National Rural Utilities Cooperative Finance Corporation (CFC) Overview

Transcription

1 National Rural Utilities Cooperative Finance Corporation (CFC) Overview September 2015 CFC:

2 Forward-Looking Statements This presentation contains forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, and are generally identified by our use of words such as intend, plan, may, should, will, project, estimate, anticipate, believe, expect, continue, potential, opportunity and similar expressions, whether in the negative or affirmative. All statements about future expectations or projections are forward-looking statements. Although we believe that the expectations reflected in our forward-looking statements are based on reasonable assumptions, actual results and performance could materially differ. Factors that could cause future results to vary from current expectations are included in our annual and quarterly periodic reports previously filed with the U.S. Securities and Exchange Commission. Except as required by law, we undertake no obligation to update or publicly release any revisions to forward-looking statements to reflect events, circumstances or changes in expectations after the date on which the statement is made. Non-GAAP Financial Measures During our discussion today we will review certain non-gaap adjusted financial measures. Please refer to our Form 10-K for the fiscal years ended May 31, 2014 and May 31, 2015, as filed with the SEC and as posted on the CFC website, for a discussion of why we believe the adjusted measures are useful information in analyzing CFC s financial performance and the reconciliation to the related GAAP measures. 2

3 Table of Contents A. Business Overview B. Operating Results, Liquidity & Funding C. Portfolio Overview D. Conclusion E. Appendix 1. Electric Cooperative Overview 2. Rated Electric Cooperatives 3. Corporate Governance, Organization Chart & Bios 3

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5 A. Business Overview CFC:

6 CFC Overview Formed 1969 Entity Type Ownership Headquarter Members * Largest private lender in the electric cooperative industry * Primary Objective Tax-exempt, member-owned cooperative Created, owned and governed by rural electric cooperatives Dulles, Virginia Total Loans $21.5 billion at 5/31/2015 Total Assets $22.9 billion at 5/31/ in consolidated total for distribution and G&T cooperatives for statewide & regional associations, NRECA, CFC & NCSC associates, RTFC members and associates To provide member-owners with an assured source of capital and financial products and services 6

7 CFC Members 7

8 CFC Members G&T Service Area 8

9 CFC Company Overview CFC Member-Owners Distribution Cooperatives Most electric cooperatives are distribution utilities purchasing wholesale power from others to distribute over their own lines to the ultimate customer. Power Supply Cooperatives (G&T Cooperatives) Generation and transmission cooperatives carry high voltage electricity from generation facilities over long distances. G&Ts provide both generation and transmission functions. Statewide and Associate Members Most states have statewide associations supported by local cooperatives in that state. They provide a variety of services and legislative representation for members. Management Agreement CFC Affiliates Affiliated business line for providing financing to CFC members and their affiliates Affiliated business line for lending to rural telephone companies and their affiliates 9

10 Credit Ratings & Debt Instrument CFC s Management compensation is based on the long-term success of CFC Long-term incentives are tied to CFC s credit ratings. Fitch Moody s S&P Debt Instrument Ratings Outlook Stable Stable Negative Last Credit Opinion 7/1/2015 7/2/2015 7/6/2015 Collateral Trust Bonds Medium Term Notes & InterNotes Subordinated Notes Commercial Paper Guarantee of Taxexempt Bonds Offer a direct pledge of electric distribution mortgage notes Offer a direct general corporate obligation of CFC Offer a direct general corporate obligation of CFC; Obligations are subordinated to other senior debt but senior to CFC s members subordinated certificates Offer a direct general corporate obligation of CFC with backup lines of credit provided by a group of banks CFC acts as guarantor and a stand-by liquidity provider. A+ A1 A A A2 A BBB+ A3 BBB+ F1 P-1 A-1 A/F1 A2/P-1 A/A-1 10

11 Collateral Trust Bonds (CTBs) Secured by the pledge of permitted investments and eligible senior secured mortgage notes from distribution system borrowers. Principal amount of eligible mortgage notes pledged must be in an amount at least equal to the outstanding principal amount of CTBs. Trustee Description of Collateral Electric distribution cooperative senior secured mortgage notes: Lien on all utility assets, a pledge of revenue and after acquired property. Eligible Mortgage Notes Criteria: -The borrower must be performing and in good standing with CFC -Notes of distribution members where 50% or more of the operating revenues are derived from direct sales of electricity -Distribution members having equity ratios of at least 20% and average debt service coverage ratios of at least 1.35x -All eligible mortgage notes of any one member cannot exceed 10% of the aggregate amount of all eligible collateral CFC Members/Borrowers Collateral Collateral $$$ $$$ Investors/CTBs Buyers 11

12 Business Strategies Focus on lending to the electric cooperative sector Maintain loan volume and strong credit quality 12

13 Business Strategies Balance leverage, funding costs, liquidity and diversity 13

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15 B. Operating Results, Liquidity & Funding CFC:

16 Income Statement Summary Tax exempt, cost-plus based cooperative lender Design rates to earn an adjusted TIER of 1.10x or higher For the twelve months ended May 31, (dollar am ounts in thousands) to 2015 Change Change in % Interest Income $1,008,911 $960,961 $955,753 $957,540 $952,976 ($4,564) 0% Interest Expense (841,080) (761,778) (692,025) (654,655) (635,684) 18,971-3% Derivative Cash Settlements (6,848) (12,846) (56,461) (73,962) (82,906) (8,944) 12% Adjusted Net Interest Income 160, , , , ,386 5,463 2% Recovery of (Provision for) Loan Losses 83,010 18,108 70,091 (3,498) 21,954 25, % Other Non-Interest (Loss) Income 11,618 (49,748) 37,284 4,268 (83,365) (87,633) -2053% Non-Interest Expense (79,681) (82,327) (95,110) (74,304) (77,400) (3,096) 4% Income Tax Benefit (Expense) (1,327) 2,607 (2,749) (2,004) (409) 1,595-80% Adjusted Net Income 174,603 74, , ,385 95,166 (58,219) -38% Derivative Forward Value (23,388) (223,774) 141,304 39,541 (114,093) (153,634) -389% Net Income (Loss) $151,215 ($148,797) $358,087 $192,926 ($18,927) ($211,853) -110% Adjusted TIER (1) (0.08) -7% Core Adjusted TIER % (1) Adjusted to ex clude the effect of the derivative forw ard value from net income and to include all derivative cash settlements in the interest ex pense. 16

17 Balance Sheet Summary Growing GAAP equity through accretion of net margins Long-term goal of maintaining an adjusted debt-to-equity ratio of around 6.0 to 1 (dollar amounts in thousands) 05/31/11 05/31/12 05/31/13 05/31/14 05/31/ to 2015 change Change in % Cash and Cash Equivalents $293,615 $191,167 $177,062 $339, ,321 (89,914) -27% Investments 58,601 $59,045 $731,632 $605, ,472 (35,705) -6% Gross Loans to Members 19,330,797 18,919,612 20,305,874 20,476,642 21,469, ,375 5% Less: Allowance for Loan Losses (161,177) (143,326) (54,325) (56,429) (33,690) 22,739-40% Loans to Members, Net 19,169,620 18,776,286 20,251,549 20,420,213 21,435,327 1,015,114 5% Foreclosed Assets 280, , , , ,507 (129,144) -53% Derivative Assets 343, , , , ,276 (94,483) -45% Other Assets 415, , , , ,227 (5,481) -1% Total Assets $20,561,622 $19,951,335 $22,071,651 $22,232,743 $22,893,130 $660,387 3% Short-term Debt 3,320,370 3,246,564 4,050,132 4,099,331 3,127,754 (971,577) -24% Long-term Debt¹ 13,815,803 13,398,837 14,365,784 14,513,284 16,287,540 1,774,256 12% Subordinated Deferrable Debt 186, , , , , % Members' Subordinated Certificates 1,801,212 1,722,744 1,729,226 1,612,227 1,505,444 (106,783) -7% Total Debt Outstanding 19,123,825 18,554,585 20,545,142 20,624,842 21,320, ,896 3% Derivative Liabilities 477, , , , ,382 20,174 5% Other Liabilities 273, , , , ,224 2,905 1% Total Equity 687, , , , ,786 (58,588) -6% Total Liabilities & Equity $20,561,622 $19,951,335 $22,071,651 $22,232,743 $22,893,130 $660,387 3% Guarantees 1,104,988 1,249,330 1,112,771 1,064, ,500 (78,322) -7% Key Financial Ratios Adjusted Liabilities² 17,170,093 16,661,477 18,407,895 18,660,071 19,488, ,206 4% Adjusted Total Equity³ 2,820,380 2,774,405 3,195,098 3,161,462 3,111,133 (50,329) -2% Adjusted Debt-to-Equity Ratio % ¹includes long-term debt maturities due within twelve months ²Adjusted Liabilities = Total Liabilities - (Derivative Liabilities + Debt used to fund loans guaranteed by RUS + Subordinated Deferrable Debt + Subordinated Certificates) ³Adjusted Equity = Total Equity - (Prior Year Cumulative Derivative Forward Value and Foreign Currency Adjustments + Year to Date Derivative Forward Value, net + Accumulated Other Comprehensive Income) + (Subordinated Deferrable Debt + Subordinated Certificates) 17

18 Debt Funding Sources Debt Instrument Maturity Range 5/31/2014 Amount 5/31/2015 Amount % ($000s) ($000s) % Daily liquidity fund Demand note $ 486, % $ 509, % Member commercial paper 1 to 270 days $ 858, % $ 736, % Member select notes 30 to 270 days $ 548, % $ 671, % Member medium-term notes Up to 30 years $ 498, % $ 618, % Member capital securities Up to 35 years $ 267, % $ 219, % Membership Certificates Up to 100 years $ 644, % $ 645, % Loan and Guarantee Certificates Up to 100 years $ 699, % $ 640, % Total - Members $ 4,003, % $ 4,040, % Guaranteed Underwriter Program Up to 20 years $ 4,299, % $ 4,406, % Notes payable (Farmer Mac) Up to 30 years $ 1,667, % $ 1,910, % Other Up to 30 years $ 52, % $ 47, % Total - Other $ 6,019, % $ 6,364, % Bank bid notes Up to 3 months $ 20, % $ - 0.0% Non-member commercial paper 1 to 270 days $ 1,973, % $ 984, % Non-member medium-term notes Up to 30 years $ 2,228, % $ 2,749, % Collateral trust bonds Up to 30 years $ 5,980, % $ 6,781, % Subordinated deferrable debt Up to 30 years $ 400, % $ 400, % Total - Capital Markets $ 10,601, % $ 10,915, % 51% from Capital Markets 21% from Guaranteed Underwriter Program 19% from Member- Owners 9% from Farmer Mac Total Debt Outstanding $ 20,624, % $ 21,320, % 18

19 Historical Funding Profile Since FY05, reliance on wholesale funding has decreased significantly 31% reduction in wholesale funding from FYE05 to FYE15 Align with CFC s strategy of diversifying funding sources and mitigating wholesale funding risk in adverse market conditions 19

20 Member-Owners Investment and Equity in CFC Member-Owners invested funds provide a stable source of funding Member-Owners investment and equity exceeded $5.2 billion at FYE15 from $3.5 billion in FYE05 20

21 CFC Capital Structure All of CFC s Members Subordinated Certificates are subordinated to all CFC non-member debt issuances (senior and subordinated) * Notes on Deposit Senior Secured Debt (o/s) (including Collateral Trust Bonds, Farmer Mac Notes, GUP Notes*) $13,099 million Senior Unsecured Debt (o/s) (including Medium Term Notes, Bank Bid Notes, Commercial Paper, Daily Liquidity Funds, Select Notes, other debt) $6,316 million Subordinated Deferrable Notes (o/s) $400 million Members Subordinated Certificates (o/s) Membership Subordinated Certificates ($645 million), Loans and Guarantee Subordinated Certificates ($641 million), Member Capital Securities ($220 million) $1,506 million Members Equity $1,167 million (As of May 31, 2015) Minimum Loss Given Default Maximum 21

22 Revolving Credit Facilities Availability as of 5/31/2015 ($ in Thousands) Total Commitment Letter of Credit Outstanding Available Commitment Three-year 10/28/17 maturity 1,720, ,719,855 Five-year 10/28/19 maturity 1,700,000 1,000 1,699,000 Total $3,420,000 $1,145 $3,418,855 Compliance 8/31/14 11/30/14 2/28/15 5/31/15 Requirement Average TIER Actual (minimum adjusted TIER over the six most recent fiscal quarters) Leverage Ratio Actual (maximum ratio of senior debt to total equity) Max In Compliance? 22

23 Liquidity Management At May 31, 2015, CFC had the following projected liquidity sources available: CFC is a well-known seasoned issuer and believes it has strong access to both long-term and short-term funding options. (1) Subject to market conditions for debt issued by Farmer Mac. (2) Scheduled loan amortization and other repayments over the next 12 months (3) Short-term debt maturities include long-term debt maturities over the next 12 months 23

24 Projected Liquidity Position at 5/31/15 ($ in Mils.) LT Loan Amortization & Repayment Projected Sources of Liquidity Other Loan Repayments Debt Issuance - LT Debt Total Sources of Liquidity Projected Uses of Liquidity LT Debt Maturities Other Loan Advances LT Loan Advances Total Uses of Liquidity Cumulative Excess Sources Over Uses of Liquidity(1) May15 $734 Aug15 $404 $65 $570 $1,039 $162 $176 $777 $1, Nov ,560 1, ,005 1, Feb May Aug Nov Totals $1,685 $105 $3,605 $5,395 $2,309 $193 $2,979 $5,481 (1) Cumulativ e excess sources ov er uses of liquidity includes cash and time deposits. (2) The dates presented are intended to reflect the end of each quarterly period through the quarter ending Nov ember 30,

25 FY15 & FY16 Major Financing Activities Revolvers October 2014 Amended and extended the credit facilities: consolidated the three credit facilities into two, extended the maturity date of one facility to 2019 and increased the total commitment by $194 million to $3.42 billion MTN/FRN CTBs September 2014 reopened $250 million 3-year FRNs at L+25 bps. Issued additional $25 million in the same security increasing the total amount outstanding to $275 million April 2015 Issued $200 million 3-year FRNs at L+35 bps April 2015 Issued $500 million 2-year fixed rate 0.95% November 2014 Issued a $300 million 5-year 2.30% December 2014 Redeemed early a $400 million 3-year 1% CTB due February 2015 January 2015 Issued a $400 million 5-year 2.00% and a $500 million 10-year 2.85% GUP November 2014 Closed a new facility for $250 million commitment, bringing the total Guaranteed Underwriter Program (GUP) commitment to $874 million February 2015 Advanced $ % for a fixed maturity of 20 years February 2015 Submitted application for additional $500 million commitment July 2015 Advanced $ %, with a 20-year final maturity Farmer Mac June 2014 Refinanced a maturing $95 million Farmer Mac note for seven 3ML+55 bps August 2014 Refinanced $75 million of maturing $175 million Farmer Mac note for five 3ML + 35 bps October 2014 Issued a $80 million 30-year Farmer Mac 3ML + 65 bps December 2014 Issued a $200 million 6-year Farmer Mac 3ML + 40 bps January 2015 Executed an amendment to increase the total commitment by $600 million to $4.5 billion and extend the maturity date by four years to January February 2015 Issued a $200 million 30-year Farmer amortizing Mac 3ML + 75 bps July 2015 Advanced $180 million 30-year amortizing 3ML + 80 bps July 2015 Executed a new 3-year $300 million secured revolving line of credit facility August 2015 Closed a Long Term Standby Commitment to Purchase agreement for an initial tranche of loans of $522 million 25

26 Long-Term Debt Maturity Schedule by Month Note: Our members traditionally roll over their MTN investments at maturity Data as of 8/31/15 26

27 Long-Term Debt Maturity Schedule by Year Note: Our members traditionally roll over their MTN investments at maturity Data as of 8/31/15 27

28 Funding Strategy Continue to utilize different funding vehicles to maintain low cost funding structure Maintain balance sheet liquidity via liquid short-term investments Member Investments Dealer CP Issuance Attract additional and retain existing investments from members Minimize wholesale funding risk by maintaining dealer CP balance in a range of $1 - $1.25 billion CTB and MTN Issuance Smaller tranches and more frequent issuances InterNotes Issuance Continue weekly postings at favorable rates and tenors GUP & Farmer Mac Issuance Attain flexibility and preserve availability 28

29 Interest Rate Management Interest rate swaps are used to manage interest rate risks, not for speculative purposes Match Funding Practice: Floating Assets Fixed Assets Funding Mismatch Floating Liabilities Fixed Liabilities Asset Liability Committee monitors interest rate risk and funding mismatch at least monthly Goal is to manage funding mismatch at the lowest cost and minimize interest rate risk 29

30 Interest Rate Management We mainly use interest rate swaps for interest rate management Accounting Treatment: o We record all derivatives as either assets or liabilities in the financial statements o We measure derivative instruments at fair value at quarter end o We record the change in fair value and realized gains and losses from cash settlements of our derivatives in the derivative losses line in the consolidated statement of operations each reporting period Derivative Related Adjustments to the Calculation of TIER o We include the derivative cash settlements in our interest expense o We exclude the change in forward value of our derivatives from net income Derivative Related Adjustments to the Calculation of Debt-to-Equity Ratio o We exclude the non-cash impact of our derivative adjustments from total liabilities and total equity 30

31 Interest Rate Management Notional outstanding for interest rate swaps: ($ in 000s) FY12 % FY13 % FY14 % FY15 % Pay fixed/receiv e floating $5,275,553 60% $5,287,889 60% $5,322,809 63% $5,776,533 60% Pay floating/receiv e fixed $3,720,440 40% $3,500,440 40% $3,124,000 37% $3,849,000 40% Total - Notional Amount Outstanding $8,995, % $8,788, % $8,446, % $9,625, % Derivative Losses/Gains on the income statement: ($ in 000s) FY12 FY13 FY14 FY15 Deriv ativ e Cash Settlements $ (12,846) $ (56,461) $ (73,962) $ (82,906) Deriv ativ e Forward Value $ (223,774) $ 141,304 $ 39,541 $ (114,093) Deriv ativ e Gains (Losses) $ (236,620) $ 84,843 $ (34,421) $ (196,999) Change in fair value/markto-market, non-cash item 31

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33 C. Portfolio Overview CFC:

34 CFC Portfolio Overview Strategy: Focus on lending to the rural electric cooperative sector 91% of loans are on a senior secured basis 98% of loans are to the electric utility sector Loan portfolio consists of primarily long-term fixed rate loans 34

35 CFC Portfolio Overview Strategy: Focus on lending to the rural electric cooperative sector Strategy: Focus on lending to the rural electric cooperative sector High quality asset portfolio During CFC s 46-year history, there have only been 16 defaults and 6 losses in the electric utility portfolio; net write-off for the electric portfolio is $86 million. At FYE15, CFC had 0% nonperforming loans. Nonperforming loans plus delinquencies/total loans outstanding 3.00% Net charge-offs(recovery)/average loans O/S 0.25% 0.22% 0.20% 0.15% 0.16% 2.00% 1.83%* 0.10% 0.08% 1.00% 0.05% 0.00% 0.01% 0.00% FY11 FY12 FY13 FY14 FY % 0.10% 0.01% 0.00% FY11 FY12 FY13 FY14 FY15 *Telecom loan 35

36 Electric Distribution Cooperatives Credit Strength Times Interested Earned Ratio (TIER) Modified Debt Service Coverage (MDSC) % 44.00% 43.50% 43.00% 42.50% 42.00% 41.50% 41.00% 40.50% Equity as a % of Assets 43.92% 42.95% 43.00% 42.32% 41.78% Amount Written off as a % of Operating Revenue Data Source: CFC, June

37 Consolidated Loans Outstanding by State & Territory at May 31, 2015 (Sorted by Loan Balance) State/Territory Loan Balance ($ in 000s) Loan Balance % Number of Borrowers State/Territory Loan Balance ($ in 000s) Loan Balance % Number of Borrowers Texas $3,202, % 73 Oregon $343, % 25 Georgia $1,242, % 46 Washington $326, % 11 Colorado $1,152, % 27 Nevada $320, % 5 Missouri $1,102, % 52 Louisiana $296, % 10 Kansas $919, % 34 Virginia $253, % 19 Alaska $897, % 19 Wyoming $251, % 15 Illinois $783, % 28 South Dakota $200, % 32 Minnesota $735, % 57 Montana $160, % 25 South Carolina $657, % 23 Arizona $149, % 12 Kentucky $636, % 25 Idaho $137, % 13 Oklahoma $635, % 27 Delaware $120, % 2 Florida $630, % 16 Michigan $118, % 15 Indiana $595, % 45 New Hampshire $94, % 2 North Carolina $528, % 29 New Mexico $68, % 16 Arkansas $523, % 21 Hawaii $68, % 2 Alabama $505, % 25 Tennessee $65, % 19 Ohio $488, % 32 Vermont $47, % 6 North Dakota $485, % 14 Nebraska $34, % 19 Pennsylvania $481, % 18 California $31, % 4 Mississippi $448, % 19 New York $31, % 6 Iowa $435, % 40 New Jersey $20, % 3 Utah $434, % 6 West Virginia $16, % 2 Wisconsin $399, % 25 Maine $11, % 4 Maryland $368, % 3 Washington DC $0 0.00% - Total $21,459, %

38 State-by-State Loan Portfolio Growth FY13-FY15 *Figures represent increase/decrease for each state in millions 38

39 D. Conclusion CFC:

40 Key Takeaways at 5/31/2015 High-Quality Portfolio 98% of loans are to rural electric systems 91% of loans are on a senior secured basis 0% of loans in the portfolio are classified as nonperforming Stable Member Investment & Strong Member Support Sufficient Liquidity and Funding Diversity 19% of funding is from member-owners Historically low reinvestment risk on member investments Maintain dealer commercial paper balance at the $1 $1.25 billion level 1.8 times liquidity coverage ratio over the next 12 months 3.6 times liquidity coverage ratio over the next 12 months, excluding short-term debt maturities related to member investments Total equity at $912 million at 5/31/2015, a 55% increase from $587 million at 5/31/2010 Consistent Operating Performance Average adjusted TIER of 1.20x for last 5 years; above goal of 1.10x. Continued improvement in adjusted net interest margin 40

41 E. Appendix 1. Electric Cooperative Overview 2. Rated Electric Cooperatives 3. Corporate Governance, Organization Chart & Bios CFC:

42 U.S. Electric Utilities Overview In the U.S., there are primarily three kinds of utilities that are distinguished by their business structure. They are electric cooperatives, investor-owned utilities ( IOUs ), and municipal systems. An electric cooperative is owned by the members it serves. Therefore, all of the owners live in the cooperative's service territory, with most customers living in rural or semi-rural areas. A cooperative operates on a non-profit, cost-of-service basis. An IOU is owned by stockholders who may or may not be customers and who may or may not live in the service area. The IOU is a forprofit enterprise. Municipal systems are usually owned by a city, a state or federal government agency. Municipal customers are usually located in urban or semi-urban areas. 42

43 U.S. Electric Utilities Overview IOUs Municipals Cooperatives Rate regulated Not rate regulated Most are not rate regulated Profit seeking; operated for the benefit of public shareholders with obligations to serve regulated ratepayers Most are large and may have multiple subsidiaries Subject to competition in the wholesale market, with some competition in the retail market Tend to have comparable rates to cooperatives and higher rates compared to municipals Private shareholder equity; no government support Operated for public benefit for the region served with obligation to serve customers Most are small relative to IOUs Little retail competition although subject to competition in the wholesale market Tend to have lower rates than G&T cooperatives and IOUs No private equity; may have access to local government fiscal support in times of fiscal stress Not-for-profit; operated for the benefit of their member owners All are small relative to IOUs Little competition Rates tend to be comparable to IOUs Most borrow from the RUS and cooperative financial institutions; larger issuers access the capital markets 43

44 U.S. Electric Utilities Overview IOUs Municipals Cooperatives Total Total Revenue ($ billions) $269 $55 $40 $364 Number of organizations 200 2, ,112 Number of total customers (in millions) Size (median number of customers) 400,000 2,000 13,000 Customers, % of total 72% 15% 13% Revenues, % of total 74% 15% 11% Kilowatt-hour sales, % of total 73% 16% 11% Sales (billions of kilowatt-hours) IOUs Municipals Cooperatives Total Residential ,420 Commercial 1, ,360 Industrial Total 2, ,700 IOUs Municipals Cooperatives Total Percentage of distribution line owned 50% 7% 43% Customers per mile of line (density) Revenue per mile of line ($) $75,500 $113,000 $15,000 Distribution plant per customer ($) $2,798 $2,740 $3,290 Assets ($ billions) $897 $266 $150 $1,313 Equity ($ billions) $283 $80 $45 $408 Equity % 32% 30% 30% Source: NRECA and EIA 44

45 U.S. Electric Utilities Comparison Share of Customers Miles of Distribution Line Coop, 7% Muni, 43% Coop, 15% IOU, 72% Muni, 13% IOU, 50% Share of Generation Miles of Transmission Line Coop, 6% IOU, 37% Nonutility, 41% Muni, 6% PPD, 4% Federal, 7% IOU, 77% Coop, 6% Muni, 6% Federal, 11% Source: NRECA and EIA 45

46 Electric Cooperative Facts and Figures 838 distribution and 66 G&T cooperatives serve: 42 million people in 47 states 19 million businesses, homes, schools, churches, farms, irrigation systems, and other establishments in 2,500 of 3,141 counties in the United States More than 12% of the U.S. population To perform their mission, electric cooperatives: Own assets worth $164 billion (distribution and G&T co-ops combined); Own and maintain 2.6 million miles, or 42%, of the nation s electric distribution lines, covering 75% of the U.S. landmass; Deliver 11% of the total kilowatt-hours sold in the U.S. each year; Generate nearly 5% of the total electricity produced in the U.S. each year ; Employ 72,000 people in the U.S.; Retire $800 million in capital credits annually; Pay over $1 billion in state and local taxes. Compared with Other Electric Utilities Co-ops serve an average of 7.4 consumers per mile of line and collect annual revenue of approximately $16,000 per mile of line IOUs average 34 customers per mile of line and collect $75,500 per mile of line Municipals average 48 consumers per mile of line and collect $113,000 per mile of line Source: NRECA (March 2015) 46

47 Electric Cooperative Facts and Figures Coops Serve Primarily Farms & Families (kwh Residential Sales) 60% 50% 40% 30% 20% 10% 0% 57% 36% 37% Coop IOU Muni Coops Serve the Most Rural Areas & Have Fewest Customers Per Mile Other Utilities Serve Primarily Businesses (kwh Commercial & Industrial Sales) 70% 60% 50% 40% 30% 20% 10% 0% 43% 64% 63% Coop IOU Muni Coops Have The Least Amount of Revenue Per Mile $120,000 $100,000 $80,000 $60,000 $75,498 $113, $40, $20,000 $14, Source: NRECA and EIA Coop IOU Muni $- Coop IOU Muni 47

48 G&T Cooperatives Generation Profile Data Source: CFC 48

49 Distribution Electric Cooperative Credit Ratings Cooperative State Type L-T Credit Ratings (S&P/Moody's/Fitch) Outlook Brunswick E.M.C. NC DIST A//A+ Stable/Not Rated/Stable Chugach Electric AK DIST A-//A Stable/Withdrawn/Stable CoServ TX DIST //AA- //Stable Delaware Electric Cooperative, Inc. DE DIST A// Stable/Not Rated/Not Rated Diverse Power GA DIST A// Stable/Not Rated/Not Rated Guadalupe Valley Elec TX DIST A+//AA- Positive/Not Rated/Stable Lakeview Light & Power WA DIST /Baa2/ Not Rated/Stable/Not Rated New Hampshire Electric NH DIST A+// Stable/Not Rated/Not Rated Overton Power District #5 NV DIST /Baa1/BBB+ Not Rated/Negative/Positive Sulphur Springs Valley Electric AZ DIST A-//A- Stable/Not Rated/Stable Vermont Electric VT DIST A//BBB+ Stable/Ratings Withdrawn/Stable (As of 5/31/2015; Source: CFC, S&P, Moody s, Fitch) 49

50 Generation & Transmission Electric Cooperative Credit Ratings Cooperative State Type L-T Credit Ratings (S&P/Moody's/Fitch) Outlook Arkansas Electric AR G&T AA/A1/A+ Stable/Positive/Positive Associated Electric MO G&T AA/A1/AA- Stable/Stable/Stable Basin Electric Power ND G&T A/A2/A+ Stable/Negative/Stable Big Rivers Electric Corp. KY G&T BB-/Ba2/BB Stable/Stable/Stable Brazos Electric TX G&T A//A Stable/Not Rated/Stable Brazos Sandy Creek TX G&T A// Stable/Not Rated/Not Rated Buckeye Power, Inc. OH G&T A-/A3/A Stable/Stable/Negative Central Electric SC G&T AA-// Stable/Not Rated/Not Rated Central Iowa Power IA G&T A//A Stable/Not Rated/Stable Corn Belt Power IA G&T A// Stable/Not Rated/Withdrawn Dairyland Power Cooperative WI G&T A/A3/ Stable/Stable/Not Rated East Kentucky Power KY G&T A-//BBB+ Stable/Not Rated/Positive Georgia Transmission Corp. GA G&T AA-/A2/AA- Stable/Stable/Stable Golden Spread Elec TX G&T A/A3/A Stable/Stable/Stable Great River Energy MN G&T A-/Baa1/A- Stable/Stable/Stable Hoosier Energy IN G&T A/A3/ Stable/Stable/Not Rated Minnkota Power Cooperative ND G&T A-/Baa2/ Stable/Stable/ North Carolina Electric NC G&T A-//A- Stable/Not Rated/Positive Old Dominion Electric Cooperative VA G&T A2/A Not Rated/Stable/Stable Oglethorpe Power GA G&T A/Baa2/A Stable/Stable/Negative PowerSouth Energy AL G&T A-/Baa1/A- Stable/Stable/Stable Rayburn Country Electric TX G&T A-// Stable/Not Rated/Not Rated San Miguel Electric TX G&T A-//A- Stable/Not Rated/Stable Seminole Electric FL G&T A-/A3/ Stable/Stable/Not Rated South Mississippi Electric MS G&T A-/Baa1/A- Stable/Stable/Stable South Texas EC TX G&T A-//A- Stable/Not Rated/Stable Southern Illinois Power IL G&T BBB//BBB Stable/Not Rated/Stable Square Butte Electric ND G&T A-/Baa1/ Stable/Positive/Not Rated Tri-State Generation CO G&T A/A3/A- Negative/Stable/Negative Wabash Valley Power IN G&T A-// Stable/Not Rated/Not Rated Western Farmers OK G&T A-//A- Stable/Not Rated/Stable (As of 5/31/2015; Source: CFC, S&P, Moody s, Fitch) 50

51 Corporate Governance CFC is committed to strong corporate governance. Board of directors consists of up to 23 members 20 managers and directors elected from 10 geographic districts 2 from the industry s trade association, National Rural Electric Cooperative Association ( NRECA ) 1 at-large position elected from general membership that meets the requirements of the audit committee financial expert as defined by Section 407 of the Sarbanes Oxley Act of 2002 No members of CFC management hold board seats. Elected board members serve a 3-year term; limited to a maximum of 2 consecutive terms. Audit, finance advisory, executive, loan, compensation and corporate relations committees are maintained by the board. Audit committee consists of no less than 7 board members. Meetings held up to 5 times annually. 51

52 Organization Chart Approximately 235 Employees 52

53 CFC Leadership Board of Directors of_directors.html CFC Senior Leadership ement/executive_team.html 53

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