1. Headwinds in Rural Water
Julia McCusker
September 2016

2. CoBank - Proud Member of the Farm Credit System
Guarantees are hard to come by in rural America. Thanks to Farm Credit, a reliable source of capital is not. For one hundred years, we’ve worked and lived in the same communities as the members we serve. Our cooperative structure ensures we never stop caring – and our financial support means rural America never stops growing.

3. CoBank has customers in all 50 states a loan portfolio that totals over $80 billion.
But our business is narrowly concentrated in a handful of vital industries:
Agriculture & agribusiness
Power
Communications
Water
Let me run through each of these very briefly before going into a little more depth about our rural water portfolio and the services we offer that critically important sector.

4. CoBank: National Lender

5. Rural Infrastructure Investment
On July 24th 2014, at a press conference in Washington, D.C., CoBank announced that it has joined with the U.S. Department of Agriculture in the formation of a new public-private partnership focused on infrastructure investment in rural America.
CoBank committed $10 billion of balance sheet capacity to partner with USDA on infrastructure projects in rural America.
Target investments include rural community facilities, water and wastewater systems, rural energy projects and rural broadband.
Aligns with CoBank’s mission to service rural America

6. CoBank: Mission-Based Lending
National lending footprint
Focus on lending to rural water and wastewater systems
Low cost financing to support keeping system rates affordable
Top Sponsor of NRWA and member of state rural water associations

7. a wind blowing from directly in front, opposing forward motion.
Headwinds
head·wind
noun
a wind blowing from directly in front, opposing forward motion
a wind blowing from directly in front, opposing forward motion.
Confidential and Proprietary

8. Headwinds in the News

9. Headwinds in the News

10. Headwinds in News

11. Headwinds in News

12. Rural Water System Headwinds
Size
Water Availability
Regulations
Technology
Succession Planning
Rates
Financing

13. CoBank Rural Water Loans
Interim / Bridge Loans
Term Loans
USDA Guaranteed Loans
Lines of Credit
This is a brief summary of the lending products we offer to the water/ wastewater industry

14. Three Key Ratios
Debt to EBIDTA
Debt Service Coverage
Debt to Capitalization

15. DEBT TO EBIDTA
DEBT = Total Debt (Indebtedness for Borrowed Money)
EBIDTA: Earnings Before Interest, Depreciation, Taxes and Amortization
(No Grant or Hook-up Fees)
Operating Income – Operating Expenses

16. Debt to EBITDA
Measures leverage - system's ability to retire debt if all “Free” Cash Flow is used repay debt
General Guideline:
Less than 9x is good
10x - 13x is fair
Over 14x is …. Not so good
Long term debt (i.e. 40 years) can skew

17. Debt Service Coverage (“DSC”)
Measures system's cash flow to cover principal and interest payments (repayment capacity)
(Net Income + Interest + Depreciation)
(Principal + Interest)
General Guideline:
1.50x or greater is good
1.20x to 1.49x is fair
1.19x or less…. Not so good

18. Total Debt to Total Capitalization
Measures Debt to “Permanent” Capitalization
Measures Lender’s Portion to Borrower’s Portion
Total Debt
(Total Debt + Net Worth)
General Guideline:
50% or less is good
65% to 51% is fair
66% or more…. Not so good

19. Where are interest rates going?
Confidential and Proprietary

20. CoBank Interest Rates – Market Based
10 Year Treasury and 30 day LIBOR
Confidential and Proprietary

21. Rural Water and the Path Forward
Planning
Communication
Working together

22. Water is economic development for your community!
Growth
Water is economic development for your community!

23. Supporting the State of South Carolina

24. CoBank in South Carolina

25. jmccusker@cobank.com Office 303-694-5858 Cell 720-317-5965
Julia McCusker
Vice President
Rural Water

26. Questions
us at