ML20171A377

2019 Annual Report

ML20171A377
Person / Time
Site:	La Crosse File:Dairyland Power Cooperative icon.png
Issue date:	06/19/2020
From:	Dairyland Power Cooperative
To:	Document Control Desk, Office of Nuclear Material Safety and Safeguards
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Download: ML20171A377 (37)

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.I DAIRYlAND POWER COOPERATIVE A Touchstone Energy Cooperative 3200 East Ave S

• PO BOX 817

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• La Crosse, .WI 54602-0817 ADDRESS SERVICE REQUESTED irst Class Mail

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ABOUT DAIRYLAND POWER COOPERATIVE Dairyland Power Cooperative provides the wholesale electrical requirements and other services for 24 MEMBER ELECTRIC DISTRIBUTION COOPERATIVES and 17 MUNICIPAL UTILITIES in the Upper Midwest. In turn, these cooperatives and municipals deliver the electricity to consumers, meeting the energy needs of more than a half-million people.

Focused on a sustainable future, Dairyland has strategically and purposefully been diversifying I its generating resources. Significant additions of WIND AND SOLAR RENEWABLE ENERGY will continue to be made, along with plans for a RENEWABLE-ENABLING COMBINED-CYCLE NATURAL GAS PLANT. Other resources include coal, natural gas, hydro and biogas.

Electricity is delivered via NEARLY 3,200 MILES OF TRANSMISSION LINES and 420 substations located throughout the system's 44,500 square mile service area.

Dairyland Power Cooperative, a Touchstone Energy Cooperative, is HEADQUARTERED IN LA CROSSE, WIS. Its service area encompasses 62 counties in four states (Wisconsin, Minnesota, Iowa and Illinois). Please visit WWW.DAIRYLANDPOWER.COM and follow Facebook or Linkedln for more information.

2-3 4-5 6-17 18 19-23 24-31 32 DAIRYLAND POWER COOPERATIVE 33 A Touchstone Energy*Cooperative

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FLEXIBLE FOR THE FUTURE We have been preparing for these "Four Os": Decarbonization, At Dairyland Power Cooperative, Future Ready is a state of mind Deregulation, Digitafuation and Decentralization. The 2020 focused on making decisions and taking actions that position Future Ready priorities focus on enhancing efficiency and our cooperative to weather the storms of change. Our goal is not positioning Dairyland for future success.

to only survive, but thrive for our members in the future. SUSTAINABLE GENERATION PLAN I Dairyland is As the saying goes, "the future is now," and Dairyland's dedicated transforming energy resources by strategically developing workforce adapted swifi:ly to tackle the unprecedented challenges power supply plans, determining furure energy mix and of COVID-19. We activated our Business Continuity Plan anticipating members' long-term needs. The goal of intent on providing the critical service of electricity, while Dairyland's Sustainable Generation Plan is to provide a keeping our employees, members and communities safe. framework for strategic decisions regarding our diversified and competitive energy portfolio. We thoughtfully Our ability for quick mobilization and disaster response is deep consider and balance the economic impact on members, in our DNA Through planning, we were prepared to manage technological feasibility, social implications and the challenges and complexities associated with the pandemic environmental responsibility.

and protect mission critical operations. Dairyland employees--

whether working onsite, in the field or remotely-are In January 2020, Dairyland announced th"e retirement of committed to safety, 24/7 reliability, resiliency and affordability. Genoa Station #3, our vintage 345 MW coal-fired power plant, which will cease operation in mid- to late-2021. This 2020 & BEYOND difficult decision aligns with our Sustainable Generation Plan and our focus on energy diversification. Genoa Station #3's Dairyland is positioned to be a dynamic cooperative leader well more than 50 years of safe operation is a testament to the into the future. Our focus is on steady decarbonization and dedication of highly skilled staff, thoughtful planning and progressive, prudent investment in diversified renewable energy excellent maintenance practices.

resources. Our guardrails are reliability and affordability.

1. FUTUREREADY I 2019 ANNUAL REPORT

Dairyland announced major solar and wind FOCUSED ON THE FUTURE energy invesonents in 2019. The Nemadji Dairyland's Board and management work closely together Trail Energy Center combined-cycle natural to take advantage of opportunities for growth and to address gas facility will serve as the "power behind industry challenges. Together, we balance building financial the power" supporting our renewable energy strength with ensuring competitive rates and sound operations.

invesonems. This 50-50 jointly-owned A new wholesale rate design will provide additional flexibility facility with Minnesota Power/AllETE was for member cooperatives beginning in May 2021.

approved by the Public Service Commission of W JSCOnsin in January 2020. It is integral Dairyland reorganized in late 2019, focused on exceeding in our transition to a lower carbon future. member expectations and reducing overall cost. The new structure supports Dairyland's Mission to be responsive to Operational excellence is essential for 24/7 reliable members and to efficiently achieve sustainability goals.

performance of Dairyland's power plants and transmission system. The men and women who operate and maintain Succession planning and employee development have been areas Dairyland's facilities are focused on safety, while holding high of emphasis during the past five years, resulting in a strong and standards for reliable operations. agile workforce. Dairyland has a strong bench of talent which provides resiliency. This is especially important as we manage DAIRYLAND SYSTEMS MODERNIZATION I Dairyland the pandemic challenge and position Dairyland for future continues to enhance efficiency during a multi-year success. Diligent planning has prepared Dairyland for a smooth implementation of a comprehensive Enterprise Resource transition in leadership as the next President and CEO takes the Planning program. These efforts provided the capability helm in mid-2020.

to quickly mobilize our workforce to work remotely and securely from home as we invoked our Business Continuity Dairyland's Plan to respond to COVID-19. As we continue, this series commitment to of projects will ensure financial, business and technical safely and reliably environments are optimal for long-term success. Vigilant providing critical cybersecurity remains a high priority. power throughout this unexpected journey STRATEGIC WORKFORCE PLANNING I This is steadfast. With cooperative-wide initiative includes analyzing, forecasting the strength of our and planning workforce supply and demand, assessing gaps cooperative mission and determining talent management activities. The goal is to and values, we are ensure Dairyland has the right people with the right skills, in Future Read), for our the right places to achieve the cooperative mission. members.

ED GULLICKSON BARBARA NICK CHAIR, PRESIDENT & CEO BOARD OF DIRECTORS

EVERYONE HOME SAFE EVERY DAY Being FUTURE READY starts and ends with an unwavering commitment to safety. Dairyland's dedication to a zero-injury workplace requires vigilance and honest communication.

A Safety Perception Surver, completed anonymously by all employees, is one tool used to help gauge the health of Dairyland's safety culture.

FUTURE READY FOR SAFETY SAFETY DURING THE STORM I EveryoneHomeSafe POWER DELIVERY TO YOUR DOOR I As a wholesale Every Day represents Dairyland's commitment to safety in and energy cooperative, Dairyland knows that planning for out of the workplace. The COVID-19 pandemic took everyone generation and transmission goes hand-in-hand. Strategic by storm. Dairyland's effective Pandemic Preparedness Plan investments in renewable energy resources require a robust aided our rapid response to the health crisis. Dairyland also electric grid.

conducts Business Continuity Plan drills and participates in Dairyland is a member of CapX2020, a joint initiative of national grid security and crisis response exercises. By following regional utilities to plan long-term for grid reliability. To industry best standards to maintain a healthy environment for that end, CapX2020 utilities embarked on the CapX2050 mission critical workers, Dairyland protects its workforce and Transmission Vision Study to identify infrastructure ensures reliable operations.

improvements that may be needed to achieve carbon reduction goals.

Dairyland is a 9 percent owner in the Cardinal-Hickory Creek transmission line, a MISO (Midcontinent Independent System Operator) Multi-Value Project proposed from Dubuque, Iowa, to Middleton, Wis. The Public Service Commission ofWisconsin approved the Cardinal-Hickory Creek line in fall 2019. The 345 kV line will help accommodate the changing energy environment by bolstering access to renewable resources.

Reliability of the grid is essential. Dairyland invests in the safe rebuilding of approximately 50 miles of its 69 kV transmission infrastructure annually.

INTERNET FOR ALL I Dairyland's member cooperatives serve rural communities in the Upper Midwest. The COVID-19 pandemic highlighted the critical need for more and better rural broadband service to allow adults to work from home and children to learn online with internet access equal to their urban peers.

Dairyland's Fiber Optics project is a key grid modernization initiative supporting broadband expansion in rural communities. Progress is being made to enable broadband service and high capacity connectivity through installation of fiber on 69 kV transmission lines.

SMART GRID SYSTEMS I Dairyland's Mobile Radio Replacement project has reached 100 percent deployment.

The new system utilizes 65 towers for direct communication between Dairyland, its member cooperatives and field crews working throughout the 44,500-square-mile service territory.

Safety was top-of-mind for the project team, with regular safety tailgates ensuring proper procedure and open communication.

1. FUTUREREADY I 2019 ANNUAL REPORT

KEEPING THE LIGHTS ON AND POWER FLOWING Ajointpon,-.,_, As a cooperative governed by the people it serves, seeking Mlnnesota-ond ~

Power Co0p,eratlve. 8eneftttn9 input and sharing information with local communities is foundational to how Dairyland does business. Dairyland 0C°"""""_...

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gtln9"'9 Director, External and Member Relations Kenric Scheevel (left) discusses the proposed Nemadji Trail Energy Center with an attendee at the 35th annual Superior Days in Madison, Wis.,

in February 2020.

The natural gas facility will support solar and wind resources through its ability to ramp up in minutes, filling in critical reliability gaps if the sun doesn't shine and the wind doesn't blow.

FUTURE READY FOR RE LIABI LITY FLOWING STRONG I Dairyland's Flambeau Hydro Station intermittent solar and wind resources, ramping up quickly (Ladysmith, Wis.) has quietly generated clean energy since when called to serve. Nemadji Trail will ensure reliable 1951. In 2019, Flambeau had a remarkable operational power while supporting Dairyland's growing renewable achievement, setting its highest generation year on record. resources. The plant will also be an economic engine for This feat is a testament to diligent unit maintenance, which is the northern region.

critical to long-term reliable operation.

Seeking and listening to community input is a high priority.

As part of our commitment to being a good neighbor, In response to concerns about water use, a technology Dairyland supports environmental enhancements in and around design change to air cooling has been proposed. This the 2,000-acre reservoir, which is surrounded by 24 miles of method mitigates the use of water for cooling the plant and shoreline offering recreational opportunities in every season. significantly reduces wastewater discharge.

SUPPORTING RENEWABLE INVESTMENTS I Dairyland ON TRACK: NEW SOLAR & WIND I Dairyland is is joining with Minnesota Power/ALLETE on the a solar leader in the Upper Midwest, with 18 solar sites Nemadji Trail Energy Center, a renewable-enabling operating in all four states it serves. Dairyland has power 625 MW combined-cycle natural gas facility purchase agreements (PPAs) with ENGIE for 17 of the proposed in Superior, Wis. The facility has been sites and groSolar for one. Many of Dairyland's member approved by the Public Service Commission of cooperatives multiplied their local renewable energy benefit Wisconsin. It is scheduled to be in service by by piggybacking onto the utility-scale sites with community 2025, contingent on further approvals. solar gardens. Dairyland also purchases energy from three other major solar installations.

Nemadji Trail will serve as the "power behind the power" supporting renewable energy investments. In January 2020, the 149 MW Badger State Solar facility The facility will be able to respond on demand to received approval from the Public Service Commission of Wisconsin. Dairyland has a PPA for the entire output of the facility, which is being developed by Ranger Power and located in southern Wisconsin. Commercial operation is expected in 2022.

Dairyland's nearly 200 MW of wind energy investments (also PPAs) reflect a sustainable, cost-effective approach to diversification. Its latest investment for 52 MW of wind energy from the proposed Tatanka Ridge II facility in Deuel County, S.D., is on track with Avangrid Renewables.

Together, Badger State Solar and Tatanka Ridge Wind will generate enough renewable energy to power over 40,000 homes. In addition, there are 2,100 consumer-owned distributed generation installations in Dairyland's service area. Fun fact: Of these, about 2,000 are solar facilities.

BACKBONE ASSETS I The John P. Madgett coal-fired generating station (Alma, Wis.), produces reliable energy no matter what the weather brings. Likewise, the Genoa Station #3 (set to retire in 2021) has served as a backbone of Dairyland's generation portfolio for over 50 years. Dairyland's Elk Mound (Wis.) natural gas/fuel oil combustion turbines have quick-start capability for times of peak energy demand.

1. FUTUREREADY I 2019 ANNUAL REPORT

FUTURE READY FOR SUSTAINABILITY DEVELOPING FUTURE READY LEADERS I The only of a multi-year, enterprise-wide systems modernization. Key constant in life is change. Dairyland's President and CEO initiatives include the Human Resources Information Systems Barb Nick will retire in July 2020. Succession planning and Enterprise Resource Planning projects.

and employee development have been key areas of focus Rock-solid cybersecutity and efficient practices help ensure during Nick's tenure as CEO, resulting in a strong and agile Dairyland is meeting its commitment to cooperative workforce. Dairyland has a strong pool of talent, which members for future success.

has proven particularly important during the COVID-19 health crisis. GREEN POWER FOR EVERYONE I For over 20 years, Evergreen has welcomed member cooperative consumers Over 250 employees have graduated from Dairyland's to participate in the regional green power program. Private Leadership Development Program. Dairyland is also a liaison to ownership of renewable energy generation can be limited due area colleges, technical schools and universities, offering student to cost or siting issues. Evergreen participants meet sustainability internships and educational opportunities. Engagement with goals while supporting renewable energy resources.

higher education and community groups helps amact the next generation of employees to careers in energy. The voluntary program has expanded to include Evergreen for Business for electric cooperative member businesses and MODERNIZING SYSTEMS I Staying ahead of the government entities within Dairyland's service territory. The digitalization curve by onboarding best Information renewable energy and affiliated renewable energy credits Technology processes is essential. Dairyland is in the midst (RECs) are beyond government requirements.

SMART AND SUSTAINABLE I Dairyland's energy efficiency experts are focused on innovations in beneficial NET MARGINS electrification. Collaborations with national organizations yield benefits to Dairyland's membership, while (IN MILLIONS) providing insights into developing innovative technologies for the future.

Dairyland supports the growth and siting of electric vehicle (EV) charging stations in member cooperative service territories. Together with members, Dairyland also tests pilot projects such as grid-interactive technologies with EVs and appliances.

Dairyland's Load Management program adapts to current conditions to maximize a sustainable energy supply. The program offers benefits to members who have electric use controlled periodically during times of peak demand, high energy prices or to help relieve system imbalance during an outage.

2015 2016 2017 2018 2019 SUSTAINABILITY REPORT I Dairyland's first annual Sustainability Repon showcases Dairyland's focus on Environmental, Social and Governance (ESG) criteria, NET MARGINS which guide Dairyland's operational, economic, employee and community work.

(PERCENTAGE OF REVENUE)

Every action Dairyland takes, from its leading suppon of pollinator habitat to the holistic LiveWell program, is approached through the lens of sustainability. View Dairyland's first annual Sustainability Repon at www.DairylandPower.com to learn about the cooperative's diverse initiatives.

2015 2016 2017 2018 2019

BEES & BUTTERFLIES I Dairyland supports nearty 300 acres of pollinator habitat around solar fanns and substations throughout its service territory.

PREPARING FOR THE STORM Annual Business Continuity Plan drills are vital to Dairytand's ability to be resilient during adversity, such as the COVlD-19 public health crisis.

1. FUTUREREADY I 2019 ANNUAL REPORT

STRONG & FLEXIBLE FOR THE FUTURE I Competitive rates are critical to the future economic well-being of the region. To be responsive to industry and market changes, a cask force reviewed Dairyland's wholesale rate structure focused on accurately recovering cost and providing members flexibility. A new Future Ready structure was approved that aligns with the Wholesale Power Contract. It adds flexibility for future growth for Dairyland's members, effective May 2021.

Dairyland's Board and management work to balance building financial strength with competitive rates and sound operations. Dairyland has credit ratings of"A3" with a stable outlook from Moody's and "A+" also with a stable outlook from Standard and Poor's.

RATE DECREASE IN 2020 I The Board approved Dairyland's 2020 budget that resulted in an average estimated rate year decrease of 1.8 percent on May 1, 2020. The 2020 budget supports the initiatives outlined in Dairyland's strategic business plan.

EQUITY TO TOTAL ASSETS FUTURE READY FOR FINANCIAL STRENGTH Dairyland's net margins in 2019 were 8.3 percent above A major component of the Sustainable Generation Plan budgeted margins at $18.3 million. Net power sales were has been evaluating how long to operate existing assets. In at a 6.3 billion kilowan-hours (kWh) compared to January 2020, the decision was made to retire the 50-year-old 6.8 billion kWh in 2018. Class A member loads decreased 345 MW coal-fired Genoa Station #3 when the contracted slightly to 5.3 billion kWh in 2019 &om 5.5 billion kWh fuel supply is depleted. The estimated retirement is June-in 2018. Total operating revenues for 2019 were at December 2021.

$470.6 million, compared to $472.8 million in 2018.

In addition to impacts on employees and communities, many Fuel to operate generating facilities is Dairyland's largest factors were considered. These include age of the facility, annual expense, with barge and rail transportation of coal system capacity requirements, regulatory requirements, constituting a significant ponion of that cost. Dairyland's projected maintenance needs and costs, fuel supply, overall cost plants used 2.2 million tons of coal in 2019, including its of power production and regional market prices for energy.

30 percent share of the Weston 4 power plant.

Dairyland contracted with EnergySolutions, a national GROWTH & DIVERSIFICATION FOR STRENGTH I radioactive waste services contractor for the La Crosse Boiling Dairyland's members continue to seek growth opponunities Water Reactor (LACBWR) decommissioning. Its subsidiary, to enhance efficiency, accelerate diversification and solidify LaCrosseSolutions, LLC, temporarily holds the license financial strength. Three member cooperatives have acquired and assumes responsibility for the decommissioning of the load &om Alliant Energy in Minnesota, with an additional LACBWR site. The project is near 100 percent completion 90-100 MW ofload for the Dairyland system in 2025. and the license is expected to return to Dairyland in 2020.

1. FUTUREREADY I 2019 ANNUAL REPORT

FUTURE READY FOR MEMBERS AND COMMUNITIES ECONOMIC DEVELOPMENT FOR STRENGTH I POLICIES FOR THE FUTURE I Together with its Dairyland is evaluating options to mitigate the economic members, statewide organizations and the National Rural hardships many are facing due to the business and job loss Electric Cooperative Association, Dairyland evaluates state caused by COVID-19. Competitive rates and micro-loans and federal legislative proposals to determine their impact to support community businesses are examples. Dairyland on the environment, system reliability and affordability.

launched a new website in 2019 to provide resources and Dairyland works with policymakers in both parties to support for economic development in the service area.

find solutions to issues that could impact the future of Dairyland has supported about 250 projects with its Dairyland's members and communities. Legislative and Economic Development revolving loan funds, totaling regulatory decisions regarding Environmental Protection

$20.5 million since the 1990s. These loans have provided Agency rules, renewable energy, infrastructure construction, financing that has assisted new and existing businesses transportation and the storage of nuclear fuel all can purchase buildings, machinery and equipment. By helping significantly affect Dairyland's operations, reliability and the to create and retain jobs, these projects improve the quality cost consumers will pay for electricity.

of life for consumers in the Dairyland system.

COMMITMENT TO COMMUNITY I Dairyland Enhancing the economic and social well-being of "adopted" a neighborhood school in 2019 to provide communities in the region is fundamental to Dairyland's needed support for the school and families. Employees cooperative mission. Dairyland has helped its 24 member- "dunked an exec" to raise additional funds during the cooperatives access 84 loans and grants totaling more than annual United Way campaign. In total, over $122,000 was

$26 million to assist them with economic development. raised by Dairyland and its employees. Dairyland supports many other community service organizations to improve Utilizing the USDA Rural Economic Development Loan and the quality oflife: American Red Cross, Salvation Army, Grant program, Dairyland and its member cooperatives have YMCA, Rotary, Children's Museum, area fire departments provided zero percent interest rate financing for industrial and others.

parks and infrastructure upgrades and extensions including sewer, water and streets. Other projects have supported health Dairyland employees are focused on improving communities care facilities, assisted living facilities, schools and fire stations. and the quality oflife in Dairyland's four-state region.

Using their unique talents, employees volunteer and provide STAYING CONNECTED I Dairyland is a regional member community support.

of Touchstone Energy Cooperatives. This national network of cooperatives has been working together for more than 20 years to develop programs and tools to engage cooperative members and strengthen rural communities.

Dairyland's A Day with Your G&T" program has provided member cooperative directors and employees opportunities to learn about their generation and transmission cooperative, CAPITAL CREDITS connect with Dairylanders and rour a power plant. RETIRED TO MEMBERS As employees and members work remotely, "The Power (IN ILLIONS OF DOLLARS) of Human Connections" slogan demonstrates the strength of working together. It is both relevant and evident as technology is used to engage and stay connected through virtual meetings for governance and education.

Touchstone Energy Cooperatives The power of human connections<<

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1. FUTUREREADY I 2019 ANNUAL REPORT

1. La Cros.se Hintgen Elementary students 3. D airyland's safety motto is ZERO BY 5. BIRD DIVERTERS make lines more expressed appreciation with hand-drawn cards for CHOICE - EVERYONE HOME SAFE EVERY visible, reducing hazards in popular bird-Dairyland ADOPTING their school and employees DAY. Hot Stick training is one of many crossing zones. Dairyland has supported providing food and personal donations. programs to ensure employees have the installation of 6,500 bird diverters over knowledge, skills and tools needed to perform the past five years, including 800 over the

2. Dairyland retirees revealed the contents their jobs safely. Mississippi River near Genoa.

of a 1950 TIME CAPSULE discovered in the cornerstone of the E.J. Stoneman Station 4. A bird's-eye view of Genoa Station #3, 6. Employees GO RED promoting (Cassville, Wis.). The plant was named for which has provided power for 50 years in heart health. Dairyland supports Dairyland's first Board President in 1951. the region. This stack hosts a nesting box for LiveWell initiatives for employees It contained memorable community and Peregrine falcons as seen on Dairyland's live- throughout the year.

construction documents, blueprints of the stream BIRD CAM.

facility, photos, newspapers and coins. #FUTUREREADY I 2019 ANNUAL REPORT

INDEPENDENT AUDITORS' REPORT MARCH 27, 2020 BOARD OF DIRECTORS We have audited the accompanying consolidated financial statements of Dairyland Power Cooperative and subsidiary (the "Cooperative"), which comprise the consolidated balance DAIRYLAND POWER COOPERATIVE sheets as of December 31, 2019 and 2018, and the related consolidated statements of revenues, expenses, and comprehensive income, member and patron equities, and cash flows for the years LA CROSSE, WISCONSIN then ended, and the related notes to the consolidated financial statements.

MANAGEMENT'S RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS I Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

AUDITORS ' RESPONSIBILITY I Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits 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 consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Cooperative's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Cooperative's internal control. Accordingly, we express no such opinion.

An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

0 PIN ION I In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Cooperative as of December 31 , 2019 and 2018, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

MINNEAPOLIS, MINNESOTA I DELOITTE & TOUCHE LLP

1. FUTUREREADY I 2019 ANNUAL REPORT

CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2019 & 2018 (ALL DOLLAR AMOUNTS IN THOUSANDS )

ASSETS ELECTRIC PLANT: 2019 2018 Plant and equipment-at original cost.................................... . $1,810,057 $ 1,798,806 Less accumulated depreciation ..... . ..... . ...... . ...................... . (729,224) (693,337)

Net plant and equipment ......................................... . 1,080,833 1,1 05,469 Construction work in progress ......................................... . 85,461 76,547 Total electric plant .............................................. . 1, 166,294 1,1 82,016 OTHER ASSETS :

Nuclear decommissioning funds (Note 4) .................................. . 1,984 1,94 1 Other property and investments (Note 8) ........................*....*..... 11,927 11 ,258 Investments in capitol term certificates of Notional Rural Utilities Cooperative Finance Corporation (NRUCFC) (Note 8) ................ . 9,1 76 9,1 76 Regulatory assets (Note 1) ............................................ . 8,288 14,916 Investment for deferred compensation . ................................... . 1,873 1,679 Deferred charges (Note 1) ............................................ . 18,434 16,513 Total other assets ............................................... . 5 1,682 55,483 CURRENT ASSETS :

Cash and cash equivalents ............................................ . 28,465 25,599 Accounts receivable:

Energy soles .................................*.................... 40,81 0 39,81 1 Other . ..... .. ..... .. ............ .. ...... . ...... . ............... . 4,2 15 1,352 Inventories:

Fossil fuels ....................................................... . 36,11 9 44,674 Materials and supplies .............................................. . 2 1,7 11 22,828 Prepaid expenses and other ........................................... . 13,906 18,499 Total current assets .............................................. . 145,226 152,763 TOTAL .. . ...................................................... . $ 1,363,202 $1 ,390,262 SEE NOTES TO THE CONSOLIDATED FI NANCIAL STATEMENTS .

CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2019 & 2018 (ALL DOLLAR AMOUNTS IN THOUSANDS)

CAPITALIZATION & LIABILITIES CAPITALIZATION : 2019 2018 Member and patron equities:

Me mbership fees ................................................. . $ $ l Patronage ca pital (Note 9) .......................................... . 32 2,443 308,540 Accum ulated other co mpre hensive income (Note l) ........................ . vns 2,487 Total member and patron equities . ................................ . 324,3 72 3 11,028 Long-term o bligatio ns (Note 6) ......................................... . 800,519 8 11,988 Total ca pita lization ............................................ . l, 124,891 1, 123,0 16 OTHER LIABILITIES :

Decommissioning and asset retire ment obligations (Note 13) ................... . 4,954 4,911 Postretirement health insurance obl igation (Note 11 ) ......................... . 4,849 4,260 Accrued benefits ................................................... . 396 415 Deferred compensatio n .............................................. . 1,873 1,679 O bligations under capita l leases (Note 7) ................................. . 5,058 5,423 Other deferred credits (Note l) ......................................... . 53,649 58,146 Total other liabilities ........................................... . 70,779 74 ,834 COMMITMENTS AND CONTINGENCIES ( NOTE 10)

CURRENT LIABILITIES :

Current matu rities of long-term obligations and obligations under capital leases ..... . 43,960 50,809 Line of credit (Note 5) ............................................... . 68,000 79,000 Nuclea r deco mmissio ning obligations (Note 13) ............................ . 405 4,319 Adva nces from me mber cooperatives and other prepayments .................. . 13,826 11,671 Accounts payable .................. . ................................ . 23,031 2 7,380 Accrued expe nses:

Payroll, vacation and benefits ................. . ...................... . 6,956 6,677 Interest ........................................................ . 22 177 Property and other taxes ............................................ . 3,797 3 ,390 Other ......................................................... . 1,535 8 ,989 Total current liabilities .......................................... . 1.67,532 192 ,4 12 TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,363,202 $ 1,390,262 SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS .

1. FUTUREREADY I 2019 ANNUAL REPORT

CONSOLIDATED STATEMENTS OF REVENUES, EXPENSES & COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31 , 2019 & 2018 (ALL DOLLAR AMOUNTS IN THOUSANDS)

UTILITY OPERATIONS : 2019 2018 Operating revenues:

Sales of electric energy ............................................. . $ 444,760 $ 447,906 Other ......................................................... . 25,884 24,928 Total operating revenues 470.644 472,834 Operating expenses:

Fuel .......................................................... . 106,389 132,360 Pu rchased and interchanged power ................................... . 103,650 85,791 Other operating expenses .......................................... . 107,800 107,385 Depreciation and amortization ....................................... . 60,008 59,019 Maintenance .................................................... . 35,174 32,434 Property and other taxes ............................................ . 9,449 9,242 Total operating expenses ....................................... . 422,470 426,231 Operating margin before interest and other ......................... . 48,174 46,603 Interest and other:

Interest expense .................................................. . 34,210 39,395 Allowance for funds used in construction-equity .......................... . (936) (1,156)

Other-net ..................................................... . (143} 167 Total interest and other ......................................... . 33,131 38,406 OPERATING MARGIN ............................................. . 15,043 8,197 NONOPERATING MARGIN (NOTE 1) ................................. . 3,286 8,326 NET MARGIN AND EARNINGS ...................................... . 18,329 16,523 OTHER COMPREH ENSIVE INCOME (LOSS)

Postretirement health insurance obligation adjustments ....................... . (559) 90 COMPREHENSIVE INCOME ......................................... . $ 17,770 $ 16,613 CONSOLIDATED STATEMENTS OF MEMBER & PATRON EQUITIES FOR THE YEARS ENDED DECEMBER 31 , 2019 & 2018 (ALL DOLLAR AMOUNTS IN THOUSANDS)

Membership Patronage Accumulated Other Total Member Fees Capitol Comprehensive Income and Patron Equities BALA NCE-DECEMBER 31, 2017 ................... $ $ 296,389 $ 2,397 $ 298,787 Net margin and earnings ........................... 16,523 16,523 Postretirement health insurance obligation adjustments ..... 90 90 Retirement of capital credits (Note 9) ................... (4,372} (4,372)

BALANCE-DECEMBER 31, 2018 ................... 1 308,540 2,487 311,028 Net margin and earnings ........................... 18,329 18,329 Postretirement health insurance obligation adjustments ..... (559) (559)

Retirement of capital credits (Note 9) ................... (4,426) (4,426}

BALANCE-DECEMBER 31, 2019 ................... $ 1 $ 322,443 $ 1,928 $ 324,372 SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31 , 2019 & 2018 (ALL DOLLAR AMOUNTS IN THOUSANDS)

CASH FLOWS FROM OPERATING ACTIVITIES: 2019 2018 Net margin and earnings ............................................. . $ 18,329 $ 16,523 Adjustments to reconcile net margin and earnings to net cash provided by operating activities:

Loss on disposal of assets ........................................... . 2,836 3,690 Depreciation and amortization:

Charged to operating expenses .................................... . 59,813 60,486 Charged through other operating elements such as fuel expense ............ . 3,336 1,764 Allowance for funds used in construction-equity .......................... . (936) (1,156)

Unrealized gains on nuclear decommissioning trust investments ............... . (15) (104)

Changes in operating elements:

Accounts receivable ............................................. . (3,861) 2,307 Inventories .................................................... . 7,919 8,270 Prepaid expenses and other assets .................................. . 4,593 (3,204)

Accounts payable ............................................... . 4,423 2,144 Accrued expenses and other liabilities ................................ . (9,203) (10,981)

Deferred charges and other ....................................... . 1,462 3,889 Total adjustments ............................................. . 70,367 67,105 Net cash provided by operating activities . ........................... . 88,696 83,628 CASH FLOWS FROM INVESTING ACTIVITIES:

Electric plant additions ............................................... . (50,434) (51,838)

Purchase of investments .............................................. . (10,928) (42,943)

Proceeds from sale of investments and economic development loans ............. . l 0, 139 43,493 Net cash used in investing activities . ............................... . (51,223) (51,288)

CASH FLOWS FROM FINANCING ACTIVITIES :

Borrowings under line of credit .........................*................ 72,000 78,000 Repayments under line of credit ........................................ . (83,000) (153,000)

Borrowings under long-term obligations .................................. . 10,394 Repayments of long-term obligations .................................... . (21,336) 32,296 Retirement of capital credits ........................................... . (4,426) (4,372)

Borrowings of advances from member cooperatives ......................... . 390,776 265,921 Repayments of advances from member cooperatives ......................... . (388,621) (266,711)

Net cash used in financing activities ............................... . (34,607) (37,472)

NET INCREASE ( DECREASE) IN CASH AND CASH EQUIVALENTS ........... . 2,866 (5,132)

CASH AND CASH EQUIVALENTS-BEGINNING OF YEAR . ... .............. . 25,599 30,731 CASH AND CASH EQUIVALENTS-END OF YEAR ........ ................ . $ 28,465 $ 25,599 SEE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.

1. FUTUREREADY I 2019 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 20 1 9 & 2018 (ALL DOLLAR AMOUNTS IN THOUSANDS )

0 MATURE OF BUSINESS & ORGANIZATION BUSINESS I Dairyland Power Coopa:am_e and subsidiary ("Dairyland" or the INVESTMENTS I Investments in marketable debt securities classi6.ed as available fur sale are reported at fair value, with the interest, dividend income and rcalized gains reported in nonoperating margin. The Cooperative continually monitors the difference "Cooperative") is an dectric generation and transmission cooperative organized between cost and estimated fair value ofits investments. If any of the Coopcrative's under the laws of the states ofW1SCOnsin and Minnesota. The Cooperative, whose investments experience a decline in value that the Cooperative believes is other than principal offices arc located in W ISCOnsin, provides wholesale dcctric service to Class A temporary, the Cooperative will realize the loss as a reduction in investment income.

members engaged in the retail sale of electricity to member consumers located in In 2019 and 2018, the Cooperative realized $0 and $28, respcctivdy, oflosscs on these Wisconsin, Minnesota, Iowa and Illinois, and provides dcctric and other services to investments as a result of other-than-temporary impairment (OTTI).

Class C, D and E members.

REGULATORY ASSETS AND LIABILITIES I The Cooperative's accounting policies PRINCIPLES OF CONSOLIDATION I The consolidated financial statements include and the consolidated financial statements confurm to accounting principles generally the accounts of Dairyland and Dairyland's wholly owned subsidiary, Genoa Fue!Tech, accepted in the United States ofAmerica applicable to dcctric cooperatives.

Inc. All intercompany balances and transaaions have been eliminated in consolidation.

The noncurrent portion of regulatory assets as of December 31, 2019 and 2018, ACCOUNTING SYSTEM AND REPORTING I The accounting records of the include the following:

Cooperative are maintained in accordance with the uniform system of accounts 2019 2018 prescribed by the Federal Energy Regulatory Commission as adopted by the Rural Power purchase contract terminotian fee . . . . . . . . . . . . . . . . . . . $ $ 4,556 Utilities Service (RUS), the Cooperative's principal regulatory agency. Alma 4 & 5 unrecovered plant balances .................... --'8"',2::.:8;.;:8'------'1"""0"",3"""6~0 ELECTRIC PLANT I The cost of renewals and betterments of units of property (as Total regulatory assets ........................*........ ...;$:....:8~,2:.:8;;:8;...._.=. $-'1-'

4"'-

,9..:.1.;:..6 distinguished from minor items of property) includes conttact work, direct labor and materials, allocable overhead, and allowance fur funds used during construction, and is Por<<r purchase contract tnmination foe - During 2015, the Cooperative established a charged to dcctric plant accounts. Included in accumulated depreciation arc nonlegal or regulatory asset for a contract termination fu: related to a power purchase agreement.

noncontractual costs of removal components. As a result, the cost of units of property This is being amorti7.Cd to purchased power cxpcnsc over the 6.vc-year remaining term retired, sold or otherwise disposed of, plus removal costs, JCS$ salvage, is charged to of the original contract beginning November 2015. In 2019, the Board of Directors accumulated depreciation and no profit or I~ is recognized in connection with ordinary approved early defcasement of this regulatory asset; the asset was removed from the retirements of property units. A provision fur these nonlegal or nonconttact:ual costs of balance sheet and charged to amortization cxpcnsc.

removal components is recognized based on depreciation rates determined by a third.-

party depreciation study completed in November 2016 and approved by RUS in 2017 fur Alma 4 d- 5 unrttc~dplant balances - During 2014, the Cooperative established rates effective in 2017. The Cooperative is unable to obtain the infurmation to separate a regulatory asset related to unrecovered plant balances upon closure of the the cumulative removal costs as of December 31, 2019 and 2018. Maintenance and repair Alma 4&5 generating stations. This is being amorti7.Cd through rates over 10 years costs and replacement and renewal of minor items of property arc charged to operations. beginning in 2015.

DEPRECIATION I Depreciation, which is based on the straight-line method at rates The expected following year's portion of these regulatory assets is included in prepaid that arc designed to amorti7.C the original cost of properties over their estimated useful cxpcnses and other at December 31, 2019 and 2018, respectivdy.

lives, includes a provision fur the cost of removing and decommissioning the properties. DEFERRED CHARGES I Deferred charges represent future revenue to the The provision fur depreciation averaged 3.5% of depreciable plant balances fur 2019 Cooperative associated with costs that will be recovered from customers through the and 2018. rate-making process. As of December 31, 2019 and 2018, the Cooperatives deferred ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION I Allowance fur funds charges arc being reflected in rates charged to customers, except the deferred nuclear used during construction (AFUDC) represents the cost of external and internal funds litigation as noted below. If all or a separable portion of the Cooperative's operations used for construction purposes, and is capitalized as a component of dectric plant by become no longer subject to the provisions of regulatory accounting, a write-off of applying a rate (5.321 % in 2019 and 4.505% in 2018) to certain construction work in deferred charges would be required, unless some form of transition recovery (refund) progress. The amount of such allowance was $2,524 in 2019 and $2,386 in 2018. The continues through rates established and collected fur the Cooperative's remaining borrowed funds component of AFUOC fur 2019 and 2018, was $1,587 and $1,229, regulated operations. In addition, the Cooperative would be required to determine any respectivdy (representing 3.345% and 2.326% in 2019 and 2018, respectively). The impairment to the carrying costs of deregulated plant and inventory assets.

equity component of AFUDC for 2019 and 2018 was $936 and $1,156, respcctivdy, The noncurrent portion of deferred charges as of December 31, 2019 and 2018, (representing 1.976% and 2.1790/4 in 2019 and 2018, respectively). The borrowed include the fullowing:

funds components were included as a reduction of interest expense in the consolidated 2019 2018 statements of revenues, expenses and comprehensive income.

Pension prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,380 $ 8,070 RECOVERABILITY OF LONG-LIVED ASSETS I The Cooperative accounts fur the Deferred nuclear litigation ............................ . 3,958 1,167 impairment or disposal oflong-lived assets, such as property and equipment, whenever Other ............. . ........ . .........*............ 9096 7276 events or changes in circumstances indicate the carrying value of an asset may not be Total deferred charges ............ , ....... , ........... $ 18,434 $ 16,513 recoverable. An impairment loss is recognized when estimated undiscounted cash flows expected to result from the use of the asset, plus net proceeds expected from disposition Pmsum prepayment - The voluntary prepayment to the Cooperativc's multiemploycr of the asset (if any) are !CS$ than the carrying value of the asset. When an impairment defined-benefit pension plan to reduce future funding amounts is being amortiud to loss is recognized, the carrying amount of the asset is reduced to its estimated fair value benefits expense over 10 years beginning in 2013 as prescribed by RUS.

based on quoted market prices or other valuation techniques. To date, management has determined that no impairment of these assets exists.

Deferred nuclear litigation - Litigation expenses from the third nuclear contract OTHER OPERATING REVENUE I Other operating revenue primarily includes damages claim against the United States government are being deferred pending the revenue received from transmission service and is recorded as services are provided.

outcome of chat litigation. See further discussion in Note 14.

ACCOUNTING FOR ENERGY CONTRACTS I Contracts chat did not meet the Other - Costs relating co the Nemadji Trail Energy Center natural gas project are being accounting definition of a derivative are accounted for as executory contracts. The accumulated in deferred charges. These charges will be amortized when the plant is in Cooperative's energy contracts that qualify as derivatives continue to be accounted for service (currently estimated for 2025). at fair value, unless those contracts meet the requirements of and have been designated as "normal purchase normal sale." The Cooperative does not have any energy contracts CASH AND CASH EQUIVALEMTS I Cash equivalents include all highly liquid chat are required to be accounted for at fair value as of December 31, 2019 and 2018.

investments with original maturities of three months or less. Cash equivalents consist primarily of commercial paper, stated at cost, which approximates market. NONOPERATING MARGIN I The nonoperating margin for the years ended December 31, 2019 and 2018, includes the following:

FOSSIL FUELS AND MATERIALS AND SUPPLIES I Coal inventories, as well as materials and supplies inventories, are stated at the lower of average cost or net 2019 2018 realizable value. Investment income . ..................*....... . .... . ... $ 2,722 $ 7,112 Investment income on nuclear decommissioning funds:

NITROGEN OXIDE EMISSION ALLOWANCES I Beginning in 2009, the U.S. Net earnings ...................................... 112 447 Environmental Protection Agency (EPA) began requiring affected electric generating Realized gains .. .. * . ..... . ........ . .............. .. 77 56 units to hold sufficient allowances to cover emissions of nitrogen oxides. Under these Realized losses and losses due to OTTI ....... ....... .... ~ (33) (478) requirements, the Cooperative is required to surrender one emission allowance per Provision-----fecorded os estimated decommissioning liabilities .... (156) (25) ton of nitrogen oxides emitted, on an annual basis and seasonal basis (May through Other .... , ..... . .. . ........ , ............... . ... , .. 564 1 214 September "Ozone Season"). Actual emissions during 2019 and 2018 did not Nonoperating margin . . .................. . .. . ......... $ 3,286 $ 8,326 require the Cooperative to purchase additional allowances beyond what was allocated under the program. As of December 31, 2019 and 2018, allowances are recorded in USE OF ESTIMATES I The preparation of consolidated financial statements in inventory at the lower of average cost or net realizable value. The transfer to the EPA conformity with accounting principles generally accepted in the United Scates ofAmerica for repotting year 2018 allowances (annual and seasonal) occurred on March 1, 2019. requires management to make estimates and assumptions that affi:ct the reported The remaining allowances in inventory as of December 31, 2019, will be surrendered amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at co EPA, as applicable, under the terms of the consent decree between Dairyland and the date of the consolidated financial statements, and the reported amounts of revenue the United States and the Sierra Club. and expenses during the reporting period. Significant estimates in the consolidated DEFERRED CREDITS I Deferred credits represent both future revenue to the financial statements relate to poscretirement benefit obligations, asset retirement Cooperative associated with customer prepayments and noncurrent obligations and obligation liabilities, fixed-asset depreciable lives, and litigation and contingencies. Actual reserves related to operations. As of December 31, 2019, the Cooperative's deferred results could differ from those estimates.

credits are being considered when determining rates charged to customers. ACCUMULATED OTHER COMPREHENSIVE INCOME I Accumulated ocher The noncurrent portion of deferred credits as of December 31, 2019 and 2018, include comprehensive income is comprised solely of a postretirement health insurance the following: obligation. See additional information in Note 11. The components for the years ended December 31, 2019 and 2018, are as follows:

2019 2018 Unearned revenue--<:ontroct prepayment ...... . .. . ... . .... $ 51,558 $ 57,286 2019 2018 Other .. ........ . ...... . .. . ................... . . . .. _ ....2.._0___9___1 _ _~8.... 60~ Balance-beginning of year ............ ... .............. $ 2,487 $ 2,397 Total deferred credits .......... . .. . ................... . ;;.$..;;5;.;;3.,;

,6~4"'-9-"'

$-'5a.a8.._,""l4""6'- Recognition in expense:

Amortization of prior service cost .......................* 65 (102)

Amortization of unrecognized actuarial gain ..*...........* (154) (1 40)

Unearned &venue - Contraa Prepayment - During 201 5, the Cooperative and Great Actuarial assumption changes . .......... * .............. !470! 332 River Energy (GRE) reached settlement terms amending a power agreement which Net other comprehensive gain (loss) ...*.............. (559! 90 shared coses and benefits of the Cooperative owned 345-megawatt coal fired generating Balance-end of year ........................ . .. . ..... $ 1,928 $ 2,487 unit located in Genoa, WISCOnsin ("Genoa Station #3"). The settlement terms allowed GRE to end its purchase of power and energy under the agreement as ofJune 1, 2015, CONCENTRATION OF RISK I Approximately 42% of the labor force for the upon prepayment by GRE of $83,543 for certain obligations under the agreement.

Cooperative is under a collective bargaining agreement that expires January 31, 2023.

GRE is no longer entitled to any output from the unit. GRE will remain responsible for its share of eventual decommissioning coses and of any liability for disposal of SUBSEQUENT EVENTS I The Cooperative considered events for the recognition coal combustion byproducts. The transaction received required approval from RUS or disclosure in the consolidated financial statements chat occurred subsequent co during 2015. December 31, 2019, through March 27, 2020, the date the consolidated financial statements were available to be issued (see Note 17 for description of subsequent events).

The prepayment is being recognized into operating revenues on a straight-line basis through 2029, the ~pproximate time frame over which the prepayment amounts would have been billed. The amounts recognized as revenue were $5,729 during both 2019 and 2018.

SALES OF ELECTRIC ENERGY I Revenues from sales of electric energy are recognized when energy is delivered. The class A wholesale rates approved by the Board of Directors have a power cost adjustment that allows for increases or decreases in class A member power billings based upon actual power costs compared to plan. For 2019 and 2018, the power cost adjustment to the class A members resulted in credits to sales billed of $239 and $0, respectively. These amounts are recorded in sales of electric energy in operating revenues on the consolidated statements of revenues, expenses and comprehensive income.

1. FUTUREREADY I 2019 ANNUAL REPORT

(~ ACCOUNTING STANDARDS In August 2018, the FASB issued new accounting for defined benefit plans. The purpose of the amendment is to modify the disclosure requirements for defined benefit RECENTLY ADOPTED I In May 2014, the Financial Accounting Standards Board pension and other posuetirement plans. This guidance is effective for the Cooperative (FASB) issued accounting guidance on the recognition of revenue from contracts with in 2021. The Cooperative is currently evaluating the impact this guidance will have on customers, which will supersede nearly all existing revenue recognition guidance under the consolidated financial statements.

generally accepted accounting principles (GAAP). Under the new standard, entities will recognize revenue to depict the transfer of goods and services to customers in amounts that reflect the payment to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows from an entity's e INCOME TAXES The Internal Revenue Service has determined that Dairyland is exempt from federal contracts with customers. In August 2015, the FASB issued accounting guidance income caxes under Section 50 l (c)(l 2) of the Internal Revenue Code. Accordingly, deferring the effective dace by one year. The Cooperative adopted this standard effective the Cooperative's utility operations are generally exempt from federal and state January 1, 2019, as required, and used the modified reuospective method of adoption, income caxes and no provision for such caxes is recorded in the consolidated financial with no material impact on the consolidated financial statements or internal conuols. statements.

0 A comprehensive review of contracts and their associated terms and conditions was completed. Based on this analysis, it was determined that a cumulative effect adjusunent to retained earnings at January 1, 2019 was not required. See Note 16, AVAILABLE-FOR-SALE INVESTMENTS Revenue from Contracts with Customers, for additional disclosures.

Investments in the nuclear decommissioning trust (NDTI are classified as available-On January 1, 2019, the Cooperative adopted Accounting Standards Update for-sale, recorded at fair value, and recorded within Prepaid expenses and other (ASU) 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the and Nuclear decommissioning funds as of December 31 , 2019, and Nuclear Presentation of Net Periodic Pension Cost and Net Periodic Postrecirement Benefit decommissioning funds as of December 31 , 2018. Investments under debt agreements Cose, as issued by the FASB. Under ASU 2017-07, companies are required to are classified as available-for-sale and recorded at fair value. lnvesunent balances as of disaggregate the current service cost component from the other components of nee December 31, 2019 and 2018, include the following:

periodic benefit cost and present it with other current compensation costs for related 2019 2018 employees in the income statement and present the other components elsewhere in the Fair Value Fair Value income statement and outside of income from operations. In addition, only the service NDT NDT cost component of nee periodic benefit cost is eligible for capitalization. The new Cash and cash equivalents .......*.........*.........*. $ 2,017 $ 1,999 guidance was adopted on a retrospective basis by the Cooperative in 2019, but because U.S. government securities . . . . . . . . . . * . .. . . . . . . . . . . . . . . . . 183 1,673 it did not have a material impact on the consolidated financial statements, the prior Corporate bonds . ............... . ....*.*..... . ..*.**. _ _ 1__8__9____2.,5~8~8'-

year amounts were not restated. $ 2,389 $ 6,260 NOT YET EFFECTIVE I In February 2016, the FASB issued new accounting guidance for leases. The new guidance increases transparency and comparability among The contractual maturities of marketable debt securities, which include U.S.

organizations by recognizing lease assets and lease liabilities on the balance sheet and government securities and corporate bonds, as of December 31, 2019, are as follows:

disclosing key information about leasing arrangements in the financial statements. In Fair Value Cast January 2018, the FASB issued additional accounting guidance on leases, amending Due after 1 year through 5 years * . . . . . . . . . * .. * . . . . . . . . . . . $ 145 $ 141 the guidance issued in 2016, co simplify the transition to the new guidance for land Due after 5 years through 10 years . . . . . . * . * . . . . . . . . . . . . . . 127 125 easements. The new guidance will be effective for the Cooperative in 2021. Early Due after 10 years ........................*....... . .*. - - - " 5_ _ ___;5c...

adoption of the accounting guidance is permitted and must be applied using one of the $ 277 $ 271 two prescribed methods. Management is currently evaluating the impact of adoption of this new guidance on the consolidated financial statements and disclosures. Information regarding the sale of avai lable-for-sale marketable securities, included In August 2018, the FASB issuedASU 2018-15, Intangibles-Goodwill and Other- in the nuclear decommissioning trusts, for the years ended December 31, 2019 and lnternal-Use Software: Customer's Accounting for Implementation Costs Incurred in a 2018, is as follows:

Cloud Computing Arrangement that is a Service Contract. The new standard requires 2019 2018 entities that are cusromers in cloud computing arrangements to defer implementation Proceeds from sale of securities ................. . .....*.* $ 9,791 $41,322 costs if they would be capitalized by the entity in sofrware licensing arrangements Realized gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 (394) under the internal-use sofrware guidance. ASU 2018-15 is effective for the Cooperative in 2021 and early adoption is permitted. The amendments allow either a retrospective For the purposes of determining realized gains and losses, the cost of securities sold is or prospective approach to all implementation costs incurred after adoption. The based upon specific identification.

Cooperative is evaluating the expected impact of this standard on its consolidated financial statements. Securities in the portfolio are reviewed to determine whether they have been other than temporarily impaired. The Cooperative has recorded impairment write-downs of its In August 2018, the FASB issued new accounting guidance changing the disclosure investments of $0 and $28 in 2019 and 2018, respectively, as the Cooperative cannot requirements for fuir value measurement. It applies to all entities that are required to represent chat it has the intent and ability to hold securities until they recover in value, make disclosures about fuir value measurements, however, certain disclosures are not since chat decision is outside of its sole conuol.

required for nonpublic entities. This guidance is effective for the Cooperative in 2020.

The Cooperative is currently evaluating the impact this guidance will have on the In accordance with restrictions enacted by the Nuclear Regulatory Commission, the consolidated financial statements. Cooperative does not conuol the day to day management of nuclear decommissioning trust fund invesunents. The nuclear decommissioning crust of the Cooperative is managed by independent investment managers with discretion to buy, sell and invest to achieve the broad investment objectives set forth by the Cooperative.

The Cooperative's policy is to provide additional funding of the nucleat The Cooperative executed, filed and recorded an indenture of mortgage, security decommissioning trust, as necessary, through rates and with future earnings, to ensure agreement and financing statement, dated as of September 13, 2011 and as that the trust will be sufficient to cover final decommissioning expenses. Earnings supplemented (the "Indenture"), between the Cooperative, as grantor and U.S. Bank on the nucleat decommissioning funds and the equivalent provision for nucleat National Association, as trustee. The perfected lien of the Indenture on substantially decommissioning costs are recorded as nonoperating margins on the consolidated all of the Cooperative's assets secured equally and ratably all of the Cooperative's long-statements of revenues, expenses, and comprehensive income, since the plant is no term debt with the exception of unsecured notes ro CoBank (balances of $8,742 and longer in service. $11,432 at December 31, 2019 and 2018, respectively). The Cooperative is required to maintain and has maintained certain financial ratios related to earnings in accordance Investment income included in nonoperating margin on the consolidated statements of with the covenants of its loan agreements as of December 31, 2019.

revenues, expenses and comprehensive income is net of investment fees of approximately

$12 and $35 for the years ended December 31, 2019 and 2018, respectively. Scheduled maturities of the Cooperative's long-term obligations as of December 31, 8

2019, were as follows:

Years Ending December 31 LINES OF CREDIT 2020 .................. . ... . ...... ... .............. * ... $ 41 ,191 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,302 To provide interim financing capabilities, the Cooperative has arranged committed lines 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,5BO of credit with availability aggregating approximately $350,000. The Cooperative has 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,920 a syndicated credit facility with CoBank originally executed on November 30, 2015, 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,204 and amended on November 20, 2019. This facility has a five-year term and provides Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 639,513 funds both fur short-term working capital requirements and fur capital projects until Total ........................ . ......... . . . . . . . .. .... . . .. $841,710 permanent financing can be obtained. Some capital projects will last longer than one year, but the intent is to pay down the line of credit as permanent funding is received.

Compensating balance requirements and fees relating to the lines of credit were not Q LEASES significant in 2019 and 2018. Information regarding line of credit balances and activity OPERATING LEASES I The Cooperative has entered into lease agreements under fur the years ended December 31, 2019 and 2018, is as follows:

which it is the lessee on an operating lease fur six rail cars and fleet vehicles. These 2019 2018 transactions are covered in the master lease agreement and have lease terms ranging Interest rate ot yeor-end . . . . . . . . . . . . . . . . . * . . . . . . . . * . . . . . 2.80% 3.40% from four to 15 years. At the end of the leases, the Cooperative can either purchase the Total borrowings outstonding ot year-end .............. . .... $ 68,000 $ 79,000 equipment at fair market value, continue to lease the assets or return the equipment Average borrowings outstanding during year . . . . . . . . . . * . . . . . $ 581900 $ 117,000 to the lessor. Rentexpense was $785 and $681 in 2019 and 20U!, respectively. The schedule of future minimum lease payments as of December 31, 2019, is as follows:

The Cooperative also allows member cooperatives to prepay their power bills and pays interest on these prepayments based on current short-term borrowing rates. Advances Years Ending December 31 from member cooperatives totaled $13,820 and $11,652 at December 31, 2019 and 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 550 2018, respectively. Interest expense on member cooperative advances was $301 and 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 454

$238 for the years ended December 31, 2019 and 2018, respectively. These amounts 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 have been included in interest expense on the consolidated statements of revenues, Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,324 expenses, and comprehensive income.

Q LONG-TERM OBLIGATIONS CAPITAL LEASES I The Cooperative has entered into sevetal capital lease agreements for latge vehicles and heavy equipment. The transactions are covered in the master lease agreement with lease terms not exceeding seven years. At the end of the lease, the Long-term obligations as of December 31, 2019 and 2018, consist of the following: Cooperative can purchase the equipment for a bargain purchase price. The original cost 2019 2018 of the assets under capital leases as of December 31, 2019 is $12,686. The assets are Federal Financing Bank obligations-1.93% to 4.46% . .... . .. . .. $ 527,723 $452,116 amortized over the lesser of their related I ~ terms or their estimated productive lives.

Federal Financing Bonk obligations-4.52% to 6.80%. . . . . . . . . . . 220,672 304,988 The schedule of future minimum lease payments as of December 31, 2019, is as follows:

Total Federal Financing Bank ... . ....... . . . ......... . . 748,395 757,104 Years Ending December 31 RUS obligations-4.125% and grant funds . . . . . . . . . . . . . . . . . . . 3,532 3,987 2020 .... .. ................ . . . ................ .. ........ $ 3,043 CoBank notes-2.6%, 2.9%, 4.3%, 6.2%, and 7.4% . . . . . . . . . . . . 12,283 18,191 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,290 Private bonds placement obligations-3.42% . . . . . . . . . . . . . . . . . 77,500 80,833 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,516 Long-term debt .. .. .. .. .. .. . . . .. .. .. .. .. .. .. .. .. .. 841,710 860,115 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 852 Less current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (41 ,19 1) (48,127) 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . * . 349 Totallong-term obligations ............................... $800,519 $811 ,988 Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 401 Total minimum lease payments ....................... . . .... . . 8,451 Quarterly principal and interest payments on the long-term obligations to the Federal Amounts representing interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . * . . . . . . (624)

Financing Bank (FFB) extend through 2048. Long-term obligations to FFB are net of Present value of minimum lease payments. . . . . . . . . . . . . . . . . . . . . . . 7,827 deposits in the RUS debt prepayment program of$809 and $162,186 as of Current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,769)

December 31, 2019 and 2018, respectively. These deposits earn 5% interest and are Long-term capital lease obligations ......... . ......... . * .... . ...... $ 5 1058 available solely for future principal and interest payments.

Long-term obligations to the RUS are payable in equal monthly principal and interest installments through 2024. Payments on the CoBank 2.6% and 4.3% notes are due quarterly and semi-annual through 2023. The private bond placement is an amortizing 30-year term loan at an interest rate of 3.42%. Quarterly principal and interest payments on this obligation extend through 2043.

1. FUTUREREADY I 2019 ANNUAL REPORT

8 FINANCIAL INSTRUMENTS The fair value of the Cooperative's financial instruments other than marketable In 2019 there were no trarafers between Levels 1, 2, and 3. The changes in Level 3 recurring fair value measurements using significant unobservable inputs for the )'Ql'S ended December 31, 2019 and 2018, are as follows:

securities and short-term borrowings, based on the rates for similar securities and 2019 201 8 present value models using current rates available as of December 31, 2019 and 2018, Other property and investments:

is estimated to be as follows: Balance-beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10, 188 $ 10,514 2019 2018 New investment and loans mode . . . . . . . . . . . . . . . . . . . . . . . 550 1,450 Recorded Fair Recorded Fair Loan repoymenls received and current maturities .... . ....... (25) (1 03)

Value Value Value Value Patronage capitol allocations . . . . . . . . . . . . . . . . . . . . . . . . . . 159 1 77 Assets: Refunds of deposits . . . ..... .. ...... . ..... . ..... . .... . _ __;(c:.1.=.5).____.,(1~,.=.85~0~)

Other property and investments . ... * .. , * $ 11,927 $ 11,927 $ 11,258 $ 11,258 Balance-end of year ................*..* . . . . . . . ..... _.:$:......:.1:;,O,c:::8.::.

5;...

7 .....:.

$_ 1.;..;0;.:.,.:..;

18;:.;8;...

Investments in capital term certificates of NRUCFC ........ . ..... 9,176 9,176 9,176 9,176 Liabilities-long-term obligations ......... 841 ,710 946,153 860,115 1,101 ,565 The valuation of these assets involved management's judgment after consideration of market f.tctors and the absence of market transparency, market liquidity and observable inputs.

ASSETS AND LIABILITIES MEASURED AT FAIR VALUE I Accounting principles generally accepted in the United States ofAmerica establish a framework for measuring fair value by creating a hierarchy for observable independent market inputs and unobservable market assumptions and provides for required disclosures about fair value measurements. Considerable judgment may be required in interpreting market data used Q RETIREMENT OF CAPITAL CREDITS The Cooperatives Board of Directors has adopted a policy of retiring capital credits to d.cvclop the estimates of fair value. Accordingly, the estimates presented herein are hot allocated to members on a first-in, first-out basis. As part of an equity devdopment necessarily indicative of the amounts that could be reallied in a current market exchange. strategy adopted in 2003, patronage capital retired will be limited to no greater than 2%

A description of the inputs used in the valuation of assets and liabilities are as follows: of the total assigned patronage capital balance as of December 31 of the prior year. This policy is subject to annual review and approval by the Board of Directors and the RUS, Level 1 inputs utilize observable market data in active markets for identical assets or and no cash retirements are to be made which would impair the financial condition liabilities. Level 2 inputs consist of observable market data, other than that included of the Cooperative or violate any terms of its agreements. Since 2003, the amount of in Level 1, that are either directly or indirectly observable- Level 3 inputs consist of nonoperating margins assigned to members each year is at the discretion of the Board of unobservable market data, which are typically based on an entity's own assumptions of Directors. Any unassigned nonoperating margins will become unallocated reserves and what a market participant would use in pricing an asset or liability as there is little, if any, part of permanent equity. Patronage capital amounts for the )'Ql'S ended December 31, related market aa:ivi.ty. In instances where the determination of the fair value measurement 2019 and 2018, are as follows:

is based on inputs from different levels of the fair value hierarchy, the level in the fair value Assigned Unassigned Total hierarchy within which the entire fair value measurement falls is based on the lowest-level Balance-December 31 , 2017 ..... . ........ . $ 218,624 $ 77,765 $ 296 ,389 input that is significant to the fair value measurement in its entirety. The Cooperative's Retirement of capitol credits . . .... . ....*... (4 ,372) (4,372) assessment of the significance of a particular input to the fair value measurement in its Current year margins ................ * ... 7,041 9 482 16 ,523 entirety requires judgment and considers fuctors specific to the asset or liability. Balance-December 31 , 2018 . ........... . . . 221 ,293 87,247 308,540 Retirement of capitol credits . . .. . **....*... (4 ,426) (4 ,426)

The following table summarizes the Cooperative's assets and liabilities measured at fair Current year margins ................... . 14 107 4 222 18 329 value on a recurring basis as of December 31, 2019 and 2018, aggregated by the level in Balance-December 31 , 2019 ........... . .. . $ 230,974 $ 91,469 $ 322,443 the fair value hierarchy within which those measurements fall:

Fair Value Measurements Using Quoted Price, inActiveMorkets for Identical Assets and Liabilities Signif1C0nt Otho, Observable Input, Significant Unob,e,vable Input,

~ COMMITMENTS & CONTINGENCIES 201 9 Fair Value (Level 1) (Level 2) (Level 3) The Cooperative is a party to a number of generation, transmission and distribution Assets-investments:

agreements, under which costs and/or revenues are recognized currently based upon the Nuclear decommissioning funds . . .... . . $ 2,389 $ 2,389 $ $

Cooperative's interpretations of the provisions of the related agreements. Differences Other property and investments . ........ 11,927 1,070 10,857 Investments in capaal term certificates between the estimates used in the consolidated financial statements and the final ofNRUCFC ...... . . . ..... . .... . .. 9,176 9,176 settlements are recorded in the year of settlement.

Investment for deferred compensation .... 2 048 2 048 The Cooperative has entered into various coal purchase contracts with one- to five.year

$ 25,540 $ 3,459 $ 2,048 $ 20,033 teims. The estimated commitments under these contracts as of December 31, 2019, Fair Value Measurements Using is as follows:

Qooted Prices Significant in Active Markets Othe, Significont Years Ending December 31 for Identical ObserYOble Unobservable Assets and Liabilities Inputs Input, 2020 . ... .. . .. ........ . .. . ... .. .. .. . . ...... . . . .. . . . .. .. . $ 89 ,763 2018 Fair Value (Level 1} (Level 2) (Level 3) 2021 .... ............. ........................ ... ... .... 14,980 Assets-investments: 2022 . . . . . . . . . . . . . . . ** . . . . . . . . . . . . * . . . . . . * . . . . ... ..*.. .. 12,483 Nuclear decommissioning funds .. . . * ... $ 6,260 $ 6,260 $ $ 2023 ... .... .......... . . . .. . .. . .. . _ ...... . ... . -.. ....... 10,189 Other property and investments ......... 11,258 1,070 10,188 2024 .. .... ... . ....... . ... . .......... . .. . . . ... _ .. . . .. ... - - - -

Investments in capitol 1erm certificates Total ...... . . ..... _ ..... . ......*. .. ... . ..... . . . ... _ ........ . $127<415 ofNRUCFC ..................... . 9,176 9,176 Investment for deferred compensation .... 1 829 1 829

$ 28,523 $ 7,330 $ 1,829 $ 19,364

The Cooperative has been named as a defendant in various lawsuits and claims arising in the The accumulated postretirement benefit obligation (APBO) and the amounts reoognized normal amrse of business. Although the outoome of these matters cannot be determined in the oonsolidated financial statements as of and for the years ended December 31, 2019 at the present rime, management and legal oounsel believe these actions can be successfully and 2018, are as follows:

defended or resolved without a material effect on the oonsolidated financial position, results of 2019 2018 operations or cash flows of the Cooperative.

• m Amount recognized in the consolidated balance sheets:

0 Total accrued qualified and nonqualified benefit obligation ..** $ 5,166 $ 4,597 Less current portion included in accrued expenses-other ..... {317) @3ZJ EMPLOYEE BENEFITS Long-term portion ...........*.......*.....*.......*** $ 4,849 $ -4,260 Change in benefit obligation:

MULTIEMPLOYER DEFINED-BENEFIT PENSION PLAN I Pension benefits for APBO-beginning of year ....*.*...................... $ 4,597 $ 4,769 substantially all employees are provided through participation in the National Rural Service cost ................*........*.. . .......... 260 283 Electric Cooperative Association (NRECA) Retirement Security Plan ("RS Plan"). This is Interest cost ......*. . ..*....*...........*.........* 176 15-4 a defined benefit pension plan qualified under Section 401 and tax-exempt under Section Actuarial gain (loss) **...*..*..***...*.*...*.**.*.... ,470 (332) 501 (a) of the Internal Revenue Code. Pension benefits are funded in acoordance with the Benefits paid ...................................... {337) !27ZJ APB~nd of year ..**.. . ...*......... . .**...*..... $ 5,166 $ -4,597 provisions of the RS Plan and are based on salaries, as defined, of each participant. The Employee Retirement Inoome Security Act of 1974, as amended by the Multiemployer Funded status of plan-December 31 ...... ...... .......... $ (5,166l $ (-4,s97l Accrued postretirernent health insurance obligations Pension Plan Amendment Act of 1980, imposes cenain liabilities on employers who are recorded at year-end ........*...... . ............*.* $ 5,166 $ -4,597 oontributors to multiemployer plans in the event of a plan termination or an employer's withdrawal. These plans have not been terminated, nor has the Cooperative undertaken Change in plan assets:

any plans to withdraw fi:om participation. Since the RS Plan is a multiemployer plan for Employer contribution. . . . . . . . . . . * . . . . . . . . ............ $ (337) $ (277) acoounting purposes, all plan assets are available to pay benefits of any plan participant. Benefits paid

• • • • • • • • • • • • • ************************* 337 277 Separate asset acoounts are not maintained for participating employers. This means that $ $

assets oontributed by one employer may be used to provide benefits to employees of other Change in accumulated other comprehensive income:

participating employers. The Cooperative may be oontingencly liable for its share of the Net income at prior measurement date .*...*..***.*...... $ 2,-487 $ 2,397 RS Plans' unfunded vested liabilities. Actuarial assumption changes . ....... . .*.........* . .... (-470) 332 Recognition in expense:

The Cooperative's contributions to the RS Plan in 2019 and 2018 represented less Amortization of prior service cost . . * . . . . . . ...........** 65 (102) than 5% of the total contributions made to the plan by all participating employers.

Amortization of unrecognized actuarial gain . ... . .. . . * . .. . {15-4) {l-40)

In 2013, the Cooperative made a voluntary prepayment of$26,899 to this plan to Accumulated other comprehensive income ** * * *** . * *. $ 1,928 $ 2,-487 reduce future contribution amounts. Expense for the RS Plan was $12,277 in 2019 and $12,133 in 2018. The 2019 expense includes contributions to the plan of$9,587 Components of net periodic postretirement benefit cost:

and $2,690 of prepayment amortization. The 2018 expense includes contributions to Service cost-benefits attributed to service during the year ..... $ 260 $ 283 the plan of $9,443 and $2,690 of prepayment amortization. Interest cost on accrued postretirement health insurance obligation . 176 15,4 Amortization of prior service cost . .*.*..*.*.*..*.....*... 65 (102)

In the RS Plan, a "wne status" determination is not required, and therefore not Amortization of unrecognized actuarial gain .........**.... !15-41 {140) determined, under the Pension Protection Act (PPA) of 2006. In addition, the Net periodic postretirernent benefit expense ..*..*....*..... . $ 347 $ 195 accumulated benefit obligations and plan assets are not determined or allocated separately by individual employer. In total, the RS Plan was over 80% funded on both Employer cash oontributions expected to be made ~o the plan duting the fiscal year January 1, 2019 and 2018, based on the PPA funding target and PPA actuarial value ending December 31, 2020, is $317. The amount of accumulated other oomprehensive of assets on those dates. inoome expected to be recognized during the fiscal year ending December 31, 2020, is an actuarial gain of $109 and amortization of prior service cost of $91.

Because the provisions of the PPA do not apply to the RS Plan, funding improvement plans and surcharges are not applicable. Future contribution requirements are For measurement purposes, a 2.90% and 3.97% discount rate was assumed for 2019 determined each year as part of the actuarial valuation of the plan and may change as a and 2018, respectively, to determine net periodic benefit oost. The 2019 and 2018 result of plan experience. annual health care oost increase assumed is 6.60% and 6. 70%, respectively, decreasing gradually to 4.50% for 2030 and thereafi:er. A one percentage point increase in the POSTRETIREMENT HEALTH INSURANCE OBLIGATION I Certain employees of assumed health care cost trend rates would increase the total of service and interest the Cooperative retiring at or afi:er age 55 are eligible to participate in a postretirement oost components by $73 and the end-of-year APBO by $577. A one percentage point health care plan through age 65. Eligible dependents of the retired Cooperative decrease in the assumed health care cost trend races would decrease the total of service employees are also eligible to participate in this plan through age 65. Retirees pay and interest oost oomponents by $60 and the end-of-year APBO by $492.

100% of the premium amount for this coverage. The premium is based upon the oombined medical claims experiences of all active employees and retirees. If Estimated future benefit payments fi:om the plan as of December 31, 2019, premiums were determined based upon the medical claims experience of retirees are as follows:

only, the resulting premium for retirees would be higher. The difference between the Years Ending December 31 premium paid by retirees and the potential actual premium amount is the basis for the 2020. . . ................................................ $ 317 postretirement benefit obligation. The Cooperative uses a December 31 measurement 2021 . . . . . . . . . . . . . * * . . . . * . . . . . . * . . . . . . . . . * . . . . . . . . . . . .

• 302 date for its plan. The postretirement health care plan is unfunded. 2022 . . . . . . * . . . . . . * . . . . * . . . . . . . * . . . . . . * * * . * . . . . . . . . * . . . 281 2023 . * . . . . . . . * . * . . . . . . . * . . * . . * * . . . . * . * * . * . . * . * . . . . . *. . 289 2024 . . . * . * * . . * * . * . . . . . . . * * . . . . . * . * . . . . . . . . * . * . * . * * . * . . 277 2025-2029 . . . . . . . . * . . . . . . * . * * . . . . . * . . . . . . . . . . . . . . . . . . . . . 1,78,4

1. FUTUREREADY I 2019 ANNUAL REPORT

DEFINED-CONTRIBUTION PLAN I Dairyland has a qualified tax-deferred savings The Cooperative has established a decommissioning trust to accumulate the estimated plan for eligible employees. Eligible participants may make pretax contributions, amounts necessary to decommission a nuclear power plant that the Cooperative formerly as defined, with the Cooperative matching up to 2.5% of the participants' annual operated and the related Independent Spent Fuel Storage Installation (ISFSI). The assets compensation. Contributions to this plan by the Cooperative were $1,298 and $1,198 of this trust in the amount of$2,389 and $6,260 as of December 31, 2019 and 2018, for 2019 and 2018, respectively. respectively, are outside the Cooperative's administrative control and are available solely to satisfy the future costs of decommissioning. Of the obligations and assets related to the OTHER PLANS I The Cooperative offers key employees deferred compensation plans decommissioning trust, $405 are classified as current as of December 31, 2019 given the available through NRECA. The plans permiHjualifying employees to defer a portion decommissioning is expected to be completed in 2020. The remaining $1,984 is related of their salary until future years. The accumulated deferred compensation balance is not to the annual ISFSI costs that will remain after completion of the decommissioning.

available to employees until termination, retirement or death.

Nuclear decommissioning and other asset retirement obligations as of December 31, All amounts of compensation deferred under the plans and all income attributable 2019 and 2018, are as follows:

to those amounts (until paid or made available to the employee or other beneficiary) are solely the property and rights of the Cooperative (not restricted to the payment of Nuclear Other Total benefits under the plan), subject only to the claim of general creditors. Participants' Balance--December31 , 2017......*..*.*..*... $23,114 $ 5,500 $28,614 rights under the plans are equal to those of general creditors of the Cooperative in an Increase in estimated obligation * . . . * . . . . . . . . * . 44 44 amount equal to the fair market value of the deferred account for each participant. The Incurred costs on projects .................... .......P:..:6:.c,8~9c..::8:., .l_-"'{2"',5'-'3:..:0._)_.{-'-19..,,--4;;..28~)

Balance-December 31, 2018 .................. $ 6,260 $ 2,970 $ 9,230 related assets and liabilities, totaling $2,048 and $1,829 as of December 31, 2019 and Increase in estimated obligation . . * . * . * . . . . . . . . 156 156 2018, respectively, are reporred at contract value, which approximates fair value.

Incurred costs on projects ....*......*. , ..*... _.._(4"",0.aa.2;;..7c..)_ _ _ _ __.{4..,,... 0__

27"4)

The Cooperative also provides employees with medical insurance coverage, vision and Balance-December 31 , 2019 . ..*...*.. , .*..*.* _.$_ 2_,3_8_9__$_ 2..,,9_7_0_ $_._5,..,_3_59_

dental insurance coverage, shorr-term and long-term disability, and life insurance, which are funded by employer and employee contributions. The Cooperative's costs The Cooperative did not record a conditional ARO related to the dismantlement related to these benefits were $10,277 and $10,001 for 2019 and 2018, respectively. of the dam and drainage reservoir for the hydro generation plant at Flambeau, the The liability for these plans of $41 and $46 as of December 31, 2019 and 2018, restoration ofland to preexisting condition at Genoa Station #3 site related to the land respectively, are recorded in accrued expenses on the consolidated balance sheets. rights permit, and the removal of transmission lines in various corridors, because the m RELATED-PARTY TRANSACTIONS The Cooperative provides electric and other services to its class A members. The Cooperative does not have sufficient information to estimate the fair value of the ARO.

m NUCLEAR REACTOR Cooperative received revenue of $401,877 and $388,140 in 2019 and 2018, LICENSE I The La Crosse Boiling Water Nuclear Reactor (LACBWR) was voluntarily respectively, for these services. The Cooperative has accounts receivable from its Class A removed from service by the Cooperative effective April 30, 1987. The intent was members of$37,362 and $35,968 as of December 31, 2019 and 2018, respectively. to terminate operation of the reactor, and a possession-only license was obtained from the Nuclear Regulatory Commission (NRC) in August 1987. LACBWR will The Cooperative has advances from class A members of $13,820 and $11,652 as of remain in safe storage status (SAFSTOR) until the final srage of decommissioning December 31, 2019 and 2018, respectively, related to the prepayment program. ofLACBWR, involving dismantlement and decontamination, can be completed.

Class A members have the option of paying their electric bill in advance, and in turn, In May 2016, the NRC approved transfer of the license to La CrosseSolutions LLC the Cooperative pays the members' interest income. The Cooperative's interest expense (Solutions), a subsidiary ofEnergySolutions LLC. Solutions will temporarily hold the related to the prepayment program was $301 and $238 for the years ended license and assumes responsibility for the decommissioning of the site. The license will December 31, 2019 and 2018, respectively. reverr back to the Cooperative following completion of decommissioning activities.

While Solutions underrakes decommissioning, the Cooperative retains a license for its

~ ASSET RETIREMENT OBLIGATIONS continued ownership of the spent fuel.

NUCLEAR WASTE POLICY ACT OF 1982 (NWPA) I Under the NWPA, the An asset retirement obligation (ARO) is the result oflegal or contractual obligations United States government is responsible for the storage and disposal of spent nuclear associated with the retirement of a tangible long-lived asset that results from the fuel removed from nuclear reactors. By statute and under contract, the United States acquisition, construction, or development and/or the normal operation of a long- government was to have begun accepting spent fuel in January 1998, but has not yet lived asset. The Cooperative determines these obligations based on an estimated asset licensed and established a repository.

retirement cost adjusted for inflation and projected to the estimated settlement dates The Cooperative filed an initial breach of contract damages claim against the United and discounted using a credit-adjusted risk free interest rate. Upon initial recognition States government in the United States Courr of Federal Claims to recover its costs of a liability for ARO, the Cooperative capitalizes the asset retirement cost by increasing generally incurred after 1998 through 2006 related to spent fuel remaining at the carrying amount of the related long lived asset by the same amount as the liability.

LACBWR. In January 2013, the Cooperative received a damages award payment of The Cooperative allocates that asset retirement cost to expense using the straight-line

$37,659 from the government for this claim.

method over the remaining useful life of the related long-lived asset. The accretion of the obligation is recognized over time up to the settlement date. Any future change in The Cooperative filed a second contract damages claim in December 2012 to recover estimate will be recognized as an increase or a decrease in the carrying amount of the its costs generally incurred from 2007 through 2012. The Cooperative and the liability for an ARO and the related asset retirement cost capitalized as part of the carrying government agreed to settle the second claim in October 2016. Settlement proceeds amount of the related long-lived asset. of$73,500 were received from the government in November 2016, and at the direction of the Board of Directors, were recorded as a regulatory liability due to Class The Cooperative determined that it has AROs related to future removal and disposal of A members. The nuclear related regulatory asset of $16,700 and deferred charges for asbestos at its power plants. There are no assets legally restricted for purpose of settling the nuclear related litigation and plant costs of$9,164 were recovered from the regulatory ARO related to future removal and disposal of asbestos.

liability as these amounts had not been collected in rates previously. The remaining net amount of$47,636 was refunded to Class A members in February 2017.

In late 2018, the Cooperative filed a third contract damages claim to recover its costs The following table disaggregates revenue by major source for the year-ended generally incurred &om 2013 through 2018. The claim is proceeding through the December 31, 2019:

legal process. 2019 Subsequent damages claims will be filed to recover the continuing costs arising &om Closs A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 401,877 the presence of the spent fuel. Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,26 1 Closs D .................................................. . 12,653 ISFSI I The Cooperative completed the temporary dry storage facility project located Closs E, Including MISO ..................................... . 21,969 on the LACBWR site and completed the move of the LACBWR spent nuclear fud to Other Soles ............................................... . 25,884 this ISFSI facility in September 2012. The spent nuclear fud will remain at the ISFSI Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 470,644 until it is able to be transferred to the government. Annual ISFSI costs are recorded on an as incurred basis and incorporated into the annual budget and rate making process.

DECOMMISSIONING I The Solutions decommissioning plan anticipates completion of decommissioning I..ACBWR, not including the ISFSI, by the end of 2020. The estimated costs of decommissioning the nuclear generating facility are m SUBSEQUENT EVENTS In January of 2020, Dairylands Board of Directors approved a resolution to cease operations at, and~ its Genoa Station #3 generating unit drecrive with the based on the Solutions cost study and decommissioning plan filed with the NRC as consumption ofiis oonttacted coal fur the unit (expected by December 31, 2021).

part of the license uansrer. Costs incurred fur decommissioning projeas are charged Dairyland will acx:elerate depreciation on Genoa Station #3 starting January 1, 2020 against the decommissioning liability. As costs are incurred, Solutions submits through December 31, 2021, resulting in a remaining book value of 7.Cl'O. The accelerated requests fur withdrawals to the Cooperative fur release of funds &om the nuclear depreciation related to the unreoovered utility plant and closure OOSIS will be secup as a decommissioning trust.

regulatory asset. A regulatory asset was approved by the Board of Directors and RUS fur up to $85,000. Amortization will begin on January 1, 2022, and occur over eight years.

~ SUPPLEMENTAL DISCLOSURES OF The GRE prepayment that is being recognized into operating revenue (see Note 1) will

~ CASH FLOW INFORMATION also be also be accelerated beginning January 1, 2020, and ending December 31, 2021.

The accderated recognized revenue will serve as an offiet to the regulatory asset.

The statement of cash flows includes the following supplemental information as of A second regulatory asset in the amount $10,000 was approved by the Board of December 31, 2019 and 2018:

Directors and RUS and relates to retirernenis and retention programs due to the 2019 2018 closure of Genoa Station #3. Amortization of this regulatory asset will begin in Cash paid for interest ................................. $ 35,360 $ 50,020 January 2022 and occur over eight years.

Electric plant additions funded through accounts payable and accrued expenses ......................... $ 2,509 $ 11,282 Electric plant additions under capitol leases ................. $ 2,654 $ 2,782 Non-cash payment of long-term debt . ..................... $ 163,428 $ 93,076

~ REVENUE FROM CONTRACTS WITH CUSTOMERS Sales of dectric energy oonsislS of sales to members pursuant to long-tenn wholesale dectric oonuacrs. Dairyland recogni7.es revenue based on the amount of energy ddivered to each eustomer at agreed upon rates. The measurement of energy sales to eustomers is generally based on meter data, which is collected through the last day of the month. Ar.

the end of each month, amounts of energy ddivered to customers is recognized.

We arc an active participant in the MISO Energy Markets, where wi: bid our generation into the Day Ahead and Real Tune markets and procure electricity fur our wholesale eustomers and sell energy at prices determined by the MISO Energy Markets. Purchase and sale transactions are reoorded using settlement information provided by MISO.

Purchase transactions are accounted fur on a net hourly position. Net purchases in a single hour are recorded as purchased and interchanged power. Sales of exc.ess energy transacted through MISO are recorded on a gross basis in other sales. For sales to the MISO Energy Markets, we have no performance obligation until the energy is sold.

The Cooperative's members consist of Oass A. C, D and E members. Class A members purchase wholesale electric service and rates are set annually with approval by the Board of Directors. Contract term is determined by the Wholesale Power Contract that is in effect until December 31, 2060. The contract automatically extends an additional (2) years in each odd-numbered~ beginningJanuary 1, 2021, unless either the Cooperative or member give notice no later than the preceding September 1 of its dection not to extend further. Class C member revenue represents conuactual sales to GRE, being recognized through 2029. Class D member revenues are based on various contracts with wholesale municipal members. Class E member revenues primarily reflect sales to MISO.

1. FUTUREREADY I 2019 ANNUAL REPORT

MEMBERS DAIRYLAND POWER COOPERATIVE CLASS A MEMBERS SPECIAL SERVICES MEMBERS FACILITIES ON MAP WISCONSIN Adams-Columbia Flectric Cooperative/Friendship, Wts. Headquarters/La Crosse, Wts.

Barron Electric Cooperative/Barron Central Wisconsin Electric Cooperative/Iola, Wis. Alma Generating Site/Alma, Wis.

Bayfield Electric Cooperative/Iron River Oconto Electric Cooperative/Oconto Falls, Wis. Elk Mound Generating Station/Elk Mound, Wis.

Chippewa Valley Electric Cooperative/CorneU Rock Energy Cooperative/Janesville, Wis. Flambeau Hydro Station/Ladysmith, Wis.

Clark Electric Cooperative/Greenwood Genoa Generating Sire/Genoa, Wis.

Dunn Energy Cooperative/Menomonie CLASS C MEMBERS Sarrell Hydro Station/Sarrell, Minn.

Eau Claire Energy Cooperative/FaU Creek Great River Energy/Maple Grove, Minn. (Eagle Creek Renewable Energy, LLC)

Jackson Electric Cooperative/Black River FaUs Minnkota Power Cooperative/Grand Forks, N.D. \ Weston 4 Generating Station/Wausau, Wts.

Jump River Electric Cooperative/Ladysmith , , WIND FACILITIES Oakdale Electric Cooperative/Oakdale CLASS D MEMBERS City of Arcadia, Wis. Adams Wind/Adams, Minn.

Pierce Pepin Cooperative Services/EUsworth Village of Argyle, Wis. Barton Wind/Kensert, Iowa (Avangrid Renewables)

Polk-Burnett Electric Cooperative/Centuria Village of Cashton, Wis. Gundersen Wind/Lewiston, Minn.

Price Electric Cooperative/Phillips City of Cumberland, Wis. Prairie Star Wind/Austin, Minn.

Richland Electric Cooperative/Richland Center City of Elroy, Wis. Quilt Block Wind/Darlington, Wis. (EDP Renewables)

Riverland Energy Cooperative/Arcadia City of Fennimore, Wis. Winnebago Wind/Thompson, Iowa (Avangrid)

St. Croix Electric Cooperative/Hammond Scenic Rivers Energy Cooperative/Lancaster City of Forest City, Iowa SOLAR FACILITIES Taylor Electric Cooperative/Medford Village of La Farge, Wis. Wisconsin: Arcadia, Centuria, Conrath, HaUie, Vernon Electric Cooperative/Westby City of Lake Mills, Iowa Hillsboro, Liberty Pole, Medford, Menomonie, City of Lanesboro, Minn. Mt. Hope, Necedah, New Auburn, Phillips, Roberts, IOWA/MINNESOTA McGregor Municipal Utilities, Iowa Viola & Westby MiEnergy Cooperative/Cresco & Rushford Village of Merrillan, Wts. Minnesota: Albert Lea & Oronoco IOWA City of New Llsbon, Wis. Illinois: Thomson Allamakee-Clayton Electric Cooperative/Postville Osage Municipal Utilities, Iowa Iowa: Decorah & Strawberry Point Heartland Power Cooperative/Thompson & St. Ansgar City of St. Charles, Minn.

PLANNED ENERGY RESOURCES City of Strawberry Point, Iowa MINNESOTA Nemadji Trail Energy Center/Superior, Wis.

Village of Viola, Wis.

Freeborn-Mower Cooperative Services/Albert Lea Badger State Solar/Jefferson, Wis. (Ranger Power)

People's Energy Cooperative/Oronoco Tatanka Ridge Wind/Deuel County, S.D.

CLASS E MEMBERS ILLINOIS Alliant Energy/Madison, Wis. (Avangrid Renewables)

Jo-Carroll Energy/Elizabeth Northwestern WtsCOnsin Electric Co./Frederic, Wis. FACILITIES NOT SHOWN NSP-Minnesota/St. Paul, Minn. Waste Management, Inc., Facilities:

NSP-Wisconsin/Eau Claire, Wis. Central Disposal Landfill/Lake Mills, Iowa Southern Minnesota Municipal Power Agency/ T unberline Trail Landfill/Weyerhaeuser, Wts.

Rochester, Minn.

GENERATING RESOURCES YEAR-END CAPACITY IN MEGAWATTS (MW)

GENERATING STATI ONS UNDER CONTRACT

• COAL ( STEAM )

• Doiryland Shere of Weston #,

JQHN P. MADGETT * * *

• 387 GENOA#3 ****.** 345 WESTON #4* . . . . . . 165

• • DIG ESTERS LANDFILL GAS MULTIPLE SITES ..*......*...****.** . 3.14 TIMBERLINE TRAIL .***..*....**..*.*** 5.6 CENTRAL DISPOSAL. **..*.*..**.....** 4.8 COMBUSTION TURB I NE

( GAS/ OI L)

ELK MOUND 1-2 ***** 74

• • SOLAR MULTIPLE SITES *.***.****. , * . , , , .... 26.7

• HYDRO FLAMBEAU ******* 17.6 TOTAL DAIRYLAND CAPACITY . . . *.* . * .* * **. 988.6 HYDRO WIND

• • 5% Share of SARTELL HYDRO , . . . . . . . * * * . . . . . . . . .

• 10 ADAMS . ***....*.*...*...........* 17.4 BARTON WIND * * * * . . . . * . . . . . . . * . . . . . 80 100 MW Wind Farm GUNDERSEN LUTHERAN ..... , .***....... 5 MCNEILUS DODGE . ..**.... , . , .*. , .... 5.7 PRAIRIE STAR WIND"* .*.**. , , * . . . . * . * . . 5 QUILT BLOCK WIND ..*......*.....*... 98 WINNEBAGO WIND FARM . . . . . . . . . . * * .

• 20 SMALL WIND ( < 5 MW) ...*...**...* , . . . 2 TOTAL UNDER CONTRACT . . .. . ...... ... . . . . . ....... ... . 283.34 TOTAL CAPACITY IN SERVICE ......**...* . .**.....*..*...**. 1,272

1. FUTUREREADY I 2019 ANNUAL REPORT

MEMBER SYSTEM O MAP NEMADJI TRAIL ENERGY CENTER' SARTEU HYDRO WESTON4 MINNESOTA TATANKA RIDGE WIND' WISCONSIN BADGER STATE SOIAR' IOWA

• PLANNED FAOUTIES *..s ILLINOIS

DAIRYLAND POWER COOPERATIVE 3200 EAST AVENUE SOUTH

• P.O. BOX 817

• LA CROSSE, WI 54602-0817

'WWW.DAIRYLANDPOWER.COM

1. ._ AS PART OF OUR SUSTAINABllllY EFFORTS TO PRESERVE THE ENVIRONMENT, THIS REPORT

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• WAS PRINTED ON RECYCLED PAPER BY DAIRYLAND'S PUBLICATION SERVICES DEPARTMENT.

DAIRYLAND POWER COOPERATIVE IS AN EQUAL OPPORTUNITY PROVIDER & EMPLOYER.

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