How GMs, Boards and CFOs Utilize the KRTA CDPAA March 2015 Meeting Ty Harrell, CFC RVP for MS and TN 3/19/15

Ty Harrell - Introduction  Born and Raised in Canton, MS  Wife of 17 years – Stacy  4 year old son – Houston  Ole Miss Rebel  Worked at the MS Statewide for 9 years –Plan Administrator of the Health Insurance Plan –Controller –Facilitator of MS Coop’s Accounting/HR & IT Supervisor Training 2

NCAA 3

KRTA 4

KRTA – Key Ratio Trend Analysis  One of the most utilized and valued CFC products / services  145 ratios whose results are computed using Coop Form 7 reported numbers  Tracks 5 years of Coop history for each ratio reported  Shows medians and coop ranking for each peer group for each ratio 5

KRTA – Ratio Categories 1) Base 2) Financial 3) Revenue and Margins 4) Sales 5) Controllable Expenses 6) Fixed Expenses 7) Total Expenses 8) Employees 9) Growth 10) Plant 6

KRTA Ratio Categories  There are ratios that will speak to each department of the coop.  My job here today is to relay what I think are the “Most Valuable” ratios for the two entities that have to incorporate “all” departments: –General Manager / CEO –Board of Directors 7

GM’s Top KRTA Concerns  Financial Strength Indicators – are these improving or declining and why? (Tier, MDSC, Equity as a % of Assets).  Cash – do ratios reflect true cash position of the coop and why or why not? (Current Ratio)  Load Mix – does increase/decrease bring up any concerns or needs for future consideration (Residential, Sm & Lg Commercial per total KWH sold)  Board – what story about the coop’s overall KRTA position stands out? How to relay that story effectively to the Board. 8

“Most Valuable” KRTA Ratios in each group for GM’s  Base – Total KWH Sold (2)  Financial – Equity as a % of Assets (16)  Revenue and Margins – Operating Margins per KWH Sold (47)  Sales – Residential, Sm & Lg KWH sold per Total KWH sold (69,72,73)  Controllable Expenses – Total Controllable Expenses per KWH Sold (86) 9

“Most Valuable” KRTA Ratios in each group for GM’s  Fixed Expenses - (3) – Power Cost per KWH Sold (88), Power Cost per KWH Purchased (89) & Power Cost as a % of Revenue (90)  Total Expenses – Total Cost of Service (minus power costs) per Total KWH Sold (105)  Employees – Overtime Hours/Total Hours (111)  Growth – Annual Growth in Total KWH Sold (114)  Plant – Line Loss (139) 10

“Most Valuable” KRTA Ratios for Board Members  Base Ratios – summarizes the personality of your coop. Track annual progress of these. -Total Consumers Served -Total KWH Sold -Total Utility Plant -Total Number of Employees -Total miles of line - I would add - Average Consumers per Mile 11

“Most Valuable” KRTA Ratios for Board Members  Financial Ratios – Do an annual review of the most valuable ratios; Also emphasize the Financial Ratios that most impact your coop -Tier -MDSC -Equity as a % of Assets -Blended Interest Rate -Current Ratio -Rate of Return on Total Capitalization 12

“Most Valuable” KRTA Ratios for Board Members  All Other Ratios – Your Individual Coop’s Personality will dictate what other ratios are valuable to ensure your Board has the Pertinent Information to make Informed Decisions. 13

Trends in KRTA Ratios  Total KWH Sold  Equity as a % of Assets  Blended Interest Rates  Average Residential Usage KWH per Month 14

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