Beartooth Forecast Model Beartooth Board meeting July 31, 2018

Risk Management Committee Agenda Determine if the Beartooth RUS forecast model could be transferred into the Compass model If the model could be transferred – determine differences between the two models Determine if the differences between the two models were explainable and understandable Interest on long-term debt Depreciation Work Plan retirements Update custom report cooperative is used to with results from Compass model Meet with Risk Management Committee to discuss above items and next steps Teri attend July board meeting present this agenda/forecast Discuss with Beartooth engagement for future services

Can the Beartooth RUS forecast model be transferred into the Compass model? Yes Model Differences RUS model was written programmed more than 20 years ago No updates since original model was written RUS model was determined by one employee at RUS CFC Compass model was completely re-written in 2016-2017 timeframe Model has many options for flexibility Base case Forecast - No automated features turned on Member testing and validation process Improved long-term debt accuracy Model can estimate future – based on weighted average past inputs Model was enhanced with options, bells and whistles to allow for a more detailed setup of input data

RUS to Compass model differences for Beartooth to be aware of Differences between the models are not material or significant differences Compass model likely more accurate approach to debt and depreciation Areas of differences Long-term interest expenses Compass model more accurate with new loan options built in Model is pre-loaded with CFC debt and expected capital credits Depreciation Model assumptions are a bit different Retirement of Plant Assets is something we need to revisit during engagement Work Plan retirements

Reporting Considerations RUS model and Compass model both have the same reports Standard RUS 325 reports Typically used in the RUS loan application process Compass model has additional loan reports for the additional loan types – more detail, summary totals are the same between RUS and Compass Beartooth has been using CUSTOMIZED Reports Linked from the RUS model Lines added to detail the Regulatory Asset A few lines combined together in a summary format Customized Reporting can continue from the Compass model Want the committee to be aware they are specifically created reports for Beartooth for your decision making and member communication purposes. Beartooth’s 3 reports can continue to be generated. They are not reports of the model. They are derived from the RUS 325 model output reports.

Work Completed to date Align the RUS model with the Compass model Completed with differences identified Rebuild Custom reports – mostly complete Profit and Loss Balance Sheet Cash Flow Review of the 3 financial statements with a subset of the Risk Management Committee The conversion of the model is pro bono. Rebuilding of the custom reports to Compass is pro bono Attendance to the July board meeting is pro bono

Next Steps Risk Management Committee Meeting – Completed 7/17 July meeting with all committee members present to review the models and differences July 31 Board meeting Meet with coop staff the morning of the board meeting to discuss data in the current model regarding: Debt Depreciation Plant retirement Board meeting presentation and discussion

Engagement of services Update forecast for years 2018 through 2023 Changes since last update Push forecast out 10 years with assumptions Dig deep into: Debt Depreciation Plant investments and retirements $300k difference in Other Assets reconciled Graphs recreated Assumptions continually updated with changes to model Equity planning – equity is growing quickly Revenue requirements as a result of Cost of Service Study work Build template to consider options What if scenario planning

Details… Comparison of Prior Forecast 8a to Compass Income Statement Prior version 8a Compass Balance Sheet Cash Flow

Beartooth Scenario 8a - Assumptions

Beartooth Scenario 8a - Statement of Operations

Compass model – Statement of Operations

Beartooth Scenario 8a - Balance Sheet

Compass model – Balance Sheet

Beartooth Scenario 8a - Cash Flow Statement

Compass model – Cash Flow Statement

Dashboard data

Cash Flow – Dashboard Example

Cash Flow Example Can further detail by category

Ratio chart example

Balance Sheet – Plat and Depreciation

Thank you for spending your time talking about your financial future! teri@terilynwallisconsulting.com 715-566-0802 www.terilynwallisconsulting.com