GREAT RIVER ENERGY ANNUAL OPERATING REPORT PERIOD ENDED 12/31/16

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1 GREAT RIVER ENERGY ANNUAL OPERATING REPORT PERIOD ENDED 12/31/16 Form 12: Certification We hereby certify that the entries in this reparÿ a re in accordance with the accounts and other records of GRE and reflect the status of GRE to the best of our lmowledge and belief. Date [ *'ÿ VP & Chief Financial Officer Title Signature Date Title 1

2 GREAT RIVER ENERGY ANNUAL OPERATING REPORT PERIOD ENDED 12/31/16 Form 12a - Section A. Statement Of Operations Last Year This Year Budget Electric Energy Revenues 896,111, ,625, ,321, Income From Leased Property (Net) Other Operating Revenue and Income 86,936, ,447,161 90,420, TOTAL OPER. REVENUES & PATRONAGE CAPITAL ( 1 thru 3 ) 983,048,866 1,022,072,784 1,064,741, Operating Expense - Production - Excluding Fuel 71,767,480 73,641,395 79,545, Operating Expense - Production - Fuel 233,360, ,859, ,452, Operating Expense - Other Power Supply 155,695, ,436, ,654, Operating Expense - Transmission 98,533, ,231, ,478, Operating Expense - RTO 5,355,506 5,393,621 5,119, Operating Expense - Distribution Operating Expense - Customer Accounts (168,587) Operating Expense - Customer Service & Information 2,748,906 2,982,047 2,929, Operating Expense - Sales 9,103,724 9,218,372 8,894, Operating Expense - Administrative & General. 52,194,988 52,251,732 50,772, TOTAL OPERATION EXPENSE (5 thru 14) 628,591, ,015, ,847, Maintenance Expense - Production 71,714,518 66,897,976 74,140, Maintenance Expense - Transmission 6,663,015 6,099,764 6,502, Maintenance Expense - RTO Maintenance Expense - Distribution Maintenance Expense - General Plant 5,650,644 5,173,846 5,992, TOTAL MAINTENANCE EXPENSE (16 thru 20) 84,028,177 78,171,586 86,636, Depreciation and Amortization Expense 139,063, ,266, ,171, Taxes 1,969,432 1,792,326 2,011, Interest on Long-Term Debt 142,333, ,645, ,824, Interest Charged To Construction - Credit (3,707,586) (3,669,766) (4,899,297) 26. Other Interest Expense 140, , , Asset Retirement Obligations 1,829,208 2,932,922 1,854, Other Deductions 6,777,463 6,167,351 5,988, TOTAL COST OF ELECTRIC SERVICE ( thru 28) 1,001,026, ,528,422 1,044,615, OPERATING MARGINS (4 less 29) (17,977,171) 28,544,362 20,126, Interest Income 1,318,902 1,643,215 1,263, Allowance For Funds Used During Construction Income (Loss) from Equity Investments (786,843) 4,837, Other Non-operating Income (Net) 30,873,758 1,229,297 (144,773) 35. Generation & Transmission Capital Credits Other Capital Credits and Patronage Dividends 1,784,512 2,127,290 1,755, Extraordinary Items 38. NET PATRONAGE CAPITAL OR MARGINS (30 thru 37) 15,213,157 38,381,631 23,000,000 2

3 GREAT RIVER ENERGY ANNUAL OPERATING REPORT PERIOD ENDED 12/31/16 Form 12a - Section B. Balance Sheet - Assets And Other Debits Line Description Last Year This Year Difference 1. Total Utility Plant in Service 4,608,138,467 4,509,826,207 (98,312,260) 1A. Plant To Be Retired-Net - 53,488,633 53,488, Construction Work in Progress 57,792, ,105,850 42,312, TOTAL UTILITY PLANT (1 + 2) 4,665,931,416 4,663,420,690 (2,510,726) 4. Accum. Provision for Depreciation and Amortization 1,981,669,461 1,965,448,611 (16,220,850) 5. NET UTILITY PLANT (3-4) 2,684,261,955 2,697,972,079 13,710, Non-Utility Property (Net) 5,179,499 5,179, Investments in Subsidiary Companies 75,532,864 80,370,331 4,837, Investment in Associated Org - Patronage Capital 399, ,211 30, Investment in Associated Org - Other - General Funds 19,644,497 19,644, Investment in Associated Org - Other - Non General Funds 81,962,491 85,294,121 3,331, Investments in Economic Development Projects Other Investments 9,814,040 10,575, , Special Funds 16,635,554 13,403,573 (3,231,981) 13A. Notes Receivable (Net) 2,301,677 2,162,725 (138,952) 14. TOTAL OTHER PROPERTY AND INVESTMENTS (6 THRU 13) 211,469, ,059,377 5,589, Cash - General Funds 708,683 77,971 (630,712) 16. Cash - Construction Funds - Trustee Special Deposits Temporary Investments 207,943, ,762,646 (181,330) 19. Notes Receivable (Net) Accounts Receivable - Sales of Energy (Net) 135,604, ,934,922 9,330, Accounts Receivable - Other (Net) 15,572,682 26,898,795 11,326, Fuel Stock 22,265,238 14,557,754 (7,707,484) 23. Renewable Energy Credits Materials and Supplies - Other 49,134,663 44,474,277 (4,660,386) 25. Prepayments 7,985,306 9,336,429 1,351, Other Current and Accrued Assets 3,327,349 7,333,221 4,005, TOTAL CURRENT AND ACCRUED ASSETS (15 THRU 26) 442,541, ,376,015 12,834, Unamortized Debt Discount & Extraordinary Property Losses Regulatory Assets 317,394, ,714,606 18,320, Other Deferred Debits 14,172,274 12,675,302 (1,496,972) 31. Accumulated Deferred Income Taxes* TOTAL ASSETS AND OTHER DEBITS ( thru 31) 3,669,840,231 3,718,797,380 48,957,149 *New accounting standard changed the reporting of deferred taxes in Reclassed 2015 to same presentation. 3

4 GREAT RIVER ENERGY ANNUAL OPERATING REPORT PERIOD ENDED 12/31/16 Form 12a - Section B. Balance Sheet - Liabilities And Other Credits Line Description Last Year This Year Difference 33. Memberships 2,800 2, Patronage Capital - a. Assigned and Assignable 569,097, ,310,836 15,213,157 b. Retired This Year b. Retired Prior Years 29,461,983 29,461,983 - d. Net Patronage Capital (a - b - c) 539,635, ,848,853 15,213, Operating Margins - Prior Years Operating Margins - Current Year (16,192,660) 30,671,652 46,864, Non-Operating Margins 31,405,817 7,709,979 (23,695,838) 38. Other Margins and Equities 1,194,767 1,194, TOTAL MARGINS & EQUITIES ( d thru 38) 556,046, ,428,051 38,381, Long-Term Debt - RUS (Net) Long-Term Debt - FFB - RUS Guaranteed Long-Term Debt - Other - RUS Guaranteed Long-Term Debt - Other (Net) 2,572,033,847 2,523,048,760 (48,985,087) 43.1 Long-Term Debt - Issuance (20,113,945) (18,713,430) 1,400, Long-Term Debt - RUS - Economic Development (Net) Payments - Unapplied TOTAL LONG-TERM DEBT (40 thru 44-45) 2,551,919,902 2,504,335,330 (47,584,572) 47. Obligations Under Capital Leases - Non current 3,067,813 2,195,560 (872,253) 48. Accumulated Operating Provisions and Asset Retirement Obligations 60,776,068 63,713,059 2,936, TOTAL OTHER NON CURRENT LIABILITIES ( ) 63,843,881 65,908,619 2,064, Notes Payable 31,155,285 27,719,271 (3,436,014) 51. Accounts Payable 54,299,550 69,794,302 15,494, Current Maturities Long-Term Debt 124,055, ,365,410 1,309, Current Maturities Long-Term Debt - Rural Development Current Maturities Capital Leases 814, ,253 57, Taxes Accrued 25,991,524 25,901,005 (90,519) 56. Interest Accrued 63,278,257 60,690,509 (2,587,748) 57. Other Current & Accrued Liabilities 69,629,296 85,712,850 16,083, TOTAL CURRENT & ACCRUED LIABILITIES (50 thru 57) 369,224, ,055,600 26,831, Deferred Credits 123,890, ,343,897 28,452, Accumulated Deferred Income Taxes* 4,915,002 5,725, , TOTAL LIABILITIES AND OTHER CREDITS ( thru 60) 3,669,840,231 3,718,797,380 48,957,149 *New accounting standard changed the reporting of deferred taxes in Reclassed 2015 to same presentation. 4

5 GREAT RIVER ENERGY ANNUAL OPERATING REPORT PERIOD ENDED 12/31/16 SECTION C. NOTES TO FINANCIAL STATEMENTS (1) Property taxes and insurance for the various plants were recorded on the following forms & line items: Operating Reports For Steam, Internal Combustion & Transmission Plant Form/Line Taxes Insurance Total Coal Creek Plant 12d Line 6 5,851,162 1,029,912 6,881,074 Elk River Steam Plant 12c Line 6 387, , ,720 Stanton Steam Plant 12d Line 6 863, ,800 1,116,510 Spiritwood 12d line 6 53, , ,946 Pleasant Valley Peaking 12f Line 5 280, , ,821 Lakefield Junction Peaking 12f Line 5 417, ,762 1,025,245 St. Boni Peaking 12f Line 5 329,640 81, ,599 Cambridge II Peaking 12f Line 5 213, , ,201 Cambridge I Peaking 12f Line 5 83,987 11,485 95,472 Maple Lake Peaking 12f Line 5 70,266 41, ,038 Rock Lake Peaking 12f Line 5 64,192 28,642 92,834 Arrowhead 12f Line 6 196,784 15, ,748 Elk River Peaking Station 12f Line 5 278, , ,691 Solar 12c Line ,584 3,401 Total Production 9,091,795 3,449,505 12,541,300 Transmission Lines & Substations 12i Line 6 19,845,438 2,089,978 21,935,416 Grand Total 28,937,233 5,539,483 34,476,716 Statement Of Operations- Form 12a -Section A Operating Expense - Other Power Supply 12a Line 7 9,091,795 3,449,505 12,541,300 Operating Expense - Transmission 12a Line 8 19,845,438 2,089,978 21,935,416 Operating Expense - A&G 12a Line 14 (5,539,483) (5,539,483) Operating Expense - Taxes 12a Line 23 (28,937,233) (28,937,233) Total Reclassifications (2) Utility Plant Accounting For DC Transmission Plant Form 12h -Section A and Section B GRE owns and operates Coal Creek Station (CCS), a 1145 MW coal operated steam plant, located in Underwood, North Dakota. This plant is called a "mine mouthed" plant in that the plant is located near the coal mine. GRE delivers this power to its Minnesota customers through a 400 KV high voltage direct current (HVDC) transmission system. The transmission line is some 435 miles long, starting in Underwood, North Dakota and ends at the Dickinson converter terminal near Delano, Minnesota. The DC line operates solely as a generation outlet facility since the plant's maximum accredited and committed capacity is very close to the DC line's maximum capacity. On Form 12h - Section A. and Section B- Utility Plant and Accumulated Depreciation and Amortization, there is not an account for generation outlet facilities. GRE has classified $304,008,840 of such assets, along with $222,421,479 of accumulated depreciation as transmission plant. However, when GRE computes its required transmission revenue to its members the DC related costs are classified as a generation expense. (3) Long term interest expense classified as fuel GRE has classified long term interest costs of $6,134,784 as fuel expense on the Statement of Operations, Form 12a and broken down in supporting sections $4,540,627 Coal Creek Operating Report, Form 12d, and $579,526 in the Elk River Station, Form 12c RE and $1,014,631 Spiritwood Station, From 12d. This interest is related to the financing of the GRE investment in the Falkirk coal mine property, the Elk River Resource Processing Plant and Spiriwood Station. It is recorded this way for comparative reasons. However, for DSC and MFI calculations, GRE will classify this as interest versus fuel expense. 5

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15 GREAT RIVER ENERGY ANNUAL OPERATING REPORT PERIOD ENDED 12/31/16 Form 12h - Section A. Utility Plant Balance Adjustments Beginning And Balance End Item Of Year Additions Retirements Transfers Of Year (a) (b ) (c ) (d) (e) 1. Total Intangible Plant (301 thru 303 ) 1,595, (128,889) 1,466, Steam Production Plant (310 thru 317) 2,193,876,773 25,717,826 6,965,234 (161,563,824) 2,051,065, Nuclear Production Plant (320 thru 326) Hydro Production Plant (330 thru 337) Other Production Plant (340 thru 347) 614,237,606 21,998,082 24,804, , ,926, Total Production Plant (2 thru 5) 2,808,114,379 47,715,908 31,769,953 (161,067,884) 2,662,992, Land and Land Rights (350) 117,792,733 3,924,297 1,003 (31,326) 121,684, Structures and Improvements (352) 89,520,530 1,027,839 18,991 7,268,036 97,797, Station Equipment (353) 411,139,278 18,435,909 2,734,108 (4,686,453) 422,154, Other Transmission Plant (354 thru 359.1) 803,404,396 30,251,633 1,842,499 (12,720,770) 819,092, Total Transmission Plant (7 thru 10) 1,421,856,937 53,639,679 4,596,601 (10,170,513) 1,460,729, Land and Land Rights (360) Structures and Improvements (361) 3,060, (2,393,072) 667, Station Equipment (362) 817,900 53,540-2,393,072 3,264, Other Distribution Plant (363 thru 374) 111, , Total Distribution Plant (12 thru 15) 3,989,098 53, ,042, Total General Plant (389 thru 399.1) 371,355,239 21,141,604 13,148,615 (349,881) 378,998, Electric Plant in Service ( ) 4,606,911, ,550,731 49,515,169 (171,717,167) 4,508,229, Electric Plant Purchased/Sold/to be Retired (102) - Net ,488,633 53,488, Electric Plant Leased to Others (104) Electric Plant Held for Future Use (105) 760, , Completed Construction Not Classified (106) 466,612 6,276,043 - (5,906,699) 835, Acquisition Adjustments (114) Other Utility Plant (118) Nuclear Fuel Assemblies (120.1 thru 120.4) Total Utility Plant in Service (18 thru 25) 4,608,138, ,826,774 49,515,169 (124,135,233) 4,563,314, Construction Work in Progress (107) 57,792, ,868,720 (115,555,818) 100,105, Total Utility Plant ( ) 4,665,931, ,695,494 49,515,169 (239,691,051) 4,663,420,690 15

16 GREAT RIVER ENERGY ANNUAL OPERATING REPORT PERIOD ENDED 12/31/16 Form 12h - Section B. Accumulated Provision for Depreciation and Amortization - Utility Plant Balance Retirements Adjustments Comp Beginning Annual Less And Balance End Item Rate (%) Of Year Accruals Net Salvage Transfers Of Year (a) (b) (c ) (d) (e) (f) 1. Depr. of Steam Prod. Plant (108.1) 1,043,017,385 79,421,497 12,137,899 (115,545,015) 994,755, Depr. of Nuclear Prod. Plant (108.2) Depr. of Hydraulic Prod. Plant (108.3) Depr. of Other Prod. Plant (108.4) 208,234,537 14,006,607 15,729,571 (165,267) 206,346, Depr. of Transmission Plant (108.5) 532,036,234 34,578,405 3,806,868 (1,784,988) 561,022, Depr. of Distribution Plant (108.6) 189, , , Depr. of General Plant (108.7) 201,126,064 15,771,403 12,582, ,314, Retirement Work in Progress (108.8) (2,933,788) - - 1,615,446 (1,318,342) 9. Total Depr. for Elec. Plt in Serv. (1 thru 8) 1,981,669, ,915,907 44,256,933 (115,879,824) 1,965,448, Depr. of Plant Leased to Others (109) Depr. of Plant Held for Future Use (110) Amort. of Elec. Plant in Service (111) Amort. of Leased Plant (112) Amort. of Plant Held for Future Use Amort. of Acquisition Adj. (115) Depr. & Amort. Other Plant (119) Amort. of Nuclear Fuel (120.5) Total Prov. for Depr. & Amort. (9 thru 17) 1,981,669, ,915,907 44,256,933 (115,879,824) 1,965,448,611 Form 12h - Section C. Non Utility Plant Balance Adjustments Beginning And Balance End Item Of Year Additions Retirements Transfers Of Year (a) (b) (c ) (d) (e) Non Utility Property (121) 5,179, ,179,499 Provision For Depr. & Amortization (122) Total Non Utility Plant 5,179, ,179,499 16

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19 GREAT RIVER ENERGY ANNUAL OPERATING REPORT PERIOD ENDED 12/31/16 Form 12h - Section F: Part I, Investments No Bal Sheet Line # Description Last Year This Year Difference 6 Ln Cash - General Cash - General funds 708,683 77,971 (630,712) TOTAL CASH- GENERAL 708,683 77,971 (630,712) 7 Ln 18 Temporary Investments Federated Prime Value 17,531,874 35,626,070 18,094,196 Bank of the West 30,039, ,333 (29,780,996) US Bank 2,526,780 12,391,278 9,864,497 Wells Fargo Investment 132,775, ,261,181 (3,514,301) CFC Select Notes 25,070,512 30,225,785 5,155,273 TOTAL TEMPORARY INVESTMENTS 207,943, ,762,646 (181,331) 9 Ln 13A + 21 Accounts And Notes Receivable - Net Notes Receivable - Business Loans 1,853,742 1,770,967 (82,775) Notes Receivable - Member Cooperatives 437, ,509 (47,732) Notes Receivable - Other 10,695 2,250 (8,445) Accounts Receivable - Blue Flint Ethanol 3,523,789 2,936,491 (587,298) Accounts Receivable - Newport 2,957,908 2,957,908 Accounts Receivable - HERC 12,777 12,777 Accounts Receivable - CapX , ,142 (516,649) Accounts Receivable - Employee loans 75,574 81,627 6,053 Accounts Receivable - MISO 509, ,476 Accounts Receivable - MN State Sales Tax Refund 946, ,297 (734,856) Accounts Receivable - Other 5,691,530 7,499,480 1,807,950 Accounts Receivable - Sale of Fly Ash, Frac Water- CCS/SS 96,077 94,321 (1,756) Accounts Receivable - Transmission 466, ,238 (36,925) Accounts Receivable - Industrial Contractors Inc 50,000 (50,000) Accounts Receivable - Resource Processing Plant invoices 2,280,817 3,110, ,155 Accounts Receivable - Miscellaneous 503,976 8,156,669 7,652,693 Accounts Receivable - Willmar 1,199, ,396 (523,416) TOTAL ACCTS & NOTES RECEIVABLE 17,874,359 29,061,520 11,187, Ln Materials & Supplies Inventory 1. Coal 18,209,834 10,724,188 (7,485,645) 2. Other Fuel 4,055,405 3,833,566 (221,839) 3. Production Plant Parts and Supplies 29,960,108 26,279,319 (3,680,788) 4. Line Material and Supplies 15,212,522 14,454,872 (757,650) 5. Other Material and Supplies 3,962,033 3,740,085 (221,948) TOTAL MATERIAL & SUPPLIES INVENTORY 71,399,901 59,032,031 (12,367,870) 19

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22 GREAT RIVER ENERGY ANNUAL OPERATING REPORT PERIOD ENDED 12/31/16 Form 12i - Section A. Expenses And Costs Item Gen Led Account Lines Stations Classification Number (a) (b) Total TRANSMISSION OPERATION 1. Supervision and Engineering Alloc 560 6,418,684 5,092,285 11,510, Load Dispatching Lines 561 7,721,790-7,721, Station Expenses Station 562-8,259,718 8,259, Overhead Line Expenses Lines 563 2,689,354-2,689, Underground Line Expenses Lines Miscellaneous Expenses Alloc , ,116 1,505,737 Insurance & Taxes Lines/Station 408/924 13,170,417 8,764,999 21,935, SUBTOTAL (1 thru 6) 30,839,866 22,783,118 53,622, Transmission of Electricity by Others Lines ,586,032-55,586, Rents Alloc ,785 10,143 22, TOTAL TRANSMISSION OPERATION (7 thru 9) 86,438,683 22,793, ,231,944 TRANSMISSION MAINTENANCE 11. Supervision and Engineering Alloc Structures Alloc Station Equipment Station , , Overhead Lines Lines 571 5,166,794-5,166, Underground Lines Miscellaneous Transmission Plant Alloc TOTAL TRANSMISSION MAINTENANCE (11 thru 16) 5,166, ,970 6,079, TOTAL TRANSMISSION EXPENSE ( ) 91,605,477 23,706, ,311, RTO/ISO Expense-Operation ,682 44,175 99, RTO/ISO Expense-Maintenance Total RTO/ISO Expense (19+20) 55,682 44,175 99, Distribution Expense - Operation Distribution Expense - Maintenance TOTAL DISTRIBUTION EXPENSE (22+23) TOTAL OPERATION AND MAINTENANCE ( ) 91,661,159 23,750, ,411,565 FIXED COSTS 26. Depreciation - Transmission Lines/Stations ,994,137 13,623,988 34,618, Depreciation - Distribution 404 3, , , Interest - Transmission Lines/Stations ,150,130 12,680,420 46,830, Interest - Distribution 427 5, , , TOTAL TRANSMISSION ( ) 146,749,744 50,010, ,760, TOTAL DISTRIBUTION ( ) 8, , , TOTAL LINES AND STATIONS ( ) 146,758,614 50,326, ,085,226 Form 12i - Section C. Labor and Material Summary Transmission Lines Substations Item Lines Station Voltage (kv) Miles Type Capacity (kva) 1. Number Of Employees KV Step-up at 2. Oper. Labor 11,825,265 9,381, KV 4.19 Generating Plts - 3. Maint. Labor 476, , KV Transmission - 4. Oper. Material 38,189,642 30,297, KV Distribution - 5. Maint. Material 258, , KV KV 2, KV Form 12i - Section D. Outages KV KV TOTAL KV KV (DC) Avg. No. Dist. Cons. Served 685,000** KV Distribution Avg. No. Hours Out Per Cons TOTAL (1 thru 13) 5,453.30* 18. Total (15 thru 17) - *Includes lines partially owned by GRE **Includes SMEC 22

2018 THIRD QUARTER REPORT

2018 THIRD QUARTER REPORT POWERING WHAT S POSSIBLE FINANCIAL HIGHLIGHTS FINANCIAL CONDITION Assets Utility plant net increased $4.7 million to $2,764 million as of September 30, 2018 due to additions and construction work in progress