Text

2002 Annual Financial Reports
	ML031390564
Person / Time
Site:	Duane Arnold
Issue date:	05/09/2003
From:	; Nuclear Management Co
To:	; Office of Nuclear Reactor Regulation
References
	Download: ML031390564 (34)
	v • d • e

!

I 11 I -ii

i

THE PEOPLE HAVE THE POWER Left, Corn Belt Power electrical maintenance and general maintenance employees build Buckner Switching Station, which will increase reliability.

Above, crews at Wisdom Generating Station lower the upper half of the turbine casing into place after a maintenance outage at the end of 2002.

Time and time again, consumer research shows that people like the idea.

They like the idea of owning part of the company to which they pay their monthly bill. They respond positively to the concept of local control and decision-making. They give a thumbs-up to the philosophy of making decisions based on consumers' best interest, not on shareholders' profits. And they overwhelmingly support a mission that focuses on improving the quality of life in their community.

Indeed, amid the 2002 news of corporate scandals, hidden agendas and rampant greed, the cooperative way of doing business is more appealing now than ever before. The coop-erative principles that foster one member one vote, return of excess margins, elected decision-makers, and ownership by members are being embraced and valued nationwide.

It's an idea that research proves consumers like:

The people have the pover.

Executive Report A

few months ago, near Kalona, Iowa, travelers on Highway 22 witnessed 150 Amish men carrying the wooden framework of a turkey barn along the shoulder of the highway. Just a little earlier, at the original barn site, the men were positioned into their places and, after a foreman yelled, "One, two, three,"

they lifted the quarter section of the barn off the ground and began carrying it toward its new location one mile west.

One passerby watching the event on the highway commented, "It certainly shows what a lot of people can do together."

This event is an example of the value of cooperation and shows how, working together to reach a common goal, people truly have the power.

Electric cooperatives operate on the same principle.

By offering local membership, support for communi-ties, sharing of margins, democratic control and equal representation, electric cooperatives give the people who own them the power to make decisions and control their own destiny.

In 2002, events and decision-making at Corn Belt Power Cooperative also demonstrated how, with the cooperative form of doing business, the people have the power.

Board resolutions approved in 2002 will increase the cooperative's power supply by adding peaking power, renewable energy and base load generation.

Throughout its history, Corn Belt Power has chosen to own its generation to assure that, when our member cooperatives need power, it will be there. The desire to control our own destiny goes back to the very beginning of Corn Belt Power when we built our first plant, the Humboldt Generating Station.

Due to continuing load growth, the board of direc-tors conducted a complete power supply study for the Corn Belt system. The results of this study showed the need for additional generating resources in the 2004 time frame and again in about 2007. In order to satisfy the growth of our members and the need for additional generation, the Corn Belt Power board decided to construct a combustion turbine for opera-tion in 2004 and to participate with others in a large coal-fired plant in the 2007 time frame.

The new combustion turbine will be located at our existing Earl F. Wisdom Generating Station site. The advantages of this site include the fact that we already own the land, transmission and natural gas pipelines are in place, and we have the necessary manpower at the site. Contracts for construction have been let and work will begin on the turbine in the spring of 2003 with commercial operation expected in the early spring of 2004. Corn Belt Power's partner in the proj-ect is Basin Electric Power Cooperative, Bismarck, North Dakota.

In order to satisfy our generation needs in 2007, the Corn Belt Power board approved participation in MidAmerican Energy Company's Council Bluffs 4 generating station. This will be a large coal-fired plant and will be owned by MidAmerican Energy, Corn Belt Power and several other utilities in the area. This project continues the tradition that we Dale M. Arends Executive Vice President

& General Manager Donald Feldman President, Corn Belt Power Cooperative Board of Directors

have followed for several plants - partnering with our neighbors to take advantage of economies of scale. MidAmerican Energy will be the operator of the plant.

A board resolution also approved a 20-year contract with FPL Energy to purchase wind power from a new wind energy center in Hancock County, Iova.

This purchase helps us prepare for the future should regulations require a renewable portfolio. The loca-tion of this project in particular couldn't be better, with Corn Belt Power transmission lines close and several electric cooperative members benefiting from leasing land for the project. The Corn Belt Power board also recognizes the positive aspects of being involved with new technology that's environ-mentally friendly.

Corn Belt Power experienced another year of consid-erable growth in 2002, setting a new sales record of 1,416 million kilowatt-hours. Increased commercial and industrial load was largely responsible for this sales growth, with new ethanol plants and additional value-added agricultural load coming on line. The addition of these and other economic development projects has helped pick up sales lost due to farm and residential load decline.

Although positive for spreading out fixed costs and keeping rates stable, expanded commercial and industrial sales also make us more vulnerable to how the industries fare. It will be important to continue with a strong key accounts program for our member cooperatives, helping them to help their members use energy wisely and to build lasting relationships so they stay in business and grow.

In 2002, Corn Belt Power conducted a risk manage-ment assessment to determine where we might be vulnerable to adversity. This process will help deter-mine where we focus our priorities and will affect future decision-making. It will be important to implement and follow up on these findings.

Rates to Corn Belt Power member cooperatives remained stable in 2002. Factors in our immediate future such as new generation, transmission line and substation construction, higher gas costs and devel-oping changes in dispatching agreements will likely affect our rates in the future. Energy prices are trend-ing up nationally and it appears unlikely that Corn Belt Power will be isolated from that trend.

Compared to some others, Corn Belt Power is a small generation and transmission cooperative. However, that has not hindered our success. We see a bright future ahead. Our relationship with each of our mem-ber cooperatives remains strong. In addition, our member cooperatives recognize that their relation-ships with their members must be strong and that they must continue to pursue new growth opportuni-ties where it is prudent. The many corporate scandals that came to light in 2002 reinforced our belief that the cooperative way of doing business is a very suc-cessful way of providing service to our members.

Indeed, we certainly show what a lot of people can do together.

Total Sales Member REC Rates I

I I

I 4

I I

C ~ CU C' 11-U) C r-Mu C) C CU C' M --T r

Mu C) C CM c

CO Cuc co co m c co

) If (

)

D C

m 0D o _

C) -

) C C T T

Cu C) C

- TT T T T

T Cu Cu 0

C o

Average REC member system cost, including substation charge; calculated average REC rate reflects power sold to municipals and others served by RECs.

1500 1200 50 40 C

30 600 300 Cu m o C T C m C

Sl D

um o CU tD m CU m C r r

r r m m m m m

) C C C o C C

0 0

0 00 0

00)

C C

C C C rCU CU Includes RECs, NIMECA, Webster City and Sales to Others

Year in Review 2002 In 2002, Corn Belt Power Cooperative demon-strated that "The people have the power," shown literally by the addition of new generation and transmission facilities, and figuratively by the cooperative way of doing business.

2002 Sales and Peak Total sales in 2002 to member cooperatives, NIMECA, Webster City Municipal Utilities and others set a new record high of 1,416 million kilowatt-hours, surpass-ing the previous record of 1,339 million kilowatt-hours set in 2000.

Although January and February were warmer in 2002 than during the previous year, the last three months of 2002 were colder than in 2001. Overall, heating degree days were up just slightly for the year, but cooling degree days were roughly 16 percent higher than the previous year.

The Corn Belt Power system gained some new indus-trial loads during the year while experiencing strong sales to member co-ops' existing commercial and industrial members. Substantial corn drying sales in the fall also added to the record sales.

A new record peak for firm power sales was set on Oct. 21 at 8 p.m. when 253 megawatts of demand, including losses, was recorded. The previous peak was set in October 2001 at 247 megawatts. The new peak can be attributed to a combination of factors: its Monday evening time frame reflects a traditionally high-use day and household load; a mid-30s temper-ature and contributing wind chill; strong corn drying loads; and large commercial and industrial loads that were on line at the time.

Wisdom Unit 2 Responding to the anticipated future needs of its member cooperatives, Corn Belt Power Cooperative continued work toward adding new generation to its power supply resources.

For the Wisdom Unit 2 generating station under development, Corn Belt Power and partner Basin Electric Power Cooperative purchased a General Electric combustion turbine generator.

Surveying and "geotech" work, which included soil testing for the foundation, was conducted at the Wisdom Unit 2 site in the fall. Utility Engineering/TIC, Omaha, Nebraska, and Casper, Wyoming, was chosen for the engineering, procurement and construction contract in December 2002.

Wisdom Unit 2 will take approximately 11 months to construct. The first natural gas fire of the turbine is scheduled for Feb. 3, 2004. The unit is expected to be fully commercial by March 8, 2004.

Wind Energy Demonstrating its support for wind energy as an environmentally friendly way to generate electricity, Corn Belt Power signed a 20-year purchase agree-ment with FPL Energy, the nation's largest producer of wind energy, to purchase power from the 98-megawatt wind energy project in Hancock County, Iowa, known as the Hancock County Wind Energy System Peak Percent Change in Mon Sales 2002/2001 25

.".T)

C

-z

°5<

t cr f

<X C0 Z

° Includes RECs, WC, NIMECA and Sales to Others S sthly l

l 11 COZ i

=

a I

nnnL'flf' Il 20 15 1 0 5

0

-5 co mC C

C

0)

>t C

X X w cD X CD u

w

-3 E

.C:

-:)

o z

o Corn Belt system peak =

(RECs + WC + Estherville) x 1 06 at time of CBPC/WC 60-minute system peak

-i L vvvvv

Center. The 148 wind turbines are owned and operat-ed by FPL Energy. Approximately 11 megawatts of the output will be sold to Corn Belt Power. Four megawatts of that capacity will go to the North Iowa Municipal Electric Cooperative Association (NIMECA) and the remaining seven megawatts will be purchased for Corn Belt Power's other members.

Located on electric cooperative members' farms, the wind energy center is interconnected with Corn Belt Power's transmission system. The purchase places additional renewable energy into Corn Belt Power's generation portfolio, which helps prepare for poten-tial future renewable energy requirements. Corn Belt Power began receiving power from the wind turbines the end of December 2002.

Council Bluffs 4 Also during 2002, the process for adding Council Bluffs 4, an approximately 750-megawatt coal-fired power plant, to the generation mix of several Iowa utilities actively continued with a targeted commer-cial operation date of June 2007.

With its approximately 60 percent share, Mid-American Energy Company will be the primary These wind turbines are part of FPL Energy's Hancock County owner of the plant and will oversee construction and Wind Energy Center near Duncan, Iowa. In 2002, Corn Belt Power signed a 20-year contract with FPL Energy to receive operation. Corn Belt Power will own approximately up to 1 1 megawatts of power from the wind energy center.

five percent of the base load unit.

Council Bluffs 4 will be fueled with low-sulfur Powder River Basin coal and will be equipped with the latest environmental controls. It will be located adjacent to the Council Bluffs 3 unit, south of Interstate 80 near Council Bluffs, Iowa.

2002 Cooperative Highlights 2001 2002

[Total Energy Sales.

1,_,,,

,,,1,320,733,561 kWh 1,416,059,310 kWh REC Peak Demand (no losses) 205,996 kW 211,039 kW ISystem Peakend 246,843 kW 253 113 kW Ei3 Miles of Transmission Line 1,620 1,638

[Dist_irution ubstatians 131 134 7-Employees 8~~~~~~~~~~~~7 91 Wisdom Station employees visit a combustion turbine Employees in Minnesota that is similar to the one that will be constructed at the Wisdom site near Spencer.

New Substations and Transmission Facilities New commercial and industrial loads served by Corn Belt Power's member systems required extensive con-struction of transmission and substation facilities.

In 2002, three new substations and their 69 kV exten-sions were constructed in the Corn Belt Power system:

Tall Corn Substation -

to serve the Tall Corn Ethanol plant on Glidden REC's lines

Rembrandt Substation -

to serve a new egg laying plant on Iowa Lakes Electric Cooperative's lines

Gerled Substation -

to serve the Midwest Grain Processors (MGP) ethanol plant on Iowa Lakes Electric Cooperative's lines Two new switching stations were also added to the Corn Belt Power system to increase reliability of serv-ice: the Willemssen Switching Station, southeast of Clarion, and the Buckner Switching Station, located between Webster City and Wellsburg.

New transmission line constructed in 2002 totaled almost 20 miles. The most extensive section was the Eagle-Armstrong line, approximately nine miles long.

A $34.6 million dollar loan from the United States Department of Agriculture (USDA), guaranteed by the Rural Utilities Service (RUS), was approved in September and will cover trans-Other en. &

Wisdom mission and Purchases 19,933 MWh substation 11 3,92 MWh 1 3 Basin 7.59 4,901 MWh construction associated with new loads on member co-ops' lines and upgrades that will improve reliability by establishing loop feeds and reconductoring aging lines.

Additional construction projects in 2002 included a 10,200-square-foot cold storage building completed in mid-November that houses equipment and materials previously kept outside.

New Microwave System Also included in the approved USDA loan were funds for a new digital microwave system. In 2002, Corn Belt Power personnel oversaw installation of new towers, refurbished existing towers and made progress toward completion of the state-of-the-art communication system.

The new microwave system will replace aging 27-year-old analog equipment that does not have the capacity to handle high-speed data. Plans are for the east side of the new system to be operational in the late spring of 2003. Spring 2004 is the targeted com-pletion time for phase two, which involves the west side of Corn Belt Power's system. Phase three will add redundancy to the east side of the system with com-pletion expected at the end of 2004.

TRANSLink Corn Belt Power continued its participation in the TRANSLink Development Company in 2002.

Formation documents for the independent transmis-sion company have an anticipated signing time frame of mid-2003 with operation startup later in the year.

457,396 MWh P-30.39' WAPA 133,040 MWh 8.8%

t\\

CB #3 180,464 MWh 12.0%

2002 Generation Summary

[represents input from major resources and 1 00% ownership shares]

Items previously stored outside are now housed in this new cold storage building on Corn Belt Power's headquarters property.

i.F

Risk Management Corn Belt Power conducted a risk analysis project in 2002, resulting in a systematic approach to managing the cooperative's risks.

Corn Belt Power's policy guidelines for managing risks include maintaining a list of action items, adding risk management to monthly department head and staff meetings, incorporating risk analysis in the project authorization process, and reassessing the process periodically.

Generation Summary

- _=L At Wisdom Generating Station, crews finished a major turbine overhaul in January and the plant ran for system requirements reliably throughout the year.

Council Bluffs 3 crews completed an outage in the spring, which included adding a new high-pres-sure turbine. The new turbine made possible the increase in accreditation from 675 MW to 690 MW net.

Neal 4 and the Duane Arnold Energy Center contin-ued to provide reliable base load energy during 2002.

A group of approximately 35 Corn Belt Power employees and spouses toured the Gavins Point Dam and Neal 4 power plants June 19, and 60 cooperative directors, employees and their guests toured the plants July 22-23, getting an up-close look at the generators that make the product their cooperatives provide to members.

2002 kWh Billed by Miles of

of

of CErn Belt Power Line Meters Served Employees a0leEleticCo-op 8882 3368-26130 143 3

Butler County REC 147,202,219 1,793.03 6,723 34

[Calhoun County REC 34,052,570 765.27 -

1,74 11 Franklin REC 55,998,917 824.69 2,046 14

(

'~~~~~~~

~~~~,~

[Glidden BEC ~

5_8723,8-35 176-1.7-5

-1,698 13 1

>< ; ji-t WAt.

X Grundy County REC 100.042,719 910.28 2,285 15

[Hain adt County NIEC 5,3, 1

,4 1~

Iowa Lakes Electric Co-op 285,955,235 4641.00*

11,737*

63

IMidlnd ower Co-op 114,165,109 1183.20*

3,089*

35 Prairie Energy Co-op 213,060,759 2,010.00 4.656 37

[SacCountyREC 23,376,795 49000,_

1,045 9

MidAmerican Energy Company's plant technology

Corn Belt Power service territory only specialist explains the operation of the turbine blades to co-op representatives touring the Neal 4 coal-fired plant near Sioux City in July.

CAq;---

Corporate Relations and Marketing Continuing to communicate the Touchstone Energy' brand and the value of doing business with coopera-tives was a main focus of corporate relations and marketing efforts in 2002.

The 11th annual all-employee marketing training was held Jan. 14-18 with Dr. Caroline Fisher presenting "Choose to Lead," encouraging participants to see themselves as leaders and create a high-performing and positive work environment.

The Touchstone Energy "Living the Brand" training was presented to cooperative employees and directors in the fall, emphasizing the importance of superior customer service.

Touchstone Energy Cooperatives continued to demonstrate the core value of commitment to com-munity by awarding local schools SchoolNet weather stations in partnership with KCCI-TV, Channel 8, Des Moines.

The Touchstone Energy Cooperatives of Iowa actively promoted Iowa's state parks in 2002. Named Green Touch, this unique partnership between Touchstone Energy Cooperatives of Iowa and the Iowa state park system sponsored a newly designed four-color brochure that lists parks and recreation areas in the state.

During the Iowa State Fair, the State Fair Web site, www.iowastatefair.org, featured links to Web cameras with live images of activities at the fair. Corn Belt Power and Central Iowa Power Co-op (CIPCO) sponsored two of the Web cameras -

the famous Butter Cow and the Varied Industries Building-.

at www.touchstoneenergycams.com on behalf of their Touchstone Energy member distribution coop-eratives. Touchstone Energy Cooperatives of Iowa; once again sponsored the Iowa State Fair tram that transported fairgoers free of charge throughout the fairgrounds.

Throughout 2002, Corn Belt Power continued placing radio, print and television advertising for the Touchstone Energy Cooperatives it serves, fulfilling the objective of having the same ads run at the same time throughout the Corn Belt Power system. Three different ads on 21 billboards promoted the advantages of men-bership in the local Touchstone Energy Cooperative.

Corn Belt Power received a first-place Award of Excellence for having the best annual report in the i

G&T category from the Council of Rural Electric 2

Communicators in its 2002 "Spotlight on Excellence.'

Iowa's electric cooperatives hosted the 11th annual Momentum is Building conference for builders, elec-tricians, plumbers and heating, ventilation and airl conditioning professionals Feb. 13-14 in Des Moines.

A record number of attendees were on hand to learn about energy efficient building techniques and elec-tric technologies.

The 2002 Mid-Iowa Community Development Conference, co-sponsored by Corn Belt Power Cooperative and Iowa State University Cooperative Extension, was held March 21 in Fort Dodge, mark-ing the 12th year of bringing together development groups and community leaders to share community improvement ideas.

2002 Touchstone Energy' Challenge 40000 35000 30000 EEE J0 101 14,451 11,655 J0 DO 0

C)

-o CD a-

-)

0 o

J

-W (1) c c

o c

X m

c o ct E

E Dr. Caroline Fisher conducts the 2002 Touchstone Energy Challenge training titled, Choose to Lead,"

attended by over 360 co-op employees and directors.

2501 2001 a

.E a

150(

1001 501

Energy efficient construction, air quality, ventilation and electric heating and cooling technology were among topics presented at five "Build-it-Right" work-shops sponsored by Corn Belt Power and its member systems in November. About 250 participants attended.

Corn Belt Power and its member systems paid over

$650,000 for marketing installation incentives to members who installed electric space heating or water heating systems in 2002. Rate incentives of over

$1.3 million were paid to customers for almost 49 million kWh of electric heating and cooling used during the year.

Iowa Lakes Electric Cooperative took first-place hon-ors in the Touchstone Energy Challenge with top points and growth awards. Employees and directors from all member systems and Corn Belt Power reported almost 20,000 hours0 days <br />0 hours <br />0 weeks <br />0 months <br /> of volunteer communi-ty service during the year.

Member systems increased their elec-tronic marketing efforts through pro-grams coordinated by Corn Belt Power.

Smart Choices, an electronic newsletter, was sent throughout the year to members via email. In addi-tion, all member co-ops updated their Web sites using the common content and functionality of Corn Belt Power's Online REC Information Center.

Dan Huffman, right, member service director, Grundy County REC, attends the trade show at the 11th annual Momentum is Building conference. Held Feb. 13-14, the conference hosted a record number of attendees.

0

-*I.

I-.

.0*I Nhle1Z"an.

S

-lXlB,.lX r*

I I

4 1gl[z]-uull@tll R

John McLaughlin, second from right, KCCI-TV meteorologist, inter-views Mike Hagen, executive vice president and general manager, Prairie Energy Cooperative, during the SchoolNet broadcast at Webster City Middle School.

r_

~~~_ _= _= __ C;w!1 I=

._~~~~~~I.n

U.

U

3.. g.

S

I.*

SO S

S*

SI*.

.

S..

S

S Business Development At its annual meeting in April, Corn Belt Power received the IADG Policy Development System Award for its work in economic development.

Corn Belt Power was represented among leaders from 10 counties in north central Iowa who joined efforts in May to create a regional eco-nomic development organization called the Mid Iowa Development Corporation (MIDC). The organization will focus on growing business and industry in towns and rural areas in the region.

At the North Iowa Touchstone Energy Golf Invitational held July 30 at the Fort Dodge Country Club, over 100 co-op representatives and their guests received information about the key account services offered by their local Touchstone Energy Cooperatives.

The Iowa Area Development Group (IADG) honored two companies served by Corn Belt Power member cooperatives with 2002 Venture Awards -

Vosberg Enterprises, served by Calhoun County REC, and Fairview Farms, a member of Humboldt County REC. West Central Soy, served by Glidden REC, was the 2002 "Value-Added Agriculture" Venture Award recipient. The 2002 "Outstanding Business of the Year" Venture Award was presented to Rembrandt Enterprises, an egg production and processing company served by Iowa Lakes Electric Cooperative.

I The winning team from Glidden REC waits to tee off at the North Iowa Touchstone Energy Golf Invitational, held July 30 with over 100 co-op representatives and their guests in attendance.

Representatives cut the ribbon during a ceremony for the Grundy County Development Park, held June 17. Located six miles north of Grundy Center on Highway 14, the park has 20 acres for development.

Government Relations Corn Belt Power representatives discussed issues of importance with state and federal legislators through-out 2002. Congressman Greg Ganske, who was running against Sen. Tom Harkin for the U.S. Senate, visited Corn Belt Power Jan. 8 on a campaign trip through north central Iowa.

Over 175 electric cooperative managers, directors and staff members attended REC Day on the Hill March 6 at the Iowa State Capitol.

A contingent of Iowa's rural electric cooperative leaders visited Washington, D.C., May 5-9 to update members of Congress on the status of Iowa's electric industry and to provide input on significant issues such as the national energy policy, creating a nuclear waste repository, taxes and the pending EchoStarl DirecTV merger.

With many of Iowa's 2003 state representatives and senators newly elected to office, the major message communicated by electric cooperative representatives at legislative meetings in November focused on how cooperatives operate differently from other electric utilities.

Human Resources A new project called Cooperative On-Line Resourcing, also known as the COLR (pronounced "color") proj-ect, resulted in employees and directors of Corn Belt Power communicating with increased efficiency, speed and accuracy. Phase one of the project included purchase and installation of computers and creation of email addresses for directors and all employees.

Rep. Greg Ganske, right, watches as Richard Hegna, chief system supervisor, shows how the Corn Belt Power transmission system is monitored and controlled. Rep. Ganske visited Corn Belt Power in January during his campaign for U.S. Senate.

L. Kirby Range, right, Corn Belt Power and Iowa Lakes Electric Cooperative director, discusses issues affecting electric coopera-tives with Rep. Russ Eddie, Storm Lake, at the REC Day on the Hill March 6.

An Intranet site called the Power Page was created and will be developed further in 2003 to include a daily news page, printed publications, plans and manuals, company forms, employee calendars, board minutes and agendas, inventory records and human resources information.

In 2002, Corn Belt Power continued its study of corporate culture, holding employee information meetings to focus on the cooperative's purpose, mission and values. The following were identified as the cooperative's key values: positive attitude, trust, respect, commitment, integrity, innovation and accountability.

Christian Nygaard, left, Humboldt County REC and Iowa Association of Electric Cooperatives director, meets with Rep. Jim Nussle during the Legislative Rally in Washington, D.C., in May.

Board of Directors Donald Feldman, Butler County REC President, Corn Belt Power Cooperative Board of Directors "The biggest advantage of being a co-op member is having local control, which means if you are elected to the board you can make decisions that will enhance the service the other members receive. Why would people not want to send their monthly check to a place where they have membership and some influence on the way the business is operated?"

Butler County REC 2002 kWh Billed by Corn Belt Power 147,202,219 Miles of Line 1,793.03

of Meters Served 6,723

of Employees 34 Ronald Deiber, North Iowa Municipal Electric Cooperative Association NIMECAl Vice President, Corn Belt Power Cooperative Board of Directors "I value being an owner of the company I'm buying from. Local leadership is very important. That leadership can be right next-door and, as a co-op member, I can go and sit down with local leadership and get answers to my questions. Large companies in many cases have headquarters located outside of the state we live in and they provide no local contact."

Donald McLean, Grundy County REC Secretary, Corn Belt Power Cooperative Board of Directors "When I think of what our electric cooperatives have to offer, I'm very proud.

The most important thing is the support we give to the local communities that we are part of This covers many things - volunteer work, contributing funds for local projects, etc. - but the most important to me is helping new businesses get established, and established companies grow and prosper."

U Grundy County REC 2002 kWh Billed by Corn Belt Power 100,042,719 Miles of Line 910.28

of Meters Served

of Employees 15 North Iowa Municipal Electric Cooperative Association armwcA3 NIMECA includes the municipal electric utilities of Alta, Bancroft, Coon Rapids, Graettinger, Grundy Center, Laurens, Milford, New Hampton, Spencer, Sumner, Webster City and West Bend.

=

i 2,285

John Schumacher, Glidden REC Director, Corn Belt Power Cooperative "Probably the greatest benefit or advantage I see in cooperative membership is thefact that I am served by an organization whose primary goal is to provide quality electric service to its members, not to generate profit. Also, if I were not served by an electric co-op, I would lose the political leverage that we now have both nationally and locally to defend the rights and benefits of the cooperative system and look after our best interests, at the same time being fair and considerate of the rights of others."

U Glidden REC 2002 kWh Billed by Corn Belt Power 58,723,835 Miles of Line 761.75

of Meters Served 1,698

of Employees 13 LeRoy Weber, Humboldt County REC Director, Corn Belt Power Cooperative "Owners of electric cooperatives have personal contact with board members about any problems they may have. The co-op is more concerned with serving the member-customer."

Humboldt County REC 2002 kWh Billed by Corn Belt Power 5553' Miles of Line 943

of Meters Served 1 849

of Employees 14 L. Kirby Range, Iowa Lakes Electric Cooperative Director, Corn Belt Power Cooperative "Customer-ownership is the biggest advantage of being a member o; cooperative. Local leadership is the mainstay in electric co-ops; custc members know and can talk with their directors."

Iowa Lakes Electric Coope 2002 kWh Billed by Corn Belt Power 285,95 Miles of Line 4641 *

of Meters Served 11,737

of Employees 63

Corn Belt Power service territory only 5 161 fa omer-3rative z5 235 7

COA F

Carrol Boehnke, Prairie Energy Cooperative Treasurer, Corn Belt Power Cooperative Board of Directors "Maybe it's because I've belonged to the cooperative system for so long, but I would have a problem with the lack of input I would have as a customer of any other type of utility. Belonging to the cooperative system, I'm assured the rates being paid do not include profits to stockholders or rates of return set by a government agency. Any monies remaining after expenses are sub-tracted from revenues are returned to the membership."

Prairie Energy Cooperative 2002 kWh Billed by Corn Belt Power 213,060,759 Miles of Line 2,010

f Meters Sered 4,656

of Employees 37 Donald O'Tool, Calhoun County REC Assistant Secretary/Treasurer, Corn Belt Power Cooperative Board of Directors "As a person who has been with a co-op for a long time, I know that the co-op is concerned with the people in the country. I would tell anyone to choose the co-op, if choice were an option, because service is our strong point, while others have profit as their goal to satisfy shareholders and service is secondary. It has been a life-changing experience to have electricity on the farm."

Calhoun County REC 2002 kWh Billed by Corn Belt Power 34,052,570 Miles f Line 765.27

of Meters Served 1,740

f Employees 11 Roger Rust, Franklin REC Director, Corn Belt Power Cooperative "A co-op has more stability than a stock company when times become turbulent. Member control makes the difference. Corn Belt Power is a very fine system and a good organization."

Franklin REC 2002 kWh Billed by Corn Belt Power 55,998,917 Miles of Line 824.69

of Meters Served 2,046

of Employees 14

Charles Gilbert, Midland Power Cooperative Director, Corn Belt Power Cooperative "While our rural electric co-ops came into existence to electrify rural America, the direct result has been and always will be improving the quality of life for our members. Rural electric co-ops strive to provide outstanding value to exceed our members' needs."

Midland Power Cooperative 2002 kWh Billed by Corn Belt Power 114,165,109 Miles of Line 1183.2

of Meters Served 3,089

of Emploeyees 35 "Corn Belt Power service territory only Norman Kolbe, Sac County REC Director, Corn Belt Power Cooperative "I value the good service that we have from our electric cooperative.

Also, being a member-owner, I know that any excess margin will be returned in patronage."

Boone Valley Electric Cooperative Boone Valley Electric Cooperative is a non-voting member of Corn Belt Power Cooperative and, therefore, does not have a director serving on the Corn Belt Power board.

U)

Sac County REC 2002 kWh Billed by Corn Belt Power 23,376,795 Miles of Line 490

of Meters Served 1 045

_ 4

of Employees 9

Boone Valley Electric Cooperative 2002 kWh Billed by Corn Belt Power 8,882,336 Miles of Line 61.5

of Meters Served 143

of Employees 3

Balance Sheets December 31, 2002 and 2001 ASSETS ELECTRIC PLANT (Notes 2 and 6):

In service................................................................................................

Less-accum ulated depreciation..........................................................

$ 222,747,516 127,167,745 95,579,771

$ 216,798,323 121,895,992 94,902,331 Construction vork in progress............................................................

Nuclear fuel, net of amortization (Note 2)..........................................

OTHER PROPERTY AND INVESTMENTS:

N onutility property..............................................................................

Investment in the National Rural Utilities Cooperative Finance Corporation (N ote 2)......................................................

Land held for future use (Note 2)........................................................

D ecom m issioning fund (N ote 2)........................................................

O ther investm ents (Note 2)..................................................................

N ote receivables (Note 2)......................................................................

CURRENT ASSETS:

Cash and cash equivalents (N ote 2)....................................................

M em ber accounts receivable................................................................

O ther receivables..................................................................................

Inventories -

Fuel, primarily coal, at last-in, first-out cost..............................

Materials and supplies, at average cost........................................

Prepaym ents..........................................................................................

DEFERRED CHARGES:

Deferred Department of Energy decommissioning costs (Note 10)................................................

Deferred refueling costs (Note 2)........................................................

Other......................................................................................................

697,823 151,918 331 850,072

$ 155.149,012 830,382 1,063,425 5,964 1,899,771

$ 155,672.436 The accompanying notes to the financial statements are an integral part of these statements.

L 2002 2001 11,800,568 5,968,375 113,348,714 4,398,148 5,329,457 104,629,936 356,761 309,698 2,514,836 2,977,665 17,884,979 1,346,126 3,995,580 29,075,947 2,514,836 2,977,665 19,327,548 1,102,541 3,562,377 29.794.665 1,722,520 3,718,926 244,626 8,506,969 3,855,569 519,206 1,941,321 3,969,483 277,403 11,874,279 1,719,294 4,501,265 245,761 19,348.064

Balance Sheets December 31, 2002 and 2001 MEMBERSHIP CAPITAL AND LIABILITIES 2002 2001 MEMBERSHIP CAPITAL:

Memberships, at $100 per membership................................................

Deferred patronage dividends, per accompanying statements (payment restricted as indicated in Note 3)....................................................................

Other equities, per accompanying statements....................................

Unrealized gain in market value of investments (Note 2)..................................................................

LONG-TERM DEBT (Note 4):

Rural Utilities Service..........................................................................

Federal Financing Bank......................................................................

Capital lease obligations (N ote 2)......................................................

Pollution control revenue bonds........................................................

N RUCFC..............................................................................................

USDA Intermediary Relending Program............................................

Less - Current maturities of long-term debt......................................

OTHER LONG-TERM LIABILITIES:

Deferred Department of Energy decommissioning costs (Note 10)..............................................................................

DAEC decommissioning liability (Note 2)........................................

Other......................................................................................................

CURRENT LIABILITIES:

Current maturities of long-term debt................................................

Accounts payable..................................................................................

Accrued property and other taxes......................................................

Accrued interest and other..................................................................

1,300 8,833,271 27,139,161 206,063 36,179,795 23,075,680 67,217,906 0

1,245,000 1,000,000 880,000 93,418,586 6,645,928 86,772,658 445,598 17,671,299 10,000 18.126,897 6,645,928 4,760,816 1,993,216 669,702 14,069,662

$ 155,149,012

$ 155,672,436 The accompanying notes to the financial statements are an integral part of these statements.

1,300 8,660,671 25,606,299 1,022,663 35.290,933 25,561,389 65,171,448 555,707 1,450,000 0

880.000 93,618,544 6.696.769 86,921,775 583,366 18,298,445 900.750 19,782,561 6,696,769 4,149,488 2,106,518 724.392 13,677,167

Statements of Revenues and Expenses For the Years Ended December 31, 2002 and 2001 2002 2001 OPERATING REVENUES:

Sales of electric energy..........................................................................

O ther......................................................................................................

OPERATING EXPENSES:

Operation -

Steam and other pover generation..............................................

Purchased pow er, net....................................................................

Transm ission..................................................................................

Sales................................................................................................

A dm inistrative and general..........................................................

Maintenance -

Steam and other power generation..............................................

Transm ission..................................................................................

General plant................................................................................

Depreciation and decommissioning (Note 2)....................................

Net O perating Revenues..............................................................

$ 49,964,446 3,846,448 53,810,894 18,810,422 6,989,479 2,720,172 2,353,344 3,030,169 3,937,350 793,956 30,471 7,683,327 46,348,690 7,462,204

$ 45,962,337 3,761,117 49,723,454 16,725,291 5,395,901 2,987,310 2,716,145 3,275,393 3,967,806 709,923 30,103 7,274,573 43,082.445 6,641,009 INTEREST AND OTHER DEDUCTIONS:

Interest on long-term debt....................................................................

Interest during construction (Note 2)................................................

Other interest and deductions..............................................................

NET OPERATING MARGIN......................................................................

NON-OPERATING MARGIN:

Interest and dividend income..............................................................

Other, net (Note 2)................................................................................

NET MARGIN..............................................................................................

5,968,691 (132,148) 11,842 5,848,385 1,613,819 339,095 259,350 598,445

$ 2,212,264 5,888,011 (323,297) 17,735 5,582,449 1,058,560 631,496 133,218 764,714 1,823,274 The accompanying notes to the financial statements are an integral part of these statements.

Statements of Cash Flow For the Years Ended December 31, 2002 and 2001 2002 2001 CASH FLOWS FROM OPERATING ACTIVITIES:

Net margin............................................................................................

Adjustments to reconcile net margin to cash provided by operations:

Depreciation and amortization....................................................

Amortization of nuclear fuel........................................................

Amortization of deferred refueling costs......................................

Amortization of Department of Energy decommissioning costs..........................................................

Changes in current assets and liabilities:

Accounts receivable........................................................................

Inventories......................................................................................

Prepayments....................................................................................

Accounts payable............................................................................

Accrued property and other taxes........................................................

Accrued interest and other liabilities....................................................

Payment to Department of Energy for decommissioning..................

Other......................................................................................................

Net cash provided by operating activities....................................

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from long-term debt..............................................................

Repayment of long-term debt..............................................................

Deferred patronage dividends paid......................................................

Net cash used in financing activities............................................

CASH FLOWS FROM INVESTING ACTIVITIES:

Additions to electric plant, net..............................................................

Additions to nuclear fuel......................................................................

Additions to deferred refueling costs....................................................

Sale of (additions to) non-utility plant, net........................................

Additions to decommissioning fund....................................................

Change in other investments................................................................

Net cash used in investing activities..............................................

Net decrease in cash and cash equivalents..................................................

CASH AND CASH EQUIVALENTS AT:

Beginning of year..................................................................................

End of year............................................................................................

$ 2,212,264 6,942,218 2,108,224 911,507 133,783 411,223 309,755 (31,642) 611,328 (113,302)

(56,817)

(135,584)

(885,117) 12,417.840 6,564,000 (6,763,958)

(577,400)

(777.358)

(13,978,203)

(2,747,142) 0 (47,063)

(1,045,052)

(607,471)

(18,424,931)

(6,784,449) 8,506,969

$ 1,722,520 1,823,274 6,678,301 1,787,375 921,164 130,482 (312,583)

(2,045,798) 7,493 (1,247,108) 76,855 (1,089,126)

(133,183)

(157,326) 6.439,820 6,433,000 (7,137,570)

(574.000)

(1,278,570)

(6,474,115)

(567,545)

(1,612,574) 128,858 (848,718)

(921,549)

(10,295,643)

(5,134,393) 13,641,362

$ 8.506.969 The accompanying notes to the financial statements are an integral part of these statements.

'A

Statements of Defferred Patronage Dividends and Other Equities For the Years Ended December 31, 2002 and 2001 DEFERRED PATRONAGE DIVIDENDS:

Balance assigned beginning of year......................................................

Net margin............................................................................................

Revenue deferred patronage dividends................................................

2002 8,660,671 2,212,264 70,598 10,943,533 2001 8,609,671 1,823,274 50.929 10,483,874 Patronage dividends paid......................................................................

Appropriation of margin -

Reserve for contingent losses........................................................

Statutory surplus............................................................................

Balance assigned end of year................................................................

OTHER EQUITIES:

(Appropriated Margins)

Balance December 31, 2000 Appropriation of margin Balance December 31, 2001 Appropriation of margin Balance December 31, 2002 Statutory Surplus

$ 4,349,484 0

$ 4,349,484 65.000

$ 4,414,484 (1,467,862)

(65.000) 8,833,271 Reserve for Contingent Losses

$ 20,007,612 1,249,203

$ 21,256,815 1,467,862

$ 22,724,677 (1,249,203) 0 8,660,671 Total

$ 24,357,096 1,249.203

$ 25,606,299 1,532,862

$ 27,139,161 Statements of Comprehensive Incomne For the Years Ended December 31, 2002 and 2001 2002 N et m argin....................................................................................................

Change in unrealized gain in market value of investments....................................................

Com prehensive incom e........................................................................

2,212,264 (816.600) 1,395.664 1,823,274 397.848 2.221.122 The accompanying notes to the financial statements are an integral part of these statements.

L (577,400)

(574,000) 2001

Notes to Financial Statements December 31, 2002 and 2001 NOTE (1) ORGANIZATION:

Corn Belt Power Cooperative (the Cooperative) is a Rural Utilities Service (RUS) financed generation and trans-mission cooperative created and owned by 11 distribution cooperatives and one municipal cooperative association.

Electricity supplied by the Cooperative serves farms, small towns and commercial and industrial businesses across 27 counties in north central Iowa.

The Cooperative's Board of Directors is comprised of one representative from each member cooperative and is responsible for, among other things, establishing rates charged to the member cooperatives.

NOTE (2) SIGNIFICANT ACCOUNTING POLICIES:

The Cooperative maintains its accounting records in accordance with the Uniform System of Accounts as prescribed by the RUS. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The significant accounting policies are:

A. Electric Plant -

Electric plant is stated at original cost which includes payroll and related benefits, sales and use taxes, proper-ty taxes and interest during the period of construction.

Costs in connection with repairs of properties and replacement of items less than a unit of property are charged to maintenance expense. Additions to and replacements of units of property are charged to electric plant accounts.

B. Depreciation and Decommissioning -

Depreciation is provided using straight-line methods and RUS-prescribed lives. These provisions, excluding nuclear facilities, were equivalent to a composite depreciation rate on gross plant of 3.09% and 2.87% for 2002 and 2001, respectively.

Under a joint-ownership agreement, the Cooperative has a 10% undivided interest in the Duane Arnold Energy Center (DAEC), a nuclear-fueled generating station, which was placed in service in 1974. The Cooperative is depreciating its interest in the DAEC and each year's property additions subsequent to 1984 on a straight-line basis over the remaining term of the initial Nuclear Regulatory Commission license for DAEC (2014). The com-posite depreciation rate on gross plant for DAEC was 3.77% and 3.50% for 2002 and 2001, respectively.

A Nuclear Regulatory Commission estimate of the decommissioning costs of DAEC was updated in 2002.

This report estimated the Cooperative's share of the decommissioning costs of DAEC to be approximately

$56,400,000 (in 2002 dollars). The Cooperative is providing for overall nuclear decommissioning costs using a funding method which assumes a 5% rate of inflation and 5% real rate of return. The method is designed to accu-mulate a decommissioning reserve sufficient to cover the Cooperative's share of decommissioning costs by the year 2014.

A

Notes to Financial Statements December 31, 2002 and 2001 Decommissioning costs are included in depreciation and decommissioning expense, in the Statements of Revenues and Expenses. Such costs were $1,045,052 and $848,718, for 2002 and 2001, respectively. These decom-missioning costs are being recovered in rates.

The total market value of the decommissioning funds accumulated at December 31, 2002, vere $17,884,979, of which $11,800,658 has been placed in a fund legally restricted for use in decommissioning DAEC. The remain-ing $6,084,321, while not legally restricted, has been designated by the Cooperative for use in decommissioning DAEC. Furthermore, the dividends, interest and realized gains (losses) on the sale of decommissioning fund invest-ments are recorded directly as increases (decreases) to the DAEC decommissioning liability in the amount of

($1,672,198) and ($1,031,886) for 2002 and 2001, respectively, in the accompanying balance sheets.

C. Nuclear Fuel -

The cost of nuclear fuel is amortized to steam and other power generation expenses based on the quantity of heat produced for the generation of electric energy. Such amortization was $2,108,224 and $1,787,375 for 2002 and 2001, respectively.

D. Land Held for Future Use -

The Cooperative owns land held for a potential generation plant and related transmission facilities to provide for future power needs.

E. Deferred Refueling Costs -

The Cooperative defers extraordinary operation and maintenance expenses incurred during refueling outages of DAEC. These costs are being amortized to expense based on the expected generation of the next fuel cycle which corresponds with the period the Cooperative is recovering these costs in its rates. Such amortization was $911,507 and $921,164 for 2002 and 2001, respectively.

F. Interest During Construction -

Interest during construction represents the cost of funds used for construction and nuclear fuel refinement. The average rate was 2.0% and 4.1% for 2002 and 2001, respectively, and is based on the Cooperative's costs of financing.

G. Capital Lease -

The Cooperative has a long-term lease agreement with the City of Webster City (Webster City) under which Webster City has agreed to provide certain generation and transmission facilities to the Cooperative. In return, the Cooperative will pay a minimum charge which approximates the debt service on these facilities. The Cooperative has capitalized this lease and reflected it in electric plant and has reflected the related obligation as a capital lease obligation.

As of December 31, 2002, no additional debt is owed under the current capital lease. The Cooperative contin-ues to operate certain Webster City generation and transmission assets and pay for the operation, maintenance, and capital additions associated with those assets. In the future, the Cooperative may request additional financing from Webster City for its share of capital additions to the combined system.

H. Income Taxes -

The Cooperative believes that it is exempt from federal and state income taxes under section 501(c)(12) of the Internal Revenue Code. Accordingly, no provision for income taxes has been included in the Cooperative's financial statements.

I. Statements of Cash Flows -

For the purpose of reporting cash flows, the Cooperative considers temporary cash investments purchased with a maturity of three months or less to be cash equivalents. Cash paid for interest, net of interest capitalized, was $5,845,035 and $6,710,593 for 2002 and 2001, respectively.

Notes to Financial Staterments December 31, 2002 and 2001 J. Cash and Investments -

The Cooperative has cash and investments in the following:

Obligations of the U.S. government and its agencies Corporate bonds Common and preferred stock National Rural Utilities Cooperative Finance Corporation commercial paper Cash and CDs deposited with federally insured financial institutions Funds held in trust Other investments The above investments are included as follows in the accompanying balance sheets:

Decommissioning fund Other investments Cash and cash equivalents 2002

$ 5,828,814 2,625,753 7,787,117 1,400,000 322,520 2,093,569 895.852

$ 20.953.625

$ 17,884,979 1,346,126 1.722.520

$ 20,953,625 2001

$ 8,462,179 2,402,342 7,720,679 7,446,220 1,060,749 1,178,681 666,208

$ 28,937,058

$ 19,327,548 1,102,541 8.506.969

$ 28,937,058 The carrying amounts of cash and cash equivalents and short-term investments of $1,722,520 and $8,506,969 at December 31, 2002 and 2001, respectively, approximate the fair value because of the short maturity of these investments. The Cooperative's decommissioning fund investments, which include marketable debt and equity securities, are reported at fair value with unrealized gains and losses reported as a net amount in a separate compo-nent of membership capital until realized.

The fair value of the Cooperative's other investments are based on quoted market prices for those or similar investments, where available. The carrying value of these investments approximate fair value as of December 31, 2002.

Notes to Financial Statements December 31, 2002 and 2001 The Cooperative has an investment of $2,514,836 at December 31,2002 and 2001, with the National Rural Utilities Cooperative Finance Corporation (CFC). This investment is required in order to allow the Cooperative to borrow funds from CFC. The investment earns interest of 5% on $2,195,507 which matures between 2070 and 2080 and 3% on $319,289 which matures between 2007 and 2025.

For investments in CFC, economic development loans and other associated organizations of $4,851,091 and

$4,352,952 at December 31, 2002 and 2001, respectively, for which there were no quoted market prices, a reasonable estimate of fair value could not be made without incurring excessive costs.

K. Note Receivables -

Note receivables consist of notes to member cooperatives and other businesses to assist in economic develop-ment of qualifying industrial sites, speculative buildings, rural housing and certain joint venture projects.

L. Operating Revenues and Cost of Power -

The Cooperative recognizes sales of electric energy and the related cost of electric energy produced or pur-chased when energy is delivered to customers.

NOTE (3) DEFERRED PATRONAGE DIVIDENDS AND OTHER EQUITIES:

In accordance with the Iowa Code, the Board of Directors is required to allocate a portion of the current year's net margin to statutory surplus until the statutory surplus equals 30% of total membership capital. No additions can be made to statutory surplus whenever it exceeds 50% of total membership capital. The Board of Directors appropriated

$65,000 of the 2002 net margins to statutory surplus.

The equity designated "Reserve for contingent losses" in the Statements of Deferred Patronage Dividends and Other Equities is an appropriation of equity by the Board of Directors. The Board of Directors appropriated $1,467,862 and $1,249,203 of the 2002 and 2001 net margins to reserve for contingent losses. There is no statutory restriction of this equity.

The Board of Directors is permitted by the lowa Code to allocate the current year's net margin to deferred patron-age dividends upon meeting certain requirements and is required to make such allocations if the net margin for the year exceeds specified maximums. The Board of Directors has appropriated $750,000 and $625,000 of the 2002 and 2001 net margins to deferred patronage dividends. Deferred patronage dividends are to be paid in the future as deter-mined by the Board of Directors.

Under the conditions of the Cooperative's mortgages, deferred patronage dividends cannot be retired without approval of the RUS and the CFC unless the remaining equity meets certain tests. The Cooperative does not meet these tests at December 31, 2002. However, the Cooperative received permission and retired $85,671 of the 1990 and

$491,729 of the 1991 patronage dividends during 2002. During 2001, $159,671 of the 1989, and $414,329 of the 1990 patronage dividends were retired.

hL

Notes to Financial Statemnents December 31, 2002 and 2001 NOTE (4) LONG-TERM DEBT:

Long-term debt consists of mortgage notes payable to the United States of America acting through the RUS and the Federal Financing Bank (FFB), capital lease obligations, notes issued in conjunction with the issuance of pollution control revenue bonds, and notes borrowed through the USDA Intermediary Relending Program "IRP Notes." The Cooperative applied for the IRP Notes in 1999 and 2000 and received the proceeds in 2000 and 2001. The proceeds of these IRP Notes are then relended to other eligible businesses within certain approved counties in the Cooperative serv-ice area. These IRP Notes are not secured by assets of the Cooperative. Substantially all the assets and all rent, income, revenue and net margin of the Cooperative are pledged as collateral for the long-term debt of the Cooperative. Long-term debt is comprised of:

Mortgage notes due in quarterly installments:

RUS 2%, due 2002-2008 RUS 5%, due 2002-2019 FFB 5.0%-10.7%, due 2002-2027 Capital lease obligations -

WVebster City revenue bonds 5.9%, due 2002 Pollution control revenue bonds -

6.125%, due 2002-2007 CFC interim loan -

3.4%, due 2006 USDA Intermediary Relending Program -

1%, due 2003-2029 Maturities of long-term debt for the next five years are as follows:

Year 2003................................................

2004................................................

2005................................................

2006................................................

2007................................................

Thereafter......................................

2002

$ 4,871,056 18,204,624 67,217,906 90,293,586 0

1,245,000 1.000,000 880,000

$ 93,418,586 2001

$ 6,123,470 19,437,919 65,171,448 90,732,837 555,707 1,450,000 0

880,000

$ 93.618.~54 4 Maturity

$ 6,645,928 6,895,353 7,030,095 8,071,984 7,006,591 57,768,635

$ 93,418,586 The Cooperative had available at December 31, 2002, an unused $12,000,000 line of credit with CFC of which $1,000,000 is available only in the event of a nuclear incident. In 2002, the Cooperative entered into an interim loan agreement with CFC. The CFC interim loan allows the Cooperative to borrow up to $17 million to fund construction commitments of which $1,000,000 had been drawn as of December 31, 2002. It is expected this loan will be repaid upon receiving long-term financing from RUS.

Based on the borrowing rates currently available to the Cooperative for debt with similar terms and maturities, the fair value of the long-term debt was $90,154,653 and $92,300,614 at December 31, 2002 and 2001, respectively.

As of December 31, 2002, the Cooperative was in compliance with its covenants on long-term debt including financial ratios.

'A

Notes to Financial Statements December 31, 2002 and 2001 NOTE (5) COMMITMENTS:

Total construction expenditures for 2003, including expenditures for the jointly-owned units, are estimated to be

$42,186,460, of which $3,810,510 is for the purchase of nuclear fuel at DAEC.

In 2001, the Cooperative entered into a joint ownership agreement with Basin Electric Power Cooperative to construct an 80-megawatt, natural gas-fired peaking facility adjacent to the Cooperative's Wisdom Station. The Cooperative will have a 50% undivided interest in the plant. The Cooperative's cost to construct the plant is estimated to range from $18,000,000 to $23,000,000 depending on the outcome of certain proposed environmental regulations.

As of December 31, 2002, approximately $6,000,000 has been expended and is included in construction work in progress in the accompanying balance sheets. The plant is expected to be put in service during 2004.

In 2002, the Cooperative entered into a joint ownership agreement with several other utilities, cooperatives and municipals to construct a coal-fired facility with a planned capacity of at least 750 megawatts. The Cooperative is expected to have a 5.33% undivided interest in the plant. The Cooperative's cost to construct the plant is estimated to range from $65,000,000 to $72,000,000. As of December 31, 2002, approximately $300,000 has been expended and is included in construction work in progress in the accompanying balance sheets. The plant is expected to be put in serv-ice during 2007.

In 2002, the Cooperative entered into a power purchase agreement to purchase 11.49% of the monthly generation from the Hancock County Wind Energy Center up to 11.22 megavatts. This agreement is effective through December 31, 2022, and rates are firm for the life of the contract.

NOTE (6) JOINT PLANT OWNERSHIP:

Under joint-ownership agreements with other Iowa utilities, the Cooperative had undivided interests at December 31, 2002, in three electric generating units as shown below:

Council Neal #4 Bluffs #3 DAEC Total electric plant...............................

$ 43,490,830

$ 14,353,230

$ 76,379,296 Accumulated depreciation..............................

$ 29,273,901

$ 8,900,963

$ 42,219,118 Unit accredited capacity (MW)......................

644 690 579 Cooperative's share (%)...............................

11.3%

3.8%

10.0%

Each participant provided its own financing for its share of the unit. The Cooperative's share of direct expenses of the jointly owned units is included in the operating and maintenance expenses on the Statements of Revenues and Expenses.

During 1991, the Cooperative, one of its members, North Iowa Municipal Electric Cooperative Association (NIMECA), and the City of Grundy Center (the City), a NIMECA member, entered into a long-term lease agreement for the use by the City of two megawatts of the Cooperative's capacity in the Neal #4 generation facilities. The Cooperative will continue to act as the Neal #4 partner on behalf of the City. The above plant statistics have been reduced to reflect the agreement.

L

Notes to Financial Statements December 31, 2002 and 2001 NOTE (7) BENEFIT PLANS:

The Cooperative participates in the National Rural Electric Cooperative Association (NRECA) Retirement &

Security Program (the Program). The Program is a defined benefit pension plan qualified under Section 401 and tax exempt under Section 501 (a) of the Internal Revenue Code. The Cooperative recorded a total current period service cost to the Program of $562,610 and $517,232 for 2002 and 2001, respectively. In this multi-employer plan, which is available to all NRECA member cooperatives, the accumulated benefits and plan assets are not determined or allocated separately by individual employer. The Cooperative also provides a 401 (k) plan, available to all employees, with the Cooperative matching 40% of the employees' contributions up to 5% of the employees' wages.

NOTE (8) NIMECA COMBINED TRANSMISSION SYSTEM:

In 1989, the Cooperative and one of its members, NIMECA, entered into a joint transmission agreement which allows several members of NIMECA an individual undivided ownership interest in and access to the Cooperative's transmission system. The Cooperative will continue to operate and maintain the system. NIMECA members will reimburse the Cooperative for the proportionate share of operating expenses of the system and will contribute propor-tionately for all future capital additions of the system. The reimbursement of the 2002 and 2001 operating expenses were $461,637 and $466,357, respectively, and were recorded as other operating revenues. Additionally, the Cooperative and NIMECA entered into a capacity sharing agreement which provides for the sharing of generating resources through at least 2009.

NOTE (9) CLEAN AIR ACT:

The Clean Air Act (Act), as amended, made significant changes in the nation's clean air laws. The Act's specific amendments to acid deposition control (acid rain) make significant reductions in the amounts of sulfur dioxide and nitrous oxide emissions allowed on an annual basis nationwide. The Cooperative's coal-fired generating stations are in compliance with the standards established by Phase I and Phase II of the Act. In January of 2002, the Cooperative sub-mitted a final alternate emissions limit petition for nitrous oxide emissions for the WVisdom Generating Station.

NOTE (10) NATIONAL ENERGY POLICY ACT:

The Federal National Energy Policy Act of 1992 requires owners of nuclear power plants to pay a special assessment into a "Uranium Enrichment Decontamination and Decommissioning Fund." The assessment is based upon prior nuclear fuel purchases and for the DAEC averages approximately $1,209,741 annually through 2007, of which the Cooperative's 10% share is $120,974. The Cooperative's total assessment of $1,814,613, which will be recovered in rates, has been recorded as a liability, net of payments, in the balance sheets. This liability, totaling $585,385 including its long-and short-term portion on December 31, 2002, has been recorded with a corresponding deferred charge amortized over a 15-year period, beginning in 1992.

A

Notes to Financial Statements December 31, 2002 and 2001 NOTE (11) TRANSLINK LLC:

In 2001, the Cooperative entered into an agreement with several other regional utilities with the intent of pursuing, among other things, a program for compliance with Federal Energy Regulatory Commission ("FERC") Order No. 2000 which calls for owners and operators of transmission lines in the United States to join regional transmission organiza-tions ("RTOs") on a voluntary basis. Once TRANSLink becomes operational, TRANSLink will exercise functional responsibility over certain transmission assets of the Cooperative. The Cooperative will be required to make payments to TRANSLink under a tariff agreement for its use of the transmission assets and will receive as compensation a monthly operating fee from TRANSLink. Furthermore, the Cooperative's participation in TRANSLink is contingent on pending tax legislation which would exclude income received or accrued by rural cooperatives from certain transactions that occur under electricity deregulation from the 85 percent test of member/non-member income. TRANSLink was not operational in 2002 and significant activity is not expected until late 2003.

NOTE (12) NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED:

In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (SFAS)

No. 143, "Accounting for Asset Retirement Obligations' SFAS No. 143 establishes accounting and disclosure for asset retirement costs, including the decommissioning of nuclear power plants. The Cooperative is currently evaluating the effects of the new standard. However, when current electric utility industry accounting practices for nuclear power plant decommissioning are changed in 2003, the annual provision for decommissioning could increase relative to 2002.

NOTE (13) NUCLEAR INSURANCE PROGRAM:

The Cooperative, under the provisions of the Price-Anderson Amendments Act of 1988 (the 1988 Act), has the ben-efit of $9.55 billion of public liability coverage. The coverage consists of $300,000,000 of insurance and $9.25 billion of potential retroactive assessments from the owners of each commercial nuclear power plant. Under the 1988 Act for losses relating to nuclear accidents in excess of $300,000,000, each nuclear reactor may be assessed a maximum of

$88,100,000 per nuclear incident, payable in annual installments of not more than $10,000,000. The Cooperative's assessment on its 10% ownership in DAEC may be up to $8,810,000 per nuclear incident with a maximum of

$1,000,000 per year. These limits are subject to adjustments for inflation in future years. Existing nuclear power plants, including DAEC, are covered under the insurance system of the Act for the remainder of their operating lives.

Extension or renewal of the Act applies only to new construction. Currently there is legislation in Congress that includes extensions of the Act, increasing the statutory limit for liability to the public for a single nuclear power plant incident and increasing the maximum annual assessment per incident.

Pursuant to provisions in various nuclear insurance policies, the Cooperative could be assessed retroactive premi-ums in connection with future accidents at a nuclear facility owned by a utility participating in the particular insurance plan. In addition, the Cooperative could be assessed annually $890,000 related to coverages for excess property damage if the insurer's losses relating to an accident exceed its reserves. While assessment may also be made for losses in certain prior years, the Cooperative is not aware of any losses in such years that it believes are likely to result in an assessment.

In the unlikely event of a catastrophic loss at DAEC, the amount of insurance available may not be adequate to cover property damage, decontamination and premature decommissioning. Uninsured losses, to the extent not recov-ered through rates, would be borne by the Cooperative and could have a material adverse effect on the Cooperative's financial position and results of operations.

L.

Independent Auditor's Report TO THE BOARD OF DIRECTORS OF CORN BELT POVER COOPERATIVE:

We have audited the accompanying balance sheet of Corn Belt Power Cooperative (a cooperative association incorpo-rated in Iowa) as of December 31, 2002, and the related statements of revenues and expenses, cash flows, deferred patronage dividends and other equities, and comprehensive income for the year then ended. These financial statements are the responsibility of the Cooperative's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Corn Belt Power Cooperative as of December 31, 2001, and for the year then ended were audited by other auditors who have ceased operations. Those auditors expressed an unqualified opinion on those financial statements in their report dated February 22, 2002.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America.

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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also indudes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial posi-tion of Corn Belt Power Cooperative as of December 31, 2002, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

KPMG LLP Kansas City, Missouri February 21, 2003

a--~

1 I

II '

4 3 le a

! 1IV(

It I_

'I

-~~~~~~

T=-

A QW

.s7:-

u

_;w

.. -

ML031390564

Text

Navigation menu

Search