's fair value position, based on
quoted market rates, and OUC's collateral deposit requirement, for its outstanding interest rate
20
exchange agreements as of September 30, 2014 and 2013, see Note M in "APPENDIX A –
AUDITED FINANCIAL STATEMENTS FOR FISCAL YEARS ENDED SEPTEMBER
30, 2014 AND 2013" attached hereto.
Outstanding Interest Rate Exchange Agreements(1)
Related
Bond
Issue
2011A
2007
2007
Counterparty
Morgan Stanley
Capital Services,
Inc.
Goldman Sachs
Bank USA
Goldman Sachs
Bank USA
Moody's,
S&P and
Fitch
Credit
Rating(1)
Baa2, A-,
A
OUC
Payer
Type
Fixed
Notional
Amount
$100,000,000
Rate
Paid
3.78%
Rate
Received(2)
67% of 1month LIBOR
Stated
Termination
Date
10/01/2027
A2, A, A
Fixed
22,615,000
3.64%
CPI + 105 bps
10/01/2015
A2, A, A
Fixed
13,400,000
3.66%
CPI + 105 bps
10/01/2016
_____________________________
(1)
(2)
OUC's Treasury Policy requires that counterparties must be rated at least "A3" or "A-" by any two
nationally recognized credit rating agencies and have capitalization of at least $150 million. See
"TREASURY POLICY" herein. The ratings of all counterparties were in compliance with this policy at
the time OUC executed each such respective interest rate exchange agreement. However, these ratings
have since been lowered, and the current ratings are set forth in this table. See "Hedging Derivative
Instruments" within Note B in "APPENDIX A – AUDITED FINANCIAL STATEMENTS FOR FISCAL
YEARS ENDED SEPTEMBER 30, 2014 AND 2013" attached hereto for a discussion of the Statement of
Governmental Accounting Standards (SGAS) No. 53, which was adopted by OUC in Fiscal Year 2010.
The impact to OUC's financial position from the implementation of SGAS No. 53 is, in part, described
therein.
The abbreviation "LIBOR" used herein refers to the London Interbank Offered Rate.
Debt Service Requirements
The following table provides the estimated debt service requirements for the Outstanding
Bonds (calculated net of OUC's payment obligations for related interest rate exchange
agreements constituting Parity Contract Obligations) and the Series 2015A Bonds. See "DEBT
SERVICE REQUIREMENTS AND COVERAGE – Interest Rate Exchange Agreements" herein
for more information regarding OUC's payment obligations for related interest rate exchange
agreements constituting Parity Contract Obligations.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
21
Estimated Debt Service Requirements
For Outstanding Bonds and Series 2015A Bonds
(Thousands of Dollars)
Bond Year
Ending
October 1
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
Total
Series 2015A Bonds
Outstanding Bonds Debt
Service(1)(2)(3)
$118,247
120,939
117,582
126,307
114,427
125,074
129,545
123,731
110,160
103,541
99,987
104,378
102,240
61,620
61,368
61,117
60,869
60,618
60,367
54,214
53,758
53,284
52,792
52,285
51,757
51,209
$2,231,416
__________________________________________
Principal
$7,250
8,050
8,890
9,770
10,700
11,670
18,595
19,980
$94,905
Interest
$ 2,017
4,745
4,745
4,745
4,745
4,745
4,745
4,745
4,745
4,745
4,745
4,745
4,745
4,745
4,383
3,980
3,536
3,047
2,512
1,929
999
$84,091
Total Debt Service
$120,264
125,684
122,327
131,052
119,172
129,819
134,290
128,476
114,905
108,286
104,732
109,123
106,985
73,615
73,801
73,987
74,175
74,365
74,549
74,738
74,737
53,284
52,792
52,285
51,757
51,209
$2,410,412
Numbers may not add due to rounding.
(1)
Debt service with respect to the Series 2007 Bonds is presented based on the fixed rate payable by OUC under the
interest rate exchange agreements with Goldman Sachs Bank USA at rates of 3.64% and 3.66%, respectively, for the
2015 and 2016 maturities of the Series 2007 Bonds. See "DEBT SERVICE REQUIREMENTS AND COVERAGE Interest Rate Exchange Agreements" herein. Although OUC is permitted to assume a lower applicable rate for the
Series 2008 Bonds in accordance with the terms of the General Bond Resolution, OUC has assumed for purposes of
this table that the Series 2008 Bonds bear interest at the following internal budgeted rates: 0.20% for Fiscal Year 2015;
0.30% for Fiscal Year 2016; 0.60% for Fiscal Year 2017; and 1.00% for Fiscal Year 2018 through maturity.
(2)
The debt service requirements shown herein do not take into account the subsidy payments that may be received from
the United States Department of the Treasury with respect to the for the Series 2010A Bonds, which could be subject to
reduction or elimination by the United States federal government. See also "PROPOSED AMENDMENTS TO
GENERAL BOND RESOLUTION; BONDHOLDER CONSENT BY ACCEPTANCE" herein for more information
regarding the impact of that certain proposed amendment to the General Bond Resolution will have on the treatment of
such subsidy payments and the calculation of debt service requirements and coverage.
(3)
For the purposes of this table, OUC has assumed that the Series 2011A Bonds will bear interest at a fixed swap rate of
3.78% under the interest rate exchange agreement with Morgan Stanley Capital Services, Inc. until maturity on October
1, 2027. The interest rate reflected in this table for the Series 2011A Bonds is based upon the $100,000,000 notional
amount of such interest rate exchange agreement and not upon the lower outstanding principal amount of the Series
2011A Bonds. See "DEBT SERVICE REQUIREMENTS AND COVERAGE – Interest Rate Exchange Agreements"
herein.
Source: OUC.
22
Debt Service Coverage
The following table depicts the historical debt service coverage for OUC's outstanding
debt obligations for Fiscal Years 2010 through 2014 and therefore does not reflect debt service
on the Series 2015A Bonds.
Debt Service Coverage
For Fiscal Year Ended September 30
(Thousands of Dollars Other than Coverage Ratios)
Sources of Revenue
Electric Operating Revenue
Water Operating Revenue
2010(1)
$801,198
62,616
2011
$811,873
64,136
2012
$790,820
63,564
2013
$762,546
62,812
2014
$815,905
64,080
Total Operating Revenue
Interest and Other Income
863,814
20,350
876,009
20,656
854,384
23,219
825,358
19,191
879,985
16,900
Gross Revenue & Income
884,164
896,665
877,603
844,549
896,885
Expenditures
Electric Operating Expenses
Water Operating Expenses
$537,416
36,590
$541,250
41,620
$539,348
37,642
$519,987
33,658
$561,670
36,392
Total Operating Expenses
Other Expenses
574,006
1,088
582,870
1,277
576,990
494
553,645
1,134
598,062
1,133
$575,094
$584,147
$577,484
$554,779
$599,195
$309,070
134,877
$312,518
128,102
$300,119
122,205
$289,770
119,698
$297,690
118,010
2.44
2.46
2.42
(2)
Total Expenses
Net Revenue and Income
Available for Debt Service
Debt Service(3)
Debt Service Coverage(4)
2.29
_____________________________________
(1)
2.52
Electric Operating Expenses for 2010 were restated to include supplemental payments to the County.
Excludes payments to the City and the County, and depreciation and amortization.
(3)
Excludes the principal amount of Bonds designated as "Designated Maturity Obligations" for the purposes of the
General Bond Resolution. See "APPENDIX B – GENERAL BOND RESOLUTION."
(4)
Debt Service Coverage reflects the calculation of debt service coverage as required under the Bond Resolution.
Source: OUC.
(2)
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
23
ORLANDO UTILITIES COMMISSION
General
OUC was created pursuant to the Act as a statutory utility commission within the State of
Florida. OUC has full authority over the management and control of the System and has been
authorized by the Florida Legislature to offer services in the County and portions of Osceola
County, Florida. The Act allows OUC to undertake, among other things, the construction,
operation, and maintenance of electric generation, transmission and distribution systems
(collectively, the "Electric System"), and water production, transmission and distribution systems
(collectively, the "Water System") in order to meet the requirements of its customers.
OUC's governing board consists of five members, including the Mayor of the City, who
is an ex-officio member. Members must be OUC customers and at least one member must reside
outside the Orlando city limits in unincorporated Orange County. Members serve without salary
and may serve only two consecutive four-year terms. New members are chosen in the following
manner: the Nominating Board of the City, which for this purpose functions only as a screening
committee, will submit the names of three qualifying persons for consideration to OUC's
governing board who will nominate one of the three persons to the City Council of the City or
reject all three persons. The City Council may reject OUC's nominee or may elect OUC's
nominee to serve a term of four years. The City may not remove a member of OUC's governing
board for any reason.
The current members of OUC's governing board and the expiration dates of their
respective terms are shown below.
Name
Linda Ferrone
Gregory D. Lee
Maylen Dominguez
Dan Kirby, AIA, AICP
Buddy H. Dyer
Title
Term Expires
President
First Vice President
Second Vice President
Immediate Past President
Mayor/Commissioner
December 31, 2018
December 31, 2015
December 31, 2016
December 31, 2017
May 31, 2016
City of Orlando, Florida and Orange County, Florida
For general information regarding the City and the County, see "APPENDIX D –
SUPPLEMENTAL INFORMATION REGARDING THE CITY OF ORLANDO, FLORIDA
AND ORANGE COUNTY, FLORIDA" attached hereto.
Management and Employees
The senior management team of OUC is composed of the General Manager and Chief
Executive Officer and eight Vice Presidents who are responsible for specific OUC business
units: Financial & Support Services; Office of the General Counsel; Energy & Water Production;
Energy & Water Delivery; Marketing, Communications & Community Relations; Customer &
24
Sustainable Services; Legislative, Regulatory & Compliance; and Information Technology. A
biographical sketch of each is provided below. OUC has a total of approximately 1,100
authorized positions. Employees are not unionized.
General Manager, Chief Executive Officer & Secretary: Kenneth P. Ksionek joined
OUC in 1985 as Director of Construction at the Stanton Energy Center (SEC) Unit 1 and was
named General Manager and Chief Executive Officer in October 2004. Mr. Ksionek has 42
years of electric utility experience working both for OUC and in the private sector. During his
tenure at OUC, he co-managed the SEC Unit 2 construction project while holding the position of
Managing Director of Electric Transmission and Distribution. He was promoted to Vice
President of the Energy Business Unit in 1995. Mr. Ksionek is passionate about reliability and
has successfully led OUC's efforts to become and remain "The Reliable One." Prior to joining
OUC, Mr. Ksionek was involved in the construction management of several major power plant
projects throughout the United States while employed for 12 years with Gilbert Associates, Inc.,
a major engineering firm. He holds a Bachelor of Science Degree in Civil Engineering from the
University of Wisconsin.
Vice President, Financial & Support Services & Chief Financial Officer: John E. Hearn
joined OUC in 1987 and served as Director of Accounting Services and Director of Fiscal
Services prior to being named Vice President of Financial Services and CFO in 1998. As of
October 1, 2012, Mr. Hearn assumed additional responsibility for several Support Services.
Prior to joining OUC, Mr. Hearn worked for the City of Kissimmee for eleven years where he
assisted in establishing the Kissimmee Utility Authority. Mr. Hearn is a graduate of the
University of Central Florida with degrees in Accounting and Psychology. He is a Florida CPA.
Vice President, Office of the General Counsel & General Counsel: W. Christopher
Browder became Vice President and General Counsel of OUC in January 2008. As General
Counsel, Mr. Browder is responsible for representing OUC in all legal matters affecting the
organization's operation; advising OUC's board members and the General Manager/CEO on legal
issues; planning, organizing and managing operations of the Legal Department; providing
strategic services for projects and proposals covering all areas of the organization; and keeping
abreast of legal changes in federal, state and local regulations, requirements and procedures
related to OUC's utility operations. As of October 1, 2012, Mr. Browder assumed the additional
role of Vice President over Human Resources, Risk Management and Records Management.
Formerly of the law firm Gray Robinson, Mr. Browder is Florida Bar Board Certified as a
specialist in City, County and Local Government Law and a Martindale-Hubbell "AV" Rated
Attorney with experience representing regulated and governmental utilities, utility regulatory
agencies and private industry since 1991. Mr. Browder earned his Juris Doctorate at the
University of Richmond, T. C. Williams School of Law. He has a Bachelor of Science in
Microbiology and Master of Arts in Urban/Regional Planning, both from the University of
Florida.
Vice President, Energy & Water Production Business Unit: Jan C. Aspuru joined OUC
in 1993. In February 2007, Mr. Aspuru assumed the responsibilities of Vice President of the
Power Resources Business Unit ("PRBU"). As of October 1, 2012, OUC expanded PRBU and
renamed the business unit to Electric & Water Production with Mr. Aspuru taking on the added
responsibilities for the management of OUC's Water Production and Chilled Water. Previously,
25
he served as Managing Director of Power Production where he was responsible for OUC's
diverse generating portfolio. Mr. Aspuru is a former Director and Manager of Fuel Services
division where he was responsible for OUC's purchases of coal, oil and natural gas. In addition,
he was responsible for managing OUC's fuel hedging program. Prior to joining the Power
Resources Business Unit, Mr. Aspuru was an Account Executive in the Commercial Marketing
division where he managed relationships with some of OUC's largest customers. Mr. Aspuru
began his OUC career in 1993 as a Demand-Side Planning Engineer in the System Operations
division and later became a Senior Sales Engineer. Mr. Aspuru earned a Master of Business
Administration from the University of Central Florida and a bachelor's degree in Electrical
Engineering from Northeastern University in Boston. He is a Certified Energy Manager.
Vice President, Energy & Water Delivery Business Unit: Clint P. Bullock joined OUC in
1989 initially working in the billing department. In 1996, Mr. Bullock joined what is known as
the Customer Connection Department and worked with commercial customers, leading OUC's
rates and pricing and developing new products and services. Before his promotion to Vice
President, Customer Relations & Sustainability, Mr. Bullock was the Managing Director of the
Customer Connection Business unit. On October 1, 2009, Mr. Bullock became Vice President of
the Energy Delivery Business Unit. Mr. Bullock became Vice President of Energy & Water
Delivery on October 1, 2012. In his current position Mr. Bullock is responsible for OUC's
Energy and Water Delivery Business Unit. Mr. Bullock received his Bachelor's Degree in
Marketing and Management Information Systems from the University of Central Florida and his
Master of Business Administration from Rollins College in Winter Park, Florida. As an active
member of the Central Florida community, he has been a board member of the Ronald
McDonald House Charities since 2007 and currently serves as Chairman for that organization.
Mr. Bullock also serves on the UCF Alumni Association board and Boone High School Athletic
Association board.
Vice President, Marketing, Communications & Community Relations: Roseann E.
Harrington joined OUC in 1986. She served as a communications specialist, electric operations
corporate trainer, community relations manager and MCCR director before being named to her
present position as Vice President in 2001. As of October 1, 2012, Ms. Harrington's assumed
additional responsibility for Economic Development and E-Commerce with a focus on recruiting
new business to Orlando and ensuring OUC remains innovative in their use of customer-facing
technology. In 2014, the Citrus Council of Girl Scouts presented Ms. Harrington with a woman
of distinction Life Time Achievement Award for her strength of character and commitment to
the community and helping other women advance their careers. In addition she was recognized
by the Orlando Business Journal as one of Central Florida's Top 10 "Women Who Mean
Business." She has also received the Metropolitan Orlando Urban League's Dr. James R. Smith
Award for outstanding humanitarianism and was named Downtowner of the Year for
contributing to the growth of Orlando's central business district. Ms. Harrington earned her
Bachelor's Degree from Loyola University in New Orleans and a Master of Business
Administration from Rollins College in Winter Park, Florida.
Vice President, Customer & Sustainable Services Department: Byron A. Knibbs joined
OUC in May 1997 as Director of Business Development. As he progressed through the
organization, Mr. Knibbs was promoted to Director of Business Development and Lighting in
January 2000; his responsibilities included aggressively marketing OUC services and managing
26
the daily operations of the Lighting Division. In March 2005, he was promoted to Vice President
of Energy Delivery Business Unit and was responsible for the day-to-day operation of OUC's
Transmission, Substation and Distribution systems. In October, 2009, Mr. Knibbs was appointed
Vice President of Sustainable Services and was responsible for renewable and conservative
programs, fleet and facilities, corporate safety training and risk management, supply-chain
management and OUC Cooling. In October 2012, Mr. Knibbs was appointed Vice President of
Customer & Sustainable Services. His responsibilities include residential and commercial
accounts, metering services, billing, collections, revenue assurance and customer experience as
well as renewable and conservation programs. Mr. Knibbs previously worked with the City of
St. Cloud Electric Utility for 12 years in different capacities, four of those years at the Electric
Utility Director. Mr. Knibbs holds an Associate/Bachelor's Degree in Aeronautical Electronic
Engineering Technology, a Bachelor's Degree in Computer Information Science and a Master's
Degree in Business Administration. He serves on many community boards in the Orlando area.
Vice President, Information Technology & Chief Information Officer: Jerry Sullivan
initially served as a consultant to OUC and in August 2012 became OUC's interim Director for
the newly formed Major Projects Delivery Division. He was named Vice President and Chief
Information Officer in May 2013 and has done an outstanding job of delivering complex and
innovative smart grid, customer service, and various technologies from inception to completion.
In his former capacity, at PA Consulting, he was Director in their Global Energy Practice
responsible for major projects in Customer Service, Delivery and Information Technology. He
has a long career as a utility veteran working at Con Edison as an engineer and manager in the
Production and Delivery organizations; and at First Energy, where he managed the business
planning for the operating companies and ran large projects in Production, Delivery, Customer
Service and Information Technology. He was the Executive Director at the transmission grid
operator for the State of Texas. Mr. Sullivan holds a Master of Business Administration from
NYU's Stern School of Business and a Bachelor of Science from West Point, as well as
graduating from the Army's Command & General Staff College.
Vice President, Legislative, Regulatory & Compliance: Lee F. ("Chip") Merriam joined
OUC in 2009 with the responsibility for managing energy and water regulatory and compliance
matters for OUC. As of October 1, 2012, Mr. Merriam was promoted to Vice President and his
responsibilities were expanded to include Water Regulatory and Compliance issues. Prior to his
tenure at OUC, Mr. Merriam has worked with the EPA on the development of the Clean Air Act
Rule, and Clean Water Act and corresponding Numeric Nutrient Criterion. In addition, Mr.
Merriam is responsible for OUC-specific development and implementation of transmission and
reliability standards under the Federal Energy Regulatory Commission (FERC), as well as the
North American Energy Reliability Commission ("NERC"). From 1990-2009, Mr. Merriam
served as the Deputy Executive Director, Water Resources for the South Florida Water
Management District.
He was responsible for coordinating and implementing the
Comprehensive Everglades Restoration Plan, capital construction of the Everglades Construction
Project, implementing the Everglades Long Term Plan for Water Quality, Everglades Research,
Kissimmee Restoration, development of the Lake Okeechobee Protection Plan, Environmental
Resource Permitting, water supply planning development and consumptive use permitting, water
quality monitoring, evaluation and assessment. Mr. Merriam also serves on the Executive
Committee of the New Water Supply Coalition and the Florida Municipal Electric Association.
27
A Florida native, Mr. Merriam is a graduate of the University of Florida with a Bachelor of
Science in Zoology.
System Overview
OUC's System is currently comprised of an Electric System (as defined herein), a Water
System (as defined herein), a Chilled Water Service Division (as defined herein), and a Lighting
Services Division (as defined herein). The Electric System is the largest component of the
System and consists of seven generation facilities, and a transmission system with 29 substations
and approximately 343 miles of transmission lines and cables. See "ELECTRIC SYSTEM"
herein for more detailed information about the Electric System. OUC's Water System consists of
seven water plants that treat water sources from 32 deep wells that tap the Floridan Aquifer, as
well as a repump facility. See "WATER SECTION" herein for more detailed information about
the water section of the System. In addition to the Electric System and the Water System, OUC
operates a chilled water business unit (the "Chilled Water Service Division") and a lighting
services business unit (the "Lighting Services Division"). See "OTHER OUC SERVICE
DIVISIONS" herein.
Future Capital Needs
The following table provides a summary of OUC's Capital Plan for Fiscal Years 20152019, which was accepted by OUC's governing board on August 26, 2014 (the "2015 Five-Year
Capital Plan"). A portion of the proceeds of the Series 2015A Bonds will be used to finance the
Series 2015A Project, which includes some of the capital projects that comprise the 2015 FiveYear Capital Plan. OUC may consider additional financings for future capital projects.
The 2015 Five-Year Capital Plan contains approximately $100 million identified for
capital improvements for Stanton Unit 1 which could be deferred or eliminated pending final
EPA rules. See "FACTORS AFFECTING ELECTRIC UTLITY INDUSTRY" herein. See
"MISCELLANEOUS" herein for a discussion regarding forward-looking statements.
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28
2015 Five-Year Capital Plan
(Dollars in Thousands)
Capital Plan
Electric, Water & Chilled Water
Production
Electric, Lighting & Water Delivery
Information Technology
Customer & Sustainable Services
Financial & Support Services
Other
Total 2015 Five-Year Capital Plan:
Cash Available for Capital Projects
Funds Needed
________________________________
Source: OUC.
2015
2016
2017
2018
2019
Total
$48,176
$43,731
$35,423
$61,785
$73,614
$262,729
64,565
29,075
7,294
3,065
730
$152,905
69,965
23,452
2,685
2,746
1,537
$144,116
80,835
12,089
2,695
3,592
1,780
$136,414
93,385
12,844
2,682
3,138
1,215
$175,049
94,435
12,516
2,685
3,043
920
$187,213
403,185
89,976
18,041
15,584
6,182
$795,697
$101,905
$84,116
$90,398
$87,962
$112,469
$476,850
$51,000
$60,000
$46,016
$87,087
$74,744
$318,847
ELECTRIC SYSTEM
General
The electric section of the OUC System (the "Electric System") provides power to
customers within the City and certain contiguous areas, encompassing approximately 244 square
miles. The Electric System is the largest component of the System and consists of seven
generation facilities, and a transmission system with 28 substations and approximately 338 miles
of transmission lines and cables.
Electric Service Territory
Electric utilities in the State of Florida may negotiate and enter into territorial
agreements. The Florida Public Service Commission ("FPSC") must approve all territorial
agreements and is charged with the authority to resolve all disputes related to service territory.
The purpose of the FPSC's involvement is to prevent the uneconomical duplication of
infrastructure by two utilities to serve the same customers. Although the boundaries of OUC's
service territory are generally established by the Special Act that created OUC, OUC and Duke
Energy Florida ("Duke") entered into a territorial agreement dated March 1, 2007 and approved
by the Florida Public Service Commission on July 5, 2007 (the "Territorial Agreement"), the
term of which expires January 31, 2016. While OUC expects that the Territorial Agreement will
be renewed before its expiration, OUC does not believe that the expiration of the Territorial
Agreement would have a material adverse impact on OUC or the Pledged Revenues.
OUC's Electric System provides power to customers within the City and certain
contiguous areas, encompassing approximately 244 square miles based on the Territorial
Agreement. As of September 30, 2014, there were 187,923 active service meters within OUC's
service territory, of which 162,065 were residential and 25,858 were commercial.
29
OUC entered into an interlocal agreement with the City of St. Cloud, Florida
("St. Cloud") in 1997 pursuant to which OUC has assumed control and operation of St. Cloud's
electric transmission and distribution system and certain generation facilities and provides retail
electric energy services to all St. Cloud customers ("St. Cloud Agreement"). The St. Cloud
service territory is approximately 150 square miles. It has recently experienced growth levels
that exceeded OUC's expectations, generating revenues for OUC above budgeted levels. The St.
Cloud Agreement expires on September 30, 2032. As of September 30, 2014, St. Cloud had
32,705 active service meters, of which 29,371 were residential and 3,334 were commercial.
In April 2008, OUC and the City of Vero Beach, Florida ("Vero Beach") executed a
power supply agreement whereby OUC supplements Vero Beach's electric capacity and energy
requirements. In association with this agreement, effective January 1, 2010, OUC began
providing Vero Beach with fuel management services and wholesale power marketing services
as well as advisory services for planning, forecasting, regulatory reporting, and power plant
operations. The term of this agreement expires in 2030, subject to automatic extension for an
additional ten year term if the parties have agreed in writing by January 1, 2027 on any
adjustment to the pricing terms and conditions of the agreement for the extension term. In 2012,
Vero Beach approached OUC about the possibility of terminating its power supply agreement in
conjunction with a proposed sale of its city-owned utility system. The termination agreement
between Vero Beach and OUC was finalized in 2013, and provides for termination in return for
settlement payments to OUC. This termination agreement continues to be contingent on Vero
Beach finalizing negotiations with other third parties as well as numerous other closing
conditions. OUC has provided Vero Beach with two options to lower its rate for energy under
the Vero Beach power supply agreement. These are currently under review by Vero Beach as a
possible alternative to the sale of its utility system. OUC continues to provide service as per the
existing power supply agreement in the interim. OUC does not believe that the termination of
this agreement would have a material adverse affect on OUC or the Pledged Revenues. See
Note I in "APPENDIX A – AUDITED FINANCIAL STATEMENTS FOR FISCAL YEARS
ENDED SEPTEMBER 30, 2014 AND 2013" attached hereto.
In October 2010, OUC and the City of Bartow executed a power supply agreement that
obligates OUC to supply wholesale electric service to the City of Bartow to enable it to provide
retail electric service to its customers. This agreement commenced on January 1, 2011 and will
expire on December 31, 2017.
In January 2014, OUC also entered into power supply agreements with the cities of
Winter Park and Lake Worth. OUC's power supply agreement with Lake Worth is for the
provision of up to 35 megawatts for three years, with two optional one-year extensions. OUC's
power supply agreement with the City of Winter Park is for the provision of up to 20 megawatts
for six years.
See " – Renewable Energy Program" below for a discussion of OUC's power supply
agreements for landfill gas.
30
Power Supply
OUC's Electric System presently consists of seven generation facilities. The following
table describes the capacity and other relevant data with respect to the generating facilities in
which OUC presently has an ownership interest:
Summary of OUC Generation Facilities
General Facility
Stanton Energy Center
(SEC)
Unit A(4)
Unit B(5)
Unit No. 1 and 2(6)
Indian River Plant A-D(6)
Net Capability
Available for
OUC
(Megawatts)(1)
As of
September 30
2013
2014
In-Service
Unit
Type(2)
Fuel(3)
Primary Alternative
10/03
02/10
07/87 & 06/96
06/89, 07/89,
08/92 & 10/92
174
298
636
206
174
298
642
206
CC
CC
ST
GT
NG
NG
BIT
NG
F02
F02
NG
F02
03/77
13
-
NP
UR
-
09/82
133
133
ST
BIT
-
06/83
60
1,520
60
1,513
NP
UR
-
Purchase Power:
TECO Energy
Southern Company
Total Available
322
322
322
322
CC
NG
LO
Firm Commitments to Other Utilities
166
207
1,676
1,628
Crystal River
Unit No. 3(7)
C.D. McIntosh Jr.
Unit No. 3(8)
St. Lucie
Unit No. 2(9)
Total Generation
Net Available for Retail
______________________________________________
(1)
Actual net capacity varies with auxiliary power consumption.
(2)
FS = Fossil Steam; N = Nuclear; CT = Combustion Turbine; CC=Combined Cycle
(3)
C = Coal; C/R = Coal and Refuse; HO = Heavy Oil (#6); LO = Light Oil (#2); NG = Natural Gas; N = Nuclear
(4)
Operated by Southern Company — Florida LLC.
(5)
Operated by OUC.
(6)
Operated by OUC. In-service dates for various units 08/1961, 03/1967, 12/1974, 04/1977, 07/1982, 09/1982. Contains
approximately 15 megawatts net capacity for St. Cloud entitlement (SEC Unit No. 2).
(7)
Operated by Duke Energy. Taken out of service in February 2013. See " – Nuclear Energy" herein for more information.
(8)
Operated by City of Lakeland.
(9)
Operated by Florida Power and Light.
Source: OUC.
31
Electric Sales
The following table details electric sales by customer class for Fiscal Years ended
September 30, 2010 through 2014:
Electric Sales (MWHs)
Customer Class
Residential
Commercial
OUC Use (1)
Lighting
Total
2010
$1,925,742
3,481,965
125,605
55,673
$5,588,985
2011
$1,867,879
3,478,325
128,965
56,183
$5,531,352
2012
$1,736,537
3,460,963
127,466
56,636
$5,381,602
2013
$1,748,182
3,501,573
127,775
56,457
$5,434,077
2014
$1,838,003
3,588,980
134,748
57,294
$5,619,025
_________________________________
Source: OUC Audited Financial Information and Statistical Report for Fiscal Year ended September 30, 2014.
(1)
Reflects electric use by OUC throughout System facilities.
Participation Agreements
OUC has entered into a series of participation agreements, which convey undivided
ownership interests in generation units in which OUC has an ownership interest. The following
table is a summary of the ownership interests of OUC and other parties with respect to such
generation units.
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32
Summary of Generation Facility Participation Agreements
Name
Plate
capacity
Total
facility net
megawatt
capacity
OUC
undivided
ownership
interest
Florida
Municipal
Power
Agency
undivided
ownership
interest
Kissimmee
Utility
Authority
undivided
ownership
interest
Agreement
Year
Facility Name
Stanton Unit 1
(SEC1)
1984 & 1985
425
444
68.55%
26.63%
4.82%
Stanton Unit 2
(SEC2)
1991
425
446
71.59%
28.41%
Indian River
Combustion
Turbines (A&B)
1988
76
76
48.80%
39.00%
12.20%
Indian River
Combustion
Turbines (C&D)
1990
224
215
79.00%
21.00%
St. Lucie Unit 2
(SL2)
1980
850
853
6.09%
McIntosh Unit 3
(MAC3)
1978
364
340
40.00%
Crystal River Unit 3
(CR3)
1975
890
853
1.60%
Stanton A (SECA)
2001
633
620
28.00%
______________________________
Source: OUC's Audited Financial Information and Statistical Report for Fiscal Year ended September 30,
2014, OUC 2009 Ten-Year Site Plan and OUC.
The following chart reflects a comparison of OUC's (i) total electric generation capacity,
(ii) total retail sales plus reserve capacity, and (iii) total retail sales plus reserves and plus
generation capacity contracted to the cities of Bartow, Vero Beach, Lake Worth and Winter Park
under their respective power supply agreements. This chart illustrates how OUC has generated
additional revenue by entering into power supply agreements for generation capacity in excess of
OUC's retail sales and reserve requirements.
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33
Management of Reserve Margin for Electric Generation Capacity (1)
___________________________________
(1)
For purposes of this chart, generation capacity for the Vero Beach power supply agreement is assumed
to terminate in 2016. See " – Electric Service Territory" above for a discussion of the potential
termination of the Vero Beach power supply agreement.
Source: OUC.
Florida Municipal Power Pool
In May 1988, OUC, Florida Municipal Power Agency ("FMPA") (All Requirements
Project) and the City of Lakeland, Florida formed the Florida Municipal Power Pool ("FMPP").
This is an operating type electric pool, pursuant to which all of the generating resources of the
pool members are dispatched in the most economical manner to meet the total load requirements
of the pool. OUC dispatches FMPP resources and manages daily energy sales, purchases and the
accounting for the allocation of pool expenses and savings. The term of the FMPP agreement is
one year and automatically renews from year to year until terminated by the consent of all
participants; however, any one participant may withdraw at any time upon one year's written
notice. In 1995, the Kissimmee Utility Authority was added as a member to the FMPP and
currently participates as an FMPA customer.
Fuel Supply
OUC's fuel strategy consists of three main areas: mitigating coal supply risk, developing
and monitoring a natural gas supply portfolio, and using financial and physical hedges to
mitigate price risk.
34
The following table shows OUC's historical fuel mix percentage, based on generation.
Fuel Mix Percentages
Year
Coal
Natural Gas(1)(2)
Oil(1)
Nuclear
Renewable(3)
Total
2010
65.8%
27.5%
0.2%
5.9%
0.6%
100.00%
2011
62.1
31.0
0.2
6.1
0.6
100.00
2012
53.2
39.9
0.2
5.9
0.8
100.00
2013
48.5
41.6
9.0
0.9
100.00
2014
51.5
39.7
7.9
0.9
100.00
__________________________________
(1)
Natural gas and oil percentages include the applicable fuel-mix allocation of energy purchased under
OUC's purchase power agreement in relation to the steam units at the Indian River Plant. All energy
purchased under this agreement is indexed to the price of natural gas and No. 6 fuel oil.
(2)
Approximately 1% of OUC's generation is fueled by landfill gas. This component has been included under
the "Natural Gas" category.
(3)
Amounts for Fiscal Year ended September 30, 2010 were restated to reflect the renewable generation and
provide information consistent with OUC's fuel strategy of creating a diverse generation portfolio to
respond to changing fuel markets.
Source: Audited OUC Financial Information and Statistical Report for Fiscal Year ended September 30, 2014 and
OUC.
OUC purchases coal through a combination of long-term contracts and spot market
purchases. OUC currently has contracts with three suppliers to provide approximately 37-71%
of its estimated needs through calendar year 2017. OUC continuously negotiates with potential
coal suppliers to obtain the best pricing. Natural gas is purchased at current market prices. OUC
mitigates the impact of changes in natural gas prices through a financial hedging program that
utilizes futures and options. OUC currently hedges to protect its retail budget for 51% of its
estimated retail natural gas consumption in the current Fiscal Year. OUC also currently hedges
forward up to four years on a tiered basis for its estimated retail natural gas consumption. OUC
executes crude oil hedges to protect retail customers from oil price changes associated with a rail
fuel surcharge for transporting coal. OUC engages an outside consultant to provide OUC with
advice and analysis with respect to its financial hedging program. See "TREASURY POLICY –
Derivatives" herein. In addition, OUC maintains a fuel stabilization fund to help stabilize fuel
costs on a short term basis in times of volatile fuel prices. If and when necessary, OUC has the
ability to pass increased fuel costs directly to its customers based solely on the decision of its
governing board.
Nuclear Energy
General. OUC's nuclear generation capacity currently comes solely from St. Lucie Unit
2, which is operated by Florida Power and Light Company ("FPL"). Until recently, OUC also
obtained nuclear generation capacity as a co-owner of Crystal River Unit No. 3 ("Crystal River
Unit No. 3" or "CR3"), which is operated by Duke.
OUC is exploring other options to add more nuclear power to its portfolio. OUC and
other municipal utilities are still participating in periodic updates with FPL regarding their
development of proposed nuclear generation at FPL's Turkey Point nuclear facility. FPL has not
made any commitments for outside participation in that project, but OUC has expressed an
35
interest in the project. The 2015 Five-Year Capital Plan, discussed under "SELECTED
FINANCIAL INFORMATION-Future Capital Needs" does not currently include any potential
financial obligation related to OUC obtaining any additional nuclear generation interests.
St. Lucie Unit 2. FPL submitted its license renewal application to the U.S. Nuclear
Regulatory Commission ("NRC") on November 29, 2001. The NRC renewed for an additional
20 years the operating license for the St. Lucie nuclear plant, Units 1 and 2, located southeast of
Fort Pierce, Florida. With the renewal, the license for St. Lucie Unit 1 is extended from March
2016 to March 2036, and the license for St. Lucie Unit 2 is extended from April 2023 to April
2043.
Crystal River Unit 3. OUC is one of nine minority joint owners ("JOs") that
cumulatively own approximately 8.2% of Duke's Crystal River Unit 3 ("CR3") nuclear power
plant. CR3 was issued an operating license on December 3, 1976, with an initial expiration of
December 3, 2016. On December 16, 2008, Duke (the successor in interest to Progress Energy
Florida) submitted to the NRC an application to renew the license for an additional 20 years, or
through 2036. However, on February 5, 2013, Duke announced its intention to retire CR3 after
months of work to attempt to repair unexpected damage that occurred during a scheduled uprate
project to increase CR3's generating capability, which included the replacement of two aging
steam generators (the "SGR Project"). Duke commissioned an independent review to assess the
CR3 repair plan, including the repair scope, risks, costs and schedule. In the final report, the
costs to repair were estimated to range from $1.49 billion to $3.43 billion and time of completion
was estimated at 31 to 96 months. As a result of the early CR3 retirement, rather than the
planned 20-year renewal license, the JOs claimed to have lost the value of CR3 nuclear-priced
energy and capacity until the plant would have otherwise been retired. In addition, the CR3 JOs
claimed to be at risk for any additional decommissioning costs that may be associated with an
early, unplanned shut down. The CR3 JOs asserted contractual claims against Duke arising
under the CR3 Participation Agreement among all owners for, among others, Duke's failure to
complete the SGR Project in a prudent manner and in accordance with good utility practice and
Duke's failure operate and maintain CR3 in accordance with all applicable regulatory
requirements.
Late in 2014, the JOs and Duke entered into the CR3 Settlement, Release and Acquisition
Agreement (the "CR3 Settlement Agreement"), pursuant to which the following closing
transactions will be consummated (collectively, the "Closing Transactions") once the NRC
approves the removal of the JOs from the current CR3 nuclear operating license. OUC (among
other JOs) will transfer its ownership in CR3 back to Duke as well as the funds currently accrued
by OUC as a Joint Owner for decommissioning costs. In return, OUC is to be paid damages for
a portion of the lost benefit of the nuclear energy from CR3, be absolved of its share of the most
recent SCR Project repair costs, be relieved of any further CR3 operation and maintenance costs
and be relieved of any further decommissioning funding obligation. In addition to the Closing
Transactions, OUC has received its share of over $21 million in CR3 nuclear insurance
reimbursed through Duke. By transferring all CR3 ownership, responsibility, liability, and
decommissioning obligations to Duke, OUC will benefit from the avoided ownership costs as
well as the risk and cost uncertainty associated with future decommissioning of CR3.
36
On November 7, 2014, Duke filed the CR3 license amendment application with the NRC.
Citing the CR3 Settlement Agreement, the application requests that the NRC consent to the
transfer to Duke of the JOs interest in the CR3 facility and that the license transfer order and
conforming license amendment be issued by April 30, 2015. The Closing Transactions are
expected to be consummated shortly after the license amendment is issued and be completed in
2016. At this time OUC does not anticipate that the execution of the Closing Transactions will
have a materially adverse impact on OUC.
Renewable Energy Program
OUC has launched a series of innovative renewable green energy programs that promote
the development of clean, alternative fuel resources within the local community. These
programs are voluntary and rely heavily on customer participation. Active customer
participation reduces OUC's capital investments in renewable energy installations while making
the most of federal and state incentive programs. Some of OUC's most prominent programs are
described below.
OUC uses methane gas from various landfills to leverage one of the most successful
renewable energy projects in the State of Florida. Since 1998, the Stanton Energy Center has
obtained methane gas from the County's landfill, which is then co-fired with coal to provide
energy for OUC's customers. In 2012, OUC and the County completed construction on a new
facility that delivers a peak of 22 MWs of landfill gas capacity from the landfill’s southern
expansion site. Also in 2011, pursuant to the terms of a 20-year agreement, OUC began
receiving 2.5 MWs of electricity from a landfill gas project in Port Charlotte. Later in 2015
OUC, will commence a 20-year agreement to begin receiving an additional 9 MWs of landfill
capacity (with an option to take up to an additional 25 MWs) from a project at Duke's Holopaw
Substation.
In addition to reducing greenhouse gas emissions, OUC’s landfill gas projects are
expected to displace up to 3% of the fossil fuel needed by Stanton Energy Center Units 1 and 2
over the life of OUC's current landfill gas agreements.
OUC's current use of landfill gas accounted for 1.6% of all energy produced for OUC
customers in Fiscal Year 2014. OUC presently expects this percentage to increase to 2.2% for
Fiscal Year 2015.
OUC's solar energy programs include (a) a net metering program and tariff, (b) a Solar
Production Incentive Program, (c) a Thermal Rebate Program, and (d) a Solar Financing/Billed
Solution Program. As of December 2014, OUC had a total of 670 customers participating in its
solar programs. 487 customers have benefitted from OUC’s Thermal Rebate Program, resulting
in 1155 KW of solar hot water capacity. 143 customers are current participants in OUC’s
Production Incentive Program resulting in 3303.5 KW of solar generation. Additionally, 39
customers are currently subscribed to OUC’s Gardenia Community Solar Project, which
produced 574,362 KWH during its first full year of operation.
OUC continues to grow its renewable energy portfolio with innovative new customer
programs that will further engage with its customers. New projects under development include a
37
utility-scale PV project at the Stanton Energy Center, a new community solar project and solar
service offerings for both residential and commercial customers.
Existing Transmission Facilities
OUC's existing transmission system consists of 28 substations and approximately 338
miles of 69 kilovolts ("kV"), 115 kV and 230 kV transmission lines and cables. OUC's
transmission system is fully integrated into the State of Florida transmission grid through one 69
kV and twenty-one 230 kV metered interconnections with other generating utilities which are
members of the Florida Reliability Coordinating Council ("FRCC") which is an operational
entity to ensure and enhance the reliability and adequacy of bulk electricity supply in Florida as
well as the regional delegate to monitor and enforce compliance for the North American Electric
Reliability Corporation. In addition, pursuant to the St. Cloud Agreement (see " – Electric
Service Territory" above), OUC is also currently responsible for approximately 56 miles of St.
Cloud's transmission system including the 69 kV interconnection from St. Cloud's Central
Substation to Kissimmee Utility Authority's Carl Wall Substation, and a 230 kV interconnection
from St. Cloud's East Substation to Duke's Holopaw Substation. OUC's transmission and
distribution system is not covered by property insurance since such coverage is generally not
available.
Reliability
OUC's Electric System has long maintained leading statistics with respect to the
reliability of OUC's energy delivery. OUC's strong performance in reliability fosters the
generation of Revenues for the System while keeping Operation and Maintenance costs
consistent with budgeted levels.
The Stanton Energy Center continues to maintain an Equivalent Availability Factor
("EAF") above the national average and an Equivalent Forced Outage Rate ("EFOR") below the
national average. The following charts show EAF and EFOR data for Stanton Energy Center
Units 1 and 2 for the 12-month period beginning December 2013 and ending November 2014.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
38
Equivalent Availability Factor
Stanton Energy Center Units 1 & 2
Running 12 Month Equivalent Availability Factor
90%
89%
88%
87%
86%
85%
84%
83%
82%
81%
80%
Dec-13
Jan-14
Feb-14 Mar-14 Apr-14 May-14 Jun-14
Year Ending EAF
SEC Units 1 & 2
Jul-14
Aug-14 Sep-14
Oct-14
Nov-14
National Average
Note: National averages are calculated based on a twelve-month rolling average.
Source: OUC.
Equivalent Forced Outage Rate
Stanton Energy Center Units 1 & 2
Running 12 Month Equivalent Forced Outage Rate
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14
Year Ending EFOR
SEC Units 1 & 2
National Average
Note: National averages are calculated based on a twelve-month rolling average.
Source: OUC.
The following charts show EAF and EFOR data for Stanton Energy Center Unit B
compared to national averages for the 12-month period beginning December 2013 and ending
November 2014.
39
Equivalent Availability Factor
Stanton Energy Center Unit B
Running 12 Month Equivalent Available Factor
95%
94%
93%
92%
91%
90%
89%
88%
87%
86%
85%
84%
83%
82%
81%
80%
Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14
Year Ending EAF
SEC Unit B
Note: National averages are calculated based on a twelve-month rolling average.
Source: OUC.
Equivalent Forced Outage Rate
Stanton Energy Center Unit B
Running 12 Month Equivalent Forced Outage Rate
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
-1%
Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14
Year Ending EFOR
SEC Unit B
Note: National averages are calculated based on a twelve-month rolling average.
Source: OUC.
OUC continues to provide reliable distribution performance. The following tables reflect
(i) a comparison of OUC's reliability index based on average minutes of service interruption per
customer and (ii) average length of service restoration, against other power utilities in Florida for
calendar years 2009 through 2013.
40
Average Minutes of Service Interruption
(per Customer)
160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
OUC
FPL
2009
Source:
Duke
2010
2011
Gulf
2012
TECO
2013
Investor Owned Utilities' Data Source - Florida Public Service Commission and OUC.
Average Length of Service Restoration
(in Minutes)
250.0
200.0
150.0
100.0
50.0
0.0
OUC
FPL
2009
Source:
Duke
2010
2011
Gulf
2012
TECO
2013
Investor Owned Utilities' Data Source - Florida Public Service Commission and OUC.
Electric Rates
OUC has full authority to establish and change retail rates for electric service. Typically
OUC performs annually a rate adequacy study for electric operations for a determination of
revenue requirements. The rate adequacy study is periodically reviewed by independent
41
consultants as to the propriety of theory and appropriateness of amounts. See "OTHER
REGULATORY MATTERS — Florida Public Service Commission" herein for a discussion of
regulation by the FPSC of the "rate structure" of municipally owned electric utilities). Also see
"SECURITY FOR THE SERIES 2015A BONDS – Rate Covenant" herein for a discussion of
OUC's rate covenant set forth in the General Bond Resolution.
OUC implemented a fuel rate increase effective October 1, 2008 which caused bills to
increase approximately 6.4% for residential customers and between 6.1% and 12.4% for
commercial customers. An additional rate increase for retail electric service was implemented
by OUC effective March 1, 2009 in response to increased operating and fuel costs, which
resulted in an increase of approximately 13.7% for residential customers and between 11.4% and
15.4% for commercial customers. Electric rates did not increase during Fiscal Years 2010 and
2011. Following fuel rate increases in 2008 and 2009, and no change in 2010 or 2011, OUC
reduced its fuel charge rate by 11% effective March 1, 2012, thus lowering electric rates in the
overall bill by 4% for residential customers and between 4% and 5.3% for commercial
customers. These decreases were a result of lower natural gas cost incurred by OUC. OUC
lowered its rates a second time effective October 1, 2012. This rate reduction resulted from
OUC's internal cost-cutting initiatives and budget reductions. The rate decrease reduced the
average OUC residential customer bill to $109.43 a month for 1,000 kilowat hours (kWh), a
savings of nearly five percent. The average OUC commercial customer saw a rate reduction of
approximately 2.8%. OUC does not presently anticipate any electric rate changes in Fiscal Year
2015.
A comparison of electric bills as of January 1, 2015, for selected Florida utilities are as
follows (excludes all taxes):
Orlando Utilities Commission
Electric Rate Comparison(1)
Residential
FPL(1)
Lakeland Electric & Water
Tampa Electric Company
OUC
JEA
Duke Energy Florida
Gainesville Regional Utility
_____________________________
(1)
Florida Power and Light.
Source: OUC.
1,000 kWh
$ 97.08
105.49
105.76
109.43
115.96
122.00
140.50
Non-Demand
(GSND)
1,500 kWh
$151.79
162.54
146.64
170.74
167.25
186.40
250.00
Demand
(GSD2-SEC)
150 kW
54,750 kWh
$4,627
4,850
4,850
4,980
5,603
5,368
7,729
Large Demand
(GSLD-PRI)
14,000 Kw
7,051,800 kWh
$513,915
571,148
563,767
595,078
665,259
636,454
961,962
As of OUC's most recent Fiscal Year end, September 30, 2014, the ten largest electric
customers accounted for approximately 18.2% of OUC's retail sales revenues. The top ten
customers are widely diversified, spanning six different business segments. OUC's largest
electric customer accounts for approximately 3.3% of OUC's total electric retail sales. Due to
seasonal variations related to electric consumption by OUC customers, these figures are updated
on an annual basis.
42
CERTAIN FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY
The information set forth in this section is intended to provide a general overview of
certain material and relevant factors that could directly or indirectly impact OUC's Electric
System. The information is provided as of the date of this Official Statement. OUC does not
purport that the information contained herein is a fully exhaustive listing of the material and
relevant factors that could directly or indirectly impact OUC's Electric System.
General
The electric utility industry has been, and in the future may be, affected by a number of
factors which could have an impact on the financial condition of an electric utility such as the
Electric System. These factors likely would affect individual utilities in different ways. Such
factors include, among others: (a) effects of compliance with changing environmental, licensing
and regulatory requirements, (b) regulatory changes and changes that might result from a
national energy policy, (c) uncertain access to low cost capital for replacement of aging fixed
assets, (d) increases in operating costs, (e) effects of competition from other suppliers of
electricity and (f) issues relating to the reliability of electric transmission systems and grids.
The future financial condition of the Electric System could be adversely affected by,
among other things, legislation, environmental and other regulatory actions promulgated by
applicable federal, state and local governmental agencies. Future changes to new and existing
regulations may substantially increase the cost of electric service by requiring changes in the
design or operation of existing or new facilities. OUC cannot predict future policies such
agencies may adopt.
Federal Initiatives under the Energy Policy Act of 1992
The Energy Policy Act of 1992 (the "1992 Energy Act") made fundamental changes in
the federal regulation of the electric utility industry, particularly in the area of transmission
access. The purpose of these changes, in part, was to bring about increased competition in the
wholesale electric power supply market. These changes have increased competition in the
electric utility industry.
With the passage of the 1992 Energy Act, the United States Federal Energy Regulatory
Commission (the "FERC") was given authority to direct utilities to make their transmission
systems available for use by others at rates and terms comparable to the owners' uses of their
own systems. In particular, the 1992 Energy Act provides the FERC with the authority, upon
application by an electric utility, federal power marketing agency, or other power generator, to
require a transmitting utility to provide transmission services to the applicant essentially on a
non-discriminatory cost of service basis. Municipally owned electric utilities are "transmitting
utilities" for purposes of these provisions of the 1992 Energy Act. This "open access"
environment has provided an expanded and more competitive market for both generators and
wholesale purchasers of electricity, and such increased competition is expected to continue in the
future.
In April 1996, FERC issued Order No. 888 and Order No. 889. Order No. 888
(a) required the provision of open access transmission services on a non-discriminatory basis by
43
all jurisdictional utilities by requiring all such utilities to file tariffs that offer other entities
seeking to effect wholesale power transactions the same transmission services they provide
themselves, under comparable terms and conditions, and, (b) required non-jurisdictional utilities
(including municipal and consumer-owned utilities) that purchase transmission service from
FERC-jurisdictional utilities under open access tariffs and that own or control transmission
facilities to, in turn, provide open access service to the transmitting utility under terms that are
comparable to the service that the non-jurisdictional utility provides itself. Order No. 888 thus
adopted the pro forma open access transmission tariff ("OATT") in the transmission planning
and service process. Order No. 888 also included provisions which, in effect, would permit
utilities to recover so-called "stranded costs" for generating and other facilities from wholesale
customers of a utility who opt to purchase from other power suppliers. Order No. 889 (a)
implemented standards of conduct for utilities that offer open access transmission services to
ensure that transmission owners and their affiliates do not have an unfair competitive advantage
in using transmission to sell power, and (b) required those utilities to establish an electronic
"Open Access Same-time Information System" ("OASIS") to post available capacity information
and transmission rates on the internet. Since 1997, OUC has maintained a "safe harbor" OATT
with FERC.
In February 2007, FERC issued Order No. 890 reforming portions of Orders No. 888 and
Order No. 889. Order No. 890 reforms include: (a) greater consistency and transparency in
available transmission capacity calculations; (b) open, coordinated and transparent planning; (c)
reforms of energy imbalance penalties; (d) reform of rollover rights policy; (e) clarification of
tariff ambiguities; and (f) increased transparency and customer access to information. FERC
reaffirmed several of the core elements of Order No. 888, in Order No. 890 including: (a) the
comparability requirement wherein third-party users of the transmission system must receive
service in a manner comparable to the transmission owner's use of the system; (b) the
continuance of protections for native load customer's transmission service rights; and (c) FERC's
approach to reciprocity for non-jurisdictional transmission owners which includes OUC.
On July 13, 2007, OUC filed an amended and restated OATT in Docket No. NJ07-6-000
incorporating the modifications required by FERC Order No. 890 that conform to its nonjurisdictional nature. A supplemental filing on Docket No. NJ07-6-000 was made on December
7, 2007 to include the Order No. 890, Attachment K Planning Process ("Attachment K").
In March 2007, FERC issued Order No. 693 entitled "Mandatory Reliability Standards
for the Bulk-Power System" or "Reliability Standards Order." In this order, FERC approved 83
of 107 proposed reliability standards developed by "NERC", which FERC has certified as the
Electric Reliability Organization ("ERO") responsible for developing and enforcing these
mandatory reliability standards. The Reliability Standards Order requires NERC to submit
changes to certain of the approved standards in the future. The Reliability Standards Order
applies to all users, owners and operators of the bulk-power system within the United States
(other than Alaska or Hawaii), including OUC. The mandatory standards became effective in
June 2007. In addition, in April 2007, FERC issued an order in Docket Nos. RR06-1-004, et al.
approving the compliance monitoring and enforcement programs to be used by the ERO and
eight regional entities, including FRCC, to monitor, assess and enforce compliance with FERC's
approved reliability standards. The ERO has delegated certain authority to FRCC to propose and
enforce reliability standards within the FRCC region, which includes OUC. The issuance of
44
these orders enabled the enforceability of the FERC approved reliability standards beginning
with the summer of 2007.
The FRCC completed an audit of OUC in February 2009 and found OUC to be in
substantial compliance with the reliability standards which were tested. The reliability standards
which were tested represent approximately 23% of the current reliability standards. OUC has
implemented a quality assurance program to comply with all Mandatory Reliability Standards for
the Bulk-Power System. However, if OUC were to be found non-compliant with the Reliability
Standards Order in subsequent audits, the FRCC is authorized under federal law to order
corrective measures and to levy financial penalties of up to $1,000,000 per day, per violation.
The FRCC completed an audit of OUC in March 2012 and found OUC to be in full
compliance with the reliability standards which were tested. OUC is responsible for being
compliant with over 1,000 individual requirements at any given time, with audits historically
reviewing about 25% at any given audit. OUC has implemented a rigorous Internal Compliance
program to monitor and internally enforce Mandatory Reliability Standards for the Bulk-Power
System to ensure compliance. However, if OUC were to be found non-compliant with the
Reliability Standards Order in subsequent audits, the FRCC is authorized under federal law to
order corrective measures and to levy financial penalties of up to $1,000,000 per day, per
violation. OUC as a Transmission Operator is on a three year audit cycle, with our next audit
scheduled for the summer of 2015.
In July 2011, FERC issued Order No. 1000 reforming the transmission planning and cost
allocation requirements. The purpose of Order No. 1000 was to benefit consumers by enhancing
the grid's ability to support wholesale power markets and to ensure transmission services are
provided at just and reasonable rates. Order No. 1000 requires, for the first time, that electricity
transmission providers engage in region-wide transmission planning, and further mandates that
such planning consider how federal and state public policies affect transmission needs. FERC
issued Order No. 1000-A and Order No. 1000-B, in May 2012 and October 2012, respectively,
which upheld the Order No. 1000 reforms to transmission planning and cost allocation.
In October 2012, OUC, FPL, Duke, and Tampa Electric Company (collectively, the
"Florida Sponsors"), individually filed Attachment Ks with the FERC. Although OUC is not
subject to FERC's jurisdiction, it submitted its filing for being affected through revisions to the
transmission planning process as set forth in OUC's OATT filed with FERC under the safe
harbor rules of FERC Order No. 888. In June 2013, the FERC issued an Order stating that the
Florida Sponsors partially complied with Order No. 1000 requirements and additionally required
filings to address shortcomings in cost allocation and other areas (the "2013 Order"). In August
2013, the Florida Sponsors requested a rehearing for further consideration on the 2013 Order and
filed a joint motion for extension of time to submit further compliance filings related to the 2013
Order which were granted in September 2013. The Florida Sponsors submitted Order No. 1000
regional compliance filings in December 2013 and the FERC issued an Order on Rehearing and
Compliance in September 2014 (the "2014 Order") which responded to the December 2013
Filing. In November 2014, the Florida Sponsors provided further Order No. 1000 regional
compliance filings pursuant to the 2014 Order.
45
In July, 2013, the Florida Sponsors also submitted their filings to comply with the
Interregional Compliance. The Florida Sponsors and the interregional interface Southeastern
Regional Transmission Planning (SERTP) region were able to reach complete agreement on the
development and parallel tariff language to implement the requirements of Order No. 1000 on
their mutual seam. FERC published this filing in the Federal Register and asked for any
interventions or protests. Subsequently, in September 2013, Florida Municipal Power Agency
and Seminole Electric Cooperative, Inc. filed a joint motion to intervene and protest Florida
Sponsors' interregional filing. Natural Resources Defense Council, Sierra Club, Southern
Environmental Law Center, and Sustainable FERC Project also filed a motion to intervene and
protest in the interregional Order No. 1000 compliance process for SERTP and its neighboring
regions, including Florida.
Energy Policy Act of 2005
The 2005 Energy Policy Act (the "2005 Energy Act") was signed into law by President
Bush in 2005. The 2005 Energy Act addressed, among other things: (a) energy efficiency; (b)
appliance standards; (c) low income energy assistance programs; (d) renewable energy; (e)
nuclear energy; and (f) a number of issues relating to electricity. The 2005 Energy Act also
provided incentives for oil and gas production and encouraged deployment of clean coal
technology. The electricity portion of the bill addressed the following areas: (a) the need for
modernization of existing transmission facilities, transmission rate reform, and improved
operations of existing transmission facilities; (b) electric reliability standards; (c) Public Utility
Holding Company Act ("PUHCA") and Public Utility Regulatory Policies Act amendments
(including repeal of PUHCA); (d) market transparency, round trip trading prohibition and
enforcement; and (e) merger reform. The 2005 Energy Act imposes mandatory electric
reliability standards to be defined through the NERC and enforced by FERC.
The 2005 Energy Act also provided for tax incentives that further encourage production,
conservation and the use of technology to stabilize energy prices and protect the environment.
OUC may continue to explore the opportunities for financial assistance from the funds
appropriated in the 2005 Energy Act for energy conservation, renewable energy, and clean coal
technology. OUC has launched a series of renewable energy programs. See "ELECTRIC
SYSTEM – Renewable Energy Program" herein.
Florida Energy Regulation
The Florida Legislature in its 2006 Legislative Session enacted a comprehensive energy
bill, codified as Sections 377.801-377.804, Florida Statutes, the "Florida Energy and Climate
Protection Act." Among other things, the Florida Energy and Climate Protection Act (a)
required the FPSC to specifically consider the benefits of fuel diversity and fuel supply reliability
in addressing the need for new power plants; (b) amended Florida's Power Plant Siting Act and
Transmission Line Siting Act to streamline the time required to complete certification of those
facilities; (c) provided for an alternative cost-recovery mechanism for nuclear power plants; and
(d) required the FPSC to conduct a review to determine methods to enhance the reliability of
Florida's electric transmission and distribution grids during extreme weather events.
46
On July 13, 2007, the Governor of Florida signed three executive orders pertaining to
climate change and greenhouse gas emissions. The Florida Energy, Climate Change and
Economic Security Act of 2008 (the "Florida Energy Act of 2008") described below, which was
approved by Governor Crist on June 25, 2008, gave legislative authority to some of Governor
Crist's Executive Orders.
Executive Order No. 07-126 established, among other things, target amounts and
schedule dates for the reduction of greenhouse gas emissions for State agencies and departments.
In addition, this Order establishes guidelines pertaining to transportation related energy use and
greenhouse gas emissions associated with State agency owned or operated automobiles and light
trucks.
Executive Order No. 07-127 established, among other things, greenhouse gas emissions
targets for the State and directs various departments and agencies of the State to adopt rules for
the maximum allowable emission levels of greenhouse gases for electric utilities with the
following minimum reductions: by 2017, emissions not greater than year 2000 utility sector
emissions; by 2025, emissions not greater than year 1990 utility sector emissions; by 2050,
emissions not greater than 20% of year 1990 utility sector emissions. In addition, this Order
provides for the adoption of California motor vehicle emission standards; the revision of building
codes, and appliance and lighting standards; and the FPSC to initiate proceedings no later than
September 2007 to require utilities to produce at least 20% of their electricity from renewable
resources; and to provide for "net metering" applicable to certain customers who generate
electricity from renewable resources.
Executive Order No. 07-128 created the Florida Governor's Action Team on Energy and
Climate Change (the "Team") and required the Team to develop a comprehensive Energy and
Climate Change Action Plan to achieve or surpass the targets for State wide reductions in
greenhouse gas emissions set forth in Executive Order No. 07-127.
The Florida Energy Act of 2008, among other things: (a) required the FPSC to develop
rules requiring electric utilities to increase the use of renewable fuels; (b) expanded the air
quality, energy and land use goals of the State Comprehensive Plan to include the development
of low carbon emitting electric power plants, the reduction of atmospheric carbon dioxide, the
promotion of the use and development of renewable energy resources and provides for the siting
of low carbon emitting electric power plants, including nuclear plants; (c) revised provisions
relating to innovation incentive awards to include "alternative and renewable energy" products
and specifies eligibility requirements for such products; (d) authorized the Florida Energy and
Climate Commission (the "FECC") to allow an investor-owned utility to earn an additional
return on equity for exceeding energy efficiency and conservation goals; (e) required each public
utility, and each municipal electric utility and rural electric utility cooperative that sells
electricity at retail to develop a standardized interconnection and net metering program for
customer-owned renewable generation; (f) required eligible systems under the Solar Energy
System Incentives Program to comply with the Florida Building Code; (g) established the
"Florida Green Government Grants Act," providing for grants to be awarded to local
governments in the development of programs that achieve green standards; (h) exempted an
electric utility from obtaining certification under the Florida Electrical Power Plant Siting Act
before constructing facilities for a power plant using nuclear materials as fuel; (i) required the
47
Florida Department of Environmental Protection ("FDEP") to address at a certification hearing
the issue of compliance with land use plans and zoning ordinances for a proposed substation
located in or along an alternate corridor; (j) required that the Florida Building Commission select
the most recent International Energy Conservation Code as a foundation code, and provides for
modification of that code by the commission under certain circumstances; (k) required the FDEP
to adopt rules relating to the placement of and access to aerial and underground electric
transmission lines; (l) required the FPSC to adopt goals encouraging the development of
demand-side renewable energy systems; (m) required the FPSC to establish rules relating to cost
recovery of new, expanded or relocated transmission lines for a nuclear power plant; and (n)
repealed the statute that required the FPSC to report to the Governor and the Legislature on
utility revenue decoupling.
The FPSC submitted a Renewable Portfolio Standard draft rule to the Florida Legislature
in early 2009. The proposed rule called for 7% renewable energy by January 2013, 12% by
2016, 18% by 2019, and 20% by the end of 2020. No action has been taken by the Florida
Legislature or the FDEP on the proposed rule. OUC does not presently anticipate additional
action by the current Legislature.
However, the Florida Legislature has begun to dismantle some of the programs listed
above. Effective July, 1 2012, the Department of Agriculture and Consumer Services ("DACS")
replaced the FECC for implementation responsibilities under the Florida Energy Act of 2008. In
addition, FDEP is currently on record that it is not moving forward with any new greenhouse gas
("GHG") rules or programs. The Legislature has directed that all regulatory agencies review and
"sunset" obsolete rules and has required that all new regulations with fiscal impacts over a
certain threshold be subject to legislative approval before becoming effective. This new
legislative oversight makes it less likely that state agencies will be able to enact more restrictive
air and water regulations in the immediate future.
In addition, in 2012, Florida adopted the Florida Energy Act of 2012. Among other
things, this act: (a) appropriates funds to evaluate whether the 1980 Florida Energy Efficiency
and Conservation Act remains in the public interest, (b) creates a sales tax exemption for
equipment used in the distribution of renewable fuels, (c) provides a renewable energy
technology investment tax credit against the corporate income tax based on investment in
equipment to be used in production, storage, and distribution of renewable fuels, and (d) creates
a renewable energy production credit. OUC cannot predict at this time whether any additional
state legislation or rules will be enacted that will affect OUC's operations and, if such laws or
rules are enacted, what future costs OUC might incur because of such action.
Retail Wheeling
Pursuant to Order No. 2000 and other mandates of the FERC, full open access to the
electric transmission network, including OUC's, is now available to all electric providers seeking
to transmit electricity for resale. The authority to order retail wheeling, which allows a retail
customer to be located in one utility's service area and to obtain power from another utility or
non-utility source, is presently specifically excluded from the enhanced authority granted to the
FERC under the 1992 Energy Act. However, while the states may have authority to determine
whether retail wheeling will be permitted, FERC has determined that it has jurisdiction over the
48
rates, terms and conditions of retail wheeling but has declined to exercise such authority.
Several states have implemented or are in the process of implementing varying degrees of retail
wheeling. However, this is not currently an issue in Florida since to date no legislation regarding
retail wheeling has been approved by the Florida Legislature. If and when retail competition will
be implemented and how far competition will be extended in Florida is uncertain at this time. As
a result of these market forces, OUC is continuing to pursue initiatives and strategies which will
result in OUC maintaining its favorable market position.
OTHER REGULATORY MATTERS
Florida Public Service Commission
The FPSC has limited jurisdiction over municipal electric utilities, consisting primarily of
the authority to prescribe uniform systems and classifications of accounts, to require electric
power conservation and reliability, to approve territorial agreements, to settle territorial disputes,
to approve the need for new steam-electric power plants over 75 megawatts and transmission
lines and to approve rate structures but does not have jurisdiction to set rate levels for such
municipal utilities, including OUC. The Florida Supreme Court, while continuing to hold that
the FPSC has no authority to regulate municipal utility "rates," that is the specific dollar amounts
charged by a municipal electric utility for specific services, has held that the FPSC has
jurisdiction and authority to regulate the "rate structure" of a municipal electric utility, that is, the
classification system used to justify charging different rates to different classes of customers. It
is not known at this time how broadly the Court may ultimately interpret "rate structures" to
permit additional regulation of rates of municipal utilities, and accordingly, OUC cannot predict
whether or how, if at all, any such future decision might impact OUC.
Pursuant to the Florida Energy Efficiency and Conservation Act ("FEECA"), the FPSC
exercises jurisdiction over conservation programs of electric utilities (including OUC) by
encouraging utilities to increase the efficiency of energy consumption and to limit the growth of
energy consumption and weather sensitive peak demands. The FPSC has adopted a series of
rules and requirements with respect to energy conservation efforts as a means to comply with the
FEECA. The rules require utilities to set specific goals for reducing the growth rate of demand
and energy and to submit ten year conservation plans. This includes implementing cost-effective
conservation programs and submitting reports by program category and by customer
classification. OUC has taken a pro-active approach to these rules and OUC's goal and
conservation achievements meet or exceed the stated requirements.
Other Climate Change Issues
In April 2007, in a case involving automobile emissions, the U.S. Supreme Court ruled
that the Environmental Protection Agency ("EPA") has the authority to regulate GHG emissions
and directed the EPA to make a determination as to whether such emissions endanger the public
health or welfare. On July 30, 2008, the EPA issued an advance notice of public rulemaking
presenting information relevant to, and soliciting public comment on, the potential regulation by
the EPA of GHG emissions under the federal Clean Air Act. On April 17, 2009, the EPA issued
a proposed finding declaring carbon dioxide and five other heat-trapping gases to be pollutants
49
that endanger public health and welfare. The EPA also proposed to find that the combined
emissions of carbon dioxide, methane, nitrous oxide, and hydrofluorocarbons from new motor
vehicles and motor vehicle engines contribute to the atmospheric concentrations of these key
greenhouse gases and hence to the threat of climate change. On December 7, 2009, the EPA
issued an endangerment finding related to carbon dioxide and five other heat-trapping gasses.
On December 23, 2010, EPA announced that it had reached an agreement with states and
environmental groups to propose greenhouse gas limits for power plants and petroleum refineries
using new source performance standards. Beginning January 2, 2011, EPA began implementing
greenhouse gas permitting for the State of Florida.
On June 23, 2014, the U.S. Supreme Court issued its decision in Utility Air Regulatory
Group v. EPA (No. 12-1146). The Court said that EPA may not treat greenhouse gases as an air
pollutant for purposes of determining whether a source is a major source required to obtain a
PSD or title V permit. The Court also said that PSD permits that are otherwise required (based
on emissions of other pollutants) may continue to require limitations on greenhouse gases
emissions based on the application of Best Available Control Technology (BACT). The EPA is
currently evaluating the implications of the Court's decision and awaiting further action by the
U.S. Courts. OUC cannot predict at this time the full impact of the decision on PSD and Title V
permitting regulations or when the EPA will provide relevant guidance and information on GHG
permitting requirements that will affect OUC's operations and what future costs OUC might
incur because of such action.
Given the increased national and international attention to climate change, additional
federal and state legislative or regulatory action in this area remains likely. The outcome in
terms of specific requirements and timing is uncertain. Compliance with the GHG emission
reduction requirements could require OUC, at significant cost, to implement carbon capture and
sequestration technology, purchase allowances or offsets, change or modify technology used at
OUC facilities, or retire high-emitting generation facilities and replace them with lower-emitting
generation facilities. The estimation of costs of compliance with any GHG legislation is subject
to significant uncertainties because it is based on several interrelated assumptions and variables.
OUC cannot predict the impact of any federal or state legislative or regulatory proposals
regarding GHG control strategies given the lack of certainty over the scope of any such
strategies.
Future Legislation or Regulations
From time to time, additional federal or state legislation or regulations affecting the
electric utility industry may be enacted. The impact of any new legislation or regulations, or
changes to existing legislation or regulations, could affect OUC's operations. OUC cannot
predict whether any additional legislation or regulations will be enacted which will affect OUC's
operations, and if such laws or regulations are enacted, what the costs to OUC might be in the
future because of such actions.
Environmental, Conservation and Other Regulations and Permitting Requirements
Operations of OUC are subject to continuing environmental, conservation and other
regulation and permitting requirements by federal, state and local authorities. OUC believes that
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its operations are currently in substantial compliance with all such regulations and permitting
requirements. Federal, State of Florida and local standards and procedures that govern control of
the environment, conservation and system operations can change. These changes may arise from
legislation, regulatory action, and judicial interpretations regarding the standards, procedures and
requirements for compliance and the issuance of permits. Therefore, there is no assurance that
the units in operation, under construction, or contemplated will remain subject to the regulations
that are currently in effect. Furthermore changes in clean air laws and environmental standards
may result in increased capital and operating costs.
Rules and proposals of current concern to OUC are the Cross-State Air Pollution Rule
(CSAPR), the Mercury and Air Toxics Standards Rule, the proposed Coal Combustion Residuals
Rule (CCR or Coal Ash Rule), the Climate Action Plan (as defined herein), and the Nutrients
Water Quality Standards.
Cross-State Air Pollution Rule (CSAPR). On July 6, 2011, CSAPR was finalized by the
EPA. The rule is intended to force the reduction of emissions that contribute to ozone and fine
particulate pollution by reducing sulfur dioxide (S02) and mono-nitrogen oxide (NOx)
emissions. EPA estimated that by 2014, the rule would reduce power plant SO2 emissions by
73% and power plant NOx emissions by 54%. The timing of CSAPR's implementation has been
affected by a number of court actions. On December 30, 2011, CSAPR was stayed prior to
implementation. On April 29, 2014, the U.S. Supreme Court issued an opinion reversing an
August 21, 2012 D.C. Circuit decision that had vacated CSAPR. Following the remand of the
case to the D.C. Circuit, EPA requested that the court lift the CSAPR stay and toll the CSAPR
compliance deadlines by three years. On October 23, 2014, the D.C. Circuit granted EPA's
request. Accordingly, CSAPR Phase 1 implementation is now scheduled for 2015, with Phase 2
beginning in 2017. Prior to the passage of CSAPR, OUC started to implement the necessary
requirements to comply with the CAIR Rule. OUC expects that these efforts will aid in
complying with the applicable provisions of CSAPR when the initial compliance period begins
for Florida during the ozone season (May 1 – September 30) of 2015.
Mercury and Air Toxics Standards. In February 2012, EPA published the final Mercury
and Air Toxics Standards (the "MATS"). The MATS established facility-specific performance
standards based on "maximum achievable control technology" (MACT) for hazardous air
pollutants (HAP's) from coal and oil-fired power plants. The MATS rule sets rigorous
performance standards based on HAP emissions control levels achieved by the best 12% of
existing sources within the source category, electric generating units (EGU). The rule is
intended to reduce emissions of heavy metals, including mercury, and acid gases, including
Hydrochloric Acid. In addition, EPA promulgated New Source Performance Standards that
include revised numerical emission limits for particulate matter, sulfur dioxide and nitrogen
oxides for new or reconstructed boilers that burn fuels to produce steam. The MATS are
required to be achieved not later than April 16, 2015, with a possible one year extension on a
case-by-case basis for technology installation. In August 2012, EPA issued a partial stay of
select parts of the MATS that applied to new power plants so that it could consider additional
technical information. In April 2013, the EPA published the final rule with respect to updated
emission limits for new power plants under the MATS. The updates only applied to future
power plants; did not change the types of state-of-the-art pollution controls that they are expected
51
to install; and did not significantly change costs or public health benefits of the rule. In April
2014, the D.C. Circuit upheld MATS for power plants.
In November 2014, the EPA completed its reconsideration of the startup and shutdown
provisions applicable to coal- and oil-fired electric utilities under the MATS. This final rule
included updated definitions and work practice standards. In addition, EPA also adjusted certain
monitoring and testing requirements related to periods of startup and shutdown.
OUC has continued to implement actions necessary to meet the MATS requirements.
OUC expects these efforts will aid in complying with the applicable provisions of the MATS
rule when the compliance period begins on April 16, 2015.
Coal Combustion Residuals. In 2010, EPA proposed rules regulating the disposal of coal
ash via the Coal Combustion Residual Rule (the "CCR Rule"). The CCR Rule was finalized on
December 19, 2014. The CCR Rule establishes technical requirements for CCR landfills and
surface impoundments under Subtitle D of RCRA. OUC will continue to implement the actions
necessary to comply with the applicable provisions of the final CCR Rule.
Climate Action Plan. On June 25, 2013, President Obama announced a series of
executive actions to reduce carbon pollution, prepare the U.S. for the impacts of climate change
and lead international efforts to address global climate change (the "Climate Action Plan"). As
part of the Climate Action Plan, President Obama issued a Presidential Memorandum directing
the EPA to work expeditiously to complete carbon pollution standards for the power sector.
The EPA released a proposed Carbon Pollution Standard rule for new power plants on
March 27, 2012 (the "2012 Proposal"). The proposed rule was intended to limit new fossil fuelfired power plants to 1,000 pounds of carbon dioxide per megawatt-hour. While the focus on
this standard was on new construction, there was industry concern that the standard could be
interpreted to apply to major construction projects at existing power plants as well. On
September 20, 2013, the EPA issued a new proposal for carbon pollution from new power plants.
After considering more than 2.5 million comments from the public about the 2012 Proposal and
consideration of recent trends in the power sector, the EPA is changing some aspects of its
approach and is proposing to set separate standards for natural gas-fired turbines and coal-fired
units. To date, no final Carbon Pollution Standard rule has been issued.
On June 18, 2014, the EPA published a proposed rule to regulate "CO2" emissions from
existing electric utility generating units. Under this proposed rule, the EPA calculated state-bystate CO2 emission rate targets to be achieved by 2030 based on measures for CO2 emissions
reductions the EPA believes are achievable. For Florida, the proposed 2030 CO2 emissions goal
represents a 38% reduction in the rate of CO2 emissions versus the 2012 CO2 emissions rate.
This emission rate target incorporates an assumption that, by 2030, generation from renewable
energy will represent 10% of the total statewide generation. Although the EPA is responsible for
setting the goal, each state will be responsible for developing and submitting a plan to meet the
goal and is not required to implement the measures used by the EPA to calculate individual state
CO2 emission rate targets. In November 2014, OUC provided comments to the proposed rule to
EPA.
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At this time, OUC cannot predict what the new standards will be. OUC continues to
monitor and review the impact of these rules on the equipment procurement and installation of
projects that would ensure compliance with these requirements. Some of OUC's projects may be
installed, canceled or delayed due to such legislation and rulemaking.
Nutrients Water Quality Standards. In 2009, the EPA determined that new or revised
water quality standards in the form of numeric water quality criteria for nitrogen and phosphorus
pollution were necessary to meet the requirements of the Clean Water Act in Florida.
Subsequently, the EPA entered into a Consent Decree with certain environmental advocacy
groups, which established a schedule for EPA to propose and promulgate numeric nutrient
criteria for Florida's lakes, springs, flowing waters, estuaries, and coastal waters (except for the
South Florida region). The EPA published the final "Water Quality Standards for the State of
Florida's Lakes and Flowing Waters" rule in December 2010, which set numeric limits, or
criteria, on the amount of nutrient pollution allowed in Florida's lakes, rivers, streams and springs
(the "Inland Rule"). The EPA received several legal challenges to the Inland Rule. On February
18, 2012 a court invalidated EPA's numeric nutrient criteria for Florida's streams and EPA's
downstream protection value for lakes that are meeting the lake numeric criteria established in
the Inland Rule. The court ordered EPA to re-propose criteria for these waters. In 2012, the
EPA promulgated several extensions and proposed to postpone the applicability of certain
sections of the Inland Rule to allow time to gain clarity on the implementation of Florida's rule.
In accordance with the court's order, and because Florida's rule did not cover a subset of flowing
waters, EPA proposed a rule for uncovered waters on November 30, 2012.
In June 2013, the EPA formally approved the "Implementation of Florida's Numeric
Nutrient Standards" dated April, 2013 submitted by FDEP and made a revised determination
regarding Florida numeric nutrient standards that removed all fresh waters from the previous
determination. EPA also filed a Motion to modify the Consent Decree. A January 7, 2014 ruling
by the U.S. District Court for the Northern District of Florida allows EPA to withdraw and
discontinue work overlapping federally promulgated criteria so Florida can implement their
state-adopted, EPA-approved criteria to address nutrient pollution in Florida's waters. On April
2, 2014, EPA published its proposal to withdraw the Inland Rule and discontinue its work on
three 2012 proposed rules. The comment period for the proposal closed on June 2, 2014. EPA
responded to all public comments, and finalized the withdrawal of the Inland Rule on September
17, 2014. As confirmed in a letter from FDEP, EPA's withdrawal of federal criteria allows
Florida's numeric nutrient criteria to become effective as the only rules covering Florida water
bodies.
When effective, the various newly adopted numeric nutrient criteria could result in costs
related to compliance for industrial and municipal wastewater dischargers. Given the uncertainty
as to the applicable standards, OUC cannot presently predict the extent of the costs OUC may
incur related to compliance with any rules enacted to implement numerical nutrient standards.
Nuclear Liability Insurance
The Price-Anderson Act, enacted in 1957 as an amendment to the Atomic Energy Act of
1954, limits the public liability of a licensee of a nuclear power plant for a single nuclear
incident, using a combination of private insurance and retrospective assessments against all
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licensees. FPL (in the case of St. Lucie Unit No. 2) and Duke Energy (in the case of Crystal
River Unit No. 3) carry such private insurance (in the amounts of $375.0 million and $500.0
million respectively) and agreements of indemnity for the benefit of OUC. The owners of a
nuclear power plant could be assessed to pay a maximum payout of $127.0 million per unit per
incident at any nuclear reactor in the United States, payable at a rate not to exceed $19.0 million
per incident per year. OUC would be liable for its 6.08951 percent share of uninsured losses (in
the case of St. Lucie Unit No. 2) and 1.6015 percent share of uninsured losses (in the case of
Crystal River Unit No. 3) of any such assessment, to the extent not recovered through rates,
which may have an adverse effect on OUC's financial position.
On behalf of all the co-owners of St. Lucie Unit No. 2 and Crystal River Unit No. 3, FPL
and Duke Energy, respectively, each carry in excess of $1.6 billion of property damage
insurance; however, substantially all insurance proceeds must first be used to satisfy
decontamination and clean-up cost before they can be used for repair or restoration of plants.
Any losses in excess of that amount are self-insured, such that OUC would be responsible for its
pro-rata share of any losses in excess of insurance coverage, which, to the extent not recovered
through rates, may have an adverse effect on OUC.
See "ELECTRIC SYSTEM – Nuclear Energy" herein for a discussion of OUC's nuclear
energy generation.
Nuclear Power Generating Industry
The disposal of radiation materials is a general concern affecting the industry. Under the
Nuclear Waste Act, the Department of Energy ("DOE") is required to construct storage facilities
and to take title to and provide transportation and storage for spent nuclear fuel for a specified
fee. Currently, FPL and Duke are storing spent fuel on-site and, subject to obtaining the required
amendments to each unit's license, plan to provide adequate storage capacity for all their nuclear
units. FPL uses both on-site storage pools and dry storage casks to store spent nuclear fuel
generated at the St. Lucie facility, and estimates that such storage will be adequate to store all
spent nuclear fuel for this facility through the facility's authorized operating license expiration in
2043. Duke previously estimated that it had adequate on-site storage through its authorized
operating license to meet its needs until at least the year 2016. However, Crystal River Unit No.
3 has since been taken offline. See "ELECTRIC SYSTEM – Nuclear Energy" herein.
The requirement by regulatory authorities for development of adequate off-site
emergency plans in the event of an accident. Emergency plans for the sites where St. Lucie Unit
No. 2 and Crystal River Unit No. 3 are located are subject to periodic review by federal and State
of Florida agencies.
Other matters concerning the nuclear power generating industry generally are steam
generator tube and reactor vessel head integrity, plant and safety-related equipment,
susceptibility to earthquake damage, electronic component failure due to heat, steam or radiation
exposure during an accident, and the impact of increased regulatory activities by external
agencies of government, fire protection regulations and insurance. Because of regulation,
engineering practice, or both, the industry is continually updating and modernizing plant
equipment. Such updating and modernization is capital intensive.
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OUC is exploring other options to add more nuclear power to its portfolio.
"ELECTRIC SYSTEM – Nuclear Energy" herein for more information.
See
WATER SYSTEM
Water System
The water section of the System (the "Water System") provides water service to
customers throughout a 200-square-mile service area set forth in a territorial agreement with the
County that expires in May of 2019; subject to automatic renewal for succeeding ten year
periods unless terminated by either party by written notice given at least one year prior to the
next renewal period. The service area encompasses the cities of Orlando, Edgewood and Belle
Isle, plus large portions of unincorporated Orange County. Water is obtained from 32 deep wells
that tap the Floridan Aquifer, a natural source of high quality water, over 1,000 feet below the
surface. Seven state-of-the-art water plants treat the water with ozone for disinfection and
hydrogen sulfide removal. In addition, a repump facility conveys water to the southeast portion
of the service area.
As of September 30, 2014, OUC's customer base included 104,237 residential active
service meters, 14,866 commercial and industrial active service meters and 16,003 irrigation
active service meters. OUC's rate structure consists of a customer charge based on meter size
plus a consumption charge for all water used. As of September 30, 2014, the ten largest water
customers accounted for approximately 10.8% of OUC's water retail sales. The ten largest water
customers are diversified, spanning seven different business segments. OUC's largest water
customer accounts for approximately 2.1% of OUC's total water retail sales. Due to seasonal
variations related to water consumption by OUC customers, these figures are updated on an
annual basis.
Consumptive Use Permit and Other Regulation
In May of 2004, OUC obtained a 20-year consumptive use permit ("CUP") for the Water
System from the St. Johns River Water Management District (the "SJRWMD") which expires in
2023. The CUP allows an annual average of 109.2 million gallons of water use. In a settlement
agreement related to the CUP, OUC is obligated, individually or jointly with the County, to
develop an alternative water source, such as a surface water or brackish water source, to provide
at least 5 million gallons per day of water. Among the CUP requirements, OUC, together with
the City, is also obligated to supply reclaimed water to customers inside of the limits of the City
for irrigation to conserve groundwater resources.
OUC is also working with other utilities to provide regional solutions to water supply
constraints. The anticipated capital costs associated with the CUP for the relevant periods are
incorporated into OUC's capital plan. OUC's estimated capital costs for the next ten years for
reclaimed water and alternative water supply projects are $49,205,000. Estimated capital costs
for the next 20 years, excluding those in the initial ten years, are an additional $62,047,000.
Water System development charges are expected to pay for a significant percent of these costs.
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OUC is also obligated to comply with a settlement agreement related to the CUP with
Lake County, Florida, under which OUC must allow Lake County (or cities contained therein) to
participate in the alternative water source project in which OUC participates. The current CUP
contains 46 conditions of compliance, the violation of which can result in fines, revocation or
shortening of the term of the CUP. OUC's last CUP compliance report was submitted in 2008
and approved in 2010. Section 373.236, Florida Statutes, was amended in July 2010 to require
ten-year compliance reports rather than five-year reports. OUC is currently in substantial
compliance with the conditions of the CUP and the settlement agreements with the County and
Lake County, Florida.
In July 2012, the FDEP and the five water management districts in Florida began
developing rules to streamline and consolidate the consumptive use permitting process, which is
commonly referred to as "CUPcon." As part of the process, the FDEP prepared a guidance
memo for the districts in their approach to compliance reports to relax the reporting requirements
and limit reductions in CUP demand allocations. In order to incentivize conservation of water, if
actual water use is less than permitted water use due to documented implementation of water
conservation measures, the permitted allocation shall not be modified by the district during the
term of the permit. The SJRWMD changed their applicant's handbook in 2014 to incorporate
these changes. These rule changes reduce the applicant's costs and potential risks. OUC's next
compliance report is due in 2018.
OUC recently completed a successful permit modification in 2014 to extend required
reclaimed water project deadlines, including an engineering report and construction, by two
additional years, thus delaying capital costs to OUC. Since the purpose of the reclaimed water
project is to offset environmental impacts from OUC's pumping above 100 mgd, and OUC's
demands are well below 100 mgd due to conservation programs and existing reclaimed water
use, this project is not necessary at this time.
OUC believes that it is likely to have access to an adequate water supply to meet its
customers' needs while the CUP is in effect. OUC has a long-term water strategy to meet our
customers' future water demands by making use of groundwater, reclaimed water, conservation,
and alternative water supplies. These items are included in the 2015 Five-Year Capital Plan.
Water Rates
OUC has full authority to establish and change rates for water service. Typically, OUC
performs annually a rate adequacy study for the Water System for a determination of revenue
requirements. The rate adequacy study is periodically reviewed by independent consultants as to
the propriety of theory and appropriateness of amounts.
A comparison of water bills as of January 1, 2015, for selected Florida utilities are as
follows (excludes all taxes):
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Water Bill Comparison — Residential Customer
10,000 gallons monthly consumption
Inside City
OUC
Lakeland Electric & Water
City of Winter Park
Gainesville Regional Utilities
Orange County
$18.48
27.98
25.90
38.30
19.65
_____________________
Source: OUC.
Outside City
$21.25
37.83
32.34
47.88
19.65
OUC is considering a water rate increase with an overall impact to the customer of
approximately 4-5% in Fiscal Year 2015-2016. However, the structure and actual amount of
such increase has yet to be finalized.
CERTAIN FACTORS AFFECTING THE WATER UTILITY INDUSTRY
The information set forth in this section is intended to provide a general overview of
certain material and relevant factors that could directly or indirectly impact OUC's Water
System. The information is provided as of the date of this Official Statement. OUC does not
purport that the information contained herein is a fully exhaustive listing of the material and
relevant factors that could directly or indirectly impact OUC's Water System.
General
The future condition of the Water System could be adversely affected by, among other
things, legislation, environmental and other regulatory actions promulgated by applicable
federal, state, and local government agencies. Future changes to new and existing regulations
may substantially increase the cost of water service by requiring changes in the design or
operation of existing or new facilities. See "WATER SYSTEM – Consumptive Use Permit and
Other Regulation" herein. OUC cannot predict future policies such agencies may adopt, but is
very involved with these agencies and their current rulemaking. OUC has a Legislative,
Regulatory & Compliance Department headed by a Vice President and multiple Directors and
staff who are on the forefront of new regulations and who work to guide and comment on these
new regulations so they are as positive for OUC as possible.
Environmental Requirements Affecting Water Treatment
The Federal Safe Drinking Water Act, originally passed in 1974 and amended in 1986
and 1996, is enforced by federal and state agencies with responsibility over drinking water
protection. The law requires actions by public water systems to protect drinking water from the
source to the customer's tap. This regulatory oversight applies to the public water systems'
storage, treatment, and distribution facilities, as well as operational practices. In addition, the
Air and Water Pollution Control Act, as amended, along with other programs passed by the
Florida legislature for the restoration and protection of state water quality, provides the statutory
basis for the regulation of most of the aspects of water quality in Florida. It provides FDEP with
57
broad powers and duties to protect and improve water quality throughout the state. These
include the power to classify surface and ground water bodies according to their most beneficial
uses; establish ambient water quality criteria within each classification for various parameters of
water quality; develop standards of quality for wastewater discharges; and implement a permit
system for the operation, construction, or expansion of any installation that may be a source of
water pollution, and may require posting a bond to operate any such installation.
The Federal Safe Drinking Water Act authorizes the EPA to establish national healthbased standards for the protection of drinking water from both naturally occurring and man-made
contaminants. Additionally, the EPA maintains a list of unregulated contaminants that are not
currently subject to any proposed or promulgated national primary drinking water regulation, but
that are known or anticipated to occur in public water systems and may become subject to
regulation in the future. As such, there is always the potential for new and/or more stringent
standards that may impose additional costs to OUC, either to existing infrastructure or operations
or to new water project development. OUC's current long-term capital improvements forecast
for the Water System addresses normal repairs and replacements in the treatment and distribution
facilities to maintain both operational reliability and compliance with the Federal Safe Drinking
Water Act and applicable regulations. OUC is required to provide a sufficient capacity and level
of water treatment and disinfection necessary to meet EPA- established "maximum contaminant
levels" for regulated contaminants as well as provide regular monitoring for these contaminants
in its treatment plants and distribution systems. OUC's Water Quality Laboratory performs
chemical, physical, and biological analyses of its finished water supplies. The "FDEP" and the
EPA have the authority to enforce drinking water quality standards for the water supplied by the
Water System. The FDEP periodically conducts compliance inspections of the water treatment
plants and laboratory monitoring provided by OUC. FDEP also performs a sanitary survey of
each facility every three years. The laboratory is capable of meeting future analytical demands
in response to system capacity additions and increased regulatory requirements either with inhouse staff or by using contract laboratories. As part of the "consumer awareness" provisions of
the Federal Safe Drinking Water Act, OUC is required to submit annual "consumer confidence
reports" to its customers addressing the sources of its drinking water and the levels of regulated
contaminants found in the drinking water through its monitoring programs. OUC's annual Water
Quality Report to its customers consistently notes that the water treated and supplied by OUC
surpasses all federal and state requirements for safe drinking water. Of the more than 135
regulated and unregulated substances for which OUC tests annually, only several have been
detected, and the detection levels were below allowable levels. The consumer confidence report
also contains the link to the FDEP website for the latest Source Water Assessment for OUC.
Other provisions of the Federal Safe Drinking Water Act require OUC to maintain operator
certifications and maintain a cross-connection program.
Environmental Requirements Affecting Water Supply
Federal and state legislation often influences OUC's water development activities. Such
legislation and regulations promulgated by federal and state agencies generally implement
environmental policies concerned with land use, appropriation and allocation of water resources,
and water quality. The constraints imposed by environmental laws and regulations could
potentially limit OUC's current Water System yield or further expansion of existing water
projects as well as limit new project development. Currently, most significant of these for OUC
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are the National Environmental Policy Act ("NEPA"), the Clean Water Act, and the Florida
Water Resources Act.
As part of the environmental assessment process under NEPA reasonable alternatives to
proposed projects must also be evaluated and reviewed as part of the federal decision-making
process. OUC projects have not been delayed to date. OUC does not anticipate any adverse
impact on projects in the near future.
The Clean Water Act creates some potential for additional constraints on water
operations and development activities. For example, in a United States Supreme Court case the
Court considered hydrologic modifications as "pollution" under the Federal Clean Water Act,
and stated that instream flow requirements as special use permit conditions may be appropriate to
protect designated stream uses. Similarly, recent federal courts of appeals decisions raise the
issue of whether a permit is necessary to transfer raw water from one water body to another.
Such conditions, along with those imposed under Section 404 of the Clean Water Act (relating to
dredge and fill permits), Section 401 (relating to state certification of water quality conditions),
Section 303(d) (relating to impaired water bodies and wasteload allocations), and those which
may be necessary to meet Section 319 (non-point source best management practices) as well as
new watershed-based requirements may increase the costs of future operations of the Water
System and development of water resources. The EPA's emphasis on watershed planning and
proposed modifications to the water quality standards program involve such issues as biological
criteria, antidegradation review of permitted activities, and standards for clean sediment and
nutrients, which could further impact future water project construction and operation.
The Florida Water Resources Act includes provisions for the establishment of a state
water regulatory agency and water management districts that, taken together, encompass the
entire state; water planning requirements; and a permit system administered by the water
management districts for water use, well construction, and the storage and management of
surface water. The regulations and programs administered by FDEP and the St. Johns River
Water Management District may adversely affect the consumption of water by OUC's customers
and present potential issues that could restrict the future operations and development of the
Water System.
Central Florida Water Initiative
The Central Florida Water Initiative (the "CFWI") is led by the region's three water
management districts, the St. Johns River Water Management District, the South Florida Water
Management District and the Southwest Florida Water Management District (collectively, the
"Water Districts"), for the purpose of undertaking a multi-step process of evaluating and
addressing both the region's short-term water resource issues and long-term approach to water
resource management. As part of the CFWI's collaborative process, the Water Districts, together
with representatives from the region's public water utilities, the FDEP and the DACS, are
working to, among other things, (i) identify sustainable quantities of groundwater sources
available for water supply, (ii) develop strategies to meet water demands in excess of the
sustainable yield of existing traditional groundwater sources, and (iii) establish consistent rule
and regulations for the Water Districts consistent with the objectives identified in (i) and (ii).
While OUC cannot currently predict what rules and regulations may result from the CFWI, it is
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possible that the potential outcomes could include, changes to the current terms of OUC's CUP
including a reduction in OUC's permitted use, and/or that OUC may, in the future, need to obtain
water from an alternative supply source or sources. Any such outcome may adversely affect the
consumption of water by OUC's customers and present potential issues that could restrict the
future operations and development of the Water System; however, OUC is a key stakeholder in
the CFWI process and has been actively instrumental in every phase of the process. OUC is
currently involved in finalizing the CFWI 2035 Water Resources Protection and Water Supply
Strategies Plan and in developing a Regulatory Program to implement the results of the CFWI
process.
OTHER OUC SERVICE DIVISIONS
Chilled Water Service Division
The Chilled Water Service Division provides a chilled water service, within OUC's
service territory, for air conditioning systems at office buildings, hotels and shopping centers and
currently operates a chilled water loop in downtown Orlando which provides service to more
than a dozen large commercial customers representing 2.85 million square feet of combined
space, and stand-alone chilled water systems serving the Sheraton Vistana Village timeshare
development in south Orange County, the Mall at Millennia shopping mall, the Orange County
Convention Center, the Lockheed Martin facility, the Burnham Institute for Medical Research
and University of Central Florida Medical School.
The Chilled Water Service Division had operating revenues of approximately $31.6
million through September 30, 2014 and income before contribution of approximately $6.2
million. The Chilled Water Service Division had 2,568 total active meter services as of
September 30, 2014.
Lighting Services Division
The Lighting Services Division provides lighting services, both within and outside of
OUC's service territory, which includes outdoor lighting, primarily along roadways, for
governmental units including the City, the Florida Department of Transportation, the County and
the City of St. Cloud, as well as outdoor lighting for a variety of commercial activities, including
residential developments, industrial parks and sports complexes. The Lighting Services Division
also provides specialized lights at the customer's request, where the customer pays a market
based price.
The Lighting Services Division had operating revenues of approximately $13.0 million
through September 30, 2014 and income before contribution of approximately $4.4 million. The
Lighting Services Division had 65,216 total fixtures as of September 30, 2014.
60
SELECTED FINANCIAL INFORMATION
Historical Operating Data
OUC's audited financial statements for the Fiscal Years ended September 30, 2013 and
2014, together with the report of Ernst & Young LLP thereon, are included as APPENDIX A
hereto. The information contained in this section captioned "Selected Financial Information,"
including information contained in the following tables should be read in conjunction with such
audited financial statements and the notes thereto.
The following tables captioned "Statement of Net Assets" and "Statement of Revenues,
Expenses and Changes in Net Assets" show certain information related to OUC's operations as of
September 30, 2010 through September 30, 2014 and for the years then ended and were
developed from OUC's 2014 Audited Financial Information and Statistical Report.
Statement of Net Assets
(Thousands of Dollars)
Assets
Plant in Service
(Depreciated)
Construction Work in Progress
Total Utility Plant
Restricted and Internally
Designated Assets
Current Assets
Other Assets and Deferred
Charges
Total Assets
Liabilities
Current Liabilities-Restricted
Current Liabilities
Other Liabilities and Deferred
Credits
Long-term Debt
Total Liabilities
Total Net Assets
2010
2011
2012
2013
2014
$2,197,831
107,333
2,305,164
$2,223,003
65,041
2,288,044
$2,214,074
84,125
2,298,199
$2,177,379
135,465
2,312,844
$2,203,069
151,557
2,354,626
658,089
302,029
614,036
369,054
593,647
311,682
557,654
284,904
551,263
253,034
136,078
$3,401,360
102,299
$3,373,433
63,127
$3,266,665
80,855
$3,236,257
84,634
$3,243,557
$127,426
205,538
$165,977
201,927
$128,763
199,917
$132,873
200,498
$135,920
214,759
399,877
1,674,109
$2,406,950
$ 994,410
393,911
1,578,785
$2,340,600
$1,032,833
351,951
1,557,968
$2,238,599
1,066,968
337,441
1,486,547
$2,157,359
$1,104,219
318,756
1,548,109
$2,217,544
$1,166,249
____________________
Numbers may not add due to rounding.
Source: Audited OUC Financial Information and Statistical Report for Fiscal Year ended September 30, 2014.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
61
Statement of Revenues, Expenses and Changes in Net Assets (Thousands of Dollars)
Operating Revenues
Electric Operating Revenues
(excluding fuel)
Fuel Revenues(1)
Water Operating Revenues
Total Operating Revenues
Operating Expenses
Fuel for generation and
purchased power
Unit Department Expenses
Depreciation and Amortization
Payments to other governments
and taxes (2)
Storm related expenses
Total Operating Expenses
Operating Income
Non-Operating Income and
Expenses Interest and Other
Income(3)
Amortization of deferred gain
on sale of assets (4)
Interest and other Expenses
Total Net Non-Operating
Expense
Income before contributions
Revenues from contributions
in aid of construction
Annual dividend payment (5)
Increase in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year
2010
2011
2012
2013
2014
$ 502,943
$ 513,090
$498,989
$480,383
$499,618
298,255
62,616
$863,814
298,783
64,136
$876,009
291,951
63,443
$854,383
282,478
62,497
$825,358
316,287
64,080
$879,985
$330,738
$332,198
$326,071
$315,867
$347,896
227,017
117,105
233,596
119,361
233,520
120,699
219,457
118,964
229,191
113,601
54,653
55,030
55,423
54,275
55,240
$729,513
134,301
$740,185
135,824
$735,713
118,670
$708,563
116,795
2,000
$747,928
132,057
16,401
16,715
20,009
14,801
14,223
3,971
3,971
4,233
4,692
2,888
(85,051)
(78,530)
(70,235)
(62,355)
(59,887
(64,679)
(57,844)
(45,993)
(42,862)
(42,776)
69,622
77,980
72,677
73,933
89,281
14,099
8,419
8,619
10,318
21,371
(45,596)
38,125
$ 956,285
$ 994,410
(47,976)
38,423
$994,410
$ 1,032,833
(47,161)
34,135
1,032,833
$1,066,968
(47,000)
37,251
1,066,968
$1,104,219
(48,622)
62,030
1,104,219
$1,166,249
_______________________
(1)
(2)
(3)
(4)
(5)
Source:
OUC accumulates funds in a fuel stabilization asset account to keep charges to customers level while fluctuations in fuel prices are
occurring. Each month, debits or credits are made from or to this account to reflect the difference between assessed fuel charged to
customers and the actual fuel costs paid by OUC. In this table, fuel revenues equal fuel expenses.
Includes a revenue-based payment to the County, calculated at 1% of gross retail electric billings to customers within the County but
outside of the city limits of the City.
Amount includes gains and losses on the valuation of investments with the exception of investments held in the debt service funds,
which are not fair valued based on OUC's application of SFAS No. 71. The debt service reserve fund is recorded at amortized cost, as
OUC intends to retain these investments until the related debt instruments have reached maturity or the series has been refunded.
Proceeds from the sale of the steam units at the Indian River Power Plant were internally designated and the gain deferred in
accordance with OUC's application of SFAS No. 71. The designated proceeds from the sale are reported under the caption of Liability
reduction fund and the recognized portion of the gain is included under the heading of Amortization of deferred gain on sale of assets.
The deferred gain amount has been recognized to mitigate additional generation, purchased power costs and depreciation.
See "DIVIDEND PAYMENT TO CITY OF ORLANDO" for additional information.
OUC Financial Information and Statistical Report for Fiscal Year ended September 30, 2014.
62
Management Discussion and Analysis of First Quarter Fiscal Year 2015 Results
Income before contributions for the three months ended December 31, 2014 was
$22.5 million, $1.3 million higher than budget.
Operating revenues were $7.0 million or 3.3% lower than budget. This variance was
primarily due to lower than budget fuel revenues of $7.8 million. Retail energy revenues were
also lower than budget, $0.7 million, as a result of lower than expected consumption driven by
mild weather. Additionally, water revenues were $0.8 million lower than budget due to
decreased irrigation and residential usage. These variances were offset by higher resale energy
revenues of $2.1 million, which were driven by an extended unplanned outage at McIntosh Unit
3, and sales to St. Cloud customers of $1.4 million and $0.7 million, respectively.
Operating expenses were $8.5 million or 4.7% lower than budget primarily due to lower
than expected fuel for generation and purchased power expenses and unit department expenses
of $7.8 million and $0.7 million, respectively.
Net non-operating expenses through December were $0.2 million higher than budget and
in line with that of prior year.
Pension Plans and Post-Employment Benefits
The following schedules present the multi-year trend information approximating the
funded status of OUC's Defined Benefit Pension Plan and Other Post-Employment Benefit Plan,
each as of October 1, 2013. This information has been prepared using the entry-age actuarial
method. OUC uses the aggregate actuarial cost method, which does not identify or separately
amortize unfunded actuarial accrued liabilities.
Defined Benefit Pension Plan Funded Status
Actuarial
Valuation
Date
10/1/2013
10/1/2012
10/1/2011
Actuarial
Value of
Assets
(a)
$286,722
267,020
252,225
Actuarial
Accrued
Liability
(AAL)
(b)
$412,298
401,073
373,054
Unfunded
AAL
(UAAL)
(b - a)
$125,576
134,053
120,829
Funded
Ratio
(a / b)
69.5%
66.6
67.6
Covered
Payroll
(c)
$72,479
70,147
73,230
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
63
UAAL as a
Percentage
of Covered
Payroll
((b - a)/c)
173.3%
191.1
165.0
Other Post-Employment Benefit Plan Funded Status
Actuarial
Valuation
Date
10/1/2013
10/1/2012
10/1/2011
Actuarial
Value of
Assets
(a)
$68,728
55,322
40,349
Actuarial
Accrued
Liability
(AAL)
(b)
$166,882(1)
188,470
177,301
Unfunded
AAL
(UAAL)
(b - a)
$ 98,154
133,148
136,952
Funded
Ratio
(a / b)
41.2%
29.4
22.8
Covered
Payroll
(c)
$72,990
70,692
71,121
UAAL as a
Percentage
of Covered
Payroll
((b - a)/c)
134.5%
188.3
192.6
____________________
(1)
The decrease in AAL is due to plan changes, effective January 1, 2014, which include a reduction in the
premium subsidy for dependent coverage provided to retirees in the Defined Benefit Plan.
See Notes K and L in "APPENDIX A – AUDITED FINANCIAL STATEMENTS FOR
FISCAL YEARS ENDED SEPTEMBER 30, 2014 AND 2013" attached hereto, for more
information regarding OUC's Pension Plans and Other Post-Employment Benefits Plan, as of
September 30, 2014 and 2013.
Dividend Payment to City of Orlando
OUC pays a revenue-based payment and an income-based dividend payment to the City.
The revenue-based payment is recorded as an operating expense and is calculated annually based
on projected gross billings. Revenue-based payments for the years ended September 30, 2014,
2013, 2012, 2011, and 2010 were $27.8 million, $29.4 million, $29.6 million, $28.8 million, and
$28.8 million, respectively.
The income-based dividend payment to the City is recorded as a reduction to net assets in
the Statement of Revenues, Expenses and Changes in Net Assets and is calculated annually as
60% of fixed income before contributions and including amounts on deposit in OUC's capital
reserve fund. The fixed income-based dividend payment was $45.6 million in 2010, $48.0
million in 2011, $47.1 million in 2012, $47.0 million in 2013 and $48.6 million in 2014.
Payment to Orange County
OUC pays a revenue-based payment to the County calculated at 1% of gross retail
electric billings to customers within the County but outside the City. Such revenue-based
payments for the years ended September 30, 2014, 2013, 2012, 2011, and 2010 were $1.5
million, $1.4 million, $1.5 million, $1.5 million, and $1.8 million, respectively.
TREASURY POLICY
OUC's three separate policies covering debt, investments and derivatives have been
consolidated into one "Treasury Policy." The Treasury Policy sets forth the guidelines and
general operating procedures for effective management of its investments, debt, and derivatives
transactions, as well as, the establishment of cash reserves.
64
Investments
The investment section of the Treasury Policy sets forth the guidelines and general
operating procedures for effective management of assets. The objectives are safety, liquidity and
return on investment. Management responsibility for investments is delegated to the Chief
Financial Officer, who has responsibility for the established and monitoring of a system of
internal controls.
The investment section of the Treasury Policy specifically identifies various portfolio
parameters, addressing investment instruments, issuer diversification, maturity constrains,
investment ratings and liquidity. The Treasury Policy is designed to provide OUC's Chief
Financial Officer sufficient latitude to effectively manage OUC's financial assets so as to
maximize the return on assets within an acceptable exposure to risk while assuring compliance
with the foremost objective of preservation of capital. This is accomplished through
diversification among types of investment instruments and maturities. The Chief Financial
Officer submits an annual report to the Commission with information sufficient to provide a
comprehensive review of investment activity and performance. For more information on the
controls that OUC utilizes to mitigate investment risk, see discussion in Note E in
"APPENDIX A – AUDITED FINANCIAL STATEMENTS FOR FISCAL YEARS ENDED
SEPTEMBER 30, 2014 AND 2013" attached hereto.
Debt
The debt section of the Treasury Policy sets forth the parameters for issuing and
managing debt; providing guidance to decision makers related to debt affordability standards;
facilitating the actual financing process by establishing important decisions in advance; and
documenting the objectives to be achieved by staff, both before and after the issuance.
Maintaining adequate cash reserves is essential for OUC to meet its operating and debt
payment obligations. The Chief Financial Officer is responsible for establishing sufficient cash
reserves to meet liquidity requirements. The Finance Committee must approve recommended
cash reserve levels.
Derivatives
The derivatives section of the Treasury Policy sets forth the guidelines and general
operating procedures regarding OUC's use of derivatives to manage exposure to fluctuations in
interest rates. The Treasury Policy permits OUC to execute interest rate swaps, swaptions,
interest rate caps, interest rate floors, interest rate collars, and interest rate locks. The Finance
Committee and Chief Financial Officer are responsible for all derivative transactions and
administration of the Treasury Policy. Commission approval is required when a derivative
transaction or the cumulative derivative transactions during any fiscal year exceed a notional
amount of $50 million. See also "DEBT SERVICE REQUIREMENTS AND COVERAGE Interest Rate Exchange Agreements" herein, and Note M to "APPENDIX A – AUDITED
FINANCIAL STATEMENTS FOR FISCAL YEARS ENDED SEPTEMBER 30, 2014 AND
2013" attached hereto, for a description of OUC's currently outstanding interest rate exchange
agreements and fuel related derivatives.
65
OUC added additional provisions to the derivatives section of the Treasury Policy for the
purpose of meeting all of the requirements relating to legislation and regulations for derivatives
transactions under Title VII of the Wall Street Transparency and Accountability Act of 2010, as
supplemented and amended from time to time, including any regulations promulgated in
connection therewith (collectively referred to as "Dodd-Frank"). Pursuant to such intent, OUC
has designated a qualified independent representative to assist in the evaluation of derivative
transactions. OUC will obtain and maintain current at all times a "legal entity identifier" from a
firm designated by the Commodity Futures Trade Commission (the "CFTC") to provide such
numbers. The Chief Financial Officer is required to prepare and distribute from time to time
detailed procedures regarding OUC's compliance with the Dodd-Frank requirements in
furtherance of the derivatives section of the Treasury Policy. In connection with the execution of
any interest rate exchange agreement entered into (or novated) on or after September 9, 2013,
OUC must complete and maintain, as required by the CFTC, an annual filing regarding how it
generally meets its financial obligations associated with entering into uncleared swaps.
The Finance Committee meets quarterly for the purpose of reviewing compliance with
the Treasury Policy.
OUC is in compliance in all material respects with its current Treasury Policy.
EMERGENCY RESPONSE AND SECURITY MEASURES
All of OUC's System facilities are equipped with state of the art security systems that
include intrusion-detection systems, alarms, cameras, real-time security alarm monitoring and
security fences or walls around the perimeter of the properties. OUC facilities utilize card reader
access controls and enhanced barrier gates, where appropriate, for greater security. Armed and
unarmed security officers provide regular patrol and security alarm response to System facilities.
Varying levels of law enforcement assistance is utilized for criminal acts and/or specific threats
related to OUC property. In addition, OUC has implemented several System controls, protective
measures and procedures that serve to protect the integrity and operation of OUC's System in the
event of cyber and other technology-based threats, as well as natural disasters. OUC monitors
security and risk management on a regular basis and deems its current emergency response and
security procedures and systems to be adequate.
LITIGATION
OUC is not a party to any litigation or other proceeding pending or, to the knowledge of
OUC, threatened, in any court, agency, or other administrative body (either state or federal)
which, if decided adversely to OUC, would have a material adverse effect on Net Revenues, and
no litigation of any nature has been filed or, to the knowledge of OUC, threatened that would
affect the provisions made for the use of Net Revenues to secure or pay the principal of or
interest on the Series 2015A Bonds, or would in any manner raise a question as to the validity of
the Series 2015A Bonds.
Any litigation whereby OUC is named as a defendant in personal injury, wrongful death
and employment matters also occur from time to time. OUC is vigorously defending several
66
such actions currently. Some of these actions against OUC are based upon alleged negligence.
However, it is the opinion of General Counsel to OUC, that OUC, as a statutory commission and
part of the City, may enjoy sovereign immunity in the same manner as a municipality, as
supported by numerous Florida Court of Appeals rulings. Under said rulings, Florida Statutes
limit of liability for claims or judgments by one person for general liability or auto liability is
$200,000 or a total of $300,000 for the same incident or occurrence; greater liability can result
only through an act of the Florida Legislature. Furthermore, any defense of sovereign immunity
shall not be deemed to have been waived or the limits of liability increased as a result of
obtaining or providing insurance in excess of statutory limitations. Nonetheless, OUC is
generally self-insured for up to $2,000,000 per occurrence and carries two excess insurance
liability policies totaling $50,000,000.
OUC also initiates condemnation proceedings as the need arises to expand its facilities.
In such cases OUC must compensate affected property owners for the value of the property taken
and any damages caused to the owner's remaining property, as well as pay fees and costs. OUC
believes it has budgeted sufficient revenues to cover all such costs.
UNDERWRITING
The Series 2015A Bonds are being purchased by J.P. Morgan Securities LLC (the
"Underwriter"), as the successful bidder pursuant to a competitive sale, at an aggregate purchase
price of $112,575,138.81, representing the par amount of the Series 2015A Bonds of
$94,905,000.00, plus bond premium of $17,957,887.35 for such Series 2015A Bonds, less an
Underwriter's discount of $287,748.54.
The Underwriter's obligations are subject to certain conditions precedent, and they will be
obligated to purchase all of the Series 2015A Bonds if any Series 2015A Bonds are purchased.
The Series 2015A Bonds may be offered and sold to certain dealers (including dealers
depositing such Series 2015A Bonds into investment trusts) at prices lower than such public
offering prices, and such public offering prices may be changed, from time to time, by the
Underwriter.
TAX MATTERS
General
The Internal Revenue Code of 1986, as amended (the "Code"), establishes certain
requirements which must be met subsequent to the issuance of the Series 2015A Bonds in order
that interest on the Series 2015A Bonds be and remain excluded from gross income for purposes
of federal income taxation. Non-compliance may cause interest on the Series 2015A Bonds to be
included in federal gross income retroactive to the date of issuance of the Series 2015A Bonds,
regardless of the date on which such non-compliance occurs or is ascertained. These
requirements include, but are not limited to, provisions which prescribe yield and other limits
within which the proceeds of the Series 2015A Bonds and the other amounts are to be invested
and require that certain investment earnings on the foregoing must be rebated on a periodic basis
67
to the Treasury Department of the United States. OUC has covenanted in the Bond Resolution to
comply with such requirements in order to maintain the exclusion from federal gross income of
the interest on the Series 2015A Bonds.
In the opinions of Co-Bond Counsel, assuming compliance with certain covenants, under
existing laws, regulations, judicial decisions and rulings, interest on the Series 2015A Bonds is
excluded from gross income for purposes of federal income taxation. Interest on the Series
2015A Bonds is not an item of tax preference for purposes of the federal alternative minimum
tax imposed on individuals or corporations; however, interest on the Series 2015A Bonds may be
subject to the federal alternative minimum tax when any Series 2015A Bond is held by a
corporation. The federal alternative minimum taxable income of a corporation must be increased
by 75% of the excess of such corporation's adjusted current earnings over its alternative
minimum taxable income (before this adjustment and the alternative tax net operating loss
deduction). "Adjusted Current Earnings" will include interest on the Series 2015A Bonds.
Except as described above, Co-Bond Counsel will express no opinion regarding other
federal income tax consequences resulting from the ownership of, receipt or accrual of interest
on, or disposition of Series 2015A Bonds. Prospective purchasers of Series 2015A Bonds should
be aware that the ownership of Series 2015A Bonds may result in collateral federal income tax
consequences, including (i) the denial of a deduction for interest on indebtedness incurred or
continued to purchase or carry Series 2015A Bonds; (ii) the reduction of the loss reserve
deduction for property and casualty insurance companies by 15% of certain items, including
interest on the Series 2015A Bonds; (iii) the inclusion of interest on the Series 2015A Bonds in
earnings of certain foreign corporations doing business in the United States for purposes of the
branch profits tax; (iv) the inclusion of interest on the Series 2015A Bonds in passive income
subject to federal income taxation of certain Subchapter S corporations with Subchapter C
earnings and profits at the close of the taxable year; and (v) the inclusion of interest on the Series
2015A Bonds in "modified adjusted gross income" by recipients of certain Social Security and
Railroad Retirement benefits for the purposes of determining whether such benefits are included
in gross income for federal income tax purposes.
As to questions of fact material to the opinions of Co-Bond Counsel, Co-Bond Counsel
will rely upon representations and covenants made on behalf of OUC in the certificates of public
officials (including certifications as to the use of proceeds of the Series 2015A Bonds and of the
property financed or refinanced thereby), without undertaking to verify the same by independent
investigation.
PURCHASE, OWNERSHIP, SALE OR DISPOSITION OF THE SERIES 2015A
BONDS AND THE RECEIPT OR ACCRUAL OF THE INTEREST THEREON MAY HAVE
ADVERSE FEDERAL TAX CONSEQUENCES FOR CERTAIN INDIVIDUAL AND
CORPORATE HOLDERS OF THE SERIES 2015A BONDS, INCLUDING, BUT NOT
LIMITED TO, THE CONSEQUENCES DESCRIBED ABOVE. PROSPECTIVE HOLDERS
OF THE SERIES 2015A BONDS SHOULD CONSULT WITH THEIR TAX SPECIALISTS
FOR INFORMATION IN THAT REGARD.
68
Information Reporting and Backup Withholding
Interest paid on tax-exempt bonds such as the Series 2015A Bonds is subject to
information reporting to the Internal Revenue Service in a manner similar to interest paid on
taxable obligations. This reporting requirement does not affect the excludability of interest on
the Series 2015A Bonds from gross income for federal income tax purposes. However, in
conjunction with that information reporting requirement, the Code subjects certain non-corporate
owners of Series 2015A Bonds, under certain circumstances, to "backup withholding" at the rate
specified in the Code with respect to payments on the Series 2015A Bonds and proceeds from
the sale of Series 2015A Bonds. Any amount so withheld would be refunded or allowed as a
credit against the federal income tax of such owner of Series 2015A Bonds. This withholding
generally applies if the owner of Series 2015A Bonds (i) fails to furnish the payor such owner's
social security number or other taxpayer identification number ("TIN"), (ii) furnished the payor
an incorrect TIN, (iii) fails to properly report interest, dividends, or other "reportable payments"
as defined in the Code, or (iv) under certain circumstances, fails to provide the payor or such
owner's securities broker with a certified statement, signed under penalty of perjury, that the TIN
provided is correct and that such owner is not subject to backup withholding. Prospective
purchasers of the Series 2015A Bonds may also wish to consult with their tax advisors with
respect to the need to furnish certain taxpayer information in order to avoid backup withholding.
Other Tax Matters
During recent years, legislative proposals have been introduced in Congress, and in some
cases enacted, that altered certain federal tax consequences resulting from the ownership of
obligations that are similar to the Series 2015A Bonds. In some cases, these proposals have
contained provisions that altered these consequences on a retroactive basis. Such alteration of
federal tax consequences may have affected the market value of obligations similar to the Series
2015A Bonds. From time to time, legislative proposals are pending which could have an effect
on both the federal tax consequences resulting from ownership of the Series 2015A Bonds and
their market value. No assurance can be given that legislative proposals will not be enacted that
would apply to, or have an adverse effect upon, the Series 2015A Bonds. For example, in
connection with federal deficit reduction, job creation and tax law reform efforts, proposals have
been and others are likely to be made that could significantly reduce the benefit of, or otherwise
affect, the exclusion from gross income of interest on obligations like the Series 2015A Bonds.
There can be no assurance that any such legislation or proposal will be enacted, and if enacted,
what form it may take. The introduction or enactment of any such legislative proposals may
affect, perhaps significantly, the market price for, or marketability of, the Series 2015A Bonds.
Prospective purchasers of the Series 2015A Bonds should consult their own tax advisors
as to the tax consequences of owning the Series 2015A Bonds in their particular state or local
jurisdiction and regarding any pending or proposed federal or state tax legislation, regulations or
litigation, as to which Co-Bond Counsel express no opinion.
Tax Treatment of Bond Premium
The difference between the principal amount of the Series 2015A Bonds and the initial
offering price to the public (excluding bond houses, brokers or similar persons or organizations
69
acting in the capacity of underwriters or wholesalers) at which price a substantial amount of such
Series 2015A Bonds of the same maturity and, if applicable, interest rate, was sold constitutes to
an initial purchaser amortizable bond premium which is not deductible from gross income for
federal income tax purposes. The amount of amortizable bond premium for a taxable year is
determined actuarially on a constant interest rate basis over the term of each of the Series 2015A
Bonds, which ends on the earlier of the maturity or call date for each of the Series 2015A Bonds
which minimizes the yield on such Series 2015A Bonds to the purchaser. For purposes of
determining gain or loss on the sale or other disposition of a Series 2015A Bond, an initial
purchaser who acquires such obligation in the initial offering is required to decrease such
purchaser's adjusted basis in such Series 2015A Bond annually by the amount of amortizable
bond premium for the taxable year. The amortization of bond premium may be taken into
account as a reduction in the amount of tax-exempt income for purposes of determining various
other tax consequences of owning such Series 2015A Bonds. Bondholders of the Series 2015A
Bonds are advised that they should consult with their own tax advisors with respect to the state
and local tax consequences of owning such Series 2015A Bonds.
RATINGS
Moody's, S&P and Fitch each have assigned their ratings of "Aa2," "AA," and "AA,"
respectively, to the Series 2015A Bonds.
The ratings, including any related outlook with respect to potential changes in such
ratings, reflect only the respective views of said rating agencies and an explanation of the
significance of the ratings may be obtained only from said rating agencies. Generally, a rating
agency bases its rating on the information and materials furnished to it and on investigations,
studies, and assumptions of its own. There is no assurance that such ratings will be retained for
any given period of time or that the same will not be revised downward or withdrawn entirely by
said rating agencies if, in their judgment, circumstances so warrant. Any such downward
revision or withdrawal of such ratings or other actions by the rating agencies or any of them, may
have an adverse effect on the liquidity and/or market price of the Series 2015A Bonds. Neither
OUC nor the Underwriter has any obligation or duty to oppose any proposed revision,
suspension or withdrawal of such ratings.
DISCLOSURE REQUIRED BY SECTION 517.051(1), FLORIDA STATUTES
Section 517.051, Florida Statutes and the regulations promulgated thereunder require that
OUC make full and fair disclosure of any of its bonds or its other obligations that have been in
default as to payment of principal or interest at any time after December 31, 1975. OUC has not
been, since December 31, 1975, in default as to payment of principal or interest on any of such
bonds or other obligations.
CONTINUING DISCLOSURE
To assist the Underwriter in complying with the Rule, simultaneously with the issuance
of the Series 2015A Bonds, OUC will enter into a Continuing Disclosure Agreement with Digital
70
Assurance Certification LLC ("DAC"), as initial dissemination agent, under which OUC will
provide continuing disclosure with respect to the Series 2015A Bonds, substantially in the form
attached hereto as "APPENDIX E - FORM OF CONTINUING DISCLOSURE AGREEMENT."
OUC, as an "obligated person" under the Rule, has covenanted in the Continuing Disclosure
Agreement to provide certain financial information and operating data relating to the System and
the Series 2015A Bonds in each year (the "Annual Report"), and to provide notices of the
occurrence of certain enumerated events. The Annual Report and notices of certain enumerated
events, when and if they occur, shall be timely filed by DAC, on behalf of OUC with EMMA.
The specific nature of the financial information, operating data, and of the type of events which
trigger a disclosure obligation, and other details of OUC's undertaking are more fully described
in "APPENDIX E - FORM OF CONTINUING DISCLOSURE AGREEMENT" attached hereto.
Notwithstanding any other provision of the Series 2015A Resolution, failure of OUC to comply
with such Continuing Disclosure Agreement shall not be considered an event of default under the
General Bond Resolution. To the extent permitted by law, the sole and exclusive remedy of any
holder of the Series 2015A Bonds for the enforcement of the provisions of the Continuing
Disclosure Agreement shall be an action seeking mandamus or specific performance by court
order to cause OUC to comply with its obligations under the Continuing Disclosure Agreement.
The following disclosure is being provided by OUC for the sole purpose of assisting the
Underwriter in complying with the Rule: OUC previously entered into continuing disclosure
undertakings, as an "obligated person" under the Rule (the "Undertakings"). In the previous five
year period beginning on March 17, 2010 and ending on March 17, 2015, OUC has not failed to
comply, in all material respects, with the Undertakings.
INDEPENDENT AUDITORS
The financial statements of OUC as of and for the Fiscal Years ended September 30,
2014 and 2013 (the "Audited Financial Statements"), appearing in "APPENDIX A – AUDITED
FINANCIAL STATEMENTS FOR FISCAL YEARS ENDED SEPTEMBER 30, 2014 AND
2013" attached hereto have been audited by Ernst & Young LLP, independent auditors (the
"Auditors"), as stated in their report appearing in "APPENDIX A – AUDITED FINANCIAL
STATEMENTS FOR FISCAL YEARS ENDED SEPTEMBER 30, 2014 AND 2013" attached
hereto. OUC has not requested or obtained the consent of the Auditors to the inclusion of the
Audited Financial Statements in this Official Statement; consequently, the Auditors have not
evaluated any events relating to the Audited Financial Statements occurring after the date of such
Audited Financial Statements.
FINANCIAL ADVISOR
Public Financial Management, Inc., Orlando, Florida (the "Financial Advisor"), is serving
as financial advisor to OUC with respect to the sale of the Series 2015A Bonds. The Financial
Advisor assisted in the preparation of this Official Statement and in other matters relating to the
planning, structuring and issuance of the Series 2015A Bonds and provided other advice. The
Financial Advisor will not engage in any underwriting activities with regard to the issuance and
sale of the Series 2015A Bonds.
71
LEGAL MATTERS
Certain legal matters incident to the validity of the Series 2015A Bonds and the issuance
thereof by OUC are subject to the approval of Bryant Miller Olive P.A. and Marchena &
Graham, P.A., both of Orlando, Florida, Co-Bond Counsel, whose approving opinions (in
substantially the form attached hereto as APPENDIX F) will be delivered concurrently with the
issuance of the Series 2015A Bonds. Co-Bond Counsel has not undertaken to verify and
therefore expresses no opinion as to the accuracy, completeness or sufficiency of any of the
information or statements contained in this Official Statement or any exhibits, schedules or
appendices hereto, except that Co-Bond Counsel will render an opinion to OUC and to the
Underwriter at closing that it has reviewed the information in the sections hereof entitled
"DESCRIPTION OF THE SERIES 2015A BONDS," "SECURITY FOR THE SERIES 2015A
BONDS," and "PROPOSED AMENDMENTS TO GENERAL BOND RESOLUTION;
BONDHOLDER CONSENT BY ACCEPTANCE," and to the extent such statements purport to
summarize certain provisions of the Bond Resolution, such statements are fair and accurate
summaries of the provisions of the Bond Resolution purported to be summarized. Co-Bond
Counsel will also state that it has reviewed the information under the caption "TAX MATTERS"
and that the statements contained therein are accurate.
Certain legal matters will also be passed upon for OUC by its Co-Disclosure Counsel,
Greenberg Traurig, P.A. and Ronald C. Nesbitt, P.A., both of Orlando, Florida, the OUC's Office
of General Counsel.
The proposed text of the legal opinions of Co-Bond Counsel is attached hereto as
APPENDIX F. The actual legal opinions to be delivered may vary from the text of APPENDIX
F, if necessary, to reflect facts and law on the date of delivery of the Series 2015A Bonds. The
opinions will speak only as of their date and subsequent distribution of such opinions by
recirculation of this Official Statement or otherwise shall not create any implication that
subsequent to the date of such opinions Co-Bond Counsel has affirmed their opinions.
Co-Bond Counsel's opinions are based on existing law, which is subject to change. Such
opinions are further based on factual representations made to Co-Bond Counsel as of the date
thereof. Co-Bond Counsel assumes no duty to update or supplement their opinions to reflect any
facts or circumstances, including changes in law that may thereafter occur or become effective.
The legal opinions to be delivered concurrently with the delivery of the Series 2015A
Bonds express the professional judgment of the attorneys rendering the opinions regarding the
legal issues expressly addressed therein. By rendering a legal opinion, the opinion giver does not
become an insurer or guarantor of the result indicated by that expression of professional
judgment, of the transaction on which the opinion is rendered, or of the future performance of
parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any
legal dispute that may arise out of the transaction.
CONTINGENCY OF FEES
OUC has retained Co-Bond Counsel and Co-Disclosure Counsel with respect to the
authorization, sale, execution and delivery of the Series 2015A Bonds. Payment of the fees of
72
such professionals and an underwriting discount to the Underwriter are each contingent upon the
issuance of the Series 2015A Bonds.
MISCELLANEOUS
This Official Statement includes descriptions of the terms of the Series 2015A Bonds and
summaries of certain provisions of the Bond Resolution. Such descriptions do not purport to be
complete and all such descriptions and references thereto are qualified in their entirety by
references to each such document. The appendices appended to this Official Statement are
integral parts hereof and should be read together with all other parts of this Official Statement.
To the extent this Official Statement contains certain "forward-looking statements"
concerning OUC's operations, performance and financial condition, including its future
economic performance, plans and objectives and the likelihood of success in developing and
expanding. These statements are based upon a number of assumptions and estimates which are
subject to uncertainties, many of which are beyond the control of OUC. The words "may,"
"would," "could," "will," "expect," "anticipate," "believe," "intend," "plan," "estimate" and
similar expressions are meant to identify these forward-looking statements. Actual results may
differ materially from those expressed or implied by these forward-looking statements.
This Official Statement is not to be construed as a contract with the purchasers of the
Series 2015A Bonds. The references, excerpts and summaries of all documents referred to in
this Official Statement do not purport to be complete statements of the provisions of such
documents, and potential investors should refer to all such documents for full and complete
statements of all matters relating to the Series 2015A Bonds, the security for the payment of the
Series 2015A Bonds and the rights and obligations of the owners of the Series 2015A Bonds.
The information set forth in this Official Statement has been obtained from OUC and other
sources, which are believed to be reliable, but such information is not guaranteed as to accuracy
or completeness by OUC, and is not to be construed as a representation of OUC or the
Underwriter. The information and expressions of opinion in this Official Statement are subject
to change without notice and neither the delivery of this Official Statement nor any sale made
shall under any circumstances create any implication that there has been no change in the matters
referred to in this Official Statement since its date.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
73
AUTHORIZATION OF AND CERTIFICATION
CONCERNING OFFICIAL STATEMENT
The delivery of this Official Statement has been duly authorized by OUC. Concurrently
with the delivery of the Series 2015A Bonds, the undersigned General Manager, Chief Executive
Officer & Secretary and the Vice President, Financial Services & Chief Financial Officer of
OUC will furnish his certificate to the effect that to the best of his knowledge, this Official
Statement, excluding the information concerning DTC and DTC's book-entry system and the
CUSIP numbers provided herein, did not as of its date and does not as of the date of the delivery
of the Series 2015A Bonds, contain any untrue statement of a material fact or omit to state a
material fact which should be included herein for the purposes for which this Official Statement
is to be used, or which is necessary in order to make the statements made herein, in light of the
circumstances in which they were made, not misleading.
ORLANDO UTILITIES COMMISSION
By: /s/ Kenneth P. Ksionek
Kenneth P. Ksionek
General Manager, Chief Executive Officer
& Secretary
By: /s/ John E. Hearn
John E. Hearn
Vice President, Financial & Support
Services & Chief Financial Officer
74
APPENDIX A
AUDITED FINANCIAL STATEMENTS
FOR FISCAL YEARS ENDED
SEPTEMBER 30, 2014 AND 2013
A-1
[THIS PAGE INTENTIONALLY LEFT BLANK]
2014
AUDITED FINANCIAL
STATEMENTS
2014 AUDITED
FINANCIAL STATEMENTS
1
FINANCIAL AND STATISTICAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS
2014
(Dollars in thousands)
Total operating revenues
Total operating expenses
Fuel for generation and purchased power
Interest, gain and net other income
Interest expense
Income before contributions
Annual dividend
Utility plant, net
Total assets and deferred outflows of resources
Long-term debt and Other bonds payable
Net position
Debt service coverage
Senior bond ratings (1)
STATISTICAL HIGHTLIGHTS
Electric metered services
Electric sales (MWH)
Average annual residential usage (KWH)
Average residential revenue per KWH
Water metered services
Water sales (MGAL)
Average annual residential usage (KGAL)
Average residential revenue per KGAL
$
$
$
$
$
$
$
$
$
$
$
879,985
747,928
347,896
17,111
59,887
89,281
48,622
2,354,626
3,319,287
1,579,363
1,166,249
2.52
AA, Aa2, AA
$
220,628
7,551,150
11,488
0.1220
$
135,106
25,357
123
2.49
$
$
$
$
$
$
$
$
$
$
$
2013
825,358
708,563
315,867
19,493
62,355
73,933
47,000
2,312,844
3,325,545
1,646,469
1,104,219
2.42
AA, Aa2, AA
% Increase /
- Decrease
6.6%
5.6%
10.1%
-12.2%
-4.0%
20.8%
3.5%
1.8%
-0.2%
-4.1%
5.6%
4.1%
$
214,424
7,011,759
11,134
0.1197
2.9%
7.7%
3.2%
1.9%
$
133,771
24,980
120
2.49
1.0%
1.5%
2.5%
0.0%
Operating expenses at September 30
Operating revenues at September 30
(Dollars in thousands)
(Dollars in thousands)
$1,000,000
$1,000,000
$750,000
$750,000
$500,000
$500,000
$250,000
$250,000
$-
$2012
Electric
2013
Water
Chilled water
2012
2014
Lighting
Fuel
Electric
2013
Water
Chilled water
2014
Lighting
(1) Bond Rating Agencies: Fitch Ratings, Moody's Investors Service and Standard & Poor's, respectively.
For more detailed statistical information, see OUC's Ten-Year Financial & Statistical Information report.
2
AUDITED FINANCIAL STATEMENTS
ORLANDO UTILITIES COMMISSION
September 30, 2014 and 2013
TableofofContents
Contents
Table
Report
of Independent
Certified
Report
of Independent
Certified
Public Accountants
Public Accountants
Management’s Discussion and Analysis
Management’s Discussion and Analysis
Statements of Net Position
Statements of Net Position
Commission Members & Officers
4
6
16
Statements of Revenues, Expenses and Changes in Net Position
Statements of Revenues, Expenses and
Changes
in NetFlows
Position
Statements
of Cash
18
Statements
of Cash
Flows
Notes
to Financial
Statements
19
Notes to
Financial Statements
Required
Supplemental
Information
20
Required Supplemental Information
54
Dan Kirby, AIA, AICP
Linda Ferrone
Maylen Dominguez
Gregory D. Lee
Buddy H. Dyer
Kenneth P. Ksionek
John E. Hearn
W. Christopher Browder
Elizabeth M. Mason
President
First Vice President
Second Vice President
Commissioner
Mayor - Commissioner
Secretary
Assistant Secretaries
3
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Ernst & Young LLP
Suite 1700
390 North Orange Avenue
Orlando, FL 32801-1671
Tel: +1 407 872 6600
Fax: +1 407 872 6626
ey.com
Report of Independent Certified Public Accountants
The Commissioners of Orlando Utilities Commission
Report on the Financial Statements
We have audited the accompanying financial statements of Orlando Utilities Commission
(OUC), as of and for the years ended September 30, 2014 and 2013, and the related notes to the
financial statements, which collectively comprise the OUC’s basic financial statements as listed
in the table of contents.
Page left blank for Audit Opinion
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements
in conformity with U.S. generally accepted accounting principles; this includes the design,
implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free of material misstatement, whether due to fraud
or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We
conducted our audits in accordance with auditing standards generally accepted in the United
States and the standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the entity’s preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.
Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of significant accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
4
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects,
the financial position of OUC as of September 30, 2014 and 2013, and the changes in its
financial position and its cash flows for the years then ended in conformity with U.S. generally
accepted accounting principles.
Required Supplementary Information
U.S. generally accepted accounting principles require that management’s discussion and analysis
on pages 6 through 15 and the schedules of funding progress on page 54 be presented to
Page
left blank
forinformation,
Audit Opinion
supplement the basic financial
statements.
Such
although not a part of the basic
financial statements, is required by the Governmental Accounting Standards Board which
considers it to be an essential part of financial reporting for placing the basic financial statements
in an appropriate operational, economic or historical context. We have applied certain limited
procedures to the required supplementary information in accordance with auditing standards
generally accepted in the United States, which consisted of inquiries of management about the
methods of preparing the information and comparing the information for consistency with
management’s responses to our inquiries, the basic financial statements, and other knowledge we
obtained during our audit of the basic financial statements. We do not express an opinion or
provide any assurance on the information because the limited procedures do not provide us with
sufficient evidence to express an opinion or provide any assurance.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we also have issued our report dated
December 9, 2014 on our consideration of OUC’s internal control over financial reporting and
on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant
agreements and other matters. The purpose of that report is to describe the scope of our testing of
internal control over financial reporting and compliance and the results of that testing, and not to
provide an opinion on the internal control over financial reporting or on compliance. That report
is an integral part of an audit performed in accordance with Government Auditing Standards in
considering OUC’s internal control over financial reporting and compliance.
December 9, 2014
EY
5
MANAGEMENT’S DISCUSSION AND ANALYSIS
This discussion should be read in conjunction with the Financial Statements and Notes to the Financial
Statements.
Management’s Report
The management of Orlando Utilities Commission (OUC) has prepared — and is responsible for — the
integrity of the financial statements and related information included in this report. The financial
statements have been prepared in accordance with generally accepted accounting principles and follow
the standards outlined by the Governmental Accounting Standards Board.
To ensure the integrity of our financial statements, OUC maintains a system of internal accounting
controls that are supported by written policies and procedures and an organizational structure that
appropriately assigns responsibilities to mitigate risks. These controls have been put in place to ensure
OUC’s assets are properly safeguarded and the books and records reflect only those transactions that
have been duly authorized. OUC’s controls are evaluated on an ongoing basis by both management
and OUC’s internal auditors.
Based on the statements above, it is management’s assertion that the financial statements do not omit
any disclosures necessary for a fair presentation of the information nor do they improperly include
untrue statements of a material fact or statements of a misleading nature.
___________________
Kenneth P. Ksionek
General Manager &
Chief Executive Officer
6
John E. Hearn
Vice President &
Chief Financial Officer
Gina R. Johnson
Director of Accounting
& Budgeting Services
MANAGEMENT’S DISCUSSION AND ANALYSIS
Overview of the Financial Statements
This discussion and analysis is intended to serve as an introduction to Orlando Utilities Commission’s (OUC)
financial statements. It defines the basic financial statements and summarizes OUC’s general financial condition
and results of operations, and should be read in conjunction with OUC’s financial statements and accompanying
notes, which follow this section.
Background
OUC was created in 1923 by a Special Act of the Florida Legislature as a statutory commission of the State of
Florida and is governed by a Board (the Board) consisting of five members including the Mayor of the City of
Orlando. The Act confers upon OUC the rights and powers to set rates and charges for electric and water
services. OUC is responsible for the acquisition, generation, transmission and distribution of electric and water
services to its customers within Orange and Osceola Counties. In addition, OUC provides chilled water and
lighting services.
Setting of Rates
The setting of electric and water rates are the responsibility of the Board. Rate changes are implemented after
public workshops are held and approved by the Board. In August 2012, the Board approved an average
residential and small commercial customer bill decrease of 4.6 percent effective for 2013. No electric rate
increases were approved for 2014. Additionally, there were no water rate changes approved for 2014 or 2013.
Financial Reporting
OUC’s financial statements are presented in conformity with generally accepted accounting principles as
prescribed by the Governmental Accounting Standards Board (GASB). The accounting records are maintained in
accordance with the accounting principles and methods prescribed by the Federal Energy Regulatory
Commission (FERC) with the exception of contributions in aid of construction, which are recorded in accordance
with the standards prescribed by GASB.
OUC is a regulated enterprise and applies the Regulated Operations section of GASB Statement No. 62
“Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and
AICPA Pronouncements”. In accordance with these principles, the Board has taken various regulatory actions for
ratemaking purposes that have resulted in the deferral or recognition of certain revenues or expenses. In 2014
and 2013, regulatory actions taken by the Board resulted in the deferral of current period revenues in the amount
of $8.0 million and the deferral of unanticipated costs of $21.5 million, respectively. These actions will be
recognized through the ratemaking process in future periods. See Note F for additional information.
Basic Financial Statements
These basic financial statements were prepared to provide the reader with a comprehensive overview of OUC’s
financial position, results of operations and cash flows.

Statement of Net Position: The Statement of Net Position was prepared using the accrual method of
accounting distinguishing current and long-term assets and liabilities, deferred inflows and outflows of
resources as well as the nature and amount of resources and obligations at a point in time.

Statement of Revenues Expenses and Changes in Net Position: This statement presents current and
prior year revenues and expenses. In addition, included in this statement is the presentation of operating
income, which was reported separately from non-operating income, contributions in aid of construction
and annual dividend.

Statement of Cash Flows: This statement was presented using the direct method and outlines the
sources and uses of cash resulting from operations, non-capital related financing, capital related
financing, and investing activities.
7
MANAGEMENT’S DISCUSSION AND ANALYSIS
Condensed Statements of Net Position
Years ended September 30
(Restated) *
(Restated) *
2013
2012
2014
(Dollars in thousands)
Assets
Utility plant, net
$
2,354,626
$
2,312,844
$
2,298,199
Restricted and internally designated assets
551,263
557,654
593,647
Current assets
253,034
281,419
309,082
Other assets
84,634
89,567
71,440
Total assets
3,243,557
3,241,484
3,272,368
Deferred outflows of resources
75,730
Total assets and deferred outflows of resources
84,061
94,824
$
3,319,287
$
3,325,545
$
3,367,192
$
1,481,003
$
1,548,109
$
1,612,662
Liabilities
Long-term debt
Current liabilities
350,679
333,371
85,727
84,505
79,728
1,917,409
1,965,985
2,021,072
235,629
255,341
279,152
884,604
789,341
744,184
265
329
1,543
281,380
314,549
321,241
Other liabilities and credits
Total liabilities
Deferred inflows of resources
328,682
Net Position
Net investment in capital assets
Restricted
Unrestricted
Total net position
1,166,249
Total liabilities, deferred inflows of resources and net position
$
1,104,219
3,319,287
$
3,325,545
1,066,968
$
3,367,192
*Additional details related to the restatement are included in Note B.
2014 Compared to 2013
Assets
Utility plant, net: Utility plant, net increased $41.8 million inclusive of accumulated depreciation. Current year
plant additions were $169.1 million of which 39.8 percent or $67.4 million was incurred for distribution capital
additions including several transmission line upgrades. Generation facility upgrade projects at each of the OUCowned Stanton Energy plants contributed $43.3 million to the increase in utility plant. Also during the year, OUC
spent $14.8 million to facilitate implementation of the final phases of the electric and water Advanced Metering
Infrastructure (AMI) upgrades. Capital additions were offset by systematic depreciation charges of $113.6 million.
Utility Plant, net at September 30
(Dollars in thousands)
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$-
2012
Electric
8
2013
Water
Chilled water
2014
Lighting
Common
MANAGEMENT’S DISCUSSION AND ANALYSIS
Restricted and internally designated assets: Restricted and internally designated assets decreased $6.4
million in 2014. This decrease was driven by the utilization of $23.3 million in fuel stabilization funds, net of
interest earnings. Offsetting this decrease was an approved Board action to designate $8.0 million in operating
cash and investments in conjunction with the deferral of unexpected resale electric revenues. Additionally,
deposits and advances increased $8.0 million as a result of net unspent designated system development costs
and other customer deposits.
Current assets: Current assets were $28.4 million lower in 2014 than 2013. Operating cash and investments
decreased $14.3 million due to funding of utility plant additions and current period principal and interest debt
service payments offset by cash provided from operations. Additionally, $8.0 million was designated to base rate
stabilization as a result of a regulatory action approved by the Board. Fuel for generation inventory decreased
$5.3 million since 2013 as a result of increased generation at the Stanton Energy Center facilities. Miscellaneous
receivables were $3.5 million lower due to outstanding receivables, in the prior year, related to the semi-annual
Build America Bond interest credit and a one-time receivable from the City of St. Cloud for the transition of
customer deposits in the amounts of $1.8 million and $2.6 million, respectively. In addition, Prepaid and other
expenses were lower than the prior year due to decreased outstanding fuel contracts of $3.5 million. These
variances were offset by increased current year Customer accounts receivable of $8.3 million.
Other assets: Other assets decreased $4.9 million in 2014 as a result of planned amortization of existing
regulatory assets and goodwill of $7.4 million offset by an increase in the prepaid long-term service agreement,
the asset retirement obligation and the net pension asset of $1.8 million, $1.3 million and $1.1 million,
respectively. Additionally, OUC decreased the regulatory asset value related to the impairment of the Crystal
River Unit 3 generation facility to $13.4 million and reported an expense of $1.9 million in the Statement of
Revenues, Expenses and Changes in Net Position as a result of the execution of a Settlement, Release and
Acquisition agreement with Duke Energy.
Deferred outflows of resources: In 2014, Deferred outflows of resources decreased by $8.3 million as a result
of systematic amortization of losses on refunded bonds of $6.5 million and fair value hedging derivative
instrument valuation changes of $1.8 million.
Liabilities
Long-term debt: In 2014, Long-term debt decreased $67.1 million as compared to 2013. The primary driver of
this change was the reclassification of the current year annual debt service requirements in the amount of $53.3
million and the systematic amortization of bond-related premiums and discounts.
Current and Long-term Bonds at September 30
(Dollars in thousands)
$2,000,000
$1,500,000
$1,000,000
$500,000
$Long-term fixed rate debt
2012
2013
Long-term variable rate debt
2014
Bonds payable within one year
As of September 30, 2014, OUC had a credit rating of ―AA‖ from both Standard & Poor’s and Fitch Ratings and a
rating of ―Aa2‖ from Moody’s Investors Service.
9
MANAGEMENT’S DISCUSSION AND ANALYSIS
Current liabilities: Current liabilities increased $17.3 million in 2014 as compared to 2013 as a result of an
increase in supplier payables, including fuel purchases, and customer deposits in the amounts of $9.5 million and
$2.9 million, respectively. In addition, OUC recorded accruals for a tax liability related to an unexpected customer
classification change, an environmental restoration at the Lake Ivanhoe site and an anticipated de-obligation of
federal assistance awards of $2.9 million, $1.1 million and $2.0 million, respectively. These variances were offset
by lower short-term fuel hedge derivatives of $2.9 million.
The Series 2011A Bonds continue to be included under the heading of Other bonds payable. These bonds were
issued as variable rate debt, with a monthly reset period, in the Windows mode without a third-party liquidity
provider. As the underlying agreement provides for a remarketing period of seven months, the opportunity for the
bonds to be subject to a mandatory tender requires the classification of the bonds as Payable from current assets.
Although classified as Payable from current assets, management anticipates this obligation will be outstanding
until the scheduled maturity date in 2027.
Other liabilities and credits: Other liabilities increased $1.2 million in 2014 as compared to 2013. The change
was driven by an increase in the asset retirement obligation related to St. Lucie Unit 2 nuclear generation facility.
Deferred inflows of resources: Deferred inflows of resources decreased $19.7 million in 2014. This decrease
was due to several changes including the planned utilization of fuel and base rate stabilization funds of $23.8
million and $1.1 million, respectively. In addition, the unamortized gain on sale amount decreased $3.0 million due
to systematic recognition of the deferred gain from the Indian River power generation facility to mitigate
depreciation-related costs for the Stanton A generation facility. These variances were offset by an OUC Board
approved deferral of $8.0 million in resale energy revenue in 2014, which will be recognized through the rates
over the next five years.
2013 Compared to 2012
Assets
Utility plant, net: Utility plant, net increased $14.6 million in 2013. Total capital additions in 2013 were $161.9
million and included $34.7 million for generation facility upgrades, $30.3 million in transmission system
enhancements and $28.5 million in information technology upgrades, which included customer-focused web
initiatives. Distribution and water capital additions of $39.3 million and $24.3 million included the Advanced
Metering Infrastructure (AMI) upgrades of $11.2 million and $12.6 million, respectively. These additions were
offset by systematic depreciation in the amount of $119.0 million.
Effective February 2013, Duke Energy announced the closing of its Crystal River 3 nuclear generation facility
(CR 3) as a result of discovering delamination and cracks in the concrete containment structure. As a result, OUC
reclassified $17.6 million of impaired assets under the heading of Regulatory assets. See Note I for more
information.
Restricted and internally designated assets: Restricted and internally designated assets decreased $36.0
million in 2013. This decrease was driven by the use of the remaining construction bond funds of $32.1 million for
capital projects and the planned decrease in fuel stabilization funds in the amount of $14.4 million as a result of
an electric retail fuel rate decrease implemented in March 2012. These decreases were offset by increased
deposits and advances of $10.2 million as a result of an increase in unspent system development charges of $6.0
million and the transition of $2.6 million in St. Cloud electric customer deposits from the City of St. Cloud.
Current assets: In 2013, Current assets decreased $27.7 million from that of the prior year. Operating cash and
investments decreased $25.1 million as a result of satisfying current period principal and interest debt service
payments of $119.4 million, the utilization of cash from operations to fund utility plant additions offset by cash
provided from operations. Prepaid and other expenses decreased primarily due to lower collateral deposit
requirements of $18.1 million and decreased hedge derivative instruments due within one year of $2.4 million.
Offsetting these amounts was a $10.8 million increase in fuel for generation as a result of an increase in coal on
hand. Miscellaneous receivables were $7.0 million higher than in 2012, primarily due to the timing of receivables
for the semi-annual Build America Bond interest credit and the transfer of customer deposits from the City of St.
Cloud in the amounts of $1.8 million and $2.6 million, respectively.
10
MANAGEMENT’S DISCUSSION AND ANALYSIS
As a result of Duke Energy’s notice that CR 3 would no longer be operational, the associated inventory of $0.9
million was reclassified on the Statement of Net Position under the heading of Regulatory assets. See Note I for
further information.
Other assets: Other assets increased $18.1 million in 2013 as compared to 2012. In November 2012, OUC
finalized plans to replace existing electric and water meters with an Advanced Metering Infrastructure. In
conjunction with the approval of this plan, the Board voted to defer the impaired value of electric and water meters
of $1.8 million and $4.4 million, respectively. These costs will be recognized in fiscal years 2014 and 2015
consistent with the Board action. Additionally with the announcement of Duke Energy’s decision to close CR 3,
the Board recognized a regulatory asset for OUC’s ownership portion in the property, plant, equipment and
supplies of $15.3 million, net of $3.2 million from insurance proceeds. This amount will be adjusted and
recognized based on the final net realizable value, as determined by negotiations and the settlement with Duke
Energy. This was offset by lower fuel hedge derivative instruments of $2.0 million.
Deferred outflows of resources: Deferred outflows of resources decreased $10.8 million during 2013. This
change was driven by a decrease in the fair value of interest rate swap derivatives and fuel hedge assets of $10.8
million and $7.1 million, respectively. These changes were offset by an increase of $7.2 million in refunded bond
losses due to the refunding of the Series 1996A, 2003A, 2003B, and 2005B Bonds in January 2013 offset by
systematic amortization.
Liabilities
Long-term debt: In 2013, Long-term debt decreased $64.6 million as compared to 2012. The primary driver of
this change was the reclassification of scheduled principal payments under the heading Current liabilities of $52.0
million. In addition, Fair value derivative instrument losses associated with interest rate swap agreements
decreased $10.8 million as a result of a strengthened market.
In January 2013, the Series 1996A, 2003A, 2003B, and 2005B Bonds, totaling $290.7 million, were refunded with
the Series 2013A Bonds. The net impact of the refunding decreased OUC long-term debt by $1.8 million.
As of September 30, 2013, OUC had a credit rating of ―AA‖ from both Standard & Poor’s and Fitch Ratings and
rating of ―Aa2‖ from Moody’s Investors Service.
Current liabilities: Current liabilities increased $4.7 million in 2013 as compared to 2012. The primary driver of
this change was the increase in customer meter deposits of $2.6 million as a result of the transition of St. Cloud
electric customer deposits from the City of St. Cloud to OUC in preparation for the conversion of these customers
to the OUC customer billing system. Accounts payable and accrued expenses also contributed to the changes as
a result of higher outstanding vendor payables.
The Series 2011A Bonds continue to be included under the heading of Other bonds payable. These bonds were
issued as variable rate debt, with a monthly reset period, in the Windows mode without a third-party liquidity
provider. As the underlying agreement provides for a remarketing period of seven months, the opportunity for the
bonds to be subject to a mandatory tender requires the classification of the bonds as Payable from current assets.
Although classified as Payable from current assets, management anticipates this obligation will be outstanding
until the scheduled maturity date in 2027.
Other liabilities and credits: Other liabilities increased $4.8 million in 2013 as a result of an increase in the asset
retirement obligation associated with St. Lucie Unit 2 nuclear generation facility and unapplied contributions in aid
of construction of $2.9 million and $5.3 million, respectively, offset by decreased fuel hedge derivative instruments
of $2.8 million.
Deferred inflows of resources: Deferred inflows of resources decreased $23.8 million from 2012 as a result of
the planned use of fuel stabilization funds of $13.4 million in response to the Board approved fuel-rate reduction in
March 2012. In addition, continued systematic recognition of the deferred gain from the Indian River Plant
decreased deferred inflows $4.8 million. Fair value hedge changes for fuel hedge agreements decreased $4.3
million.
11
MANAGEMENT’S DISCUSSION AND ANALYSIS
Condensed Statements of Revenues, Expenses and Changes in Net Position
Years ended September 30
2014
(Dollars in thousands)
Operating revenues
$
2013
879,985
$
2012
825,358
$
854,383
Operating expenses
747,928
708,563
735,713
Operating income
132,057
116,795
118,670
Net non-operating expenses
42,776
42,862
45,993
Income before contributions
89,281
73,933
72,677
Contributions in aid of construction
21,371
10,318
8,619
(48,622)
(47,000)
(47,161)
Annual dividend
Increase in net position
Net position - beginning of year
Net position - end of year
$
62,030
37,251
34,135
1,104,219
1,066,968
1,032,833
1,166,249
$
1,104,219
$
1,066,968
2014 Compared to 2013
Changes in Net Position
Operating revenues: Operating revenues increased $54.6 million or 6.6 percent as compared to 2013. Total
retail electric revenues increased $30.7 million with increases in retail energy and fuel revenues of $13.1 million
and $17.6 million, respectively. This increase was driven by a 3.4 percent increase in consumption. Additionally,
fuel revenues increased as a result of rising natural gas costs. Total resale revenues increased $22.4 million in
2014, inclusive of the Board approved action to defer $8.0 million. Consistent with retail electric revenues, resale
electric revenues earned through the St. Cloud inter-local agreement were $5.2 million higher than the prior year.
In 2014, OUC also benefited from wholesale market opportunities due to extreme weather conditions and an
extended outage at the McIntosh 3 generation facility. Additionally, agreements executed with the City of Winter
Park and City of Lake Worth began in January 2014.
Operating Revenues at September 30
(Dollars in thousands)
$900,000
$450,000
$-
2012
Retail Electric
2013
Resale electric
Water
2014
Chilled water
Lighting
Other
Operating expenses: In 2014, Total operating expenses were $39.4 million or 5.6 percent higher than in 2013.
Fuel for generation and purchased power costs contributed the largest portion of this change with a $32.0 million
increase in 2014 as compared to 2013 or 10.1 percent. This increase was driven by higher resale and retail sales
due to an extended outage at Lakeland’s McIntosh Unit 3 and increased native load requirements.
Unit/department expenses in 2014 were $11.7 million higher than 2013. The variance was driven by increased
labor, pension and medical costs.
12
MANAGEMENT’S DISCUSSION AND ANALYSIS
Depreciation and amortization was $113.6 million, a decrease of $5.4 million or 4.5 percent as compared to 2013.
This change was primarily due to additional depreciation study savings offset by accelerated depreciation costs
associated with the write-down of retired assets and incremental year-over-year systematic depreciation related to
the capitalization of new assets.
Payments to other governments and taxes were $1.0 million higher in 2014 as compared to 2013 as a result of
the agreed upon revenue-based payment to the City of Orlando.
Operating Expenses at September 30
(Dollars in thousands)
$800,000
$400,000
$-
2012
2013
2014
Fuel for generation and purchased power
Unit/department expenses
Deprecation and amortization
Payments to other governments and taxes
Net non-operating expenses: Total net non-operating expenses for 2014 were in-line with 2013. However,
there were material fluctuations which included lower interest expenses, as a result of the annualized impact of
the January 2013 bond refunding, offset by a decrease in the amortization of the gain on sale of assets of
$1.8 million, to reflect the impact of the depreciation study changes.
Contributions in aid of construction: Contributions in aid of construction increased $11.1 million in 2014 as
compared to 2013 due to the completion of a St. Cloud transmission project.
2013 Compared to 2012
Changes in Net Position
Operating revenues: Operating revenues decreased $29.0 million or 3.4 percent in 2013 as compared to 2012.
Total retail electric revenues decreased $23.8 million with decreases in retail energy and fuel revenues of $15.5
million and $8.3 million, respectively. The decrease in retail energy revenues was driven by a Board approved 4.6
percent decrease in electric base rates in October 2012. Retail fuel revenues decreased as a result of the
annualized impact of the fuel rate decrease approved by the Board in March 2012 and lower utilization of fuel
stabilization due to decreased fuel costs. Total resale revenues decreased $5.7 million in 2013 as a result of a
decrease in resale energy of $4.5 million coupled with a decrease of $1.2 million in resale fuel. Consistent with
retail electric revenues, resale electric revenues earned through the St. Cloud inter-local agreement were lower
than prior year due to the electric rate reductions.
Water revenues decreased $0.9 million due to a 1.3 percent decrease in water consumption as compared to
2012. Other revenues increased $1.1 million primarily due to increased reconnection and other energy service
revenues.
13
MANAGEMENT’S DISCUSSION AND ANALYSIS
Operating expenses: In 2013, Total operating expenses were $27.2 million or 3.7 percent lower than in 2012.
Fuel for generation and purchased power costs decreased $10.2 million in 2012 or 3.1 percent as a result of
lower coal commodity costs.
Unit/department expenses decreased $14.1 million or 6.0 percent in 2013. Minority-owned generation facility
operating costs at Stanton Unit A and St Lucie Unit 2 were $3.9 million and $2.0 million, respectively, lower than
those incurred in 2012 as a result of major outages. Labor costs were $3.7 million lower than the prior year as a
result of position vacancies and the reassignment of labor resources as part of the mutual aid agreement to
support communities affected by Super Storm Sandy. Additionally in 2013, OUC completed a study that analyzed
the classification of costs associated with material handling, procurement and the movement of fuels. Based on
FERC guidance, $4.1 million was reclassified from Unit/department expense to Fuel for generation and
purchased power. These changes were offset by increased benefit costs of $2.6 million as a result of higher
pension and medical costs.
Depreciation and amortization was $119.0 million in 2013, a decrease of $1.7 million or 1.4 percent from 2012.
This change was due primarily to savings garnered as a result of the implementation of the depreciation study
OUC conducted during 2013 of $11.6 million. The impact of the study results was offset by accelerated
depreciation costs associated with the write-down of water meters in preparation for the Advanced Meter
Infrastructure implementation of $3.3 million, the recognition of previously deferred remediation costs for the
Martin Substation of $0.8 million and incremental year-over-year systematic depreciation related to the
capitalization of new assets.
Payments to other governments and taxes were slightly lower than the amounts incurred in 2012 as a result of
decreased operating revenues.
Net non-operating expenses: Total net non-operating expenses decreased $3.1 million or 6.8 percent in 2013
as compared to 2012. A component of this change was due to lower current period interest expenses, inclusive of
interest rate swaps, in the amount of $7.8 million as a result of the January 2013 bond refunding transaction.
Offsetting this change was the recognition of $2.2 million less in interest earnings in 2013 stemming from the
timing of investment valuations. Also contributing to the decrease was the reversal of unrealized regulatory
compliance costs of $0.9 million in 2012.
Contributions in aid of construction: Contributions in aid of construction increased $1.7 million in 2013 as
compared to 2012 as a result of increased water system growth projects.
Currently Known Facts or Conditions That May Have a Significant Effect on OUC’s
Financial Condition or Results of Operations
OUC continues to reinforce its core value of maintaining reliability while providing customers with competitive
rates and supporting electric and water sustainability initiatives. In 2014, OUC completed the implementation of
customer-facing projects initiated in 2013 and began to introduce new web technologies, including self-service
and mobile features. These new technologies enable OUC customers to better manage their utility accounts while
reducing their consumption and costs. The new technologies also allow OUC to control costs by migrating
customers to more economical and efficient customer service channels. In conjunction with the implementation of
the Advanced Metering Infrastructure program, these technologies enable customers to strengthen their support
of conservation efforts while allowing OUC to maintain high reliability standards.
In 2014, revenues of $880.0 million, net of a Board approved regulatory deferral of $8.0 million related to
unexpected increase in wholesale energy sales, were slightly below the 2014 budgeted expectation. The 2015
operating budget reflects a measured retail sales growth as the Orlando area continues to rebound; with
operating revenues in the near term, net of fuel revenue, projected to increase 1.0 percent. There is currently no
electric rate increase planned for 2015; however a water rate increase is being considered.
14
MANAGEMENT’S DISCUSSION AND ANALYSIS
In 2015, OUC will implement GASB Statement No. 68, “Accounting and Financial Reporting for Pensions – An
Amendment of GASB Statement No. 27”, (Statement No. 68). The primary objective of this statement is to
improve accounting and financial reporting for pension plans by providing decision-useful information and creating
transparency. Statement No. 68 establishes standards for measuring and recognizing liabilities, deferred outflows
and inflows of resources and expenses. For defined benefit pension plans, Statement No. 68 further identifies the
methods and assumptions that should be used to project benefit payments, discount projected benefit payments
to the actuarial present value and attribute that present value to periods of employee service. OUC is currently
evaluating the financial impact of this implementation to the Statements of Net Position and Statements of
Revenues, Expenses, and Changes in Net Position.
OUC is subject to legislative and regulatory mandates that impact its operations. Electric utilities are subject to
emissions requirements issued under the Clean Air Interstate Rule (CAIR) which limits emissions of nitrogen
oxides (NOX) and sulfur dioxide (SO2), the byproducts of fuel combustion in power plants. The EPA is working to
finalize the new Cross-State Air Pollution Rule (CSAPR) which will further limit the NO X and SO2 emissions by
2015. The estimated costs of compliance with CSAPR are expected to be significant and are being evaluated by
OUC. Additionally, the EPA has promulgated the Mercury Air Toxins rule (MAT) to further regulate mercury
emissions. OUC is currently implementing processes to assess its current emission levels as well as making plant
modifications to address compliance. While the costs for the proposed MAT requirements are not anticipated to
be material, further compliance measures may prove to be significant. Finally, the EPA has announced that a new
carbon dioxide (CO2) rule under the authority of Section 111(b) of the Clean Air Act will be finalized by June 2015.
Compliance costs associated with this ruling will be assessed upon issuance. See Note I for further information.
OUC received public assistance awards of $17.1 million, $11.6 million and $3.4 million from the Federal
Emergency Management Agency (FEMA) for damages resulting from the 2004 hurricanes Charley, Frances and
Jeanne, respectively. The Office of Inspector General of the Department of Homeland Security (OIG) conducted
an audit to determine whether OUC accounted for and expended FEMA grant funds in accordance with federal
regulations and FEMA guidelines. The audit revealed that although funds were expended in accordance with
guidelines, OUC did not follow federal procurement requirements, but did follow its own procurement processes
for certain emergency situations where bidding is not reasonably possible. As a result, OIG recommended that
FEMA de-obligate $4.1 million, $6.1 million and $0.6 million for each of the three hurricanes, respectively. OUC
responded by stating that competitive bidding for contract work during this period was unfeasible due to a
shortage of viable bidders and wide spread power outages in Florida during that time. At FEMA’s request, OUC
provided a ―Reasonable Cost‖ analysis of the contract costs sited in the OIG reports. As a result of previous
rulings related to repayment of FEMA awards, OUC estimates that the de-obligation for the three hurricanes will
be $2.0 million and has recorded this obligation under the heading of Accounts payable and accrued expenses in
the Statements of Net Position.
Finally in February 2013, Duke Energy announced their decision to close the jointly owned Crystal River 3 nuclear
generation facility (CR 3) as a result of delamination within the reactor containment building. OUC’s Board
approved the impairment and reclassification of its ownership share of CR 3 property, plant, equipment and
inventory of $15.3 million, net of insurance proceeds, as a regulatory asset. On September 30, 2014, the joint
owners of CR 3 executed a Settlement, Release and Execution agreement to address the damages claimed by
the joint owners and permitting Duke Energy to file an application with the Nuclear Regulatory Commission for a
license amendment. Upon approval of the license amendment, OUC will transfer both their ownership in CR 3
along with their current decommissioning trust funds back to Duke Energy. In exchange, Duke Energy will
assume all past and future liabilities associated with the maintenance and decommissioning of the CR 3 facility as
well as make settlement payments to OUC of $13.0 million. OUC will recognize the transaction in accordance
with GASB Statement No. 62 upon completion of this process.
15
STATEMENTS OF NET POSITION
Years ended September 30
(Restated) *
2014
(Dollars in thousands)
Assets
Utility plant
Utility plant in service
Allowances for depreciation and amortization
Utility plant in service, net
Land
Construction work in progress
Total utility plant, net
$
Restricted and internally designated assets
Restricted assets
Internally designated assets
Total restricted and internally designated assets
3,749,368
(1,615,754)
2,133,614
69,455
151,557
2,354,626
2013
$
3,680,510
(1,572,345)
2,108,165
69,214
135,465
2,312,844
53,212
498,051
551,263
52,376
505,278
557,654
38,081
60,333
76,034
13,702
37,983
24,821
42,226
1,456
18,283
448
253,034
67,697
17,231
39,275
30,168
42,561
2,117
21,824
213
281,419
Other assets
Net pension and other post-employment benefits assets
Regulatory assets
Other long-term assets
Hedging derivative instrument
Total other assets
Total assets
31,368
34,900
18,140
226
84,634
3,243,557
30,265
42,096
17,118
88
89,567
3,241,484
Deferred outflows of resources
Accumulated decrease in fair value of hedging derivatives
Unamortized loss on refunded bond
Total deferred outflows of resources
Total assets and deferred outflows of resources
23,808
51,922
75,730
3,319,287
25,622
58,439
84,061
3,325,545
Current assets
Cash and investments
Customer accounts receivable, less allowance for doubtful
accounts (2014 - $8,420 and 2013 - $23,124)
Miscellaneous receivables
Accrued utility revenue
Fuel for generation
Materials and supplies inventory, net
Accrued interest receivable
Prepaid and other expenses
Hedging derivative instrument maturing within one year
Total current assets
See Notes to the Financial Statements
*Additional details related to the restatement are included in Note B.
16
$
$
STATEMENTS OF NET POSITION
Years ended September 30
(Restated) *
2014
(Dollars in thousands)
Liabilities
Current liabilities
Payable from restricted assets
Current portion of long-term debt
Accrued interest payable on notes and bonds
Customer meter deposits
Total payable from restricted and designated assets
$
Payable from current assets
Accounts payable and accrued expenses
Billings on behalf of state and local governments
Compensated absences and accrued wages
Accrued governmental payments
Accrued swap payables
Other bonds payable
Hedge derivative instrument maturing within one year
Total payable from current assets
Total current liabilities
Other liabilities
Asset retirement obligation and other liabilities
Hedge derivative instruments
Total other liabilities and credits
Long-term debt
Bond and note principal
Unamortized discount/premium
Fair value of derivative instruments
Total long-term debt
Total liabilities
Deferred inflows of resources
Accumulated increase in fair value of hedging derivatives
Regulatory credits
Unamortized gain on refunded bond
Total deferred inflows of resources
Net position
Net investment in capital assets
Restricted
Unrestricted
Total net position
Total liabilities, deferred inflows of resources and net position
$
53,310
29,826
52,784
135,920
2013
$
51,950
31,031
49,892
132,873
82,801
16,987
12,748
2,479
872
98,360
512
214,759
350,679
67,332
15,858
11,639
2,979
871
98,360
3,459
200,498
333,371
85,438
289
85,727
84,263
242
84,505
1,359,650
98,346
23,007
1,481,003
1,917,409
1,412,960
113,228
21,921
1,548,109
1,965,985
674
233,029
1,926
235,629
301
252,936
2,104
255,341
884,604
265
281,380
1,166,249
3,319,287
789,341
329
314,549
1,104,219
3,325,545
$
See Notes to the Financial Statements
*Additional details related to the restatement are included in Note B.
17
STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
Years ended September 30
2014
(Dollars in thousands)
Operating revenues
Retail electric revenues
Resale electric revenues
Water revenues
Chilled water revenues
Lighting revenues
Other revenues
Total operating revenues
$
590,123
157,009
63,415
30,534
12,876
26,028
879,985
2013
$
559,400
134,573
62,497
30,323
12,697
25,868
825,358
Operating expenses
Fuel for generation and purchased power
Unit/department expenses
Depreciation and amortization
Payments to other governments and taxes
Total operating expenses
347,896
231,191
113,601
55,240
747,928
315,867
219,457
118,964
54,275
708,563
Operating income
132,057
116,795
Non-operating income and expenses
Interest income
Other income, net
Amortization of gain on sale of assets
Interest expense
Total net non-operating expenses
4,848
9,375
2,888
(59,887)
(42,776)
4,512
10,289
4,692
(62,355)
(42,862)
89,281
73,933
21,371
(48,622)
10,318
(47,000)
62,030
37,251
1,104,219
1,066,968
Income before contributions
Contributions in aid of construction
Annual dividend
Increase in net position
Net position - beginning of year
Net position - end of year
See Notes to the Financial Statements
18
$
1,166,249
$
1,104,219
STATEMENTS OF CASH FLOWS
Years ended September 30
2014
(Dollars in thousands)
Cash flows from operating activities
Cash received from customers
Cash paid for fuel and purchased power
Cash paid for unit/department expenses excluding salaries and benefits
Cash paid for salaries and benefits
Cash paid to other governments and taxes
Net cash provided by operating activities
$
Cash flows from non-capital related financing activities
Dividend payment
Build America Bond interest received
Net cash used in non-capital related financing activities
2013
857,969
(326,155)
(57,821)
(148,339)
(55,739)
269,915
$
808,235
(318,861)
(60,574)
(137,864)
(54,317)
236,619
(48,622)
5,487
(43,135)
(47,000)
1,982
(45,018)
Cash flows from capital related financing activities
Utility plant net of contributions in aid of construction
Debt interest payments
Collateral deposits
Principal payments & refunding costs on long-term debt
Debt issuances
Debt issue expense
Net cash used in capital related financing activities
(144,399)
(65,904)
(1,600)
(51,950)
(1,435)
(265,288)
(149,974)
(68,942)
11,100
(358,766)
308,305
(2,896)
(261,173)
Cash flows from investing activities
Proceeds from sales and maturities of investment securities
Gain on sale of investments
Purchases of investment securities
Investments and other income received
Net cash provided by / (used in) investing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents - beginning of year
Cash and cash equivalents - end of year
$
403,529
338
(301,646)
9,608
111,829
73,321
150,545
223,866
$
398,949
421
(487,028)
10,904
(76,754)
(146,326)
296,871
150,545
$
132,057
$
116,795
Reconciliation of operating income to net cash provided by operating activities
Operating income
Adjustments to reconcile operating income to net cash provided by operating activities
Depreciation and amortization of plant charged to operations
Depreciation and amortization charged to fuel for generation & purchased power
Depreciation of vehicles and equipment charged to unit/department expenses
Changes in assets and liabilities
Decrease / (increase) in receivables and accrued revenue
Decrease / (increase) in fuel and materials and supplies inventories
Increase in accounts payable
Increase in deposits payable and liabilities
Decrease in stabilization and deferred credits
Net cash provided by operating activities
$
Reconciliation of cash and cash equivalents
Restricted and internally designated equivalents
Cash and investments
Debt service and related funds
Cash and cash equivalents - end of the year
$
Non-cash investing, capital and financing activities
Increase in donated utility plant assets
Decrease in fair value of investments
Decrease / (increase) in accounts payable related to utility plant purchases
$
$
$
$
113,601
2,804
3,636
118,964
2,017
3,960
3,483
11,987
17,257
2,392
(17,302)
269,915
(544)
(8,261)
11,108
2,062
(9,482)
236,619
137,210
3,629
83,027
223,866
3,646
(176)
647
$
$
61,919
5,758
82,868
150,545
$
$
$
$
4,451
(3,112)
(1,587)
See Notes to the Financial Statements
19
NOTES TO FINANCIAL STATEMENTS
Note A – The Organization
Orlando Utilities Commission (OUC) was created in 1923 by a Special Act of the Florida Legislature as a statutory
commission of the State of Florida. The Act confers upon OUC the rights and powers to set rates and charges for
electric and water. OUC is responsible for the acquisition, generation, transmission and distribution of electric and
water services to its customers within Orange and Osceola Counties. In addition, OUC provides chilled water and
lighting services.
OUC’s governing Board (the Board) consists of five members including the Mayor of the City of Orlando.
Members serve without compensation and with the exception of the Mayor, who is an ex-officio member of OUC,
may serve no more than two full consecutive four-year terms.
Note B – Summary of Significant Accounting Policies
Basis of presentation: The financial statements are presented in conformity with generally accepted accounting
principles for enterprise funds as prescribed by the Governmental Accounting Standards Board (GASB). The
accounting records are maintained in accordance with the accounting principles and methods prescribed by the
Federal Energy Regulatory Commission (FERC) with the exception of contributions in aid of construction which
are recorded in accordance with the standards prescribed by GASB.
OUC is a regulated enterprise and, as such, applies GASB Statement No. 62, “Codification of Accounting and
Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements”. Under
this guidance, certain expenses and revenues are deferred and recognized in accordance with rate actions of the
Board.
Reporting entity: OUC meets the criteria of an ―other stand-alone government‖ as defined in GASB Statement
No. 14, ―The Financial Reporting Entity” and GASB Statement No. 39, ―Determining Whether Certain
Organizations are Component Units”.
OUC has undivided interests in several power generation facilities which are operated through participation
agreements and are described in Note D. Title to the property is held in accordance with the terms defined in
each agreement, and as such, each party is obligated for its contractual share of operations. There are no
separate entities or organizations associated with these agreements.
Measurement focus, basis of accounting, and financial statement presentation: OUC reports operating
revenues and expenses separately from net non-operating expenses and contributions in aid of construction.
Operating revenues and expenses generally result from producing and delivering utility services in the forms of
electric, water, chilled water and lighting. The principal operating revenues are charges to retail and wholesale
customers and are recorded net of the provision for doubtful accounts. Operating expenses include fuel and
purchased power, unit/department, taxes, and depreciation on capital assets. Net non-operating expenses include
financial and investment activities. Contributions in aid of construction are primarily comprised of impact fees
assessed for the future expansion and development of OUC’s water system as well as developer contributions to
OUC’s electric and water systems above the required obligation-to-serve levels.
Setting of rates: According to the existing laws of the State of Florida, the five Board members of OUC act as the
regulatory authority for the establishment of electric and water rates. Electric rates are set in accordance with the
―rate structures‖ established by the Florida Public Service Commission (FPSC), as they have the jurisdiction to
regulate the electric ―rate structures‖ of municipal utilities in Florida. A ―rate structure‖ is defined as the rate
relationship between customer class and among customers within rate classes and is distinguishable from the
total amount of revenue requirements a utility may receive from rates.
Periodically, OUC performs a rate adequacy study to determine the electric base and fuel revenue requirements.
Based on this study, current cost-of-service studies, and regulations of the FPSC regarding electric rate
structures, OUC develops the electric rate schedules. Prior to the implementation of any rate change, OUC
notifies customers individually, convenes a public workshop, presents the rates to the Board for approval and files
the proposed tariffs with the FPSC. Water rate requirements are studied and prepared in a similar manner
excluding filing a notification with the FPSC.
20
NOTES TO FINANCIAL STATEMENTS
Note B – Summary of Significant Accounting Policies (continued)
In August 2012, the Board approved an electric base rate reduction for 2013. This rate change yielded an
average 4.6 percent residential and small commercial customer rate decrease. There were no electric rate
changes in 2014, nor are there any proposed electric rate changes for 2015.
Water rates have not been changed since 2009. OUC is evaluating a water rate change for 2015 to cover rising
operating costs.
Budgets: Revenue and expense budgets are prepared on an annual basis in accordance with OUC's Budget
policy and bond resolutions and submitted to the Board for approval prior to the beginning of the fiscal year.
OUC’s annual operating budget and capital plan are approved and adopted, respectively, in the month of August
preceding the upcoming fiscal year. The legal adoption of OUC’s operating budget and capital plan are not
required.
In accordance with OUC’s Budget policy and bond resolutions, actual revenues and expenses are compared to
the approved budget by operating unit line item and then submitted to the Board monthly.
Utility plant: Utility plant is stated at historical cost with the exception of the fair value assets recorded in
accordance with FERC Order 631, ―Accounting, Financial Reporting, and Rate Filing Requirements for Asset
Retirement Obligations” and impaired assets recorded in accordance with GASB Statement No. 42, “Accounting
and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries”. Fair value assets are
recognized over the license period of the nuclear generation facility and are subject to periodic re-measuring.
Historical utility plant costs include the costs of contract work, labor, materials and allocated indirect charges for
equipment, supervision and engineering. Interest expense is not a component of OUC’s historical utility plant
costs.
Assets are subject to capitalization if they have a useful life of at least two years, a unit cost of at least $1,000 with
the exception of bulk asset purchases which must have a minimum per unit cost of $500 and a total purchase
amount of at least $75,000. Assets are depreciated systematically using the straight-line method over the
estimated useful life, considering the depreciation study completed in 2013, FERC guidelines or the license period
of the asset. The impact of the depreciation study resulted in a decrease in depreciation expense of $22.7 million
and $11.6 million for the years ended September 30, 2014 and 2013, respectively.
The cost of electric or water utility plant assets retired, together with removal costs less salvage, are charged to
accumulated depreciation. In addition, when a utility plant constituting an operating unit or system is sold or
disposed of and the net proceeds are at least $0.5 million, the gain or loss on the sale or disposal is deferred and
proceeds, if applicable, are placed in the renewal and replacement fund in accordance with the Board approved
Policy for Accounting Treatment of Disposal of Capital Assets.
The consolidated average annual composite depreciation rates for 2014 and 2013 inclusive of impairment
expenses were 3.1 percent and 3.6 percent, respectively. Depreciation is calculated using the following estimated
lives:
Electric
Water
Chilled Water
Lighting
Common
3 – 60 years
3 – 75 years
5 – 50 years
20 years
3 – 40 years
In addition, nuclear fuel is included in utility plant and recognized to fuel for generation and purchased power as it
is used.
21
NOTES TO FINANCIAL STATEMENTS
Note B – Summary of Significant Accounting Policies (continued)
Cash, cash equivalents and investments: Cash and cash equivalents are reported under the headings of
Restricted and internally designated assets and Current assets. OUC’s cash and cash equivalents include all
authorized instruments purchased with an original maturity date of three months or less including all investments
in money market funds. Premiums and discounts on investments are amortized using the effective interest
method.
Investments are reported in accordance with GASB Statement No. 31, “Accounting and Financial Reporting for
Certain Investments and for External Investment Pools”. As such, investments having maturities of greater than
one year at the time of purchase are reported at fair value and those with maturities of less than one year at the
time of purchase are reported at amortized book value.
Realized and unrealized gains and losses for all investments except those executed in conjunction with a bond
refunding are included in Interest income on the Statements of Revenues, Expenses and Changes in Net
Position. Realized gains associated with a bond refunding are included as a component of the unamortized
amount on refunding. The following summarizes the realized gains included as a component of Interest and other
income as well as the associated prior year unrealized gains at September 30:
2014
(Dollars in thousands)
2013
Realized gains
$
338
$
421
Prior year unrealized gains
$
67
$
1,311
There were no gains associated with a bond refunding for the years ended September 30, 2014 and 2013.
Investments maintained in OUC’s Defined Benefit and Other Post-Employment Benefit Trust funds were reported
at quoted market value as of their actuarial valuation date. See valuation information related to these trust funds
following the footnotes under the heading of Required Supplemental Information.
Restricted and internally designated assets: Funds classified as restricted assets represent cash, cash
equivalents and investments which were designated by law, bond requirements or regulatory statutes. Funds
classified as Internally designated assets also represent cash, cash equivalents and investments for which OUC
has a customer obligation or the Board has taken action to designate.
Accounts receivable: OUC recognizes revenue and the associated Customer accounts receivable, net of the
allowance for doubtful accounts, on a cyclical basis in the period in which it was earned. The allowance for
doubtful accounts was calculated based upon OUC’s historical experience with collections and current energy
market conditions. Bad debt expenses for estimated doubtful accounts were recorded as a reduction of operating
revenues in the Statements of Revenues, Expenses and Changes in Net Position.
In 2014, doubtful accounts in the amount of $14.6 million were sold for $0.3 million. Included in this amount were
aged agency receivables in the amount of $1.8 million. In 2013, provisions were established for aged agency
receivables and billed as a component of the agency remittance process.
The net customer receivable balance of $76.0 million and $67.7 million at September 30, 2014 and 2013 includes
an allowance for doubtful accounts of $8.4 million and $23.1 million, respectively. In 2014 and 2013, the net
customer receivable amount for billings on behalf of the state and other local governments were $9.4 million and
$9.0 million inclusive of an allowance for doubtful accounts of $0.9 million and $2.2 million, respectively. Agency
billings are not reflected in the Statements of Revenues, Expenses and Changes in Net Position.
As of September 30, 2014 and 2013, Miscellaneous accounts receivables, including participation billing, were
$13.7 million and $17.2 million net of allowance for doubtful accounts of $0.6 million and $0.4 million, respectively.
22
NOTES TO FINANCIAL STATEMENTS
Note B – Summary of Significant Accounting Policies (continued)
All receivables are anticipated to be collected within an operating cycle and are reported as current assets at
September 30:
2014
(Dollars in thousands)
Customer accounts receivable, net
Customer receivables
Agency receivables
$
Wholesale receivables
Total customer accounts receivable, net
Miscellaneous accounts receivable, net
Total accounts receivable, net
2013
57,236
9,389
$
9,409
76,034
$
13,702
89,736
52,781
8,974
5,942
67,697
$
17,231
84,928
Bad debt expenses were $3.3 million and $3.1 million for the years ended September 30, 2014 and 2013,
respectively.
Accrued utility revenue: This amount represents services provided to retail customers but not billed at the end
of the fiscal year for electric, water, chilled water and lighting. Accrued unbilled revenue at September 30, 2014
and 2013 was $38.0 million and $39.3 million, respectively, including unbilled electric fuel revenues in the amount
of $12.2 million and $12.7 million, respectively.
Fuel for generation: Fuel oil and coal were reported at current cost, based on market fuel indices. Fuel for
generation at September 30, 2014 and 2013 was $24.8 million and $30.2 million, respectively.
Materials and supplies inventory: Materials and supplies were reported at current cost based on contractual
material and supply agreements. Materials and supplies inventory, net at September 30, 2014 and 2013 was
$42.2 million and $42.6 million including an allowance for obsolescence of $4.8 million and $4.3 million,
respectively. The allowance for obsolescence was calculated at a rate of 25.0 percent for inventory with no
activity for more than three years.
Prepaid and other expenses: Prepaid expenses represent costs that are anticipated to be recognized in the
Statements of Revenues, Expenses and Changes in Net Position in the near future, including service agreement
costs and margin deposits. Prepaid expenses at September 30, 2014 and 2013 were $18.3 million and $21.8
million, respectively, for which interest rate swap margin deposits were $12.2 million and $10.6 million,
respectively.
Net pension and other post-employment benefits (OPEB) assets: Changes to the net pension and net OPEB
assets are recorded in accordance with calculations provided to OUC by its actuaries in conjunction with the
respective annual actuarial valuation reports. The net asset balances were $29.4 million and $28.3 million for
pension and $1.9 million and $2.0 million for OPEB at September 30, 2014 and 2013, respectively. As part of the
GASB Statement No. 68 implementation, OUC will evaluate the financial statement impact related to the net
pension asset and make any necessary adjustments in 2015.
23
NOTES TO FINANCIAL STATEMENTS
Note B – Summary of Significant Accounting Policies (continued)
Hedging derivative instruments: All effective derivative instruments are included on the Statements of Net
Position as either an asset or liability measured at fair market value. Changes in the fair value of the hedging
derivative instruments during the year were deferred and recognized in the period in which the derivative was
settled. The settlement of fuel and financial related hedging derivative instruments were included as a part of Fuel
for generation and purchased power costs and Interest expense, respectively, in the Statements of Revenues,
Expenses and Changes in Net Position. Changes in the fair value of investment derivative instruments were
recognized in the Statements of Revenues, Expenses and Changes in Net Position in the period in which they
were incurred unless otherwise authorized by Board action to be deferred and recognized through the ratemaking process.
Fuel related derivative transactions for natural gas and crude oil are executed in accordance with OUC's internally
established Energy Risk Management Oversight Committee (ERMOC) whose primary objective is to minimize
exposure to energy price volatility for cash flow and control purposes. ERMOC has a defined organizational
structure and responsibilities, which include approving all brokerage relationships, counterparty credit worthiness
and overall program compliance. In addition, the Energy Risk Management Program incorporates specific volume
and financial limits for natural gas derivatives which begin at 40.0 percent of the approved retail fuel budget of the
current year (the first year) and graduate down in 5.0 percent increments to 20.0 percent of the forecasted annual
retail fuel budget for the fifth year. Crude oil derivatives are hedged based on the expected volume of oil
consumed in conjunction with coal transportation costs.
Financial related derivatives are executed to modify interest rates on outstanding debt. These agreements are
prepared in accordance with OUC’s Treasury policy, presented to the Finance Committee and approved by the
Board. Periodically, as defined by the underlying agreement, the net differential between the fixed and variable
rate is exchanged with the counterparty and included as a component of Interest expense. Financial related
derivatives terminated in conjunction with a bond refunding are deferred and included as a component of
Unamortized gain or loss on refunded bond under as a Deferred inflow or outflow of resources, respectively.
Financial related derivatives which are terminated prior to their original maturity date and are not terminated in
conjunction with a bond refunding, are recognized as a component of Interest expense unless otherwise
authorized by Board action.
Current portion of long-term debt: Bonds payable within one year represents scheduled principal payments
due within the upcoming year, in accordance with the serial requirements of the bond agreements.
Proportionately throughout the year, the annual required funds are segregated and included as a component of
Internally designated assets.
Accounts payable and accrued expenses: Accounts payable and accrued expenses include liabilities incurred
in conjunction with fuel and purchased power costs, supplier payables and accrued expenses for self-insurance.
The following summarizes the significant payable balances included under this heading at September 30:
2014
(Dollars in thousands)
Supplier payables
$
Fuel and purchased power payables
Accrued self-insurance expenses
Other accounts payable and accrued expenses
Total accounts payable and accrued expenses
29,726
2013
$
39,348
32,969
2,411
3,357
11,316
$
27,165
82,801
3,841
$
67,332
Other accounts payable and accrued expenses under this heading include taxes billed on behalf of various
governmental authorities and pollution remediation. Pollution remediation of $2.7 million and $1.6 million at
September 30, 2014 and 2013, respectively, was recorded in accordance with GASB Statement No. 49,
―Accounting and Financial Reporting for Pollution Remediation Obligations”.
24
NOTES TO FINANCIAL STATEMENTS
Note B – Summary of Significant Accounting Policies (continued)
Compensated absences and accrued wages: OUC accrues vacation leave for all employees annually on
January 1. Sick leave is earned annually on the employee’s anniversary date and is accrued based on a ratio of
sick leave not taken to sick leave earned. This ratio is then used to determine an employee’s payout at either the
retirement rate of 50.0 percent or termination rate of 25.0 percent. No payout is available for employees with less
than two years of employment. Compensatory time is accrued when earned. At September 30, 2014 and 2013,
the estimated liability for Compensated absences and accrued wages was $12.7 million and $11.6 million,
respectively.
Other Bonds Payable: Variable rate bonds with final maturities extending past one year that are not supported
by an underlying liquidity facility are classified as current under the heading Other bonds payable.
Asset retirement obligation and other liabilities: Included in this amount are the asset retirement obligations
(ARO) related to the legal requirement of decommissioning OUC’s interest in the St. Lucie Unit 2 (SL 2) and
Crystal River Unit 3 (CR 3) nuclear generation facilities and advances received from customers for construction
commitments.
The ARO was determined based on the most recent approved FPSC report provided to OUC by the owneroperators of these plants. The amount estimated for OUC’s share of the decommissioning cost of these facilities,
in 2010 dollars, was $43.2 million and $13.5 million for SL 2 and CR 3, respectively. This liability is systematically
accreted over a life consistent with each plant’s license period. ARO recorded at September 30, 2014 and 2013
was $46.0 million and $43.9 million, respectively for SL 2 and $17.6 million each year for CR 3.
The operational license expiration date for SL 2 is fiscal year 2043. See Note I for additional information on the
status of CR 3.
Other liabilities under this heading included advances received for future services that are recognized over a
period consistent with the associated service. At September 30, 2014 and 2013, these balances were $13.3
million and $13.6 million, respectively.
Unamortized discount/premium: Unamortized discount/premium on outstanding bonds was recorded in the
year of issuance. Amortization of these amounts was recorded using the bonds outstanding method based on the
individual serial maturities and was presented net of accumulated amortization.
Contributions in aid of construction: Funds received from developers and customers including system
development fees and assets deeded to OUC for future maintenance were recorded as Contributions in aid of
construction in the period in which they were received on the Statements of Revenues, Expenses and Changes in
Net Position.
Net position: OUC classifies net position into three components as follows:

Net investment in capital assets: This component of net position consists of capital assets, net of
accumulated depreciation reduced by the outstanding debt balances.

Restricted: This component consists of net position with external constraints placed on their use.
Constraints include those by debt indentures, grants or laws and regulations of other governments and
those established by law through constitutional provisions or enabling legislation.

Unrestricted: This component of net position consists of net position that is not included in the definition
of ―Net investment in capital assets‖ or ―Restricted‖.
25
NOTES TO FINANCIAL STATEMENTS
Note B – Summary of Significant Accounting Policies (continued)
Implementation of new accounting standards: In 2014, OUC adopted GASB Statement No. 65 “Items
Previously Reported as Assets and Liabilities”, (Statement No. 65), which was issued by GASB in 2012. The
application of this standard established accounting and financial reporting standards that required the
reclassification of certain items previously reported as assets and liabilities to that of Deferred outflows of
resources or Deferred inflows of resources or as Outflows or Inflows of resources. The implementation of this
statement also limited the use of the term deferred in the financial statement presentation.
At September 30, 2013, OUC had $8.7 million of unamortized debt issuance costs. Statement No. 65 required
debt issuance costs to be recognized as Outflows of resources in the period incurred. In 2014 as a result of Board
action, OUC elected to follow accounting guidance for regulated operations and recorded previously incurred debt
issuance costs as a regulatory asset. These costs will be amortized using the straight-line method through 2023
and recognized under the heading Interest expense on the Statements of Revenues, Expenses and Changes in
Net Position. Debt issuance costs incurred subsequent to September 30, 2014 will be recognized as an Outflow
of resources. Adoption of Statement No. 65 also impacted the Statements of Net Position, as certain assets and
liabilities were reclassified under the headings Deferred outflows of resources or Deferred inflows of resources.
For comparative purposes, the Statement of Net Position for 2013 included within this document has been
restated for these changes. Noted below are the specific areas impacted:
Year ended September 30
(Dollars in thousands)
(Restated)
(Previously reported)
2013
2013
Assets
Other assets
Regulatory assets
$
42,096
$
33,373
Unamortized debt costs
$
-
$
3,497
$
58,439
$
-
$
-
$
252,936
$
51,666
Deferred outflows of resources
Loss on refunded debt
Liabilities
Other liabilities and credits
Regulatory liabilities
Long-term debt
Unamortized discount/premium
$
113,228
Regulatory credits
$
252,936
$
-
Gain on refunded debt
$
2,104
$
-
Deferred inflows of resources
The Statements of Revenues, Expenses and Changes in Net Position were not impacted by the implementation
of Statement No. 65.
26
NOTES TO FINANCIAL STATEMENTS
Note B – Summary of Significant Accounting Policies (continued)
Recent accounting standards: In 2012 and 2013, GASB issued Statement No. 68, “Accounting and Financial
Reporting for Pensions – an amendment to GASB Statement No. 27”, (Statement No. 68) and Statement No. 71,
“Pension Transition for Contributions Made Subsequent to the Measurement Date”, (Statement No. 71).
Statement No. 68 establishes standards for measuring and recognizing liabilities, deferred outflows and deferred
inflows of resources and expenses related to pensions. For defined benefit pension plans, this statement
identifies the methods and assumptions that should be used to project benefit payments, discounts projected
benefit payments to their actuarial present value, and attributes that present value to periods of employee service.
Note disclosures and required supplementary information requirements about pensions also are addressed.
Statement No. 71 addresses an issue regarding application of the transition provisions of Statement No. 68.
The impact of Statements No. 68 and No. 71 is currently being evaluated and is anticipated to be material to the
presentation of OUC’s financial position. These statements will be implemented, as required by GASB, in 2015.
Reclassifications: Certain amounts in 2013 have been reclassified to conform to the 2014 presentation.
27
NOTES TO FINANCIAL STATEMENTS
Note C – Utility Plant
Activities for the years ended September 30, 2014 and 2013 were as follows:
(Dollars in thousands)
Utility plant
Electric
Water
Chilled Water
Lighting
Shared/Customer Service
Total utility plant
Accumulated depreciation
Electric
Water
Chilled Water
Lighting
Shared/customer service
Total accumulated depreciation
Total depreciable utility plant, net
Land and other non-depreciable assets
Construction work in progress
Utility plant, net
(Dollars in thousands)
Utility plant
Electric
Water
Chilled Water
Lighting
Shared/Customer Service
Total utility plant
Accumulated depreciation
Electric
Water
Chilled Water
Lighting
Shared/customer service
Total accumulated depreciation
Total depreciable utility plant, net
Land and other non-depreciable assets
Construction work in progress
Utility plant, net
2013
$
$
2,787,317
514,842
115,504
69,405
193,442
3,680,510
Additions
$
(1,220,202)
(192,567)
(34,882)
(26,278)
(98,416)
(1,572,345)
2,108,165
69,214
135,465
2,312,844 $
2012
$
$
2,762,807
509,709
115,637
67,041
201,040
3,656,234
14,845
3,845
3,244
21,934
$
(78,338)
(14,869)
(3,645)
(3,512)
(12,477)
(112,841)
(90,907)
251
146,954
56,298 $
Additions
$
(1,164,162)
(188,042)
(31,346)
(23,196)
(105,436)
(1,512,182)
2,144,052
70,022
84,125
2,298,199 $
11,812
4,936
2,841
19,589
Retirements/
reclassifications
Transfers
92,787
18,068
1,376
2,356
7,947
122,534
$
(44,736) $
(5,375)
(5)
(506)
(24,988)
(75,610)
2,850,213
531,380
116,875
71,255
179,645
3,749,368
1,367
303
(17)
(567)
(1,086)
122,534
(122,534)
$
38,774
7,537
(15)
215
22,921
69,432
(6,178)
(10)
(8,328)
(14,516) $
(1,258,399)
(199,596)
(38,559)
(30,142)
(89,058)
(1,615,754)
2,133,614
69,455
151,557
2,354,626
Retirements/
reclassifications
Transfers
$
(78,563)
(17,484)
(3,943)
(3,102)
(14,683)
(117,775)
(98,186)
6
142,343
44,163 $
2014
43,855
19,311
274
2,416
12,275
78,131
$
(6)
(6)
16
(4)
78,131
(78,131)
$
2013
(31,157) $
(19,114)
(407)
(52)
(22,714)
(73,444)
2,787,317
514,842
115,504
69,405
193,442
3,680,510
22,529
12,965
407
4
21,707
57,612
(15,832)
(814)
(12,872)
(29,518) $
(1,220,202)
(192,567)
(34,882)
(26,278)
(98,416)
(1,572,345)
2,108,165
69,214
135,465
2,312,844
In 2014, the depreciation study recommendations were implemented and group asset reporting was transitioned
to industry standards for group asset depreciation, the retirement of aged assets and the incorporation of net
salvage value.
In 2013, the Board approved the write-down of the existing electric and water meter assets in conjunction with the
implementation of the Advanced Metering Infrastructure (AMI) project, resulting in a reduction to Utility plant, net
of $1.8 million and $4.4 million, respectively. These amounts were classified as a regulatory asset and are being
amortized during fiscal years 2014 and 2015.
28
NOTES TO FINANCIAL STATEMENTS
Note D – Power Generation Facility Operations
Jointly Owned Generation Facilities
OUC operated: OUC maintains fiscal, budgetary and operating control at four power generation facilities for
which there are undivided participant ownership interests. These undivided ownership interests are with the
Florida Municipal Power Agency (FMPA) and Kissimmee Utility Authority (KUA). Each agreement is limited to the
generation facilities and excludes the external facilities. OUC also maintains operational control of a wastewater
treatment facility at the Stanton Units 1 and 2 site through an agreement with Orange County, providing OUC with
approximately 3.0 percent of its water requirements.
Non-OUC operated: OUC maintains an undivided participant interest with Southern Company at their Stanton
Unit A combined cycle generation facility located at OUC’s Stanton Energy Center (SEC), Florida Power & Light
at their St. Lucie Unit 2 nuclear generation facility, Duke Energy at their Crystal River Unit 3 nuclear generation
facility and the City of Lakeland at their McIntosh Unit 3 coal-fired generation facility. In each of these agreements,
fiscal, budgetary and operational controls are not maintained by OUC with the exception of fuel related services at
Stanton Unit A where OUC retains responsibility as fuel agent through the purchased power agreement term.
Funds secured in this role as fuel agent are restricted on the Statements of Net Position and disclosed in Note E.
OUC and non-OUC operated agreements and the related undivided interests were as follows:
Facility name
McIntosh Unit 3 (MAC 3)
St. Lucie Unit 2 (SL 2)
Stanton Unit 1 (SEC 1)
Indian River (IRP - A&B)
Indian River (IRP - C&D)
Stanton Unit 2 (SEC 2)
Stanton Unit A (SEC A)
Agreement year
1978
1980
1984
1988
1990
1991
2001
Total facility net
megawatt capacity
364
850
425
76
224
425
633
OUC undivided
ownership interest
40.00%
6.09%
68.55%
48.80%
79.00%
71.59%
28.00%
Net OUC megawatt
capacity
146
52
291
37
177
304
177
Asset Valuation: Plant balances and construction work in progress for SEC 1, SEC 2, MAC 3 and the Indian
River Plant Combustion Turbines (CTs) include the cost of common and/or external facilities. At the other plants,
participants pay user charges to the operating entity for the cost of common and/or external facilities. User
charges paid for SEC A are remitted back to OUC at their proportionate ownership interest of shared facilities.
Allowance for depreciation and amortization of utility plant is determined by each participant based on their
depreciation methods and rates relating to their share of the plant. The following is a summary of OUC's recorded
gross and net share of each jointly owned power generation facility at September 30:
Utility plant
(Dollars in thousands)
SEC 2
SEC 1
MAC 3
SL 2
SEC A
IRP
Total
2014
Accumulated
depreciation
$
$
463,544
365,112
189,385
193,828
84,638
56,105
1,352,612
$
$
206,792
213,019
123,307
91,841
35,753
41,467
712,179
Net book value
$
$
256,752
152,093
66,078
101,987
48,885
14,638
640,433
2013
Accumulated
depreciation
Utility plant
$
$
452,074
363,833
185,584
189,872
87,479
65,732
1,344,574
$
$
196,118
206,022
119,718
89,513
34,377
50,235
695,983
Net book value
$
$
255,956
157,811
65,866
100,359
53,102
15,497
648,591
29
NOTES TO FINANCIAL STATEMENTS
Note D – Power Generation Facility Operations (continued)
Wholly Owned and Operated Generation Facilities
In February 2010, commercial operations began at Stanton Unit B (SEC B), a combined cycle generation facility.
SEC B provides 300 megawatts of generation and is owned and operated by OUC with no undivided participant
ownership interests. The net book value of this facility at September 30, 2014 and 2013 was $232.4 million and
$238.4 million, respectively.
Note E – Cash, Cash Equivalents and Investments
OUC maintains a portion of its Cash, cash equivalents and investments in interest-bearing qualified public
depository accounts with institutions insured by the Federal Deposit Insurance Corporation or collateralized by a
pool of U.S. Governmental securities, per the Florida Security of Public Deposits Act, Chapter 280 of the Florida
Statutes as well as other types authorized by the Treasury policy.
Unexpended funds from the sale of bonds, debt service funds, and other special funds are included in the
Restricted and internally designated section of the Statements of Net Position. The use of these funds is
designated in accordance with applicable debt indentures, Board action, or any other laws and regulations
established through legislation.
Securities are recorded at their fair values with gains and losses recorded as a component of Interest income in
the Statements of Revenue, Expense and Changes in Net Position. At September 30, 2014 and 2013 the total
amount of deposits and investments were $589.2 million and $617.9 million, respectively on the Statements of
Net Position.
The Treasury policy, inclusive of the maximum portfolio weighting, provides management with guidelines to
ensure risks associated with these assets are mitigated. The following are the key controls which OUC utilizes to
mitigate investment risk:
30

Interest Rate Risk: OUC’s Treasury policy requires a minimum of 10.0 percent of the operating portfolio
be held in highly marketable securities with maturities not exceeding 30 days. This requirement enables
OUC to mitigate fair value changes within the portfolio and reduce its exposure to this risk. In addition, the
Treasury policy limits maturities based on investment type and credit strength and entrusts OUC’s
management to execute transactions in accordance with the ―prudent person‖ rule requiring the
evaluation of current market conditions to ensure overall interest rate risks that might adversely affect the
portfolio value are mitigated.

Custodial Credit Risk: This is the risk that in the event of the failure of a depository financial institution or
counterparty, OUC’s deposits may not be returned or OUC will not be able to recover the value of its
deposits, investments or collateral securities that are in the possession of another party. OUC does not
have a Deposit policy for custodial credit risk and as such, $146.2 million and $124.8 million of
investments held in money market funds and interest-bearing qualified public depository accounts were
exposed to this risk as of September 30, 2014 and 2013, respectively. OUC views this type of risk as
minimal due to its use of Qualified Public Depositories (QPD’s) of the State of Florida or money market
mutual funds rated at the highest available credit rating for this type of security with a stable net asset
value of $1 per share or a Morningstar rating of four out of five stars for funds with a floating net asset
value and daily liquidity.

Credit Risk: To mitigate the risk that an issuer of an investment will not fulfill its obligation to the holder of
the investment, OUC limits investments to those rated, at a minimum, ―A-1 / P-1 / F1‖ or equivalent for
commercial paper and ―A3 / A-‖ for medium-term corporate notes by nationally recognized rating
agencies.
NOTES TO FINANCIAL STATEMENTS
Note E – Cash, Cash Equivalents and Investments (continued)

Foreign currency risk: This is the risk of loss associated with changes in exchange-rates which could
adversely affect investment valuations. As OUC is not authorized to invest in foreign currency, there is no
exposure to this risk.

Concentration Risk: This is the risk of loss associated with the extent of OUC’s investment in a single
issuer. OUC places limits on the amounts invested in any one issuer for certain types of securities. The
following are the investment concentrations greater than 5.0 percent for a single issuer:
Investment type
U.S. agencies
Federal Home Loan Mortgage Corporation (Freddie Mac)
Federal National Mortgage Association (Fannie Mae)
Federal Home Loan Banks
U.S. treasury notes
Commercial paper
Mountcliff Funding LLC
2014
2013
<5%
8%
12%
11%
14%
8%
7%
8%
<5%
5%
Cash, cash equivalents and investments are managed by OUC in accordance with its Treasury policy. The
following table summarizes the investment criteria underlying OUC’s Treasury policy segregated by investment
type, credit guidelines and maximum portfolio weighting.
Investment type
Credit guidelines
Maximum portfolio
weighting
Portfolio weighting at
September
2014
2013
Certificates of deposit
Investments held by or purchased from institutions certified with the Florida
Security of Public Deposits Act, Chapter 280 of the Florida Statutes.
5%
Corporate notes
Minimum rating of "A-", "A3" by at least two nationally recognized rating
agencies.
35%
19%
23%
Municipal notes
Minimum "A1" rating by a nationally recognized rating agency.
25%
4%
3%
Bankers acceptances
Inventory based with an unsecured, uninsured and unguaranteed obligation
rating of at least "P-1" and "A", and "A-1" and "A" by Moody’s and S&P,
respectively. Bank must be ranked in the top 100 banks.
10%
-
-
Money markets
Limited to funds that meet a stable net asset value of $1 per share and have
the highest available credit rating for this type of security.
20%
-
-
Commercial paper
Minimum rating of "A-1", "P-1" and "F1" by at least two nationally recognized
rating agencies.
20%
16%
16%
Depository accounts
Investments held by or purchased from institutions certified with the Florida
Security of Public Deposits Act, Chapter 280 of the Florida Statutes.
30%
25%
20%
Local government surplus
funds investment pool
Qualified under the laws of the State of Florida.
-
25%
-
-
-
U.S. treasury notes
Direct obligations that are unconditionally guaranteed by the United States
Government.
100%
12%
8%
U.S. agencies
Indebtedness issued by government-sponsored enterprises (GSE), which
are non-full faith and credit by the United States Government.
100%
24%
30%
Floating NAV mutual
funds
Morningstar rating of at least 4 out of 5 stars.
10%
-
-
Repurchase and reverse
repurchase agreements
Secured transactions executed under a master repurchase agreement with
collateral limited to direct governmental and agency obligations with terms of
<10 years and held and maintained by a third party trust at a market value of
102% of the cash value.
50% and 20%,
respectively
-
-
31
NOTES TO FINANCIAL STATEMENTS
Note E – Cash, Cash Equivalents and Investments (continued)
The following schedule discloses the weighted average maturity in years for each of the investment classifications
at September 30:
Investment type
Municipal notes
U.S. treasury notes
U.S. agencies
Corporate notes
Commercial paper
Credit ratings (1)
Aaa / AAA-Aa2 / AA
Aaa / AA+ / AAA
Aaa / AA+ / AAA
Aaa / AAA - A3 / AA-1 / P-1 / F1
Weighted average
maturity in years
2014
2013
3.90
4.02
3.87
3.93
3.75
3.62
2.38
2.44
0.27
0.38
(1) - Moody's Investor Service / Standard & Poor's / Fitch Ratings
The following schedule discloses Cash, cash equivalents and investments at September 30:
2014
(Dollars in thousands)
Cash
Cash equivalents
Depository accounts
Commercial paper
U.S. agencies
Total cash equivalents
Total cash and cash equivalents
Investments
U.S. agencies
U.S. treasury notes
Corporate notes
Commercial paper
Municipal notes
Total investments
Total cash, cash equivalents and investments
Restricted and internally designated assets
Restricted assets
Nuclear generation facility decommissioning funds
Total restricted assets
$
$
$
Internally designated assets
Stabilization funds
Debt service sinking funds
Renewal and replacement fund
Deposits and advances
Capital reserve
Self-insurance fund
Total internally designated assets
2013
3,629
$
5,758
146,247
63,990
10,000
220,237
223,866
124,795
19,992
144,787
150,545
131,735
63,333
109,857
32,000
28,418
365,343
589,209
186,334
46,260
138,648
75,779
20,318
467,339
617,884
53,212
53,212
$
$
52,376
52,376
144,425
83,027
53,752
88,379
118,968
9,500
498,051
159,775
82,868
53,752
80,415
118,968
9,500
505,278
Total restricted and internally designated assets
551,263
557,654
Cash and investments
Less accrued interest receivable from restricted and internally designated assets
Total cash, cash equivalents and investments
38,081
(135)
589,209
60,333
(103)
617,884
32
$
$
NOTES TO FINANCIAL STATEMENTS
Note F – Regulatory Deferrals
Based on regulatory action taken by the Board and in accordance with the Regulated Operations section within
GASB Statement No. 62, OUC has recorded the following regulatory assets and credits that will be included in the
ratemaking process and recognized as expenses and revenues, respectively, in future periods.
Regulatory assets
Loss on defeasance: In December 2006, OUC used $109.8 million from the Liability Reduction Fund to defease
portions of the Series 2001, 2001A and 2003A Bonds in anticipation of yielding a favorable rate differential
between the interest earnings from the Liability Reduction Fund and the defeased debt. In conjunction with this
defeasance, a loss in the amount of $10.9 million was deferred and is being amortized over an eight year period,
the original scheduled recovery period. The amount of deferred loss at September 30, 2014 and 2013 was $0.4
million and $2.5 million respectively.
Unamortized issue costs: In conjunction with the implementation of GASB Statement No. 65, OUC established
a regulatory asset for unrecognized costs previously incurred in connection with the issuance of debt obligations,
principally underwriter fees and legal costs. The regulatory asset will be collected in rates over a period of ten
years. Future debt issuance costs will be expensed as incurred. The unrecognized issue cost as of September
30, 2014 and 2013 was $7.6 million and $8.7 million, respectively.
Unamortized interest costs: This amount represents the deferral of interest costs incurred in association with
the Series 1993 and 1993B Bonds as a result of differing short-term and long-term rates at the time of bond
issuance. The amount of deferred charges at September 30, 2014 and 2013 was $3.3 million and $3.7 million,
respectively. Deferred charges are currently amortized to interest expense over the remaining period of the
original bond series.
Asset retirement obligation costs: This amount represents the deferral of the difference between retirement
obligation expenses and the amounts recovered in rates charged to customers. To date, retirement obligation
expenses exceed the amounts charged to customers and the income earned from the associated restricted
retirement obligation investments. As such, the asset retirement obligation regulatory asset at September 30,
2014 and 2013 was $7.1 million and $5.7 million, respectively.
Unamortized meter assets: In 2013, OUC began upgrading all electric and water meters with an Advanced
Metering Infrastructure (AMI). In conjunction with this program, the remaining asset value for the existing electric
and water meters of $1.8 million and $4.4 million, respectively, was deferred. The deferral balance as of
September 30, 2014 was $0.9 million and $2.2 million respectively. The remainder of the asset write-down costs
will be recognized in 2015.
Unamortized impaired assets: In February 2013, Duke Energy announced their decision to close the Crystal
River 3 nuclear generation facility (CR 3). This amount represents the deferral of OUC’s portion of CR 3 property,
plant, equipment and supplies excluding funds restricted in the decommissioning trust funds of $15.3 million.
Based on the net realizable value, as determined by the final settlement with Duke Energy, the balance of
impaired assets at September 30, 2014 was $13.4 million.
The following is a summary of OUC’s regulatory assets at September 30:
(Dollars in thousands)
Loss on defeasance
Unamortized issue costs
Unamortized interest costs
Asset retirement obligation costs
Unamortized meter assets
Unamortized impaired assets
Total regulatory assets
$
$
2014
412
7,647
3,264
7,079
3,098
13,400
34,900
(Restated)*
2013
$
2,493
8,723
3,672
5,749
6,196
15,263
$
42,096
* See Note B of the financial statements for discussion on the restatement.
33
NOTES TO FINANCIAL STATEMENTS
Note F – Regulatory Deferrals (continued)
Regulatory Credits
Fuel stabilization: This account was established in accordance with guidelines from the Public Utilities
Regulatory Policies Act of 1978 and represents the difference between the fuel costs charged to customers
inclusive of accrued utility revenue and fuel costs. The amount of fuel stabilization at September 30, 2014 and
2013 was $96.7 million and $120.5 million, respectively.
Rate stabilization: The Board established these accounts for costs/revenues that are to be recovered by or used
to reduce rates in periods other than when incurred/realized. In August 2010, the Board approved the deferral of
$5.5 million of retail electric revenue requirements as a result of budgetary changes to the commencement and
depreciable life of Stanton Unit B. These funds are being recognized systematically during the years of 2012 to
2016 in the amount of $1.1 million. In 2014, the Board approved the deferral of $8.0 million as a result of higher
than expected sales during the year.
Deferred wholesale trading profits: This account represents a portion of profits generated from resale sales net
of funds used for approved regulatory actions. No funds were approved for deferral or usage in 2013. The
balance was $16.0 million for each of the periods ended September 30, 2014 and 2013.
Other stabilization funds: In 2009, $2.2 million was deferred as a result of delays associated with OUC’s
participation in the construction of a new nuclear generation facility. These amounts are anticipated to be
recognized consistent with the recognition of nuclear generation development costs and continue to remain
outstanding at September 30, 2014.
Deferred gain on sale of assets: On October 5, 1999, OUC sold its steam units at the Indian River Plant (IRP)
and elected to defer the gain on sale of $144.0 million. In accordance with this action, $45.0 million was
designated to offset generating facility demand payments. In addition to the gain on the sale amount, OUC also
received $20.2 million for the advance payment of transmission access rights for a twenty year period.
In 2012, OUC repurchased IRP and in conjunction with this acquisition, provided notice of the termination of the
previously reserved transmission access rights. At the time of the termination, $10.4 million of unamortized
deferred revenue remained outstanding. In accordance with the original Board action to defer the gain proceeds,
this amount was reclassified from deferred revenue to deferred gain on sale of assets.
As a result of these actions, gains in the amount of $2.9 million and $4.7 million were recognized for the years
ended September 30, 2014 and 2013, respectively. The deferred gain on sale of assets at September 30, 2014
and 2013 was $67.5 million and $70.4 million, respectively and continues, in accordance with Board action, to be
recognized systematically over a period consistent with the life of the Stanton Unit A generation facility.
Deferred gain on settlement: As a result of an eminent domain action in July 2005, the Florida Department of
Transportation (FDOT) took possession of OUC’s Administration building parking garage. In exchange for taking
possession of OUC’s garage and the underlying land, the FDOT provided OUC with an adjacent land parcel and
a cash settlement of $15.0 million. In association with this action, OUC constructed a new administration facility
and utilized $6.0 million of the gain on settlement for transition and relocation costs. In addition to the accrued
transition and relocation amount, a residual gain on settlement amount of $2.3 million was deferred. In 2012, the
old Administration building site was sold and the associated gain on the sale of $0.9 million was deferred in
accordance with the Board’s Capital Asset Disposal Policy and included as a regulatory liability on the Statements
of Net Positions. The deferred gain on settlement amount at September 30, 2014 and 2013 was $2.6 million and
$2.7 million, respectively. This regulatory liability will be recognized systematically over a period consistent with
the life of the asset.
34
NOTES TO FINANCIAL STATEMENTS
Note F – Regulatory Deferrals (continued)
In conjunction with the recording of these regulatory credits, the Board internally designated funds in the amount
of $144.4 million and $159.8 million at September 30, 2014 and 2013, respectively.
The following is a summary of OUC’s Regulatory credits at September 30:
2014
(Dollars in thousands)
Fuel stabilization
$
2013
96,655
$
120,465
Rate stabilization
48,124
41,224
Deferred wholesale trading profits
16,000
16,000
Other stabilization funds
Deferred revenue regulatory credits
Deferred gain on sale of assets
2,175
2,175
162,954
179,864
67,496
70,384
Deferred gain on settlement
Deferred gain regulatory credits
Total regulatory credits
$
2,579
2,688
70,075
73,072
233,029
$
252,936
Note G – Long-Term Debt
The following schedule summarizes the long-term debt activity for the year ended September 30:
Series
(Dollars in thousands)
2003T Bonds
2006 Bonds
2007 Bonds
2009A Bonds
2009B Bonds
2009C Bonds
2010A Bonds
2010C Bonds
2011B Bonds
2011C Bonds
2012A Bonds
2013A Bonds
Total fixed rate debt
2007 Bonds
2008 Bonds
2011A Bonds
Total variable rate debt
Total debt
Final
principal
payment
2018
2023
2014
2039
2033
2017
2040
2022
2023
2027
2027
2025
Interest rates (%)
4.97 - 5.07%
4.00 - 5.00%
5.00%
5.25%
5.00%
3.50 - 5.00%
5.662%
3.00 - 5.25%
3.00 - 5.00%
4.00 - 5.00%
3.00 - 4.00%
3.00 - 5.00%
2016
2033
2027
Variable rate (1 )
Variable rate (1 )/(2)
Variable rate (1 )/(3)
2013
$
26,580
123,515
41,980
100,000
114,125
87,905
200,000
83,805
69,675
86,450
52,935
241,925
1,228,895
36,015
200,000
98,360
334,375
1,563,270
Less: Bonds payable within one year
Less: Other bonds payable (3)
Less current portion
Total long-term debt
Additions
during year
$
$
-
(51,950) $
(98,360)
(150,310) $
$ 1,412,960
Decreases
during year
$
3,905
20,570
16,235
6,740
4,500
51,950
$
51,950
(53,310) $
(53,310) $
(51,950)
(51,950)
2014
$
22,675
123,515
21,410
100,000
114,125
71,670
200,000
77,065
69,675
86,450
52,935
237,425
1,176,945
36,015
200,000
98,360
334,375
1,511,320
(53,310)
(98,360)
(151,670)
$ 1,359,650
(1) Variable rates ranged from 0.03% to 3.177% for the year ended September 30, 2014.
(2) The Series 2008 Variable Rate Demand Obligation Bonds of $200.0 million are supported by a Stand By Bond Purchase Agreement (SBPA), which will
expire on April 7, 2017.
(3) The Series 2011A Bonds, of $98.4 million were issued in the Windows mode as extendable debt excluding underlying liquidity facilities. As such, these
bonds were classified as current.
35
Current
portion
$ 4,095
1,800
21,410
16,880
7,075
2,050
53,310
$ 53,310
NOTES TO FINANCIAL STATEMENTS
Note G – Long-Term Debt (continued)
The following schedule summarizes the long-term debt activity for the year ended September 30:
Series
(Dollars in thousands)
1996A Bonds
2003A Bonds
2003B Bonds
2003T Bonds
2005B Bonds
2006 Bonds
2007 Bonds
2009A Bonds
2009B Bonds
2009C Bonds
2010A Bonds
2010C Bonds
2011B Bonds
2011C Bonds
2012A Bonds
2013A Bonds
Total fixed rate debt
2007 Bonds
2008 Bonds
2011A Bonds
Total variable rate debt
Total debt
Final
principal
payment
2023
2022
2022
2018
2025
2023
2014
2039
2033
2017
2040
2022
2023
2027
2027
2025
Interest rates (%)
3.75%
4.00 - 5.00%
4.75 - 5.00%
4.87 - 5.07%
4.55 - 5.00%
4.00 - 5.00%
5.00%
5.25%
5.00%
3.50 - 5.00%
5.662%
3.00 - 5.25%
3.00 - 5.00%
4.00 - 5.00%
3.00 - 4.00%
1.50 - 5.00%
2016
2033
2027
Variable rate (1 )
Variable rate (1 )/(2)
Variable rate (1 )/(3)
2012
$
60,000
45,950
69,695
30,305
120,000
123,515
61,515
100,000
114,125
103,845
200,000
90,260
69,675
86,450
52,935
1,328,270
36,015
200,000
98,360
334,375
1,662,645
Less: Bonds payable within one year
Less: Other bonds payable (3)
Less current portion
Total long-term debt
Additions
during year
$
241,925
241,925
$
241,925
(50,610) $
(98,360)
(148,970) $
$ 1,513,675
Decreases
during year
$
60,000
45,950
69,695
3,725
120,000
19,535
15,940
6,455
341,300
$
341,300
(51,950) $
(51,950) $
(50,610)
(50,610)
2013
$
26,580
123,515
41,980
100,000
114,125
87,905
200,000
83,805
69,675
86,450
52,935
241,925
1,228,895
36,015
200,000
98,360
334,375
1,563,270
(51,950)
(98,360)
(150,310)
$ 1,412,960
(1) Variable rates ranged from 0.04% to 3.212% for the year ended September 30, 2013.
(2) The Series 2008 Variable Rate Demand Obligation Bonds of $200.0 million are supported by a Stand By Bond Purchase Agreement (SBPA), which will
expire on April 7, 2014.
(3) The Series 2011A Bonds, of $98.4 million were issued in the Windows mode as extendable debt excluding underlying liquidity facilities. As such, these
bonds were classified as current.
36
Current
portion
$
3,905
20,570
16,235
6,740
4,500
51,950
$ 51,950
NOTES TO FINANCIAL STATEMENTS
Note G – Long-Term Debt (continued)
Debt service requirements: Aggregate annual debt service requirements at September 30 are presented below.
The schedule includes net receipts and payments on outstanding effective hedging derivative instruments and
interest subsidies anticipated on refundable tax credits. The Series 2008 and Series 2011A Bonds were reported
according to the scheduled maturity dates as management anticipates these bonds will remain outstanding.
Variable interest rates and current reference rates are included at their current rates and are assumed to remain
static until their maturity. As these rates vary, actual interest payments on variable rate bonds and effective
hedging derivative instruments will vary in relation to these changes.
Principal
(Dollars in thousands)
2015
2016
2017
2018
2019
2020-2024
2025-2029
2030-2034
2035-2039
2040-thereafter
Subtotal long-term debt
Current portion
Total long-term debt
$
$
55,880
60,765
59,510
70,260
61,750
382,325
301,765
203,395
213,895
48,465
1,458,010
53,310
1,511,320
Interest
$
$
58,453
56,629
54,989
53,366
49,999
196,323
121,128
93,790
49,981
2,744
737,402
60,655
798,057
Federal interest
subsidy
$
$
(3,674)
(3,963)
(3,963)
(3,963)
(3,962)
(19,817)
(19,817)
(19,817)
(12,626)
(960)
(92,562)
(3,678)
(96,240)
Hedging derivative
instrument
$
$
3,915
3,546
3,084
2,680
2,680
13,400
6,700
36,005
4,045
40,050
Total
$
114,574
116,977
113,620
122,343
110,467
572,231
409,776
277,368
251,250
50,249
2,138,855
114,332
2,253,187
$
General bond resolution: All bonds outstanding were subject to the provision of this resolution for which some of
the key provisions are as follows:

Rate covenant: The net revenue requirement for annual debt service has been set at 100.0 percent or
available funds plus net revenues at 125.0 percent of annual debt service.

Additional bonds test: This test is limited to OUC’s certification that it meets the rate covenant.

Flow of funds: There are no funding requirements; however, consistent with prior resolutions, OUC can
determine whether to fund a debt service reserve account on an issue-by-issue basis or internally
designate funds.

System definition: OUC's system definition has been modified to utility system. This definition is a more
expansive definition to accommodate organizational changes and the expansion into new services.

Sale of assets: System assets may be sold if the sale will not interfere with OUC's ability to meet rate
covenants. Consistent with prior lien resolutions, proceeds must first be used to pay debt service.
Refunded bonds: Consistent with accounting guidance, all refunded and defeased bonds are treated as
extinguished debt for financial reporting purposes and have been removed from the Statements of Net Position.
The proceeds secured from refunding transactions are invested in United States Treasury obligations in
irrevocable escrow deposit trust funds. Each escrow deposit trust is structured to mature at such time as to
provide sufficient funds for the payment of maturing principal and interest on the refunded bonds. Interest earned
or accrued on these escrow funds has been pledged and will be used for the payment of the principal and interest
on each respective bond series.
37
NOTES TO FINANCIAL STATEMENTS
Note G – Long-Term Debt (continued)
In January 2013, OUC issued the fixed rate Series 2013A Bonds at a par of $241.9 million and a premium of
$66.4 million. The proceeds from the offering were escrowed for the refunding of the Series 2003A and Series
2003B Bonds and the advance refunding of the Series1996A and 2005B Bonds in the amount of $46.0 million,
$64.7 million, $60.0 million and $120.0 million, respectively. The refunding included an unamortized loss of $21.7
million which was included under the heading of Deferred outflow of resources on the Statements of Net Position
and will be amortized over the life of the refunded issues. The transactions resulted in a present value savings of
$53.3 million.
Bond issue proceeds were invested to ensure that there are sufficient funds available to satisfy the outstanding
debt principal, at the time of maturity, for refunded bonds. The refunded bonds are summarized below for the
period ended September 30, 2013. There were no bonds refunded during the period ended September 30, 2014.
Debt issued
Par amount
issued
Par amount
refunded PV savings
2013A Bonds
$
$
241,925
290,690
$
53,326
Reclassified
bond costs /
(credits)
$
4,243
Deferred
charges
$
Savings % of
refunded bonds Debt refunded
17,466
18%
1996A, 2003A, 2003B & 2005B Bonds
The balance outstanding at September 30, 2014 and 2013 for defeased bonds was $226.6 million and $318.5
million, respectively.
Interest rate swaps: OUC limits its execution of interest rate swap agreements to major financial institutions with
a minimum credit rating of ―A3‖ or ―A-― by any two nationally recognized credit rating agencies per the Treasury
policy. The ratings of all swap counterparties met the minimum rating requirements as of the execution dates.
Although some counterparty ratings have changed since the date of issuance, OUC does not anticipate
nonperformance by a counterparty nor have any instances of this nature occurred. In the event of the termination
of a swap agreement, OUC may be required to make or be subject to receive a termination payment, as shown in
the swap schedule below.
In accordance with each interest rate swap agreement, margin deposit thresholds have been established. These
thresholds require OUC to remit deposits to mitigate exposure to counterparty credit risk. As a result of continued
market volatility and the fair value liability of certain interest-rate swaps in excess of their contractual thresholds,
margin deposits in the amount of $12.2 million and $10.6 million were held by OUC counterparties at September
30, 2014 and 2013, respectively.
The following schedule summarizes OUC’s fair value position, based on quoted market rates, for its outstanding
swap agreements at September 30, 2014 and 2013. Costs associated with these agreements are deferred and
amortized over the life of the underlying bond agreement. The notional amounts below are the basis for which
interest is calculated; however, the notional amounts are not exchanged. Derivative instrument disclosure
requirements are presented in Note M.
Bond series
(Dollars in thousands)
2007
2007
2011A
Total
38
Notional
amount
22,615
13,400
100,000
OUC
pays
Fixed
Fixed
Fixed
Rate paid
3.640%
3.660%
3.780%
Rate received
CPI + 105 bps
CPI + 105 bps
67% of Libor
Initiation date
1/23/2007
1/23/2007
6/1/2011
Termination
date
10/1/2015
10/1/2016
10/1/2027
2014 Fair
2013 Fair
value liability value liability
(590)
(819)
(442)
(548)
(21,975)
(20,554)
$
(23,007) $
(21,921)
Counterparty
Goldman Sachs
Goldman Sachs
Morgan Stanley
Counterparty
credit rating
Baa1 / A- / A
Baa1 / A- / A
Baa2 / A- / A
NOTES TO FINANCIAL STATEMENTS
Note H – Insurance Programs and Claims
Insurance Programs
OUC was exposed to various risks of loss related to torts, theft and destruction of assets, errors, omissions and
natural disasters. In addition, OUC was exposed to risks of loss due to injuries and illness of its employees. These
risks were managed through OUC’s self-insurance and third-party claims administration programs.
Under the self-insurance program, OUC was liable for all claims up to certain maximum amounts per occurrence.
On September 30, 2014, insurance coverage was available for claims in excess of $0.25 million for healthcare
coverage and $2.0 million for general and automobile liability. As of September 30, 2014 coverage was available
for workers’ compensation claims in excess of $0.5 million, decreasing $0.1 million from the limit on September
30, 2013.
The healthcare benefits program was administered by an insurance company (administrator). The administrator
was responsible for processing claims in accordance with OUC’s benefit specifications and was reimbursed
regularly for claims paid. Incurred claims included current period payments and estimated incurred but not
received claims based on actuarial information received in conjunction with OUC’s annual State of Florida selfinsurance filing.
Liabilities associated with the healthcare programs were determined based on actuarial studies and include
amounts for claims that have been incurred but not reported. For workers’ compensation claims, liabilities were
determined from estimates provided by OUC’s third party administrator based on amounts already paid and the
age and type of claim. Liabilities associated with general and automobile liability coverage were determined
based on historic information in addition to estimated costs for current pending claims. The total of these liabilities
is included in the Statements of Net Position under the heading of Accounts payable and accrued expenses.
Self-insurance program liability at September 30, 2014 and 2013 was as follows:
Workers compensation
General and automobile liability
Health and medical claims
Total
$
$
565
281
2,511
3,357
$
$
$
$
632
286
2,142
3,060
$
$
Incurred claims
(249) $
(217)
(16,936)
(17,402) $
Payments,
net
2012
(Dollars in thousands)
Workers compensation
General and automobile liability
Health and medical claims
Total
Payments,
net
2013
(Dollars in thousands)
184
274
15,998
16,456
Incurred claims
(311) $
(151)
(16,914)
(17,376) $
244
146
17,283
17,673
2014
$
$
500
338
1,573
2,411
2013
565
281
2,511
$
3,357
$
Claims
It is the opinion of OUC’s general counsel that OUC, as a statutory commission, may enjoy sovereign immunity in
the same manner as a municipality, as allowed by Florida Court of Appeals rulings. Under said rulings, Florida
Statutes limit of liability for claims or judgments by one person for general liability or auto liability is $0.2 million or
a total of $0.3 million for the same incident or occurrence; greater liability can result only through an act of the
Florida Legislature. Furthermore, any defense of sovereign immunity shall not be deemed to have been waived or
the limits of liability increased as a result of obtaining or providing insurance in excess of statutory limitations.
OUC’s transmission and distribution systems are not covered by property insurance, since such coverage is
generally not available.
39
NOTES TO FINANCIAL STATEMENTS
Note H – Insurance Programs and Claims (continued)
Nuclear Liability Insurance: Liability for accidents at the nuclear power plants for which OUC has a minority
interest were governed by the Price-Anderson Act which limits the public liability of nuclear reactor owners to the
amount of insurance available from private sources and an industry retrospective payment plan. Both majority
owners, Florida Power & Light (FPL) for St. Lucie Unit No. 2 (SL 2) and Duke Energy for Crystal River 3 nuclear
generation facility (CR 3) maintain private liability insurance for all participants owning an undivided interest in the
generation facility of $375.0 million and $500.0 million per site, respectively, and participate in a secondary
financial protection system. In addition, both majority owners participate in nuclear mutual companies that provide
limited insurance coverage for property damage, decontamination and premature decommissioning risks.
Irrespective of the insurance coverage, should a catastrophic loss occur at either of the plants, the amounts of
insurance available may not be adequate to cover property damage and other expenses incurred. The owners of
a nuclear power plant could be assessed to pay a maximum payout of $127.0 million per unit, per incident at any
nuclear utility reactor in the United States, payable at a rate not to exceed $19.0 million per incident, per year.
Uninsured losses, to the extent not recovered through rates, would be borne by each of the owners at their
proportionate ownership share and may have an adverse effect on their financial position. Any losses in excess of
that amount are self-insured, such that OUC would be responsible for its pro-rata share of any losses in excess of
insurance coverage. See Note D for OUC’s ownership interest in SL 2 and CR 3.
On behalf of all the co-owners of SL 2 and CR 3, FPL and Duke Energy, respectively, each carry in excess of
$1.6 billion of property damage insurance; however, substantially all insurance proceeds must first be used to
satisfy decontamination and clean-up costs before they can be used for repair or restoration of plants.
On September 30, 2014, CR 3 continues to remain inactive due to extensive damage discovered during the 2009
planned outage. Duke Energy has communicated that the CR 3 plant will be decommissioned and details of the
decommissioning, including potential cost recovery from insurance proceeds, are being finalized. See Note I for
additional information.
40
NOTES TO FINANCIAL STATEMENTS
Note I – Commitments and Contingent Liabilities:
Fuel for generation and purchased power commitments: OUC has entered into fuel supply and transportation
contracts which align with the ownership for Stanton Units 1, 2 and B, and the Indian River Plant generation
facilities and for its fuel agent obligations for Stanton Unit A and the Vero Beach generation facilities. For those
generation facilities in which there is participation ownership, each participant has a commitment proportionate to
its ownership interest. In addition to the fuel for generation contracts, included in the schedule below are OUC’s
purchased power capacity commitments required to meet its load requirements; several of which have minimum
take or pay energy commitments for the years ended September 30:
2015
2016
2017
2018
2019
2020-2024
2025 - thereafter
(Dollars in thousands)
$
84,811
$
60,853
$
59,198
$
50,598
$
47,898
$
193,573
$
152,396
Generation facility agreement: OUC maintains a Customer Service Agreement (CSA) to cover parts, services,
repairs, program management, additional warranties and automated performance monitoring for the high risk/high
dollar equipment related to the combustion and steam turbine components of Stanton Unit B. The CSA
agreement was secured in 2010 for an estimated period of 14 years at an aggregate amount of $50.0 million. In
November 2014, the Board authorized OUC to execute Amendment No.1 to the CSA with GE to include SEC B
compressor and rotor coverage increasing the aggregate amount of the agreement $3.1 million to $53.1 million.
Through September 30, 2014, OUC has incurred $7.6 million under the GE CSA.
Crystal River Unit 3 (CR 3): During the planned outage in September 2009 for CR 3, delamination was
discovered in the containment building. In March 2011, Duke Energy notified the minority owners that a second
delamination was discovered and further repairs were needed. In February 2013, Duke Energy announced its
decision to close the CR 3 facility.
In August 2013, the Board approved the reclassification of the $15.3 million net book value of OUC’s share of the
CR 3 property, plant, equipment, and supplies as a regulatory asset. In September 2014, the joint owners
executed a Settlement, Release and Acquisition agreement to address damages claimed by the joint owners and
permitting Duke Energy to file an application with the Nuclear Regulatory Commission (NRC) for a license
amendment. Upon approval of the license amendment by the NRC, the joint owners will transfer their ownership
in CR 3 back to Duke Energy via a special warranty deed. Additionally, the joint owners will transfer their
decommissioning trust funds to Duke Energy. In exchange, Duke Energy will assume all past and future liabilities
associated with the maintenance and decommissioning of the CR 3 facility, as well as make a final settlement
payment to the joint owners. Based on the proposed settlement agreement, OUC adjusted the regulatory asset
value to $13.4 million and reported an expense of $1.9 million in the Statements of Revenues, Expenses and
Changes in Net Position under the heading Unit/department expense as of September 30, 2014. Closing on the
exchange of property under the settlement is not expected to occur until 2016.
Vero Beach agreement: In 2012, The City of Vero Beach (Vero Beach) approached OUC about the possibility of
terminating its inter-local power supply agreement in conjunction with a proposed sale of its city-owned utility
system. The termination agreement between Vero Beach and OUC was finalized in 2013, and provided for
termination in return for settlement payments to OUC. OUC’s termination agreement continues to be contingent
on Vero Beach finalizing negotiations with other third parties as well as numerous other closing conditions. OUC
has provided Vero Beach with two options to lower its rate for energy under the Vero Beach power supply
agreement. These are currently under review by Vero Beach as a possible alternative to the sale of its utility
system. OUC continues to provide service as per the existing Inter-local agreement in the interim.
41
NOTES TO FINANCIAL STATEMENTS
Note I – Commitments and Contingent Liabilities (continued)
Regulation: The electric utility industry continues to be affected by a number of legislative and regulatory factors.
The following summarizes the key regulations impacting OUC.

Environmental Protection Agency (EPA): In August 2010, the EPA proposed the Clean Air Transport Rule
(CATR) which not only corrected the Clear Air Instate Rule (CAIR) defects identified by the court, but
increased the stringency of the emissions of nitrogen oxides (NOx) and sulfur dioxide (SO2). In July 2011 the
CATR was renamed the Cross State Air Pollution Rule (CSAPR). This modified rule aggressively set
deadlines for the significant reduction of emissions of nitrogen oxides (NOx) and sulfur dioxide (SO 2).
Concerns regarding the implementation deadline were expressed by the Utility Air Regulatory Group (UARG),
backed by representatives within twenty-five states. Seven states, including Florida, joined the challenge
through the Attorney General’s offices and filed lawsuits for Judicial Review of the rule including requesting a
Judicial stay.
On August 21, 2012, the United States District Court of Appeals for the DC District vacated the CSAPR in its
entirety, stating that the EPA had transgressed its statutory boundaries and returned the emission
requirements to the previously discussed CAIR Rule Phase I and Phase II. The EPA recently requested and
was provided in the United States Supreme Court the previously discussed Appellate review vacating the
CSAPR. With the Supreme Court decision, the EPA is expected to finalize a new rule in 2015. Costs to
implement will be evaluated at that time but are expected to be significant.
Additionally, following the guidance outlined in the memorandum provided by the President of the United
States, the EPA has announced the development of new CO2 rules for new power plants under authority of
Section 111(b) of the Clean Air Act (CAA). The new rules set a cap for the amount of CO2 emitted from any
newly constructed power plant. The proposed rule does not currently apply to any existing stationary source,
but the EPA has developed a unique approach to regulating existing sources. Utilizing Section 111(d) of the
CAA as well as developing goals via a Guidance Memorandum entitled the ―Clean Power Plan,‖ the EPA has
developed guidance, or Building Blocks, setting goals for specific states based on the ability of each state to
comply or achieve the goals. This will require a significant amount of coordination with state environmental
protection agencies. A final and enforceable rule is expected on or before June 1, 2015. Many states are
preparing comments, as well as legal strategies, to challenge this proposed rule. OUC has been participating
in the meetings individually, as well as part of industry groups including APPA, AFFORD, LPPC and other
state-wide groups.
The authority that EPA has been utilizing to implement many of the rules that are either under development or
under challenge was derived from a Massachusetts Supreme Court Decision regarding emissions from
automobile tailpipes and has also been granted certification from the United States Supreme Court. It is
OUC’s expectation that the current rule will go through a significant number of changes over the next several
months, in part to narrow the points of entry for challenges to the rule. OUC’s intentions are to lessen the
impact of a 2020 rule requirement allowing a ―glide path‖ that would extend compliance of the rule and allow
for the depreciation of OUC assets.
Finally, EPA has also proposed a rule commonly known as the Mercury Air Toxins rule (MAT) to further
regulate mercury. This rule was published in December 2012 and OUC is currently adding technology to
better access the emissions of mercury as well as upgrading portions of the coal generation facility to address
compliance with these new requirements. While costs for the proposed technology change are not anticipated
to be material, costs may be significant if further compliance measures are required.
42
NOTES TO FINANCIAL STATEMENTS
Note I – Commitments and Contingent Liabilities (continued)

Federal regulation enforcement: In accordance with the authority granted by the Federal Energy
Regulatory Commission (FERC) to impose non-discriminatory open transmission system access
requirements for all public entities, OUC has adopted a ―safe harbor‖ Open Access Transmission Tariff
(OATT). This OATT ensures that OUC will have access to all transmission related services offered by
public utilities through its offering of reciprocal services. In addition, FERC has the authority to impose
standards which enforce an acceptable level of reliability to the Bulk Electric System. The monitoring of
these standards in Florida is performed by the Florida Reliability Coordination Council (FRCC).

Florida state regulation: Legislation under sections 366.80 through 366.85, and 403.519, Florida
Statutes (FS), are known collectively as the Florida Energy Efficiency and Conservation Act (FEECA).
This Act provides the Florida Public Service Commission (FPSC) with the authority to establish goals
every five years to encourage electric utilities to increase the efficiency of energy consumption, limit the
growth of energy consumption and minimize weather sensitive peak demands. OUC submitted its fiveyear Conservation Plan, and final approval was submitted through a Consummating Order on September
28, 2010. The approved plan calls for OUC to achieve the same level of conservation it has achieved
through its programs in the past. Pursuant to section 366.82, FS, the FPSC must review a utility’s
conservation goals not less than every five years. The FPSC commenced its review process in August
2013. The FPSC’s review of conservation goals and the supporting demand-side management plan is
scheduled to be completed in 2015. In the meantime, OUC will continue to address conservation and
appropriately budget costs to implement demand-side management, conservation and customer
education programs.
Note J – Major Agreements
City of Orlando: OUC pays to the City of Orlando (City) a revenue-based payment and an income-based
dividend payment.
The revenue based payment is recorded as an operating expense and is derived to yield a payment based on 6.0
percent of gross retail electric and water billings and 4.0 percent of chilled water billings for retail customers within
the City limits. The income-based dividend payment is recorded as a reduction to the increase in Net Position on
the Statements of Revenues, Expenses and Changes in Net Position and is derived to yield a payment of 60.0
percent of net income before contributions. The revenue based payment for the years ended September 30, 2014
and 2013 were $27.8 million and $29.4 million, respectively.
Prior to 2008, the revenue and income based payments were remitted based on actual revenue billed and income
before contributions, respectively. Beginning in 2008 and continuing through 2014, these payments were fixed
based on projected revenues and income before contributions. The income based payments for the years ended
September 30, 2014 and 2013 were $48.6 million and $47.0 million, respectively.
City of St. Cloud: In April 1997, OUC entered into an inter-local agreement with the City of St. Cloud (STC) to
provide retail electric energy services to all STC customers and to maintain and operate STC's electric
transmission, distribution and generation facility rights and ownership interests. The term of the agreement
commenced May 1, 1997 and, as amended in April 2003, continues until September 30, 2032. In return, OUC has
guaranteed to pay STC 9.5 percent of gross retail electric billings to STC customers and to pay STC’s electric
system net debt service. The debt service requirement outstanding at September 30, 2013 was $1.8 million. In
July 2014, OUC remitted the final payment for the STC electric system net debt service. Debt secured
subsequent to the agreement date for electric system upgrades and enhancements has been secured by OUC
and is included in Note G.
43
NOTES TO FINANCIAL STATEMENTS
Note J – Major Agreements (continued)
Billed revenue for this inter-local agreement is included under the heading of Resale electric revenues and was
$68.3 million and $65.2 million, respectively, for the years ended September 30, 2014 and 2013. Revenue-based
payments and net debt service payments recorded under the heading of Payments to other governments and
taxes for the years ended September 30, 2014 and 2013 were $7.9 million and $8.7 million, respectively.
Orange County: OUC pays a revenue-based payment to Orange County calculated at 1.0 percent of gross retail
electric and chilled water billings to customers within the County but outside the city limits of the City of Orlando
and other municipalities. This payment is recorded under the heading of Payments to other governments and
taxes on the Statements of Revenues, Expenses and Changes in Net Position. Revenue based payments
accrued were $1.5 million and $1.4 million, respectively, for September 30, 2014 and 2013.
City of Vero Beach: In April 2008, OUC and the City of Vero Beach (Vero Beach) executed a power supply
agreement whereby OUC supplements Vero Beach’s electric capacity and energy requirements. In association
with this agreement, effective January 1, 2010 OUC began providing to Vero Beach fuel management services,
wholesale power marketing services as well as advisory services for planning, forecasting, regulatory reporting,
and power plant operations. The term of the agreement is twenty years with a ten year extension option. Billed
revenues included under the heading of Resale electric revenues, were $34.2 million for each of the years ended
September 30, 2014 and 2013.
In accordance with the terms of the agreement, Vero Beach has executed a termination agreement. See Note I
for additional information.
City of Bartow: In October 2010, OUC entered into an inter-local agreement with the City of Bartow (Bartow) to
provide wholesale electric services sufficient to meet Bartow’s load requirements. The term of the agreement is
seven years and its effective date was January 1, 2011. Billed revenues, included under the heading of Resale
electric revenues, were $20.0 million and $19.1 million for the years ended September 30, 2014 and 2013,
respectively.
City of Lake Worth: In February 2013, OUC and the City of Lake Worth (Lake Worth) initiated an agreement
whereby OUC would act as the administrator to provide wholesale electric and asset management services. The
term of the agreement began January 1, 2014 for three years with an option for Lake Worth to extend the term for
two additional one-year terms. Billed revenues, included under the heading of Resale electric revenues, were
$9.8 million for the year ended September 30, 2014.
City of Winter Park: In August 2013, OUC and the City of Winter Park (Winter Park) executed a power supply
agreement whereby OUC supplements Winter Park’s electric capacity and energy requirements. The service
date of the agreement was January 1, 2014 with an initial term of six years. Billed revenues, included under the
heading of Resale electric revenues, were $4.0 million for the year ended September 30, 2014.
Note K – Pension Plans
Defined Benefit Plan
Plan description: OUC is the administrator of a single-employer, defined benefit pension plan and as such has
the authority to make changes subject to Board approval. Benefits are available to all employees who regularly
work 20 or more hours per week and are detailed as follows:

44
Traditional defined benefit offering: This benefit offering was closed on December 31, 1997 and
provides benefits to all employees hired prior to January 1, 1998 who did not elect to transition their
pension plan interests to the defined contribution pension plan. Under the provisions of this closed
offering, employees who participate receive a pension benefit equal to 2.5 percent of the highest three
consecutive years’ average base earnings times years of employment. Benefits in this plan vest after five
years of service and are earned for up to a maximum service period of 30 years. OUC also offers a
NOTES TO FINANCIAL STATEMENTS
Note K – Pension Plans (continued)
supplementary cost of living adjustment (COLA), based on the net return on plan investments, for
employees covered under the defined benefit pension plan. Approved COLA benefits from October 1,
2000 through October 31, 2013 are scheduled to be paid outside the plan through December 31, 2014.
In July 2014, the plan was amended to incorporate the annual COLAs approved since October 1, 2000,
as well as future COLAs, with monthly payments funded from the Pension Trust, beginning January 1,
2015. The future COLA increases will be based on the net return on plan investments for the previous
fiscal year as follows:
Net investment return
Up to 4.0%

COLA rate
-
Greater than 4.0% up to 8.0%
1.0%
Greater than 8.0% up to 12.0%
1.5%
Greater than 12.0%
2.0%
Cash balance defined benefit offering: Effective May 1, 2011, OUC established a cash balance
pension offering for all employees participating in the defined contribution pension plan. This plan is fully
funded by OUC and includes a sliding pay credit scale based on the combination of an employee’s age
and years of service at September 30. Pay credits range from 5.0 percent to 12.0 percent and are earned
annually. A service credit is earned if an employee has worked 1,000 hours or more in the fiscal year.
Annually, pay credits earn interest at a rate set at the commencement of the fiscal year with an interest
rate floor established at 4.0 percent. Benefits vest after five years of service and normal retirement is
available following the earlier of an employee reaching age 62 with a minimum of five years of service or
30 years of continuous service.
Actuarial reports are prepared annually with the most recent reports completed for the periods ending September
30, 2014 and 2013. To better match the budgetary and rate-making requirements, the actuarial reports received
each February disclose the valuation of plan assets and actuarial liabilities as of the beginning of the current fiscal
year for required contribution levels in the subsequent fiscal year. Therefore, the actuarial valuation report dated
October 1, 2012 was used for September 30, 2014, and the valuation report dated October 1, 2011 was used for
September 30, 2013. At the October 1, 2012 valuation date, the plan included 1,079 active participants and 892
retirees, beneficiaries and terminated vested members.
Periodically, the plan issues stand-alone financial statements, with the most recent report issued for the year
ended September 30, 2013. This report may be obtained by writing to OUC Pension Plans, Reliable Plaza at 100
West Anderson Street, Orlando, Florida 32801.
Funding policy: The pension plan agreement requires OUC to contribute, at a minimum, amounts actuarially
determined. Required participant contribution obligations for the traditional defined benefit offering are 4.0 percent
of earnings until the later of age 62 or completion of 30 years of service, with no required contributions thereafter.
The benefit reduction for early retirement is 1.0 percent per year. No participant contributions are required for the
cash balance defined benefit offering.
The required rate of contribution, based on annual covered payroll for vested employees, for the year ending
September 30, 2014 was 29.3 percent. This rate was based on a plan amendment in June 2014 to incorporate
the future funding of annual COLAs into the plan, effective October 1, 2013. For comparative purposes, the
required rate of contribution, inclusive of the ad-hoc COLAs approved and paid outside the plan, for the year
ended September 30, 2013 was 25.0 percent.
In November 2003, OUC issued taxable pension bonds in the amount of $55.3 million to advance fund the plan.
Proceeds from this issuance were remitted to the defined benefit trust and have been included as a component of
the net pension asset. The balance of the asset related to this advance funding was $29.5 million and $28.3
million in 2014 and 2013, respectively.
45
NOTES TO FINANCIAL STATEMENTS
Note K – Pension Plans (continued)
Actuarial methods and assumptions: OUC recognizes annual pension costs in accordance with GASB
Statement No. 27, “Accounting for Pensions by State and Local Government Employers,’” and based on
information obtained from the annual actuarial report. GASB Statement No. 27 also requires recognition of a net
pension asset or obligation for the cumulative differences between the annual pension cost and employer
contributions to the plan.
Annual actuarial amounts are calculated using the aggregate cost method and are based upon the following
approved actuarial assumptions for the valuation periods of October 1, 2012 and 2011 for required contribution
levels at September 30, 2014 and 2013.
October 1
2012
2011
Investment rate of return
7.75%
8.00%
Projected salary increases
5.00%
5.00%
Inflation component
4.00%
4.00%
In July 2014, the pension plan was amended to incorporate annual COLA into the plan, with monthly payments
funded from the Pension Trust, beginning January 1, 2015. These substantive plan changes were communicated
to plan participants prior to September 30, 2014. Prior to the plan amendment, an ad-hoc COLA benefit had been
provided annually to retirees in the traditional defined benefit offering based on approval by the General Manager
and Chief Executive Officer. A COLA of 1.0 percent was approved for September 30, 2014 and no COLA benefit
was approved for September 30, 2013.
Approved non-binding ad-hoc COLA benefits prior to 2001 have been vested to the plan and as such are
recognized as plan liabilities and included in the actuarial report. Approved non-binding COLA benefits provided
for the periods of 2001 through 2013 are included in the actuarial report, however were paid outside of the plan on
a pay-as-you go basis through September 30, 2014. As of October 1, 2012, costs associated with future ad-hoc
COLA benefits have been included in the actuarial valuation report.
Annual pension cost and net pension asset: Actuarial amounts for the annual pension costs are calculated
using the aggregate method, which as noted in the guidance, does not identify or separately amortize unfunded
actuarial assets/obligations. The actuarial value of assets/obligations was determined using techniques that
smooth the effects of short-term volatility in the market value of investments over a five-year period as well as
incorporates the recognition of the current year impacts associated with corridor changes.
The following are the pension costs and the net pension assets on September 30:
2014
(Dollars in thousands)
Actuarial required contribution (ARC)
$
Interest earnings on net pension asset
2013
$
(2,191)
18,893
(2,444)
Adjustment to ARC
2,976
2,895
Annual pension cost
21,969
19,344
Contributions applicable to pension period
23,150
17,729
Change in net pension asset
1,181
(1,615)
Beginning net pension asset
28,267
29,882
Ending net pension asset
46
21,184
$
29,448
$
28,267
NOTES TO FINANCIAL STATEMENTS
Note K – Pension Plans (continued)
The following table summarizes the three-year trend information for the pension plan, including the impacts of the
amortization of the pension bonds.
Annual pension
cost (APC)
(Dollars in thousands)
Current year
contributions Net Pension Asset
Percentage of APC
contributed
2014
$
21,969
$
23,150
$
29,448
105.4%
2013
$
19,344
$
20,173
$
28,267
104.3%
2012
$
17,700
$
18,783
$
29,882
106.1%
Funded status and funding progress: For the year ending September 30, 2014, including the impacts of the
plan amendment related to COLA benefits, the plan was 69.5 percent funded. The actuarial accrued liability for
benefits was $412.3 million and the actuarial value of the plan assets was $286.7 million for an unfunded actuarial
accrued liability (UAAL) of $125.6 million. The covered payroll was $72.5 million and the ratio of the UAAL to the
covered payroll was 173.3 percent. The fair value of the plan assets, based on published investment market rates
at September 30, 2014, was $329.0 million.
For the year ending September 30, 2013, including the impacts of previously approved COLA benefits, the plan
was 66.6 percent funded. The actuarial accrued liability for benefits was $401.1 million and the actuarial value of
the plan assets was $267.0 million for an unfunded actuarial accrued liability (UAAL) of $134.1 million. The
covered payroll was $70.1 million and the ratio of the UAAL to the covered payroll was 191.1 percent. The fair
value of the plan assets, based on published investment market rates, at September 30, 2013, was $300.7
million.
The Schedule of Funding Progress, which presents multi-year trend information, follows the Notes to the Financial
Statements under the heading of Required Supplemental Information.
Defined Contribution Plan
All employees who regularly work 20 or more hours per week and were hired on or after January 1, 1998, are
required to participate in a defined contribution retirement plan established under section 401(a) of the Internal
Revenue Code and administered by OUC. In addition, employees hired prior to January 1, 1998, were offered the
option to convert their defined benefit pension account to this plan. On September 30, 2014 and 2013 active
employees enrolled in this pension plan were 783 and 780, respectively.
Under the plan, each eligible employee, at the start of their employment, is required to contribute 4.0 percent of
their salary. This required contribution is matched equally by OUC. In addition, eligible employees may also
voluntarily contribute to up to 2.0 percent of their salary. Employees are fully vested after one year of
employment. Total contributions for the years ended September 30, 2014 and September 30, 2013 were $5.2
million ($2.0 million employer and $3.2 million employee) and $4.9 million ($1.9 million employer and $3.0 million
employee), respectively.
Note L – Other Post-Employment Benefits
Health and Medical Insurance
Plan description: OUC offers medical and dental coverage, as well as life insurance coverage, to all employees
upon their retirement. Post-employment benefits, in the form of utility discounts, are offered to employees hired
prior to 1985. Consistent with the defined benefit pension offerings, two benefit offerings are available for health
and medical coverage as follows:
Employees participating in the traditional defined benefit pension plan: Under this health and medical
benefit offering, employees are provided continued access to medical, dental and life insurance coverage upon
retirement on or after age 55 with at least ten years of service or at any age after completing 25 or more years of
service. Secondary health coverage is also available for those retirees who are Medicare eligible. Costs
associated with these benefits are fully subsidized for the employee and partially subsidized for their dependents.
47
NOTES TO FINANCIAL STATEMENTS
Note L – Other Post-Employment Benefits (continued)
Effective January 1, 2014, the plan was modified to phase out the premium subsidy for dependent coverage
provided to pre-Medicare eligible retirees over a five-year period.
Employees participating in the cash balance defined benefit plan: Under this health and medical benefit
offering, employees and their dependents are provided access to medical and dental coverage upon retirement
on or after age 62 with at least five years of service or at any age after completing 30 years of service. Medical
and dental benefits, inclusive of secondary health coverage for Medicare eligible employees, are not directly
subsidized. Participants are eligible for implicit subsidy benefits and, at retirement, access to an employer funded
health reimbursement account (HRA). The HRA is funded annually by OUC consistent with the funding
requirements of the cash balance defined benefit offering. A notional account is funded for each employee in the
amount of $400 per year, indexed annually, and can be used to pay all eligible medical costs including medical
premiums at retirement. Retirees participating in the defined contribution plan, the plan in place prior to the
establishment of the cash balance defined benefit plan, were also provided an employer funded HRA based on
their years of service prior to retirement.
On September 30, 2014, 1,050 plan participants (289 active employees and 761 retired employees) were eligible
for fully subsidized medical and dental coverage and 779 plan participants (763 active employees and 16 retired
employees) were eligible for implicit subsidy benefits. On September 30, 2013, 1,074 plan participants (324 active
employees and 750 retired employees) were eligible for fully subsidized medical and dental coverage and 774
plan participants (765 active employees and 9 retired employees) were eligible for implicit subsidy benefits.
OUC is the administrator of this single employer other post-employment benefit plan and, as such, has the
authority to make changes thereto. Consistent with the defined benefit plan disclosed in Note K, OUC issues
stand-alone financial statements for this plan. The most recent report was issued for the year ended September
30, 2013.
Funding policy: In accordance with GASB Statement No. 45, ―Accounting and Financial Reporting by Employers
for Post-Employment Benefits other than Pensions” (OPEB), funding for post-employment benefits is established
from actuarial valuations and is approved annually by the Board.
In 2008, an OPEB Trust (Trust), similar to the Defined Benefit Pension Trust, was established to retain funds for
the future payment of other post-employment benefit costs. The Trust agreement was set-up such that OUC will
fund the annual required contribution to the Trust and periodically withdraw amounts to reimburse operations for
costs incurred on a pay-as you-go basis.
The annual required contribution provided to OUC as part of the actuarial valuation report prepared on October 1,
2013 for the year ended September 30, 2014 and the actuarial valuation report prepared on October 1, 2012 for
the year ended September 30, 2013 was $13.6 million and $14.4 million, respectively. The portion of the annual
OPEB cost, which was funded on a pay-as-you-go basis in 2014 and 2013, was $7.3 million and $7.6 million,
respectively. The remaining portion of the annual OPEB cost, $6.3 million and $6.7 million, was paid to the Trust
in 2014 and 2013, respectively.
The rate of contribution, based on annual covered payroll for the years ended September 30, 2014 and 2013 was
18.6 percent and 20.3 percent, respectively.
48
NOTES TO FINANCIAL STATEMENTS
Note L – Other Post-Employment Benefits (continued)
Actuarial methods and assumptions: Projection of benefits for financial reporting purposes was based on the
substantive plan as defined by GASB Statement No. 45 and includes the types of benefits provided at the time of
each valuation and actuarial methods and assumptions used, including techniques that are designed to reduce
the effects of short-term volatility in actuarial liabilities and the actuarial value of assets, consistent with the longterm perspective of the calculations. Actuarial valuations involve estimates of the value of reported amounts and
assumptions about the probability of events into the future; as such these actuarial amounts are subject to
continual valuation.
The annual actuarial valuations were prepared using the frozen entry age normal cost method with an increasing
normal cost pattern consistent with the salary increase assumption. The actuarial assumptions used for the
October 1, 2013 and 2012 valuations were:
Investment rate of return
7.75%
General price inflation rate
3.00%
Annual healthcare cost trend rate
8.50%
As of October 1, 2013, the amortization of the unfunded actuarial accrued liability as a level percentage of
projected payrolls was changed from a twenty-year to a ten-year period to better reflect the current demographic
composition of the covered population.
Annual OPEB cost and net OPEB asset: OUC’s annual OPEB cost (expense) is calculated based on the
annual required contribution (ARC) actuarially determined in accordance with the parameters of GASB Statement
No. 45. In 2014 and 2013, OUC’s ARC and OPEB expenses were $13.6 million and $14.4 million, respectively.
The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal costs each
year and a portion of the unfunded actuarial liabilities over a period of ten years, a period consistent with the
estimated employment tenure of those employees receiving fully subsidized benefits. The net OPEB asset at
September 30, 2014 and 2013 was $1.9 million and $2.0 million, respectively.
The following table shows the components of OUC’s OPEB cost, current year contributions and changes in the
net OPEB asset at September 30 as follows:
2014
(Dollars in thousands)
Actuarial required contribution (ARC)
$
Interest earnings on net OPEB asset
2013
13,558
$
(155)
14,358
(274)
Adjustment to ARC
233
314
Annual OPEB Cost
13,636
14,398
(7,623)
Pay-as-you-go contributions
(7,249)
Change in OPEB obligation
6,387
6,775
Amount paid to OPEB Trust
6,309
6,702
Change in net OPEB asset
Beginning net OPEB asset
Ending net OPEB asset
(78)
$
1,998
1,920
(73)
$
2,071
1,998
49
NOTES TO FINANCIAL STATEMENTS
Note L – Other Post-Employment Benefits (continued)
The following table summarizes the three-year trend information for the OPEB plan including the annual OPEB
cost. In addition, the schedule includes the amount and percentage of current year funds contributed.
Annual
(Dollars in thousands)
OPEB cost
(AOPEBC)
Current year
contributions
Net OPEB
Asset
AOPEBC
contributed
2014
$
13,636
$
13,558
$
1,920
2013
$
14,398
$
14,325
$
1,998
99.4%
99.5%
2012
$
14,175
$
14,177
$
2,071
100.0%
Funded status and funding progress: On September 30, 2014, the most recent actuarial valuation date, the
plan was 41.2 percent funded. The actuarial accrued liability for benefits was $166.9 million and the actuarial
value of the plan assets was $68.7 million for an unfunded actuarial accrued liability (UAAL) of $98.2 million.
Covered payroll (including 289 employees receiving fully subsidized benefits and 763 employees receiving implicit
subsidy benefits) was $73.0 million and the ratio of the UAAL to the covered payroll was 134.5 percent.
At September 30, 2013, the plan was 29.4 percent funded. The actuarial accrued liability for benefits was $188.5
million and the actuarial value of the plan assets was $55.3 million for an unfunded actuarial accrued liability
(UAAL) of $133.1 million. Covered payroll (including 324 employees receiving fully subsidized benefits and 765
employees receiving implicit subsidy benefits) was $70.7 million and the ratio of the UAAL to the covered payroll
was 188.3 percent.
The Schedule of Funding Progress, which presents multi-year trend information, follows the Notes to the Financial
Statements under the heading of Required Supplemental Information.
Note M – Hedging Activities
OUC manages the impacts of interest rate and fuel market fluctuations on its earnings, cash flows and market
value of assets and liabilities through its hedging programs.
Interest rate hedges: Interest rate risk, for variable rate debt, is managed through the execution of interest rate
swap agreements (swaps). Swaps are executed in accordance with OUC’s Treasury Policy, presented to the
Finance Committee and approved by the Board. Swaps are typically executed in conjunction with a bond
transaction and as such, have inception and termination dates that align with the underlying debt series. Early
termination of a swap can be executed in accordance with the terms of the agreement.
OUC’s Treasury policy requires counterparty creditworthiness to achieve at least an ―A‖ rating category from at
least two of the three nationally recognized rating agencies, at the time of execution, maintaining a rating for
qualified swap providers. In addition, two-way credit support agreements may be required with parental
guarantees and/or letters of credit or collateral. In respect to the fair value of swaps, the value of these
agreements takes into consideration the prevailing interest-rate environment and the specific terms and
conditions of each contract. Fair value amounts are estimated using the zero-coupon discounting method,
including utilizing option pricing models, which consider probabilities, volatilities, time, underlying prices and other
variables.
Fuel rate hedges: Oversight of the fuel hedge program is performed by the Energy Risk Management Oversight
Committee (ERMOC). ERMOC’s responsibilities include establishing volume and financial limits, as well as
overall program compliance and counterparty creditworthiness. Counterparty creditworthiness is evaluated
considering the market segment, financial ratios, agency and market implied ratings and other factors.
50
NOTES TO FINANCIAL STATEMENTS
Note M – Hedging Activities (continued)
As a result of engaging in hedging activities, OUC is subject to the following key risks:

Credit risk: This is the risk that results when counterparties are unable or unwilling to fulfill their present
and future obligations. OUC addresses this risk through creditworthiness criteria included in its Treasury
Policy and responsibilities of the ERMOC. Interest rate counterparties must have minimum credit ratings
of ―A-,― issued by Standard and Poor’s or Fitch Ratings or ―A3‖, issued by Moody’s Investor Services at
the time the agreement is executed.

Interest rate risk: This is the risk that changes in interest rates will adversely affect the fair values of
OUC’s financial instruments or cash flows. OUC is exposed to this risk through its pay-fixed receive
variable rate swaps and, as such, has managed this risk through active management. There is no
exposure to this risk for fuel hedges.

Basis risk: This is the risk that arises when variable rates or prices of swaps and fuel hedges are based
on different reference rates. OUC is exposed to this risk on its Series 2011A Bonds swap, as the variablerate index received by OUC differs from the rate paid on the swap. OUC is exposed to this risk on its fuel
hedges due to a difference in commodity value between different delivery points or between cash market
prices and the pricing points used in the financial markets.

Termination risk: This is the risk that a derivative instrument’s unplanned end will affect OUC’s asset
and liability strategy or potentially require termination payments. This risk is mitigated through OUC’s
creditworthiness criteria and to date, no instances of this nature have occurred.

Rollover risk: This is the risk that a derivative instrument associated with a hedged item does not extend
to the maturity of the hedge item. OUC is exposed to rollover risk on swaps and hedges that mature or
terminate prior to the maturity of the hedged item. This risk is mitigated through OUC’s underlying
derivative policies, the creditworthiness of its counterparties and the volume and nature of its fuel
derivatives.

Market access risk: This is the risk that OUC will not be able to enter credit markets for both swaps and
fuel hedges or that credit markets will become more costly. OUC maintains a strong credit rating - ―AA‖
from Standard & Poor’s and Fitch Ratings and ―Aa2‖ from Moody’s Investors Service and, to date, has not
encountered any market barriers or credit market challenges.
In accordance with GASB Statement No. 53, ―Accounting and Financial Reporting for Derivative Instruments,”
outstanding derivatives are evaluated and classified as either hedging derivative instruments (effective) or
investment derivative instruments (ineffective), with the accumulated change in fair market value recognized as
Deferred inflows/outflows of resources or investment income/expense, respectively.
Interest rate derivatives: OUC’s interest rate swaps have been determined effective and, as such, changes in
the fair value of these derivatives have been included on the Statements of Net Position.
51
NOTES TO FINANCIAL STATEMENTS
Note M – Hedging Activities (continued)
The following statement summarizes the interest rate derivative contracts outstanding for the years ended
September 30:
2013
Fair value
(Dollars in thousands)
Interest rate swap agreements
2007 Bonds (1)
Forward interest rate contracts
2011A Bonds (1)
Accumulated decrease in fair value
hedging derivatives
$
$
Change in fair
value
(1,367) $
335
Settlement /
(termination)
amount
$
-
(20,554)
(1,421)
-
(21,921) $
(1,086) $
-
2014
Fair value
$
$
2014
Notional
amount
Net settlement
charges
(1,032) $
373
$
36,015
(21,975)
3,672
$
100,000
(23,007) $
4,045
(1) Additional interest rate swap information is included in Note G.
2012
Fair value
(Dollars in thousands)
Interest rate swap agreements
2007 Bonds (1)
Forward interest rate contracts
2011A Bonds (1)
Accumulated decrease in fair value
hedging derivatives
$
$
Change in fair
value
(1,257) $
Settlement /
(termination)
amount
(110) $
(31,491)
10,937
(32,748) $
10,827
-
2013
Fair value
$
$
-
$
2013
Notional
amount
Net settlement
charges
(1,367) $
336
$
36,015
(20,554)
3,643
$
100,000
(21,921) $
3,979
(1) Additional interest rate swap information is included in Note G.
Fuel derivatives: Fuel derivatives are settled in the period in which the option expires and are recognized as fuel
expenses on the Statements of Revenues, Expenses and Changes in Net Position. Settlement gains and losses
for the year ended September 30, 2014 for fuel related derivatives resulted in net gains of $1.0 million; whereas,
the year ended September 30, 2013 resulted in losses of $6.8 million. The outstanding fuel derivatives were
determined to be effective and as such, the changes in fair value are recorded on the Statements of Net Position
as either a Deferred outflow or Deferred inflow of resources until such time as the contract matures.
52
NOTES TO FINANCIAL STATEMENTS
Note M – Hedging Activities (continued)
The following is a summary of the fuel related derivative changes for the years ended September 30:
2013
Fair value
(Dollars in thousands)
Natural gas
$
Change in fair
value
96
$
2014
Fair value
340
$
2014 Notional
amount
Volume
436
3,820
MMBTU
Crude oil
117
(105)
12
7
MBBLS
Total current fuel hedge assets
213
235
448
Natural gas
67
159
226
3,720
MMBTU
Crude oil
21
(21)
-
-
MBBLS
Total non-current fuel hedge assets
88
138
226
Accumulated increase in fair value
hedging derivatives
Natural gas
$
301
$
373
$
674
$
(3,459) $
2,976
$
(483)
3,270
MMBTU
(29)
17
MBBLS
Crude oil
-
Total current fuel hedge liabilities
(29)
(3,459)
Natural gas
2,947
(512)
(240)
1
(239)
1,350
MMBTU
(2)
(48)
(50)
24
MBBLS
(242)
(47)
(289)
2013 Notional
amount
Volume
Crude oil
Total non-current fuel hedge liabilities
Accumulated decrease in fair value
hedging derivatives
$
2012
Fair value
(Dollars in thousands)
Natural gas
(3,701) $
$
Crude oil
2,900
$
Change in fair
value
2,545
$
50
(801)
2013
Fair value
(2,449) $
96
1,170
MMBTU
67
117
13
MBBLS
Total current fuel hedge assets
2,595
(2,382)
213
Natural gas
2,052
(1,985)
67
1,290
MMBTU
21
9
MBBLS
(3,459)
8,750
MMBTU
-
-
MBBLS
Crude oil
-
Total non-current fuel hedge assets
21
2,052
(1,964)
88
Accumulated increase in fair value
hedging derivatives
Natural gas
$
$
Crude oil
4,647
$
(7,791) $
(4,346) $
4,332
$
301
(24)
24
Total current fuel hedge liabilities
(7,815)
4,356
(3,459)
Natural gas
(2,996)
2,756
(240)
2,760
MMBTU
(2)
3
MBBLS
Crude oil
-
Total non-current fuel hedge liabilities
(2,996)
(2)
2,754
(242)
Accumulated decrease in fair value
hedging derivatives
$
(10,811) $
7,110
$
(3,701)
53
NOTES TO FINANCIAL STATEMENTS
Required Supplemental Information
Defined Benefit Plan
The following funding schedule presents multi-year trend information that approximates the funded status of the
Defined Benefit Pension Plan as of October 1, 2013. In accordance with GASB Statement No. 50, ―Pension
Disclosures,‖ this information has been prepared using the entry-age actuarial method. OUC uses the aggregate
actuarial cost method, which does not identify or separately amortize unfunded actuarial accrued liabilities.
Schedule of funding progress
(Dollars in thousands)
Actuarial
valuation
date
10/1/2013
10/1/2012
10/1/2011
$
$
$
Actuarial
value of
assets
(a)
286,722
267,020
252,225
Actuarial
accrued liability
(AAL) - entry age
(b)
$
412,298
$
401,073
$
373,054
$
$
$
Unfunded
AAL (UAAL)
(b - a)
125,576
134,053
120,829
Funded
ratio
(a / b)
69.5%
66.6%
67.6%
Covered
payroll
(c)
$
72,479
$
70,147
$
73,230
UAAL as a %
of covered
payroll
((b - a) / c)
173.3%
191.1%
165.0%
Other Post-Employment Benefit Plan
The following funding schedule presents multi-year trend information that approximates the funded status of the
Other Post-Employment Benefits Plan as of October 1, 2013. This schedule has been prepared using the entryage actuarial method, which was also used to prepare OUC’s actuarial valuation.
Schedule of funding progress
(Dollars in thousands)
Actuarial
Actuarial
Actuarial
value of
accrued liability
Unfunded
Funded
Covered
UAAL as a %
of covered
valuation
date
assets
(a)
(AAL) - entry age
(b)
AAL (UAAL)
(b - a)
ratio
(a / b)
payroll
(c)
payroll
((b - a) / c)
10/1/2013
$
68,728
$
166,882
(1) $
98,154
41.2%
$
72,990
134.5%
10/1/2012
$
55,322
$
188,470
$
133,148
29.4%
$
70,692
188.3%
10/1/2011
$
40,349
$
177,301
$
136,952
22.8%
$
71,121
192.6%
(1) The decrease in the AAL is due to plan changes, effective January 1, 2014, which include a reduction in the premium subsidy for dependent coverage
provided to retirees in the Defined Benefit Plan.
54
APPENDIX B
GENERAL BOND RESOLUTION
B-1
[THIS PAGE INTENTIONALLY LEFT BLANK]
(THIS PAGE INTENTIONALLY LEFT BLANK)
APPENDIX C
SERIES 2015A RESOLUTION
[THIS PAGE INTENTIONALLY LEFT BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
APPENDIX D
SUPPLEMENTAL INFORMATION REGARDING
THE CITY OF ORLANDO, FLORIDA AND ORANGE COUNTY, FLORIDA
THE SUPPLEMENTAL INFORMATION REGARDING THE CITY OF ORLANDO,
FLORIDA (THE "CITY") AND ORANGE COUNTY, FLORIDA (THE "COUNTY")
CONTAINED HEREIN HAS BEEN OBTAINED FROM (1) THE CITY'S BOND
DISCLOSURE SUPPLEMENT FOR FISCAL YEAR ENDED SEPTEMBER 30, 2013 AND (2)
THE COUNTY'S BOND DISCLOSURE SUPPLEMENT FOR FISCAL YEAR ENDED
SEPTEMBER 30, 2013, WITH UPDATES PROVIDED AS AVAILABLE ON THE DATE OF
THIS OFFICIAL STATEMENT. BOTH THE CITY AND THE COUNTY'S BOND
DISCLOSURE SUPPLEMENTS CAN BE OBTAINED ON THE MUNICIPAL SECURITIES
RULEMAKING BOARD'S ELECTRONIC MUNICIPAL MARKET ACCESS SYSTEM AT
HTTP://EMMA.MSRB.ORG. OUC BELIEVES THAT THESE SOURCES ARE RELIABLE.
HOWEVER, DUE TO THE TIMING OF THE AVAILABILITY OF CERTAIN
INFORMATION AND THE FREQUENCY WITH WHICH UPDATES TO SUCH
INFORMATION BECOME AVAILABLE, THE INFORMATION PRESENTED IN THIS
APPENDIX MAY NOT REFLECT THE CURRENT ECONOMIC CONDITIONS OF THE
CITY AND/OR THE COUNTY. ALL OF THE FOLLOWING INFORMATION, ESTIMATES
AND EXPRESSIONS OF OPINION ARE SUBJECT TO CHANGE WITHOUT NOTICE.
THE DELIVERY OF THE INFORMATION CONTAINED HEREIN SHALL NOT, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
MATERIAL CHANGE IN THE AFFAIRS OF THE CITY OR THE COUNTY SINCE THE
DATE OF THIS OFFICIAL STATEMENT.
THIS INFORMATION IS INCLUDED ONLY FOR THE PURPOSES OF SUPPLYING
GENERAL INFORMATION REGARDING THE PRIMARY COMMUNITY SERVED BY
OUC. THE SERIES 2015A BONDS ARE PAYABLE SOLELY FROM THE PLEDGED
REVENUES DESCRIBED IN THIS OFFICIAL STATEMENT, AND ARE NOT PAYABLE
OR SECURED BY ANY PROPERTIES OF THE CITY, THE COUNTY, OR ANY OTHER
POLITICAL SUBDIVISION OF THE STATE OF FLORIDA.
GENERAL
City of Orlando, Florida
The City was incorporated on July 31, 1875, and is located in the approximate center of
the State of Florida (the "State") in the County. The County, established by the Florida
Legislature in 1824, is located midway between Jacksonville to the north and Miami to the south,
between St. Petersburg Tampa on the Gulf of Mexico on the west and Daytona Beach on the
Atlantic coast on the east. Two of the State's major highways, Interstate 4 for east west travel
and the Florida Turnpike for north south travel, intersect just outside of the City. The County
encompasses approximately 1,003 square miles, ranking nineteenth in the State in terms of land
area.
D-1
Orange County, Florida
The County was established in 1824 and became a Charter County upon the enactment of
its County Charter approved by the voters effective January 1, 1987. Its territorial limits as they
presently exist were defined in 1913 and encompass approximately 1,000 square miles. The City
of Orlando, the County seat, is its principal city. It is located geographically in the approximate
center of the State, midway between Jacksonville to the north and Miami to the south, between
the St. Petersburg-Tampa area on the Gulf of Mexico and Daytona Beach on the Atlantic Coast.
Two of the State's major highways, Interstate 4 (for east-west travel) and the Florida Turnpike
(for north-south travel), intersect ten miles southwest of downtown Orlando. The City's central
location and mild climate have proven to be especially attractive to residents and a broadening
economy. The City offers a unique range of living styles from a quiet countryside to the cultural
and entertainment amenities of a major urban area. Leisure activities are enhanced by the City's
85 lakes and 3,092 acres of developed parks and recreation areas.
POPULATION
The following table indicates the population trends for the City, the County, the Orlando
MSA and the State since 1960 (in thousands).
City of Orlando(1)
Orange County(1)
Orlando MSA(1)
Florida(1)
%
%
%
%
Year
Population Change Population
Change
Population Change Population Change
1960
88.1
-- %
263.5
-- %
337.5
-- %
4,951.6
-- %
1970
99.0
12.4
344.3
30.7
453.3
34.3
6,791.4
37.2
1980
130.4
31.7
481.7
39.9
723.9
59.7
9,747.0
43.5
1990
164.7
26.3
677.5
40.6
1,072.7
48.2
12,937.9
32.7
2000(2)
188.0
14.1
867.2
28.0
1,644.6
53.3
15,982.4
23.5
2001
192.0
2.1
884.7
2.0
1,684.6
2.4
16,261.0
1.7
2002
194.9
1.5
955.9
8.1
1,762.9
4.9
16,713.1
2.8
2003
201.9
3.6
980.2
2.5
1,801.3
2.2
16,917.3
1.2
2004
208.9
3.5
999.9
2.0
1,837.7
2.0
17,177.8
1.5
2005
217.6
4.2
1,043.4
4.4
1,953.4
6.3
17,912.7
4.3
2006
224.1
2.9
1,079.5
3.5
2,032.9
4.1
18,349.1
2.4
2007
228.8
2.1
1,105.6
2.4
2,083.9
2.5
18,680.4
1.8
2008
234.1
2.3
1,115.0
0.9
2,103.5
0.9
18,807.2
0.7
2009
233.1
-0.4
1,108.9
-0.5
2,097.4
-0.3
18,750.5
-0.3
2010
238.3
2.2
1,146.0
3.2
2,134.4
1.8
18,801.3
0.3
2011
242.0
1.6
1,157.3
1.0
2,154.1
0.9
18,905.0
0.6
2012
245.4
1.4
1,175.9
1.6
2,184.6
1.4
19,074.4
0.9
2013(3)
250.4
2.0
1,203.0
2.3
2,225.7
1.9
19,259.5
1.0
___________________
(1)
U.S. Census of Population (1960, 1970, 1980, 1990, 2000 and 2010). Annual estimates: University of Florida
Bureau of Economic and Business Research (via State of Florida Office of Economic & Demographic
Research).
(2)
As of December 31, 1992, Lake County (population 231,072) was added to the Orlando MSA. MSA consists of
Orange, Osceola, Seminole and Lake Counties.
(3)
2013 Population estimates are as of April 1, 2013, based on the State of Florida's Office of Economic and
Demographic Research June 2014 updates.
D-2
HOUSING
As of 2013, residential building permits in the County totaled 9,033, of which 4,364 were
for single-family dwellings. Residential valuation was in excess of $1.39 billion.
During 2013, 30,645 homes were sold in the City with an average selling price of
$189,985. The median selling price for an existing home in the City in the second quarter of
2014 was $182,000 compared with the national average of $212,400.
There were 3,000 estimated apartment unit completions in the Orlando MSA during
2013. The overall estimated apartment vacancy rate in 2013 was 5.1%, with rentals at an
estimated average of $924 a month.
____________________
Sources:
Metro Orlando Economic Development Commission, Orlando Regional Realtor Association,
University of Florida, College of Business Administration, Bureau of Economic & Business
Research, http://www.bebr.ufl.edu/, and Marcus & Millichap 2014 National Apartment Report
The following table shows historical build permit data for the County.
Building Permits
2004 – 2013
Year
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
____________________
Source:
SingleFamily
4,364
3,909
2,389
2,186
1,811
2,473
4,053
9,527
10,863
11,681
MultiFamily
4,669
3,323
1,694
694
118
2,923
4,110
4,619
6,357
2,947
Residential
Valuations
(in thousands)
$1,394,508
1,049,948
638,469
504,558
381,545
685,040
1,166,640
2,080,202
2,382,446
1,938,500
University of Florida, College of Business Administration, Bureau of Economic & Business
Research, http://www.bebr.ufl.edu/.
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D-3
ECONOMY
Employment
As of August 2013, employment in the County was 603,542, with an unemployment rate
of 6.5%.
___________________
Source:
Florida Research and Economic Information Database Application
The following table shows the largest employers in the County.
Largest Employers in Orange County, Florida
2014
Employer
Walt Disney Company
Orange County Public Schools
Universal Orlando Resort
Adventist Health System/Florida Hospital
Orlando International Airport
University of Central Florida
Orange County Government
Lockheed Martin Corporation
Darden Restaurants, Inc.
Consulate Health Care
___________________
Number of
Employees
70,000
22,347
19,000
18,668
18,000
10,854
10,416(1)
7,000
6,419
5,000
Source: Orlando Business Journal: 2015 Book of Lists, Central Florida
(1)
Orange County Government numbers are adjusted upwards from original source information to include
employees of the six Constitutional Officers, which are included in the Primary Government. With the
implementation of GASB Statement No. 61 in Fiscal Year 2012, the Orange County Library District is now
excluded.
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D-4
The following table compares historical annual unemployment rates for the County, the State
and the United States.
Comparison of Annual Unemployment Rates
2005 – 2014
Orange County
Florida
Year
(1)
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
5.6%
6.8
8.5
10.0
11.1
10.3
5.8
3.7
3.1
3.5
6.1%
7.2
8.6
10.3
11.3
10.4
6.3
4.0
3.3
3.8
U.S.
5.9%
7.4
8.1
8.9
9.6
9.3
5.8
4.6
4.6
5.1
________________________
Source: Florida Research and Economic Information Database Application (subject to frequent revision)
(1)
As of September 2014.
The following table provides a summary of the County's historical annual labor force.
Average Annual Labor Force Summary
Orange County, Florida
2005 – 2014
Year
Labor Force
Employed
2014(1)
2013
2012
2011
2010
2009
2008
2007
2006
2005
________________
680,736
646,339
635,557
625,622
616,999
595,826
602,784
597,079
568,652
549,459
642,750
602,385
581,241
562,785
548,466
534,592
567,561
575,232
551,153
530,001
Unemployed
37,986
43,954
54,316
62,837
68,533
61,234
35,223
21,847
17,499
19,458
Unemployment
Rate
5.6%
6.8
8.5
10.0
11.1
10.3
5.8
3.7
3.1
3.5
Source: Florida Research and Economic Information Database Application (subject to frequent revision)
(1)
As of September 2014.
D-5
INDUSTRY AND COMMERCE
The following information on Industry and Commerce in the Orlando MSA was obtained
from the Metro Orlando Economic Development Commission.
The Orlando area is located in the center of Florida's High Tech Corridor. This corridor
extends from the Tampa Bay region through Metro Orlando and on to Volusia County and the
Space Coast. Fortune, Forbes, Business Week, Entrepreneur and Time magazines have touted
the region, using such terms as emerging leader; fastest growing; and among the best cities in the
nation for high technology, film, television and digital media production, and business
development. The City's advantageous location, quality workforce, and progressive business
environment draw corporations to Metro Orlando.
Corporate headquarters based in Metro Orlando benefit from a strong pro-business
atmosphere and unlimited potential that only the nation's very best business communities can
offer. Neighbors include AirTran, Darden Restaurants, Ruth's Chris Steakhouse and Tupperware
International.
Orlando has worked hard and cohesively to position itself as an international force in
global business. As the world's sixteenth largest economy, Florida's international sector
continues to grow. Metro Orlando leads that growth. In fact, recent expansions at our key
transportation centers, Orlando International Airport and Port Canaveral, further connect our
community with the rest of the world. And a strong high tech industry of 3,500 companies and
53,000 employees puts the region at the forefront of innovation.
A number of strong and established industry sectors are based in Metro Orlando.
Community and industry leaders are dedicated to advancing the growth of these sectors as the
region enhances its standing as a corporate and high tech hub. The area's major industrial sectors
include:
Advanced Manufacturing. From production of high performance components for
medical equipment, computing, power generation systems, frequency control products,
automotive systems and more, Metro Orlando is emerging as a significant locale for advanced
manufacturing. Crossing over many traditional industry sectors, these companies share a
reliance on research, engineering and intensive manufacturing. Key businesses in the industry
have established headquarters in Metro Orlando, which reinforces the region's position as a
center for advanced manufacturing. In addition to production, advanced manufacturing
companies in the region are involved in the design and prototyping of complex products. The
sector enjoys strong support from public and private organizations, benefits from a central
location with infrastructure vital to distribution activity and possesses a highly skilled, diverse
workforce. Additionally, local well-respected educational institutions attract research dollars and
consistently produce an impressive number of graduates that adds to the quality of workforce
availability in Metro Orlando.
Agritechnology. Metro Orlando is emerging as a prime location for the rapidly
developing field of agritechnology, a segment of biotechnology that focuses on genetic
engineering, cloning and high tech horticulture and agriculture. Key projects led by agritech
D-6
companies based in the area include cloning hard-to-grow plants, extracting plant oils for
medicinal and botanical purposes, developing alternative irrigation processes to conserve
precious water and protect the environment, and extracting liquid from vegetables for use in
pharmaceuticals, nutraceuticals, food colors, flavors, and cosmetics. Local agritech companies
are collaborating with state and federal agencies and educational institutions on various research
and development projects aimed at leveraging this emerging science to increase energy
efficiency in growing operations and protecting the environment.
Aviation and Aerospace. The aviation and aerospace sector in Metro Orlando has
developed over the past 60 years from a collection of military installations and small airstrips to
become a hub for global commercial air travel, advanced flight training, air defense projects and
space exploration. Aviation in the region is anchored by the first-rate Orlando International
Airport. One of the top largest airports in the world, Orlando International Airport is frequently
cited as a key advantage to companies doing business in Metro Orlando. With more than 50
airlines, scheduled service to over 100 domestic and international locations and thriving air cargo
operations, companies across a diverse range of industries can easily transport both people and
goods to virtually anywhere in the world from Orlando International Airport. Defense contract
powerhouse Lockheed Martin is a stronghold in the region, earning billions of dollars in
government and commercial contracts for a host of projects from missile and rocket systems to
jet fighters. Smaller companies in the region often capture lucrative government subcontracts,
along with other major contractors that have a Florida presence such as The Boeing Co. and
Harris Corporation. With many crossover applications, the sector benefits from a region firmly
designated as the world's capital for modeling, simulation and training. Organizations in the
region employ simulation technology in such applications as flight training for commercial and
private pilots and air traffic management. The sector enjoys strong support from public and
private organizations that are dedicated to advancing the industry locally. Additionally,
community educational institutions develop programs specifically geared toward enhancing the
quality of the workforce available to aviation and aerospace businesses.
Clean Technology & Sustainable Energy. Metro Orlando has firmly established a
traditional energy sector with the presence of such worldwide industry leaders as Siemens Power
Generation, Inc. and Mitsubishi Power Systems, as well as leading utility companies and a host
of related service and equipment companies. With this foundation in place, the sector is
beginning to shift more focus on alternative fuel sources. The region is steadily becoming a
hotbed for renewable energy and alternative fuel endeavors as businesses and non-profit entities
engage in a variety of research and development projects aimed at deploying more cost-efficient,
environmentally-friendly power. With federal government urgency to reduce reliance on foreign
oil, hydrogen technologies are a key area of research being conducted in Metro Orlando. NASA,
the world's chief end user of liquid hydrogen, and the federal Department of Energy have
awarded millions of dollars in grant money toward hydrogen research in the region. State and
local government are committed to creating a diversified economy, which ensures ample
supporting resources and incentives are available for high-tech industry sectors in the region,
including energy and alternative fuels. As a result, there is great potential in Metro Orlando for
start-up and existing businesses alike to flourish.
Digital Media. The progressive digital media sector in Metro Orlando has sprung from
the convergence of several established fields in the region, including modeling, simulation and
D-7
training (MS&T), film and television production, theme park/ride and show, and interactive and
immersive entertainment. Today, the region is positioned in the heart of one of the top 12
clusters for digital media in the country. As new applications for digital technology have
continued to emerge, the industry has kept pace in Metro Orlando. With a focus on content
creation and enabling technologies, the digital media sector features 1,200+ companies, 30,000
workers and annual revenue of an estimated $9 billion (figure includes location-based
entertainment). Metro Orlando has the technical infrastructure, talented employee pool and
educational resources necessary to further the growth of digital media in this region. Combined
with strong community dedication to enhancing the sector, Metro Orlando is brimming with
opportunity for both entrepreneurs and established businesses.
Film & Television Production. Well known as the world's premier tourist destination,
Metro Orlando is also a leading destination for film, television and commercial production.
State-of-the-art soundstages and unique venues have helped the region become one of the busiest
production centers in the United States. Year-round filming capabilities, a highly-skilled local
crew base, and supportive local communities have helped advance this region's reputation as
among the world's best for film production. Skilled crew, diverse locations, world-class studios,
specialized service companies, the Orlando region offers the very best to film and television
producers. It is no wonder that, in the past 17 years, this region has grown from a $2.5 million to
an $845.5 million annual production market. Today, more than 3,400 Metro Orlando employees
are engaged in film and television production-related activities. Complementing this high-profile
industry is a significant, emerging digital media sector that will serve to broaden the base of this
community's creative development offerings.
Financial Services & Financial Technology. The Metro Orlando region has emerged as a
national leader for the financial services and financial technology industry. Led by top industry
players that have major divisions and operations based or housed in Orlando – such as Fiserv,
Harland, FIS, The Bank of New York Mellon, Charles Schwab and Chase – this 'most wired U.S.
city' is home to over 50,000 financial services and financial technology workers. Perhaps even
more noteworthy is the fact that Orlando is among the top metros in the nation when it comes to
employment growth in this industry. From 2003 to 2007, Orlando's financial service
employment grew 13 percent, while FiTech employment grew 30 percent. Dominating industry
growth here are companies in the key segments of software development, banking and finance,
investments and insurance. And companies such as Fiserv and The Bank of New York Mellon
have expanded numerous times, bringing in sister companies and subsidiaries. Additionally,
Florida is second only to New York in the number of FINRA securities licenses that are critical
to companies such as The Bank of New York Mellon and Schwab. The industry is bolstered
overall by a world-class telecom infrastructure, a strong and ever-growing technology base
(which includes more than 1,400 software and information technology businesses), and a
swelling number of knowledge and multi-language workers coming from our community
colleges and universities. In particular, the University of Central Florida, now the fifth largest
university in the country, granting more than 900 economics, accounting and finance degrees
annually and boasting top-ranked engineering and computer science programs. Rounding out
Orlando's competitive edge for the industry is its central location with global access – one that
provides easy air access to nearly all major U.S. and international financial centers.
D-8
Life Science & Biotechnology. Metro Orlando's emerging biotechnology and life science
sector has sprung from a renowned regional healthcare system, comprising some of the top
hospitals in the country. The sector has also spun off from a prominent agricultural base and the
collaborative efforts of the region's established photonics and modeling, simulation and training
sectors. Clinical trials of newly-developed medications are emerging as an important aspect of
this sector as well. The region's strength in agriculture, combined with an established high tech
base, have spurred an agritechnology boom that is integrating advanced processes for use in
everything from industrial food ingredients to cosmetics to plant reproduction. Today, the sector
features more than 200 life science companies, employing nearly 6,900 workers, with an
estimated annual payroll of $535 million. When including the clinical/health care delivery side,
the numbers increase to more than 4,300 companies, employing more than 87,000 workers, with
an estimated annual payroll of more than $5 billion. The biotechnology and life science sector is
augmented by several prestigious educational and research centers such as the Mid-Florida
Research and Education Center, the University of Central Florida's Biomolecular Science Center,
and the Central Florida Research Park, one of the country's top 10 research facilities.
Development of a second research park, which would be dedicated to biotechnology study and
research, is currently being explored by local governmental officials. Metro Orlando's teaching
hospitals provide valuable medical training in a number of fields, which additionally contributes
to the knowledge base of the sector. Through the convergence of thriving high tech industries,
agriculture, healthcare systems and superior public and private supporting resources, Metro
Orlando's biotechnology and life science sector is poised to continue flourishing.
Manufacturing, Warehousing & Distribution. Metro Orlando's central location in Florida
positions it as a hub with exceptionally quick, easy access to air, land, water and space
transportation routes. This distinctive geographical advantage makes the region an ideal location
for general manufacturing, warehouse and distribution businesses. A full range of manufacturers
and warehouse/distributors are represented in Metro Orlando, supplied by a deep, diverse talent
pool of experienced employees. Major corporations operating in the region include the
headquarters for Mitsubishi Power Systems Americas, Inc. and major operations for HD Supply.
A proliferate number of mid-sized manufacturers and distributors further fuel the region's
economic engine. As businesses in this sector continually explore ways to reduce transportation
shipping costs, Orlando's locale is increasingly recognized as a valuable asset. Orlando
International Airport is within overnight trucking distance of many major U.S. cities, and has
scheduled non-stop service to more U.S. airports than any other Florida airport. Strategic
partnerships between educational institutions and business also have a positive impact on the
sector. Companies wishing to start up in or relocate to Metro Orlando can find a wealth of
support and assistance in practically all aspects of their business.
Modeling, Simulation & Training. Metro Orlando has long been established as the
nation's epicenter for modeling, simulation and training (MS&T) technology. The MS&T sector
in Metro Orlando features 100+ companies, more than 12,500 workers, and Gross Regional
Product of $3 billion. As the largest MS&T cluster in the country, it has evolved over the past
40 years from its roots in military training to provide applications in such diverse fields as
aviation and aerospace, education, emergency services, entertainment, homeland security,
medical technologies, microelectronics, optics and photonics and transportation. Backing the
MS&T industry in Metro Orlando are a number of renowned research, support and educational
facilities, such as the National Center of Excellence in Simulation, the University of Central
D-9
Florida's Institute for Simulation and Training, and Embry Riddle Aeronautical University's
aviation simulation programs. Metro Orlando's strong MS&T standing has earned the region the
distinction of being designated a National Center of Excellence in Simulation and Training. The
extensive resources and expertise available in Metro Orlando, through the convergence of
prominent MS&T organizations, reinforce the region's position as an unmatched locale for new
and expanding companies within the industry.
Optics & Photonics. Metro Orlando is a nationally recognized leader in the optics and
photonics industry, and local companies within this sector have a rich history of innovation and
expansion. Since the early 1960s, the industry has grown from a highly specialized military
pursuit to a strong diverse sector. Today, the sector features approximately 95 optics and
photonics companies, 15,000+ workers, and over $2 billion in gross regional product. These
companies enjoy an environment fostering progress through collaboration with internationally
recognized academic institutions, a highly skilled workforce and numerous community and
government agencies dedicated to facilitating industry growth throughout Metro Orlando. The
optics and photonics industry in Metro Orlando is clearly poised to flourish well into the future.
Software & Hardware. Metro Orlando is home to some of the most progressive, talented
and diverse software development companies in the U.S. Led by companies serving the financial
services industry, more than 1,400 businesses specializing in software development and service,
data processing and information retrieval are based in the region. Employing approximately
15,000, these companies generate over $1 billion in annual revenue and serve such distinct
industries as banking and finance, government, education, consumer products and utilities
automation. The software sector also crosses over into the well-established modeling, simulation
and training and digital media clusters, which are heavily involved in developing programs for
use in such applications as film and television, interactive entertainment, military exercises and
transportation planning. The sector is strengthened by a community dedicated to advancing the
industry by providing supporting resources for entrepreneurs and established companies alike,
bolstering technology education and working to reinforce the region's standing as a nationallyrecognized hub for software development.
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D-10
TOURISM
General
The County is one of the world's top visitor destinations. In 2013, the area hosted 59.3
million visitors. Major tourist attractions in Orange County include Walt Disney World Magic
Kingdom, Epcot, Disney's Hollywood Studios, Disney’s Animal Kingdom, Downtown Disney,
SeaWorld Orlando, Discovery Cove, Aquatica, Universal Studios, Islands of Adventure and
CityWalk.
In addition to the theme park attractions, the County, with its mild climate and natural
scenic beauty, offers visitors a wide assortment of activities. Beaches on both the Atlantic coast
and Gulf of Mexico are easily accessible from Orlando. The area contains more than 2,000
freshwater lakes that accommodate a wide range of recreational activities. A number of worldclass golf and tennis facilities are located in the County and Central Florida. Professional sports
franchises such as the NBA's Orlando Magic and arena football's Orlando Predators offer a
variety of opportunities for professional sports enthusiasts.
The mild climate, abundant hotel rooms and meeting facilities, the fifth busiest Origin &
Destination airport in the United States, and the second largest convention center in the United
States (prime exhibit space), make the County a desirable location for business travelers and
convention/meeting attendees.
In 2013, the Orange County Convention Center ("OCCC") was ranked the #1 convention
center in the U.S. by Business Review U.S.A. In previous years, the OCCC was awarded the
Exhibitor’s Choice Awards in the following categories: the Chairman’s Award and the Best
Convention Center Award.
The County hosted 10.1 million business-related visitors in 2013. Among those who
came for a convention or group meeting, 60% stayed overnight, with an average length stay of
2.9 nights.
2013 and Historical Information
Tourism is the driving force behind the County and Central Florida's economy. The
economic impact on the Central Florida economy in 2013 was $35.4 billion in visitor spending,
$5.5 billion of which came from international visitors and $30 billion from domestic visitors.
More than one third of total wage and salary employment in Orlando is directly or indirectly
sustained by tourism. Direct industry employment accounted for $8.5 billion in direct wages in
2013. In Fiscal Year 2013, tourism generated $187 million in the County tourist development
taxes (all six cents).
Of the 59.3 million visitors in 2013, 54.4 million were domestic and 4.9 million were
international. Of the 54.4 million domestic visitors, 44.3 million or 81% were leisure travelers
and 10.1 million were business travelers. The average length of stay for overnight leisure visitors
was 3.8 nights. Overnight convention/meeting attendees accounted for 3.4 million of the 10.1
million business visitors and had an average stay of 2.9 nights.
D-11
Of the 4.9 million international visitors in 2013, 3.7 million were from overseas and 1.1
million were from Canada. Canada remains Orlando’s top international country of origin.
Attraction Information
Of the top 10 most visited theme parks in North America in 2013, seven are in the
Orlando area. In addition, the 12th most visited park is Busch Gardens in Tampa. Attendance
estimates for these attractions are presented on the following chart.
Park
Theme Park Attendance (1)
(in Millions)
2011
2012
2013
Walt Disney World Magic Kingdom 17.14
10.83
Epcot
9.78
Disney’s Animal Kingdom
9.70
Disney’s Hollywood Studios
7.67
Islands of Adventure
6.04
Universal Studios
5.20
Sea World Orlando
4.28
Busch Gardens of Florida
70.64
Total Theme Park Attendance
17.54
11.06
10.00
9.91
7.98
6.20
5.36
4.35
72.40
% Increase
2011 to 2012 2012 to 2013
18.59
11.23
10.2
10.11
8.14
7.06
5.1
4.1
74.53
2.3%
2.1
2.2
2.2
4.0
2.6
3.1
1.6
2.5%
6.0%
1.5
2.0
2.0
2.0
13.9
-4.9
5.7
2.9%
________________
Source: Theme Entertainment Association – Economic Research Association
(1)
Numbers may vary due to rounding
Walt Disney Company
The Walt Disney Company owns more than 28,000 acres in Central Florida containing
four theme parks as well as numerous on-site resorts. The Magic Kingdom is comprised of
approximately 107 acres made up of numerous family friendly attractions. EPCOT covers over
300 acres. Its World Showcase pavilions highlight 11 countries, while Future World, with its
corporate sponsors, examines past, present and future technology. Disney’s Hollywood Studios
encompasses 135 acres and combines a working television and motion picture studio and theme
park. Animal Kingdom is the largest of the parks with over 500 acres. It combines rides,
dramatic landscapes and close encounters with exotic animals.
Walt Disney Company also has several ancillary attractions and entertainment complexes
that attract visitors. They include Downtown Disney, the ESPN Wide World of Sports Complex
and the Walt Disney World Speedway. Downtown Disney, comprised of Pleasure Island, West
Side and Marketplace consists of numerous eateries, clubs, shops, a 24-screen movie theater,
Cirque Du Soleil, and the DisneyQuest Indoor Interactive Theme Park. The ESPN Wide World
of Sports Complex includes a 7,500-seat baseball stadium (home of the Atlanta Braves Spring
Training Camp) and fitness facilities. The Walt Disney World Speedway is home to the Richard
Petty Driving Experience. Disney Cruise Line operates two ships with three, four and seven-day
itineraries sailing from Port Canaveral. Blizzard Beach and Typhoon Lagoon offer water-
D-12
oriented parks to visitors. In addition, Walt Disney World offers numerous hotels priced to meet
every budget.
Universal Orlando
The Universal Orlando Resort is comprised of Universal Studios, Islands of Adventure
and CityWalk. The Portofino Bay Resort, the Hard Rock Hotel, and the Royal Pacific Resort are
located on-site. Universal Studios is an 838-acre park combining a motion picture and television
studio complex with theme park rides, and motion picture and television theme performances.
Islands of Adventure is an adjacent theme park with numerous rides. The much anticipated
Wizarding World of Harry Potter opened in the Islands of Adventure Park in June 2010, and was
expanded to include Diagon Alley which opened in July 2014. CityWalk is a 30-acre
entertainment complex comprised of eateries, clubs, shops and a 20-screen movie theater.
Universal Orlando purchased Wet 'n Wild, a water slide based theme park located at the
intersection of Universal Boulevard and International Drive, in 1999.
SeaWorld Orlando
SeaWorld Orlando is the world’s largest marine life park. Its Shamu Stadium is the
world’s largest mammal stadium and research complex. Along with its water park, Aquatica,
SeaWorld is offering its guests more variety on its property east of International Drive and south
of Sea Harbor Drive. Discovery Cove is an exclusive, reservations-only paradise adjacent to
SeaWorld designed to offer guests the ultimate experience through once-in-a-lifetime, up-close
encounters with dolphins and other exotic sea life.
Hotel/Accommodations
There were approximately 87,658 hotel rooms in Orange County at the end of 2013. The
total number of rooms in the metro Orlando area, which includes surrounding counties, was
116,499 in 2013. Occupancy in the Metro Orlando area was 71% in 2013, which was a 3.2%
increase from 2012. 2013’s average daily rate was $101.53, up 4.5% from the previous year.
________________________________________
Sources:
Visit Orlando Market Research & Insights Department, Smith Travel Research, Metro Orlando
Economic Development Commission, and Orange County Comptroller’s Office.
D-13
MEDICAL RESEARCH
A state-of-the-art medical, biomedical technology and research corridor is taking shape in
southeast Orange County. The Sanford-Burnham Medical Research Institute at Lake Nona
opened its 175,000 square-foot medical research facility in October 2009. The Institute’s
overarching goal is to make breakthrough scientific discoveries, with particular focus on early
translational research relevant to diabetes and its cardiovascular complications, cancer, and drug
discovery.
Established in 2006 and opened in 2009, The UCF College of Medicine is one of the first
U.S. medical schools in decades to be built from the ground up. The College’s new state-of-theart medical education building at Lake Nona cost about $65 million and covers about 170,000
square feet. It features the latest in lab and classroom technology for the college that is working
to be the nation’s premier 21st Century medical school.
The Department of Veterans Affairs has broken ground on a new Orlando VA Medical
Center to be located on 65-acres in Southeast Orange County. The 1.2 million-square-foot
facility, opening in 2014, is estimated to cost $665 million to construct. The new $44 million,
100,000-square-foot University of Florida Academic & Research Center opened in 2012.
Located in the heart of Lake Nona Medical City, the $397-million Nemours Children's
Hospital opened in October 2012. The state-of-the-art, 630,000-square-foot hospital includes 95
beds and anchors a 60-acre, fully integrated health campus that includes a new Nemours
Children’s Clinic, and extensive research and education facilities.
_____________________
Sources: Sanford-Burnham Medical Research Institute, University of Central Florida, College of Medicine
Department of Veterans Affairs, and The Nemours Foundation.
NAVAL AIR WARFARE CENTER TRAINING SYSTEMS DIVISION
In operation since the mid-1960s, the Naval Air Warfare Center Training Systems
Division is the principal Navy center for research, development, test and evaluation, acquisition,
and product support of training systems. Formerly the Naval Training Systems Center, the
Training Systems Division ("TSD") is the recognized leader in the field of simulation for
military training. TSD employs approximately 1,100 civilian and military personnel.
____________________
Source: Naval Air Warfare Center, Training Systems Division.
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D-14
AGRICULTURE
Agriculture and related agribusiness industries are a major part of the economy of the
County and are valued at $1.5 billion in 2013. There are over 1,400 farms and plant nurseries in
the County and 20% of the land area continues to be in agricultural use. The County is ranked
9th among Florida’s 67 counties in total annual farm cash receipts. Many more individuals and
businesses work in marketing and distribution of agriculture related products and services.
The City of Apopka and the surrounding greenhouse foliage industry in northwest
Orange County are known as "The Indoor Foliage Capital of the World." There are more than
800 nursery businesses in the county and those nurseries together with foliage spin-off
businesses and woody ornamental plant nurseries contribute approximately $224 million to the
economy.
Citrus has been an important economic factor in the County for the last century. In 2013,
3,442 acres of citrus produced 1.2 million boxes of fruit. The groves and two citrus
packinghouses in the county made a direct and indirect impact to the economy of $93 million. It
should be noted that each acre of citrus grove captures over 1.25 million gallons of rainfall
annually, making citrus groves a major contributor to recharging the aquifer.
The value of the vegetable industry is $10.2 million which includes a unique five-acre
mushroom farm, as well as the producer of the famous Zellwood sweet corn. The value of the
livestock/agronomy area is approximately $16 million.
Related industries such as landscape services and pest control use agricultural products
and equipment and given the urban nature of the County, this contribution to the local economy
is significant, with over $1 billion in economic activity annually.
2013 Value of Orange County Agriculture
Industry
Landscape services, pest control, retail garden, golf courses ....................
Nursery, greenhouse, tree and sod farms ...................................................
Vegetables ..................................................................................................
Citrus ..........................................................................................................
Livestock/Agronomy .................................................................................
Total ...........................................................................................................
Value
$1,159,300,000
224,700,000
10,200,000
943,000,000
16,100,000
$1,503,300,000
____________________
Sources: Orange County Cooperative Extension Service, University of Florida/IFAS, Food & Resource
Economics Department, Florida Dept. of Agriculture: Division of Plant Industry, United States Census of
Agriculture, and Florida Agricultural Statistics Service.
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D-15
EDUCATION
The Orlando MSA has many notable institutions of higher learning including the
following: the University of Central Florida (a four-year state university with more than 60,000
full and part-time students, second largest university in the nation); Rollins College (the oldest
four-year institution of higher learning in the State and an independent, co-educational liberal
arts college with a full and part-time equivalent enrollment of nearly than 4,000 students); Barry
University Dwayne O. Andreas School of Law (founded in early 1993 as the University of
Orlando School of Law, it became part of Barry University in 1999, and received full ABA
accreditation in 2006).Seminole State College (an undergraduate institution with a total
enrollment of more than 32,000 students that offers two-year degrees as well as five bachelor’s
degrees); Valencia College (an undergraduate institution covering seven campuses and centers
with almost 70,000 full and part-time students that offers two-year degrees as well as three
bachelor degree programs); and the Florida A&M University Law School which opened in fall of
2002 and has been ABA accredited since 2004.
The following chart provides public school enrollment for the school districts located in
the Orlando MSA during the 2011-2012 school year.
Total Number of Schools(1)
Number of Elementary Schools
Number of Secondary Schools
Number of Students(2)
Number of High School Grads
Number of Full-Time
Instructional Staff (3)
Average Teacher Salary
Public School Statistics
Orlando MSA
2011 - 2012 School Year
Orange
Seminole
County
County
237
70
130
41
107
29
179,989
64,335
11,036
4,380
Lake
County
57
28
29
41,315
2,620
Osceola
County
61
26
35
54,776
3,625
12,706
$45,054
2,827
$41,865
3,581
$45,475
4,359
$47,202
__________________
(1)
Includes Elementary Schools, Middle Schools, High Schools, Combination Schools and Adult Schools.
(2)
Includes Elementary School, Middle School and High School Students.
(3)
Does not include guidance counselors, social workers, school psychologists, librarians, and audio-visual
workers.
Sources:
Metro Orlando Economic Development Commission; University of Central Florida; Rollins College;
Barry University; Seminole State College; Valencia College; Lake-Sumter Community College; Florida
A&M University; Law School Admission Council
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D-16
TRANSPORTATION
The terminal facility at Orlando International Airport (OIA) opened at its present location
in 1981. The airport currently has four parallel runways (three of which can be used
concurrently) and covers over 13,000 acres (23 square miles), which makes OIA the third largest
airport in the United States. In 2000, the airport's fourth airside terminal was opened. For the
12-month period ended September 2013, OIA served 34.8 million passengers. The airport has
93 jet gates, a 4.8 million square foot landside terminal with retail, restaurants, the 445-room
Hyatt Hotel and 42,000 square feet of convention/meeting space. A total of 9,300 parking spaces
are located in the terminal area as well as rental car and commercial ground transportation
facilities and there are over 11,300 remote satellite parking spaces available.
In 2013, the airport was served by 44 airlines. As of January 2014, OIA has direct
service to 79 U.S. destinations and 32 international destinations, making it the 13th largest
airport in the United States and the 33rd largest in the world. The airport authority continues to
implement capacity projects to meet projected demand. OIA added a fourth runway (third
concurrent) that opened in December 2003. OIA projects the airport will handle 53 million
passengers annually by 2021.
The Orlando area is criss-crossed by the Florida Turnpike and Interstate 4. Currently the
$2.7 billion I-4 expansion project is in progress and consists of phased construction projects
including the addition of general use lanes, High Occupancy Vehicle (HOV) lanes and
interchange improvements. These improvements began construction in 2000 and will be
completed throughout a 20-year period. The Martin Andersen Beachline Expressway (State
Road 528) links the east coast beaches with Interstate 4 and the Florida Turnpike. State Road
408 (formerly the Holland East-West Expressway) expedites traffic through the City of Orlando
and to outlying cities and counties.
Concurrent planning and development is now underway for a beltway road system
around the Orlando area. More than three quarters of the beltway, called the Central Florida
Greeneway and Western Beltway, is now in use. The regional 20-year cost feasibility plan calls
for light rail to connect Seminole, Orange and Osceola counties with the City of Orlando. In
addition, the initial segment of SunRail, a commuter light rail system (as described below), is
currently under construction.
The Orlando MSA is served by 122 carrier truck lines, parcel delivery and package
express services, most of which have local terminals. The Orlando area is fast becoming a
staging point for Florida freight movements – nearly two thirds of all of Florida's north/south
flows are to, from or through Orlando.
Greyhound Bus Lines offers charter, express and passenger services.
CSX
Transportation provides freight service with an average of 16 trains per day passing through
Orlando. Rail passenger stations in the Orlando area are the busiest in the southeast. Amtrak
operates four trips per day through the Orlando metropolitan area.
The City, together with the Florida Department of Transportation and Orange, Osceola,
Seminole and Volusia Counties (the "Local Government Partners") developed plans for the
D-17
acquisition, construction and operation of a commuter rail system serving portions of central
Florida ("SunRail"). Construction is now complete for the first 31-mile segment of SunRail
(between DeBary and Sand Lake Road in Orange County). The first 31-mile segment began
operating on May 1, 2014 and includes stations at DeBary/Fort Florida Road; Sanford/SR 46,
Lake Mary, Longwood, Altamonte Springs, Maitland, Winter Park/Park Avenue, Florida
Hospital, LYNX Central, Church Street, Orlando Amtrak/ORMC and Sand Lake Road. In
addition, the current SunRail plan would provide extended service for stations at Meadow
Woods, Osceola Parkway, Kissimmee Amtrak and Poinciana Industrial Park, and a new northern
terminus at the DeLand Amtrak station later in 2015.
D-18
APPENDIX E
FORM OF CONTINUING DISCLOSURE AGREEMENT
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CONTINUING DISCLOSURE AGREEMENT
by and between
ORLANDO UTILITIES COMMISSION
and
DIGITAL ASSURANCE CERTIFICATION, L.L.C.
relating to:
$94,905,000
ORLANDO UTILITIES COMMISSION
UTILITIES SYSTEM REVENUE BONDS, SERIES 2015A
Dated as of April 28, 2015
This CONTINUING DISCLOSURE AGREEMENT (this "Disclosure Agreement")
dated as of April 28, 2015, is executed and delivered by the ORLANDO UTILITIES
COMMISSION, a statutory utility commission within the State of Florida ("OUC") and
DIGITAL ASSURANCE CERTIFICATION, L.L.C., a limited liability company duly
organized and existing under the laws of the State of Florida, and any successor dissemination
agent serving hereunder pursuant to Section 12 hereof (the "Dissemination Agent" or "DAC").
RECITALS:
A.
Contemporaneously with the execution and delivery of this Disclosure Agreement,
OUC authorized the issuance and delivery of those certain $94,905,000 in original aggregate
principal amount of its Utility System Revenue Bonds, Series 2015A (the "Series 2015A Bonds"),
pursuant to Chapter 9861, Laws of Florida, Special Acts of 1923, as amended and supplemented
(the "Act"), and pursuant to OUC's Second Amended and Restated General Bond Resolution
adopted on October 9, 2001, and amended and restated on October 11, 2011, as it has and may be
further amended and supplemented from time-to-time (the "General Bond Resolution"), and as
particularly supplemented by the series resolution of OUC adopted on March 10, 2015 relating to
the Series 2015A Bonds (the "Series Resolution" and together with the General Bond Resolution,
the "Bond Resolution"). Capitalized terms not otherwise defined herein shall have the meanings
set forth in the Bond Resolution.
B.
The Series 2015A Bonds are being issued by OUC to provide funds which will be
used, together with other legally available funds, for the purpose of (i) financing all or a portion of
the cost of the Series 2015A Project, and (ii) paying certain costs in connection with the issuance
and delivery of the Series 2015A Bonds.
C.
OUC has authorized the preparation and distribution of the Preliminary Official
Statement dated March 17, 2015 with respect to the Series 2015A Bonds (the "Preliminary Official
Statement") and, on or before the date of the Preliminary Official Statement, OUC deemed that
the Preliminary Official Statement was final within the meaning of the Rule (as defined herein).
D.
Upon the initial sale of the Series 2015A Bonds to the Participating Underwriter
(as defined herein), OUC authorized the preparation and distribution of the Official Statement
dated April 28, 2015 with respect to the Series 2015A Bonds (the "Official Statement").
E.
As a condition precedent to the initial purchase of the Series 2015A Bonds by the
Participating Underwriter in accordance with the terms of the Official Notice of Sale dated March
17, 2015, and in compliance with the Participating Underwriter's obligations under the Rule, OUC
has agreed to undertake certain disclosure obligations of certain operating data or financial
information on an ongoing basis for so long as the Series 2015A Bonds remain outstanding as set
forth herein and in the continuing disclosure undertakings of OUC.
NOW THEREFORE, in consideration of the purchase of the Series 2015A Bonds by the
Participating Underwriter and the mutual promises and agreements made herein, the receipt and
sufficiency of which consideration is hereby mutually acknowledged, OUC and the Dissemination
Agent do hereby certify and agree as follows:
Section 1. Incorporation of Recitals. The above recitals are true and correct and are
incorporated into and made a part hereof.
Section 2. Definitions.
(a)
For the purposes of this Disclosure Agreement, all capitalized terms used, but not
otherwise defined herein shall have the meanings ascribed thereto in the Bond Resolution and the
Official Statement, as applicable.
(b)
In addition to the terms defined elsewhere herein, the following terms shall have
the following meanings for the purposes of this Disclosure Agreement:
"Annual Filing" means any annual report provided by OUC, pursuant to and as described
in Sections 4 and 6 hereof.
"Annual Filing Date" means the date, set forth in Sections 4(a) and 4(e) hereof, by which
the Annual Filing is to be filed with the MSRB.
"Annual Financial Information" means annual financial information as such term is
used in paragraph (f)(9) of the Rule and specified in Section 6(a) hereof.
"Audited Financial Statements" means the financial statements of OUC for the prior
Fiscal Year, certified by an independent auditor and prepared in accordance with generally
accepted accounting principles, as in effect from time to time, and audited by an independent
certified public accountant in conformity with generally accepted accounting principles, as
modified by applicable State of Florida requirements and the governmental accounting standards
promulgated by the Government Accounting Standards Board.
"Beneficial Owner" means any beneficial owner of the Series 2015A Bonds. Beneficial
ownership is to be determined consistent with the definition thereof contained in Rule 13d-3 of the
SEC, or, in the event such provisions do not adequately address the situation at hand (in the opinion
of nationally recognized bond counsel), beneficial ownership is to be determined based upon
ownership for federal income tax purposes.
"Disclosure Representative" means the Chief Financial Officer of OUC or his or her
designee, or such other person as OUC shall designate in writing to the Dissemination Agent from
time to time as the person responsible for providing Information to the Dissemination Agent.
"Dissemination Agent" means Digital Assurance Certification, L.L.C., acting in its
capacity as initial Dissemination Agent hereunder, or any successor Dissemination Agent
designated in writing by OUC pursuant to Section 11 hereof.
"EMMA" shall mean the MSRB’s Electronic Municipal Market Access system or any
successor thereto.
"Filing" means, as applicable, any Annual Filing or Notice Event Filing or any other
notice or report made public under this Disclosure Agreement.
2
"Fiscal Year" means the fiscal year of OUC, which currently is the twelve-month period
beginning October 1 and ending on September 30 of the following year or any such other
twelve-month period designated by OUC, from time to time, to be its fiscal year.
"Information" means the Annual Financial Information, the Audited Financial
Statements (if any), the Notice Event Filings, and the Voluntary Reports.
"MSRB" means the Municipal Securities Rulemaking Board established pursuant to
Section 15B(b)(1) of the Securities Exchange Act of 1934, as amended.
"Notice Event" shall have the meaning specified in Section 5(a) hereof.
"Notice Event Filing" shall have the meaning specified in Section 5(a) hereof.
"Obligated Person" means OUC and any person who is either generally or through an
enterprise, fund, or account of such person committed by contract or other arrangement to support
payment of all, or part of the obligations on the Series 2015A Bonds (other than providers of
municipal bond insurance, letters of credit, or other liquidity facilities). OUC confirms that
currently it is an Obligated Person with respect to the Series 2015A Bonds.
"Participating Underwriter" means the original purchaser of the Series 2015A Bonds
required to comply with the Rule in connection with the offering of the Series 2015A Bonds.
"Repository" shall mean each entity authorized and approved by the SEC from time to
time to act as a repository for purposes of complying with the Rule. The Repositories currently
approved by the SEC may be found by visiting the SEC's website at
http://www.sec.gov/info/municipal/nrmsir.htm. As of the date hereof, the only Repository
recognized by the SEC for such purpose is the MSRB, which currently accepts continuing
disclosure submissions through its EMMA web portal at http://emma.msrb.org.
"Rule" means Rule 15c2-12 of the SEC promulgated pursuant to the Securities Exchange
Act of 1934, as the same may be amended from time to time.
"SEC" means the United States Securities and Exchange Commission.
"Third-Party Beneficiary" shall have the meaning specified in Section 3(b) hereof.
"Unaudited Financial Statements" mean the financial statements (if any) of OUC for
the prior Fiscal Year which have not been certified by an independent auditor.
"Voluntary Report" means the information provided to the Dissemination Agent by OUC
pursuant to Section 8 hereof.
Section 3. Scope of this Disclosure Agreement.
(a)
OUC has agreed to enter into this Disclosure Agreement and undertake the
disclosure obligations hereunder, for the benefit of the Participating Underwriter and as a condition
precedent to the Participating Underwriter's original purchase of the Series 2015A Bonds, in order
3
to assist the Participating Underwriter with compliance with the Rule. The disclosure obligations
of OUC under this Disclosure Agreement relate solely to the Series 2015A Bonds. Such disclosure
obligations are not applicable to any other securities issued or to be issued by OUC, nor to any
other securities issued by or on behalf of OUC.
(b)
Neither this Disclosure Agreement, nor the performance by OUC or the
Dissemination Agent of their respective obligations hereunder, shall create any third-party
beneficiary rights, shall be directly enforceable by any third-party, or shall constitute a basis for a
claim by any person except as expressly provided herein and except as required by law, including,
without limitation, the Rule; provided, however, the Participating Underwriter and each Beneficial
Owner are hereby made third-party beneficiaries hereof (collectively, and each respectively, a
"Third-Party Beneficiary") and shall have the right to enforce the obligations of the parties
hereunder pursuant to Section 9 hereof.
(c)
This Disclosure Agreement shall terminate upon: (i) the defeasance, redemption or
payment in full of all Series 2015A Bonds, in accordance with the Bond Resolution, as amended,
or (ii) the delivery by the Disclosure Representative to the Dissemination Agent of an opinion of
counsel expert in federal securities laws retained by OUC to the effect that continuing disclosure
is no longer required under the Rule as to the Series 2015A Bonds.
Section 4. Annual Filings.
(a)
OUC shall provide, annually, an electronic copy of the Annual Filing to the
Dissemination Agent not later than two (business days prior to the Annual Filing Date. Promptly
upon receipt of an electronic copy of the Annual Filing, the Dissemination Agent shall provide the
Annual Filing to the Repository, in an electronic format as prescribed by the MSRB. Not later
than the March 31st immediately following the preceding Fiscal Year ended September 30,
commencing with the Fiscal Year ending September 30, 2015, shall be the Annual Filing Date.
The Annual Filing may be submitted as a single document or as separate documents composing a
package, and may cross-reference other information as provided in Section 6 hereof.
(b)
If on the second business day prior to the Annual Filing Date, the Dissemination
Agent has not received a copy of the Annual Filing, the Dissemination Agent shall contact the
Disclosure Representative by telephone and in writing (which may be by email) to remind OUC
of its undertaking to provide the Annual Filing pursuant to Section 4(a) hereof. Upon such
reminder, the Disclosure Representative shall either (i) provide the Dissemination Agent with an
electronic copy of the Annual Filing no later than 6:00 p.m. on the Annual Filing Date (or if such
Annual Filing Date falls on a Saturday, Sunday or holiday, then the first business day thereafter),
or (ii) instruct the Dissemination Agent in writing as to the status of the Annual Filing within the
time required under this Disclosure Agreement, and state the date by which the Annual Filing for
such year is expected to be provided. If the Dissemination Agent has not received either (i) the
Annual Filing by 6:00 p.m. on the Annual Filing Date, or (ii) notice from OUC that it intends to
deliver the Annual Filing to the Dissemination Agent by 11:59 p.m. on the Annual Filing Date,
OUC hereby irrevocably directs the Dissemination Agent to immediately send a notice thereof to
the Repository the following business day. Notwithstanding the foregoing, if OUC fails to file the
Annual Filing by 11:59 p.m. on the Annual Filing Date, OUC hereby directs the Dissemination
Agent to immediately send a notice thereof to the Repository the following business day.
4
(c)
If the Audited Financial Statements are not available prior to the Annual Filing
Date, OUC shall provide the Unaudited Financial Statements and when the Audited Financial
Statements are available, provide in a timely manner an electronic copy to the Dissemination
Agent, accompanied by a certificate for filing with the Repository.
(d)
The Dissemination Agent shall:
(i)
upon receipt, promptly file each Annual Filing received under
Section 4(a) hereof with the Repository;
(ii)
upon receipt, promptly file each Audited Financial Statement or Unaudited
Financial Statement received under Section 4(c) hereof with the Repository;
(iii)
upon receipt, promptly file the text of each disclosure to be made with the
Repository together with a completed copy of the MSRB Event Notice Cover Sheet in the
form attached as Exhibit "B" or otherwise acceptable to the MSRB, describing the event
by checking the box in said form when filing pursuant to the pertinent sections of this
Disclosure Agreement; and
(iv)
provide OUC evidence of the filings of each of the above when made, which
shall be by means of the DAC system, for so long as DAC is the Dissemination Agent
under this Disclosure Agreement.
(e)
OUC may adjust the Annual Filing Date upon change of its Fiscal Year by
providing written notice of such change and the new Annual Filing Date to the Dissemination
Agent and the Repository, provided that the period between the existing Annual Filing Date and
new Annual Filing Date shall not exceed one year.
(f)
Each Annual Filing shall contain the information set forth in Section 6 hereof.
Section 5. Reporting of Notice Events.
(a)
To the extent applicable, the occurrence of any of the following events with respect
to the Series 2015A Bonds shall constitute a Notice Event:
(1)
Principal and interest payment delinquencies;
(2)
Non-payment related defaults, if material;
(3)
difficulties;
Unscheduled draws on the debt service reserve fund reflecting financial
(4)
Unscheduled draws on credit enhancements reflecting financial difficulties;
(5)
Substitution of credit or liquidity providers, or their failure to perform;
(6)
Adverse tax opinions, the issuance by the Internal Revenue Service of
proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 57015
TEB) or other material notices or determinations with respect to the tax-exempt status of
the Series 2015A Bonds, or other material events affecting the tax status of the Series
2015A Bonds;
(7)
Modifications to rights of Series 2015A Bondholders, if material;
(8)
Calls on the Series 2015A Bonds, if material, and tender offers on the Series
2015A Bonds;
(9)
Defeasance of the Series 2015A Bonds;
(10) Release, substitution or sale of property securing repayment of the Series
2015A Bonds, if material;
(11)
Rating changes;
(12) Bankruptcy, insolvency, receivership, or a similar proceeding on the part of
an Obligated Person (as such term is defined in the Rule). Such an event is considered to
have occurred when there is an appointment of a receiver, fiscal agent or similar officer for
an Obligated Person in a proceeding under the U.S. Bankruptcy Code or in any other
proceeding under state or federal law in which a court or governmental authority has
assumed jurisdiction over substantially all of the assets or business of the Obligated Person,
or if such jurisdiction has been assumed by leaving the existing governing body and
officials or officers in possession but subject to the supervision and orders of a court or
governmental authority, or the entry of an order confirming a plan of reorganization,
arrangement or liquidation by a court or governmental authority having supervision or
jurisdiction over substantially all of the assets or business of the Obligated Person;
(13) The consummation of a merger, consolidation, or acquisition involving an
Obligated Person, or the sale of all or substantially all of the Obligated Person other than
in the ordinary course of business, the entry into a definitive agreement to undertake such
an action or the termination of a definitive agreement relating to any such actions, other
than pursuant to its terms, if material; or
(14) Appointment of a successor or additional trustee or the change of name of
a trustee, if material.
OUC shall promptly notify the Dissemination Agent in writing of the occurrence of a Notice Event
(and, in all cases in sufficient time for the Dissemination Agent to file a notice of any such Notice
Event not later than ten business days after the occurrence thereof as required under Section 5(c)
below); provided, however, to the extent any such Notice Event has been previously and properly
disclosed on the Repository by or on behalf of OUC, OUC shall not be required to provide such
additional notice of such Notice Event in accordance with this subsection. Such notice shall
instruct the Dissemination Agent to report the occurrence pursuant to Section 5(c) hereof. Such
notice shall be accompanied with the text of the disclosure that OUC desires to make (each a
"Notice Event Filing"), the written authorization of OUC for the Dissemination Agent to
6
disseminate such information, and the date OUC desires for the Dissemination Agent to
disseminate the information.
(b)
The Dissemination Agent is under no obligation to notify OUC or the Disclosure
Representative of an event that may constitute a Notice Event. In the event the Dissemination
Agent so notifies the Disclosure Representative, the Disclosure Representative will, within five
business days of receipt of such notice, instruct the Dissemination Agent that (i) a Notice Event
has not occurred and no filing is to be made, or (ii) a Notice Event has occurred and the
Dissemination Agent is to report the occurrence pursuant to Section 5(c) hereof, together with the
text of the disclosure that OUC desires to make, the written authorization of OUC for the
Dissemination Agent to disseminate such information, and the date OUC desires for the
Dissemination Agent to disseminate the information.
(c)
If the Dissemination Agent has been instructed by OUC as prescribed in
subsection (a) or (b)(ii) of this Section 5 to report the occurrence of a Notice Event, the
Dissemination Agent shall promptly file a notice of such occurrence with the Repository in an
electronic format as prescribed by the Repository and in a timely manner not in excess of ten
business days after the occurrence of the Notice Event.
Section 6. Content of Annual Filings. Each Annual Filing shall contain the following:
(a)
Statement:
Updates to the operating data or financial information set forth in the Official
(i)
the table entitled "Outstanding Bonds;"
(ii)
the table entitled "Outstanding Interest Rate Exchange Agreements;"
(iii)
the table entitled "Debt Service Coverage;"
(iv)
the table entitled "Electric Sales;"
(v)
the table entitled "Summary of Generation Facility Participation
Agreements;" and
(vi)
the table entitled "Fuel Mix Percentages."
(b)
If available at the time of such filing, the Audited Financial Statements for the prior
Fiscal Year. If the Audited Financial Statements are not available by the time the Annual Filing
is required to be filed pursuant to Section 4(a) hereof, the Annual Filing shall contain Unaudited
Financial Statements of OUC prepared in accordance with generally accepted accounting
principles, as in effect from time to time, and the Audited Financial Statements shall be filed in
the same manner as the Annual Filing when they become available. The Audited Financial
Statements (if any) will be provided pursuant to Section 4(c) hereof.
Any or all of the items listed above may be included by specific reference from other
documents, including official statements of debt issues with respect to which OUC is an Obligated
7
Person, which have been previously filed with the Repository or the SEC. If the document
incorporated by reference is a final official statement, it must be available from the Repository.
OUC will clearly identify each such document so incorporated by reference.
Section 7. Responsibility for Content of Reports and Notices.
(a)
OUC shall be solely responsible for the content of each Filing (or any portion
thereof) provided to the Dissemination Agent pursuant to this Disclosure Agreement. The
Dissemination Agent shall not be responsible for reviewing or verifying the accuracy or
completeness of any such Filings.
(b)
Each Filing distributed by the Dissemination Agent pursuant to Section 4 or 5
hereof shall be in a form suitable for distributing publicly and shall contain the CUSIP numbers of
the Series 2015A Bonds and shall be in substantially the form set forth in Exhibit "A" and Exhibit
"B" attached hereto, as applicable. If an item of information contained in any Filing pursuant to
this Disclosure Agreement would be misleading without additional information, OUC shall
include such additional information as a part of such Filing as may be necessary in order that the
Filing will not be misleading in light of the circumstances in which made.
(c)
Any report, notice or other filing to be made public pursuant to this Disclosure
Agreement may consist of a single document or separate documents composing a package and
may incorporate by reference other clearly identified documents or specified portions thereof
previously filed with the Repository or the SEC; provided that any final official statement
incorporated by reference must be available from the Repository.
(d)
Notwithstanding any provision herein to the contrary, nothing in this Disclosure
Agreement shall be construed to require OUC or the Dissemination Agent to interpret or provide
an opinion concerning information made public pursuant to this Disclosure Agreement.
Section 8. Voluntary Reports.
(a)
OUC may instruct the Dissemination Agent to file information with the Repository,
from time to time pursuant to a Certification of the Disclosure Representative accompanying such
information (a "Voluntary Report").
(b)
Nothing in this Disclosure Agreement shall be deemed to prevent OUC from
disseminating any other information through the Dissemination Agent using the means of
dissemination set forth in this Disclosure Agreement or including any other information in any
Annual Filing, Annual Financial Statement, Voluntary Report or Notice Event Filing, in addition
to that required by this Disclosure Agreement. If OUC chooses to include any information in any
Annual Filing, Annual Financial Statement, Voluntary Report or Notice Event Filing in addition
to that which is specifically required by this Disclosure Agreement, OUC shall have no obligation
under this Disclosure Agreement to update such information or include it in any future Annual
Filing, Annual Financial Statement, Voluntary Report or Notice Event Filing.
(c)
Notwithstanding the foregoing provisions of this Section 8, OUC is under no
obligation to provide any Voluntary Report.
8
Section 9. Defaults; Remedies.
(a)
A party shall be in default of its obligations hereunder if it fails or refuses to carry
out or perform its obligations hereunder for a period of five business days following notice of
default given in writing to such party by any other party hereto or by any third-party beneficiary
hereof, unless such default is cured within such five business day notice period. An extension of
such five business day cure period may be granted for good cause (in the reasonable judgment of
the party granting the extension) by written notice from the party who gave the default notice.
(b)
If a default occurs and continues beyond the cure period specified above, any
nondefaulting party or any third-party beneficiary may seek specific performance of the defaulting
party's obligations hereunder as the sole and exclusive remedy available upon any such default;
excepting, however, that the party seeking such specific performance may recover from the
defaulting party any reasonable attorneys' fees and expenses incurred in the course of enforcing
this Disclosure Agreement as a consequence of such default. Each of the parties hereby
acknowledges that monetary damages will not be an adequate remedy at law for any default
hereunder, and therefore agrees that the exclusive remedy of specific performance shall be
available in proceedings to enforce this Disclosure Agreement.
(c)
Notwithstanding any provision of this Disclosure Agreement or the Bond
Resolution to the contrary, no default under this Disclosure Agreement shall constitute a default
or event of default under the Bond Resolution.
Section 10. Amendment or Modification.
(a)
This Disclosure Agreement shall not be amended or modified except as provided
in this Section. No modification, amendment, alteration or termination of all or any part of this
Disclosure Agreement shall be construed to be, or operate as, altering or amending in any way the
provisions of the Bond Resolution.
(b)
Notwithstanding any other provision of this Disclosure Agreement, OUC may
amend this Disclosure Agreement and any provision of this Disclosure Agreement may be waived,
if: (i) such amendment or waiver is made in connection with a change in circumstances that arises
from a change in legal requirements, change in law, or change in the identity, nature, or status of
the obligor on the Series 2015A Bonds, or type of business conducted by such obligor; (ii) such
amendment or waiver does not materially impair the interests of the beneficial owners of the Series
2015A Bonds, as determined either by an unqualified opinion of counsel expert in federal
securities laws retained by OUC or by the approving vote of a majority of the Beneficial Owners
of the Series 2015A Bonds outstanding at the time of such amendment or waiver; and (iii) such
amendment or waiver is supported by an opinion of counsel expert in federal securities laws
retained by OUC, to the effect that such amendment or waiver would not, in and of itself, cause
the undertakings herein to violate the Rule if such amendment or waiver had been effective on the
date hereof but taking into account any subsequent change in or official interpretation of the Rule,
as well as any change in circumstances.
(c)
If any provision of Section 6 hereof is amended or waived, the first Annual Filing
containing any amended, or omitting any waived, operating data or financial information shall
9
explain, in narrative form, the reasons for the amendment or waiver and the impact of the change
in the type of operating data or financial information being provided.
(d)
If the provisions of this Disclosure Agreement specifying the accounting principles
to be followed in preparing OUC's financial statements are amended or waived, the Annual Filing
for the year in which the change is made shall present a comparison between the financial
statements or information prepared on the basis of the new accounting principles and those
prepared on the basis of the former accounting principles. The comparison shall include a
qualitative discussion of the differences in the accounting principles and the impact of the change
in the accounting principles on the presentation of the financial information, in order to provide
information to the beneficial owners of the Series 2015A Bonds to enable them to evaluate the
ability of OUC to meet its obligations. To the extent reasonably feasible, the comparison shall
also be quantitative. OUC will file a notice of the change in the accounting principles with the
Repository on or before the effective date of any such amendment or waiver.
(e)
Notwithstanding the foregoing, the Dissemination Agent shall not be obligated to
agree to any amendment expanding its duties or obligations hereunder without its consent thereto.
(f)
OUC shall prepare or cause to be prepared a notice of any such amendment or
modification and shall direct the Dissemination Agent to make such notice public in accordance
with Section 8 hereof.
Section 11. Agency Relationship.
(a)
The Dissemination Agent agrees to perform such duties, but only such duties, as
are specifically set forth in this Disclosure Agreement, and no implied duties or obligations of any
kind shall be read into this Disclosure Agreement with respect to the Dissemination Agent. The
Dissemination Agent may conclusively rely, as to the truth, accuracy and completeness of the
statements set forth therein, upon all notices, reports, certificates or other materials furnished to
the Dissemination Agent pursuant to this Disclosure Agreement, and in the case of notices and
reports required to be furnished to the Dissemination Agent pursuant to this Disclosure Agreement,
the Dissemination Agent shall have no duty whatsoever to examine the same to determine whether
they conform to the requirements of this Disclosure Agreement.
(b)
The Dissemination Agent shall not be liable for any error of judgment made in good
faith by a responsible officer or officers of the Dissemination Agent unless it shall be proven that
the Dissemination Agent engaged in negligent conduct or willful misconduct in ascertaining the
pertinent facts related thereto.
(c)
The Dissemination Agent shall perform its rights and duties under this Disclosure
Agreement using the same standard of care as a prudent person would exercise under the
circumstances, and the Dissemination Agent shall not be liable for any action taken or failure to
act in good faith under this Disclosure Agreement unless it shall be proven that the Dissemination
Agent was negligent or engaged in willful misconduct.
(d)
The Dissemination Agent may perform any of its duties hereunder by or through
attorneys or agents selected by it with reasonable care, and shall be entitled to the advice of counsel
concerning all matters arising hereunder, and may in all cases pay such reasonable compensation
10
as it may deem proper to all such attorneys and agents. The Dissemination Agent shall be
responsible for the acts or negligence of any such attorneys, agents or counsel.
(e)
None of the provisions of this Disclosure Agreement or any notice or other
document delivered in connection herewith shall require the Dissemination Agent to advance,
expend or risk its own funds or otherwise incur financial liability in the performance of any of the
Dissemination Agent's duties or rights under this Disclosure Agreement.
(f)
The Dissemination Agent shall not be required to monitor the compliance of OUC
with the provisions of this Disclosure Agreement or to exercise any remedy, institute a suit or take
any action of any kind without indemnification satisfactory to the Dissemination Agent.
(g)
The Dissemination Agent may include in any dissemination correspondence
enclosing or furnishing any Notice Event Filings made public by it under this Disclosure
Agreement the following disclaimer with respect to the source of the information contained in, and
the identity of the party responsible for compiling or preparing, such reports or notices: "The
information set forth in the attached notice has been provided by the Orlando Utilities Commission
("OUC") to Digital Assurance Certification, L.L.C. in its capacity as disclosure dissemination
agent (the "Dissemination Agent") for OUC, together with written dissemination directions to the
Dissemination Agent. The Dissemination Agent has not prepared or verified, and is not
responsible in any way for, the content of this notice or the accuracy, timeliness or completeness
thereof. Under no circumstances shall the Dissemination Agent or OUC have any obligation or
liability to any person or entity for (i) any loss, damage, cost, liability or expense in whole or in
part caused by, resulting from, or relating to any error (negligent or otherwise) or other
circumstances involved in processing, collecting, compiling or interpreting the data included in
this notice, or (ii) for any direct, indirect, special, consequential, incidental or punitive damages
whatsoever arising from any investment decision or otherwise. This notice has not been reviewed
or approved by any state or federal regulatory body."
(h)
The Dissemination Agent may resign at any time by giving at least ninety (90) days
prior written notice thereof to OUC. The Dissemination Agent may be removed for good cause at
any time by written notice to the Dissemination Agent from OUC, provided that such removal
shall not become effective until a successor dissemination agent has been appointed by OUC under
this Disclosure Agreement.
(i)
In the event the Dissemination Agent shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of the Dissemination Agent for any reason, OUC
shall promptly appoint a successor. Notwithstanding any provision to the contrary in this
Disclosure Agreement or elsewhere, OUC may appoint itself to serve as Dissemination Agent
hereunder.
(j)
Any company or other legal entity into which the Dissemination Agent may be
merged or converted or with which it may be consolidated or any company resulting from any
merger, conversion or consolidation to which the Dissemination Agent may be a party or any
company to whom the Dissemination Agent may sell or transfer all or substantially all of its agency
business shall be the successor dissemination agent hereunder without the execution or filing of
any paper or the performance of any further act and shall be authorized to perform all rights and
11
duties imposed upon the Dissemination Agent by this Disclosure Agreement, anything herein to
the contrary notwithstanding.
Section 12. Miscellaneous.
(a)
Each of the parties hereto represents and warrants to each other party that it has
(i) duly authorized the execution and delivery of this Disclosure Agreement by the officers of such
party whose signatures appear on the execution pages hereto, (ii) that it has all requisite power and
authority to execute, deliver and perform this Disclosure Agreement under applicable law and any
resolutions, ordinances, or other actions of such party now in effect, (iii) that the execution and
delivery of this Disclosure Agreement, and performance of the terms hereof, does not and will not
violate any law, regulation, ruling, decision, order, indenture, decree, agreement or instrument by
which such party or its property or assets is bound, and (iv) such party is not aware of any litigation
or proceeding pending, or, to the best of such party's knowledge, threatened, contesting or
questioning its existence, or its power and authority to enter into this Disclosure Agreement, or its
due authorization, execution and delivery of this Disclosure Agreement, or otherwise contesting
or questioning the issuance of the Series 2015A Bonds.
(b)
This Disclosure Agreement shall be governed by and interpreted in accordance with
the laws of the State of Florida and applicable federal law.
(c)
If any provision hereof shall be held invalid or unenforceable by a court of
competent jurisdiction, the remaining provisions hereof shall survive and continue in full force
and effect.
(d)
This Disclosure Agreement may be executed in one or more counterparts, each and
all of which shall constitute one and the same instrument.
Section 13. Identifying Information. All documents provided to the Repository
pursuant to this Disclosure Agreement shall be accompanied by identifying information as
prescribed by the MSRB.
Section 14. Severability. In case any part of this Disclosure Agreement is held to be
illegal or invalid, such illegality or invalidity shall not affect the remainder or any other section of
this Disclosure Agreement. This Disclosure Agreement shall be construed or enforced as if such
illegal or invalid portion were not contained therein, nor shall such illegality or invalidity of any
application of this Disclosure Agreement affect any legal and valid application.
[SIGNATURE PAGES TO FOLLOW]
12
SIGNATURE PAGE TO
CONTINUING DISCLOSURE AGREEMENT
ORLANDO UTILITIES COMMISSION
UTILITY SYSTEM REVENUE BONDS, SERIES 2015A
IN WITNESS WHEREOF, OUC and the Dissemination Agent have each caused this
Disclosure Agreement to be executed, on the date first written above, by their respective officers
duly authorized.
ORLANDO UTILITIES COMMISSION
(SEAL)
By:
John E. Hearn
Vice President, Financial and Support
Services and Chief Financial Officer
ATTEST:
By:
Elizabeth Mason
Assistant Secretary
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
SIGNATURE PAGE TO
CONTINUING DISCLOSURE AGREEMENT
ORLANDO UTILITIES COMMISSION
UTILITY SYSTEM REVENUE BONDS, SERIES 2015A
IN WITNESS WHEREOF, OUC and the Dissemination Agent have each caused their
duly authorized officers to execute this Continuing Disclosure Agreement to be effective as of the
day and year so specified hereinabove.
DIGITAL ASSURANCE CERTIFICATION, L.L.C.,
as Dissemination Agent
By:
Name:
Title:
Date:
EXHIBIT A
NOTICE TO REPOSITORY OF THE OCCURRENCE OF
[INSERT THE NOTICE EVENT]
Relating to
$94,905,000
ORLANDO UTILITIES COMMISSION
UTILITY SYSTEM REVENUE BONDS,
SERIES 2015A
Originally Issued on April 28, 2015
[**CUSIP NUMBERS**)]
Notice is hereby given by the Orlando Utilities Commission ("OUC"), as obligated person
with respect to the above-referenced Series 2015A Bonds issued by OUC, under the Securities and
Exchange Commission's Rule 15c2-12, that [**INSERT THE NOTICE EVENT**] has
occurred. [**DESCRIBE NOTICE EVENT AND MATERIAL CIRCUMSTANCES
RELATED THERETO**].
This Notice is based on the best information available to OUC at the time of dissemination
hereof and is not guaranteed by OUC as to the accuracy or completeness of such information.
OUC will disseminate additional information concerning [**NOTICE EVENT**], as and when
such information becomes available to OUC, to the extent that the dissemination of such
information would be consistent with the requirements of Rule 15c2-12 and OUC's obligation
under that certain Continuing Disclosure Agreement dated as of April 28, 2015. [**Any questions
regarding this notice should be directed in writing only to OUC. However, OUC will not
provide additional information or answer questions concerning [**NOTICE EVENT**]
except in future written notices, if any, disseminated by OUC in the same manner and to the
same recipients as this Notice**].
DISCLAIMER: All information contained in this Notice has been obtained by OUC from
sources believed to be reliable as of the date hereof. Due to the possibility of human or mechanical
error as well as other factors, however, such information is not guaranteed as to the accuracy,
timeliness or completeness. Under no circumstances shall OUC have any liability to any person
or entity for (a) any loss, damage, cost, liability or expense in whole or in part caused by, resulting
from or relating to this Notice, including, without limitation, any error (negligent or otherwise) or
other circumstances involved in procuring, collecting, compiling, interpreting,
A-1
analyzing, editing, transcribing, transmitting, communicating or delivering any information
contained in this Notice, or (b) any direct, indirect, special, consequential or incidental damages
whatsoever related thereto.
Dated: _____________________
ORLANDO UTILITIES COMMISSION
By:
Name:
Title:
A-2
EXHIBIT B
CONTINUING DISCLOSURE EVENT NOTICE COVER SHEET
This cover sheet and continuing disclosure event notices should be sent, with all submissions
made, to the Municipal Securities Rulemaking Board pursuant to Securities and Exchange
Commission Rule 15c2-12(b)(5)(i)(C) and (D).
Issuer's and/or Other Obligated Person's Name: Orlando Utilities Commission
Issuer's Six-Digit CUSIP Number: __________________________ or Nine-Digit CUSIP
Number(s) of the certificates to which this material or other event notice relates:
Number of pages of attached continuing disclosure or other event notice: _____
Description of Continuing Disclosure Notice (Check One):
1.
2.
3.
4.
5.
6.
___
___
___
___
___
___
Principal and interest payment delinquencies
Non-payment related defaults
Unscheduled draws on debt service reserves reflecting financial difficulties
Unscheduled draws on credit enhancements reflecting financial difficulties
Substitution of credit or liquidity providers, or their failure to perform
Adverse tax opinion, the issuance by the Internal Revenue Service of proposed
or final determinations of taxability, Notices of Proposed Issue (IRS Form
5701-TEB) or other material notices or determinations with respect to the tax
status of the Series 2015A Bonds, or other material events affecting the taxexempt status of the Series 2015A Bonds
8. ___ Modifications to rights of Bondholders
9. ___ Bond calls and tender offers
10. ___ Defeasances
11. ___ Release, substitution, or sale of property securing repayment of the Series
2015A Bonds
12. ___ Rating changes
13. ___ Bankruptcy, insolvency, receivership or similar event of OUC
14. ___ The consummation of a merger, consolidation, or acquisition involving OUC,
or the sale of all or substantially all of the assets of OUC, other than in the
ordinary course of business, the entry into a definitive agreement to undertake
such an action or the termination of a definitive agreement relating to any such
actions, other than pursuant to its terms
15. ___ Appointment of a successor or additional trustee or the change of name of a
trustee
16. ___Other event (specify)
B-1
I hereby represent that I am authorized by OUC or its agent to distribute this information
publicly:
Signature:
Name: ____________________________________
Title: _____________________________________
Employer: Digital Assurance Certification, L.L.C.
Address:
__________________________________________
__________________________________________
__________________________________________
Phone:
__________________________________________
B-2
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APPENDIX F
FORM OF CO-BOND COUNSEL OPINION FOR SERIES 2015A BONDS
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FORM OF CO-BOND COUNSEL OPINION
Upon delivery of the Series 2015A Bonds in definitive form, Bryant Miller Olive P.A.,
Co-Bond Counsel, proposes to render its final approving opinion in substantially the following
form:
[Date of Delivery]
Orlando Utilities Commission
Orlando, Florida
$94,905,000
ORLANDO UTILITIES COMMISSION
UTILITY SYSTEM REVENUE BONDS,
SERIES 2015A
Ladies and Gentlemen:
We have acted as Co-Bond Counsel to the Orlando Utilities Commission ("OUC") in
connection with the issuance by OUC of its $94,905,000 Utility System Revenue Bonds, Series
2015A (the "Series 2015A Bonds") pursuant to the Constitution and laws of the State of Florida,
including in particular, Chapter 9861, Laws of Florida, Special Acts of 1923, as amended and
supplemented, and pursuant to the Second Amended and Restated General Bond Resolution,
adopted by OUC on October 11, 2011, as supplemented and amended (the “General Bond
Resolution”), and as particularly supplemented by the series resolution adopted by OUC on
March 10, 2015 (the "Series Resolution" and, together with the General Bond Resolution the
"Bond Resolution"). In such capacity, we have examined such law and certified proceedings,
certifications and other documents as we have deemed necessary to render this opinion. Any
capitalized undefined terms used herein shall have the meaning set forth in the Bond
Resolution.
As to questions of fact material to our opinion, we have relied upon representations of
OUC contained in the Bond Resolution and in the certified proceedings and other certifications
of public officials and others furnished to us, without undertaking to verify the same by
independent investigation. We have not undertaken an independent audit, examination,
investigation or inspection of such matters and have relied solely on the facts, estimates and
circumstances described in such proceedings and certifications. We have assumed the
genuineness of signatures on all documents and instruments, the authenticity of documents
submitted as originals and the conformity to originals of documents submitted as copies.
In rendering this opinion, we have examined and relied upon the opinion of even date
herewith of W. Christopher Browder, Esquire, General Counsel to OUC, as to the due creation
and valid existence of OUC, the due adoption of the Bond Resolution and the due execution
and delivery of the Series 2015A Bonds.
25041/015/00988092.DOCv3
Orlando Utilities Commission
[Date of Delivery]
Page 2 of 3
The Series 2015A Bonds are limited obligations of OUC, payable from and are equally
secured by a pledge of and lien on the Pledged Revenues, in the manner and to the extent
provided in the General Bond Resolution, on a parity and equal status with OUC's outstanding
Water and Electric Revenue Bonds, Series 2003T, and Utility System Revenue Bonds, Series
2006, Series 2007, Series 2008, Series 2009A, Series 2009B, Series 2009C, Series 2010A, Series
2010C, Series 2011A, Series 2011B, Series 2011C, Series 2012A and Series 2013A and with any
pari passu additional Bonds which OUC may issue pursuant to the Bond Resolution.
The full faith and credit of the City of Orlando (the "City") is not pledged for the
payment of the Series 2015A Bonds. The Series 2015A Bonds do not constitute a general
obligation or indebtedness of the City or OUC within the meaning of any constitutional,
statutory or other limitation of indebtedness and Holders of the Series 2015A Bonds shall never
have the right to compel the exercise of the ad valorem taxing power of the City, or taxation in
any form of any real or personal property, or application of any other funds of OUC or the City
for the payment of the principal of or interest on the Series 2015A Bonds. The Series 2015A
Bonds and the obligations evidenced thereby shall not constitute a lien upon OUC's Utility
System, or any part thereof, or on any other property of or in OUC.
The opinions set forth below are expressly limited to, and we opine only with respect to,
the laws of the State of Florida and the federal income tax laws of the United States of America.
Based on our examination, we are of the opinion that, under existing law:
1.
The Bond Resolution constitutes a valid and binding obligation of OUC
enforceable against OUC in accordance with its terms.
2.
The Series 2015A Bonds are valid and binding limited obligations of OUC
enforceable in accordance with their terms, payable solely from the Pledged Revenues in
the manner and to the extent provided in the Bond Resolution.
3.
The Bond Resolution creates a valid lien upon the Pledged Revenues for
the security of the Series 2015A Bonds on a parity with OUC's outstanding Water and
Electric Revenue Bonds, Series 2003T, and Utility System Revenue Bonds, Series 2006,
Series 2007, Series 2008, Series 2009A, Series 2009B, Series 2009C, Series 2010A, Series
2010C, Series 2011A, Series 2011B, Series 2011C, Series 2012A and Series 2013A and with
any pari passu additional Bonds which OUC may issue pursuant to the Bond
Resolution, all in the manner and to the extent provided in the Bond Resolution.
4.
Interest on the Series 2015A Bonds is excludable from gross income for
federal income tax purposes and is not an item of tax preference for purposes of the
federal alternative minimum tax imposed on individuals and corporations; however,
interest on the Series 2015A Bonds may be subject to the federal alternative minimum
25041/015/00988092.DOCv3
Orlando Utilities Commission
[Date of Delivery]
Page 3 of 3
tax when any Series 2015A Bonds are held by a corporation. The opinions set forth in
this paragraph are subject to the condition that OUC complies with all requirements of
the Internal Revenue Code of 1986, as amended, (the "Code") that must be satisfied
subsequent to the issuance of the Series 2015A Bonds in order that the interest thereon
be, and continue to be, excludable from gross income for federal income tax purposes.
OUC has covenanted in the Bond Resolution to comply with all such requirements.
Failure to comply with certain of such requirements may cause interest on the Series
2015A Bonds to be included in gross income for federal income tax purposes
retroactively to the date of issuance of the Series 2015A Bonds.
It is to be understood that the rights of the owners of the Series 2015A Bonds and the
enforceability thereof may be subject to the exercise of judicial discretion in accordance with
general principles of equity, to the valid exercise of the sovereign police powers of the State of
Florida and of the constitutional powers of the United States of America and to bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting creditors' rights
heretofore or hereafter enacted.
For purposes of this opinion, we have not been engaged or undertaken to review and
therefore have no opinion herein regarding, the accuracy, completeness or adequacy of the
Official Statement or any other offering material relating to the Series 2015A Bonds, except as
otherwise stated in a separate opinion of even date herewith. This opinion should not be
construed as offering material, an offering circular, prospectus or official statement and is not
intended in any way to be a disclosure statement used in connection with the sale or delivery of
the Series 2015A Bonds. Furthermore, we are not passing on the accuracy or sufficiency of any
CUSIP numbers appearing on the Series 2015A Bonds. In addition, we have not been engaged
to and, therefore, express no opinion as to compliance by OUC or the underwriters with any
federal or state statute, regulation or ruling with respect to the sale and distribution of the Series
2015A Bonds or regarding the perfection or, except as described in paragraph 3 above, priority
of the lien on the Pledged Revenues created by the Bond Resolution. Further, we express no
opinion regarding federal income tax consequences arising with respect to the Series 2015A
Bonds other than as expressly set forth herein.
Our opinions expressed herein are predicated upon present law, facts and
circumstances, and we assume no affirmative obligation to update the opinions expressed
herein if such laws, facts or circumstances change after the date hereof.
Respectfully submitted,
25041/015/00988092.DOCv3
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