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| {{#Wiki_filter:SALT RIVER PROJECT 2021 ANNUAL REPORT Including Five-Year Operational and Statistical Review and Rnancial Summary Si¥fe": | | {{#Wiki_filter:}} |
| Delivering water and power
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| Contents 2 From the President and the Vice President 4 From the General Manager & CEO 6 Reviewing Financial Results 9 SRP Boards and Councils 11 SRP Officers and Executives 12 Five-Year Operational and Statistical Review J 202 SALT RIVER PROJECT r£i
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| About SRP SRP has delivered on ITS COMMITMENT TO PROVIDE RELIABLE AND AFFORDABLE WATER AND POWER to the people living in central Arizona this past year and for more than a century. By providing these essential resources, we have helped the Phoenix metropolitan area develop and thrive.
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| We act in the best interest of the people we serve and strive to help build a better future for Arizona. In the years ahead, we will continue to lead the way by applying our forward-thinking approach and new technology to address water and energy supply challenges.
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| SRP's 118-year history is a story of challenges faced and challenges overcome. Throughout it, SRP has never failed to meet its commitment to shareholders, customers and the community.
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| From the President and the Vice President SRP's 118-year history is a story of challenges Amid the pandemic crisis, SRP and energy faced and challenges overcome. Throughout it, providers throughout the West and Southwest SRP has never failed to meet its commitment to were put to the test last summer by a combination shareholders, customers and the community. The of record heat, devastating wildfires, issues with past year presented challenges that were unique natural gas availability and more. Generation and and historic by any measure. transmission capacity were at times stretched to their limits. Because of the hard work, The pandemic led to a tragic loss of life, impacting preparedness, resiliency of employees and the families in our community and throughout the company's comprehensive system planning world. Since it began, we have all faced disruptions process, together with some good fortune, to every part of our lives at home and at work.
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| SRP avoided the outages and other challenges Through it all, however, every member of the SRP faced by many utilities.
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| team adapted and met the challenge so that despite the many far-reaching disruptions caused by the The President's Office and our elected Board and pandemic, the most essential services affordable, Council work closely with executive management to reliable and sustainable SRP-supplied water and support the sound resource planning that is critical power were always available. SRP was founded in times of crisis. This collaboration allows SRP by a community commitment to the Valley's future. to responsibly integrate the renewable energy our That spirit of community is woven into the fabric customers expect and learn how to most effectively of SRP and is at the heart of who we are and use battery storage, all while maintaining reliability everything we do. As was especially evident during and meeting the Valley's growing residential, the past year, when the community needs us most, commercial and industrial demand for energy.
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| SRP is always there.
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| " aU21 ANNUAL REPORT
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| In FY21, SRP announced a plan to double its We and all SRP elected officials take our utility-scale solar commitment to 2,025 megawatts governance responsibility seriously. We understand (MW) by 2025 by adding 1,375 MW of solar that our decisions have impacted and will continue energy on top of those solar facilities already to impact not just our fellow SRP team members, online or contracted and under development. This but also the shareholders and customers we were demonstrates SRP's commitment to sustainable elected to represent. Our core commitment is to resources and reinforces our position as a leader always and in every instance act in the best interest in renewable energy. It is an essential effort toward of those shareholders and customers. FY22 will meeting the 2035 Sustainability Goals adopted by bring new challenges and opportunities, and we are our Board. confident that SRP is prepared to respond.
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| These goals also include a strong focus on protecting and conserving our critical water David Rousseau John R. Hoopes resources, which is especially important during periods of extended drought such as those we President Vice President are experiencing today. SRP consistently seeks to maximize water collection and storage and is working with the Bureau of Reclamation to identify the best way to increase the capacity of a reservoir system that is the envy of the West. Ultimately, this effort is expected to benefit not just the shareholders and customers of SRP, but the rest of central Arizona as well.
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| SRP 2021 ANNUAL REPORT 3
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| From the General Manager & CEO As SRP emerges from the pandemic stronger and GENERATING REUABLE, SUSTAINABLE POWER with a vision for the future, we continue to deliver
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| * SRP reliably met customers' power needs on our mission to serve our shareholders, our during an intense summer that included an all-customers and the community.
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| time system record peak demand and two major I'm extremely proud of what we accomplished at wildfires that threatened key transmission lines SRP during the year and of how our team members and other infrastructure. The entire West was responded to the pandemic. Our employees helped dealing with these challenging conditions at the SRP meet and exceed expectations and placed us same time, critically stressing energy availability.
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| in a strong position moving forward in FY22.
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| SRP's customers continued to receive power during this period and throughout the year with a level of reliability among the best in the nation.
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| KEEPING SAFETY AT THE FOREFRONT
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| . Throughout the year we prioritized the health . Key Power System indicators remained on track and well-being of our employees and our to meet or beat reliability performance targets customers, keeping responsible restrictions in for this fiscal year, including Run Reliability that place at facilities and in the field while having exceeded 98% from May to September.
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| approximately two-thirds of our employees work
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| . We continue to upgrade SRP's existing gas plants remotely. Collaborating with state and local health to increase efficiency and output. Crews recently officials, SRP offered COVID-19 vaccinations to completed work on the Unit 1 turbine system at employees, their family members and retirees.
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| Desert Basin Power Plant, increasing total output by more than 21 MW, reducing the minimum load by 30 MW and slashing NOx emissions by 36%.
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| STAYING ON TRACK
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| * SRP delivered a successful financial performance . Just as importantly, SRP announced it has more in FY21, including positive CNR results primarily than doubled its solar commitment and will add driven by above-normal temperatures, strong a total of 2,025 megawatts of new utility-scale customer growth and a focus on managing direct solar energy by the end of fiscal year 2025. As costs. Capital spending was 3.3% above budget part of that commitment, we brought two new 100 as demand remained strong for new construction MW solar facilities online last December East during the pandemic. Direct cost savings are Line Solar and Saint Solar and construction will 4.3% below the revised budget, or 7.8% below soon start on another 100 MW project. Central the original FY21 budget, due to initial expense Line Solar. SRP has also contracted for the output reductions and continued savings throughout of the largest solar-charged battery storage the fiscal year. project in Arizona and plans to add more storage going forward.
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| A .RP 2021 ANN'..A. REPORT
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| DEMONSTRATING WATER LEADERSHIP PRIORITIZING DIVERSITY, EQUITY AND INCLUSION
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| . Arizona and the West continue to experience
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| * As part of SRP's strong focus on diversity, equity extreme drought that has gripped the region and inclusion as well as our transition to a hybrid for two decades. SRP is partnering with our workplace for the future, we elevated Human shareholders, customers and the communities Resources to the top of the organization and we serve to create awareness and increase water hired Geri Mingura as Associate General Manager conservation through public campaigns, public and Chief Human Resources Executive. Geri's and private partnerships, and strategic planning. extensive experience wilt be critical to SRP's Diversity, Equity and Inclusion efforts as well
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| * Recent research shows that SRP's watersheds and as reshaping other important HR functions.
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| system are more resilient and resistant to climate change than other river basins. Because we are always managing for drought conditions, reservoir DEVELOPING INNOVATIVE PARTNERSHIPS storage levels are good, and shareholders and
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| . SRP continued its dedication to helping our customers will receive full allocations in FY22.
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| customers and the community continue to grow
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| * SRP recently reopened the Granite Reef and thrive, and that includes investing in the Underground Storage Project (GRUSP), which had future through research and innovation. SRP been closed due to storm damage. SRP operates expanded its longtime partnership with Arizona the facility, which it jointly owns in a partnership State University to focus on developing energy with local communities. GRUSP is part of the solutions and stronger communities of the future, effort to replenish natural underground aquifers with a core goal of comprehensively addressing and to store water for use when needed during resilience and adaptation to climate change.
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| drought conditions.
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| * Wildfire remains a constant and significant threat LOOKING AHEAD WITH CX>NHDENCE to the watershed. SRP continues to advocate for There are still many unknowns as we move ahead effective forest management and has launched the in FY22, but what doesn't change is our mission Healthy Forest Initiative to support thinning to serve our shareholders and our customers with of overgrown forests. reliable, affordable and sustainable water and power and to support the community.
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| . The Bureau of Reclamation and SRP continue to conduct stakeholder meetings for the Verde Based on the resilience, skill and dedication of our Reservoirs Sediment Mitigation Study (VRSMS) employees and what they have accomplished during appraisal report. The draft appraisal report for the past year, I am confident that SRP will continue stakeholder review was completed on May 17, to meet and exceed expectations going forward.
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| 2021, which included the results of the I want to especially thank our publicly elected Board stakeholder evaluations. and Council members for their perseverance and support throughout a very challenging FY21. As we
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| . SRP took additional steps toward its 2035 move forward in FY22, I'm incredibly optimistic Sustainability Goals as the Board approved new and excited about what's ahead.
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| water pricing principles, established a 2035 water support goal and aligned the allocation of associated expenses and revenues with our Mike Hummel governing documents. In March, the Board General Manager & CEO approved the pricing changes needed to support continued progress toward achieving the goal of reducing water support to not more than 60%
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| of Association expenses by 2035.
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| Investment income, net was $317.7 million for FY21 compared to $18.8 million for FY20. Investment income, net includes fair value gains of $312.5 million for FY21 and fair value losses of $5.8 million for FY20.
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| Reviewing Financial Results RESULTS OF OPERATIONS Operating expenses were $3.0 billion both for FY21 Operating revenues were $3.5 billion for fiscal year and FY20. Power purchased expense increased
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| $255.7 million due to increased purchased volumes 2021 (FY21) and $3.1 billion for fiscal year 2020 (FY20), an increase of $354.1 million, or 11.3%. to meet the higher demand caused by the higher temperatures and participation in the EIM. Fuel The increase in operating revenues was primarily used in electric generation expense decreased due to increased retail electric and wholesale
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| $227.2 million primarily due to lower-cost natural revenues. FY21 retail electric revenues increased
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| $179.6 million, or 6.4%, primarily due to higher gas and the shutdown of Navajo Generating Station average temperatures in FY21 compared to FY20. (NGS) in FY20. Combined, power purchased and Wholesale revenues increased $178.1 million, or fuel used in electric generation increased $28.6 86.2%, to $384.7 million compared to FY20. FY21 million. Fuel used in electric generation and purchased power expenses include adjustments wholesale revenues included a fair value loss of
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| $15.8 million compared to a $28.9 million loss for the fair value of certain fuel and purchased-power contracts. Excluding the fair value gain of in FY20. Excluding the fair value losses, FY21
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| $107.0 million in FY21 and the fair value loss of wholesale revenues would have been $400.5 million compared to $235.5 million in FY20, an increase of $30.4 million in FY20, these expenses would have increased $166.0 million, or 16.1%. In addition to
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| $165.0 million, or 70.1%. The increase is primarily the increase of fuel and power purchased expenses, due to the higher average temperatures in FY21 operations and maintenance expense increased and the District's participation in California ISO's
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| $54.2 million when compared to FY20 due to the Energy Imbalance Market (EIM). The total number timing of scheduled plant maintenance projects.
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| of customers was 1,093,263 as of April 30, 2021, These increases were partially offset by a decrease a 1.7% increase from the previous year.
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| ANNUAL REPOR'
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| in depreciation and amortization expense of $47.1 financial results, see Note 7 in the notes to the million primarily due to the shutdown of NGS. Combined Financial Statements (available at srpnet.com/annualreport).
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| Investment income, net was $317.7 million for FY21 compared to $18.8 million for FY20. Investment The Energy Risk Management Program is managed income, net includes fair value gains of $312.5 according to a policy approved by the District's million for FY21 and fair value losses of $5.8 million Board of Directors (Board) and overseen by a Risk for FY20. Oversight Committee. The policy covers market, credit and operational risks and includes portfolio Net financing costs were $136.7 million and $144.3 strategies, authorizations, value-at-risk limits, stop-million in FY21 and FY20, respectively.
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| loss limits, and notional and duration limits. The Net revenues for FY21 were $577.1 million Risk Oversight Committee is composed of senior compared to net expenses for FY20 of $17.8 million. executives. The District maintains an Energy Risk Excluding the effects of the changes in the fair value Management Department, separate from the energy of fuel and purchased-power contracts, wholesale marketing area, which regularly reports to the positions and investment income, net revenues Risk Oversight Committee. SRP believes that its would have been $173.4 million and $47.4 million existing risk management structure is appropriate for FY21 and FY20, respectively. and that risks are properly measured, reported and managed.
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| ENERGY RISK MANAGEMENT PROGRAM ELECTRICITY PRICING The District's mission to serve its retail customers The District has a diversified customer base, is the cornerstone of its risk management approach.
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| with no single retail customer providing more SRP builds or acquires resources to serve retail than 3% of its retail electric revenues. The District customers, not the wholesale market. However, as has implemented projects and programs geared a summer-peaking utility, there are times during the toward enhancing customer satisfaction by offering year when the District's resources and/or reserves customers a range of pricing and service options.
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| are in excess of its retail load, thus giving rise to Moreover, SRP is one of the low-price leaders wholesale activity. The District has an Energy Risk in the Southwest.
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| Management Program to limit exposure to risks inherent in retail and wholesale energy business The District is a summer-peaking utility, and it has operations by identifying, measuring, reporting made an effort to balance the summer-winter load and managing exposure to market, credit and relationships through seasonal price differentials. In operational risks. To meet the goals of the Energy addition, SRP offers prices on a time-of-use basis Risk Management Program, SRP uses various for residential, commercial and industrial customers.
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| physical and financial instruments, including The District's price plans include a base price forward contracts, futures, swaps and options.
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| component and a Fuel and Purchased Power Certain of these transactions are accounted for Adjustment Mechanism (FPPAM). Base prices under Accounting Standards Codification (ASC) recover costs for generation, transmission, 815, "Derivatives and Hedging." For a detailed distribution, customer services, metering.
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| explanation of the effects of ASC 815 on SRP's
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| meter reading, billing and collections, and system CAPITAL IMPROVEMENT PROGRAM benefits charges that are not otherwise recovered The Capital Improvement Program is driven by the through the FPPAM. The FPPAM was implemented need to sustain the generation, transmission and in May 2002 to adjust for increases and decreases distribution systems of the District to meet customer in fuel costs. electricity needs and to maintain a satisfactory level On March 25, 2019, the Board concluded a public of service reliability.
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| process by approving changes and adjustment to FY21 capital spending levels were slightly above its price plans including an overall average annual original expectations. Generation projects price decrease of 2.2%, effective with the May 2019 accounted for 19% of the year's expenditures.
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| billing cycle. The overall average decrease was These projects included plant modification costs comprised of an average 3.9% decrease to FPPAM, for Palo Verde, Gila River and Desert Basin partially offset by an average base price increase generating stations.
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| of 1.7%.
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| Expansion of the electrical distribution system On February 1, 2021, the Board voted to approve to meet future growth and to replace aging an eventual overall average annual price increase underground cable accounted for 40% of FY21 of 3.9% by approving new FPPAM prices. In capital expenditures. More than one quarter of consideration of customers, the pandemic and the distribution system spending was for New overall economic environment, the proposal Business projects. The addition of new transmission delayed implementation of the increased prices until facilities made up 17% of FY21 capital expenditures.
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| November 2021. In order to help manage the FPPAM These projects included the Price Road Industrial under collection balance, the Board also approved Expansion as well as transmission pole to transfer $82.0 million to the Rate Stabilization asset management.
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| Fund which was applied to offset the FPPAM under collection balance on April 30, 2021.
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| ,21 ANNUAL SEPOSr
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| SRP Boards and Councils SRP BOARDS member, plus 10 additional members (one from The District is governed by a 15-member Board each of the 10 voting districts), half being elected of Directors. The District Board, among other biennially for four-year terms. The President and things, establishes overall District policy, approves Vice President are elected at large by eligible the annual budget and major contracts, authorizes shareholders of the Association. The Board major purchases and sales of assets, sets electric members, the President and the Vice President prices for the District as per Arizona statutes, and are elected by votes weighted in proportion to the authorizes the issuance of revenue bonds. The amount of eligible land owned by each shareholder.
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| District Board members are elected from among Members of both boards are elected by property the District electors (landowners) for four-year owners within the respective boundaries and terms and consist of the President, who is an ex serve staggered four-year terms.
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| officio member, plus one member from each of the 10 voting divisions of the District, plus four SRP COUNCILS additional members who are elected at large, half being elected biennially for four-year terms. The Both the District and the Association have President and Vice President are elected at large 30-member Councils three members from each by the electors of the District. With the exception of the 10 voting districts (Association) or voting of the four at-large Board members, all are elected divisions (District), half being elected biennially by votes weighted in proportion to the amount for four-year terms. All Council members are of eligible land owned by each elector. The four elected by votes weighted in proportion to the at-large Board positions are elected based on one amount of eligible land owned by each shareholder/
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| person, one vote by eligible District electors. elector. Most often, candidates seek election to both Councils. The two Councils, among other The Association is governed by an 11-member things, enact and amend bylaws of the respective Board of Governors. Among other things, the organizations and set compensation of elected Board is involved in establishing the policies, officials, and the District Council approves the annual budget, major contracts, water rates and issuance of revenue bonds.
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| fees for the Association. The Association Board members are elected from among the Association's Visit srpnet.com/about/map.aspx for a detailed shareholders (landowners) for four-year terms map of the 10 SRP voting districts and divisions for and consist of the President, who is an ex officio SRP Boards and Councils.
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| SRP Boards and Councils The Association Board: The District Board: Directors at-large:
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| District 1: District 6: Division 1: Division 6: Seat 11:
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| Larry D. Rovey Jack M. White Jr. Kevin J. Johnson Jack M. White Jr. Anda G. McAfee District 2: District 7: Division 2: Division 7: Seat 12:
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| Paul E. Rovey Keith B. Woods Paul E. Rovey Keith B. Woods Corey J. Hawkey District 3; District 8: Division 3: Division 8: Seat 13:
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| Mario 3. Herrera Deborah S. Hendrickson Mario J. Herrera Deborah S. Hendrickson Nicholas R. Brown District 4: District 9: Division 4: Division 9: Seat 14:
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| Leslie C. Williams Robert C. Arnett Leslie C. Williams Robert C. Arnett Randy J. Miller District 5: District 10: Division 5: Division 10:
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| Stephen H. Williams Mark V. Pace Stephen H. Williams Mark V. Pace The Association Council: The District Council:
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| District 1: District 6: Division 1: Division 6:
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| Tyler M. Francis, Jacqueline L. Miller, Tyler M. Francis, Jacqueline L. Miller, Ronald S. Kolb, Nicholas J. Vanderwey Ronald S. Kolb, Nicholas J. Vanderwey Clifford M. Leatherwood Clifford M. Leatherwood District 2: District 7: Division 2: Division 7:
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| Jerry E. Geiger, Mark A. Lewis, Jerry E. Geiger, Mark A. Lewis, Suzanne Naylor, Barry E. Pace ley. Kimberly A. Owens, Barry E. Paceley, William W. Sheely HarmenTjaarda Jr. William W. Sheely Harmen Tjaarda Jr.
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| District 3: District 8: Division 3: Division 8:
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| Aaron M. Herrera, Christopher J. Dobson, Aaron M. Herrera, Christopher J. Dobson, Richard W. Swier, Mark L. Farmer, Richard W. Swier, Mark L. Farmer, Paul A. Van Hofwegen Mark C. Pedersen Paul A. Van Hofwegen Mark C. Pedersen District 4: District 9: Division 4: Division 9:
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| Garvey M. Biggers, A. Allen Freeman, Garvey M. Biggers, A. Allen Freeman, M. Brandon Brooks, Mark A. Freeman, M. Brandon Brooks, Adam S. Hatley Michael G. Rakow Adam S. Hatley Michael G. Rakow District 5: District 10: Division 5: Division 10:
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| John R. Augustine, Dave B. Lamoreaux, John R. Augustine, Dave B. Lamoreaux, J. Weston Lines, William P. Schrader Jr, J. Weston Lines, William P. Schrader Jr.,
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| John R. Shelton William P. Schrader III John R. Shelton William P. Schrader III
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| < - 2021 ANNUAL REF-'Or:
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| SRP Officers and Executives Corporate Officers David Rousseau, President John R. Hoopes, Vice President y
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| John M. Felty, Corporate Secretary
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| - LI.
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| Brian 3. Koch, Treasurer r -
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| * j-Executive Management Mike Hummel, General Manager &
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| Dave Roberts, Associate General Manager, Jim Pratt, Associate General Manager
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| .. I
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| ,.'1 Chief Executive Officer Water Resources & Chief Customer Executive Alaina Chabrier, Aidan McSheffrey, Kelly Barr, Associate General Associate General Manager Associate General Manager Manager & Chief & Chief Financial Executive & Chief Corporate Communications Executive Services and John Coggins, Sustainability Executive Rob Taylor, Associate General Associate General Manager & Chief Manager & Chief Power System Executive Public Affairs Executive Geri Mingura, Michael O'Connor, Associate General Manager Associate General Manager & Chief Human
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| & Chief Legal Executive Resources Executive
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| Five-Year Operational and Statistical Review FINANCIAL DATA ($000) 2021 2020 2019 2018 2017 Total operating revenues $ 3,475,507 $ 3,121,431 $ 3,370,610 $ 3,196,486 $ 3,084,688 Retail electric revenues 2,989,995 2,810,421 2,902,560 2,847,104 2,780,916 Water revenues 22,189 20,823 18,661 18,151 16,238 Other revenues 463,323 290,187 449,389 331,231 287,534 Total operating expenses 3,045,280 3,012,233 2,959,389 3,064,672 2,741,432 Total other income, net 283,510 17,299 65,777 52,589 81,856 Net financing costs 136,685 144,263 171,170 165,100 177,275 Net (expenses) 577,052 (17,766) 305,828 19,303 247,837 revenues for the year Taxes and tax equivalents 170,610 173,211 166,508 176,153 166,898 Utility plant, gross 17,305,702 16,891,569 17,079,497 16,438,352 15,698,318 Long-term debt 4,744,294 4,621,694 4,587,689 4,742,857 4,465,538 Electric revenue contributions 65,202 59,158 58,115 47,534 58,209 to suDDort water ooerations For comparative purposes, certain prior-year amounts have been reclassified to conform with the current-year presentation.
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| SELECTED DATA 2021 2020 2019 2018 2017 Total debt service coverage ratio 4.0 3.8 4.2 4.1 3.6 Debt ratio 44.3 46.2 45.9 48.2 46.7 Total electric sales (million kWh) 41,254 35,204 37,161 35,256 34,257 Peak-SRP retail customers (kW) 7,615,000 7,250,000 7,305,000 7,219,000 6,873,000 Water deliveries (acre-feet) (1) - 795,160 785,126 766,288 773,527 Runoff (acre-feet) (1) - 885,624 1,415,489 269,469 1,136,862 Employees at year-end 4,846 4,966 5,040 5,089 5,186 Customers at year-end 1,093,263 1,074,952 1,057,122 1,041,342 1,026,118 (V Water data is by calendar year, all other data is by fiscal year ending April 30.
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| FINANCIAL INQUIRIES BRIAN 3. KOCH Treasurer & Senior Director, Financial Services (602) 236-2993 BONDHOLDER INFORMATION SRP Treasury Department (602) 236-2222
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| CORPORATE HEADQUARTERS STREET ADDRESS SRP 1500 N. MILL AVE. TEMPE, AZ 85281-2389 MAILING ADDRESS SRP P.O.BOX 52025 PHOENIX, AZ 85072-2025 CONNECT facebook.com/srpconnect n twitter.com/srpconnect Q youtube.com/srpconnect instagram.com/srpconnect srpnet.com Delivering water and power 177700}}
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