ML031390564

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)

Text

! I 11 I -ii

i THE PEOPLE HAVE THE POWER 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.

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.

Executive Report A few months ago, near Kalona, Iowa, travelers on Highway 22 witnessed 150 cooperatives need power, it will be there. The desire to control our own destiny goes back to the very Amish men carrying the wooden beginning of Corn Belt Power when we built our first framework of a turkey barn along the plant, the Humboldt Generating Station.

shoulder of the highway. Just a little earlier, at the Due to continuing load growth, the board of direc-original barn site, the men were positioned into their tors conducted a complete power supply study for the places and, after a foreman yelled, "One, two, three,"

Corn Belt system. The results of this study showed they lifted the quarter section of the barn off the the need for additional generating resources in the ground and began carrying it toward its new location 2004 time frame and again in about 2007. In order to one mile west.

satisfy the growth of our members and the need for One passerby watching the event on the highway additional generation, the Corn Belt Power board commented, "It certainly shows what a lot of people decided to construct a combustion turbine for opera-can do together." tion in 2004 and to participate with others in a large coal-fired plant in the 2007 time frame.

This event is an example of the value of cooperation and shows how, working together to reach a common The new combustion turbine will be located at our goal, people truly have the power. existing Earl F.Wisdom Generating Station site. The advantages of this site include the fact that we already Electric cooperatives operate on the same principle.

own the land, transmission and natural gas pipelines By offering local membership, support for communi-are in place, and we have the necessary manpower at ties, sharing of margins, democratic control and the site. Contracts for construction have been let and equal representation, electric cooperatives give the work will begin on the turbine in the spring of 2003 people who own them the power to make decisions with commercial operation expected in the early and control their own destiny.

spring of 2004. Corn Belt Power's partner in the proj-In 2002, events and decision-making at Corn Belt ect is Basin Electric Power Cooperative, Bismarck, Power Cooperative also demonstrated how, with the North Dakota.

cooperative form of doing business, the people have In order to satisfy our generation needs in 2007, the the power.

Corn Belt Power board approved participation in Board resolutions approved in 2002 will increase the MidAmerican Energy Company's Council Bluffs 4 cooperative's power supply by adding peaking power, generating station. This will be a large coal-fired renewable energy and base load generation. plant and will be owned by MidAmerican Energy, Throughout its history, Corn Belt Power has chosen Corn Belt Power and several other utilities in the to own its generation to assure that, when our member area. This project continues the tradition that we Dale M. Arends Donald Feldman Executive Vice President President, Corn Belt

& General Manager Power Cooperative Board of Directors

have followed for several plants - partnering with use energy wisely and to build lasting relationships our neighbors to take advantage of economies of so they stay in business and grow.

scale. MidAmerican Energy will be the operator In 2002, Corn Belt Power conducted a risk manage-of the plant. ment assessment to determine where we might be A board resolution also approved a 20-year contract vulnerable to adversity. This process will help deter-with FPL Energy to purchase wind power from a mine where we focus our priorities and will affect new wind energy center in Hancock County, Iova. future decision-making. It will be important to This purchase helps us prepare for the future should implement and follow up on these findings.

regulations require a renewable portfolio. The loca- Rates to Corn Belt Power member cooperatives tion of this project in particular couldn't be better, remained stable in 2002. Factors in our immediate with Corn Belt Power transmission lines close and future such as new generation, transmission line and several electric cooperative members benefiting substation construction, higher gas costs and devel-from leasing land for the project. The Corn Belt oping changes in dispatching agreements will likely Power board also recognizes the positive aspects of affect our rates in the future. Energy prices are trend-being involved with new technology that's environ- ing up nationally and it appears unlikely that Corn mentally friendly. Belt Power will be isolated from that trend.

Corn Belt Power experienced another year of consid- Compared to some others, Corn Belt Power is a small erable growth in 2002, setting a new sales record of generation and transmission cooperative. However, 1,416 million kilowatt-hours. Increased commercial that has not hindered our success. We see a bright and industrial load was largely responsible for this future ahead. Our relationship with each of our mem-sales growth, with new ethanol plants and additional ber cooperatives remains strong. In addition, our value-added agricultural load coming on line. The member cooperatives recognize that their relation-addition of these and other economic development ships with their members must be strong and that projects has helped pick up sales lost due to farm they must continue to pursue new growth opportuni-and residential load decline. ties where it is prudent. The many corporate scandals Although positive for spreading out fixed costs and that came to light in 2002 reinforced our belief that keeping rates stable, expanded commercial and the cooperative way of doing business is a very suc-industrial sales also make us more vulnerable to how cessful way of providing service to our members.

the industries fare. It will be important to continue Indeed, we certainly show what a lot of people can with a strong key accounts program for our member do together.

cooperatives, helping them to help their members Total Sales Member REC Rates 1500 50 1200 40 C

30

• - - I 600

. I I I I I I I 4 I I I I I I I I I I I I I I 300 Cu m oC T C m C Sl D umo CU tD m CU ~ CO r- MuC) C )r oD _ CM CU C' 11- U) C

) CU If (C' M -- T MuC) C m C r r r r m m m m m ) C C C oC cC Cuc coco mc co m 0D C C 0 0 0 0 0 00 C C 0 C

00) C C C C C C C) - ) C C T T Cu C) C - TT T T T Cu Cu T 0 C o rCU CU Includes RECs, NIMECA, Webster City and Sales to Others Average REC member system cost, including substation charge; calculated average REC rate reflects power sold to municipals and others served by RECs.

Year in Review 2002 In 2002, Corn Belt Power Cooperative demon-strated that "The people have the power," shown loads; and large commercial and industrial loads that were on line at the time.

literally by the addition of new generation and transmission facilities, and figuratively by the Wisdom Unit 2 cooperative way of doing business. Responding to the anticipated future needs of its member cooperatives, Corn Belt Power Cooperative 2002 Sales and Peak continued work toward adding new generation to its Total sales in 2002 to member cooperatives, NIMECA, power supply resources.

Webster City Municipal Utilities and others set a new record high of 1,416 million kilowatt-hours, surpass- For the Wisdom Unit 2 generating station under ing the previous record of 1,339 million kilowatt- development, Corn Belt Power and partner Basin hours set in 2000. Electric Power Cooperative purchased a General Electric combustion turbine generator.

Although January and February were warmer in 2002 than during the previous year, the last three months Surveying and "geotech" work, which included soil of 2002 were colder than in 2001. Overall, heating testing for the foundation, was conducted at the degree days were up just slightly for the year, but Wisdom Unit 2 site in the fall. Utility Engineering/TIC, cooling degree days were roughly 16 percent higher Omaha, Nebraska, and Casper, Wyoming, was chosen than the previous year. for the engineering, procurement and construction contract in December 2002.

The Corn Belt Power system gained some new indus-trial loads during the year while experiencing strong Wisdom Unit 2 will take approximately 11 months sales to member co-ops' existing commercial and to construct. The first natural gas fire of the turbine industrial members. Substantial corn drying sales in is scheduled for Feb. 3, 2004. The unit is expected to the fall also added to the record sales. be fully commercial by March 8, 2004.

A new record peak for firm power sales was set on Wind Energy Oct. 21 at 8 p.m. when 253 megawatts of demand, Demonstrating its support for wind energy as an including losses, was recorded. The previous peak was environmentally friendly way to generate electricity, set in October 2001 at 247 megawatts. The new peak Corn Belt Power signed a 20-year purchase agree-can be attributed to a combination of factors: its ment with FPL Energy, the nation's largest producer Monday evening time frame reflects a traditionally of wind energy, to purchase power from the 98-high-use day and household load; a mid-30s temper- megawatt wind energy project in Hancock County, ature and contributing wind chill; strong corn drying Iowa, known as the Hancock County Wind Energy System Peak Percent Change in Monsthly Sales 2002/2001 25 _

20 15 l a

10 l

5

. }

0 11 I nnnL'flf' . .

vvvvv co mC Il

. . . . -5 C - C - 0) >t C X X w cD X CD , , ,,, u w .".T)

.C: C

-3 < E -:) < o z o Corn Belt system peak =

-i L (RECs + WC + Estherville) x 1 06 at time of -z °5< <Xt crf C0 Z ° .

CBPC/WC 60-minute system peak Includes RECs, WC, NIMECA and Sales to Others S COZ ,

i

=

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. In2002, Corn Belt Power signed a 20-year contract with FPL Energy to receive operation. Corn Belt Power will own approximately up to 11 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. ,,,1,320,733,561 1,_,,, 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 construction associated with new loads on member Transmission Facilities co-ops' lines and upgrades that will improve reliability New commercial and industrial loads served by Corn by establishing loop feeds and reconductoring Belt Power's member systems required extensive con- aging lines.

struction of transmission and substation facilities.

Additional construction projects in 2002 included a In 2002, three new substations and their 69 kV exten- 10,200-square-foot cold storage building completed sions were constructed in the Corn Belt Power system: in mid-November that houses equipment and materials previously kept outside.

• Tall Corn Substation - to serve the Tall Corn Ethanol plant on Glidden REC's lines New Microwave System

• Rembrandt Substation - to serve a new egg laying Also included in the approved USDA loan were plant on Iowa Lakes Electric Cooperative's lines funds for a new digital microwave system. In 2002, Corn Belt Power personnel oversaw installation of

• Gerled Substation - to serve the Midwest Grain new towers, refurbished existing towers and made Processors (MGP) ethanol plant on Iowa Lakes progress toward completion of the state-of-the-art Electric Cooperative's lines communication system.

Two new switching stations were also added to the The new microwave system will replace aging 27-Corn Belt Power system to increase reliability of serv- year-old analog equipment that does not have the ice: the Willemssen Switching Station, southeast of capacity to handle high-speed data. Plans are for the Clarion, and the Buckner Switching Station, located east side of the new system to be operational in the between Webster City and Wellsburg. late spring of 2003. Spring 2004 is the targeted com-New transmission line constructed in 2002 totaled pletion time for phase two, which involves the west almost 20 miles. The most extensive section was the side of Corn Belt Power's system. Phase three will add Eagle-Armstrong line, approximately nine miles long. redundancy to the east side of the system with com-pletion expected at the end of 2004.

A $34.6 million dollar loan from the United States Department of Agriculture (USDA), guaranteed by TRANSLink the Rural Utilities Service (RUS), was approved Corn Belt Power continued its participation in the in September and TRANSLink Development Company in 2002.

will cover trans- Formation documents for the independent transmis-Other en. & Wisdom mission and sion company have an anticipated signing time frame Purchases 19,933 MWh substation of mid-2003 with operation startup later in the year.

11 3,92 MWh 13 Basin 7.59 4,901 MWh 457,396 MWh P- 30.39' i.F WAPA 133,040 MWh 8.8%

t\ CB #3 180,464 MWh 12.0%

2002 Generation Items previously stored outside are now housed in this new cold storage Summary building on Corn Belt Power's headquarters property.

[represents input from major resources and 100% ownership shares]

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.

CAq;--- 2002 kWh Billed by CErn Belt Power Miles of Line

1. of # of 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_ WAt. ><

'.Grundy ji-t > REC

X County'-. 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 inJuly.

Corporate Relations and Butter Cow and the Varied Industries Building-.

Marketing at www.touchstoneenergycams.com on behalf of Continuing to communicate the Touchstone Energy' their Touchstone Energy member distribution coop-brand and the value of doing business with coopera- eratives. Touchstone Energy Cooperatives of Iowa; tives was a main focus of corporate relations and once again sponsored the Iowa State Fair tram that marketing efforts in 2002. transported fairgoers free of charge throughout the fairgrounds.

The 11th annual all-employee marketing training was held Jan. 14-18 with Dr. Caroline Fisher presenting Throughout 2002, Corn Belt Power continued placing "Choose to Lead," encouraging participants to see radio, print and television advertising for the themselves as leaders and create a high-performing Touchstone Energy Cooperatives it serves, fulfilling the and positive work environment. objective of having the same ads run at the same time throughout the Corn Belt Power system. Three different The Touchstone Energy "Living the Brand" training ads on 21 billboards promoted the advantages of men-was presented to cooperative employees and directors bership in the local Touchstone Energy Cooperative.

in the fall, emphasizing the importance of superior customer service. Corn Belt Power received a first-place Award of ,

Excellence for having the best annual report in the i Touchstone Energy Cooperatives continued to G&T category from the Council of Rural Electric 2 demonstrate the core value of commitment to com-Communicators in its 2002 "Spotlight on Excellence.'

munity by awarding local schools SchoolNet weather stations in partnership with KCCI-TV, Channel 8, Iowa's electric cooperatives hosted the 11th annual Des Moines. Momentum is Building conference for builders, elec-tricians, plumbers and heating, ventilation and airl The Touchstone Energy Cooperatives of Iowa actively conditioning professionals Feb. 13-14 in Des Moines.

promoted Iowa's state parks in 2002. Named Green A record number of attendees were on hand to learn Touch, this unique partnership between Touchstone about energy efficient building techniques and elec-Energy Cooperatives of Iowa and the Iowa state park tric technologies.

system sponsored a newly designed four-color brochure that lists parks and recreation areas in the state. The 2002 Mid-Iowa Community Development Conference, co-sponsored by Corn Belt Power During the Iowa State Fair, the State Fair Web site, Cooperative and Iowa State University Cooperative www.iowastatefair.org, featured links to Web cameras Extension, was held March 21 in Fort Dodge, mark-with live images of activities at the fair. Corn Belt ing the 12th year of bringing together development Power and Central Iowa Power Co-op (CIPCO) groups and community leaders to share community sponsored two of the Web cameras - the famous improvement ideas.

2002 Touchstone Energy' Challenge 40000 35000 _

30000 EEE 2501J0 a

.E a

2001 Dr. Caroline Fisher conducts the 2002 Touchstone 150(101 14,451 Energy Challenge training titled, Choose to Lead,"

11,655 attended by over 360 co-op employees and directors.

1001 J0 501DO 0

C) -o CD a- -) o 0 J -W - (1) c ' c o c X - '-

m co ct E E -

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 0 ** . -*I.

during the year.

• I-. .0*I 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 Nhle1Z"an. * . S -lXlB,.lX r*

reported almost 20,000 hours0 days <br />0 hours <br />0 weeks <br />0 months <br /> of volunteer communi-ty service during the year. I I '. 1gl[z]-uull@tll 4 R Member systems increased their elec-tronic marketing r_ efforts through pro-grams coordinated by Corn Belt Power.

~~~__= _= __ C;w!1 Smart Choices, an I=

electronic newsletter,

._~~~~~~I.n 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, John McLaughlin, second from right, KCCI-TV meteorologist, inter-attends the trade show at the 11th annual Momentum is Building views Mike Hagen, executive vice president and general manager, conference. Held Feb. 13-14, the conference hosted a record number Prairie Energy Cooperative, during the SchoolNet broadcast at of attendees. Webster City Middle School.

U. - U -

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

3. . g. . S Year" Venture Award was presented to Rembrandt Enterprises, an egg production and

, I.*

• SO S S*

processing company served by Iowa Lakes

• SI*. S..

Electric Cooperative.

. S

• S I

The winning team from Glidden REC waits to tee off at the North Iowa Representatives cut the ribbon during a ceremony for the Touchstone Energy Golf Invitational, held July 30 with over 100 co-op Grundy County Development Park, held June 17. Located representatives and their guests in attendance. 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 L. Kirby Range, right, Corn Belt Power and Iowa Lakes Electric industry and to provide input on significant issues Cooperative director, discusses issues affecting electric coopera-tives with Rep. Russ Eddie, Storm Lake, at the REC Day on the such as the national energy policy, creating a nuclear Hill March 6.

waste repository, taxes and the pending EchoStarl DirecTV merger.

With many of Iowa's 2003 state representatives and An Intranet site called the Power Page was created senators newly elected to office, the major message and will be developed further in 2003 to include a communicated by electric cooperative representatives daily news page, printed publications, plans and at legislative meetings in November focused on manuals, company forms, employee calendars, board how cooperatives operate differently from other minutes and agendas, inventory records and human electric utilities. resources information.

Human Resources In 2002, Corn Belt Power continued its study of A new project called Cooperative On-Line Resourcing, corporate culture, holding employee information also known as the COLR (pronounced "color") proj- meetings to focus on the cooperative's purpose, ect, resulted in employees and directors of Corn Belt mission and values. The following were identified as Power communicating with increased efficiency, the cooperative's key values: positive attitude, trust, speed and accuracy. Phase one of the project included respect, commitment, integrity, innovation and purchase and installation of computers and creation accountability.

of email addresses for directors and all employees.

Rep. Greg Ganske, right, watches as Richard Hegna, chief system supervisor, Christian Nygaard, left, Humboldt County REC and Iowa shows how the Corn Belt Power transmission system is monitored and Association of Electric Cooperatives director, meets controlled. Rep. Ganske visited Corn Belt Power inJanuary during his with Rep. Jim Nussle during the Legislative Rally in campaign for U.S. Senate. 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 ifyou are elected to the boardyou 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 ofLine 1,793.03

1. of Meters Served 6,723

1. 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 headquarterslocated outside of the state we live in and they provide no local contact."

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.

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 U

businesses get established, and established companies grow and prosper."

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

1. of Meters Served 2,285

1. of Employees 15

=

i

John Schumacher, Glidden REC Director, Corn Belt Power Cooperative "Probablythe greatest benefit or advantage I see in cooperative membership is thefact that I am served by an organizationwhose primarygoal is to provide quality electric service to its members, not to generateprofit. 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

1. of Meters Served 1,698

1. of Employees 13 LeRoy Weber, Humboldt County REC Director, Corn Belt Power Cooperative "Owners of electric cooperatives have personalcontact 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' 5 161 Miles of Line 943

1. of Meters Served 1 849

1. of Employees 14 L. Kirby Range, ,

Iowa Lakes Electric Cooperative Director, Corn Belt Power Cooperative  :

"Customer-ownershipis the biggest advantage of being a member o;fa .

cooperative. Local leadership is the mainstay in electric co-ops; custcomer-members know and can talk with their directors."

Iowa Lakes Electric Coope3rative 2002 kWh Billed by Corn Belt Power 285,95z5 235 MilesofLine 4641 *

1. of Meters Served 11,737 7

1. of Employees 63

• Corn Belt Power service territory only .

}

COA F

Carrol Boehnke, Prairie Energy Cooperative Treasurer, Corn Belt Power Cooperative Board of Directors "Maybe it's because I've belonged to the cooperativesystem 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 beingpaid do not include profits to stockholders or rates of return set by a government agency.Any monies remaining after expenses are sub-tractedfrom revenues are returned to the membership."

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

1. f Meters Sered 4,656

1. 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 shareholdersand 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

1. of Meters Served 1,740

1. 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 ofLine 824.69

1. of Meters Served 2,046

1. 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

1. of Meters Served 3,089

1. ofEmploeyees 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."

Sac County REC 2002kWh BilledbyCornBeltPower 23,376,795 MilesofLine 490

1. of Meters Served 1 045

_4 #of Employees 9 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.

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

1. of Meters Served 143 ofEmployees

1. 3 U)

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

In service................................................................................................ $ 222,747,516 $ 216,798,323 Less-accum ulated depreciation .......................................................... 127,167,745 121,895,992 95,579,771 94,902,331 Construction vork in progress ............................................................ 11,800,568 4,398,148 Nuclear fuel, net of amortization (Note 2).......................................... 5,968,375 5,329,457 113,348,714 104,629,936 OTHER PROPERTY AND INVESTMENTS:

Nonutility property .............................................................................. 356,761 309,698 Investment in the National Rural Utilities Cooperative Finance Corporation (Note 2)...................................................... 2,514,836 2,514,836 Land held for future use (Note 2) ........................................................ 2,977,665 2,977,665 Decom missioning fund (Note 2) ........................................................ 17,884,979 19,327,548 Other investm ents (Note 2).................................................................. 1,346,126 1,102,541 Note receivables (Note 2)...................................................................... 3,995,580 3,562,377 29,075,947 29.794.665 CURRENT ASSETS:

Cash and cash equivalents (N ote 2) .................................................... 1,722,520 8,506,969 M ember accounts receivable ................................................................ 3,718,926 3,855,569 Other receivables .................................................................................. 244,626 519,206 Inventories -

Fuel, primarily coal, at last-in, first-out cost .............................. 1,941,321 1,719,294 Materials and supplies, at average cost ........................................ 3,969,483 4,501,265 Prepaym ents .......................................................................................... 277,403 245,761 11,874,279 19,348.064 DEFERRED CHARGES:

Deferred Department of Energy decommissioning costs (Note 10)................................................ 697,823 830,382 Deferred refueling costs (Note 2) ........................................................ 151,918 1,063,425 Other ...................................................................................................... 331 5,964 850,072 1,899,771

$ 155.149,012 $ 155,672.436 The accompanying notes to the financial statements are an integral part of these statements.

L

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

Memberships, at $100 per membership................................................ $ 1,300 $ 1,300 Deferred patronage dividends, per accompanying statements (payment restricted as indicated in Note 3).................................................................... 8,833,271 8,660,671 Other equities, per accompanying statements.................................... 27,139,161 25,606,299 Unrealized gain in market value of investments (Note 2).................................................................. 206,063 1,022,663 36,179,795 35.290,933 LONG-TERM DEBT (Note 4):

Rural Utilities Service .......................................................................... 23,075,680 25,561,389 Federal Financing Bank ...................................................................... 67,217,906 65,171,448 Capital lease obligations (Note 2) ...................................................... 0 555,707 Pollution control revenue bonds ........................................................ 1,245,000 1,450,000 NRUCFC .............................................................................................. 1,000,000 0 USDA Intermediary Relending Program............................................ 880,000 880.000 93,418,586 93,618,544 Less - Current maturities of long-term debt...................................... 6,645,928 6.696.769 86,772,658 86,921,775 OTHER LONG-TERM LIABILITIES:

Deferred Department of Energy decommissioning costs (Note 10) .............................................................................. 445,598 583,366 DAEC decommissioning liability (Note 2) ........................................ 17,671,299 18,298,445 Other...................................................................................................... 10,000 900.750 18.126,897 19,782,561 CURRENT LIABILITIES:

Current maturities of long-term debt ................................................ 6,645,928 6,696,769 Accounts payable.................................................................................. 4,760,816 4,149,488 Accrued property and other taxes ...................................................... 1,993,216 2,106,518 Accrued interest and other .................................................................. 669,702 724.392 14,069,662 13,677,167

$ 155,149,012 $ 155,672,436 The accompanying notes to the financial statements are an integral part of these statements.

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

Sales of electric energy.......................................................................... $ 49,964,446 $ 45,962,337 Other ...................................................................................................... 3,846,448 3,761,117 53,810,894 49,723,454 OPERATING EXPENSES:

Operation -

Steam and other pover generation.............................................. 18,810,422 16,725,291 Purchased pow er, net.................................................................... 6,989,479 5,395,901 Transm ission.................................................................................. 2,720,172 2,987,310 Sales................................................................................................ 2,353,344 2,716,145 Adm inistrative and general .......................................................... 3,030,169 3,275,393 Maintenance -

Steam and other power generation.............................................. 3,937,350 3,967,806 Transm ission.................................................................................. 793,956 709,923 General plant ................................................................................ 30,471 30,103 Depreciation and decommissioning (Note 2) .................................... 7,683,327 7,274,573 46,348,690 43,082.445 Net Operating Revenues .............................................................. 7,462,204 6,641,009 INTEREST AND OTHER DEDUCTIONS:

Interest on long-term debt.................................................................... 5,968,691 5,888,011 Interest during construction (Note 2) ................................................ (132,148) (323,297)

Other interest and deductions.............................................................. 11,842 17,735 5,848,385 5,582,449 NET OPERATING MARGIN ...................................................................... 1,613,819 1,058,560 NON-OPERATING MARGIN:

Interest and dividend income .............................................................. 339,095 631,496 Other, net (Note 2) ................................................................................ 259,350 133,218 598,445 764,714 NET MARGIN .............................................................................................. $ 2,212,264 $ 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 ............................................................................................ $ 2,212,264 $ 1,823,274 Adjustments to reconcile net margin to cash provided by operations:

Depreciation and amortization .................................................... 6,942,218 6,678,301 Amortization of nuclear fuel ........................................................ 2,108,224 1,787,375 Amortization of deferred refueling costs...................................... 911,507 921,164 Amortization of Department of Energy decommissioning costs .......................................................... 133,783 130,482 Changes in current assets and liabilities:

Accounts receivable........................................................................ 411,223 (312,583)

Inventories ...................................................................................... 309,755 (2,045,798)

Prepayments.................................................................................... (31,642) 7,493 Accounts payable............................................................................ 611,328 (1,247,108)

Accrued property and other taxes ........................................................ (113,302) 76,855 Accrued interest and other liabilities.................................................... (56,817) (1,089,126)

Payment to Department of Energy for decommissioning .................. (135,584) (133,183)

Other ...................................................................................................... (885,117) (157,326)

Net cash provided by operating activities .................................... 12,417.840 6.439,820 CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from long-term debt.............................................................. 6,564,000 6,433,000 Repayment of long-term debt .............................................................. (6,763,958) (7,137,570)

Deferred patronage dividends paid ...................................................... (577,400) (574.000)

Net cash used in financing activities ............................................ (777.358) (1,278,570)

CASH FLOWS FROM INVESTING ACTIVITIES:

Additions to electric plant, net.............................................................. (13,978,203) (6,474,115)

Additions to nuclear fuel ...................................................................... (2,747,142) (567,545)

Additions to deferred refueling costs.................................................... 0 (1,612,574)

Sale of (additions to) non-utility plant, net ........................................ (47,063) 128,858 Additions to decommissioning fund.................................................... (1,045,052) (848,718)

Change in other investments ................................................................ (607,471) (921,549)

Net cash used in investing activities.............................................. (18,424,931) (10,295,643)

Net decrease in cash and cash equivalents .................................................. (6,784,449) (5,134,393)

CASH AND CASH EQUIVALENTS AT:

Beginning of year .................................................................................. 8,506,969 13,641,362 End of year ............................................................................................ $ 1,722,520 $ 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 2002 2001 DEFERRED PATRONAGE DIVIDENDS:

Balance assigned beginning of year...................................................... $ 8,660,671 $ 8,609,671 Net margin ............................................................................................ 2,212,264 1,823,274 Revenue deferred patronage dividends................................................ 70,598 50.929 10,943,533 10,483,874 Patronage dividends paid...................................................................... (577,400) (574,000)

Appropriation of margin -

Reserve for contingent losses........................................................ (1,467,862) (1,249,203)

Statutory surplus............................................................................ (65.000) 0 Balance assigned end of year ................................................................ $ 8,833,271 $ 8,660,671 OTHER EQUITIES:

(Appropriated Margins)

Reserve for Statutory Contingent Surplus Losses Total Balance December 31, 2000 $ 4,349,484 $ 20,007,612 $ 24,357,096 Appropriation of margin 0 1,249,203 1,249.203 Balance December 31, 2001 $ 4,349,484 $ 21,256,815 $ 25,606,299 Appropriation of margin 65.000 1,467,862 1,532,862 Balance December 31, 2002 $ 4,414,484 $ 22,724,677 $ 27,139,161 Statements of Comprehensive Incomne For the Years Ended December 31, 2002 and 2001 2002 2001 Net m argin.................................................................................................... $ 2,212,264 $ 1,823,274 Change in unrealized gain in market value of investments .................................................... (816.600) 397.848 Comprehensive incom e ........................................................................ $ 1,395.664 $ 2.221.122 The accompanying notes to the financial statements are an integral part of these statements.

L

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:

2002 2001 Obligations of the U.S. government and its agencies $ 5,828,814 $ 8,462,179 Corporate bonds 2,625,753 2,402,342 Common and preferred stock 7,787,117 7,720,679 National Rural Utilities Cooperative Finance Corporation commercial paper 1,400,000 7,446,220 Cash and CDs deposited with federally insured financial institutions 322,520 1,060,749 Funds held in trust 2,093,569 1,178,681 Other investments 895.852 666,208

$ 20.953.625 $ 28,937,058 The above investments are included as follows in the accompanying balance sheets:

Decommissioning fund $ 17,884,979 $ 19,327,548 Other investments 1,346,126 1,102,541 Cash and cash equivalents 1.722.520 8.506.969

$ 20,953,625 $ 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:

2002 2001 Mortgage notes due in quarterly installments:

RUS 2%, due 2002-2008 $ 4,871,056 $ 6,123,470 RUS 5%, due 2002-2019 18,204,624 19,437,919 FFB 5.0%-10.7%, due 2002-2027 67,217,906 65,171,448 90,293,586 90,732,837 Capital lease obligations -

WVebster City revenue bonds 5.9%, due 2002 0 555,707 Pollution control revenue bonds -

6.125%, due 2002-2007 1,245,000 1,450,000 CFC interim loan -

3.4%, due 2006 1.000,000 0 USDA Intermediary Relending Program -

1%, due 2003-2029 880,000 880,000

$ 93,418,586 $ 93.618.~54 4 Maturities of long-term debt for the next five years are as follows:

Year Maturity

$ 6,645,928 2003................................................

2004................................................ 6,895,353 2005................................................ 7,030,095 2006................................................ 8,071,984 2007................................................ 7,006,591 Thereafter ...................................... 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

! 1IV(

II '

It I_

'I 4

3le a

-~~~~~~ A QW T=-

.. . ,@::. .s7:- u ,

_;w . . -