Text

Possession-Only License DPR-45 - Financial Statement and Auditors' Report
	ML22123A082
Person / Time
Site:	La Crosse File:Dairyland Power Cooperative icon.png
Issue date:	04/25/2022
From:	Ridge B; Dairyland Power Cooperative
To:	; Document Control Desk, Office of Nuclear Material Safety and Safeguards
References
	LAC-1448
	Download: ML22123A082 (87)
	v • d • e

BRE NT J. RIDGE President and CEO DAIRYLAND POWER COOPERATIVE April 25, 2022 In reply, please refer to LAC-14484 DOCKET NO. 50-409 ATTN: Document Control Desk U.S. Nuclear Regulatory Commission Washington, DC 20555-0001

SUBJECT:

Dairyland Power Cooperative La Crosse Boiling Water Reactor (LACBWR}

Possession-Only License DPR-45 Financial Statement and Auditors' Report

REFERENCE:

1) 10 CFR 50.71(b)

In accordance with the requirements of Reference 1, we are forwarding three (3) copies of the Financial Statements and Independent Auditors' Reports for Dairyland Power Cooperative as of De~ember 31, 2021 and 2020.

Brent J. Ridge President and CEO BJR :CLO :tco G:\PLANTS\ ISFSI\NRC\NRC AUDITS - Financial Statement Letters\LAC-14484 Enclosure(s) cc: John B. Geissner, NRC Regional Administrator Marlayna Vaaler, NRC, FSME Tim Lightfoot, DPC Cheryl Olson, DPC (LACBWR/ISFSI}

Mike Russell, DPC Nicole Metzler, DPC

~T~

A Touchstone Energy" Cooperative 3200 East Ave . S.

PO Box 817

La Crosse, WI 54602-0817

608-787-1449

608-787-1321 fa x

www.da irynet.com Da iryland Powe r Coope rative is an equa l opport unity provide r and emp loye r.

Document Control Desk LAC-14484 Page 3 April 25, 2022 cc (letter only)

Ken Robuck David Leclear, Mgr Radiation Protection .

Group President Disposal & Decom Division of Public Health - WI DHS EnergySolutions PO Box 2659 299 South Main Street, Suite 1700 Madison, WI 53701-2659 Salt Lake City, UT 84111 Brent Ridge President and CEO John Sauger Dairyland Power Cooperative Executive VP and Chief Nuclear Officer 3200 East Avenue South Reactor D & D La Crosse, WI 54602 EnergySolutions 2701 Deborah Ave Brad Smalldridge Zion, IL 60099 VP Business Development Dairyland Power Cooperative 3200 East Avenue South Gerard van Noordennen La Crosse, WI 54602-0817 Sr. VP Regulatory Affairs EnergySolutions Martin G. Moe 121 W Trade Street, Suite 2700 La Crosse Boiling Water Reactor Charlotte, NC 28202 Dairyland Power Cooperative S4601 State Highway 35 Joseph Nowak Genoa,Wl54632-8846 General Manager, LaCrosseSolutions S4601 State Highway 35 Kathleen Galioto Genoa, WI 54632-846 Deputy Director of Legal Services Dairyland Power Cooperative Russ Workman 3200 East Avenue South General Counsel, EnergySolutions La Crosse, WI 54602 299 South Main Street, Suite 1700 Salt Lake City, UT 84111 Joyce Peppin Dir, Gov Relations and Legal Services Jerome Pedretti, Clerk Town of Genoa Dairyland Power Cooperative E860 Mundsack Road 3200 East Avenue South Genoa, WI 54632 La Crosse, WI 54602 Jeffery Kitsembel John Henkelman Division of Energy Regulation La Crosse Boiling Water Reactor Wisconsin Public Service Commission Dairyland Power Cooperative PO Box 7854 S4601 State Highway 35 Madison, WI 53707-7854 Genoa,Wl54632-8846 G:\PLANTS\ISFSI\NRC\NRC AUDITS - Financial Statement Letters A Touchstone Energy" Cooperative ~.)(

3200 East Ave. S.

PO Box 817

La Crosse, WI 54602~0817

608-787-1449

608-787-1321 fax* www.dairynet.com Dairyland Power Cooperative is an equal opportunity provider and employer:

Document Control Desk LAC-14484 Page 2 April 25, 2022 STATE OF WISCONSIN)

COUNTY OF LA CROSSE Personally came before me this /2-~ day of A-£\-, \ , 2022, the above named, Brent J. Ridge, to me known to be the person who executed the foregoing instrument and acknowledged the same.

Courtney$. Cuto f>(pt111y Pu6(k Sltlte '1/'Wiseonsui My commission expires C\ \ 'bO \ wlh

Dairyland Power Cooperative and Subsidiary Consolidated Financial Statements as of and for the Years Ended December 31, 2021 and 2020, and Independent Auditor's Report

Deloitte & Touche LLP Deloitte. Suite 2800 SO South Sixth Street Minneapolis, MN 55402-1538 USA Tel: +1 612 397 4000 Fax: +1 612 397 4450 www.deloitte.com INDEPENDENT AUDITOR'S REPORT Board of Directors Dairyland Power Cooperative La Crosse, Wisconsin Opinion We have audited the consolidated financial statements of Dairyland Power Cooperative and subsidiary (the "Cooperative"), which comprise the consolidated balance sheets as of December 31, 2021 and 2020, and the related consolidated statements of revenue, expenses and comprehensive income, member and patron equities, and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively referred to as the "financial statements").

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS}. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for one year after the date that the financial statements are available to be issued.

Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that

includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we:

Exercise professional judgment and maintain professional skepticism throughout the audit.

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, no such opinion is expressed.

Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

March 28, 2022 DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2021 AND 2020 (In thousands) 2021 2020 ASSETS ELECTRIC PLANT:

Plant and equipment-at original cost $ 2,055,575 $ 1,864,390 Less accumulated depreciation (867,431) (821,525)

Net plant and equipment 1,188,144 1,042,865 Construction work in progress 87,032 68,812 Total electric plant 1,275,176 1,111,677 OTHER ASSETS:

Nuclear decommissioning funds 1,987 1,988 Intangible asset, net (Note 2) 30,566 Other investments (Note 8) 12,350 13,550 Investments in capital term certificates of National Rural Utilities Cooperative Finance Corporation (Note 8) 9,176 9,176 Regulatory assets (Note 2) 25,614 16,139 Investment for deferred compensation 1,776 1,530 Deferred charges (Note 2) 19,357 18,165 Total other assets 100,826 60,548 CURRENT ASSETS:

Cash and cash equivalents 46,244 19,535 Designated funds (Note 2) 22,668 8,000 Accounts receivable:

Energy sales 37,111 35,541 Other 7,105 1,311 Inventories:

Fossil fuels 24,234 41,327 Materials and supplies 17,936 20,908 Prepaid expenses and other 12,675 10,736 Total current assets 167,973 137,358 TOTAL $ 1,543,975 $ 1,309,583 (Continued)

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2021 AND 2020 (In thousands) 2021 2020 CAPITALIZATION AND LIABILITIES CAPITALIZATION:

Member and patron equities:

Membership fees $ 1 $ 1 Patronage capital (Note 9) 341,427 326,600 Accumulated other comprehensive income 1,753 1,376 Total member and patron equities . 343,181 327,977 Long-term obligations (Note 6) 820,090 835,120 Total capitalization 1,163,271 1,163,097 OTHER LIABILITIES:

Deferred credits (Note 2) 9,418 2,519 Obligations under capital leases (Note 7) 7,934 6,623 Postretirement health insurance obligation (Note 11) 5,164 5,523 Decommissioning and asset retirement obligations (Note 14) 2,231 4,957 Other non-current liabilities 4,577 3,627 Total other liabilities 29,324 23,249 COMMITMENTS AND CONTINGENCIES (Note 10)

CURRENT LIABILITIES:

Current maturities of long-term obligations and obligations under capital leases 45,654 44,167 Line of credit (Note 5) 209,707 Nuclear decommissioning obligations (Note 14) 56 56 Advances from member cooperatives and other prepayments 20,584 13,704 Deferred credits (Note 2) 20,945 Regulatory liabilities (Note 2) 22,668 8,000 Accounts payable 33,985 26,255 Accrued expenses:

Payroll, vacation, and benefits 5,669 5,897 Interest 6,841 Property and other taxes 3,642 3,201 Other 2,574 1,012 Total current liabilities 351,380 123,237 TOTAL $1,543,975 $1,309,583 See notes to consolidated financial statements. (Concluded)

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED STATEMENTS OF REVENUES, EXPENSES AND COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (In thousands) 2021 2020 UTILITY OPERATIONS:

Operating revenues:

Sales of electric energy $449,340 $425,214 Other 14,254 17,217 Total operating revenues 463,594 442,431 Operating expenses:

Fuel 91,261 96,273 Purchased and interchanged power 107,852 89,874 Other operating expenses 126,704 108,058 Depreciation and amortization 53,515 68,343 Maintenance 29,284 27,541 Property and other taxes 9,534 8,903 Total operating expenses 418,150 398,992 Operating margin before interest and other 45,444 43,439 Interest and other:

Interest expense 28,855 29,785 Allowance for funds used in construction-equity (963) (1,008)

Other-net (60) (60)

Total interest and other 27,832 28,717 OPERATING MARGIN 17,612 14,722 NONOPERATING MARGIN 1,878 984 NET MARGIN AND EARNINGS 19,490 15,706 OTHER COMPREHENSIVE INCOME (LOSS)-Postretirement health insurance obligation adjustments 377 (552)

COMPREHENSIVE INCOME s 19,867 s 15,154 See notes to consolidated financial statements.

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED STATEMENTS OF MEMBER AND PATRON EQUITIES FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (In thousands)

Accumulated Total Other Member Membership Patronage Comprehensive and Patron Fees Capital Income Equities BALANCE-January 1, 2020 $ 1 $322,443 $1,928 $324,372 Net margin and earnings 15,706 15,706 Postretirement health insurance obligation adjustments (552) (552)

Retirement of capital credits (Note 9) (11,549) (11,549)

BALANCE-December 31, 2020 1 326,600 1,376 327,977 Net margin and earnings 19,490 19,490 Postretirement health insurance obligation adjustments 377 377 Retirement of capital credits (Note 9) (4,663) (4,663)

BALANCE-December 31, 2021 $ 1 $341,427 $1,753 $343,181

=

See notes to consolidated financial statements.

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (In thousands) 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES:

Net margin and earnings $ 19,490 $ 15,706 Adjustments to reconcile net margin and earnings to net cash provided by operating activities:

Gain on disposal of assets (2,685) (1,279)

Depreciation and amortization:

Charged to operating expenses 53,515 68,324 Charged through other operating elements such as fuel expense 3,363 Allowance for funds used in construction-equity (963) (1,008)

Unrealized gains on nuclear decommissioning trust investments 6 Changes in operating elements:

Accounts receivable (7,364) 8,173 Inventories 15,292 (5,068)

Prepaid expenses and other assets (1,939) 3,170 Accounts payable 7,730 3,721 Accrued expenses and other liabilities 10,963 11,480 Deferred charges and other 23,327 (17,337)

Total adjustments 97,876 73,545

Net cash provided by operating activities 117,366 89,251 CASH FLOWS FROM INVESTING ACTIVITIES:

Electric plant additions (62,971) (54,021)

Asset acquisition (205,221)

Purchase of investments (14,154) (6,247)

Proceeds from sale of investments and economic development loans 14,792 5,071 Net cash used in investing activities (267,554) (55,197)

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings under line of credit 209,707 44,000 Repayments under line of credit (112,000)

Borrowings under long-term obligations 23,902 79,958 Repayments of long-term obligations (36,135) (43,086)

Retirement of capital credits (4,663) (11,549)

Borrowings of advances from member cooperatives 388,140 378,670 Repayments of advances from member cooperatives (381,386) (378,977)

Net cash provided by (used in) financing activities 199,565 (42,984)

NET INCREASE (DECREASE) CASH, CASH EQUIVALENTS AND RESTRICTED CASH 49,377 (8,930)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH -Beginning of year 19,535 28,465 CASH, CASH EQUIVALENTS AND RESTRICTED CASH-End of year $ 68,912 $ 19,535 See notes to consolidated financial statements.

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (All dollar amounts in thousands)

1. NATURE OF BUSINESS AND ORGANIZATION Business-Dairyland Power Cooperative and subsidiary ("Dairyland" or the "Cooperative") is an electric generation and transmission cooperative organized under the laws of the states of Wisconsin and Minnesota. The Cooperative, whose principal offices are located in Wisconsin, provides wholesale electric service to class A members engaged in the retail sale of electricity to member consumers located in Wisconsin, Minnesota, Iowa and Illinois, and provides electric and other services to class C, D and E members.

Principles of Consolidation-The consolidated financial statements include the accounts of Dairyland and Dairyland's wholly owned subsidiary, Genoa FuelTech; Inc. All intercompany balances and transactions have been eliminated in consolidation.

Accounting System and Reporting_.:The accounting records of the Cooperative are maintained in accordance with the uniform system of accounts prescribed by the Federal Energy Regulatory Commission as adopted by the Rural Utilities Service (RUS), the Cooperative's principal regulatory agency.

2. SIGNIFICANT ACCOUNTING POLICIES Electric Plant- The cost of renewals and betterments of units of property (as distinguished from minor items of property) includes contract work, direct labor and materials, allocable overhead, and allowance for funds used during construction, and is charged to electric plant accounts. Included in accumulated depreciation are nonlegal or noncontractual costs of removal components. As a result, the cost of units of property retired, sold or ot~erwise disposed of, plus removal costs, less salvage, is charged to accumulated depreciation and no profit or loss is recognized in connection with ordinary retirements of property units. A provision for these nonlegal or noncontractual costs of removal components is recognized based on depreciation rates determined by a third-party depreciation study completed in November 2016 and approved by RUS in 2017 for rates effective in 2017 through 2021.

The Cooperative is unable to obtain the information to separate the cumulative removal costs as of December 31, 2021 and 2020. Maintenance and repair costs and replacement and renewal of minor items of property are charged to operations.

Significant components of electric plant were as follows as of December 31:

Depreciable Lives 2021 2020 Production 11-60 years $ 1,208,130 $ 1,036,631 Transmission 23-50 years 642,029 627,011 Distribution 38 years 101,890 97,455 General plant 5-47 years 101,764 101,531 Other 32 years 1,762 1,762 Construction work in process 87,032 68,812

$ 2,142,607 $ 1,933,202 Less accumulated depreciation (867,431) (821,525)

Electric plant $ 1,275,176 $ 1,111,677 Depreciation-Depreciation, which is based on the straight-line method at rates that are designed to amortize the original cost of properties over their estimated useful lives, includes a provision for the cost of removing and decommissioning the properties. The provision for depreciation averaged 2.5%

and 3.8% of depreciable plant balances for 2021 and 2020, respectively.

Allowance for Funds Used During Construction-Allowance for funds used during construction (AFUDC) represents the cost of external and internal funds used for construction purposes, and is capitalized as a component of electric plant by applying a rate (4.719% in 2021 and 5.872% in 2020) to certain construction work in progress. The amount of such allowance was $2,549 in 2021 and $2,785 in 2020. The borrowed funds component of AFUDC for 2021 and 2020, was $1,586 and $1,777, respectively (representing 2.929% and 3.747% in 2021 and 2020, respectively). The equity component of AFUDC for 2021 and 2020 was $963 and $1,008, respectively, (representing 1.790% and 2.125% in 2021 and 2020, respectively). The borrowed fu.nds components were included as a reduction of interest expense in the consolidated statements of revenues, expenses and comprehensive income.

Designated Funds-Designated funds represent the amounts collected from customers through rates and deferred for future use.

Asset Acquisitions-In December 2021, the Cooperative completed their purchase of the assets of RockGen Energy Center in the amount of $210,079. RockGen Energy Center, located in Cambridge, WI, is a 503 megawatt (MW) simple-cycle, dual fuel power generating facility that runs primarily on natural gas. The facility will help the Cooperative meet its Members' power needs as the Cooperative transitions to more renewable resources. Due to the timing of the acquisition, the Cooperative elected to secure short-term financing for RockGen Energy Center.

The purchase price was allocated based on the estimated fair values of the assets acquired and liabilities assumed at the date of the acquisition and includes the following:

Purchase Price Allocation Assets acquired:

Property, plant and equipment $175,000 Intangible asset 30,221 Accounts receivable 9,314 Inventories 2,359 Other current assets 1,000 Total assets acquired 217,894 Liabilities assumed:

Accounts payable 5,478 Deferred revenue 2,337 Total liabilities assumed 7,815 Total purchase price $210,079 Plant assets related to this acquisition will be depreciated over a period of 20 years beginning in December 2021.

Intangible Asset-In December 2021, the Cooperative recorded an intangible asset as part of their purchase of the RockGen Energy Center in the amount of $30,211. The intangible asset consists of the assignable capacity and energy sales contracts that were defined in the asset purchase agreement and will be amortized over the remaining life of the contracts as energy is sold.

Regulatory Asset-The Cooperative's accounting policies and the consolidated financial statements conform to accounting principles generally accepted in the United States of America applicable to

. electric cooperatives.

The noncurrent portion of regulatory assets as of December 31, 2021 and 2020, include the following:

2021 2020 Genoa #3 unrecovered plant balances $25,614 $16,139 Genoa #3 Unrecovered Plant ~a/ances-During 2020, the Cooperative established a regulatory asset related to the unrecovered plant balances upon closure of the Genoa #3 generating station that occurred in 2021. Additional costs associated with the closure of $17,822 were recorded in the current year. Amounts will be amortized in rates through 2029.

The current portion of the Genoa #3 regulatory asset as of December 31, 2021 and 2020 is $5,621 and

$3,144, respectively. These amounts are recorded in prepayments and other assets.

Deferred Charges-Deferred charges represent future revenue to the Cooperative associated with costs that will be recovered from customers through the rate-making process. As of December 31, 2021 and 2020, the Cooperative's deferred charges are being reflected in rates charged to customers, except the deferred nuclear litigation as noted below. If all or a separable portion of the Cooperative's operations become no longer subject to the provisions of regulatory accounting, a write-off of deferred charges would be required, unless some form of transition recovery (refund) continues through rates established and collected for the Cooperative's remaining regulated operations. In addition, the Cooperative would be required to determine any impairment to the carrying costs of deregulated plant and inventory assets.

The noncurrent portion of deferred charges as of December 31, 2021 and 2020, include the following:

2021 2020 Pension prepayment $ - $ 2,690 Deferred nuclear litigation 8,858 6,271 Nemadji Trail Energy Center 9,986 8,671 Other 513 533 Total deferred charges S19,357 $18,165 Pension Prepayment-The voluntary prepayment to the Cooperative's multiemployer defined-benefit pension plan to reduce future funding amounts is being amortized to benefits expense over 10 years beginning in 2013 as prescribed by RUS. In 2021, the Board of Directors approved early defeasement of this deferred liability.

Deferred Nuclear Litigation-Litigation expenses from the third nuclear contract damages claim against the United States government are being deferred pending the outcome of that litigation. See further discussio11 in Note 14.

Nemadji Trail Energy Center-Costs relating to the Nemadji Trail Energy Center natural gas project are being accumulated in deferred charges. These charges will be amortized when the plant is in service (currently estimated for 2027).

Cash and Cash Equivalents-Cash equivalents include all highly liquid investments with original maturities of three months or less. Cash equivalents consist primarily of commercial paper, stated at cost, which approximates market.

Fossil Fuels and Materials and Supplies-Coal inventories, as well as materials and supplies inventories, are stated at the lower of average cost or net realizable value.

Regulatory Liabilities-As of December 31, 2021 and 2020, the Cooperative had various revenue deferrals reflected as regulatory liabilities. The revenue deferrals pertained to favorable results from market credits through transactions with the Mid-Continent Independent System Operator (MISO) in addition to favorable results due to market conditions. The summary of regulatory liabilities as of December 31, 2021 and 2020 is as follows:

2021 2020 Planned 2023J.P. Madgettoutage costs $13,000 $ -

Business growth and development 7,400 6,000 Planned 2022J.P. Madgett outage costs 1,900 Electric vehicle charging stations 368 1,000 Rate relief 1,000

$22,668 $8,000 Planned 2023 J.P. Madgett Outage Costs-In January 2022, the Board of Directors approved the creation-of a regulatory liability revenue deferral plan in the amount of $13,000. The Cooperative deferred $13,000 of 2021 revenue and plans to recognize this amount in 2023. The deferral plan was approved by RUS in February of 2022.

Business Growth and Development/Electric Vehicle Charging-In December 2021, the Board of Directors approved the carryforward of the 2020 revenue deferral plan in the amount of $6,000. The Board of Directors also approved an additional regulatory liability revenue deferral in 2021 in the amount of $1,400 for business growth and development. This amended deferral plan was approved by RUS in January 2022. In addition, the Board of Directors approved the carryforward of another 2020 revenue deferral plan in the amount of $368 in January 2022. The amended deferral plan was approved by RUS in February 2022. The Cooperative plans to recognize this amount in 2022.

Planned 2022 J.P. Madgett Outage Costs-In November 2021, the Board of Directors approved the creation of a regulatory liability revenue deferral plan in the amount of $1,900. The Cooperative deferred $1,900 of 2021 revenue and plans to recognize this amount in 2022. The deferral plan was approved by RUS in February of 2022.

Deferred Credits-Deferred credits represent both future revenue to the Cooperative associated with customer prepayments and noncurrent obligations and reserves related to operations. As of December 31, 2021, the Cooperative's deferred credits are being considered when determining rates charged to customers.

Deferred credits as of December 31, 2021 and 2020 were comprised of the following:

2021 2020 Customer energy prepayments $7,924 $2,519 Elk Mound startup revenue deferral 1,432 Other 62 Total deferred credits $9,418 $2,519 The current deferred credits balance of $20,945 as of December 31, 2020 related to the remaining balance of the Great River Energy prepayment associated with the Genoa #3 generation station and was recognized in 2021 with the closure of the G3 plant.

Sales of Electric Energy-Revenues from sales of electric energy are recognized when energy is delivered. The class A wholesale rates approved by the Board of Directors have a power cost adjustment that allows for increases or decreases in class A member power billings based upon actual power costs compared to plan. For 2021 and 2020, the power cost adjustment to the class A members resulted in credits to sales billed of $3,834 and $2,770, respectively. These amounts are recorded in sales of electric energy in operating revenues on the consolidated statements of revenues, expenses and comprehensive income.

Other Operating Revenue-Other operating revenue primarily includes revenue received from transmission service and is recorded as services are provided.

Accounting for Energy Contracts-The Cooperative does not have any energy contracts that are required to be accounted for at fair value as of December 31, 2021 and 2020.

Use of Estimates- The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities atthe date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant estimates in the consolidated financial statements relate to postretirementbenefit obligations, asset retirement obligation liabilities, fixed-asset depreciable lives, and litigation and contingencies. Actual results could differ from those estimates.

Concentration of Risk-Approximately 37.5% of the labor force for the Cooperative is under a collective bargaining agreement that expires on January 31, 2023.

Subsequent Events- The Cooperative considered events for recognition or disclosure in the consolidated financial statements that occurred subsequentto December 31, 2021, through March 28, 2022, the date the consolidated financial statements were available to be issued.

3. ACCOUNTING STANDARDS Adopted-The Cooperative adopted ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software: Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract in the current year. The new standard requires entities that are customers in cloud computing arrangements to defer implementation costs if they would be capitalized by the entity in software licensing arrangements under the internal-use software guidance. The adoption of ASU 2018-15 did not have a material impact on the Cooperative's financial statements and related disclosures.

Not Yet Effective-In February 2016, the FASB issued new accounting guidance for leases. The new guidance increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements in the financial statements. In January 2018, the FASB issued additional accounting guidance on leases, amending the guidance issued in 2016, to simplify the transition to the new guidance for land easements. The Cooperative adopted the new lease guidance on January 1, 2022 using the modified retrospective approach. The adoption ofthe,new lease guidance did not have a material impact on the Cooperative's financial statements.

4. INCOME TAXES The Internal Revenue Service has determined that Dairyland is exempt from federal income taxes under Section 501(c)(12) of the Internal Revenue Code. Accordingly, the Cooperative's utility operations-are generally exempt from federal and state income taxes and no provision for such taxes is recorded in the consolidated financial statements.

5. LINES OF CREDIT To provide interim financing capabilities, the Cooperative has arranged committed lines of credit with Co Bank. The original line was executed on November 30, 2015, and amended on November 20, 2019, with availability aggregating approximately $350,000. This facility has a five-year term and provides funds both for short-term working capital requirements and for capital projects until permanent financing can be obtained. Some capital projects will last longer than one year, but the intent is to pay down the line of credit as permanent funding is received.

The Cooperative, under the syndicated line of credit with Co Bank, has the availability to issue letter of credit for its account. On December 15, 2021 the Cooperative issued a letter of credit in the amount of

$700 under the revolver, maturing December 31, 2022.

In December 2021, the Cooperative arranged a second.line of credit for $215,000. The purpose of these funds was to finance the purchase of the RockGen plant. The term of the line is 12 months; however, it is anticipated that the line will be converted to permanent financing in mid-2022.

Compensating balance requirements and fees relating to the lines of credit were not significant in 2021 and 2020. Information regarding line of credit balances and activity for the years ended December 31, 2021 and 2020, is as follows:

2021 2020 Interest rate at year-end 1.11 % 1.16 %

Line 1-$350M $ $ -

Line 2-$215M 209,707 Total borrowings outstanding at year-end $209,707 s -

Average borrowings outstanding during year S 17,476 $22,400 The Cooperative also allows member cooperatives to prepay their power bills and pays interest on these prepayments based on current short-term borrowing rates. Advances from member cooperatives totaled $20,584 and $13,704 at December 31, 2021 and 2020, respectively. Interest expense on member cooperative advances was $125 and $191 for the years ended December 31, 2021 and 2020, respectively. These amounts have been included in interest expense on the consolidated statements of revenues, expenses, and comprehensive income.

6. LONG-TERM OBLIGATIONS Long-ter:m obligations as of December 31, 2021 and 2020, consist of the following:

2021 2020 Federal Financing Bank obligations-1.24%-4.49% $ 584,270 $ 582,110 Federal Financing Bank obligations-4.50%-5.20% 201,942 209,964 Total Federal Financing Bank 786,212 792,074 RUS oblig~tions-4.125% and grant funds 2,557 3,055 CoBank notes-2.9% and 4.3% 3,362 7,232 Private bonds placement obligations-3.42% 70,833 74,167 Long-term debt 862,964 876,528 Less current maturities (42,874) (41,408)

Total long-term obligations $ 820,090 $ 835,120 Quarterly principal and interest payments on the long-term obligations to the Federal Financing Bank (FFB) extend through 2053.

Long-term obligations to the RUS are payable in equal monthly principal and interest installments through 2024. Payments on the CoBank 2.9% and 4.3% notes are due quarterly and semi-annually, respectively, through 2023. The private bond placement is an amortizing 30-year term loan at an interest rate of 3.42%. Quarterly principal and interest payments on this obligation extend through 2043.

The Cooperative executed, filed and recorded an indenture of mortgage, security agreement and financing statement, dated as of September 13, 2011 and as supplemented (the "Indenture"), between the Cooperative, as grantor and U.S. Bank National Association, as trustee. The perfected lien of the Indenture on substantially all of the Cooperative's assets secured equally and ratably all of the Cooperative's long-term debt with the exception of unsecured notes to Co Bank (balances of $3,362 and

$7,232 at December 31, 2021 and 2020, respectively). The Cooperative is required to maintain and has maintained certain financial ratios related to earnings in accordance with the covenants of its loan agreements as of December 31, 2021.

Scheduled maturities of the Cooperative's long-term obligations as of December 31, 2021, were as follows:

Years Ending December 31 2022 $ 42,874 2023 42,049 2024 52,474 2025 43,620 2026 45,069 Thereafter 636,878 Total $ 862,964

7. LEASES Operating Leases- The Cooperative has entered into lease agreements under which it is the lessee on operating leases for various fleet vehicles and six rail cars. These transactions are covered in the master lease agreement and have lease terms ranging from four to 15 years. At the end of the leases, the Cooperative can either purchase the equipment at fair market value, continue to lease the assets, or return the equipment to the lessor. Rent expense was $598 and $653 in 2021 and 2020, respectively.

The schedule of future minimum lease payments as of December 31, 2021, is as follows:

Years Ending December31 2022 $430 2023 382 2024 60 2025 11 Total $883 Capital Leases- The Cooperative has entered into several capital lease agreements for large vehicles and heavy equipment. The transactions are covered in the master lease agreement with lease terms not exceeding seven years. At the end of the lease, the Cooperative can purchase the equipment for a bargain purchase price. The original cost of the assets under capital leases as of December 31, 2021 is

$19,297. The assets are amortized over the lesser of their related lease terms or their estimated productive lives.

The schedule of future minimum lease payments as of December 31, 2021, is as follows:

Years Ending December31 2022 $ 3,130 2023 2,388 2024 1,890 2025 1,818 2026 1,323 Thereafter 976 Total minimum lease payments 11,525 Amounts representing interest (811)

Present value of minimum lease payments 10,714 Current maturities (2,780)

Long-term capital lease obligations S 7,934

8. FINANCIAL INSTRUMENTS The fair value of the Cooperative's financial instruments other than marketable securities and short-term borrowings, based on the rates for similar securities and present value models using current rates available as of December 31, 2021 and 2020, is estimated to be as follows:

2021 2020 Recorded Fair Recorded Fair Value Value Value Value Assets:

Other investments $ 12,350 $ 12,350 $ 13,550 $ 13,550 Investments in capital term certificates of NRUCFC 9,176 9,176 9,176 9,176 Liabilities-long-term debt 862,964 979,972 876,528 1,053,339 Assets and Liabilities Measured at Fair Value-Accounting principles generally accepted in the United States of America establish a framework for measuring fair value by creating a hierarchy for observable independent market inputs and unobservable market assumptions and provides for required disclosures about fair value measurements. Considerable judgment may be required in interpreting market data used to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that could be realized in a current market exchange.

A description of the inputs used in the valuation of assets and liabilities are as follows:

Level 1 inputs utilize observable market data in active markets for identical assets or liabilities. Level 2 inputs consist of observable market data, other than that included in Level 1, that are either directly or indirectly observable. Level 3 inputs consist of unobservable market data, which are typically based on an entity's own assumptions of what a market participant would use in pricing an asset or liability as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest-level input that is significant to the fair value measurement in its entirety. The Cooperative's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

The following table summarizes the Cooperative's assets and liabilities measured at fair value on a recurring basis as of December 31, 2021 and 2020, aggregated by the level in the fair value hierarchy .

within which those measurements fall:

Fair Value Measurements Using Quoted Prices in Significant Active Markets for Other Significant Identical Assets Observable Unobservable and Liabilities Inputs Inputs 2021 Fair Value (Level 1) (Level 2) (Level 3)

Assets-investments:

Nuclear decommissioning funds $ 2,043 $ 2,043 $ - $ -

Other investments 12,350 4,235 1,364 6,751 Investments in capital term certificates of National Rural Utilities Finance Corporation 9,176 9,176 Investment for deferred compensation 1,941 1,941

$3,305 $15,927

==

Fair Value Measurements Using Quoted Prices in Significant Active Markets for Other Significant Identical Assets Observable Unobservable and Liabilities Inputs Inputs 2020 Fair Value (Level 1) (Level 2) (Level 3)

Assets-investments:

Designated funds $ 8,000 $ 8,000 $ - $ -

Nuclear decommissioning funds 2,045 2,045 Other investments 13,550 4,035 1,419 8,096 Investments in capital term certificates of National Rural Utilities Finance Corporation 9,176 9,176 Investment for deferred compensation 1,668 1,668

$3,087 $17,272 The changes in Level 3 recurring fair value measurements using significant unobservable inputs for the*

years ended December 31, 2021 and 2020, are as follows:.

2021 2020 Other investments:

Balance-beginning of year $ 8,096 $ 10,857 New investment and loans made 25 Loan repayments received and current maturities (409) (949)

Patronage capital allocations 55 101 Patronage capital retirements (991)

Transfers from Level 3 to Level 1 (1,585)

Transfers from Level 3 to Level 2 (353)

Balance-end of year $ 6,751 $ 8,096 The valuation of these assets involved management's judgment after consideration of market factors and the absence of market transparency, market liquidity and observable inputs.

9. RETIREMENT OF CAPITAL CREDITS The Cooperative's Board of Directors has adopted a policy of retiring capital credits allocated to members on a first-in, first-out basis. As part of an equity development strategy adopted in 2003, patronage capital retired will be limited to no greater than 2% of the total assigned patronage capital balance as of December 31 of the prior year. This policy is subject to annual review and approval by the Board of Directors and the RUS, and no cash retirements are to be made which would impair the financial condition of the Cooperative or violate any terms of its agreements. Since 2003, the amount of nonoperating margins assigned to members each year is at the discretion of the Board of Directors. Any unassigned nonoperating margins will become unallocated reserves and part of permanent equity.

Patronage capital amounts for the years ended December 31, 2021 and 2020, are as follows:

Assigned Unassigned Total Balance-December 31, 2019 $230,974 $91,469 $322,443 Retirement of capital credits (11,549) (11,549)

Current year margins 13,713 1;992 15,706 Balance-December 31, 2020 233,138 93,461 326,600 Retirement of capital credits (4,663) (4,663)

Current year margins 16,649 2,841 .19,490 Balance-December 31, 2021 $245,124 $96,302 $341,427 During 2020, as a result of the COVID-19 pandemic the Board of Directors approved capital credit.

retirements at 5% of net patronage capital. This one time increase was to provide relief to the Class A member cooperatives and enable them to provide relief to their end-use members. The Board of Directors determined that the one time increase would neither impair the financial condition of Dairyland nor violate the terms of the indenture of mortgage or any outstanding loan agreements that Dairyland is party to.

10. COMMITMENTS AND CONTINGENCIES The Cooperative is a party to a number of generation, transmission and distribution agreements, under which costs and/or revenues are recognized currently based upon the Cooperative's interpretations of the provisions of the related agreements. Differences between the estimates used in the consolidated financial statements and the final settlements are recorded in the year of settlement.

The Cooperative has entered-into various coal purchase contracts with one- to four-year terms. The estimated commitments under these contracts as of December 31, 2021, is as follows:

Years Ending December31 2022 $ 41,271 2023 36,041 2024 20,727 2025 2,242 Total S 100,281 The Cooperative has been named as a defendant in various lawsuits and claims arising in the normal course of business. Although the outcome of these matters cannot be determined at the present time, management and legal counsel believe these actions can be successfully defended or resolved without a material effect on the consolidated financial position, results of operations or cash flows of the Cooperative.

11. EMPLOYEE BENEFITS Multiemployer Defined-Benefit Pension Plan-Pension benefits for substantially all employees are provided through participation in the National Rural Electric Cooperative Association (NRECA)

Retirement Security Plan ("RS Plan"). This is a defined benefit pension plan qualified under Section 401 and tax-exempt under Section 501(a) of the Internal Revenue Code. Pension benefits are funded in accordance with th_e provisions of the RS Plan and are based on salaries, as defined, of each participant.

The Employee Retirement Income Security Act of 1974, as amended by the Multiemployer Pension Plan Amendment Act of 1980, imposes certain liabilities on employers who are contributors to multiemployer plans in the event of a plan termination or an employer's withdrawal. These plans have not been terminated, nor has the Cooperative undertaken any plans to withdraw from participation.

Since the RS Plan is a multiemployer pla'n for accounting purposes, all plan assets are available to pay benefits of any plan partidpant. Separate asset accounts are not maintained for participating employers. This means that assets contributed by one employer may be used to provide benefits to employees of other participa_ting employers. The Cooperative may be contingently liable for its share of the RS Plan's unfunded vested liabilities.

The Cooperative's contributions to the RS Plan in 2021 and 2020 represented less than 5% of the total contributions made to the plan by all participating employers. In 2013, the Cooperative made a voluntary prepayment of $26,899 to this plan to reduce future contribution amounts. The remaining prepayment was fully amortized in 2021. Expense for the RS Plan was $15,161 in 2021 and $12,724 in 2020. The 2021 expense includes contributions to the plan of $9,781 and $5,380 of prepayment amortization. The 2020 expense includes contributions to the plan of $10,034 and $2,690 of prepayment amortization.

In the RS Plan, a "zone status" determination is not required, and therefore not determined, under the Pension Protection Act (PPA) of 2006. In addition, the accumulated benefit obligations and plan assets are not determined or allocated separately by individual employer. In total, the RS Plan was over 80%

funded on both January 1, 2021 and 2020, based on the PPA funding target and PPA actuarial value of assets on those dates.

Because the provisions of the PPA do not apply to the RS Plan, funding improvement plans and surcharges are not applicable. Future contribution requirements are determined each year as part of the actuarial valuation of the plan and may change as a result of plan experience.

Postretirement Health Insurance Obligation-Certain employees of the Cooperative retiring at or after age 55 are eligible to participate in a postretirement health care plan through age 65. Eligible dependents of the retired Cooperative employees are also eligible to participate in this plan through age 65. Retirees pay 100% of the premium amount for this coverage. The premium is based upon the combined medical claims experiences of all active employees and retirees. If premiums were determined based upon the medical claims experience of retirees only, the resulting premium for retirees would be higher. The difference between the premium paid by retirees and the potential actual premium amount is the basis for the postretirement benefit obligation. The Cooperative uses a December 31 measurement date for its plan. The postretirement health care plan is unfunded.

The accumulated postretirement benefit obligation (APBO) and the amounts recognized in the consolidated financial statements as of and for the years ended December 31, 2021 and 2020, are as follows:

2021 2020 Amount recognized in the consolidated balance sheets:

Total accrued qualified and nonqualified benefit obligation $ 5,560 $ 5,825 Less current portion included in accrued expenses-other (396) (302)

Long-term portion s 5,164 S 5,523 Change in benefit obligation:

APBO-beginning of year $ 5,825 $ 5,166 Service cost 354 297 Interest cost 117 145 Actuarial loss (434) 534 Benefits paid (302) (317)

APBO-end of year s 5,560 s 5,825 Funded status of plan-December 31 S (5,560) S(5,825)

Accrued postretirement health insurance obligations recorded at year-end $ 5,560 $ 5,825 Change in plan assets:

Employer contribution $ (302) $ (317)

Benefits paid 302 317 s s Change in accumulated other comprehensive income:

Net income at prior measurement date $ 1,376 $ 1,928 Actuarial assumption changes 434 (534)

Recognition in expense:

Amortization of prior service cost 91 Amortization of unrecognized actuarial gain (57) (109)

Accumulated other comprehensive income s 1,753 s 1,376 _

Components of net periodic postretirement benefit cost:

Service cost-benefits attributed to service during the year $ 354 $ 297 Interest cost on accrued postretirement health insurance obligation 117 145 Amortization of prior service cost 91 Amortization of unrecognized actuarial gain (57) (109)

Net periodic postretirement benefit expense s 414 s 424 Employer cash contributions expected to be made to the plan during the fiscal year ending December 31, 2022, is $396. The amount of accumulated other comprehensive income expected to be recognized during the fiscal year ending December 31, 2022, is an actuarial gain of $80 and amortization of prior service cost of $0. All prior service costs have been fully amortized.

For measurement purposes, a 2.55% and 2.07% discount rate was assumed for 2021 and 2020, respectively, to determine net periodic benefit cost. The 2021 and 2020 annual health care cost increase assumed is 6.50% and 6.50%, respectively, decreasing gradually to 4.46% for 2041 and thereafter.

Estimated future benefit payments from the plan as of December 31, 2021, are as follows:

Years Ending December31 2022 $ 396 2023 386 2024 330 2025 339 2026 402 2027-2031 1,519 Defined-Contribution Plan-Dairyland has a qualified tax-deferred savings plan for eligible employees.

Eligible participants hired prior to January 1, 2020 may make pretax contributions, as defined, with the Cooperative matching up to 2.5% of the participants' annual compensation. Eligible participants hired after December 31, 2019 may make pretax contributions, as defined, with the Cooperative matching up to 13% of the participants' annual compensation. Contributions to this plan by the Cooperative were

$1,409 and $1,325 for 2021 and 2020, respectively.

Other Plans-The Cooperative offers key employees deferred compensation plans available through NRECA. The plans permit qualifying employees to defer a portion of their salary until future years. The accumulated deferred compensation balance is not available to employees until termination, retirement or death.

All amounts of compensation deferred under the plans and all income attributable to those amounts (until paid or made available to the employee or other beneficiary) are solely the property and rights of the Cooperative (not restricted to the payment of benefits under the plan), subject only to the claim of general creditors. Participants' rights under the plans are equal to those of general creditors ofthe Cooperative in an amount equal to the fair market value of the deferred account for each participant.

The related assets and liabilities, totaling $1,942 and $1,668 as of December 31, 2021 and 2020, respectively, are reported at contract value, which approximates fair value.

The Cooperative also provides employees with medical insurance coverage, vision and dental insurance coverage, short-term and long-term disability, and life insurance, which are funded by employer and employee contributions. The Cooperative's costs related to these benefits were $9,867 and $10,562 for 2021 and 2020, respectively. The liability for these plans of $59 and $5 as of December 31, 2021 and 2020, respectively, are recorded in accrued expenses on the consolidated balance sheets.

12. RELATED-PARTY TRANSACTIONS The Cooperative provides electric and other services to its class A members. The Cooperative received revenue of $376,523 and $384,984 in 2021 and 2020, respectively, for these services. The Cooperative has accounts receivable from its class A members of $30,829 and $32,311 as of December 31, 2021 and 2020, respectively.

The Cooperative has advances from class A members of $20,584 and $13,704 as of December 31, 2021 and 2020, respectively, related to the prepayment program. Class A members have the option of paying their electric bill in advance, and in turn, the Cooperative pays the members' interest income. The Cooperative's interest expense related to the prepayment program was $125 and $191 for the years ended December 31, 2021 and 2020, respectively.

13. ASSET RETIREMENT OBLIGATIONS An asset retirement obligation (ARO) is the result of legal or contractual obligations associated with the retirement of a tangible long-lived asset that results from the acquisition, construction, or development and/or the normal operation of a long-lived asset. The Cooperative determines these obligations based on an estimated asset retirement cost adjusted for inflation and projected to the estimated settlement dates and discounted using a credit-adjusted risk-free interest rate. Upon initial recognition of a liability for ARO, the Cooperative capitalizes the asset retirement cost by increasing the carrying amount of the related long-lived asset by the same amount as the liability. The Cooperative allocates that asset retirement cost to expense using the straight-line method over the remaining useful life of the related long-lived asset. The accretion of the obligation is recognized over time up to the settlement date. Any future change in estimate will be recognized as an increase or a decrease in the carrying amount of the liability for an ARO and the related asset retirement cost capitalized as part of the carrying amount of the related long-lived asset.

The Cooperative determined that it has AROs related to future removal and disposal of asbestos at its power plants. There are no assets legally restricted for purpose of settling the ARO related to future removal and disposal of asbestos.

The Cooperative has established a decommissioning trust to accumulate the estimated amounts necessary to decommission a nuclear power plant that the Cooper_ative formerly operated and the related Independent Spent Fuel Storage Installation (ISFSI). The assets of this trust in the amount of

$2,043 and $2,045 as of December 31, 2021 and 2020, respectively, are outside the Cooperative's administrative control and are available solely to satisfy the future costs of decommissioning. As the expected completion is planned for 2022, the balance of the trust as of December 31, 2021 of $56 is recorded as current in the consolidated balance sheet. The remaining $1,987 is related to the annual ISFSI costs that will remain after completion of the decommissioning.

Nuclear decommissioning and other asset retirement obligations as of December 31, 2021 and 2020, are as follows:

Nuclear Other Total Balance-December 31, 2019 $2,389 $ 2,970 $ 5,359 Increase in estimated obligation 9 9 Incurred costs on projects (354) (354)

Balance-December 31, 2020 2,044 2,970 5,014 Incurred costs on projects ( 1) (2,726) (2,727)

Balance-December 31, 2021 $2,043 s 244 $ 2,287 The Cooperative did not record a conditional ARO related to the dismantlement of the dam and drainage reservoir for the hydro generation plant at Flambeau, the removal of transmission lines in various corridors, and RockGen Energy Center because the Cooperative does not have sufficient information to estimate the fair value of the ARO.

14. NUCLEAR REACTOR License- The La Crosse Boiling Water Nuclear Reactor (LACBWR) was voluntarily removed from service by the Cooperative effective April 30, 1987. The intent was to terminate operation of the reactor, and a possession-only license was obtained from the Nuclear Regulatory Commission (NRC) in August 1987.

LACBWR will remain in safe storage status {SAFSTOR) until the final stage of decommissioning of LACBWR, involving dismantlement and decontamination, can be completed. In May 2016, the NRC approved transfer of the license to .La CrosseSolutions LLC (Solutions), a subsidiary of EnergySolutions LLC. Solutions will temporarily hold the license and assumes responsibility for the decommissioning of the site. The license will revert back to the Cooperative following completion of decommissioning activities. While Solutions undertakes decommissioning, the Cooperative retains a license for its continued ownership of the spent fuel.

Nuclear Waste Policy Act of 1982 (NWPA)-Under the NWPA, the United States government is responsible for the storage and disposal of spent nuclear fuel removed from nuclear reactors. By statute and under contract, the United States government was to have begun accepting spent fuel in January 1998, but has not yet licensed and established a repository.

The Cooperative has filed two successful breach of contract damage claims against the United States government in the United States Court of Federal Claims to recover its costs generally incurred after 1998 through 2013 related to spent fuel remaining at LACBWR. The Cooperative received damage award payments of $37,659 and $73,500 in January 2013 and November 2017, respectively. Proceeds from the award payments were used to defease the nuclear related regulatory asset and deferred charges for nuclear related litigation and plant costs. Remaining proceeds have been refunded to Class A Members.

In January of 2022, the Board of Directors approved to accept a partial summary judgement in the amount of $23.1 million from the United States government related to the NWPA third contract damage claim. Claim proceeds, less accrued legal fees, were refunded back to Class A Members in February 2022.

Subsequent damage claims will be filed to recover the continuing costs arising from the presence of the spent fuel.

ISFSI-The Cooperative completed the temporary dry storage facility project located on the LACBWR site and completed the move of the LACBWR spent nuclearfuel to this ISFSI facility in September 2012.

The spent nuclear fuel will remain at the ISFSI until it is able to be transferred to the government.

Annual ISFSI costs are recorded on an as incurred basis and incorporated into the annual budget and rate making process.

Decommissioning-The Solutions decommissioning plan anticipates completion of decommissioning LACBWR, not including the ISFSI, in 2022. The estimated costs of decommissioning the nuclear generating facility are based on the Solutions cost study and decommissioning plan filed with the NRC as part of the license transfer. Costs incurred for decommissioning projects are charged against the decommissioning liability. As costs are incurred, Solutions submits requests for withdrawals to the Cooperative for release of funds from the nuclear decommissioning trust.

15. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION The statement of cash flows includes the following supplemental information as of December 31, 2021 and 2020:

2021 2020 Cash paid for interest $ 24,062 $ 32,096 Electric plant additions funded through accounts payable and accrued expenses 4,357 2,888 Electric plant additions under capital leases 4,337 4,758 Non-cash payment of long-term debt 809 The amount shown in the consolidated statements of cash flows for cash, cash equivalents and restricted cash as of December 31, 2021 of $68,912 is comprised of cash and cash equivalents of

$46,244 and designated funds of $22,668.

16. REVENUE FROM CONTRACTS WITH.CUSTOMERS Sales of electric energy consists of sales to members pursuant to long-term wholesale electric contracts. Dairyland recognizes revenue based on the amount of energy delivered to each customer at agreed upon rates. The measurement of energy sales to customers is generally based on meter data, which is collected through the last day of the month. At the end of each month, amounts of energy delivered to customers is recognized.

We are an active participant in the MISO Energy Markets, where we bid our generation into the Day Ahead and Real Time markets and procure electricity for our wholesale customers and sell energy at prices determined by the MISO Energy Markets. Purchase and sale transactions are recorded using settlement information provided by MISO. Purchase transactions are accounted for on a net hourly position. Net purchases in a single hour are recorded as purchased and interchanged power. Sales of excess energy transacted through MISO are recorded on a gross basis in other sales. For sales to the MISO Energy Markets, we have no performance obligation until the energy is sold.

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

The following table disaggregates revenue by major source for the years ended December 31, 2021 and 2020:

2021 2020 Class A $376,522 $384,984 Class C 2,387 5,729 Class D 16,879 10,151 Class E, including MISO 53,552 24,350 Other sales 14,254 17,217 Total $463,594 $442,431 Dairyland Power Cooperative and Subsidiary Consolidated Financial Statements as of and for the Years Ended December 31, 2021 and 2020, and Independent Auditor's Report

Deloitte & Touche LLP Deloitte. Suite 2800 SO South Sixth Street Minneapolis, MN 55402-1538 USA Tel: +1 612 397 4000 Fax: + 1 612 397 4450 www .deloitte.com INDEPENDENT AUDITOR'S REPORT Board of Directors Dairyland Power Cooperative La Crosse, Wisconsin Opinion We have audited the consolidated financial statements of Dairyland Power Cooperative and subsidiary (the "Cooperative"), which comprise the consolidated balance sheets as of December 31, 2021 and 2020, and the related consolidated statements of revenue, expenses and comprehensive income, member and patron equities, and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively referred to as the "financial statements").

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the.

design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for one year after the date that the financial statements are available to be issued.

Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that

includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we:

Exercise professional judgment and maintain professional skepticism throughout the audit.

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, no such opinion is expressed.

Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

March 28, 2022 DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2021 AND 2020 (In thousands) 2021 2020 ASSETS ELECTRIC PLANT:

Plant and equipment-at original cost $ 2,055,575 $ 1,864,390 Less accumulated depreciation (867,431) (821,525)

Net plant and equipment 1,188,144 1,042,865 Construction work in progress 87,032 68,812 Total electric plant 1,275,176 1,111,677 OTHER ASSETS:

Nuclear decommissioning funds 1,987 1,988 Intangible asset, net (Note 2) 30,566 Other investments (Note 8) 12,350 13,550 Investments in capital term certificates of National Rural Utilities Cooperative Finance Corporation (Note 8) 9,176 9,176 Regulatory assets (Note 2) 25,614 16,139 Investment for deferred compensation 1,776 1,530 Deferred charges (Note 2) 19,357 18,165 Total other assets 100,826 60,548 CURRENT ASSETS:

Cash and cash equivalents 46,244 19,535 Designated funds (Note 2) 22,668 8,000 Accounts receivable:

Energy sales 37,111 35,541 Other 7,105 1,311 Inventories:

Fossil fuels 24,234 41,327 Materials and supplies 17,936 20,908 Prepaid expenses and other 12,675 10,736 Total current assets 167,973 137,358 TOTAL $ 1,543,975 $ 1,309,583 (Continued)

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2021 AND 2020 (In thousands) 2021 2020 CAPITALIZATION AND LIABILITIES CAPITALIZATION:

Member and patron equities:

Membership fees $ 1 $ 1 Patronage capital {Note 9) 341,427 326,600 Accumulated other comprehensive income 1,753 1,376 Total member and patron equities 343,181 327,977 Long-term obligations (Note 6) 820,090 835,120 Total capitalization 1,163,271 1,163,097 OTHER LIABILITIES:

Deferred credits {Note 2) 9,418 2,519

Obligations under capital leases {Note 7) 7,934 6,623 Postretirement health insurance obligation (Note 11) 5,164 5,523 Decommissioning and asset retirement obligations {Note 14) 2,231 4,957 Other non-current liabilities 4,577 3,627 Total other liabilities 29,324 23,249 COMMITMENTS AND CONTINGENCIES (Note 10)

CURRENT LIABILITIES:

Current maturities of long-term obligations and obligations under capital leases 45,654 44,167 Line of credit {Note 5) 209,707 Nuclear decommissioning obligations {Note 14) 56 56 Advances from member cooperatives and other prepayments 20,584 13,704 Deferred credits {Note 2) 20,945 Regulatory liabilities (Note 2) 22,668 8,000 Accounts payable 33,985 26,255 Accrued expenses:

Payroll, vacation, and benefits 5,669 5,897 Interest 6,841 Property and other taxes 3,642 3,201 Other 2,574 1,012 Total current liabilities 351,380 123,237 TOTAL $1,543,975 $1,309,583 See notes to consolidated financial statements. (Concluded)

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED STATEMENTS OF REVENUES, EXPENSES AND COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (In thousands) 2021 2020 UTILITY OPERATIONS:

Operating revenues:

Sales of electric energy $449,340 $425,214 Other 14,254 17,217 Total operating revenues 463,594 442,431 Operating expenses:

Fuel 91,261 96,273 Purchased and interchanged power 107,852 89,874 Other operating expenses 126,704 108,058 Depreciation and amortization 53,515 68,343 Maintenance 29,284 i7,54l Property and other taxes 9,534 8,903 Total operating expenses 418,150 398,992 Operating margin before interest and other 45,444 43,439 Interest and other:

Interest expense 28,855 29,785 Allowance for funds used i_n construction-equity (963) (1,008)

Other-net (60) (60)

Total interest and other 27,832 28,717 OPERATING MARGIN 17,612 14,722 NONOPERATING MARGIN 1,878 984 NET MARGIN AND EARNINGS 19,490 15,706 OTHER COMPREHENSIVE INCOME (LOSS)-Postretirement health insurance obligation adjustments 377 (552)

COMPREHENSIVE INCOME s 19,867 s 15,154 See notes to consolidated financial statements.

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED STATEMENTS OF MEMBER AND PATRON EQUITIES FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (In thousands)

Accumulated Total Other Member Membership Patronage Comprehensive and Patron Fees Capital Income Equities BALANCE-January 1, 2020 $ 1 $322,443 $1,928 $324,372 Net margin and earnings 15,706 15,706 Postretirement health insurance obligation adjustments (552) (552)

Retirement of capital credits (Note 9) (11,549) (11,549)

BALANCE-December 31, 2020 1 326,600 1,376 327,977 Net margin and earnings 19,490 19,490 Postretirement health insurance obligation adjustments 377 377 Retirement of capital credits (Note 9) (4,663) (4,663)

BALANCE-December 31, 2021 S 1 $341,427 S 1,753 $343,181 See notes to consolidated financial statements.

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (In thousands) 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES:

Net margin and earnings $ 19,490 $ 15,706 Adjustments to reconcile net margin and earnings to net cash provided by operating activities:

Gain on disposal of assets (2,685) {1,279)

Depreciation and amortization:

Charged to operating expenses 53,515 68,324 Charged through other operating elements such as fuel expense 3,363 Allowance for funds used in construction-equity {963) {1,008)

Unrealized gains on nuclear decommissioning trust investments 6 Changes in operating elements:

Accounts receivable (7,364) 8,173 Inventories 15,292 {5,068)

Prepaid expenses and other assets (1,939) 3,170 Accounts payable 7,730 3,721 Accrued expenses and other liabilities 10,963 11,480 Deferred charges and other 23,327 (17,337)

Total adjustments 97,876 73,545 Net cash provided by operating activities 117,366 89,251 CASH FLOWS FROM INVESTING ACTIVITIES:

Electric plant additions (62,971) (54,021)

Asset acquisition (205,221)

Purchase of investments (14,154) (6,247)

Proceeds from sale of investments and economic development loans 14,792 5,071 Net cash used in investing activities (267,554) (55,197)

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings under line of credit 209,707 44,000 Repayments under line of credit (112,000)

Borrowings under long-term obligations 23,902 79,958 Repayments of long-term obligations (36,135) (43,086)

Retirement of capital credits (4,663) (11,549)

Borrowings of advances from member cooperatives 388,140 378,670 Repayments of advances from member cooperatives (381,386) (378,977)

Net cash provided by (used in) financing activities 199,565 (42,984)

NET INCREASE (DECREASE) CASH, CASH EQUIVALENTS AND RESTRICTED CASH 49,377 (8,930)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH -Beginning of year 19,535 28,465 CASH, CASH EQUIVALENTS AND RESTRICTED CASH-End of year $ 68,912 $ 19,535 See notes to consolidated financial statements.

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (All dollar amounts in thousands)

1. NATURE OF BUSINESS AND ORGANIZATION Business-Dairyland Power Cooperative and subsidiary ("Dairyland" or the "Cooperative") is an electric generation and transmission cooperative organized under the laws of the states of Wisconsin and Minnesota. The Cooperative, whose principal offices are located in Wisconsin, provides wholesale electric service to class A members engaged in the retail sale of electricity to member consumers located in Wisconsin, Minnesota, Iowa and Illinois, and provides electric and other services to class C, D and E members.

Principles of Consolidation-The consolidated financial statements include the accounts of Dairyland and Dairyland's wholly owned subsidiary, Genoa FuelTech, Inc. All intercompany balances and transactions have been eliminated in consolidation.

Accounting System and Reporting-The accounting records of the Cooperative are maintained in accordance with the uniform system of accounts prescribed by the Federal Energy Regulatory Commission as adopted by the Rural Utilities Service (RUS), the Cooperative's principal regulatory agency.

2. SIGNIFICANT ACCOUNTING POLICIES Electric Plant-The cost of renewals and betterments of units of property (as distinguished from minor items of property) includes contract work, direct labor and materials, allocable overhead, and allowance for funds used during construction, and is charged to electric plant accounts. Included in accumulated depreciation are nonlegal or noncontractual costs of removal components. As a result, the cost of units of property retired, sold or otherwise disposed of, plus removal costs, less salvage, is charged to accumulated depreciation and no profit or loss is recognized in connection with ordinary retirements of property units. A provision for these nonlegal or noncontractual costs of removal components is recognized based on depreciation rates determined by a third-party depreciation study completed in November 2016 and approved by RUS in 2017 for rates effective in 2017 through 2021.