Delivering Financial Results

Comments by General Manager, Darren Schauer

February 2012

Maintaining a financially strong cooperative is important to the membership of GVEC. Doing so allows us not only to operate efficiently, but it also opens the door to sizeable savings in future endeavors concerning system reliability and member service. High credit ratings and strategic debt management have positioned GVEC well to address the needs of today’s members as well as those of future generations.

Standard & Poor’s “A+” and “A-1” Ratings Affirmed

In November 2011 Standard & Poor’s (S&P) affirmed GVEC’s “A+” issuer credit rating as well as its “A-1” short-term rating with a “stable outlook.” This was the fifth consecutive year for the issuer rating as well as the second consecutive year for the short-term rating. S&P cited “certainty regarding its wholesale power supply arrangements,” “a history of very strong financial metrics,” and “strong projections for liquidity and coverage” as just a few of GVEC’s strengths. High credit ratings such as these are among a distinction given to only a handful of cooperatives and gain GVEC access to important savings opportunities such as Commercial Paper.

Commercial Paper Saves Members $1.4M to Date

In 2010 GVEC began taking advantage of a short-term financing method called Commercial Paper (CP). Much like the way a construction loan works, CP allows the Cooperative to utilize low short-term interest rates to save money while funding its capital investments as necessary. With a little less than two years participating in CP, GVEC has recognized over $1.4 million in short-term interest savings to date compared to other short-term financing available from traditional cooperative sources. Savings like this contribute to keeping electric rates as low as possible.

Future Savings of $3.3M Projected

Given CP is a short-term financing strategy, funds eventually roll over to long-term debt — much like a home mortgage would. This is where investors review a company’s overall credit rating and financial stability to offer competitive interest rates on long-term financing needs. Approximately $40 million in GVEC bonds were taken to market in December 2011. Negotiations began with prominent financial investors and resulted in Prudential assuming all $40 million of the 30-year debt at a low 3.77% interest rate: the lowest offered by each of the potential investors. At this rate, GVEC will eventually recognize over $3.3 million dollars more in long-term interest savings as compared with the next lowest offering.

GVEC continues to take a progressive, yet vigilant, approach to debt management in order to save you money. Prudent financial management is just one core value the GVEC Board and staff utilize to constantly improve what we deliver for the thousands of member-owners who rely on us for quality service, in many forms, each and every day.