Appropriate for Income

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1 Missouri Joint Municipal Electric Utility Comm. Investment Category: Income Sector: Utility Municipal Bond Research Kyle Harpin, CFA August 22, 2018 Municipality Overview MJMEUC is a not-for-profit entity that was created to provide competitively priced power for its members. MJMEUC's member base includes 67 electric systems which serve approximately 708,000 customers. Underlying Credit Ratings Moody's... A2/Stable* Fitch... A/Stable* *Above ratings are for MJMEUC bonds issued for the Prairie State Energy Campus. Ratings below are in order of Moody's/Fitch/ S&P. MoPEP projects: A2/A/NR Stable Iatan 2: A2/A/NR Stable Plum Point: A3/A-/A Stable U.S. Recommended Municipal Bond Sector Weightings General Obligation (30%- 80%) Revenue Bond - Tax-Backed (5%- 20%) Revenue Bond - Utilities (10%- 25%) Revenue Bond - Transportation and Other (5%- 20%) Revenue Bond - Education (0%- 10%) Revenue Bond - Health Care (0%- 5%) Revenue Bond - Housing (0%- 10%) U.S. Recommended Bond Ladder Short-term (up to 5 years) Intermediate-term (6-15 years) 15%- 25% 30%- 40% 40%- 50% Long-term (16+ years) Appropriate for Income Recommendation We consider project revenue bonds issued by the Missouri Joint Municipal Electric Utility Commission (MJMEUC) to be an appropriate holding for Edward Jones' clients seeking Income as an objective within a well-diversified portfolio. Edward Jones Credit Strength Assessment Investment Summary MJMEUC is a non-profit entity that provides competitively priced power to its members. Originally comprised of six municipally owned retail electric systems, MJMEUC's member base has grown to 67 electric systems, which serve approximately 708,000 customers. MJMEUC has issued bonds for five main projects, which are outlined below. Each bond is backed by a separate set of city utilities who are the ultimate source of bond principal and interest payments. Missouri Public Energy Pool (MoPEP) projects: Bonds were issued for the Dogwood Generating Facility and the Fredericktown Energy Center. MJMEUC's shares of these facilities are fully dedicated to MoPEP, a pool of 35 city utilities located throughout Missouri. Iatan Unit 2: Bonds were issued for this coal-fired generating facility located near Weston, Mo. MJMEUC's share of the plant is split between MoPEP, Independence, Mo., and Columbia, Mo. Plum Point: Bonds were issued for this coal-fired generating facility located in Osceola, Ark. MJMEUC's share of the plant is split between MoPEP, North Little Rock, Ark., Osceola, Ark., Poplar Bluff, Mo., and four other city utilities. Prairie State Energy Campus: Bonds were issued for this coal-fired generating facility located in southwest Illinois. MJMEUC's share of the project is divided among MoPEP and seven other city utilities. Overall, we consider each of these MJMEUC bonds to be an appropriate holding for clients who seek Income as an objective within a well-diversified portfolio. Bond Strengths Broad member base with an overall investment-grade credit quality Favorable contract terms Unregulated rate-setting authority Bond Weaknesses Single-asset risks Increased risks associated with moving from buying power to generating power Coal concentration and risks of future adverse legislation for it Please see important disclosures and certification on page 5 of the report. Page 1 of 5

2 Municipality Outlook MJMEUC was established in 1979 in order to provide competitively priced power for its members. From its origins of six members, MJMEUC has grown to 67 municipally owned electric systems. Some of these systems receive all of their power from MJMEUC while others receive only a portion of it from the entity. These electric systems ultimately serve 708,000 retail customers. Within MJMEUC is a pool of members, known as MoPEP, which is a group of 35 municipally owned electric systems throughout Missouri. This pool has agreed to receive all of its current and future required power from MJMEUC. MJMEUC has another class of members, known as the unit power purchasers (UPPs), who have agreed to purchase a portion of their systems' required power from MJMEUC. Both the UPPs and MoPEP have entered into these agreements with MJMEUC with overall favorable terms for bondholders that help to ensure timely interest and principal payments. MoPEP Facilities The MoPEP facilities consist of the Dogwood Generating Facility and the Fredericktown Energy Center. The 650 MW Dogwood facility is located about 20 miles southeast of Kansas City, Mo. The 28 MW Fredericktown Energy Center is located in Fredericktown, Mo., approximately 90 miles south of St. Louis, Mo. These natural-gas-fired projects are known as peaking units because they are generally only used in times of peak demand, such as the summer when air conditioning units are running high. MJMEUC's 8% and 100% respective shares of the Dogwood Generating Facility and the Fredericktown Energy Center are fully dedicated to MoPEP. Because of this, the credit quality of the bonds issued for these projects will be affected by the credit quality of the electric utilities that make up MoPEP. We view the large, broad member base of MoPEP to be a favorable attribute of the bonds issued for the MoPEP facilities. MOPEP Participants Iatan 2 Rolla Lebanon Farmington Marshall Jackson Chillicothe Harrisonville Trenton Macon Lamar All Others Mo., which we consider to be investment grade. We also believe the competitiveness of the plant helps mitigate the concentration risk because it provides flexibility in the event problems arise with one of the unit power purchasers. Iatan 2 began operations in 2011 and has been recognized for its ability to control emissions. Moreover, the project has been performing at good levels, but has had maintenance and repair issues in 2015 and Iatan has offered MJMEUC s members competitive rates when compared with the other major projects. The Iatan 2 project is a key power-generating resource of MJMEUC that has been used year-round for power needs. Iatan 2 Participants Plum Point Independence, Mo. MoPEP Columbia, Mo. The Plum Point project is a coal-fired generating facility located in Osceola, Ark. MJMEUC's 22% share is predominately split between the electric systems of MoPEP, North Little Rock, Ark., Osceola, Ark., and Poplar Bluff, Mo. Together with the systems that make up the remaining members, we consider the member base to be geographically broad. Since a large portion of MJMEUC's power from Plum Point is allocated to North Little Rock, we believe these bonds also have some concentration risks. The contracts for the Arkansas members in the Plum Point project have slightly weaker terms in regard to their agreement with MJMEUC, relative to the contracts of the Missouri members. However, we view the likelihood of an event occurring that would make this difference material to be unlikely at this time. The Plum Point project is also a key power-generating resource of MJMEUC that has been used year-round for power needs. Like Iatan 2, Plum Point has recently performed well and produced power at relatively low rates for the members that invested in the project. Plum Point has also been built with the latest emission-control technology, which will help limit the cost impact of future coal regulations. The Iatan 2 project is a coal-fired generating facility located near Weston, Mo. MJMEUC's 12% share is split between the electric systems of MoPEP, Independence, Mo., and Columbia, Mo. Since MJMEUC's power from Iatan 2 is largely allocated to two unit power purchasers, we consider these bonds to have some concentration risks. Offsetting the concentration is the credit quality of the electric utilities of Columbia and Independence, Page 2 of 5

3 Plum Point Participants MoPEP North Little Rock, Ark. Osceola, Ark. Poplar Bluff, Mo. Carthage, Mo. Piggott, Ark. Benton, Ark. Malden, Mo. principal on the bonds issued for the project regardless of the project's ability to deliver power to the unit power purchaser. The MoPEP pool participant agreements are slightly different. These participants only pay for the power they receive from the project; however, these entities still have to pay for their allocated portion of principal and interest, which is incorporated into the price of their power. They, too, are required to pay their allocated portion of principal and interest payments to bondholders regardless of whether they are in the pool or receive energy from an individual project. Prairie State Energy Campus The Prairie State Energy Campus (PSEC) is a 1600 MW coalfired generating facility located in southwest Illinois. MJMEUC's 12% share is divided mainly among the electric systems of MoPEP, Columbia, Mo., Hannibal, Mo., and Kirkwood, Mo. Together with the other systems that make up the remaining members, we consider the member base to be broad. Like the other projects, the PSEC was built with the newest emission technology, which will help limit PSEC s exposure to future coal regulations. PSEC is also a key power-generating resource of MJMEUC that has been used year-round for power needs. Another feature of the contracts that is favorable for bondholders is the length of time the contract is in place. All of the contracts, regardless of whether the member is part of MoPEP or a unit power purchaser, extend through the life of the bonds. This helps to ensure the predictability of the principal and interest payments for all the bonds issued for the project. Furthermore, if a member of MJMEUC defaults on their obligation to the project, the contract terms have a step-up provision to cover some if not all of the defaulting member's payment to bondholders. Also, the payments for debt service from the members to MJMEUC are paid before the debt service on the members' own debt. Finally, if a member defaults on their obligation to MJMEUC, MJMEUC is no longer required to provide power to that participant. On its road to completion in 2012, the PSEC faced many delays and cost overruns that caused the price of power to be higher than originally anticipated. The energy plant is now operating at adequate levels when compared with other coal plants, though not at the originally anticipated levels. We expect this plant to continue to work towards its capacity goals and provide MJMEUC s members with a long-term cost-effective power supply. MOPEP Participants Favorable Contract Terms Rolla Lebanon Farmington Marshall Jackson Chillicothe Harrisonville Trenton Macon Lamar All Others We view the terms of the contracts between MJMEUC and its member base to be favorable overall for bondholders. According to the contracts, the UPPs of the project have agreed to accept the electricity on a take-or-pay basis. This means the unit power purchasers have agreed to pay for the electricity from the project whether they take the electricity or not. Moreover, these members have to pay their portion of the interest and A risk factor of the contracts includes their untested strength. While evidence exists that supports the legality of the contracts, the contracts have not been court-tested. Although we have seen some cases of discontent among MJMEUC's members, we believe the dissatisfaction is manageable at this time. However, we will continue to watch the developments, especially if members begin to challenge their contracts. Investment-Grade Participant Credit Profile We believe MJMEUC's member base is of an investment-grade quality overall. This is a very important characteristic of the member base because these are the entities that are paying the principal and interest payments on the revenue bonds for each project. It should be noted that some of the electric utilities backing the bonds are stronger than others. Also, because these members differ from project to project, it is important to recognize that the financial strength of a bond from one project does not necessarily carry over to a bond from another project. Despite the differences in credit quality, we believe the large and broad base of electric utilities paying for the bonds, the favorable contracts, and the presence of a step-up provision help to mitigate the differences in credit quality. Owning More Generating Assets Creates New Risks While MJMEUC's pursuit of owning generating assets is expected to help minimize fluctuations in the power prices of its member base, it adds a layer of complexity to managing the power cooperative. Also, because many of the plants MJMEUC has invested in have come online in the last few years, they are subject to unique risks that occur during the startup phase of a Page 3 of 5

4 project. Thus, MJMEUCs management team could be tasked with dealing with cost overruns, delays and the management of new generation risks. MJMEUC Fuel Sources While these risks are new to MJMEUC, its management team is equipped with tools to help minimize them. One of these tools is MJMEUC s and its member's unregulated rate-setting authority. This allows them to raise rates to cover expenses without the need to consult a regulatory body. Also mitigating the risk of the new projects is management's practice of growing cash levels available to MJMEUC. MJMEUC's available cash could cover nearly 155 days' worth of operating and maintenance expenses, which is about what is expected for an entity with a similar credit rating as MJMEUC. This cash can help to cover unforeseen expenses that occur during the startup phase and beyond. Source: MJMEUC, Edward Jones Edward Jones Credit Strength Assessment Coal Natural Gas Purchased Renewable MJMEUC Available Cash We believe the credit strength assessment for bonds issued by MJMEUC is average. While the bonds face single-asset risks since the bonds are backed solely by revenue generated from the operations of one generating asset, we believe a broad member base and favorable contract terms enhance credit stability Source: MJMEUC, Edward Jones When looking at MJMEUC s financial measures, debt appears to be high; however, this is typical of entities that issue debt to fund projects for its members. Similarly, debt-service coverage levels, which measures available revenue against the amount needed to make payments on debt, appear low. While a weak financial indicator, low levels are targeted by MJMEUC. We expect MJMEUC to continue to operate with low but adequate coverage levels in the future. Exposure to Evolving Coal Regulatory Environment Much of the power supplied in the United States is derived from coal-fired plants. Recently the Environmental Protection Agency (EPA) has taken steps to limit emissions from coal plants, which has raised questions about the long-term competitiveness of power derived from these plants. While the EPA has released its Clean Power Plan, the rules continue to evolve and a significant amount of uncertainty remains as to how they will affect individual projects. A large majority of MJMEUC s power is supplied from coal-fired plants, and this exposes the entity to the uncertainties of the new regulations. However, all of the major coal-fired projects that MJMEUC has invested in have been built in recent years with some of the newest clean-coal technology in place. While not entirely offsetting the EPA's regulations of coal, we believe these emission controls will help mitigate future costs that could result from these regulations. Page 4 of 5

5 Required Research Disclosures Appropriate for Income Appropriate for Aggressive Income Sell FYI Appropriate for Income We consider bonds Appropriate for Aggressive Income We consider Sell We recommend investors sell these bonds. We FYI - For informational purposes only; to be an appropriate holding for investors seeking Income within a well-diversified portfolio. Our time horizon is 3-5 years. bonds appropriate only as a small Aggressive Income portion within a well-diversified portfolio. Bonds within this category are riskier, with a higher possibility of loss due to default, than bonds classified as Income. Our time horizon is 3-5 years. believe these bonds are no longer an appropriate fixedincome holding because, in our opinion, they offer an factual, no opinion. unattractive risk/reward scenario at current prices. Our time horizon is 3-5 years. Initiated Coverage (Appropriate for Income) 12/18/14 Analyst Certification I certify that the views expressed in this research report accurately reflect my personal views about the subject securities and issuers; and no part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in the research report. Kyle Harpin, CFA Analysts receive compensation that is derived from revenues of the firm as a whole which include, but are not limited to, investment banking, sales, and trading revenues. Edward Jones trades as principal in the debt securities that are the subject of this research report. Other Disclosures This report does not take into account your particular investment profile and is not intended as an express recommendation to purchase, hold or sell particular securities, financial instruments or strategies. You should contact your Edward Jones Financial Advisor before acting upon this report. This report is a product of the Edward Jones Fixed Income Research Department. All investment decisions need to take into consideration individuals unique circumstances such as risk tolerance, taxes, asset allocation and diversification. Before investing in bonds, you should understand the risks involved, including interest rate risk, credit risk and market risk. Bond investments are subject to interest rate risk such that when interest rates rise, the prices of bonds can decrease, and the investor can lose principal value if the investment is sold prior to maturity. Edward Jones limits inventory positions for fixed income securities. This security may currently be subject to these internal limits; however, this should not be considered contrary to our current recommendation. This opinion is based on information believed reliable but not guaranteed. The foregoing is for INFORMATION ONLY. Additional information is available on request. 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Credit ratings generally represent the rating company's opinion of the bond's ability to meet its ongoing contractual obligations. These ratings are estimates and should be one of many factors considered in evaluating fixed income investments. These ratings do not address suitability or future performance. N/A indicates no rating available. When investing in issuers incorporated outside your own country of residence, you should consider all other material risks such as currency risk, political risk, liquidity risk and accounting rules differences, which can adversely affect the value of your investment. Please consult your Financial Advisor for more information. Edward Jones Credit Strength Assessment: Low Our opinion is these credits are of low financial quality. We believe these credits are the most likely to default and experience the most financial hardship. Below Average Our opinion is these credits are of below-average financial quality. We believe these credits are more likely to default or experience financial hardship than the average. Average Our opinion is these credits are of average financial quality. We believe these credits have a low probability of default or low chance of experiencing financial hardship. Above Average Our opinion is these credits are of above-average financial quality. We believe these credits are less likely to default or experience financial hardship than the average. High Our opinion is these credits are of the highest financial quality. We believe these credits have the lowest probability of default and will experience the least financial hardship. Ratings from Standard & Poor's ("S&P"), Moody's and Fitch may be shown for certain securities. 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