ML20042F093

1989 Annual Rept

ML20042F093
Person / Time
Site:	Fermi
Issue date:	12/31/1989
From:	Nordbeck W WOLVERINE POWER SUPPLY COOPERATIVE, INC. (FORMERLY
To:
Shared Package
ML20042F086	List: ML20042F090 ML20042F093 NRC-90-0068, Forwards 1989 Annual Financial Repts for Detroit Edison Co & Wolverine Power Supply Cooperative,Inc
References
NUDOCS 9005070217
Download: ML20042F093 (31)

Text

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1 WOLVERINE POWER SUPPLY COOPER ATIVE, INC. t E,l7... ~j L '989 [ Annual Report e% q ,/i*4' 1) );> <d ,F [- J i' f \\Q 5 ,5 y ~= 3#* Sitl'[ r + ( ,z F'L:

^ t ~ i Member-Systems [),...,, p -~/}-g -3 The seven membor sntoms composing U Wolvorino Power Supoly Cooperativo. Inc. _ 4_ l provide rehoblo and economical electric - 7.. 1 l s energ/ in 35 Michigan counties. Theso member systems are responMb!O for deltvor-( ing electric energy to nearly 500.000 people Hj - J j overy day and are among the state's i loodors in customer service and electrical + reliobility, j Cherryland Electric Cooperative. Inc. P.O. Box 298 Grown. MI 49637 t (616) 276-9212 [ Philip Colo Genorc' Manager O & A Electric Cooperative,Inc. 490 Quarterinne Road Nowaygo. Mi 49337 (616) 652 1654. i Robert L Hanco General Monager P Oceano Electric Cooperative i P.O Box 232 I Hart. MI 49420 (616) 873 2155 Robert Frederiksen General Manager Presque Isle Electric Cooporcilve, Inc. 49831 M 68 Onoway. Mi 49765 l (517) 733-8515 A Barkley travis - General Manager r C Top O' Michigan Electric Company 1123 E. Division. P.O Box 70 Boyne City. MI 49742 (616) SS2 6521 ( Tom Hanno General Manager Trl County Electric Cooperative P.O Box 379 Portiond Mi 48875 (517) 647-7554 Robert W. Motheny General Manager Western Michigan Electric Cooperative P O Box 24B Scottvi!1e. MI 49454 (616) 757-4724 i Jack W, Stickney - Genero! Manager 1 e e v -~wre w we~ee-w-, ,e,e-,w- ~ +~,+h, n re

i i 1 CONTENTS ) Board of Directors 2 Corporate ideals and Objectives. 3 President & General Manager's Report 45 Finance & Administrofive Services 6 General Counsel 7 Power Production. 8 Transmission. Engineering & Operations 9 Fermi 11 10-11 Financial Highlighis 12 Audit Report. 13-27 F Wolverine Power Supply Co-l operative,' headquartered in Codillac Michigon, is a non-profit electric generation and transmission cooperative sup-plying wholesale electric en-ergy to seven electric distribu-tion cooperatives serving a total consumer-membership exceeding 140.000 in 35 Mich-igon counties. Wolverine owns and/or operates 157,000 kil-owotts of coal-fired, natural gos, diesel and hydroelectric generation and owns and maintains more than 1.600 miles of 69,000 and 138,000 l volt transmission line. l l l 1

Board of Directors ~ I .,b i ~ R,. c. s. J r , n.y -d y q a 7u -a D [p> 4 '!;, L 52 Lig A WAfrNE NORDBtCK CARL MOR10N CARL FORiHKA IHADDtVS GAM L President Soruor Vco President Socrotary Treasurer Cherry 1ond Tri County o&A Presque ble Emq i e t

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[ [ Ideals & Objectives m. gg ~ mym2%$$ G2f m e% .m - gg g y-%c,, y Eporate _ deals & Objectives WEBEUEVE. ..that on odeouote sucoly of lowest possible cost electricity is one of the most important ingre ' rten':, for improving the economy and the,peopie's standard of hving. that he l<urol fiectnficohon Administration progrom of oroviding long term, low interest loan funds ' to the rural electric cooperatives is one of the most valuable. programs for the social.cnd economic ' benefit of people ever undertaken by our Federal Government. ond that this program should be con $nued as on important device to foster the economic development of rurol areas and to help improve the ctonoord of IMng of its consumer-owners l . that a clean and hechhy environment which we all need and enjoy must be maintained and that the energy inctustry must do all that is feasiblo to miniml?e the negative impacts on the enwonment. inot the benehts of the development of our naturoi resources should ocCrue to the people. ond. i the Sto+e and f ooeral g ovemments have o principal responsibihty for estabhshing and maintaining I l programs and ochcies to protect the pubhc interest in fne mormum mutt: purpose development of conservabon and utih2abon of our water, power resources and naturo! beauto l that ou CODperat#ve was estabbshoo for allits members and the benefits of its oporotton should r accrue to them on o consistent ano uniform bous TO blESE ENDS WE Pt EDGE OURSELVES TO THE FOLLOWING 09)ECTIVLS: . to provice for our members on ocequate supp!y of wholesale electric power and high quakty. at se vtce at the lowest possible cost to our membership os o whole. . to mo'ntoin a competent staff of ded.cateo employees and to estabhsh pohrdes which provide dvochon to monogement and staff for the day to day operation of tne Cooperative. .to adopt o one. tive and ten-year plan for implementation by and gutoonce of the manage-ment of the Cooperchve to conduct the business affo:rs of the Cooperative os 'he trustee for the interest of the members, and on a basis cf honesty and equity. . to help pro note the oroa development tnroughout the Cooperchve's service oteo by working witn our member systems in tne planning and execution of programs to help develop the natural human and economic resources within ine reg:on and to encourage effccient use of eieCtrico: energy .to condact a vigorous member service program in order to promote the Cooperative's pobes p!ans onc omg en among employees, members and other interested parties. 3

Prisidont & Ginoral Manag r's RJport insteen Hundred Eighty Nine was a year of these increases wone in comparison to our antic-transition for Wolverine Power Supply Cooperative, ipoted costs had we remained on owner in Fermi 11. From our power supply situation to the relocation of our new corporate offices. the post year was Transition was most clearly evident in the reloco-def anotely one in which change was the dominating tion of our Corporate offices from Boyne City to the factor. new 23.000 square foot facility near Codilloc Operational efficiencles have improved as a result in terms of wholesale energy sold to our seven of this new facility which we o' cupied in late member systems, the post year was o record one. September 1989, in addition, the tronsition We sold more than L2 billion kilowatthours of resulted in the loss of onty one staff member. energy to our member-systems - a three percent increase over lost year's level We're proud that Building upon relationships with the municipal each of the member systems Contributed to this electric members of the Michigan Putilic Power increase Agency was also on important task throughout the i year. Wolverine and several of the state's l Increased solos result in increased margins and enunicipal electric utilities are in the process of form-Woiverine completed ic89 with margins totaling ing a new municipal / cooperative power pool. We more tnan SS 7 million. of which S4.3 million op-have also joined forces in on o' tempt to purchase pl!ed to the Fermi !! Debt Service Escrow Account-odditional ownership in the Consumers Power Company transmission system - thereby reducing The overoll cost of wholesale power to our expensive wheeling charges. member systems increased the post year These increases were pomarily attributable to rate hikes The Rural Electrificohon Administration (REA) re-necessitated by the Seventh Amendment to the quest for additional security on out opproximately Fermi Il Participation Agreement. Our in- $20 million R-12 construction loon also received a tema! operating costs have remained very stable, g< eat deal of attention from our monagement and in many instances have been reduced staff and Board of Directors. This loan was approv-ed by REA lost September. However, monies con-The cost of who!Osole power lo our member-not be advanced untii odeQuote security is pro-systems was 49 91 miils per kilowatthour, of which vided to REA. This loan is imperative to Wolverine's 7 35 mit!s per kilowatthour was the result of the ability to meet the continU(fd growth throughout Seventh Amendment scle agreement. However, the system 'A

t l i f Stoff and consulting engineers R.W Beck pursued the opphcotion and federal hCensing of the , Cooperative's Kleber and Tower hydroelectric generating facilities. Federal operating licenses are necessary for Wolvenne to maintain the abihty - 4 to own and operate the two small hydro Mq( generating facilities on the Black River in Cheboygon County. Fah entroinment and other .. t 'W Wayne B Nordbeck Raymond G. Towne monitonng studies will be ongoing throughout the next two years. Ongoing repair and mo:ntenance lhe 25 000 kw Burntos ST AG unit resumed base work 01 the two facilities has also resulted in load operchon in Apol 1989 Installotton of a new greater operational efficiencies reduction gear box resutted in 3.500 kw of addb tional capacity at the plant A f avorable natural The Mchigan Public Service Commission also con-gas supply contract has been approved which tinued to play a vital support role in our opero-f win aiso aHow for intermediate and peax loading tions - parhcularly with the implementation of 1 i of generating unes at our Hersey Plant controlled water heating and other incentive ( rates We wiu continue to look to the Commission A new three-year cohoctwo txrganing ag'ee statt for its guidance and support ment was reached with Loco! S76 of the Interno f,onal Brothe' hood of Elecincal Workers this post Most importantly. our staff and employees were July. The IBEW represents nea% one hoif of the pnmory reason for the many successes we Wotvenne s 130 employees achieved. Benefits attainobio through implementaton of a / load monogement system were under review tn Wayne B Nordbeck staff and Central Area Data Processing Woivenne Prestdent and the member systems wd! begin tmplementa-tion of such a load Control system in jare 1000 or early 1991, Potential savings to WoNenne and its fa T f member-systems through load managemont could Raymond G. Towne Executive vice President total several m0 hon doHors and Genero Manager 5

Finance & Administrative Services p,~ + 5l ,J i 1 Wav J Go ca Manage Won ine compieten of t% oudd by tne inde. ener sus.500 eom tne mes interest Eamed pendent accounting hrm of Coopers & Lybrand. Roto (ilER) refund The ilER refund is on MPSC ordet Wo!venne recorded the best year f;nonciohy in the that ol lows Wolvenne to reduce its revenues from i Cooperchve s hmtory in 1959, Wolverine sales members in order to maintain a i SS IlfR. The reached 1,223 600 mwh which gene cied revenues Cooperohve hntshed ihe year with net margins of in excess of 361000.000. The 9N% increase over approximatety $5.730 000 1969 revenue !s attributed to a 313% increase in mwh sales lo our member-cooperot.ves and the The finance and Administrative Services deport-increase of 3 5 mms in our rates through the ment hos worked dihgently with REA mgording the 1 MicNgon Pubhc Service Commission (MPSC) Order R-12 construchon loan dunng the post year. The U 8994 This increase was reauaed in order to $ 20.000.000 guoronteed and insured loon wm twe' the debt service obSgotion to the Rurat Elec-aHow Wolvenne to construct new transmisson lines inhcotion Acmirmtrohon (RE A) in repovment of the and substohons necessory in order to meet system $200,000.000 debt remo,ning hom the F ermi 11 set-demand and conhnued growth The toon will otso homent M compnonce with the Debt Restructunna oHow us to upgrade our tocWies and conhove our Agreement. Wo!venne was requned to depout re!iobmty to our members. The hnal condibons sur. S4.282.700 in on escrow occount danng 1989. rounding the R 12 loon should be settled early in Inese funds wm be useo to repov certain f ederoi 1990. Financing bank (fib) deot witnn the next two veors On September 19,1969 the Cooperchve relocated i s corporate headauarters from Boyne City to t Coddloc For the Finance and Administrohve Serv-t Operating Revenue (millions) ices Department, th!s invoived p:onning and or-65 0 goninng the transfer of 40 years of records in 60 0 6' 3 oroer to accomphsh this endeavor. O dedicated 55 8 and cooperotwo effort was required by the Co- %' 0 opero% e's personnel The new facStv enobies man-50 0---@ 47 9 47.7 agement to operate more officienhy. improse com-45 0 I I I_. municatons and create a bette' working environ- '85 '80 '87 '8 B '80 ment for its staff and employees Wotvenne's conhnued growth was evident by the addition of 52 A00.000 in plont service in 1989. The Fermi U closing is in the hnoi stages most of The total plant ret: red in our sys'em to;t year was the lego! and hnonc!al documents have been (325.000. Wokerine occrueo $2,000.000 in rect prerforea and are awathng s;gnatures as tne ono persono: property to< babihty this year. Feoruary 21.1990 clos:ng date draws neon On th s cate. The Detroit Echson Company wm gwe Wdn a r.ew corporate headauarters and the Fermi RK mortgage bonds in the amount of $540 000.000 I settierrent complete 1 the finance and Admin. and Wokerine wdi sign two mortgage notes totch !strahve Services Depo tment staff and its employees ing S200,000,000 to comp lete the brst soie of a are looking forward to improving accounhng pro-joinhy-owned nucl(ior piant by o Cooperative to cedJres and expandeg our knowledge in the ever-On investor owned uhlity chang:ng utWtv industs in the following year. Our efforts wHi focus on fin ncial forecoshng, cost of Through the Powe' Supply Cost Recovery (PSCR setece stuC6 budget and planning. PSCR fMng. refurd me:homsm, WoNenne refunded 5354.000 piant accounhng and tne development of software to i+s semn rnember d=stnbuhon cooperchves and programs on the IBM System 36 6 L

Gencral Counsci mv -$fe J j ,, h -D_.i g + 1 , y ~y 5 ConyderatNe time and money hos been spent on the 'D hydro keenwg apphcahon penong before HRC. As @i o part of the bcensing Wolvenne has had to develop kchard L long a compmhensNe safety plan inclusng performing General CDJr# "edan stud:es and rnaintenUnce wofk Also, tne !hh M hgan Department of Naturat Resources [DNr0 ond the U S fish and Wadhfe Service ate reauaing fah stadies to detemine the e*tect of the dams on the rnovement of fsh and the numt:ers of fish being kmed . or injured when Dawng thiough turbrnes WONenne't, The past year was highbghted by the move of hcmW Opphwhm is s'W pending and wm not be fur-WolvE'nne s Qoneral oft 6ces to the new fo'dht6es near ther considered unld at least the sumniet of 1991, Caddac. Our expanded. centro!vod raciubes are when the fisn stud es are completed in adston, promoong gmater eficency and the centrahred Wo!Venne 1S hoong to nstall Corta n reciochonal locotron in the mid@e of WoWeine's system has fahs at the dams, as rmuned by the DNR. tubstanhatN recuced travel and te!ephone time WoNenne has completed negobation of a gas supply [ranog the pJ.t yeat Wokerme has Continued to Ob. Contract with the Natural Gas Cieannghouw for pur-tan, bumess tronchbes Revocable 30 par franchmes chose of 4 000 to 6.000 MMBTU per day to be used have been obto!ned from Greenwcod 10wnsmo of fne Burnsps and He%ey Plants The contract prov60ed f mc oda CounN) Abendaie loa nship (Ottawa County) for o fu year fbed pnce favorable to WoWenne and 7eoland IownShrp [OttawQ Couniv) and Gotheid bODO"0I 00 bdNd POCU !OI IhO 6"COOd YOUI b Charter Township (Grano IroveMe County) Alt of these gas hanspmtahon cont act hos been entered into francNses have toen or O'e bung submf*ied ta the with Amencan Natu"of Resources for transportahon of oectors of tne township in the nos few weeks for rat.f, the gas from Loulstona to Vichigan at favorable cahon which wW rT,abe the tranchbes arevocab e far rates A contract has been tigned with M(chigan Gas thirty 130) veas it a tavarable vote 6 otuainea Utaes fm cehery of the gas to the Bumips Plant in ada hon. Wotvenne has entmod into a gas distobu-Wohn-me has not been able to complete nego. bon contract ana gas storage contract with MichCon fiat;ons with Coasumers Power Company to anow ad and us oftma'ed momehog company, for the daonal purchases of an una vrded interest in Con. hompartohon ond storage of gas to be usad at the sumers' transnyss,an bVstem so os to be able to Hesev Plant These contracts do not requhe minimum transmit aust>onal power over the Consumers' system omounts to be purchasea or payment of montnly tS 3r d by Charges witiloJt poying wheOhn[) fates A3(ver:no is shH I hopefJ1 that inese negg+iahons con be WCCeduh conciuaua Wo:venne has completed a'rangements and obtain-i ed a purchase order from Medusa Cement Company l An ornenament ta tne Shou Cool Conhact was b how ch fiy osh from the Advance Steam Pont i negat'ated so os to reduce tne,equ,rea purchams of ooksered to the cement piant f or use h the cement coal to m tioa loads for tCgg r anufactunng p*ocesses 4 Wolvenne has been invsved in the foHow!ng Court proceeaings danng the post year l

1. Settlement of Prescue isie County condemnahon Energy Sold to Member Systems (mwh) com o% on appeol by propmty ownes cla: ming substanbai cashonal oppraisal toes owed by i

i x0 s ____ _._ WoNerine the opr>oci was d'opped by lne property J owners without WoNenne payng ac1hanN fees 1.2?3,639 l i wo U00 1.166.557 - Powe Company under PUIPA for ospiced costs ofter 2 Met of o nounts to be paid G'ond Dver i i 1.104.237 WoNeve appeo ed the unfavorable MDSC aecson: a e'n p" gpg the se*Sement red;ces WoNenne s montnly cayment l 0 *"U "V 1.018.294

== 3W _ e mop _s _ n Drsmct Court i 4 WoNenne. throJgh It3 insurance Ca'rier agreed j to Day So0 0]O to the caner ona pho+ of the hF copter invotved in the fatai occiacint o' the Bar-l WONenne cOmpe ed Ond e(OcU!t?d an 07eemen' TDs IIont based upon CUCuit Court mediOhon. to, the 19ad.w intrco necton a Consumes Pouer Compy y in Wadana Iown3Nf: Mo WoNe%+*

• noV WOber ne IfiC(mW coMDieted the soie of ih comp;et.ng a new three way infeconne; ion a7ee

'n'e'eS' n f ermt I! Whsh me 'est was pecnased by e rnent to' t% Me'nborg NtEtation near Grand Ma nn Debon Edison, tne cios'ng o' this compter and dithcutt l among Grana haven Como" e4 *owm ano sa o provaes WoNenne with reasonable power costs Woh.w and o secure f:nancal t/ure 7-i l i l' I i 2

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, J %j ' a#3 Abihty to controt electrical demand during 4 g y,f James D. Nic9el P E. peak penods will result in significont sovings to h h]J, e" UV the member customer, the member. systems and Wolverine. Wolvenne staff, working in con-junction with Central Area Ooto Processing, is presenhy completing the Cooperative's load management feasibility study and, if results La,ge scale p,ojects. botn in terms of impaci subs'oaha'e 'eas'oi"'v wo'veae o"e 5 and capital expenditures, received the most atten-member-Systems will be working to begin in* lion from deportment staff and employees this Stalling system control equipment by late 1990. T.he Michigan Public Service Comm!ssion has past year. The majority of these efforts focused upon methods of provdng Wolverine's seven already approved Controlled Water Heating. member systems with an even more reliable and Dual Fuel and Electrical Storage heating rates economical supply of wholesale electric energy. for the member systems to offer their member-customers-Wolverine continued to operate the Municipal Cooperahve Pool (MCP) dunng 1989. This pool Staff and consulting engineers R.Wyeck moved forward with final hcensing efforts at the combines the loods and resources of Wolverine with Traverse City, Grand Haven. Zeeland and Cooperahve's Tower and Kleber hydroelectric Lowell. and has been of considerable mutua: genso facMes b conWon d he M benefit for over 20 years Ash and Wddlife Service, the Michigan Depart-mont of Natural Resources and the Federal Extensive negotiations continued with the Energy Regulatory Commission (FERC), the municipal electric members of the lvhchigan Cooperchvo is following oli hcensing pro-Pubhc Power Agency in an effort to combine cedu es necessory to olow for conhnved power pooling operations. Present est mates c.wnarsh!p and operation of the two small place o combined power pool in operation ' generahng facilities located on the Block River sometime in early 1991. In addihon to the ex-risar Tower. Fish entrainment and other wildhfe isting MCP members, the combined pool will in' and recreational studies are now underway, clude the cities of Lonsing, Petoskey, The licensing process, and ite extensive en-Chodevoix. Harbor Springs and Holland This vironmental studies involved, were required by pool wWI have substanhally more resources the FERC as a result of Congressional actions than the MCP. and wiH enhance Wolverine s danng the late 1980's-obihty to obtain economical capacity and energy in the future. A new all-time peak deman'11evel of 245.500 kw was reached on November 16. This peak The Cooperative's future power supply also was more than 12.000 kw higher than the 1988 received close scruhny as part of a cost /beneht peak However, il is oNo important lo note that onalysis for the proposed load management the Cooperahve's winter and summer peak de-program The significant growth in both elec' mand levels are both increasing Wolverine has incal demand and energy sold to the member-traditionally been a winter peaking system but systems has already resulted in tne the past several years have narrowed tne gap Cooperative reaching tne 1998 peak demand between summer and winter peaks levels which wert, forecasted in tne 1986 Power Requirements Study (PRS). New natural gas supply and transportation contracts were signed for operation of the 23.000 kw Burnips STAG Unit and the diesel and gas turbine units at the Hersey Generating System Peak Demand (mw) Plant The Burnips unit operated throughout 250-g much of 1989 as a base-load unit - and will 240 likely continue ope"chon in that mode unless natural g is prices nse sharply. Operation of the 230 l 223 ~ Bumios Plant resulted in less rekonce on pur-220 2' 5 chased power from outside sources and lower 210___.2F overall whotesale power costs The 23,000 kw Advance Steam Plant's Unit No. 3 contnued 200 I operahon as a base load unit. while the plant's TS ?$ 17 16 '89 two smaller units were operated on an interme-dl ate and peak loading basis 8 )

TransmissionJ Engineering

and Operations J

f i lhchoro B Choppell MON 95 Stoff, in conjunction with Greiner, Inc. ond Asso Brown Bovef L completed initial engineering - ond site work for the new 50 MVA Bradley Inter-connection subdotion with Consumers Power Company. Located near Woyland, this high-ew construction, mo:ntenance and operations voltage interconnection will further improve. octivities were the primary point of focus for tronsmisslon system voltage regulation and l department stoff and erpployees during the post reliability for O & A Electric Cooperative and year. The continued growth of Wolvenne's seven 7:i County Electric Cooperative. i member systems, and aging of Wolverine's system [ was, and continues to be, the primos reason for Nelson Tree Service, under supervision and the majority of this work. -direction froM40Vironmental stoff, continued with brush clearing and fra trimming work on All departmental efforts were aimed at ensuring severol of the Cooperchve's rights of-way. En-transmission system Integrity continues of high vironmental stoff were also octively involved in levels: the procurement of odditional properties and rightvof way for electrical substations and - New distribution substations were constructed transmission lines. The environmental staff is and energized at Drentne and Osceolo. A tem-also monitoring oli toxic, hazardous, restricted porary mobile substation was installed at South use chemicals and oils for proper permits and [ Airport, until the permanent substotton is finish-required records and procedures. ed this June. Each of these substations was, or - I is being built, specificolty to accommodate in-Energies were also spent on clean up efforts of creased system growth. lhe Drenthe Subsfotion, the Grand Ledge Substation this post summer y constructed on behoff of O & A Electric os vandois pierced on electrical transformer Cooperative, serves the new Highpointe In-radiator cousing several hundred gollons of oil dustrial Park near Zeeland Kolium Chemicots. to be spilled on the substation property. Wolverine stoff and line personnel and the Michigan Department of Natural Resources gg, : worked very closely together to ensure clean. l sw.,. Up was completed in compilance with all op-J ~ plicablo fogulations. i 4 rgwpwme _. y. K"~'7* The Apprenticeship Unemon's Training Pro-Ngg wed l gram, supervised by Safety Director Art l h G,2 @ p fq 3 g eelT?M N gg Bingham. conhnues to flounsh, in excess of 20 gj investor-owned municipo! and electric j l <. .% jf/QF ;m - ^ \\5 cooperative utikties presently have linemen y7

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porticipating in the classroom /on-theiob 4 t pmm..um -uuma - mwanm-Implementation of a new Computer Assisted o!so served by O & A Electric Cooperative, is Design (CAD) drafting system is alread/ helping tne pnmary benetoctor of the Osceolo Substo-to exped;te several of the department's draft-tion Coerryland Electric Cooperchve member-ing and technicion functions. This new CAD customers. J P. Manufactunng and Lake Pointe system allows c much greater degree of oc-Vil! age ore two examples of the commercio! Curacy, precision and speed in all electrical and industnot growth which o'! Owed Wolverine design and drawing areas A new GO TRAC to construct the Sourn Airport Substation 300 Flex Troc unit has also been purchased Severo! new d stnbution substohons are being and will greatly improve pole change out considered in '1990. procedures 9 .4 ,-a .v

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f< 4 ); 1 i ,s x + + s On February 21,1990. Wolverine, the Detroit Edison Company and f/ the Rurol Electrificotton Administro. ~ /. g. flon completed the landmark sps ' Y,. 7*'**),, t. f'M %,$ [ ogreement that allowed the .N6; Cooperative to sellits entire owner- .q s (f. - ~ [h /) .~ hf ]- ship interest in the Fermill Nuclear g {3 y qq}h(: y%g y g f +?' Power Plant back to Detroit f.dison. ( y,. f p-Enomining one of the many closing < S ypt. gp {- g);,. I documents are (left to right) Jock

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9 VonMork, Acting Rf A Admmistrator, Kyp', 4 w - j y f g' "ge y ggf;;@[$p$Mft.,W w $he Roymond G. Towne. Wolverine p,s .,,4 ).g .. a (k!y <[LWih4% P4Q 4 General Monoger and Walter J Utsp u% .-.,[%Qijgdg%g;g[bjhf{[fy ?O'4%Argf '. A.

1. j McCarthy Jr., Detrott Edison Choir-gj

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f Farmi IlChronology ] y s 1968: Pions revecied for six. year $226 June 1985: Ed: son agrees to make J mi! bon Fermi plant. Wolverine's interest and principal payments in retum for a buy back of a r 1969: Construction permits sought and portion of Wotvenne's ownership in tne site proporohon begins plant. 1972: Atomic Energy Commission (now July 1985: NRC grants Edison full-h the Nuclear Regulatory Commission) power license for Fermi 11. giving it.the j j p issues permit. highest rating possibfe for o nuclear -! ) piant. Edison officials predict 75 percent 1973: Costs double to more than $500 power will be reached by October. l militon. - l(i July 1985: URC !eoms of premature i 1974: Construction stops for 27 montns cho.n reaction and orders piant not to go j until 1977. beyond 5 percont power. ft 1977: Northem Michigan Electric September 1985: Ed4 son makes hrst j Cooperchve and Wolvenne Elecinc interest payment for Wolvenne p Cooperchve (forerunners of Wolverine October 1985: Fermt Il shut down for ' Power Supply Cooperchve. Inc.) jointly rouhne montenance purchase a 20 percent ownership in l March 1986: Ed: son beg;ns making - I, ( Fermi 11 { ( 1978: Cost eshmates fecFermt 11 reach Wolverine's pnncipoi payments in ex-r Si billion change for buy back of a proporhonal. g amount of Wolvenne's plont ownership. 7 1979: Three Mae Island occident resuits July 1986: Cost now of $3.8 billion. NRC ( in design changes at Fermi 11 and other g nuctor plants opproves restort low power teshng. O 3 1980: Wolvenne Etectnc Co-op and September 1986: NGC grants per-k y Northern Michigan Electric Co op seek missi n for Fermi 11 to operate at 20 per-i pe V 5181 miikon in addihono: icons from the cent power: Cost reaches $4.23 b4 lion [ Rurat Electrification Administration (REA) October 1986: Edison nears compfe-to hnonce their shore of increased Fermi g fion of first phase of testing of 20 percent / h construchon costs power. Commerciol operohon predicted kj U 1981: increased reguiotons push con-bY M Y N $Q g struction cost to $2 bi! hon October 1986: Wolvenne agrees to 1982: Northern M>chigan Electnc Co-op sell the remo;nder of its ownership in Fermi f5 and Wolvenne Electnc Co op seek on cd-c back to Ed son for opproximately $550 4 d: trend S220 m@on from the RE A for Fermi m on on January 1,1990 in the moon-3 A 11 construction hme. Ed: son will poy $264 million in in-j terest and pnncipot for Wolvenne 1983: Construction 95 percent h January 1988: Detroit Edison meets ? guicehnes proposed by the Michigan qi i 1983: Wolve ine Power supply seeks od-we seMee Commisuon ona w n K$ E ditional Si70 milkon loan from REA to begos commerctoi operchon Detrod Q[y p finance Fermi 11 construchon Edison customers begin to see ineir efec-t tric bili increase os o result of Fermi it s ng l 1983: Wolvenne and Ed' son reach ed h{g? ) 3 m$n7c$,"s'in F January 15 16,1990: Ferm H pre- 'V "*

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h i 1' j closing held of RE A off.ces in Washing?cn. d* &ng@:p ? D C. I January 1985: Waivenne announces i it may need a fourth REA toon to pay its February 20:21,1990: Fermi 8 so;e b q interest on Fermi H invastment costs closing is he d in Washington. D C Detroit [ jh 1 Edison assumes Wolvenne's teto! owner- ? M 9 Merch 1985:cermi li gets hcense for ship in Fermi n and tne Cooperchve is 1 i q low power Toshng cost now pegged at relieved of approximateN S550 muhon in (gf a S3 t been related indebtedness 9dg aa

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y 3. Financial Highlights 1989 Assets - 877,173.186 Operating Revenues 61,348,334 Total Cost of Electric Servico 56,643,994-Non-Operating Margins 1.012.066 Net Margins 5,734,576 System Peak Demand (mw)- 245 Energy Sales (mwh) 1,223.639-Member Revenue per Kwh sold (mills /kwh) 49.91 Purchased Power Costs (mills /kwh) 32.46 Total Cost of Electric Service (mills /kwh sold) 46.33 Advance Plant Fuel Cost (mills /kwh)' 24/2 Purchased Cool (S/ ton) 50.29 Fulltime Employees 123 l Purchased Power Costs (mills per kwh) 33.00 32 ab 32 00 31.00 30 91 30.65 30.00 1989 WOLVERINE GENERAllON AND PURCHASES -29.00 V 28 00 "W R 'W 27 83 . cooperchve U /, ipja > 27 00 - Pod e 3m 26 00 26 00 h"* ffhi$shS N fjk 25.00 g * 's

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c w 1 1.. .4 .~ W'" y w ) m,_ &,_ Coo 3ers: &Lyarand 4 Report-of Independent Acc'odntants! s ,m; o 1To:the Board of-Directors andfMembers of? <WolverineiPowe' Supply Cooperative,Inc.: r

We have audited the'a'ocompanying b'alance sheets 6f! Wolverine Powe'r Supply:

Coo'perativeilnc. as of De' omber:31H989.and 1988, land the related sicitements;, c - of revenue, patronage capital and other equiiles, and-cash flows for tne years then,. ended. These. financial' statements ' are: the' responsibility;of L the1 Cooperative's - -manage'm.ent. Our responsibility is to express an opinion' on these financial statements J based.on'our audits-We conducted our audits intacco_rdance with generally. accepted auditing stan-dards.'Those standards require that we plan and perform;the audit lo obtain, reasonable assurance about whether the financio1 statements are free of material.- misstatements. An audit includes' examining, on a test basis, evidence supporting the amounts and disclosures in' the financial: statements. An: audit alsoLincludes -assessing the accounting principles used and significant estimates 1 mode tsy; management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.- In our opinion, the financial statements referred to above present fairly,ln all material respects, the financial position of Wolverine Power Supply Cooperative, Inc. as of December 31,1989 and 1988, and the results of its operations and its; cash flows . for the years then ended in conformity with. generally accepted -accounting principles. As more fully described in Note D to the financial statements, construction delays. and cost overruns at the Fermi 11 Nuclear Power Plant (Fermi 11), in which the Cooperative had an undivided ownership interest'until February 21,1990,'have adversely affected the Cooperative's financial condition.. On December 14;1987, the Cooperative entered into on agreement with The Detroit Edison Company (Detroit Edison) to sell its remaining ownership interest in Fermi 11 to Detroit Edison on or about February 21, 1990. Under the agreement, the selling price 'was equal to the-Cooperative's Fermi 11 indebtedness less $200 million. Detroit Edison assumed respon-4

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l ? {. . 'l 'I: ' - 1 r t 1 3-, y( + ,.j t .j w y s. _s ..m 4 a -i MICHIGAN 46l NEWAYGO s WOLVERINE POWER SUPPLY COOPERATIVE, INC:. y .g, 1 BALANCE SHEETS, os of DecemberL31.1989 andl988: > ~. j ( ', ASSETS 3 I~1989? ?198i' M, a 1 ] - :- {loctric'plantrat cost i. +

(Notes. A; B.'G ond,). -

1 ' ' ' in service ' 4 $, ;i17,798,308- .S-1115,746.264 ' ^ ' J.160.566 y f 3.282.882(

Construction work Irf Orogress.

g. ' 17.906530i i 121,081,190:' .c 2 'l + J.kessa AccurT)vloted' depreciation and 0' omortization -; ~ ' 1 . ~ ^ 44.278.291 - t' 47,739.544.: Net.electnc plant 73.341.646 - J73A28iS39 ' ~ [. Y' nvestment in Fermi 11.'at' not r Idoble 766.415.653" 755 4B7.250 -

value (Notes A. D and G)'

'q. Other ossets orid investments 0 s ' investments in ostociateo n 3.598;848-c , organizations (Note C) 3.015.954 s . Note receivobiel -237,726- '235.558 , T6tal other ossets onc investments ' ~ 3.253a80 '13.834.406 e ~ Current ossets: Cosh ond cash investments > General funds' 8.090.833-7,249.3011 , 56;714-

ii4.807i Cosh Construction funds -

,4.678.G34 71S;720, i's Rote increcae escrov( fund (Note D). Accounts receivable .7.208.720 6,397,416; Receivable from Detfoit Edison (Note O) 16.794.828 149,211,742 - Materio!s and supplies (Note A1 ' 7.486.50^ : '7.807.448 ' Other current and ocerued assets - 395.979 534.624 Toto! Current assets ~ 44.801.617 42.031.058* Doferred charges '288.993 Total assets ${ 877.173.186. . SL --885,909.656 - r + \\ t y t s 1 1. (' The accompanying notes are o part of the financloi statements.

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O; i 3 u 4 x ,,.2 r 1 D ~ ..'\\ 4 e f. ~ N .. 3 s f 7:.. EEQUITIES AND LIABillilES. 1989 '1989.1 ~ ^ 1. C Equities K$ '. ' O 00 0 . Patronogo capitat :

5. 6 -

.,520.046;115 4 15.341.774 : . Memberships F i,400 .Othor.~ eqQite. s -

3.920.042

2.892.807: 4 3 s 4 ,. Total ocultieb ^ '18.235.9814 1 -21967.557* f Long-terrrt-cebt (Notes D.ond G)- ,.1 s . Formt 11 ; 1749,946.876 363'.881.70tel i ~ Other 4 67.072A77 ;

60,708 707 2-Totoi long-term deot -

. 833.590A08 L .,t_ c B 17.019_.353 s J Comm! ments and contingencies 4 - (Notes D ond ()1 n. y + Current icoliities;. y ~. Cunent motudties of tono term debt f s ,,(Note G). 8:100.~000 ! 7.'000.000i ~. Fermi 11' s .3288200; 2.520,600 , Ottier , As^ counts paydbke - purchosed powef' l 5.205.9001 4.396.541 < Accoun's payobie f otner

939,918..

578.988: rRotunds poyable to members.(Note f) . 366.868 f 975.159. Mows and wages boyade' ' >. {820.023 ', t981633l . Accrued vocat:on and sick leave 659.t>75 ' t' 641.945 - Accrucci irrknest (Noto D)' '15 805.602 .... :16.008 A01 ' ,7, ' Total current liabiuties 36.486.276 ..-..J34.083.267-1 Total equdies and liabilities 877;i73.186' '. --885.909.656[ r t I 4 w g / l 3 Y1 s ( ' J' i s .Vi',, l 8'. L 17: u s s [ h f r.h' k j.: ,i' .a 4., h 3 r

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.jI-4 I,z' .s a + 5 ,,.e=, k. I. iE ,i ~ ? y 1 ( t -w. 4 . c. =+- x s i 4 y - -, On a n N 5 ^ 4 0, e l STATEMENTS'OF.PATRO. AGE CAPITAb AND OTHER EQUITIES N I -for the years ended December 31,1989 and 1988 e 'E

PATRONAGE CAPITAL

Y g. .;4933s i r . r.. Balonce; begv.11ng of year ;

S.

145.341,774.- ..S ,13,884.250 l ,j ( n s Ope (atinih morcinsi ossignoble.: L-4.704.341 ~ .457.524 i

. 5 t'

' Botoncor ond'5t yearc JS. J20.04$.iiS2 Ij. '45;34 6774-1 .S 4.704.341' $\\ b fi.457.52d . Aisignoblel 15.341,774 . ~ "13.884.250 - + Assigned to date ; - r &["g$es%ga fdffA 8MM @dMNdM

k. M Nh % #dMMk$9hNFWM@49wegg$g$w

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?=809A494M 4[WME$620.384%FW GW@M@6 Qh$cqbuntfpoyobiddoths@Qf %9M g366,930$4 QNM469463)M%QM '

p Espnn8 ~n W@p(608,29.1)NF@ mw.= dp eMM f %n$p;$pu H6 L Mam QM 162,610) pug ytMW69;770fp a .a ~ w - g gmw aw m gg g@ox;es ond p ~ ages (pdyoble g~tS. $. f[Dg:$ki Qw%w w%pfG Mccrued:vpcolson and sick leove MUQ M Kf % $ gy(MZ %p NF f tQ 3jne A W a~m+aHAcWkedintoiest@g~ M M, ~ M, ~MM. 4RW.,V J " h202.199)M Q dW q N ns ~ w c ~ a.% s ww m fQ9Qg$g≫&w > ;#w:. &v. nw 7 % 6 to*:: % ' a m a~ vy?g u& y y -4g q: a Q n% ~ y M:y ;. 2 Shlyosh:ptcylded bpc6n;L @a ctinding d g 4 <+g. wmg q ngew amiceps M@weyy n M q;igy wA

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s 3 QQ%,jMyggigdp$q My-m Aq%N ep, ST M i d. ? oneratiryggtivitiesp ?!Q M.;v m%,%d 7g A@; $g} 7 k MM $p/p ww t nn,. 4 <v~ r m,%w,29'3459QQQ *Q@iO3,02tK,gn y@, n7 m y., . m, wwy., eQn. m w &x.;,,n w y c - .m c vwe.m, n , - ', nw$$$my?*$@W@w!w% n; 9 wv n m pc ~ ' ', WMope'roting a* ANej Cosh provided-byjused;lnld$ continued $ g

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+ %a U s a% < m, n x; m.,ctwi,tisGAw%. , M, S ; ' % ' ; 4: W@FW _., f rG W - Wc7 Amis g wy n ms -.. s n: & dNet cash provided by operahng;actlyities A @y a _,_a y nga MC2.j< ' M f{ ' 8 .,FL ..n. D.s .,o -%7.293A59 MV9 ~ ; - M103,02th jW Gl' 4 i i - Jms. .;n-c. ' s 1m' ^ way 'W',% e E*i mz w'; w:4tkv ' W.W p, tels& ,s m --m;t ukus W Y: ~ s w A nW: \\' s ': va i 5 'ae

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$ G N}jg %@ b {jf(14' M 322A64 9 w Mst >? M me $ ' Q' 'V^c,dA gg"c j Cash,flons prokided.Dv;(used in) investing actavl,liesh Qy q W.J pu 6p 9 ,-:i r p$g@ y b I. i g;W i w. p pWM!.WCopitoicredititofundod!rsCFCE ' 'Joceedsiffom sole ofinves,t.mepun Ferrn! 6( %y o Og NMi 3 P..w 44 i dii f 4598,063MQW# " M72L5EWWM LMg@M a.JPoym'ents receivled oh noto"fotlsoie of office bUhdMb c ' i, C R .+ A3,737; tim -M J O 8;542/ N C M M M ., n W M ~ Q" N E ~ $ 000jl $2 "l'i V R g-bR

Purchase %f other.investmentsT

~ dCh t (foyments fdr jr terest and ot'hdr cosisfcopiiobedL " ', " M.k # .j % 2$ -8 :%' @ % % % % fd %p O, " s gfrelatingioformi O . $ h(1,906A22)l;l'N i-(3.327A68)( @% P ~ EMM V ~ [, ~g

• 1 bD lPurchoso Df electric]ptont u....,:;

s x n a- -..w . 's..,. m w kepiA ~ %vo y%n:: m. MMet~ cosh proylded Mr (used in)inve%ng; , ' W(4.632;090)?f '. m' ' f" a ;7342,663' ". ' %.., pa. M f < N; c _iyW I Se v 4. . soc #vitiesJ b-44 -s 2 pgd + <

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s.,s p.m a y cq A i % M; n 1, ^ 4' yt7 m -g,3:;g; - ,t w s-ns -a 3 3 ..p. o g. 5ar Mhjp , @ Cash,frows. provided by (u' sed in} financM octiVitiesl;[; ' "T630.000 ' 9 R OS.000 C .h Q 'Ni i s,. 4 QWL " Advances *froniinA % ( L ~... t r M+gkhi ddi**nts a longJerm.debi : j Ae MUL676)P .'E,yj mo e v. a- "(2.$07;63g. L- ,s %,$[g; %.l:W$7 s

3. Cash provided by (usedjn), financing '

m +

+

i nF: ~ 'v 2l @ g jg>g ? ' a{, > ~.. i a 4 .j j 5 octivities - , ~ .fi .4 "(L877,630) i a +[,M, q 4 13,325W s t q. i, i-n.. a., s. .+ ~ s. 4. .-d, k , '. ' ' ~'.j ' % u. v ;,' ).3 [ gj, 9 4[f (g#p,. > c,y4 q itnereose in, cosh ana cosh lovestmeds! n. . + ~ A. 3783A39 -. 9 A59,009n L,M. + (s.m ',,sW 1.Costiond cost [inyestments/ beginning o,f year 4 17.3643084,.e 't 9 5,905.099 6 4 M, Huw g

7..f ", b (

W 7 p**p,p - _j' 2 ~/ , ~.-j j ,7 i

i...

+; r 4s_ V. COs@0nd CO$hjnvestmeN5, $Dd Of yedr, .,,a-m: s_ h$k,1 .1.:

$ ; ' ' 78J47,$47!

L$( ' 2 7,36dMOE! ' M wrn 'n m'. ', ,s N 4 /;r il . Sim m.n M-Nt 3 Yi h@%m v w t.%... - e e h kC ' ($ubpidmerifoi disc {osur'es df cash'fdk informationi _.. ^ ~ ^ y _' C04h paid during the years ended December'3L iC89 ond 1988 fori y ['M $ tolerestJDeilof interest codifolitod ' ~ - 2,276.351f ~ /3'62 {89M,A,%',. ]C ?kQ ly.' +S : . i, - N[ $l h., W{ (# $} ' + 's ', 4 A r,, u hfl$hh:YM' f The CCCompanyitig nOfes ofe o port of ING fincricial $tbfements. ^, 7 _ l f 4 wpngy s x mw .a.w / M: m-[ .+ Q $h. ~ QQ, ;i Oy% &.L,.,!' SWO; r id i

o. wM.':hw[% j ?Qy ?g [ ~' dy>,.. + ~ ';p/,_,. % r...,

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• ' 4.,. %WT H,

u .g 3 nm,, g,u.- 4. l?.$:t d bh W Y M'?Ib?l,' u. u _i _w ,, n p ,ws. N h'h f& h] f.: bu ~ l ~~ %*j %* .x OY ? ' '? N Y ^O. J 1 ,1

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+ ,e 3 ), INOTES TO klNANCNSTATEM&dS. ~ >W (for;lhe ' years encieci Decembef3 O 4989 aridi988. / y. 4. A l i t4OTE A' l ACCOUNTING POUCiES? V, , e - i l,. el 'The foliosing is o sumtnory of the accountitig pohties adopted by Wolvenne Power Supply Cooperative.- i inc]the " Coop' rafke") whkh have o signihco6t effect on the/Inoncial sta'ements 9 e 7 Moteqats.ond supplies are stated at overage un!t cost &hich is not}ln excess of) 4 jnventory Vatuot;on f e .m momet - fermil! Costs i The Cooperaftvo hos capitoland di costs incuned in connection with Formill. including : d i.. interest costs'en Formi 11 t'eloted debt (see Note D) Totoi interest costs of S L775,944 and S$214245 l 1 ,' wine capitchzed daring t,he yeois ended December 31,1989 and 198S, respect.ve[y,' .} .. ~ } fermi.li n under an agreement for sa% ond Is presented separately in ine.bolan:,e sheets. The Currymp. ? m .e omount at DecorHoer 3(1989 lond 1988]nctodes opproximately,$200 mi! bon of eshmatedloss on. 3 disposch which is being 'defened in occordance with Statement of Financiot Accounting Standards. e .No. 90 hee Note D). M4 ) , + e federahncome Taxes i The Cooperative.k exempt from todorofinchme toxes under Section 501(cll12)1 of the infemot Pevenue Code. Thereforo. no provision,for federal Incorne taxes hos been mdde in these. 6nancial statements a -g t + .Q A. LN_O E_ m ELECTRIC PLANT AND DEPRE'CIAh0N - 4 Bi .s 1 Electric piant in sonoce consis'ed of the following at December 3f c 1987 and A988 .J q 1989 1988-1 8 infang; tie clont S~ . 628.005-- 628 005 4 Production ptont 38.626:1901 -38,594.088 { Transmission plant

55.1.10.041-

' 54 784.332-j s . Distrmutton plant 14.573,956 14 A42.504 L Generof plant 8.851 A 16' 7,297.245 03 .ictoi 117398,308 ii5.746.2 M l L Prov!sion has been (node for deprectohon of productlon transmission.and distribuhon plants at straighb J b Ene composite annuoi rates of 310% 2 ?$% and 2.88%. respechvety: j h. General plant annua! deprociation rotes have been applied on a stra gnt Ans basis.chd are os todown s 4 g Str ctures and irnprovemehls . 2% ; j u fransportchon equipment 14-17'6 ] Powy operated equip' ment 10-11% y Communicot4ons campment ._8%' .i ' O'fice fouhture and frdures 6 10 %' j Toota onct shop ecpioment 0%' - Q g. 6%< j Labofotory eatspment Other goaerol Want $90% ]4 a Deprecc%n und any azonon of e6cctnc plant in sennce was charged as todows for the veors ended Ced tber. j 3 t.1939 and 1988 j 1 1989- '1988 c h v j f-Charged to a p Correciohon and amortuotion S 3 A53,691 S 3 A 10,336 [ Fuet handong e pense 12.20s 12 ?08 V-CJoadng accoun's 141 462 . _ 97.9827 e t Tota! ,S 3.614.36.1 3.629,526 [ '22 a 1 u

hhhhh $Yb h hY Yh b M W E S M M M M)YMWWWW MM8E$e$<p$wR;;~p$r$wc3 MS bewd AumpWW4 w g%-nhg hh$mem J n APa%A ewoe ggwng$ k@nyeJvbm k n& vg:m-@.mttw; years ended decembersw a -mw w n n n <r v.4m kNI ggg EMMWQEMor@OTESJO $NANC)AL3 STATEMENTS? Continued MQgpugggg g ms qA,ogWawm o m m m > w a m% s +Wim MMg hhh@gLp^ey%;;3;-@c M/d,pve@ +fp W E eJ2CJ$ y N MW @ k h $ $ $ $ h 0 dOAQW Ndby/MWM N6. a myp m cx f 2% 4 p $$hhkYh [MM/MWM NOTE CWSONVESTMENTS MMSOCIATED DRGAft2ATIONSM ?lh YkhY h4 WtMkh MW Njgy M MQMQMnMN W D fM Ms%w mm$mm m ma01 WW g c nM;m w w%m QlfyqyMMoninvestments in iated organizat!ons consisted 4f the fpitowing Md8MWid@%n%y>9;%w%m%@b;@&Wn%w M989@W&Hw@L.MWUQk Mi@phr:mW: j @%MWi 3 4@ NdR C ; M R M &g@M;Mk@q wgh at onqd,RurodtEliesR$w 2&wp WgWMQynk&qW M w %d468%M%pwh M wd Vv k a, xMWh ns% 7% M MytN

~ hgWKMMMhFMs, w m w a % w a m :m w w.MIF.u n n n.oMMM:

GyfMQ N Qvpam ym me n@ a.W@M m v of r M[jdNQQY ' i NMicortificoton NMMM; hdMMh@$gS $UW4G GO OW2.860A96@iQ 4$d % tBBO.69 p M y M f N b h h N N Pot n,. c4 e % ? MdW,~M M. e@redlts@andgicopit5fhhTh M avW W %W m. s#a.c 4F V 1,w 10?, A92 NNd Y M420.593r OFCUaGE. n,Wbb%w&gUg% n nam ,%m %m m % V Mg W @ v,he? W V" m ; % V, a*M MW MDAV.?MM OX Ct W n a n a s MY W;GP W%.gQ.;. L;;" n :ye A@4 =M(... ' m-,.M+ a p'% <>-.@-< TW 2:M, g' ?,e.;, i., xa -4 m%p%. &a; N.,., P,,y w. -.. - W l '9,u A+' % y,. y z. 4 Ms e y v%c M&g. %.r; d M-w Q D> e em7 g y s W M

q.W;+g- %,Q ~ n.

ny .t.. + WQh, sE;T &dG &'A >nup Q3 q,yi p,. d % qs # x B Q g g '. W h~ d~ o.ta Q @ % q M w ? - q:;%g,, %M S98,848 M sM G M g_ y W 9 71. Qf:%:wh%,._, ?$ G W3.015,954p&m#%:n :,. m%S@ r m A 4%* ~M e n d$/Q Wh MM9 MC $ NOTE Di 'SM MS S,. f Q: @ _ g% a$VC ~~4 Mh? K ~ 'Wl'!* Q @ys% g&W$p%g Q WFERMIII.3 EM 44 ,M% Jb J R e s g $m/j%8CA: $ern,iinods consi, te.MthA following at DNeinbb[p ~ ' y 3pMl3 Q f W g,qq 4? 4 % eQ 7 ggig4 s @q ThM y:v c w $ ;., + q,.= e: ~ .g c,, e, ,- m uvy n aww,4 :w yt 4- @am. ,ns, e gn g

• r. 9,:9_,,qg g(,.-

6 ,j y e 3 , e m 3 (m , -- 7 c rz3 m 3. 2.-.ug, f.: s w 3 ,p-e,.. r ; s,1iggq1g 1.1. g g, gggg3<< a,.g+9 p.g g; d 4 g 4 s 7 y 4r y ,s . _ _ g e,. g gymg ~n-w .g7 A-y,W72gi Ptont Iri se, e.ivice.- WSg 1733.896,424F Os f,: A m.r g,a g g+, j#p. ~,g V ,/< t3^Wa 733;898A24 6,A A n3%@ 5 p Jy <pg,w, < a 7 V37;930.694[:ma;M ?%s W m-y-:;,, t A NEscrow fund.s A., @w,c, h.n eA,s, w e. e. q-m o t 4 9 9 o 2 M. n

• l. i 43 #

-, O R.X037.26S. M.M,,6 m ~s n a Na _ - s. , - J Mate. ri.ots' o.n.e,t supphes>,.j W w .,i~ KDO.ferreq Operating expenses (y@C, > M. a,2.205.896W, M. M. y %g_a120$.896_ Mn-MW o,, a m %Nm T ' Wg$K,48 045 592M]M M! w mp. m Q M.FG .S + WQ,e 4,'fq%lMfp@2$@ ?g?W gw,,'a y' a-a and depreciation 1,,3 1 Og _ M B/3.8 4. . em&. wm o# h ($ v i.fotal #;, t 1 ~.. - v 8 s sn a n Ji1 Mm08,294;349N, ' ,79 W H. p u.2A50.33W WM uw e 4 wn -, =. ~.. ~ c;n_ 37 ey" 4 ', yu, r ,o o - r e u jd;, = MS% c,;w m,y~ ,.p" i .s s sm 2,- 'N - LessiAccUmuroted.depreciatio g d#.. p~ atbwnh Ae 4 t g ~ ~ j;Vb4 . im 4' *? i y ;'ppfQ m 2,4-b f 41$ k r e "E' (T: W * ; amorti20 tion %,,. $.y' 4 W518n7.099 / C46.034.683 M ,n;V .e aA,, n. >' < . pg dotot[not' c + ~L .u w. 7 55:487,2504%p~ p 4766:445;653 %L,< ~ rx-e w .d. (hk v... _ e. .. % A 'v" J P % '. %... W ' Wh ~ t- 'p4

~# w.

u m g4d l <By a Participohor( Agreement doted Februory,8Ji977, the,Coccerative ond theDetroitEdisonCompan...,. ~4 _yt"petroitf _ s d .py[ " b : ' XEcison")-were joint owner's,6s tenonts in commongof a CD93 megoWott nucleoi censrot f ,y s Ehrico Formi, Nuclear Ppwer,Plont Unwell ("Fer,mliti}q 6cated InfrenchtownJownship Monroe CounNM ' l Q<,a

Michigon{ Vndet 1,he PorticipoHo,n Agrew ent;the CooperotN e ogreed to purchose o twenty percent (20%)l ~

A,y . N, N und.ivided. inte, rest In rermiII and receive o twenty percent (20%. ) entittement to. the plant's:copocitr, an.d. ?,. M ~ v c. pg y t.. _ net energy outputy ~ / Q*.,qq. ~ Y y 2 y. + p , 9. - z -%. C . + -< 1 + -a. - ~ %A nd ,.h o u g 3 "m,. r ..,.a- .is ,s. s i When the Cooperative entered into.the Participotion A' greerrynbrd9?7s;ti,wos onticipated that Ferr'n'H,Iwould f ' ' et ggyi,' .,,u >r 13 e jpg

be completed in 1980 of a cost ofless than Si bmlorn Femil.it) cost uitimototy rose t6 more than $4 5 bj!!idry Q %y 3g 1heploni cchieved commerclot opero? ion on January 21 1988( ~ O

"? _*? <a,4 y _%. m y m .c --s .. s . ~. - '. wws O pg 3 -.The Constructi n delays Ond cost overruns have adver50Q pff0Cled the Cooperatrve's' finonC%f cond fiori and i WQ G4 cou' ed the Cooperative and Detroit Edison to enter into o number'of amendments to the inihat' Port @pon Y-s h-% MQ8 -

tion Agreemen!Jihd m6siieledant ohhose omendmentijs the Soventh Amendnientdated Decemberft4&%^ *, Q 1987; which coils for the sde of the CooperolivWs entirp Fermi If 6wnotshipLinterest as origiriolly outlined M

'W S 1 @M,,. ~ In a Term-$heet signed by the Cooperative lDetroft Edis6n:cn. d tise Rur.ot.Etectrificatfoo Ad, min,fsfictich (REA}s., - a@ on August 7l 1987. ~ *;- n ~ O- ~ ! a s u,w m. gc s 11i e M i fl s t mg y& c e,s, .= a fN. -.f' i Y 5,. S - iy

,a -,

,m ] s O e.k 9 w ,,, ta. -f. ,s.f- & _( N %.,. E D' $ qi '. s51 w 5* yg ' i 4 4 P1 b + wa M ~ ,Md W: r.4CMy,- 1 w u. >~:~,>4 }7 %} f[A_$' M /M $ h. L ms 4 y h g. t 3 w,- n= 'x $61 1 "1? % 'a 'NM MbhN@hNM h D D h SI $ '1 M dMdIMMN M i "NNE M

4 v y > w- -ee <e n w; n. s ,w,m wa :trq; a ~ n: - x y ~ w n + .? v x j v g3 4 t y. o 1 g ,a f, . a ~ s 5 e 1 p 1 NOT5S TO FIN NCIAL STdi MENTS;Contir3ued/ ^ ?for the ye~ ors ended December >3h 19fand 1988., V, ^ -e .h s , NOTE D:. 1, -i u MERMI il Contnuedc N a . = s ,, r: 9j The Ierros of th_e Seventh Amendment, which hoye been formo!Iy opproved by the Cooperotve and its membed. A, - distribupon' cooperatives;Detro.it Edisor. ond REA include the fobowing ~. , n: c DDetrott Edison provided the Cooperative with' funds necessory to meet its.quarterN Fermi ll related prin-; - Cipal and interest obhQotions to FFB lhrOugh' December 31/ i?89JTotal phncipol and interest poyments - t3 1 umade to the FFD tsy Detroit Edison for the veorsinded December 31: 1989 and 1988 were.S73,i33.200 i ond 560.972 AOL respective!y' The receivoo,e from Detroit Edisop and the majority of the occrued interest - poydble at December..Sifi989 and 1988 is c tesutt of the fourtn' quarter 1989 and 1988 payments not J .be}nO rece ved from Detroit Edison unS1,Jdnuary 2,1990 and January'ay %89l rnpectivestyS f i q, i-ln une 989 the Cooperative COnvefted) oS requested by Detroit 'Esson,itsfermtit reloted short o7 in- -3 d ~p. termediate term FFB debt into longsefrrt deot, Ine Cooperative potd $63,094 of prepayment.penoities 4 .i ' 'E assoCioted wilh the debt Conversion. i lhe Cooperchve nos entered int 6 o Power Supply Agreement with Detroit Edison requiring the purchasef /I of motor porhons of the Cooperchve's copocity and energy' requirements..on a firm and interruptible basis. , from Detroit Edison through December:31s202SJ Q s i . The CO6perotWe and Detro:t Edison nove obtained o(t regulatory approvals necessary to implernent the; ~ 1 Seventh Amenoment. o On February 21: 19VO. Detroit Edison purchokd the. Cooperative s. remaining FermH1 ow'nershiplirderest; of ; 'which time titie possed to Detroit Ed: son.1he amount which Detroit Foson 0010 the Cooperative was equo: q to the Cooperative's f otoi unomortged f ermH1 debt on January 2 A990less S200 mi! bon; and on add!tiono! g Fermi it related costs not financed. The sehing price opproximated $558 rndhon,which represents Ferm!11 - 1 debt which Detroit Edison w!ll assume responsibihty for poyment to the Federal Financing BonX : J With rosoect to the Cooperot ve's remaining S200 mphon idermi lhndobtedness'not heing asfumed by Detroit : Edison, the Cooperchve ond RE A have entered into o Debt Restructuring Agreement which is incorporated - ( lato the Seventh Amendment. On April 5; 1988. the Cooperat ve received opp oval from the Michigan PubHc -t ' Service Comtrussion (the ? Commission") to enter into sord Debt Restructuring Agreofpent with REA. j s Consistent witn the Debt Restructuring AO'eement.this remaining $200 mnon of debt wih be separated into .l two notes. o $ 100 mMon Fhed Obbgohon Note and a $100 miliron Laod Growth Note Each note shou bear <l j$ interest of a rate of 7.5% per annum commencing on the dote of sole? On June 21.1988, the Cooperative receNeo approval from the Commission. per Order No U-8994,- to imt j piement rate increases 1 ocessory to meet the S100 mdison Fixed Obligohon Note. It Wos determined that J o S100 militoa deb repoyable over 36 years at 7x5% Interest per year resuhod in on annual debt service. -{ t payment of $8148.000 The Cooperatve and REA then determined that the annual required payfnents of d $8.148.000 could be met through the eouivalent of a six mGs per kWh rate increoso effective January 1; 1990; j 4 ' The rote increase is being accomplished in three steps - one mill por kWh on June 1,1968. and on oddb

1 tional two and one hotf mitis per kWh on January 1.1989 and January 1,1990aThfs three step rate increase j

reftects the Cooperofwe3 desire to ovoid sudden and disruphve rote increases to its member distnbuhon ] s cooperatives. ( With rescoct to the $100 mioon t. cod Growin Note Ooyments thereon are based upon the Cooperchve's icod. .j growth as defined in tne Deot Rostructonng Agreement The formuto for repayment of this $100 mWon Lood j Growth Note is bosed upor 1 L t growth mumpher derived by cofcu'chng the overogelood growth of the t ts too preceeding years. In any instance, the Coccerchve's annuot payment pursuant to the $;100 million j Lood Growth Note will not be less than tne annuo' payment for the prior year. In addmon, portions of the f{ 3100 milhon tood Growth Note wh;ch are not repaid by December 31,2025 wi!I be dtscharged by REA. w 85 d, 6 } 1 < 8 M" al.O.,2 'a,d oS . -_,_,ga_g g yg

t AW ~ ~" A e m JJ a, .m o s o y At .u w- - 31e u 44; 3 ,3 e,,j u.

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>., o 4 t g' s ye 3.4 7, . y' . q a m-~ + q s y + 3 . o o< L L NOTES TO BNANCIAL STATEMENTSfContinued: j, J{ l tbr the) years ended Decchiber '3th989 fan.d 1988j ^ ~ 4 4 v ~, 4 ,n-~. t-r \\ \\E s 4 ' T.NO.-TE UnNERMiiC Conclude. d. - w. + c a,t'~ .u ~ H [- q 7 , Funds conoroted from itse rote lncreases hcVe been piaced in a Rote inciease Esciow Fundj $63hM of whsh N 1 Iwas used to pay debt converston r,eno!!#es in June 1980 Tho'remo:ntng 'fuhds in the Rote increase. Escrow - Fund will be used to t9 duce nonkrrn! p related cebtE s v. g t 11.be Cooperative ' os' received funds from Detroit Ed!sorifor the decomminio' ing of.Ferm) H oninUcisor fue( '\\ h n

expense and the decommissioning omount was deposited into o Decommissioning Trust rund.The'd;tforence ;

s "botween the nucleor' fuel expense und the principal payment of debt ossociated with the nuclooFfuel trt 4 ( [the reoctor was depostted into the Nucieor Fuel Fund & scrow accour)L Upon completion of tne sole to Defro;t i Y . Edison. the Decommissioning Trust Fund.wos assigred..to Detroit Edison and the Nuclear F nd Escrow aci, u o > count was used to reduce FFB debt reloted tofermi Hi -r 0 0perat:ng resuits of Fermill for.1989 and 1988 ore reported separatelv as d;scontinued operofloris in the i statements of revenue and are summarized below 4 u s ih / 19e9 '6 a9881 .g } e, s 4 . Revenues S-401._071.495 T 88.829.022. s -T Operating expenses, excluding 1 b I. depreciation 97.142.204.. 81.063.6091 Deprecioton ' 20.894.743 - -17.703.697 c . Total expensos H 8.036.952 ' ,98.767.366: 11'5.965AS7 ' 9.933.364i - Less, ceferred expenses + 102.073 495.- . BB,829,022 l ~ Not expensos income from oisconhneed j operations .~ 'S -{. y Depreciation.hos been provided since the date of commercto! operations'en.o straightline basis over 38 ' years DeprecioHon in excess of principal paid by Detroit Ed. son on the Fermiit related ceot hos been deferred. ' The transac? on is being accounted for in occordance with Statement of Financto! Accounting Stondoros [SFASy ' 'No ib. "Accounhng by Debtors and Cre$ tors for Troubled Debt Restructunngs" and SFAS No. 7 0 { Account; ing for the Effects of Certain Types of Regulaton." os amended by SFAS No190.JRegulated. Enter.pnses 4 Accountmg for Abandonments and D!soHowances of Plant Costs.9 whereby the remaining Fermi V re10ted ' deferred charges off er the sole to Detroit Edison of operoximotely S200 macn will be amortued to incense over the tem of the Debt Restructuring Agreement in amoubts oporosmohng principal tepoyments on the t $200 mmon cobt. -NdTE E LINE OF CREDif. The Cooporchve has ovadocie on un56 cured fine-of cred.t with tne National Rura! Utnities Cooperotve brionce - Corpr rahon (CFC) whereby advances of 312.000.000 for generot opmotons are available until Apr41990c. [- subject to CFC approvalfor advances requemen,torest on ad/ances is determined monthly by CFC. NOJEF; REFUNDS PAYABLE T'O MEMBERS ' Refunds pcyou!e to members condst of two separate refunds. The fa st refynd is determined under o Michigan s statute.1982 PA304 whereby estimated power. ost for o twelve-month period is bmed by the CooperotWe. to its member distribution cooporahves each montn On o monthly basis a reconcihoton of octual power s cost to Wimated power cost cetermines the under of over coDechon with the opproprfote cenount betng collected from or row J to the memcer distdbutico coocerchyos Total over co0ect;ons in 1989 and 1988 were 3249.474 ond S19 It514. respective:y. At December 31J989 the CooperoWe had under-cotected - $78.672. which wm be rechled through subseouent b0hngs At December 31 4968, tne Coocorotwo had ovecoMocted S569.84% which was refunded to its memberd:stnbukon cooperotnes i-f' The second a o i 3S TER Refund approved by the Board of Directors in 4989 and 1988 The refund is the F difference between 35% of interest on long-term debt and net margins before the TER Re und. The refund r .is OHocated to the members based on each member's porcentage of power purchased to toto! power - ? purchased by members. The omaunt of the 13511EQ Refund poycoie of December 31/19S9 and 1968 is 25' i' ' $445.540 and $405210. respechvery. e (;

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.f. i .f 1 7 ~ NOTES TOfl.N.ANCIAL STATEMENTS; ContinuedJ 4 for the years ended 1989 and1988 c( 4 n NOTE Go .LONG4ERM DLBT.l ~Substantially on assets are pledged s collotordi for long term debt Long-term debt consisted of the tonow- ~\\

ing at December 131L1989 and 1988;:

lW g m.. ~ 1988" 11989 : . Fermi II.. .Otner r sFermi L - Other'- - 4 " = 1,217.344 3 ' CFC- -S, 1;21 t.770 -- 0$. c 4B.663.357 ! N- ~49.946.965 3 - RE A 1 n ..---J ~ - FfB I 758.046.876 = 20.485.5501 "770.6a1301 124.073.9c8 L \\ i -*=s Total = ?758.046.876 ' ,70.360.6.77 D D 70.88 Q01

72.238.307 sf maturibes 8,4.00,,000 ?

t 3.288.200, ..., / ' : tessJCurrent 7 000.000' '2.529.600 J ~. w Long term debt 749.946.876. 5 "-61072 A77 Sc 763.881.701! - 'S - /69.7083 0[. 1 Nobonal Rurol Utih!!es Coccorative finance Corporation (CFC) n6te bears interesiof 10.5s per onrium The i s note is payable in quarterly Instoriments to.the yect 2019.' Rurci Electofication Adminishchon~(RE A) mortgoge notes bear interest o' 2% and 5% per annum The notes i oto poyable :n quarterly instoilments to the year 2018 - y Federof Financing Bont(FFB) noiesf guaranteed by REA.beor iriterest at 7.205% 40.645% per annum of ^, Decemb3r 31.1989. The rate ot. interest is redotormined by FFB of,eoch change of maturity dates Advances mode under FFB notes bsued prior to October $1; 1983 have a seen year deferment befdre the : repoytTeM of odncipo ts required, Ibe hnot principal payment of oil loons is established w1ien the notes -are issued 'At the hme of each cdvance, the Cooporchve can sefect on initial moturity date for that od-vonce of noHess than two years or more than seven ' ear' Extens_ ions of the initial motUnty date are avoitocle. y s however not to be less than two years in length Jihe tvW pedod of the initio! maturity date and extensions : connot exceed o mox! mum of sevei / ears. After the maximum sovon year moturity, tho' advances are.to - be repod occording to FFB guidehnes. ^ Maturity cotes of ol: Fermili rototoo odvancosistued of:or October 1.1983 were determined by REA based - - on the prog,>ct's eshmated commerciot operoNon dote. Alt advances under thm 9tes are to be repaid OccQfding to FfB Quidelines. All notes issued prioi to October i.1983 oni34 year niottgage notes and oli notes issued ottor October l 1.1983 ore 30 year mortgago. notes - Unadvanced toen funds of S3.545.000 ore avoitobre to the Cooperative on locn commitments from FFB ct December 31.1989. . Annual motJrities of long4orm deot f:y thoso notei being repold, exc!uding FFB' notes in defermont of December 31.1989, in accordonce with the Debt ReS9ucturing Agreement for fne next f(ve yoors are os follow 1990 ' 511.38d. 20.1991 J $11 A06,900 1992 - $11 A27400; 1993 Sii 455A00 and i994 Sii.459.300.. 4 o 4 e %\\ 'f jgl '.

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$M1989)nd 1968 There Werp"no'contt!butionhlve fd the'NRECA doctorins lilm4rotorium"oh bontributidnM d MUN v pg&l& ? k$$? $??N$por6entohs of empipyeef eompe6sotior@ers $ d&M/%!h didy Mor.e.liosed on d l-?WW0$$O QWhI g%ANMONTINGENC! esp?gg$$l]WQ$hilg&Q&$&[$Q$$$gdgyig&&$ 4%[g JGEQg Qg% %gg PKg %d%Q MMMMk MNUN$$k%NNNMNNEMMYM$%9M 7-Q NI[dMf!kMMk@h M$@g@b ~ J 8g g ' gThe Cooperative Jeotes certain wo,rehouses and equipment Minimum onnvol rental ComMilments'utWer theso $#M6 3 3% J g pp>peroJinD looses are os fotiowk1990 US R580id99WStB20M99244490f@i993X$ 4320! 1994 i:8 @s ' dQond1hereoffett32.240$$~ _N M- _WM. <.^. ~PR.R_.Mm_h; Pt jlMQ MM@G gW 9M W tly' W. ~R.'mM. d OF d f 4 ' kyM g W R % Q o _ &_ sY W Ue @ mom ~ M_ 4C khh, z.,;c~ m. e m m s ,.m-4 yd-K RODrolOKpen$94nde(OllOperatinQ leQ&e5 0ggregoted S614710rd $ 63,266 Tor th d-Mi yy y ig;j$y pyys9 and3988prospectivepp&uu gata m m w : m %,4 pg pggggg 1 ggy3 yg v W w%seexperenv isacercamn:vo;co sm am n wy A mm yw~ proceng4aqsing3ninorumeeoum of beinangpg s. Q P.. Wm not have a materlot effectioh thetooporouvei results,:o e g; * ' w iopiniondmanageme%dosocioktneadyiceofiegot'counset;ineusrboteresolutlosof thesdr>roceedin g~. s;,t g s$

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