ML20206K609

Central Iowa Power Cooperative 1998 Annual Rept

ML20206K609
Person / Time
Site:	Duane Arnold
Issue date:	12/31/1998
From:	Darrell Murdock, Newman D CENTRAL IOWA POWER COOPERATIVE
To:
Shared Package
ML20206K596	List: ML20206K603 ML20206K609 NG-99-0620, Forwards 1998 Annual Financial Repts for Alliant Energy, Central Iowa Power Cooperative & Corn Belt Power Cooperative,Iaw 10CFR50.71(b) & 10CFR140.15(b)(1)
References
NUDOCS 9905130215
Download: ML20206K609 (36)

Text

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) CENTRAL IOWA POWER COOPERATIVE A Touchstone Energy

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T CIPC0 Headquiters: Cedar Rapids, Iowa ' jdO%f? % . a us,v", W;.seM v~,A9.I

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4 myng. ,'7' 83 " ; n a p e: , ; y< .m- -n s Table of Contents Introduction... .................2 CIPC0 at a Glance .2-3 From the President & CEO ......... 4-5 Power Stability Can Help the Competitive Edge ....7 ( Linn County REC is a Thinking Partner ..8 I i Cooperative Benefits Dyersvil!e Community .9 Consistency in Power Supply.. ...... 10 An Educated Partnership. .11 Networking for the Community . 13 From Farm to Home .. 14 The Year in Review..... .... 14-15 System Map . 16-17 Financial Report / Independent Auditors' Report . 18-27 Ten Y^ar Financial Summary... ...... 28-29 Member Cooperative Operating Statistics.. ... 30-31 ) 1 1

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( g Introduction Central Iowa Power Cooperative (CIPCO), planning and support services for its fourteen headquartered in Cedar Rapids, Iowa, sup-member systems. For more than 50 years plies the wholesale electric and semce require-CIPCO has accomplished its mission of pro-ments of thirteen rural electric cooperatives viding competitively priced electricity through and one municipal cooperative in Iowa. These ownership of a diverse mix of several gener-mernber-owners serve urban and rural resi-ation sources, an integrated network of trans-dences, traditional farmsteads, municipalities, mission lines and substation facilities, and commercial businesses and industry within a energy purchases and exchange agreements service territory reaching across the state from with other utilities. the Mississippi River on the east to the Mis-souri River on the couthwest. CIPCO has a dedicated team of directors, management and staff working to develop pro-From its headqu:rters in Cedar Rapids and grams and services that meet the high expecta-outposts in Creston and Wilton, CIPCO provides tions of today's discriminating energy consumer. CIPCO at a Glance 1998 STATISTICS Energy Sales........................ 2,312,147 MWh %Ih M J,# 'u L'. 'g ,[.'+=,g['j t r Total Operating Revenue..................$100,809,254 9% ~ sy9, ; N et Margin............................ 5 5,710,03 8 jg;" \\f m Total Assets...........................$3 60,780,112 ~ Average System Rate.................. 41.21 Mills /kWh Member Systems.............................. 14 Total Retail Consumers (approximate number of meters)....107,000 Approximate Population Served................ 250,000 1998 Peak Demand......................... 456 MW Miles of Transmission Line..................... 2,000 Employees (inctuding a fttiated and subsidiary companies)....... 119 a 2 l

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( A ( 3 From the President & CEO CIPCO's 1998 operating performance and year-net worth. Total Cooperative assets increased end financial condition are impressive. Rev-to $360,780,112 while total equity increased to enues for 1998 were in excess of $100,000,000. $70,653,802 creating on equity to asset ratio of Total margins of $5,710,038 exceeded forecast nearly 20%. These factors argue well for our by nearly 50% primarily due to continued cost financial capacity to compete in our changing containment programs and lower market prices industry and marketplace. for purchased power and fuel. But a new game is unfolding in the energy Our balance sheet has been consistently im-business with new rules, new players, and proving for several years. As of the end of different market-driven ways of doing busi-1998 versus 1997, we continued to convert our ness and measuring provider performance. Ac-assets to a more liquid and marketable state, cordingly, CIPCO management is convinced required little additional debt, and increased that today's industry standards of excellence are not necessarily relevant indicators of fu-ture competitiveness. Customers will require a broader array of pro-ducts and services which will be available from many suppliers. While traditional finan-cial conventions will still be important, cus-tomer satisf action and loyalty will be com-pelling determinates of success. In fact, when the full impact of open competition is felt, many traditional industry performers will experience loss of market unless they find new ways to listen to and better serve their customers. In a relatively short span of time, our industry will evolve from a monopoly to one in open competition among many providers. These providers will include new players with non-traditional agendas and market segment tar-gets and strategies. Qw.a ;w %gS,,,gg Q Jand Odef Executhe Omem, and tsk R[Newman, Pnesident.. j g ~,s 4,- g i

r m As regulated monopolies, the primary strategic As we look back over the past few years, we priority of utilities has been to satisfy technical take pride in having anticipated the issues that and engineering challenges while mediating will define the future of our industry. We be-the interests of utility owners, regulators and lieve we've done an excellent job preparing consumers. In a competitive environment, the our physical assets and financial condition for priority of successful providers will become the challenges ahead. the creation of a culture alert and sensitive to customer needs. Success will depend on value-CIPCO owes a debt of gratitude to its distri-added programs and servirss for customers bution members, employees, officers, and di-created from new skills ad more responsive rectors whose commitments have enabled decision processes. us to realize our traditional mission and posi-tion us for the future. We thank them for their Against this template and vision, CIPCO con-many contributions and look forward to their tinually strives to further measure its effective-inspiration in dealing with the opportunities ness in terms of what is anticipated in the and challenges ahead. competitive marketplace of the future. Frankly, we are confident of our possibilities but remain / / uncertain about our ability to implement against jf M a common vision. / ]tvl}lgyg / CIPCO is a smaller generation and transmis-sion company and its combined member retail 4,e. system is also small. Accordingly, CIPCO's scale of economy will be considered when re-viewing marketing strategies and tools that compete for customer choice. It will be the most important priority of CIPCO management during 1999 to work toward craft-ing a workable consensus among ClPCO and its distribution members on a number of crit-ical issues. Reaching this consensus may j prove our greatest challenge and pose a for more significant threat than external com-petition. However, the real measure of how good we are will lie in our ability to collec-tively change our internal culture and the way we make decisions. ] ( ) T

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[ T BOONE percent of the market, a prolonged outage could Power Stability Can Help the Competitive Edge mean devastating losses. The cooperative brought in higher voltage service for the refrig-erators (which reduces the call for higher amper-To stay competitive in the biotechnology in-age.) Now, DeKalb enjoys a two-way feed from dustry,it helps to have allies. And that's just a substation one half mile from the plant. The what DeKalb Genetics Corporation in Boone first (original) feed allows DeKalb a secure has with the Midland Power Cooperative in back-up system. Jefferson, Iowa. Maintaining 40,000 square feet of refrigerated space at a critical 50" F. Further expansion is in the near future for and fluctuating that temperature to main-DeKalb Genetics (they already doubled their tain perfect humidity in the seed stock requires electricity requirements in the past two years). special considerations. During that period of growth, the cooperative worked side by side with the engineers of Plant Manager Note Cottington says Midland DeKalb Genetics to design and build the ex-Power is a trustworthy partner for his bus-pansion. "We're planning another major ex-iness, noting very few outages, quick response pansion in five years," Cottington said. "It's to problems if they occur and a cooperative good to know what type of planning we can attitude. For DeKalb, the second largest seed count on from the cooperative when that corn company in the country with 12-13 time comes." ,c psh $"kfl, I 5.: l I~ a f Meeting with Nate Cottington/ Plant Managerfam (l tol) Jim Fost; CIPCO's Vice; ensident W Corporate; operations! Donald sevmon, General _ Manager.of Midland Power C operative, Nate Cottington, and Norm fandet, Midland's Divector of 2 $ ? Mavhetin(g/ Member Services. ,T _ 9:y ; j i i ~ C

bWe can always turn to'the REC for assistance and know that

the people wilihAlp us work through any situation related to. Q q

g 4 .m ~ fkki 4 ur P wer.5uPPly,{says Stephen C. Conner, CEO Hawkeye Food - -Y .s

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..,./b $ g p y j Systems (middle) with CIPC0 CEO Dennis Murdock (r) and unn. 4 jh?% County REC Manager Kim Colberg.'- f W i ) %.L l. -/ a gt;~ g, gmq a; ' QY f _ }f 'N hl ey =y em L q$w i y ~. Q, g gf _ M WWg g h/ . t-Na, : h ln a .. c y - w w v &. g CORALVILLE 'Vk. service business, ranging from mops to menu Linn County REC is a Thinking Partner design and cash registers to cantaloupes. They help businesses set up new facilities and supply everything they need from the The relationship cooperatives have with their ground up. industrial customers isn't just about supply, it's about being a thinking partner when it Much of the space in Coralville is occupied comes to saving and using power efficiently. by energy efficient freezers with glycol floors Hawkeye Food Systems in Coralville and the (to keep the walking surface from freezing). Linn County Rural Electric Cooperative have The move to this particular type of freezer a relationship that spans nearly four decades, was funded in part by a grant from the Linn and it is no surprise that many suggestions County REC. Energy saving strategies have from the cooperative have been put to use. ranged from using electric forklifts that can be charged during off-peak hours to the Beginning in the 1960s, Linn County REC ac-purchase of speciallighting to reduce power tually owned the land where Hawkeye Food consumption. Engineers from the Linn Coun-Systems (HFS)is now located. Since then HFS ty REC have always been available to either has expanded to 128,000 square feet and is a offer suggestions or explain specific techni-prominent supplier of allitems associated col situations that come up when discussing with the restaurant and institutional food-usage assessments or energy efficiency. J .i

f bWe can always turn to the REC for assistance and knowihat the people will help us work through any situation related to - ] hN 4 q ' ' D,. M our power supply," says Stephen C. Conner, CEO Hawkeye Food M fjj.{ ,3 ,wghJpi Sys'tems (middle).with CIPC0 CEO Dennis Murdock (r) and Linn b

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<pp 4 m p4 7 A N.k2g dh / ff CORALVILLE service business, ranging from mops to menu Linn County REC is a Thinking Partner design and cash registers to cantaloupes. They help businesses set up new facilities and supply everything they need from the The relationship cooperatives have with their ground up. industrial customers isn't just about supply, it's about being a thinking partner when it Much of the space in Coralville is occupied comes to saving and using power efficiently. by energy efficient freezers with glycol floors Hawkeye Food Systems in Coralville and the (to keep the walking surface from freezing). Linn County Rural Electric Cooperative have The move to this particular type of freezer a relationship that spans nearly four decades, was funded in part by a grant from the Linn and it is no surprise that many suggestions County REC. Energy saving strategies have from the cooperative have been put to use. ranged from using electric forklif ts that can be chargr ' during off peak hours to the Beginning in the 1960s, Linn County REC oc. purchase of speciallighting to reduce power tuolly owned the land where Hawkeye Food consumption. Engineers from the Linn Coun-Systems (HFS)is now located. Since then, HFS ty REC have always been available to either has expanded to 128.000 square feet and is a offer suggestions or explain specific techni-prominent supplier of allitems associated cal situations that come up when discussing with the restaurant and institutional food-usage assessments or energy efficiency. N ) m

) DYERSVILLE new fire station / rescue facility serving a six Cooperative Benefits Dyersville Commum.ty township area. One of their greatest needs was funding. MVEC was able to partner with The responsibility an electric cooperative feels the city and provide a $200,000 USDA no-interest toward its member-consumers does not end loan that the city will repay with revenues with supplying their electricity. Cooperative from a local option tax. This saved about one personnel who live and work in the communi-third of the cost of the construction. ties they serve care about events that affect their hometowns. Gary Jasper, City Coordinator, gives MVEC a lot of credit for " putting them over the top" and Maquoketa Valley Electric Cooperative making the project viable. He says that the (MVEC), Anamosa, serves a portion of the city project " drew on volunteerism and contribu-of Dyersville. A cooperative representative tions from many levels of the community" and made a courtesy visit to the city and found the partnership which included MVEC was a that they were in the process of planning a valuable part of the success of their dream. 3t 3 b. ,_.,___y_ k h e sw & Ae ca. acca, m. e,.sw.,a or C$rp. rate MannWans. Business S-M; - - N M T._

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.glj V Enduro President Alan Brown (l) describes some of the processes f; f" '~~ ~ ~ behind custom injection molding to If ,, C. ~ ' .. AMh, ~M ' ? John Smith, Pella Cooperative Electric's CEO (middle) and CIPCO's 9,p s[r' - %.ee s s Jim Fogt. FP g g ^ +ad af largest custorners include Maytag. Frigidaire 0 and Lennox, is allowed a " budget" of rejected PELLA paris on the oraer of one per 10.000. subse-quently, the strict demands put on Enduro for quality control caused them to change their manufacturing processes. Consistency in Power Supply Means Consistency in Custorners Pella Cooperative and Enduro spent many ~ hours together working out lower cost and The cost and reliability of electricity is of reliability. Through many changes in his op-vital concern to all member-consumers of an erotion and several expansions, Brown came electric cooperative. It becomes even more to rely on his partnership with Pella Coop-critical to those whose survival depends on erative. "Our customers expect us to reduce competitively priced products and just-in-time their cost by three percent per year. To do delivery dictated by industry standards, that we need service partners who under-stand our needs and the importance of con-According to Allan Brown President of Enduro, sistency. Pella Cooperative is that kind of a Pella, his electric cooperative was instrumen-partner " Brown said. "And true to their word tal in suggesting ways to improve his power. six hours is the longest I can remember being This injection molding operation, whose down in the last five years." p c IU.

s AFTON t was once a smaH rural schoolin An Educated Partnership Between School and Co-op this small southwest Iowa town has grown to 500 students from grades 3-12, and their "It's been a very positive relationship over the enrollment has increased since early 1998. years," explains Rich Turner, Superintendent Recognizing need generated by growth, Rideta of the East Union Community Schools in Af ton, Electric offered their help by providing an Iowa. Mr. Turner refers to the helping hand he interest-free loan of $120,000 over a term of and his school district have received from the ten years. This generous interest-free loan Rideta Electric Cooperative. provided advanced technology initiatives for the school that involves students and members "They've helped explain things to our [ school) of the community. board when we're doing assessments of our power utilization," Turner said. "Four years "We now can host audio visual exchanges with ago, we closed two school buildings to con-other institutions," Turner said. "We've also solidate into one location. To accommodate the made the facility available to the community. displaced students, modular buildings were We've had nurses in the classroom. The Farm added to the existing structure. Rideta help-Bureau uses it, and there are adult education ed us out by placing a transformer nearby classes as well. It beats having to travell" and guided us through some technical issues." iThe room full of the latist iMaEcomputab demonstrates the East 1 * .. n 2. ..s.s, $ Union f-' 2.y Schools"com'mitment'to.. education and technolog.? . ~. . ~..., fRich Turner, School Superintendent (r), discussed their program 'with ;

Cralgilde (i);pd Tim $ thwart,' Itidsta asctric Cooperative' Manager 2 m

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6 WILTON 1 Networking for the Community ..V .m..-., Bringing a new business to a community of ten velopment connection Ed became aware of means being in the right place at the right Plasticraft's search for a new site in the area. time. To do that means being involved in the Negotiations resulted in Plasticraf t locating development process itself. That is the case their new facility in Wilton's Industrial Park, with locating Plasticraf t, an injection mold served by Eastern Iowa. company based in Albertville, Alabama,in Wilton, Iowa. Plastieraft supplies products for This new facility is in its infancy and plans Hon Industries in nearby Muscatine. to be in continuous expansion mode adding machines and employees. Larry Duvall, Plant Eastern Iowa Light and Power Cooperative, Manager, touted the support of the electric Wilton, encourages its employees to partici-cooperative in the whole process of relocating. pate in community activities. Ed Bomberger He also emphasized that this operation is is their Business Development Manager. As " bringing Iowan's back to Iowa" with good pay-such he volunteers on Wilton's Economic De-ing jobs, as some of his key people are Iowans velopment Commission. Through his local de-who are happy to return to the state. - DIMTON 8 8 musanpm H Standing against a backdrop lof Plasticraft'inew facility [in the i ? Witton Industrial Park im (l to. r) Patrick Murphy, CIPCO's 3 Assistant Vice President of Corporate DevelopmentiLarry Duvalli? ' Plant Maiinger, and Ed Bomberger,' Business Development, ' Manager for Eastern Iowa Light and Power Cooperative. f ii

Standing't to r: / Duane Dinville, Manager of Southwest Iowa Service e ' Cooperative, Don Williams, - and Craig Fricke. Y VILLISCA f from Farm to Home: SWISCO is There to Help Don Williams is a big believer in local control It was this stability that was needed when and local service. As a farmer in Villisca, Mr. Williams proceeded with his plans to heat Williams runs a farrow to finish operation of his home with electric ceiling cable many about 11,000 pigs a year with grain farming years ago. After learning about radiant heat and beef cows on 1200 acres. Therefore, he in a newsletter, he knew this was the most needs consistent power to run lights and fans hassle-free way to go. "If something were to for his operation. go wrong, I knew the co-op would come out and fix it," he said. "Everyone's conscious of the price of energy, but what wa forget about is service," Williams Heating his 1800 square foot home would have t said. "If something goes wrong, the co-op needs been too expensive had there not been a special to be there, and they are." There was some heat rate provided by SWISCO. Don says concern in the community about service when he can heat the whole house during the i the Adams and Nyman cooperatives consol-winter months for just $400. "It's been 20 l idated into the Southwest Iowa Service Co-years and I've never had any trouble with l operative (SWISCO). But things may even be the system," Williams said. "I'm glad the co-better now. "Our service has been constant; it's op was there and provided the information I been really great," Williams remarked. "It never needed to make the right decision. I can always changed, even af ter the consolidation." count on them." ) 1

Standing i to r: ,4 Duane Dinville, Manager of Southwest Iowa Service Cooperative, Don Williams, and Craig Fricke. .Y na VILLISCA r From Farm to Home: SWISCO is There to Help Don Williams is a big believer in local control It was this stability that was needed when and local service. As a f armer in Villisca. Mr. Williams proceeded with his plans to heat Williams runs a furrow to finish operation of his home with electric ceiling cable many about 11,000 pigs a year with grain farming years ago. After learning about radiant heat and beet cows on 1200 acres. Therefore, he in a newsletter, he knew this was the most needs consistent power to run lights and fans hassle-free way to go. "If something were to for his operation, go wrong, I knew the co-op would come out and fix it," he said. "Everyone's conscious of the price of energy, but what we forget about is service " Williams Heating his 1800 square foot home would have [ said. "If something goes wrong, the co-op needs been too expensive had there not been a special to be there, and they are." There was some heat rate provided by SWISCO. Don says concern in the community about service when he can heat the whole house during the g the Adams and Nyman cooperatives consol-winter months for just $400. "It's been 20 y idated into the Southwest Iowa Service Co-years and I've never had any trouble with operative (SWISCO). But things may even be the system " Williams said. "I'm glad the co-better now. "Our service has been constant; it's op was there and provided the information I been really great," Williams remarked. "It never needed to make the right decision. I can always changed, even after the consolidation." count on them." ) si

i i r The Year in Review CIPC0's long range strategy is to be the reliable, eco. Touchstone Energy and supports membership nomical source of energy for member-owners and to be for its local distribution systems. In addition, on the leading edge of technology, programs, and CIPCO is working with statewide and region-processes. However, increasing attention is being paid al groups to develop broad advertising and to the restructuring of the electric utility industry, the promotional strategies that will provide econ-environmental protection questions, and the devel-omies for all partners. } opment of competitive energy-related services to support the member-owner. Strategies must now be The principle values of Touchstor.e Energy targeted to support these efforts with long term goals tell the nation what electric coope:ative to improve the quality and effectiveness of member member-consumers have always known; a relations and services, quality system which is served and main-I toined by community-oriented individuals RESTRUCTURING IN IOWA who are known for their integrity, accountability, There is now at least a vision of how the and innovation. electric utility industry will look in the f uture. Clearly it will not be " business as usual." ADDING VALUE Representatives from Iowa's electric coopera-What does a website have to do with selling tives spent the greater part of 1998 working electricity? It represents a genuine interest with industry leaders draf ting consensus in providing information that helps consu-legislation to introduce open competition mers make informed choices. CIPCO has begun among electric utilities. The goal was to pro-the process through its website which links pose a bill that represents consumer interests to The Electric Universe, a 300-page feature and protects the roles, rights and respon-on electric safety for all ages, and WeatherEye, sibilities of all parties in the restructured indus-an innovative weathet education program. try. This legislation may be introduced early in 1999. (Visit our web-site www.cipco.org As corporate sponsor of the WeatherEye on for updates on this subject). KGAN-TV in Cedar Rapids and KDSM, FOX 17 TV, in Des Moines, CIPCO will receive NATIONAL BRANDING many hours of image advertising over the next CIPCO joined a national branding initiative year on these stations. CIPCO has promoted in 1998 in anticipation of open competition. these features of its website at conferences for Touchstone Energy", and its positioning state-educators during this past year. ment, The Power of Human Connections, was developed to unify the local cooperative CIPCO's web site includes an interactive en-and other electric cooperatives throughout ergy guide, Get a Handle on Your Energy Bill. the country. CIPCO is a regional partner of By itemizing energy requirements either inj H

T (the home or farmstead, monthly bills can be D COMMUNITY DEVELOPMENT calculated. Help sections list improvements Community development continues to be a 11 to more efficiently use electricity. major part of CIPCO's support to its member systems. In cooperation with Corridor Devel-GENERATION AND TRANSMISSION (G&T) opment, Inc., three buildings have been con-CIPCO's generation system produces com-structed and leased at the Myriad Technology petitively priced energy in the Midwest. CIPCO Plaza on the campus of the University of Iowa is intent on keeping these facilities in top condi-Research Center in Coralville. The fourth build-I tion as it promotes greater efficiency and sound ing in the original Myriad project will be com-environmental stewardship. pleted in 1999. I Weather is an important factor in determining In 1998, CIPCO provided funding opportuni-operating performance of a transmission sys-ties for qualifying businesses through its zero tem. May and June recorded several tornadoes, interest loan program, rate discounts, grants, severe lightning, and hurricane force winds loan guarantees, and miscellaneous project affecting a major portion of the CIPCO System. support iunding. i In November the System was ravaged by high winds and bitter cold causing interruption CIPCO has an ongoing relationship with the problems. In addition to regularly scheduled member systems in three spec buildings at maintenance, CIPCO added a new tool in 1998 Perry, Urbana and Greenfield. l to help target Sa r=1 vuure of hghtning inter-ruptions, the Global Atmospheric lightning de-MEMBER SUPPORT tection and analysis system. CIPCO assembled a group of experts to assist Guthrie County REC in promoting the value of In 1998, CIPCO's New to Replace Old program ground source heat pumps for the new school I completed three line sections, bringing the being planned by the Panora Community. total of rebuilt line to 325 miles since 1989. The 1998 construction included a transmission Load Research metering was installed in ] line serving a substation for Maquoketa Valley homes with particular lifestyles in the service l Electric Cooperative, and 5.5 miles of line for territories of Linn County REC and Maquoketa Q Eastern Iowa Light and Power Cooperative's Valley Electric Cooperative to discover the dif-feed to a natural gas pumping station for North-ference in electric use patterns among various ern Border Pipeline. user groups. This will allow cooperatives to be better prepared for the time when Iowa allows CIPCO is expanding its economic and analytic customer choice. capabilities to manage its power supply port-folio in response to its changing load mix and Database information is being recorded to increasing need for purchases. By issuing Re-allow member cooperatives to match improved quests for Proposals and purchasing the types programs and services to consumers. and quantities of power needed, CIPCO has been able to optimize its power supply portfolio. j

C___I L _ _ _ _ _ - - _ _ - _ - - - - - - - - - - - - - - - - - - - - - - - - -2 3 --

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6-7 _.. ~. ~ - l l-I'~ I$U d4 - M7di~ ' MNl" Y -I-4 "",' 7.. 7-% 3 .m QEL(, ' l }..o...L. uw e f _ 7 %. M, " Y~~ CIPC0 EXECUTIVE COMMITTEE (l. TO R): Secretary- -i; ~ ~ Treasurer Marvin Focht,' President Date Newman, CEO l Dennis Mur' dock, Vice' President Keith' Wirt,' Assistant-. ]Fous ~' im

Secretary-Treasurer Wayne Horno'cker and Executive.

I.. ,,[, nt Denise Guy-Himes, _h" i 7, . r--- r[d.a 4, ] (>A/i ) n . p;p ]( a j g ---1 3,.- . 7._ .. 7 j 7 DJ I cp ( [ i( ,,..(( w,- p a s g , _;. 3, 5,l ~ Q, (s0 in' l; }s ? ;-b u ~~ . z) ~ j C l3,,. JT ,l j M.. L p S e t '( o, [ 4 J 7, ) ~ }{C_IPC0 EXECUTIVE STAFF (L T ~ { {' O w: u Vice Presidentfof? Corporate - .. J j o g . Operations James Fpgt, Assistant ~ '" j i M

Vice President of Businessi B

. Development Patrick Murphy, Vice. e 'L.$ ~# _ President of Corporate Planning ' and. Business. Development Craig L Tl;, O O s -,s., g _t Fricke and Vice President of litility - [

• 5 Operations Richard Anderson.

L,i o,,,I. c su o. I U ~ ,as. O A F v n' i r 3 e E i ) ,~ e t g mummmmmmes y,,f-- fp Sindfi la {l* kQ-k .0 r 0 l 7 CIPC0 SYSTEM MANAGERS (L To R): Franklin M 4 E @; Darrel Heetland,@; Melvin Nicholas,@; Duane Dinville,@; John Smith,@; Dorothy Postel,@; M), { Timothy Stewart,@; Kim Colberg,@;' Martin. 2 .g

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10- ~11 12 31 3 s._: l [.ui~"~;, - L 4': i F#" g,,2 J To.e &( e..,j %, Q3p CIPC0 B0ARD OF DIRECTORS (L70'R): Donald Mayes,. ~ ' %,h""O t'~ ~G .Duane Armstead, Allan Duffe/ Frederick Weis, Kenneth, [ ~ k ",_

• s,jk Hastings, Donald Williams, Wayne Wilcox, Norman' Van

>> D~t P .Mo.[hester "f,,.., L, ~ f-~~i Zante, Melvin Neil and James Paper. L. k-g. j ar.- - '9 9 J 7 2 h S l '{6 .Jt s M q -) L..,;(}) na,w l . MLW+n. r+a m no,&tl t - - Ig \\ - ~ u n, 4 i 1 0 A R. f-f

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,?,',b), { a -e Et asp g g-Marshall County REC, j ] L+1 ._yt_ i Marshalltown ' 7 _v.- ) Co' perauve Doctde, y [ ""', o ,,. 9,,,,, i tove l East-Centrallowa Rural Doctric 'I',o ~ ~. l j Cooperative, Urbana 3 T.I.P.11EC, - ,([ 3 . oP[ Brooklyn [ {ep* A.

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Linn County REC. e C-5Y o _ 1 E.,en. JW o 4.e < c, u Murion - "of /., t i @ M quokota Valley Dectnc ? 1 "F rq '% Ne i A**', lr J, c-"'""-- -f-Cecie , j a -- () y,,

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( Eartville. Fontanelle Gowrie, cu'>us. h ;,+ne* n,, . :x. y j (_ f,,:p Q Greenfield Lamoni, Lenox, l - p ; g'8 * '-.,. s, t '*n t., Stuart. Villisca, Winternet. s ..x m? V ...) A ve r y

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1 2 3 4 5 6 7 oo M ( t q, f- __ a bT p y -y i' 'I 4 9 j pq. ? <O ( O { 'r_f CIPCO EXECUTIVE COMMITTEE (L TO R); Secretary-Mi{" f i 7 Treasurer Marvin Focht, President Dale Newman, CEO i;. o l Dennis Murdock, Vice President Keith Wirt, Assistant 4om Secretary Treasurer Wayne Hornocker and Executive [ .3 nt Denise Guy-Himes. e f y .}.- < _ ;,

• ",,1.

. ('. 'd. y e i m I_.c p:p -O .. y 3 .O I (, b Ehg o ~ 4( l' o 1-Ehl .f \\_ e [CIPCO EXECUTIVE STAFF (L TO R)y E w IO Vice President of Corporate l Operations James Fogt, Assistant O Vice President of Business B \\' Development Patrick Murphy, Vice 3 e

• ~

President of Corporate Planning i and Business Development Craig 1,. O 9 L' ~ Fricke and Vice President of Utility g i " Operations Richard Anderson. } o v~ .i. ra a Q Y k-q g /,. 'r--- ina.oricta .,,y ~T CIPCO SYSTEM MANAGERS (L TO R): Franklin Mains,, @; Darrel Heetland,@; Melvin Nicholas,@; Duane Dinville,@; John Smith,@; Dorothy Postel,@; - L-Timothy Stewart,@; Kim Colberg,@; Martin ( Gardner,@; Tom Killebrew,@; Daniel Bohlke, and John Wietzke,@. Not Shown: Don Severson,@@. ) j q- -o r)_7_, _

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1. ._l3, {;

P*i? 'N Duane Armstead,. Allan Duffe, Frederick Weis, Kenneth -'mi?;, y ~f~ " T ' ' s * -"M, Hastings, Donald Williamsf Wayne Wilcox, Norman Van '<'O /" g

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'""'~p (Zante, Melvin Neil and James Paper.

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( 3 Peat Marwick tte 2500 Ruan Center P.O. Box 772 Des Moines, IA 50303 i The Board of Directors Central Iowa Power Cooperative We have audited the accompanying consolidated balance sheets of Central l i Iowa Power Cooperative and arbsidiary as of December 31,1998 and 1997, and j the related consolidated statements of revenue and expenses, members' equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Coeperative's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perfonn the audit to obtain reasonable assurance about whether the financial statements are free { of material misstatement. An audit includes examining, on a test basis, j evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present 7 fairly, in all material respects, the financial position of Central Iowa Power b Cooperative and subsidiary as of December 31,1998 and 1997, and the results { of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. DMGrTea4-Marssock LCP 1 February 19,1999 I l Member Ftrm of Miynveld Peat Marwn:k Goerdeier si

l r m CENTRAL IOWA POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS December 31,1998 and 1997 1998 1997 Assets (Note 6) Electric utility plant, at cost (Notes 2 and 9): In service $ 374,042,553 371.484,431 1.ess accumulated depreciation 172,287,188 162,629,145 201,755,365 208,855.286 Construction work in progress 1,587,535 1,213,097 Nuclear fuel, at cost less accumulated amortization of $65,146,152 in 1998 and $61,627,726 in 1997 7,272,293 10.474,859 Net electric utility plant 210,615,193 220.543,242 Non-utility property, at cost less accumulated depreciation of $279,235 in 1998 and $555.148 in 1997 (Note 3) 885,501 1.571.479 Investments and notes receivable: Investments in associated organizations 9,873,391 10.029.933 Investments in other organizations 5,135,616 5.322,181 Investments-decommissioning trust fund (Note 4) 16,708,718 12,962.416 Other investments (Note 4) 58.137,353 44,683,302 Notes receivable from affiliate 1,902,833 1,473,449 Notes receivable - other 687,5fl3 766,968 Totalinvestments and notes receivable '.<2,645,414 75,238,249 Current assets: Cash and cash equivalents: Cash, general 2,641,304 4.337,518 Cash, construction 5,015 5.015 Cash equivalents 29,074,940 20,960,865 Accounts receivable, members 8,382,660 7,812.729 Other receivables 339,284 2,196,957 Fossil f uel, materials and supplies 4,617,902 5,701,049 Prepaid expenses 259,849 447,739 Interest receivable 520,997 571.459 Deferred charges 2,374,763 644,510 Total current assets 48,216,714 42,677.841 Deferred charges B,417,290 8,809,531 Total assets $ 360,780.112 348,840,342 Ca italization and Liabilities Ca talization: mbers' equity: Membership iees 1,500 1.600 Patronage capital 24,394,642 23,090,557 Accumulated other comprehensive income 12,527,436 11,511,982 Other equities (Note 5) 33,730,224 29,820,186 j Total members' equity 70,653,802 64,424,325 Long-term debt, less current maturities (Note 6) 242,583.793 239,854,400 Total capitalization 313,237,595 304,278,725 Current liabilities: Current maturities of long-term debt (Note 6) 10,205,000 9.350,067 Accounts payable 4,083,340 5.411,280 Accrued property taxes 5,270,640 5.296,930 Accrued interest 11.022 12.140 Other accrued expenses 653,121 330,496 Total current liabilities 20,223,123 20,400,913 I Other liabilities: Decommissioning reserves 21,572,727 18,352,887 Special assessment 2,228,305 2.230,380 Deferred taxes (Note 8) 3,430,340 3,519.106 Other 88,022 58.331 Total other liabilities 27,319,394 24,160,704 Commitments and contingent liabilities (Notes 10 and 11) Total capitalization and liabilities $ 360,780,112 348,840,342 N Y See Accompanying Notes to Consc,!idated unancial Statements. si

f ( h CENTRAL IOWA POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED STATEMENTS OF REVENUE & EXPENSES Years Ended December 31,1998 and 1997 1998 1997 Operating revenue: Electric: Energy sales S 95,279,621 85,467,960 Rent of property 4,629,780 4.737,843 Miscellaneous 457,716 397,542 Other 442.137 596,954 Total operating revenue 100,809,254 91,200,299 Operating expenses: Purchased power 16,789,263 12,844,702 Operations: Production plant - fuel 15,603,100 15,215.274 Production plant - other 17,584,071 16,937,424 Transmission plant 4,444,107 4,493.496 Maintenance: Production plant 6,845,639 6,327,656 Transmission plant 1,615.293 1,397,047 Member services 1,452,306 1,344,865 Administrative and general 3,578,046 3,709.180 Depreciation and amortization 11,561,393 11,757,936 Decommissioning provision 3,219,840 2,476,040 Property and other taxes and insurance 602,289 664,729 Other 660,180 655,311 Total operating expenses 83.955,527 77,823,660 Net operating margin 16,853,727 13.376,639 Other revenue: Investment income 4,549,642 6,497,800 Patronage capital allocations 155,680 160,199 Miscellaneous income, net 142,049 197,844 Total other revenue 4,847,371 6,855,843 Net margin before interest charges 21,701,098 20,232,482 Interest charges: Interest on long-term debt 16,098,695 15,577,675 Allowance for borrowed funds used during construction (107,635) (359,584) Net interest charges 15,991,060 15,218.091 Net margin S 5,710,038 5,014,391 N ) See Accompanying Notes to Connohdated Financial Statements. b

l [ D i CENTRAL IOWA POWER COOPERATIVE AND SUBSIDIARY f CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY Years Ended December 31,1998 and 1997 Accumulated other Total Membership Patronage comprehensive Other members' fees capital income equities equity Balance at December 31,1996 1,600 21,290,557 8,972.177 26.605,795 56,870,129 Comprehensive income: Net margin 5,014.391 5,014,391 Investments held by Cooperative: Umealized gains arising during the year on securities available-for-sale 5,191,758 5,191,758 Realized gains on securities 4 available-for-sale (3,129,446) (3,129.446) Equity method investee's investments: Unrealized gains arising during the year on securities available-for-sale 601,243 601,243 Realized gains on securities available-for-sale (123,750) (123,750) ) Total comprehensive income 2,539,805 5,014,391 7,554,196 Patronage capital allocated 1,800,000 (1,800,000) Balance at December 31,1997 1,600 23,090,557 11.511,982 29,820,186 64,424.325 Comprehensive income: Net margin 5,710,038 5,710,038 Investments held by Cooperative: Unrealized gains arising during the year on securities available-for-sale 1,520,222 1,520,222 Bealized gains on securities available-for-sale (194,453) (194,453) Equity method investee's investments: Unrealized losses arising during the year on securities available-for-sale (186,565) (186,565) Realized gains on securities available-for-sale (123,750) (123,750) Total comprehensive income 1,015,454 5,710,038 6,725,492 Patronage capital paid (495,915) (495,915) Patronage capital allocated 1,800,000 (1,800,000) Return of membership fees (100) (100) Balance at December 31,1998 1,500 24,394,642 12,527,436 33,730,224 70,653,802 N Y See Accompanying Notes to Consolidated Financial Statements. b.1

CENTRAL IOWA POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS December 31,1998 and 1997 1998 1997 Cash flows from operating activities: Net margin 5,710.038 5,014.391 Adjustments to reconcile net margin to net cash provided by operating activities: Depreciation and amortization of electric utility plant and non-utility property 11,817,221 12,006,566 Amortization of deferred charges 1,811,922 2,071.541

)

Amortization of nuclear fuel 3,518,426 4.125,525 Decommissioning provision 3,219,840 2,476,040 l Patronage capital allocations not received in cash (146,128) (159,416) Amortization of repricing costs 396,690 396,690 1,oss on disposal of investments - decommissioning trust fund and other investments 2,913,787 316,463 Gain on disposal of investments - decommissioning trust fund I and other investments (3,108,240) (3,445,909) Gain on disposal of non-utility property (7.161) (76.252) Equity in net income of unconsolidated investees (113,121) (107,795) Interest income reinvested (774.810) (623,735) l Decrease in receivables 1,144,929 92,410 j Decrease (increase) in fossil fuel, materials and supplies 1,083,147 (466.268) i Decrease (increase)in prepayments and interest receivable 238,352 (334,316) Refueling outage and other costs deferred (3,546,624) (Decrease) increase in accounts payable, accrued liabilities, and other liabilities (1,032,723) 531,048 Other (2,075) 63,324 Net cash provided by operating activities 23,123,470 21,880,307 Cash flows from investing activities: Additions to electric utility plant, net (5,445,357) (4,402.443) Additions to non-utility property, net (19,241) (332,734) Proceeds from sale of non-utility property 1,055,999 859,330 Purchases of investments-decommissioning trust fund and other investments (82,528,211) (41,167,458) Sales of investments-decommissioning trust fund and other investments 67,486,562 23,488.495 Purchases of nuclear fuel (315,860) (4,898,289) Purchase of investments in associated organizations and other organizations (126,579) (295,260) Receipt of prior years' patronage capital allocation 202,367 211,668 Sales of investments in associated organizations and other organizations 63,814 138.296 Decrease in notes receivable 307,990 32,688 Net cash used in investing activities (19,318,516) (26,365,707) Cash flows from financing activities: Principal payments on long-term debt (9,521,078) (12,106.492) Principal payments on notes payable (10,000,000) (3,412,715) Proceeds from notes payable borrowings 10,000,000 Proceeds from long-term borrowings 12,630,000 20,260,000 Patronage capital paid and membership fees returned (496 015) (300,000) Decrease in advances from members Net cash provided 1 y financing activities 2,612.907 4.440,793 Net increase (decrease)in cash and cash equivalents 6,417,861 (44,607) Cash and cash equivale its at beginning of year 25,303,398 25,348,005 Cash and cash equivale sts at end of year 31,721,259 25,303,398 Supplemental disclosum of cash flow information: Cash payments for in'.erest 15,489,569 15,035,395 Supplemental disclosure of non-cash activities: Receivables entered into on the solo of non-utility property 10,000 1,683,615 Note receivable entered into on the sale of non-utility property 766,968 1.ong-term debt assumed in exchange for note receivable 475,405 N Y See Accompanying Notes to Consohdated Financial Statements. EE m

\\ CENTRAL IOWA POWER COOPERATIVE AND SUBSIDIARY pg NOTES TO CONSOLIDATED TV FINANCIAL STATEMENTS Decernber 31,1998 and 1997 Note 1: Sumanary of Significant Accounting Policies (a) Basis of Accounting The consolidated financial statements include the accounts of Central lowa Power Cooperative (the Cooperative) and its majority owned subsidiary, Central lowa Energy Cooperative (CIECO). The Cooperative is an electric generation and transmission cooperative providing wholesale electric service to its 14 members. CIECO owns assets held for sale and invests in joint ventures primarily with members of the Cooperative. All significant intercompany balances and transactions have been eliminated in consolidation. The accounting records of the Cooperative are maintained in accordance with the Uniform System of Accounts prescribed by the Rural Utilities Service (RUS). The Cooperative is not subject to external regulation other than by the RUS. Distribution of margins of the Cooperative and CIECO (collectively, the Company) are made in accordance with the provisions of the Code of Iowa. (b) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (c) Electric Utility Plant Depreciation of electric utility plant in service is piovided over the estimated useful lives of the respective assets on the straight-line basis. Maintenance and repair of property and replacement and renewal of items determined to be less than units of property are charged to expense. Replacement and renewal of items considered to be units of property are charged to the property accounts. At the time properties are disposed of, the original cost, plus cost of removal less salvage of such property, is charged to occumulated depreciation. (d) Nuclear Decommissioning Based upon the Nuclear Regulatory Commission (NRC) DECON option (which provides for the removal or decontamination of all equipment and structures necessary to permit release of the property,or unrestricted use), the Cooperative's share of the costs to decommission the Duane Arnold Energy Center (DAEC)is estimated at $99,000,000 in 1998 dollars. The Cooperative includes a provision for disposal of spent fuel in its nuclear fuel expense. The NRC minimum formula estimate is being used as the basis for decommissioning iunding. For purpses of developing a decommissioning funding plan, the Cooperative assumes decommissioning costs will escalate at an annual rate of 4.5 percent and the average return on investments will be approximately 10 percent. The funding plan assumes decommissioning will start in 2014, the anticipated plant shutdown date. The decommissioning costs are being recognized over the expoeted service life of the plant and are included in the Cooperative's service rates. At December 31, 1998, the Cooperative has $16,708.718 in investments set aside for decommissioning in a legally restricted external trust fund and has also designated $4,864,009 of other investments for decommissioning. (e) Non-utility Property Non-utility property is carried at cost less accumulated depreciation. Depreciation is computed by the straight-line method over the estimated useful lives of the respective assets, which range from 5 to 10 years for equipment. (f) Allowance for Funds Used During Construction The allowance for funds used during construction represents the estimated cost, during the period of construction, of borrowed funds used for construction purposes. The composite rates used to calculate the allowance for 1998 and 1997 were approximately 6.7 percent and 6.5 percent, respectively. (g) Nuclear Fuel The cost of nuclear fuel, including capitalized interest and taxes, is being amortized to fuel expense on the basis of the number of units of thermal energy produced in relationship to the total thermal units expected to be produced over the life of the fuel. Nuclear fuel expense includes a provision for estimated spent nuclear fuel disposal cost which is being collected currently from members. (h) Fossil Fuel Materials and Supplies Fossil fuel, materials and supplies are stated at moving average cost. (1) Investments and Notes Receivable Investments in associated organizations consist primarily of approximately $5,500,000 in capital term certificates 4 issued by National Rural Utilities Cooperative Finance Corporation (CFC) and memberships in other cooperatives. These l investments are stated at cost, adjusted for patronage capital allocations. Investments in other organizations consist primarily of an investment in a venture capital corporation (31 percent ownership) which is accounted for on the equity method. Investments - decommissioning trust fund is a legally restricted external trust fund and consists primarily of U.S. Treasury notes, other bonds and notes, common stock and money market funds, which are carried at market value with net unrealized gains and losses reported in other equities until realized. 23

h MNh 3 Other investments consist primarily of U.S. Treasury notes, other bonds and notes, common stock and money market funds which are carried at market value with net unrealized gains and losses reported in other equities until sechzed. Notes receivable from an offiliated joint venture bears interest at 6.80 percent to 8.65 percent, and is due in quartei % installments of $44.600 including interest through 2015. Notes receivable - other represents a non-interest bearing note with a balance of $1.100,000 with annual installments of $100,000 through 2008. The note was discounted using a 6.55 percent interest rate. Also included is a note receivable which bears interest at 3.00 percent, and is due in monthly installments of $826 through 2023. (1) Pension Plan The Company's policy is to fund pension costs accrued. (k) Deferred Charges Deferred charges consist principally of a special assessment established by the Energy Policy Act of 1992 for decontamination and decommissioning of the Department of Energy enrichment facilities and repricing costs incurred to obtain lower interest rates on long term debt. These costs are being recovered throJ0h rates over various amortization periods as follows: the special assessment,15 years ending in 2007, and the repricing costs,17-21 years ending in 2014. The amount of these costs to be amortized in 1999 has been reflected as a current asset on the balance sheet. (1) Cash Equivalents Cash equivalents of $29.074,940 and $20,960,865 at December 31,1998 and 1997, respectively, consist primarily of CFC commercial paper. For purposes of the statements of cash flows, the Company considers all highly liquid investments with maturities of three months or less at the date of purchase to be cash equivulents. (m) Comprehensive Income On January 1,1998, the Company adopted Statement of Financial Accounting Standards (SFAS) No.130,"fleporting Comprehensive Income? SFAS No.130 established standards for reporting and presentation of comprehensive income and its components in a full set of financial statements. Comprehensive income consists of net ince,me and net unrealized gains (losses) on securities and is presented in the consolidated statements of members' equity. SFAS No.130 :equires only add-itional disclosures in the financial statements; it does not affect the Company's financial position or results of operations. (n) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of The Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No.121, Accounting for impairment of Long Lived Assets and for Long Lived Assets to Be Disposed 01, on January 1,1997. This Statement requires that long-lived assets and ceWiin identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the ccc rying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. !! such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. (o) Fair Value of FinancialInstruments Fair value estimates, methods, and assumptions are set forth below. Cash and Cash Equivalents. Accounts and Other Receivables, Interest Receivable. Accounts Payable and Advances from Members The carrying amount approximates fair value because of the short-term nature of these instruments. Investments and Notes Receivable It was not practicable to estimate the fait value of invest.ments in associated and other organizations. The investments in associated organizations are carried at their original cost, adjusted for patronage capital allocations. The untraded capital term certificates currently bear interest at 3 percent to 5 percent and primarily mature in 2020 through 2080. The patronage capital allocations are noninterest-bearing and mature based upon the granting cooperatives' polieles. The investments in untraded other organizations are accounted for on the equity method. The fair value of investments-decommissioning trust fund and other investments are based on quoted market prices published in financial newspapers or quotations received from securities dealers. At December 31,1998, the estimated fair value of investments decommissioning trust fund and other investments were $16,708,718 and $58.137,353, respectively.The carrying value of the notes receivable approximates the fair value. Long Term Debt The fair value of long-term debt is calculated by discounting scheduled cash flows through maturity using estimated market discount rates. The discount rate is estimated using the rates currently offered for long-term debt of similar remaining maturities. At December 31,1998. the Company estimated the fair value of its long-term debt as $264.000,000. Limitations Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. Because no market exists for a portion of th e Company's financial instruments, fair value estimates are based on judgments regarding current economic conditions, risk characteristics of various fMancialinstruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. tp) Reclassifications Certain amounts for 1997 have been reclassified to conform to 1998 presentation. _24

l ( 3 Note 2: Electric Utility Plant in Service The major classes of electric utility plant in service at December 31.1998 and 1997 and depreciation and amortization for 1998 and 1997 are as follows: Depreciation and Composite Cost amortization rates 1998 1997 1998 1997 intangible plant 1,562,078 1.405,616 24,379 17.053 4.00 Production plant 239,994,933 238,822.450 7,930.255 7,912,8 % 3.10-3 50 Transmission plant 124,107,164 122,852.765 3,482,414 3,337,510 2.75 Distribution plant 454,256 454.256 12,914 12,914 2.75 General plant 7,924,120 7.949,344 246,379 560.990 3.00-16.00 Electric utility plant in service 374,042,553 371,484.431 11,696,341 11,841,363 Note 3: Non utility Property At December 31,1998, and 1997, non-utility property consists of the following: 1998 1997 Guthrie County site

• 321,299 Equipment 686,116 1.215,065 Other property 478,620 590.263 1.164,736 2.126.627 "The remair.ing portions of Guthrie County site were sold during 1998.

Note 4: Investments At Decembei 31,1998 and 1997, investments-decommissioning trust fund and other investments were classified as available-for-sale and consisted of the following: Decommissioning Trust Fund Other Investments Amortized Unreall ed Unrealized Market Amortized Unrealized Unrealized Market Cost Gains Losses Value Cost Gains Losses Value 1998 U.S. Treasury notes $ 1.203.794 61,231 1,038 1,353,987 2,874,849 125.151 3,000,000 Other bonds and notes 2,071,517 42,853 6.103 2,108,313 27,538,436 274.143 214,679 27.597.900 Common stock 7,872,274 4.450,593 68,348 12,254,519 17,031.197 10,301,106 1,056,049 26,276,254 Money market iunds and other 991.899 991.899 1,263,199 1,263,199 Totals $ 12,229,484 4.554,723 75.489 16,708,718 48,707,681 10,700.400 1.270,728 58.137,353 1997 U.S. Treasury notes $ 2.182.826 73.421 2.956 2,253.291 4,680,474 285.176 4,965,650 Other bonds and notes 615.206 16.782 7,205 624.783 23.002,969 - 23,002.969 Common stock 7,042,817 2,667,911 161,644 9,549,084 0,095,604 9,994.251 193.833 15,896.022 Money market funds and other 535.258 535,258 818,661 818,661 Totals $ 10,376,107 2,758.114 171,805 12,962.416 34.597.708 10,279.427 193,833 44,683,302 Note 5: Other Equities At December 31,1998. and 1997, other equities consist of the following: 1998 1997 Unallocated margin 5,710,038 5.014,391 Reserve for contingent losses 21,442,021 18,727,630 Surplus 6,578,165 6,078.165 33.730,224 29,820.186 The reserve for contingent losses is a discretionary reserve established by the Company for unexpected future losses. s

f . NOTES T010NSOUDATED FINANGAL STATEMENTS 1 b " (Connmuod) : N G 3 Note 6: Long term Debt At December 31,1998, and 1997,long-term debt consists of the following: ) 1998 1997 RUS,2% and 5% mortgage notes payable, due in quarterly installments approximating ) $1.693.000 adjusted quarterly, including intesest, maturing through June 2019 $ 66,723,680 70.281,051 Federal Financing Bank (FFB),5.418% to 10.584% mortgage notes payable. l guaranteed by the RUS, due in quarterly installments approximating $3,784,000, including interest, maturing from December 2010 through 2029 153,609,920 151,511,161 CFC,5.25% to 6.25% mortgage notes payable, due in quarterly installments approximating $570,000, including interest, maturing from March 2007, through May 2031 21,505,504 8.126,272 CFC, variable interest rate (6.0% at December 31,1998) notes payable, due in quarterly installments approximating $102,500 adjusted quarterly, including interest, maturing through December 2027 5,540,863 13,767,555 Cooperative members, variable interest rate (6.40% ot December 31,1998) unsecured notes payable, due in quarterly installments approximating $26,000, including interest, maturing on December 31,2005 460,357 636.111 City of Council Bluffs, Iowa 5.80% to 6.125% Pollution Control Revenue Bonds guaranteed by CFC, due in semi-annual installments ranging from $60,000 to $110,000, maturing on December 1,2007 1,585,000 1,715,000 Louisa County, Iowa,3.90% - 4.65% Pollution Control Revenue Bonds guaranteed by CFC, due in annual installments ranging from $240,000 to $305,000, maturing on December 15,2003 1,410,000 1,655,000 National Cooperative Services Corporation,6.80% to 8.65% mortgage notes payable, due in quarterly installments approximating $44,600, including interest, maturing through 2015 1,584,469 1,450,353 Other 369,000 61,964 Total long-term debt 252,788.793 249,204,467 Less current maturities 10.205,000 9.350,067 Total long-term debt, less current maturities $ 242,583,793 239,854,400 Mng 1998, approximately $11.046,700 of CFC variable interest rate notes payable were converted to fixed rate mortgage notes payable. The aggregate maturities o8 long-term debt for each of the five years subsequent to December 31,1999 are as iollows: 1999, $10,205,007: 2000, $10,768,602,2001, $11,325,216; 2002, $11,920,541; and 2003, $12,560,829, At December 31,1998, the Cooperative had available a $10,000,000 short-term line of credit agreement with CFC which expires in August,1999, and approximately $19,256,000 of unadvanced funds available for various construction projects At December 31,1998 and 1997 there were no borrowings standing under the line of credit agreement. All assets of the Company are pledged to secure the long-term debt to RUS, FFB and CFC. Note 7: Pension Plan The Company participates in a multi employer pension plan which covers substantially all employees The accumulated plan benefits and net assets of the plan are not determined or allocated separately by individual employer. Pension expense for the years ended December 31,1998 and 1997 omounted to $316,000 and $404,000, respectively. Note 8: Income Tax Status The Cooperative is a nonprofit corporation under the laws of Iowa and is exempt from federal and state income taxes under applicable tax laws. CIECO is organized as a taxable cooperative under the laws of Iowa. At December 31,1998. CIECO had net operating loss carryforwards of approximately $2,600,000 for federal income tax purposes available to reduce future federal taxable income through 2013. CIECO also has unused investment tax credits of approximately $44,000 available to reduce future income taxes through 2000. For financial reporting purposes, the tax loss carryforward and unused investment tax credits have been applied to eliminate net deferred tax credits. To the extent the tax loss carryforward and investment tax credits are used to offset income taxes for tax purposes, net deferred tax credits will be restored at the then current rates. At December 31,1998 and 1997, CIECO had established a deferred tax liability of $3.430,340 and $3.519,106, respectively against the unrealized gain in market value of investments recorded in accumulated other comprehensive income. Y 26

( 3 Note 9: Jointly owned Electric Utility Plant The Cooperative's share of jointly owned generating facilities as of December 31,1998,is reflected in the following table. These facilities provide approximately 50% of the Cooperative's total generating capacity. The Cooperative is required to provide financing for its share of the units. The Cooperative's share of expenses associated with these units is included with the appropriate operating expenses in the statements of revenue and expenses. The following table provides the net balance recorded in the Dectric-Utility Plant by facility, at December 31,1998. Percentage Capacity Dectric Facility Ownership MW Utility Plant. Net DAEC 20.0 % 107 $70.094.359 Council Bluffs Unit No. 3 11.5 78 20,929,111 Louisa Generating Station 4.6 32 16.705,007 Note 10: Commitments and Contingent Liabilities The Cooperative's operations and activities with respect to its coal-fired facilities are subject to developing environmental legislation and regulations by Federal and State authorities. Recent amendments to the Federal Clean Air Act require utilities, including the Cooperative, to comply with rrore restrictive emissions standards commencing in 19%. The Cooperative is recovering any increased costs resulting from compliance with the environmental legislation through increased rates. The Price Anderson Amendments Act of 1988 (1988 Act) sets a statutory limit of $9.8 billion for liability to the public for a single nuclear power plant incident and requires nuclear power plant operators to provide financial protection for this amount. The DAEC provides this financial protection through a combination of $200 million of insurance and $9.7 billion of industry-wide retrospective payment plans. Under the industry-wide plans. DAEC could be assessed a maximum of $88.1 million per nuclear incident, with a maximum of $10 million per year (of which the Cooperative's 20 percent ownership portion would be $17.6 million and $2 million, respectively), if losses relating to the accidents exceeded $200 milliors The Cooperative, as 20 percent owner of DAEC is a member of Nuclear Doctric Insurance Limited (NDL). NDL provides $540 million of insurance coverage for the Cooperative on certain property damage, decontamination and I premature decommissioning. The proceeds from this insurance however, must first be used for reactor stabilization and site decontamination before the insurance can be used for plant repair and premature decommissioning. NDL further provides separate coverage for additional expense incurred during certain outages. Owners of nuclear generating stations insured through NDL are subject to retroactive premium adjustments if losses exceed accummulated reserve funds. NEIL's accummulated reserve funds are currently sufficient to cover its exposure in the event of a single incident under the primary and excess property damage or additional expense coverages. However, the Cooperative could be assessed annually a maximum of $0.54 million for NDL primary property. $1 million for NDL excess property and $0.2 million for NEIL additional expenses if losses exceed the accumulated reserve funds. The Cooperative is not aware of any losses that they believe are likely to result in an assessment. In the unlikely event of a catastrophic loss at DAEC. the amount of insurance available may not be adequate to cover property damage, decontamination and premature decomrnissioning. Uninsured losses, to the extent not recovered through rates, would be borne by the DAEC owners and could have a material adverse effect on the Company's financial position and results of operations. Note 11: Subsequent Event On February 8,1999 the Cooperative entered into an agreement to purchase all outstanding common stock in the Iowa Capital Corporation (ICC). At December 31.1998 the Cooperative had a 31 percent equity ownership interest in ICC. After consumation of this transaction the Cooperative will have a 62 percent ownership interest in ICC. The purchase price for the outstanding common stock will be based on the value of ICC at December 31 1999. The purchase price will be a minimum of $1,000,000 with a maximum of $2.600.000. The final closing date will be on or before April 1,2000. 27

f ( 3 CENTRAL IOWA POWER COOPERATIVE AND SUBSIDIARY ) TEN YEAR FINANCIAL

SUMMARY

Unaudited 1998 1997 1996

SUMMARY

OF OPERATIONS Operating revenue 100,809,254 91,200,299 91,732,592 Operating expenses and interest: Purchased power 16,789,263 12,844,702 8,519,525 Operations, maintenance and other 46,752,390 45,026,208 47,860,033 Member servirv 1,452,306 1,344,865 1,214,659 Administrative - 3 general" 3,578,046 3,709.180 3,134,472 Depreciation e > a amortization 11,561,393 11,757,936 11,476,590 Decommissioning provision 3,219,840 2,476,040 2,132,340 Property and other tctxes and insurance 602,289 Ct t,729 678,479 Net interest charges 15,991,060 15.218.091 14,470,081 Total operating expenses and interest 99,946,587 93,041,751 89,486.179 Operating margin 862,667 (1,841,452) 2,246,413 Other revenue 4,847,371 6,855,843 4,220,667 Net margin S 5,710,038 5,014.391 6,467,080 ASSETS Electric utility plant 448,048,533 444,800,113 435,847,094 Less accumulated depreciation and amortization 237,433,340 224,256,871 209,131,696 Net electric utility plant 210,615,193 220.543,242 226,715,398 Net non-utility plant, investments, and notes receivable 93,530,915 76,809,728 54,619,045 Current assets 48,216,714 42,677,841 42,287,705 Deferred charges 8,417,290 8,809,531 9,342,892 Total assets S 360,780,112 348,840,342 332,965,040 i CAPITALIZATION AND LIABILITIES Members' equity 70,653,802 64,424,325 56,870,129 1 Long-term debt 242,583,793 239,854,400 231,480,716 Current liabilities 20,223,123 20,400,913 22,993,410 Decommissioning reserves 21,572,727 18,352,887 15,876,847 Special assessment and other liabilities 5,746,667 5,807,817 5,743,938 Total capitalization and liabilities S 360,780.112 348.840,342 332,965,040 (1) Not restated to reflect consolidation of majority owned subsidiary, CIECO. (2) Beginning in 1994, certain salaries, benefits, and other costs previously classified as administrative and general have been reclassified as member services or operations, maintenance and other to be more reflective of the services provided. Years 1993 through 1989 have not been reclassified on a comparative basis as it was not practical, j ) r.

b ( 3 1995 1994 1993 1992 1991:" 1990" 1989'" 89,037,508 85,028,734 85,785,058 82,376,927 80.491.877 75,817,988 72,561,582 6.606,936 6.118,306 9.492,228 6,238,944 5.093.377 6.994,000 3,271,280 50,991,054 48,633,354 43,099,230 43,664,579 44,075.995 38,829,499 39,151,630 1,420.792 1,082,301 1,086,483 728,473 691,385 549,161 412,649 2,936,127 3,039,463 3,795,594 4,404.458 3,629,407 3,221,043 2,853,246 10,449,639 11,375,564 10,799,746 10,205,712 9,398,207 10,788.846 9,400,390 1,824,3D 1,594,812 1,770,725 1,204,770 1,009,870 1,725,699 1,001,790 756,618 113,741 102,099 109.298 459,102 606,570 700,655 14,786,377 14.097,906 15,061,130 15,482,054 15.453,492 15.237,629 15,283,640 89,771,873 86,055.447 85,207,235 82,038,288 79,81C,835 77,952,447 72,075,280 (734,365) (1,026.713) 577,823 338,639 681,042 (2.134.459) 486,302 3.043,818 2,936,268 1,887,856 2,000,743 2,090,006 4,098,528 2,093,041 2,309.453 1,909,555 2.465,679 2,339,382 2,771,048 1,% 4.069 2,579,343 413,216,505 397,021,724 384,457,411 371,882.103 361,894,125 348,703,621 351,945,766 194,007,022 180,772,357 168,641,832 156,930,198 145,171,769 133,099,805 137,980,323 219,209,483 216,249,367 215,815,579 214,951,905 216,722,356 215,603,816 213,965,443 36,957,633 33,248,839 30,267,892 28,352,028 23,142.382 18,448,543 16.234,231 51,290,287 37,169,726 36,184,307 18,749,147 19,900,184 23.024,779 22,686,762 9,803,040 11.001.268 6.442,156 5,197,969 3,986,348 5,012,018 7,537,685 317,260,443 297,669,200 288.709,934 267,251,049 263,751,270 262,089,156 260,424.121 43,282,394 39,465,790 37,745,673 35,279,994 33,418,329 30,707,281 28,743,212 235,124,252 221,732,790 215,429,551 202,507,475 204,381,424 209,197,377 213,767,922 22,346,204 21,758,749 22,728,477 18,411,229 18,601,647 15,904,498 13,358,686 13,744,507 11,920.177 10,325,365 8,554,640 7,349,870 6,280,000 4,554.301 2,763,086 2,791,694 2.480,868 2.497,711 317,260,443 297,669.200 298,709,934 267,251,049 263,751,270 262,089,156 260.424,121 ( ) ii

[ [ CENTRALIOWA POWER COOPERATIVE AND SUBSIDIARY MEMBER COOPERATIVE OPERATING STATISTICS Unaudited Clarke East-Central Eastern Farmers Guthrie

SUMMARY

OF OPERATIONS: 1 Operating Revenue $ 6,007,500 11,707,391 39,535,710 7,756,538 6,226,363 I Purchased Power 2,945,404 7,149,365 29,832,711 4,703,034 3,557,651 Operating Expenses 1,730,158 2,510,965 5,328,727 1,649,039 1,437,053 Depreciation 462,053 716,490 1,865,874 493,447 342,000 Tax Expense 11,502 91 l Interest Expense 521.481 779,181 1,240,610 529/140 459,766 . Total Cost - Electric Service $ 5,659,096 11,167,503 38,267,922 7,374,860 5,796,561 { Operating Margins 348,404 539,888 1,267,788 381,678 429,802 Non-operating Margins & Capital Credits 168,153 247,950 803,128 145,986 (1,831) Margins S 516,557 787.838 2,070,916 527,664 427,971 ASSETS AND OTHER DEBITS: Total Utility Plant $ 18,832.669 27,592,154 67,257,195 18,549,510 13,877,449 Accumulated Depreciation & Amortization 6,603,822 7,139,049 20,679,844 5,024,569 5,595.448 Net Utility Plant 12,228,847 20,453,105 46,577,351 13,524,941 8,282.001 Property & Investments 1,682,796 4,063,070 7,989,725 2,491,387 1,490,349 Current & Accrued Assets 2.774,810 3,604,765 7,825,446 2,187,889 3,743,614 Deferred Debits 749,341 521,751 37,372 Total Assets & Other Debits $ 16,686,453 28,870,281 62,914,273 18,241,589 13,515,964 LIABILITIES AND OTHER CREDITS: Margins & Equities S 5,598,588 13,220,713 33,627.809 7,186,472 5.487,441 Long Term Debt 10,284,035 14,059,308 25,135,072 9,717,206 6,607.116 Cc rent & Accrued Liabilities 720,382 1,333,981 3,631,785 1,037,770 945,561 Deferred Credits & Misc. Oper, 83,448 256,279 519,607 300,141 475,846 Total Llabilities & Other Credits $ 16,686,453 28,870.281 62,914,273 18,241,589 13,515,964 j OTHER STATISTICS: Miles of Line 1,770 2,185 4,534 1,772 1,385 Consumers Served 4,480 7.389 20.735 4,887 4,728 Consumers Per Mile 2.5 3.4 4.6 2.8 3.4 kWhs Sold per Consumer 13,155 20.148 38,321 21,272 16,465 MWh Sales 58.935 148,874 794,584 103,956 77,847 Annual Revenue per Consumer $1,341 $1,584 $1,307 $1,587 $1,317 Plant Investment per Consumer $4,204 $3.734 $3,244 $3,796 $2,935

• This data represents the combined service territories of Greene County REC and Hardin County REC.

(

r 3

1. inn Maquoketa Marshall Midland

• Pella Rideta SWISCO T. I. P.

Total 17,176,246 16,809,365 6.087,850 15,751,259 3,611,662 3,437,738 4,474,150 8.475,376 147,057,148 10,984,881 11,329,504 3,633,840 9,599,101 2,193,273 1,763,101 2,346,148 5,113,520 95.151,533 3,270,368 3,511,985 1,364,100 2,708,414 870,839 920,429 1,408,339 1,850,571 28,560,987 874,565 901,762 382,114 1,207,481 152,296 311,634 321,792 449,660 8,481.168 ) 370,792 192,785 143,948 14,797 71,596 3.428 4,396 178,836 992,171 1,491,418 695,073 332,555 964,015 199,084 341,308 338,803 406,480 8,299,114 16,992,024 16,631,109 5,856.557 14,493,808 3,487,088 3,339,900 4,419,478 7,999,067 141,484,973 184,222 178,256 231,293 1,257,451 124,574 97,838 54.672 476,309 5,572,175 407,718 473,700 152,375 341,245 147,146 120,678 111.564 295,502 3,413,314 591.940 651,956 383.668 1,598.6 % 271,720 218,516 166.236 771,811 8,985,489 37,223,367 33,212,287 13,145,211 38,233,793 7,326,822 11,238,283 11,753,655 17,942,688 316,185,083 ) i 7,382.498 13,080,243 4,841,044 10,660,254 2.497,736 3,507,281 4,033,747 5,374,964 96,420,499 29,840,869 20,132,044 8,304,167 27,573,539 4,829,086 7,731,002 7,719,908 12,567,724 219,764,584 4,341,069 6,098,710 1,696,466 3,938,263 962,036 1,048,431 1,534,177 2,536,027 39,872,506 2,319,636 4,314,073 1,687,354 3,317,642 1,277,516 1,539,691 1,192,733 7,939,254 43,724,423 (133,091) 284,671 19,919 43,921 17,492 16,831 69,956 1,702 1,629,865 36,368,483 30.829,498 11,707,906 34.873,365 7,086,130 10,335,955 10.516,774 23,044,707 304,991,378 9.877,822 15,943,860 5,168,902 14,660,377 3,426.977 3,191,911 3,867,246 10,306,370 131,564,488 22,123,202 13,169,977 5,918,338 18,396,011 3,047,131 6,669,493 5,958,145 11,240,680 152,325,714 3,493,459 1.454,332 612,819 1,691,897 363,444 335,374 657,914 866,582 17,145,300 874,000 261,329 7,847 125,080 248,578 139,177 33,469 631,075 3,955,876 36,368,483 30.829.498 11,707,906 34,873,365 7,086,130 10,335,955 10,516,774 23,044,707 304,991,378 1,805 3.045 1,091 2,811 607 1,217 1,365 1,734 25,321 14,383 12.550 4,431 8,513 2,341 2,632 3,092 5,554 95,715 8.0 4.1 4.1 3.0 3.9 2.2 2.3 3.2 3.8 14,734 17,588 15,839 24,334 19,012 14,128 15,512 18,551 22,221 I 211,924 220,728 70,183 207,155 44,507 37,184 47,963 103,034 2,126,874 $1,194 $1,339 $1,374 $1,850 $1,543 $1,306 $1,447 $1,526 $1,536 $2,588 $2,646 $2,967 $4,491 $3,130 $4,270 $3,801 $3,231 $3,303 N ] ii

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l i l l 1 l Y CENTRAL IOWA POWER C00 PERATIVE J ENERGY 5 MART. COMMUNITY MINDED 1400 Highway 13 SE P O B o x 2 517 Cedar Rapids, Iowa 52406 Tel. 319.3 6 6.8011 Fa x 319.3 6 6.8 6 2 6 Website www.cipco.org A Touchstone Energy

• Partner 4 N

EM o LA All of these energizing clevelopmejys... gd ki 7 U; 3.;- .-,_e. f - a nen' reconipeak dernand [ - nere record energy sales [ - lattnch of a nete brand - pttrchase of additional capacity l - a reditction in rates [a? - creation of ajoint nlarketing l'entitre f v _ aq. l L. m :.a.mwww ry ~~ -e m -we,--s

i. -

[} propelled Corn Belt Pou'er b3 ~ [~ Cooperative thnnigh a year ~ of reconignneth and into a l pou'erfitiposition to cornpete L in a nete utility trorld. p w b e .{J i1 La ?:' " l g; y19 L1 Gmu'th occitrred in a t'ariety of areas - sales, connnercial and inditstrial load, andpartnerships n'ith other coop-eratit'es. Conibined n'ith the opportunity [ 10 offer lou'er rates to oltr nietnbers, j i these energizing det'elopnients niade 1998 a year that invigorated the entire Corn Belt Pou'er systent. V I rn r .4 La c. J a E3

ECUMVE "" ' " ''". '"" "I h e board Corn llelt members' hnes. contmued to approve projects to = felt it was important to purchase maintain and strengthen our trans-O this capacity now rather than have mission system. Although good { to try to buy power in an uncertain maintenance can be costly, a strong future market. If we keep increas-transmission system will be an ing our demand for power, our important negotiation advantage in With a new record peak, record future supply may run short. We the future. j energy sales and lower average will continue to coordinate power A studv examining aspects of a rates, Corn llelt Power Cooperative purchases with other neighboring new supe'rvisory control and data enjoyed a year of financial strength utilities. Although few utilities are acquisition (SCADA) system was and prosperity in 1998. building power plants at this time, conducted in 1998. Options Although the record peak Corn Helt does maintain land that included incorporating distribution i occurred in October,it was not an could be developed for future gen-SCADA fi)r all Corn licit members increase in crop drying that pushed crating stations. A power supply nto a single system to serve both the total to 227 megawatts. Rather, Corn llelt and its distribution ~2L b an average crop year combined with new commercial and indus- ~ co-ops. Specifications fi>r the sys-tem are being drafted and purchase trial loads created not only a new [ '. , g'i' 1999. A telecommunications study of the new SCADA is planned for peak load, but also a new sales P record of almost 1.3 billion kilowatt began in 1998 to review the bulk hours sold during the year. We can communications needs of Corn see that our economic develop-llelt. Options being studied include ment effi>rts are paying off and relocating to a different microwave helping to keep rates down. frequency and developing a fiber Good-sized margins also 'S optics system. reflected our strong financial condi-J4 Corn licit representatives con-tion in 1998.The board of directors tinued to contact state and federal reduced power bills to our member .: f .s legislators in 1998, educating them cooperatives the last timr months of on cooperatives' views about elec-z the > car and gave marketing rebates tric utility restructuring. It is impor-on December bills. Additional funds were transferred to reserves to '.1;J..;;. tant to visit them not only during ~ the large rallies, but also when they maintain Corn Belt Power's posi- .'r,,.,. are home. Deregulation is going to c 7 tion in a deregulated environment. s come. If legislation is enacted in Corn llelt and its members - 1. 1999 we will probably see it imple-became partners in Touchstone ented in three or four years. Energy

• in 1998. The Thuchstone in 1998. the Corn llelt board of o,,,,,,,,no, Energy alliance is a good marketing ereudent nemtwe we Preudent directors acted in several areas that tool that allows us to be recognized

'"d ""#" " 9" prepared the cooperative ihr the nationally while at the same time study initiated in 1998 will review deregulated marketplace: lets us maintain our local identity options for future capacity pur- , Purchased additional capacitv and presence.We are fortunate that chases and will examine opportuni-all of our member cooperatives ties in distributed generation. Placed more dollars toward buy-down of the Duane Arnold have chosen to join in the Touch-In preparation for deahng w.ith a Energv Center, our nuclear plant sto nc incrgy, partners tip. n, pilot project in Iowa that opens Corn licit system is made up of some commercial, industrial and

• Continued to maintain our strong cooperatives that are all working residential loads to competitive bid-transmission system together. We must maintain that ding, Corn llelt developed a service

. Continued to educate employees unity to prosper imancially and to company with Northwest Iowa about operating in a deregulated remain competitive in a deregu-Power Cooperative (NIPCO) named environment lated market. AmeriChoice Energy Group. The Joined theTouchstone Energv The record peak load and record new venture will help with both ~ Mli e for a national marketing energy sales require $l Corn llelt to customer retention and brm, gmg purchase capacity in 1998. This new loads onto cooperative lines. _2

Partnered with NIPCO to create Ameri-ggg g gg maipir Choiec to increase Corn llelt's ability M 50 to compete for new commercial and industrial loads 45 7 Indeed,1998 will be remembered as a 40 year of positive growth and energizing devel- [ opments for Corn llelt Power Cooperative 35 and its member systems. 30 ) 25 ) immiw , s usie,s ,a 20 . _.. n Bell Pown ides of lme j imployees (w 8,408,331 55 129 10 146,501,903 1,782.54 5,582 5 31,070,140 770.41 1,725 0 g 819 1,810 j,7g j9g3 j,gg j,93 j,9g 40,455,959 755.4 1,720 Average REC member sysiem cost, including subsiation 48,900 651 917 2'269 cbrge; c icul ted over ge REC rare reflects power sold to municipots and others served by RECS. s 47,291,365 923 1,843 3 48,8i2.464 934.51 1,846 am Total Corn Belt kWh Sales ' 239,125,729 4,622 9,786* I 8# l 112,468,533 2,811 3,081* t,1H - 21,973,840 488.93 1,225 1,gg. 173,789,477 1,035 2,520 m.--.

• Corn Belt service territory only

- g .1% Cooperative' Highlights ?

• a =

$g..__7 q E g Sales g, t998: 1./68,9 i U /90 & Wh !If l 1997: 1 I i 1. 6419 / 9 k Wh ' ,IM3 ma ma ms m3 ms im im 1996: i. fU's i I 4 40 3 rwh inch, des RECS, NIMECA, Webster City & Sales to Others REC Peak Demand: (no kwsf ~ 1998: IH/ / W t.w Corn Belt Monely 'E0 n ySM Mk M* 1 I I i System Peak m.mo: 3 4 .iRf D w ehnter y m mIIe < > v k v.w.) my L l 1998;///;0 4 " m.m--" t

---

j- -

1997: /uv A9', kW igm. _} 'I 996: / i 9 / 90 f W ' I Miles of Transmission I.,ines: I /,i 4 - imm.. Distribution Substations: I /'> ~ l I _ feb. Her. Apr8 May June hily Ag5. Sept. Od lia Dec. Jet Corn Belt System Peak - REC + Webster City x 1.06 at time of CBPC/WC 60 minute System Peak

I__BA_ _ _ _ _ _ _ _ _ to the peak load. capacity from Gen-Sys from Also contributing to the peak was a ber of liasin Electric Power Cooper-load expansion at Farmland Indus-ative, purchasing power under tries, Vincent, served by Wright liasin's load development rate for County REC. New commercial and industrial customers. The board industrial (C&I) members also added also approved purchasing peaking June 1 through Nov. 30,1998. \\ yn v MARKETING [% REBATE j + i 3.k Because margins were higher p: f e than originally forecast, the Corn [, 'GR 8 Belt board approved a marketing M* $3 d g rebate of seven percent on member C l( cooperatives' bills from September h(NW g Qs A through December 1998. In addi-lf, f 1 k. tion, $500,000 was returned on F (h. J, JW g*y ?re member systems' December power T} jif y, bills as a marketing credit. "A y TOUCHSTONE F, e ENERGY Corn Belt Power and its mem-bers started out the year by joining as partners in Touchstone Energy *, 1*!'v,Y OpOO"TJEl1,'AU,k"NUJdCE" yod 77/CMl!%%$$i')' falue f el ic op ati Touchstone Energy brand repre-RECORD PEAK, sents the foundations electric coop-A major component of Corn eratives around the country were RECORD SALES Belt's coincident demand peak was built on: in tegrity, mnovation, the corn drying load. Although the accountability and commitment to Corn Belt Power Cooperative harvest season started out quite dry, made history at 8 p.m. on Oct. 21, wet conditions prevailed later in the commumty. Cooperatives' presence 1998, when the cooperative deliv-fall and created corn drving demands ered more megawatts of electricity s milar to those experienced in 1997. k to its members than ever before. The new record coincident peak of A record was also set in 1998 for 227 megawatts included sales to total energy sales, reaching almost j member cooperatives, Estherville 1.3 billion kilowatt-hours sold - s and Webster City, plus six percent more than 14 percent above the losses. Non-firm sales to North previous record set in 1997. Iowa Municipal Electric Coopera-1998 was warmer than usual tive Association (NIMECA) mem-with August's high temperatures bers other than Webster City were and humidity pushing cooling not included in the record peak. degree days almost 22 percent past Several factors contributed to 1997's total. Winter months were the new record. For the first year, also warmer than in previous years the city of Estherville was on line with the number of heating degrees to purchase its total electric down about 16 percent. requirements. Served by Corn llelt To accommodate the record kN with the assistance of Iowa lakes peak and new C&I load, the Corn Touchs Energy-Electric Cooperative, Estherville Belt board of directors approved added 6.7 megawatts to the total. Corn Belt becoming a class D mem-f;"ll",M7,ff;J/;;"Q",$*lg' Cl'glhg 2ll N a mm,2,a 2E7 lCn"s*l, 'Ep",*ll

3,.,3 & D3 y Paul, Minnesota, the 'Ibuchstone Energy Place at RiverCentre. g[m} ~ Incally, Touchstone Energy part-n v. 3 i ners m lowa sponsored a promotion c g? 7 9e 4 ' W., during the Register's Annual Great + g p ] _ Bike Ride Across Iowa (RAGilRAI), u. A-greeting cyclists July 19-25 and p y Q 3.. g& ,s4 telling them about coops'new affili-M

M.

ation with lbuchstone Energy and f showing why co-ops use the tagline i g" y 4( ;1 - ,;f

• the power of human connections."

4Dm9 7 Employees distributed waterproof yg " neck totes that contained a map of Egn - 51 the RAGIIRAI route and a list of what gy['~ ' ' I(j }h.. including free lemonade, dmwings g! g RECS were offering along the way, j y~ 1hr Touchstone Energy t-shirts, frec A { i camping on REC office gmunds and .n d{ souvenir key tags. A'm u' .., a In one of many projects that c

e show commitment to community, M"orU US AL*"$"1Cl4n"o"v, M"$"*" """ *"""*"""#

• "d"'d """' 5"*'""""

Corn Belt crews attached the cross to a newly-constructed church in in Iowa's communities remains tion incentive as part of its Power llampton's old-fashioned town on strong. Co-op employees live in the Olympics marketing prognm. Dur. the Franklin County fairgrounds. communities they serve and donate ing 1998, Corn llelt member sys-When plans were made to start the countless hours volunteering to tems reported participating in over two-year process of building the help their friends, family members 40 community service projects, church, the fair board contacted and neighbors. joining in the national Tbuchstone Corn llelt Power to see if a basket The Touchstone Energy brand Energy effbrt promoting the" power truck would be available to attach stands for those values that make of human connections.- the cross during the fair. cooperatives unique and represents In addition,172 individ-the advantages offered by utilities uals reported over 11,500 owned and controlled by their hours of volunteer activity members. during the year. Activities Corn llelt Power Cooperative ranged from serving as created a special volunteer recogn. Scout leaders, school volun-teers and 4-11 leaders to vol-p unteering for senior citizen 9 .. *M N meal delivery, church choir, + and service clubs. Each per- . i d s son reporting at least 25 'S hours of service received a / Touchstone Energy jacket.

?

i Nationally, 'Ibuchstone / Energy acquired title spon-j sorship of the April 25

• i NASCAR Busch Grand I

National 300-mile mce at ti s the Talladega Superspeed-4 way in Talladega, Alabama. A Touchstone Energy also T i purchased the right to name the new RiverCentre d ""*'"d' in ye mi cume or axw.m n a.mmament to ene" convention facilit}* in St- '" '",W""."."cmm"" "s *dm"ne m"o"w,"r ammm"'un. can u"n"e"=e uy,mun nn. can wn eone ocws newo,m n a non 4 nv %,fded h)ut hif 0tte I nt# gy J.k lit"!5 (O PfPplOyt'M arid difet tur$ Who 10 el(hVf(h th.pft in (ng* oldfrhf spryw.d town 90 the J rgtglgri dwe c(RADfy idlylOUnd$ (k)(umented ConfitfAIUng dt le.Mt /$ hOUM Of SPfVK e 5

5 -.lw. ~ ww%& ~,, [y-[;l,[.lj ;O.;'.;p.2.n. v.. m m m.. y :n/.f

. wa w

,q

w

- 'n

~- v. REVIEW 3..g.ll:g, %.." j p g' y C ?h

l t

1

g..

g. TRANSMISSION + ~' ~' T 4 ' ,i AND ELECTRICAL ~ . i. ^ M'~ f % ~. - MAINTENANCE Strategic planning studies con-sistently point to one of Corn llelt .I';y. 1,[, 3 .y Power Cooperative's major .,). strengths -- its reliable transmis-V, p 4 7.##' ' sion system, including its 125 l.-@'l~ j ~ ~ " " "W electric substations. During 1998, ~ Corn llelt Power was on line to its ~ members 99.95% of the time. Spring storms that ripped through member systems' service a sy,,,y w,,,,,,,, %om o,,m eix m.mnn,s a i u om..n,%,n,,, %. ncm w mi,- e,n-,u..o mem a areas severely damaged a 161 kV dual circuit line in Kossuth and MidAmerican Energy.The wind . Completion of phase II and County. The extreme weight of the turbines are expected to come on construction of phase III of the 100-foot poles presented crews line to serve customers of the Laurens to Linn Grove 69 kV line with several challenges during the investor-owned utilities in the . Gnstrwtion of IIcanland Substation repair work. spring of 1999. Although Corn licit Power members will not receive

• Construction of Dover dual-Ihroughout the year, electrical maintenance crews installed wild _

power from the wind farm, genera _ circuit 69 kV 1ine tion from the wind turbines will be . Reconductoring of original 69 kV life protection devices, lightning arrestors and new insulators in wheeled over Corn llelt's transmis-lines; entire system will be up-substations, minimizing the number sion system. The Dover Switching graded over the next 20 years of substation outages due to equip _ Station will allow for more control to maintain reliability ment failure. of the system in the area and will A special ceremony honored prevent overload conditions on the Corn licit crews built the Dover Warren C. Snell, retired director of lines should an outage occur. Switching Station ne:w Pocahontas both C.orn llelt Power and 4,n.,ht g Additional transmission and County REC.when the Snell Substa-to provide transmission suppon n, the new wind generation farm that electrical maintenance projects in tion was dedicated Sept. I1. Iluilt in will supply power to Alliant Energy 1998 included: 1997 to sene expanded electrical F L.,__ i ImM i m.. s 2 M A c a ng1 y- ...! /g . - %, ? 'E y [ I a.x t - p(' m. mw x w my , a 1 ss, y m-4 ( i g% 3 3 / h X' A u-imunio na e a y.ourom,no sw o n uuu,n u %., s.,wy suw,,

1. ,gg,,s,,,.a -a r,,,.,yn,

,,.m, o o,,ca,,.s e,,, n,.,, %e,.,,o e,,, c.,,, m f,Mi y Of s,0ll suto.),qni,1 W,k huf K) fed ff1910 (b dH r,(,0f't( P(, t _6

J'p;q }} gj .A.- j At the Council Illuffs 3 coal-fired ~ J L,. I.h,9. ; >&{N'g.- plant,a new railline was completed,

'sf (,

....'.

,s2 Jg allowing for competitive bidding on +7,

1. 1@Q

- Np(N.yL3 c tM 9301h rail rates between llurlington North-i kf y r~g .q p, g4@ j#ge ;

1. / L'd crn and Union Pacific.

p c ,, m ~ .,, sh. . ou p. f k',;g i O.~& sw p g. y &.,

y*

'.}: ". u k:L g, A Y2K " h }jf" - E 1 e, y 7 I d ,;. p & 4 Corn llelt Power continues to i f [' f S prepare for the next century,metic- )) [@ %mE%k !?.M ulously checking its system tech-E [ F P "7! A nologies for any problems that i j y might be caused by the " year 2000 !f g,y' ~~ ( o w bug," also referred to as the Y2K ml k I problem. In addition to individual ~} p sc a: 4 computers, other equipment that _[j d%, U contains computer chips is also being tested. c.

w M,

mm ~_.~ w, -7 - ~ TN_&m W"..Wydi DEREGULATION ~ ~ .w wnww. m, _e,, <,,_,o_ s _m n.__,m.m__,, _,m, -,..,,_, LEGISLATION ,m - m load at Farmland Industries,the sub-as it waits to discover its role in an During 1998, representatives fmm Corn Beh Power and its mem-station is located on old Ilighway 20 uncertain future generation market. six miles east of Fort Dodge.During Outdoor video cameras feed her cooperatives voiced concerns his tenure as a director in the mid-pictures back to monitors in the to legislators about deregulation 1960s, Snell witnessed construction control center which is staffed 24 legislation that may be acted upon in 1999. Co-op representatives of the first lines and substation that hours a day at the ilumboldt head-stressed that restructuring must serve Farmland Industries, one of quarters. Motica and heat detectors Wright County itEC's largest loads. installed inside the plant cover all benefit aH lowans. provide a choice internal areas of the building. of supphers, maintain reliability and ~

.z safety, provide guaranteed access, j

At Wisdom Station, a new plant and protect the environment. IIEC Q +,g,,. ' 3 ey engineer was hired. Mike Thatcher representatives also reminded legis-g . ! j-gf. l t came to Corn llelt Power with pre-lators that cooperatives are differ-(' g.j g4h4 } vious experience working for an ent from investor-owned utilities, I investor-owned utility. Long-time offering numerous examples of

-gy~ p employee Jim lloling was promoted ilECs' involvement in their commu-g, f7 to plant manager and Craig Poulsen nities and detailing co-ops' eco-1

.j, ~ c 1~ was named operations and mainte-nomic development efforts d.? nance supervisor. throughout the state. N_ eg / e u,a s ..n,wE E,..n ew <.au-,,, meno r,m, A scheduled refueling outage at !"Uf"f,7"y/MZ"$1-7$17 ""' ** the Duane Arnold Energy Center near Palo began in April and was Q. Y', GENERATING Hnished in MayJHw DAEC nuclear plant has operated 1,935 davs since STATIONS its last iost-time injury.

• j After almost 50 years since its A planned outage at the Neal 4 I

tp construction and 10 years since it coal-fired plant near Sioux City was put on extended outage, Corn enabled crews to upgrade a high-llelt's llumboldt Generating Station pressure steam turbine to increase .. M hecame an unmanned site in Janu-the plant's efficiency. This upgrade E- ? ary W48. It is now secured with will increase net generating capac-5= g *g y g "# fy g g,l1l? electronic surwillance equipment ity and reduce net plant heat rate. 1"" g" g f'"u = " = '=F"r "

• I

was started in response to Corn llelt's member systems 51idAmerican Imergy,s pilot project have received numerous grants for open access,which began at the from the United States Department EVIE end of 1998. Objectives for Ameri-of Agriculture's rural economic Choice are to develop a strategy fi>r development loan and grant pro-competition, evaluate participation gram.Over $1 million was received in the open-access pilot projects in in 1998 to fund a fire station, a distance learning project, a public

j.-

library and sewer infrastructure. jQg '

• g-MARKETING AND PIJBLIC REl ATIONS

j*

• ' A _ z.",

in the 1998 Power Olympics mar- '.Y,~# keting program, four coops shared w top awards based on total points 3 earned and kilowatt-hours sold dur-e, 88 4% ing the year. Power Olympics points g, were earned for the sale and installa-6- p' q['f af .k tion of electric water heaters, elec- ,d D e D *M Y tric resistance heat, heat pumps and f en . b-i diversified non-electric products and f ~ ' 9 - @ ' g- ~ services. Coops also earned points

• I

- {\\ for marketing displays and educa-g < h,,, yy. tional programs presented in the M community. New Power Olympics -k'.'. 4 ,87 categories in 1998 highlighted cup '8s and employee involvement in com-c== mumty service. DOOO$1"E,7n"ZCJCET.',%gTM;%M *g'g,'",$'*""' A new electric heating and cool-ing rate was implemented in 1998 Alectings were held with U.S. Iowa and gather infiarmation that to replace the previous dual fuel, congressional representatives and will help with both customer reten-interruptible and all-electric rates. senators in Washington, D.C., during tion and obtaining new loads for Inad control components of the the NRECA Legislative Rally in Slay. coops to serve. marketing plan were eliminated Co-op directors and staff members beginning Jan.1,1998. also hosted state legislators at RII ECONOMIC Day on the Ilill m, Des Stoines and at numerous legislative meetings DEVELOPMENT ,7,2 ",",'"," " 5f.", ". throughout the state in November. Speculative buildings created through joint ventures with mem-c,3 AMERICHOICE ber co-ops were soid to new busi-T,0.7,'",, ) mm., tas nesses in both the llumboldt and YY. is.ss ER/CHO/CE Ilampton industrial parks in 1998. j A spec building in the Spencer 15% Technical Park was leased and con-Corn llelt Power's newest ven. struction was started on two more ture for dealing with competition in buildings in Spirit Lake and Web-the electric utility industry was cre, ster City. New industrial parks ated in conjunction with Northwest were created in Greene and Gar-lowa Power Cooperative (NIPCO) 81er. Corn llelt Power continues to and named Americhoice Energy work with the Iowa Area Develop-Group. The for-profit subsidiary ment Group and its member filed its articles of incorporation in systems to expand value-added ,,.m,,,,,/ \\]"A late September. The joint venture agnculture m lowa. as _ nn, 3

]sM c K (f ' l/ Iluilding Contractors Conference in 544 g

February, hosting

builders,

.3 j y 'M V "Ab - 1 g plumbers, electricians and llVAC f ?' M, /: contractors to learn more about energy-efficient building tech-niques and products. 7' Along with lowa State Univer- ? sity Extension, Corn llelt Power agam sponsored the Mid-lowa ~ x'" Community Devclopment Confer-ence in April, bringing together ~ community leaders from small towns to share their development d. l2 ~ ' /; success stories. o E' j(G SERVICE AWARDS I D[4 ces were honored for service to the ) Nine Corn llelt Power employ-cooperative and received awards at j 8' the company Christmas party. P,"~$,'U0i ff EUf0,'C"MC%,%71%%'c%.""""' '"""""' """"*""" Recognized were William Fore-man, journeyman lineman, ilum-Electric water heater installa-The number of energy-efficient holdt; John Larson, journeyman tions reached an all-time high in homes in the Model IIcat Pump lineman, Emmetsburg; and Kenneth 1998, with 947 units installed, 44 Ilome progmm increased to seven in Stone, shift operator, Spencer, all 20 percent of which were new instal-the Corn llelt sy3 tem during 1998. vears; Dale Arends, executive vice lations or gas conversions. Almost The new homes help demonstrate ' resident and general manager, p 350 electric water heaters were that energy efficiency not only saves llumboldt; Robert Gress, journev-retained through the maintenance money, but also increases comfort man lineman, Emmetsburg; Robe $t program. and quality. Each home achieved a Nielsen, line threman, ilumboldt; New electric resistance heat load high enenty-efliciency rating and fea-and John Ralph, shift operator, topped the previous record set in tures a geothermal heat pump. Spencer, all 25 years; Robert llur-1997 with 2,819 kW connected dur-Corn llelt Power, along with gett, system supervisor, ilumboldt, ing 1998. IIcat pump installations Iowa's other generation and trans-35 years; and George Jensen, com-were lower, with 63 air source and mission cooperatives, sponsored puter maintenance technician, 35 geothermal units connected. the sixth annual Momentum is ilumboldt,40 years. 1998 Power Olympics Totals Total Corn Belt Sales Percentage Change indmduid Sam Penn 1998 campsedin199/ 10 00o - sn 16 000 24 000 30% - 11 000 2n - 11 000 16 000 14 000 in. 11900 it 950 10% 00D0 6.000 4 900 1.000 .- - 0 ~.~,.. - - ----. ~ s,. ~ ~ ~ - Indudet RKt hkler 04 NMU t Sales is Othen EE

MD . O g g Dale Arends,cxecutive vice pres- ~ 2 ident and general manager says of MU98HO OF398F Corn licit's retiring president, Gene y- .3 + - dg M-O has a relaxed style. Ile allows peo-c pie to say what is on their minds. T g. l On important issues he goes - Qw around the table and specifically giF, j - asks each director his opinion.We . m' " .Those who have sat around a will Mways remember his sense of ~ l boardroom tabic wnh him may humor an'd his ability to get people T to work together." $( have not always agreed on the issues,but they agree on one thing: Y Eugene Drager has a gift fi>r using Drager was elected as a director his sense of humor to diffuse tense of Ilumboldt County REC in 1950, situations and bring people taking over the seat that was vacated together. when his father Leonard Drager passed away suddenly. A farmer ,Flye result? Under his leaderslu.p from Kossuth County, Eugene Dmger as director of llumboldt County served as secretary and vice presi-REC for the past 49 years and as dent of the REC board before being president of Corn llelt Power for named president in 1966. lie served T the past 18 years,both cooperatives in that capacity until 1980. Drager have a strong sense of unity among was first appointed to the Corn llelt their decision makers. board in 1967 and served as treas. As Eugene Drager prepares to urer and vice president until being [ %,%n % * [ ', Q,' Q */"y. retire as a director, no one will named president m 1981. m oirector of Hurnooidt county arc in describe him as a polished orator. 1999 He was hrst titMied to itk Rf C txxud lie won't be remembered as a pres- . "Y," E "" '" ' " d"d *'ved as P'evde"' '** '

• 6 ship is to seek mput from all direc-w 1980 se was ippointed to rne corn e'st ident who made persuasive tors."A progressive board is when Power Doard 'n 196 7 and ** eleved pres' speeches or who could summarize d'"' '" "8 '

everyone has a chance to speak. We discussion into a concise motion. don't always all agree, but in the Instead,he will be remembered for end all are agreeable. Plus, after the was in on the start ofIADG and I ve a leadership style that promoted work is done,we go out and have a seen how it has helped the co-ops. harmony among directors and gave good time"he explains. We've also been having very prof-all a chance to have their say. itable years, so you know you're , Ilis emphasis on commu-doing something right." ss ,t mtv service has been I } directed not only toward Drager is a proponent of eco- 'w

• i so -

N the REC, but other organiza. nomic development and product ) h tions as well. Although he diversification. lie has supported [9 f and his wife Lorraine have investment in speculative buildings w <,e Y no children of their own, he and voted for new programs such volunteered as a 4-11 leader as offering Direc'lY through flum- / fi>r 25 years and served on boldt County REC. ~g. the Kossuth County Fair Drager's hopes for Corn licit's -)/ - one of those things. You strengths. "I hope the co-ops in Iloard fi>r 40 years. -It's just future include emphasizing its need to work with your Corn llelt stay together and stay uni-community - that's what tied.That will give Corn llelt and its ~.. // .? vou're the'e for.1 ve always members much more potential r T,q l enjoyed the people and I than if the co-ops act alonel ] never thought about quit- { / What would he like his legaev ting. If not for my age, I of the past half-century of service - y wouldn,t be quitting now, to be? -l would like to be remem-9 Several things are bered for keeping the board in v ).[y lh included in Drager's list of harmony l he concludes with a t y proud accomplishments. well-known, well-worn mischic- + Creation of the Iowa Area vous grin. "And you got to have t ? s ~. .-. ranks near the top. "1 felt I little full of it.you know." Development Group (IADG) a president of the board who is a 07%MANO Z 73E""* """"" b

f/:) O Q {eRf. ~ " ~.p. ~ f 4,,, ,as f g s, g k p,

. h e.

45 ~ .g. - / ( 3 f , :AQ ,' \\ s. The 1998 Corn Belt Power Cooperative Board of Directors (front row from left): Eugene Drager, Humboldt County REC, president; Donald Feldman, Butler County REC, secretary; Carrol Boehnke, Hancock County REC, treasurer; Donald OTool, Calhoun County Electric Cooperative Association, assistant secretary / treasurer; Roger Rust, Franklin REC; (back row from left): Keith Gelder, Midland Power Cooperative; Donald McLean, Grundy County REC; Lawrence Wittry, Glidden REC; Ronald Delber, NIMECA, vice president; L Kirby Range, Iowa Lakes Electric Coop-erative; Norman Kolbe, Sac County REC; and Russe ll Krog, Wright County REC.

1. Ikwine Valle) 13cctric Oxiperative NIMICA (then not have a tumrd represent.atwr)

2. Ilutler County RIC Oxiperatisc Association includes

3. Calhoun County 13ectric clectric utihties of:

Oxiperative Awiciation g

4. Iranklin RFC Ilancroft

5. Glidden Rif Coon Rapids arttinger

6. Grundy Count) RIC flancock Giunty Rif I tfr H. Ilumboldt O>unty Rif Milford

9. Iowa lakes IJectric Cooperative New llampton I"

10. Midland Power Cooperative A c e.n w Sumner

11. Sac County RFC Webster City

12. Wright County RIE West 15cnd

,,y

1 BALANCE SHEETS omernoer n wm and om ASSETS 1928 '997 ELECTRIC PIANT (Notes 2 and 6): In service. $ 214,809,849 $ 210,897,843 Irss-accumulated depreciation _ 112.097.302 123.816.726 82,712,540 87,081,117 Construction work in progress. 2,103,474 2,301,454 Nuclear fuel, net of amortization (Note 2) .5608,18f6 5.154.084 88.424m200 94.536.655 OTIIER PROPERTY AND INVESTMENTS: Nonutility property 272,363 290,716 Investment in the National Itural Utilities Cooperative Finance Corporation (Note 2).. 2,515,018 2,515,201 Land held for future use (Note 2). 2,963,060 2,963,060 Decommissioning fund (Note 2). 16,227,548 13,694,236 Other investments and receivables (Notes 2 and 9). 4.212.336 4.388.962 26.190.325 23.852.182 CURRENT ASSETS: Cash and cash equivalents (Note 2) 9,047,607 6,480,795 51 ember accounts receivable. 3,908,053 4,737,418 Other receivables.. 237,956 260,921 Inventories - Fuel, primarily coal, at last-in, first-out cost. 1,368,197 880,790 51aterials and supplies,at average cost. 2,988,950 2,786,285 Prepayments 2.94.016 475.532 17.84 6222 15.621.751 DEFERRED CIIARGES: Deferred Department of Energy decommissioning costs (Note 11) 1,246,359 1,367,499 Deferred refueling costs (Note 2). 1,046,659 250,486 Unamortized refinancing cost 0 13,903 Other. 11.450 105.403 2.304.4(s4 1.737.291 $_1312fth722 $ 135.747.879 l The accompanying notes to the financial statements are an integral part of these statements. i 1

BALANCE SHEETS December 31, I 998 and I 997 t MEMBERSHIP CAPITAL AND LIABILITIES 1998 1997 MEMBERSIIIP CAPITAI2 Memberships,at $100 per membership. 1,400 1,400 Deferred patronage dividends, per accompanying statements (payment restricted as indicated in Note 3) 8,777,682 8,333,683 Other equities, per accompanying statements. 20,747,978 17,689,498 Unrealized gain in market value of investments (Note 2) 1.779.12.5 1.038.487 31.306.185 27.063.068 IDNG-TERM DEHT (Note 4): Rural Utilities Service. 32,627, / / / 34,847,588 Federal Financing Ilank. 60,715,741 63,008,377 Capital lease obligations (Note 2).. 2,190,076 2,649,972 Pollution control revenue bonds 2.005,000 2.165.000 97,538,594 102,670,937 j i Irss - Current maturities of lor @ term debt. 5.371.631 5.080.561 92.166.963 97.590.376 OTIIER IDNG-TERM LIABII.ITIES: Deferred Department of Energy decommissioning costs (Note 11) 1,017,543 1,142,274 Deferred compensation.. 43,683 60,465 Other. 33.637 46.203 1.094.863 1.248.942 CURRENT LIABILITIES: Current maturities of long-term debt. 5,371,631 5,080,561 Accounts payable 2,208,729 2,055,996 Accrued property and other taxes. 2,097,447 2,192,484 Accrued interest and other., 517.954 516.452 10.195.761 9.845.493 $_.13_4,263,712 $_135.747.879 The accompanying notes to the financial statements are an integral part of these statements.

i l STATEMENTS OF REVENUES AND EXPENSES i For r f n Mu ', Er u k d Dc m r ihm.3 I. 1 WH and I ')') / 11)98 1997 OPERA 11NG REVENUES: Sales of electric energy $ 45,208,268 $ 42,436,264 Other. 3.722,823 3.764.049 48.936.141 46.200.313 OPERATING EXPENSES: Operation - Steam and other power generation 15,491,423 16,776,444 Purchased power, net 5,572,336 2,123,250 Transmission. 2,750,81' 7,739,468 Sales.. 900,814 966,505 Administrative and general. 2,692,659 2,546,788 31aintenance - Steam and other power generation 4,069,554 3,647,385 Transmission. 680,723 655,143 General plant.. 29,637 18,991 Depreciation and decommissioning (Note 2). (hM10133 6.786.405 1 39.078 121 36.260.379 Net Operating Revenues. 9,83 & O 2 0 9.939.934 INTEREST AND OTIIER DEDUCTIONS: Interest on long-term debt.. 6,516,683 6,929,676 Other interest (Note 2). 1,073,606 1,017,067 Interest during construction (Note 2)., (78,709) (196,611) Other deductions.. 4,455 33,253 Amortization of reacquired debt (Note 4).. 13,903 66,713 Amortization of loan expense. 20.752 20.752 7.550.690 7.870.850 NET OPERATING 51ARGIN 2,307.3310 2.069.084 NON-OPERATING MARGIN: Interest and dividend income 1,276,663 921,685 i Other, net. 854J 8_3 987.163 2J30.846 1.908.848 NIff 51ARGIN BEFORE EXTRAORDINARY ITE51. 4.438.126 3.977.932 loss on refinancing of debt (Note 4). 459,375 0 NEF AIARGIN. _$._J,228,801 $ 3.977.932 The accompanying notes to the financial statements are an integral part of these statements. .a

STATEMENTS OF CASH FLOWS For flu Y(ar s E r ich d Decer rltx:' 31, l')')B ancJ l(19 / (NOT E 2) 1998 1997 CASII FLOWS FilOAt OPEllATING ACFIVITIES: Net margin $ 3,978,80I $ 3,977,932 Adjustments to reconcile net margin to cash provided by operations: Depreciation and amortization 6,375,318 6,231,358 Amortization of nuclear fuel 1,742,407 2,040,633 Amortization of deferred refueling costs. 1,201,315 1,212,508 Amortization of spent nuclear fuel disposal costs. 0 210,264 Amortization of refinancing cost. 13,903 66,713 Amortization of Department of Energy decommissioning costs 121,140 149,350 Changes in current assets and liabilities: Accounts receivable. 852,333 (911,579) Inventories. (690,072) 240,772) l repayments. 181,523 551,538 Acwunts payable. 152,733 (686,899) { Accrued property and other t ixes.. (95,037) (19,795) Accrued interest and other liabilities.. (625) (29,704) j Payment to Department of Energy for decommissioning. (248,641) (272,176) Other 64.605) (85.3i9) Net cash provided by operating activities. $ 13.649.703 $ 12.675.566 CASII FLOWS FI(OAl FINANCING ACTIVITIES: llepayment of long-term debt (5,132,343) (5,333.8 io) Deferred patronage dividends paid. (556,000) (523,835) Cash provided from CTS fund (Note 9). 0 2.016.442 Net cash used in financing activities. (5.688.343) (3 811,254) CASil FLOWS Fl(031 INVESTING ACTIVITIES: Additions to electric plant. net.. (1,854,917) (4,651.465) Additions to nuclear fuel (196,509) (2.390,965) Change in deferred refueling costs (1,997,488) (90.809) Sale of non-utility plant 18,353 53.050 Additions to decommissioning fund (1,792,674) (l.841,173) Change in other investments. 428t(t81 110.423 Net cash used in investing activities (5.394.548) (8.781.239) Net increase in cash and cash equivalents.. 2,566,812 80,09i CASII AND CASil EQUIVAIENTS AT: 15cginning of year. 6j80,795 6a00. 01 End of year. $ 9,()41J01 _$_.1180.795 The accompanying notes to the financial statements are an integral part of these statements. 15

STATEMENTS OF DEFERRED PATRONAGE DIVIDENDS AND OTHER EQUITIES I ( n ll n ' % 'ctt ' L t n b 31 ! '

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J 1998 1222 DElliHRED PATRONAGE DIVIDENDS: lla19nce assigned beginning of ) car.. $ H,333,683 $ 7,857,51H Net suargin. 3,978,801 3,977,932 llevenue deferred patroaage dividends. 73,618 HJdLO j I 2,392,I 62 11,917,760 Patronage dividends paid. (556,000) (523,835) Appropriation of margin - 1(eserve for contingent losses. ( 2,808,4 H0) (2,810,212) Statutory surplus. U50.000) (250.000) llalance assigned end of year.. _ _$ H,777,6HJ $1331683 OTIIER EQUITIES: (Appropriated Margins) Reserve for Statutory Contingent Stirp.lUh IMhCS Tolgl llalance Decernher 31,1996 $ 3,599,481 $ 11,029,772 $ 14,629,256 Appropriation of inargin 250.000 2.H10.242 3.060.2 il llalance December 31,1997 3,849,484 13,840,014 17,689,498 Appropriation of rnargin 250.000 2.80H AHO 3.058.189 Italance December 31,1998 $ 1.022d8j $ 16.6J8j9] $ 29.~12.278 STATEMENTS OF COMPREHENSIVE INCOME I cn ine M mr' f 'rtcieci [h 'c ut i tl wt.3l, l ')')H ar n i I()')/ 1998 1997 Net margin. $ 3,978,801 $ 3,977,932 Change in unrealized gain in market value of investments. 749,638 395.587 Comprehensive income. , gt4,719,439 __$21.323,519 The accompanying notes to the financial statements are an integral part of these statements. 56

NOTES TO FINANCIAL STATEMENTS Ilcer nber 31, I 998 arid l 99 / NOTE (1) OltGANIZATION: Corn llelt Power Cooperative (the Cooperative) is a Rural Utilities Service (ItUS) financed genera-tion and transmission cooperative created and owned by 12 distribution cooperatives and one munic-ipal cooperative association. Electricity supplied by the Cooperative serves farms, small towns and commercial and industrial businesses across 27 counties in north central lowa. The Cooperative's lloard of Directors is comprised of one representative from each member cooper-ative and is responsible fbr,among other things, establishing rates charged to the member cooperatives. NOTE (2) SIGNIFICANT ACCOUNTING POLICIES: l The Cooperative maintains its accounting records in accordance with the Uniform System of Accounts as prescribed by the itUS. The preparation of financial statements in contbrmity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The significant accounting policies are: A. Electric Plant - Electric plant is stated at original cost which includes payroll and related benefits, sales and use taxes, property taxes and interest during the period of construction. Costs in connection with repairs of properties and replacement of items less than a unit of property are charged to maintenance expense. Additions to and replacements of units of property are charged to electric plant accounts. II. Depreciation and Decomntissioning - Depreciation is provided using straight-line methods and itUS-prescribed lives.These provi-sions, excluding nuclear facilities,were equivalent to a composite depreciation rate on gross plant of 2.73% and 2.74% for 1998 and 1997,respectively. Under a joint-ownership agreement, the Cooperative has a 10% undivided interest in the Duane Arnold Energy Center (DAEC),a nuclear-fueled generating station,which was placed in serv-ice in 1974.The Cooperative is depreciating its interest in the DAEC and each year's property addi-tions subsequent to 1984 on a straight line basis over the remaining term of the initial Nuclear llegulatory Commission license for DAEC (2014).The composite depreciation rate on gross plant for DAEC was 3.41% and 3.36% for 1998 and 1997,respectively. A Nuclear llegulatory Commission estimate of the decommissioning costs of DAEC was updated in 1998.This report estimated the Cooperative's share of the decommissioning costs of DAEC to be approximately $49,577,393 (in 1998 dollars).The Cooperative is providing for overall nuclear decommissioning costs using a funding method which assumes a % rate of inflation and 3% real rate of return. The method is designed to accumulate a decommissioning reserve sufficient to cover the Cooperative's share of decommissioning costs by the year 2014. A new study was received by the Cooperative in February 1999 and is being evaluated to determine the future impact on the Cooperative.

NOTES TO FINANCIAL STATEMENTS Decem!>t r 31,1998<uW 1997 i Decommissioning costs are included in depreciation and decommissioning expense, in the Statements ofllevenues and Expenses.Such costs were $719,069 and $762,555,Ihr 1998 and 1997, respectively. l The total decommissioning funds accumulated at December 31,1998, were $16,227,548, of which $9,757,360 has been placed in a fund legally restricted for use in decommissioning DAEC. The remaining $6,470,188, while not legally restricted, has been designated by the Cooperative fbr use in decommissioning DAEC. The interest component shown as other interest was $ 1,073,606 and $1,017,067 for 1998 and 1997,respectively. C. Nuclear Fuel - 'lhe cost of nuclear fuel is amortized to steam and other power generation expenses based on the quantity of heat produced for the generation of electric energy. Such amortization was $1,742,407 and $2,040,633 for 1998 and 1997,respectively. D. Land IIeld for Future Use - The Cooperative owns land held for a potential generation plant and related transmission facilities to provide for future power needs. F.. Deferred Refueling Costs - The Cooperative defers extraordinary operation and maintenance expenses incurred during refu-cling outages of DAEC. These costs are being amortized to expense based on the expected genera-tion of the next fuel cycle which corresponds with the period the Cooperative is recovering these costs in its rates.Such amortization was $1,201,315 and $1,212,508 for 1998 and 1997, respectively. F. Interest During Construction - Interest during construction represents the cost of funds used for construction and nuclear fuel refinement. The average rite was 4.5% and 5.6% for 1998 and 1997,respectively,and is based on the Cooperative's levels and costs of financing. G. Capital trase - The Cooperative has a long-term lease agreement with the City of Webster City (Webster City) under which Webster City has agreed to provide certain generation and transmission facilities to the Cooperative. In return, the Cooperative will pay a minimtmi charge which appioximates the debt service on these racihties. The Cooperative has capitalized this lease and reflected it in electric plant and has reflected the related obligation as a capital lease obligation. II. Inconne Taxes - The Cooperative is exempt from federal and state income taxes under section 501(cX 12) of the Internal llevenue Code. I. Staternents of Cash Flows - For the purpose of reporting cash flows,the Cooperative considers temporary cash investments purchased with a maturity of three months or less to be cash equivalents. Cash paid for interest, net ofinterest capitalized,was $6,438,256 and $6,733,813 for 1998 and 1997,respectively. R$

NOTES TO FINANCIAL STATEMENTS Deceniber 3 i,1998 ar1d i 99'7 J. Cash and Investments - The Cooperative has cash and investments in the following: 1998 1997 Obligations of the ILS. government and its agencies $ 7,209,198 $ 8,778,095 Corporate bonds 2,764,965 724,228 Common and preferred stock 5,060,011 4,197,005 National Rural Utilities Cooperative Finance Corporation commercial paper 7,938,748 6,150,000 Cash and CDs deposited with federally insured financial institutions 1,115,479 337,206 Funds held in trust invested primarily with lowa Public Agency Investment Trust 2,723,162 1,501,686 Economic development investments 2,481,110 2,732,758 Other investments 194.818 14 1022 $ 29.487.491 $ 24.564.000 The above investments are included as follows in the accompanying balance sheets: Decommissioning fund $ 16,25,548 $ 13,694,236 Other investments and receivables 4,212,336 4,388,969 Cash and cash equivalents 9.Q47.607 6.480.795 $ 29.487.491 $ 24.564.000 The above amounts include $978,507 and $932,351 at December 31,1998 and 1997,respec-tively,which must be used to fund construction of electric plant. The carrying amounts of cash and cash equivalents and short-term investments of $9,047,607 and $6,480,795 at December 31,1998 and 1997, respectively, approximate the fair value because of the short maturity of these in.vutments. The Cooperative's decommissioning fund investments, which include marketable debt and equity securities, are reported at fair value with unrealized gains and losses reported as a net amount in a separate component of membership capital until realized. The fair value of the Cooperative's other investments anJ receivables are based on quoted market prices for those or similar investments,where available.The fair value and carrying costs of these investments are as follows: 1998 1997 Other investments carrying value $ 1,022,190 992,816 Other investments fair value $ 1,022,200 992,860

NOTES TO FINANCIAL STATEMENTS x DemtrOer 31,1998 ar d i VW For other investments and receivables of $3,190,146 and $3,396,153 at December 31,1998 and 1997,respectively,for which there were no quoted market prices,a reasonable estimate of fair value could not be made without incurring excessive costs. These investments include $1,000,000 f invested in the preferred stock of the Iowa Capital Corpomtion (ICC). The ICC is a fi>r-profit corporation established for the purpose of advancing economic devel-opment in the state ofIowa. After payment of operating costs and certain reserves,the net proceeds of ICC will be paid to the preferred stockholders, including the Cooperative, until the preferred stock investment plus a 15% cumulative return has been returned. After which,any remaining pro-ceeds will be split 2/3 to the preferred stockholders and 1/3 to the common stockholders (the state of Iowa). The Cooperative has an investment of $2,515,018 and $2,515,201, at December 31,1998 and 1997, respectively, with the National Itural litilities Cooperative Finance Corporation (CIC).This investment is required in order to allow the Cooperative to bormw funds from CFC. The investment earns interest of 5% on $2,195,507 which matures between 2070 and 2080 and 3% on $319,289 which matures between 2007 and 2025. K. Iteclassifications - Effective January 1,1998, the IlllS modified its tiniform System of Accounts related to the accounting for property taxes, property insurance, payroll taxes, and employee benefits.The 1997 Statement of llevenues and Expenses has been restated to conform with the 1998 presentation. Furthermore, there is no effect on the 1997 net margin. NOTE (3) DEFERitED PATitONAGE DIVIDENDS AND OTIIER EQUITIES: In accordance with the Iowa Code, the lloard of Directors is required to allocate a portion of the current year's net margin to statutory surplus until the statutory surplus equals 30"o of total equity. No additions can be made to statutory surplus whenever it exceeds 50"o of total equity. The lloard of Directors appropriated $250,000 of both the 1998 and 1997 net margins to statutory surplus. The equity designated iteserve for contingent losses" in the Statements of Deferred Patronage Dividends and Other Equities is an appropriation of equity by the lloard of Directors.The lloard of Directors appropriated $2,808,480 of the 1998 net margin to reserve for contingent losses.There is no statutory restriction of this equity. The lloard of Directors is permitted by the Iowa Code to allocate the current year's net margin to deferred patronage dividends upon meeting certain requirements and is required to make such allocations if the net margin for the year exceeds specified maximums. The lloard of Directors has appropriated $1,000,000 of both the 1998 and 1997 net margins to deferred patronage dividends. Deferred patronage dividends are to be paid in the future as determined by the lloard of Directors. (Inder the conditions of the Cooperative's mortgages, deferred patronage dividends cannot be retired without approval of the IttIS and the CFC unless the remaining equity meets certain tests. The Cooperative does not meet these tests at December 31,1998. Ilowever, the Cooperative received permission and retired $272,317 of the 1986 and $283,683 of the 1985 patronage dividends during 1998. During 1997, $523,835 of the 1985 patronage dividends were retired. E 1

NOTES TO FINANCIAL STATEMENTS Dewrnber 31, I 998 and i 997 NOTE (4)IDNG-TERM DEHT: long4erm debt consists of mortgage notes payable to the United States of America acting through the RUS and the Federal Financing llank (FFil), capital lease obligations, and notes issued in conjunc-tion with the issuance of pollution control revenue bonds. Substantially all the assets and all rent, income, revenue and net margin of the Cooperative are pledged as collateral for the long-term debt of the Cooperative. Inng-term debt is comprised of: 1998 1997 Mortgage notes due in quarterly installments: RUS 2%,due 1999-2008 $ 9,835,443 $ 11,042,268 RUS 5%,due 1999-2019 22,792,334 23,805,320 FFil 5.5%10.7%,due 1999-2019 60.715.741 63.008.37-' 93.343.518 97.855.965 Capital lease obligations - Webster City revenue bonds 5.9%,due 1999-2002 2.190&2ft 2.649.972 Pollution control revenue bonds - 5.8%-6.I25%,due 1999-2007 2.005.000 2.I65.000 _$3L538,594 $ 102.670.932 Maturities of long-term debt for the next five years are as follows: Year Maturity 1999. $ 5,371,631 2000. .5,639,131 2001. .5,939,266 2002. .6,169,606 2003 .5,816,294 The Cooperative had available at December 31,1998, an unused $12,000,000 line of credit with CFC of which $1,000,(X)0 is available only in the event of a nuclear incident. Ilased on the borrowing rates currently available to the Cooperative for debt with similar terms and maturities,the fair value of the long-term debt was $106.813,365 and $113,365,992 at December 31, 1998 and 1997,respectively. The Cooperative paid the FFil $459,375 to reduce the interest rate on a number of its FFil debt issues. The present value savings as a result of the interest rate reduction,less the fees,was $1,668,986 for the 1998 transactions. 23E

NOTES TO FINANCIAL STATEMENTS Dem mt>cr 31.1998 in xJ lW7 NOTE (5) CONS 1110CTION COMMrfMENTS: Total construction expenditures for 1999, including expenditures for the jointlymwned units, are estimated to be $11,016,690,of which $2,789.350 is for the purchase of nuclear fuel at DAEC. NOTE (6) JOINT PIANT OWNERSIllP: Under joint-ownership agreements with other lowa utilities, the Cooperative had undivided inter-ests at December 31,1998 in three electric genenting units as shown below: Council Neal#4 Illuffs #3 DAEC lbtal electric plant. $ 45,257,210 $ 14,192,718 $ 68,190,533 Accumulated depreciation. $ 26,251,898 $ 7,651,502 $ 32,736,238 Unit accredited capacity (mW) 624 675 530 Coopemtive's share (%) 11.3% 3.8% 10.0% Each participant provided its own financing for its share of the unit.The Cooperative's share of direct expenses of the jointly owned units is included in the operating and maintenance expenses on the Statements of iterenues and Expenses. During 1991, the Cooperative, one of its members, North lowa Municipal Electric Cooperative Association (NIMECA), and the City of Grundy Center (the City), a NIMECA member, entered into a long-term lease agreement for the use by the City of two megawatts of the Cooperative's capacity in the Neal #4 generation facilities. The Cooperative will continue to act as the Neal *4 partner on behalf of the City. The above plant statistics have been reduced to reflect the agreement. i NOTE (7) IIENEFIT PIANS: The Cooperative participates in the National Ilumi Electric Cooperative Association (NilECA) Itetirement & Security Program (the Progam).The Program is a defined benefit pension plan qualified 1 under Section 401 and tax exempt under Section 501 (a) of the Internal llevenue Code. The Cooper-ative recorded a total current period service cost to the Program of $343,945 and $256,116 for 1998 and 1997,respectively. In this multirmployer plan,which is available to all NitECA member coopera-tives,the accumulated benefits and plan assets are not determined or allocated separately by individ-ual employer. The Cooperative also provides a 401(k) plan, available to all employees with the Cooperative matching 25% of the employees' contributions up to 4% of the employees' wages.

NOTES TO FINANCIAL STATEMENTS 1 Dewr111]er 31, ! 998 and i 99 / NOTE (8) IJAllHIFY FOR SPENT NUCLEAR FUEL DISPOSAL COSTS: The Nuclear Waste Disposal Act of 1982 gave approval to the federal government to construct a repository for the nation's civilian spent nuclear fuel.The Act stated that funding fi>r this repository would be provided by assessing nuclear generating unit owners a one-time fee for spent nuclear fuel being stored on-site at each nuclear facility in April 1983,and by assessing all future energy generated by nuclear facilities at a rate of 1.0 mill per kilowatt hour. The Cooperative is paying the post-1983 fees on a current basis and such fees are being charged to steam and other power generation expenses. The Cooperative has previously paid the one-time fee and is amortizing it to expense over a 13-year period which corresponds with the period the Cooperative is recovering these costs in its rates. { A total of $0 and $210,261 was amortized in 1998 and 1997, respectively, to steam and other power i generation expenses. NOTE (9) NIN1ECA COMilINED TRANSN11SSION SYSTEM: In 1989,the Coopemtive and one ofits members,NIMIX'A, entered into a joint transmission agreement which allows seveml members d NIMECA an individual undivided ownership interest in and access to the Coopemtive's transmission system.The Coopemtive has a receivable of $9~8,507 from a trust estab-lished by NIMIX:A for ultimate payment to the Cooperative.These funds can only be used to fund RUS approved transmission projects. The Cooperative will continue to operate and maintain the system. NIMIX'A members will reimburse the Coopemtive for the proportionate share of operating expenses of the system and will contribute proportionately for all future capital additions of the system.The reim-bursements of the 1998 and 1997 opemting expenses were $ 181,991 and $550.686,respectively,and were recorde(! as opemting revenues. Additionally, the Cooperative and NIMIX:A entered into a capacity sharing agreement which provides for the sharing of generating resources through at least 2009. NOTE (10) CLEAN AIR ACT: The Clean Air Act (Act), as amended, made significant changes in the nation's clean air laws. The Act's specific amendments to acid deposition control (acid rain) make significant reductions in the amounts of sulfur dioxide and nitrous oxide emissions allowed on an annual basis nationwide. The Cooperative's coal-fired generating stations are in compliance with the standards established by Phase I of the Act and management has begun implementing the program necessary to meet the compliance requirements of Phase 11 which will be effective in the year 2000 NOTE (11) NATIONAL ENERGY pol 3CY ACT: The Federal National Energy Policy Act of 1992 requires owners of nuclear power plants to pay a special assessment into a " Uranium Enrichment Decontamination and Decommissioning Fund." The assessment is based upon prior nuclear fuel purchases and for the DAEC averages approximately $ 1,143,580 annually through 2007, of which the Cooperative's 10"6 share is $ 142,948. The Coopera-tive's total assessment of $1,978,529,which will be recovered in rates,has been recorded as a liability, net of payments,in the balance sheets /Fhis liability, totaling $ 1,143,580 on December 31,1998,has been recorded with a corresponding deferred charge amortized over a 15-year period, beginning in 1992.

NOTES TO FINANCIAL STATEMENTS December 3 i, i 998 ancJ l 997 i NOTE (12) NUCLEAR INSURANCE PROGRAM: The Cooperative, under the provisions of the Price-Anderson Amendments Act of 1988 (the 1988 Act),has the benefit of $9.8 billion of public liability coverage.The coverage consists of $200,000,000 of insurance and $9.6 billion of potential retroactive assessments from the owners of each commer-cial nuclear power plant. Under the 1988 Act for losses relating to nuclear accidents in excess of $200,000,000,each nuclear reactor may be assessed a maximum of $38,100,000 per nuclear incident, payable in annual installments of not more than $ 10,000,000. The Coopentive's assessment on its 10% ownership in DAEC may be up to $8,810,000 per nuclear incident wkh a maximum of $1,000,000 per year. These limits are subject to adjustments for inflation in future years. Pursuant to provisions in various nuclear insurance policies, the Cooperative could be assessed retroactive premiums in connection with future accidents at a nuclear facility owned by a utility participating in the particular insurance plan. In addition, the Cooperative could be assessed annually $540,000 related to coverages for excess property damage if the insurer's losses relating to an accident exceed its reserves.While assessment may also be made for losses in certain prior years, the Coopera-tive is not aware of any losses in such years that it believes are likely to result in an assessment. In the unlikely event of a catastrophic loss at DAEC,the amount of insurance available may not be adequate to cover property damage, decontamination and premature decommissioning. Uninsured losses,to the extent not recovered through rates,would be borne by the Cooperative and could have a material adverse effect on the Cooperative's financial position and results of opentions. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO THE BOARD OF DIRECTORS OF CORN BELT POWER COOPERATIVE: We have audited the accompanying balance sheets of Corn Belt Power Cooperative (a cooperative asso-ciation inco. porated in Iowa) as of December 31,1998 and 1997, and the related statements of revenues and expense i, cash flows, deferred patronage dividends and other equities, and comprehensive income for the years then ended. These financial statements are the responsibility of the Cooperative's management. { Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards.Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examinmg, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management,as well as evaluating the over-all financial statement presentation.We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly,in all material respects, the financial position of Corn Belt Power Cooperative as of December 31,1998 and 1997,and the results of its operations and its cash flows for the years then ended in conformity with generally accepted j accounting principles. 1 ARTHUR ANDERSEN LLP Kansas City, Missouri February 18,1999 >A

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