2026 Energy Prepayment
Transactions
Rusty Mills, CFO | June 3, 2026
Energy Prepayment Financing Overview
2 • IRS Regulations codified in 2005 allow for tax-exempt debt to be issued for the prepayment of electricity to serve load.
• Tax-exempt debt (issued by CCCFA) provides a lower cost of funding than energy prepay financing participants would be able to receive by issuing taxable debt or internal funding. • Bond investor risk is tied to the energy prepay funding recipient (not Ava), and their ability to pay debt service and redeem bonds in event of default on the bonds. • Ava enters 30-year energy supply agreements, commits to purchasing a fixed volume of energy during that period, and receive a fixed $/MWh discount to the market energy price. • Objective: Prepay transactions enable Ava to lower its cost of energy on existing and future energy contracts through the discount and enable a customer value proposition into the future.
Goal: Reduce the cost of public power purchases by monetizing tax-exempt debt.
Energy Prepayment Transaction Diagram
3 1. Bond Issuance: CCCFA issues the Bonds to
fund the prepayment.
2. Prepayment: CCCFA applies bond proceeds
to prepay Energy Supplier for 30 years of
energy deliveries.
3. Commodity swap: Energy Supplier enters
swap transaction at fixed price.
4. CCCFA commodity swap: CCCFA enters
commodity swap at same fixed price to de-risk variability of debt service.
5. Ava: Ava enters energy supply contract to
buy energy delivered by Energy Supplier at a
fixed discount to Ava’s energy contracts.
6. Funding Agreement: Energy Supplier
finances bond proceeds with third-party
funding recipient to enhance savings
potential.
7. Assigned PPAs: Ava assigns its existing and
future PPAs to Energy Supplier through a
custodial account. Energy Supplier
contributes pays and take title to underlying
PPA energy.
Ava
Energy Supplier
Affiliate
2026 Prepay Financing Plans
Staff will be seeking approval for two-three transactions by the Board in June o Similar to last year, each would be authorized for up to $1.25 billion, but will likely be approx. $1 billion, similar to prior deals
o We plan to propose using Morgan Stanley and Goldman Sachs as underwriter and supplier for one transaction each; staff evaluating using a third bank as we plan for reaching our capacity on number of prepays (RBC/JP Morgan/Citadel, among others)
▪ Further optimizes each related PPA pool of resources with the existing banks ▪ Using a third bank further diversifies Ava counterparty risk and continue to drive competition o Staff will seek Green Bond designation for all transactions o Transactions would occur after approvals by Ava and CCCFA boards in June, subject to market conditions o Selection of funding recipient will occur after approvals; Ava will seek Bond Ratings shortly after in preparation for each bond sale
4 May FAP
June
ExComm
June Ava
Board
June CCCFA
Board
Receive
Ratings/Mail POS
Price and Close
Prepay transactions
June 1 July 1 Aug - January
Summary Table by Transaction
5 CCCFA 2021B CCCFA 2022A CCCFA 2023E CCCFA 2025C CCCFA 2025E Total Project Participant(s) Ava & SVCE Ava Ava Ava Ava N/A
Initial Bond Principal
Amount $1,234,720,000 $931,120,000 $997,895,000 $1,004,395,000 $960,730,000 $5,128,860,000 Delivery Period Start
Date 1/1/2022 4/1/2023 1/1/2024 11/1/2025 4/1/2026 N/A
Bond Refinancing Date 8/1/2031 8/1/2028 3/1/2031 10/1/2033 5/1/2035 N/A Total Discount to Ava
($/MWh) $4.28 $7.46 $12.66 $10.85 $13.30 $9.55/MWh
Initial Period Savings
($M) $21.4M $26.8M $49.6M $47.1M $56.5M $201.5M
Initial Period Energy
Delivery (MWh) 5.0MM 3.59MM 3.92MM 4.34MM 4.25M 21.1M
# of Ava PPAs Currently
Assigned2 2.5 2.5 2 1 2 10
Ava’s transactions to date have resulted in over $5.1B in CCCFA bond issuances, with $/MWh discounts improving in more recent transactions driven largely by market conditions.
2 Where a decimal is present, certain Ava PPAs have energy volume allocated on a pro rata basis across multiple prepayment transactions.
Ava Energy Prepay Savings by Transaction
6 • Ava’s initial five prepay
transactions are expected to
provide $201.5M in energy savings
over the initial bond periods.
• Average savings discount:
$9.55/MWh across ~21.1 TWh of
Ava energy procured through 2035.
• Annual savings of >$20M per year
from 2026-2030 from the five
existing prepays $-
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Ava Annual Energy Savings1from Existing Prepay Transactions ($M) CCCFA 2021B CCCFA 2022A CCCFA 2023E CCCFA 2025C CCCFA 2025E 1 Annual savings above reflect total expected energy discount received by Ava through the respective bond refinancing date.
Note: the savings decline in later years (2031-2035) above is a function of Ava’s existing transactions reaching their refinancing date on a rolling basis. At refinancing, Ava would issue a new bond and receive a new $/MWh discount for the duration of the bond.
Prepay Structure Risks
7 Risk Description Mitigation
Market risks Macro factors (Iran, inflation, Fed rate decisions, etc.) may impact bond pricing and Ava savings potential of energy prepayment transactions.
Ava and PFM to coordinate closely with underwriters
on market timing to optimize execution.
Refinancing risk • Initital prepay bond savings periods are typically 5-10 years. • Each transaction must be re-financed at that time
• Future savings are subject to decrease/increased based on market conditions at refinancing.
• Energy prepayment transaction volume has meaningfully increased in past few years, so the refinancing market will have a higher supply in the coming years.
Ava to assess opportunities to stagger Ava transaction
refinancing dates to de-risk market and interest rate
conditions at re-financing.
Issuing transactions in 2026 may result in higher
savings than future years when new issuances
may compete with refinancings for the same bond
purchaser pool.
Load loss risk Material inability by Ava to deliver contracted MWh in future years may lead to loss of energy discount.
Ava limits its prepay-committed power relative to its
long-term load forecast. After Prepays #6 & 7,
approximately 49 % of Ava’s future load will be
committed to prepays.
Out of pocket costs Requires staff time to execute & manage; ratings agency and green bond fees are paid regardless of transaction’s success.
Fees are greatly outweighed by the savings potential.
Tax / regulatory risk Changes in tax law or RPS standards may impact energy prepayment transactions in the future and potentially cause existing deals to unwind.
Limited ability to mitigate.
Ava Planning Risk - Loss of discounted power would place some future budgetary pressure on Ava Prepaid Energy Refinancing Risk
8 Over $95.6B of prepaid energy financings are coming due for refinancing by 2036, which may result in pressure on future bond pricing, energy discounts, and market access.
Potential for Future Prepay Transactions
9 • Under tax guidance, Ava’s aggregate load committed to all energy prepayment transactions should not exceed 80% of total expected load in any given year.
• Through 5 transactions: 34% of Ava’s forecasted load is committed to energy prepayments in peak years.
• After Prepays #6 & 7, 49% of Ava’s forecasted load will be committed across all transactions.
• Following Prepay #7, Ava expects to have load capacity headroom for 2-4 additional prepayment transactions. This is subject to change based on actual volume commitments in forthcoming transaction and will be reviewed over time
against Ava's long-term load forecast.
Energy prepayment load commitments as
% of Ava's expected load3
34.3%
14.5%
31.1%
20.0%
Prepay #1-5 volume
Expected Prepay #6 & 7
volume
Headroom for future
transactions
Reserved per tax guidance
3Percentages in chart reflect expected volumes for
calendar year 2051, which is the peak aggregate
volume commitment for Ava's existing energy
prepayment transactions.
Summary & Next Steps
• Prepays provide significant savings for Ava that could approach $40-50 million annually with more prepays
• Budget Planning Risk- Perpetual savings uncertain due to broad structural risks ▪ Staff recommends using prepays within legal guidance to maximize savings while monitoring budget risk over the mid-long-term
• Staff planning up to three transactions this summer and will seek board approval in June
• Planning includes mitigating certain factors within the prepay market that could affect future savings and cause budgetary pressure for Ava • Staff also weighing benefits to further diversification of energy suppliers within the prepay program and optimal program structure at full capacity. 10