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2012 Annual Report 1

2012 Annual Report

2

Table of Contents

To Our Readers ......................

2012 Board of Directors........

Financial Highlights...............

Energy Market Statistics........

2012 Highlights......................

Glossary of Terms..................

Report of Management.........

Financial Statements.............

3

8

10

12

14

30

32

33

Platte River’s headquarters is in Fort Collins, Colorado. The building was dedicated in 1978.

32012 Annual Report

From the Chairman of the Board and General ManagerTo ouR ReadeRs

In this, Platte River Power Authority’s 40th year of providing safe, reliable, cost-effective, and environmentally responsible electricity and services to our owner communities — Estes Park, Fort Collins, Longmont, and Loveland — we reflect on the enduring strength of our founders’ efforts. Our continuing ability to build on this strong foundation is enhanced by their forward-thinking actions. Capable leadership, mutually beneficial partnerships, and employee dedication over four decades have made Platte River the strong organization it is today.

We continue to respond to customer needs and expectations in an energy environment that is continually evolving. Through innovation and responsiveness, we will help ensure the long-term sustainability of our communities and our organization.

The year 2012 was eventful for Platte River. Among the highlights were the under-budget completion of the Rawhide Unit 1 spring maintenance outage, the completion of a new 230 kV transmission line to ensure a continued high level of electrical reliability in Loveland and Fort Collins, and the issuance of over $65 million in power revenue bonds for the purposes of lowering financing costs and funding construction projects.

These accomplishments were the result of an unwavering focus on Platte River’s vision, mission and strategic business objectives that seek to provide value to customers, improve quality of life, support our communities, create development opportunities for our employees, and maintain a strong financial position. While the need to apply these fundamentals remains consistent over time, the methods used do not. Changing regulations, evolving customer expectations, and advances in best practices and technologies often demand new approaches or allow new opportunities.

Tom Roiniotis and Jackie Sargent

4

To help build on the strong foundation that Platte River has established, we emphasize the following goals:

• The safety of our employees and contractors will always be a top priority. Accordingly, we are expanding an organizational safety team to continue to foster a culture of safety, update our emergency response plan, and establish new proactive safety practices.

• While compliance with regulatory and policy requirements is mandatory, we continue to follow the spirit as well as the letter of the law. We regularly review and update policies to enhance operations, create efficiencies, and ensure that appropriate controls are in place. When feasible, we implement new technologies even before requirements are imposed. Good stewardship of the environment remains our guiding principle and supports our commitment to improve the quality of life in our owner communities.

As we look ahead in 2013, the Platte River Senior Management Team will be focusing on strategic planning to identify opportunities to improve and expand the value and services we provide. In an environment of renewed interest in climate change, energy efficiency/demand side management, and renewable energy, we will evaluate our resource portfolio and carefully determine where best to make investments. Keeping electricity affordable and reliable are key considerations, as are sustainability, innovation, and stakeholder involvement.

al Hamilton, Platte River’s first General Manager (standing right), and stan Case, Platte River Chairman of the Board (sitting right), with bond underwriters.

• Financial integrity is crucial for maintaining access to capital and managing debt expense, especially in a political environment that challenges the tax-free status of municipal bonds.

• Operational excellence helps us optimize the value of Platte River’s assets.

• Providing exceptional customer service remains an over-arching goal. We are responsive to changing customer needs and expectations. We continue to provide value-added services, such as demand side management programs, and will identify opportunities to enhance communication and coordination to improve integration of “wholesale” and “retail” planning efforts.

• Reaching our objectives is possible only with engaged employees. It is important to use best practices for hiring, training, motivating, and retaining a talented workforce in today’s competitive market. Employee development, knowledge transfer, and succession planning are both crucial and ongoing.

Platte River’s vision, mission, and strategic objectives focus on providing excellent service and value to our municipalities. As your leadership team, we vow to do everything in our power to make the next 40 years the energy future our customers deserve.

Tom J. RoiniotisChairman of the Board

Jacqueline A. SargentGeneral Manager

Jacqueline Sargent Named New General Manager

Platte River Power authority’s

Board of directors hired

Jacqueline sargent to succeed

retired general manager Brian

Moeck on august 27, 2012.

Ms. sargent has over 24 years

of experience in the energy

industry including electric

and gas utility operations,

power generation, energy

marketing, rates and regulatory

affairs, strategic planning,

renewable energy development,

and project management.

Immediately prior to coming

to Platte River, Ms. sargent

held the position of senior Vice

President of Power supply and

Market operations

for austin energy, one

of the nation’s largest

municipal utilities located

in austin, Texas.

52012 Annual Report

6

Fort Collins

Denver

Loveland

Longmont

Estes Park

C O L O R A D O

W Y O M I N GPlatte River Power Authority is a Colorado

political subdivision established to provide

wholesale electric generation and

transmission. Platte River delivers reliable,

competitively priced and environmentally

responsible electricity to the municipal

utilities of its owner communities —

Estes Park, Fort Collins, Longmont,

and Loveland.

6

72012 Annual Report

Me

gaw

atts

ReCoRd HeAT PuSHeS SySTeM PeAk HiGHeRThe summer of 2012 was warmer than normal in northern Colorado—seven record daily high temperatures and a record monthly high temperature were experienced in June. Smoke from nearby forest fires added to residents’ discomfort and prevented them from opening windows to cool their homes at night. As a result, air conditioners ran harder and demand for electricity in Platte River’s four municipalities reached an all-time high of 653 megawatts on June 25, 2012.

MuNICIPaL sYsTeM PeaK

550

525

575

600

625

650

675

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

560

533

576

618

603

635 634

576

615

639

653

8

Platte River Power Authority’s Board of directors

Bill PiNkHAM Mayor, Vice Chairman of the Board

kAReN WeiTkuNATMayor

ReuBeN BeRGSTeNUtilities Director

GeRRy HoRAkCouncilmember

esTes PaRK, Co

FoRT CoLLINs, Co

92012 Annual Report

deNNiS CooMBSMayor

CeCil GuTieRReZMayor, Secretary of the Board

ToM RoiNioTiS Director of Power & Communications, Chairman of the Board

STeVe AdAMSDirector, Water and Power

LoNGMoNT, Co

LoVeLaNd, Co

9

10

0

1,000

2,000

3,000

4,000

2012 2011 2010

To Others

To MunicipalitiesGW

h

eNeRGY deLIVeRIes

Financial Highlights Years ended december 31 Revenues/expenses ($000) Operating revenues Operating expenses Nonoperating expenses, net

Income before contributions

Power operations Demand-municipalities (MW) Energy-municipalities (GWh) Energy-others (GWh)

selected other data Gross utility plant ($000) Long-term debt, net ($000) Debt to equity ratio Total revenue bond coverage

2012

$182,635160,918(10,313)

$11,404

6533,192

745

$1,285,308$265,285

36/64 1.72x

2011

$181,443 161,284

(8,750)

$11,409

6393,182

937

$1,269,785$256,554

36/641.80x

2010

$176,222 162,644

(8,155)

$5,423

6153,1121,024

$1,239,522$275,535

38/621.58x

1,024937745

3,192 3,182

4,119 4,1363,937

3,112

Western area Power administration supplies Platte River with power from facilities such as this hydroelectric plant near estes Park.

112012 Annual Report

ReVeNues, exPeNses, INCoMe

$18

2,6

35

$11

,40

4

$11

,40

9

$5

,42

3

-$10

,313

-$8

,75

0

-$8

,15

5

$18

1,4

43

$17

6,2

22

-$16

0,9

18

2012 2011

-$16

1,2

84

-$16

2,6

44

$150,000

$100,000

$50,000

($50,000)

($100,000)

($150,000)

$0

($0

00

)

Platte River’s Medicine Bow Wind Project began operations in 1998.

2010

Income Before Contributions

Net Nonoperating Expenses

Operating Expenses

Operating Revenues

12

energy Market Statistics

Number of Customers (average)

Residential

Commercial & Industrial

Other

ToTaL

Megawatt-hour Sales

Residential


Other

ToTaL

Revenue

Residential


Other

ToTaL

Residential Averages (annual)

kWh per Customer

Revenue per kWh (cents)

Revenue per Customer

Combined Retail Sales for Four Municipalities1 2012 2011 2010

131,186

18,383

307

149,876

1,114,372

1,970,721

3,577

3,088,670

$98,063,760

128,805,027

494,378

$227,363,165

8,495

8.80

$747.52

129,764

18,028

311

148,103

1,114,846

1,945,153

3,630

3,063,629

$91,822,238

118,780,953

506,105

$211,109,296

8,591

8.24

$707.61

128,474

17,823

313

146,609

1,117,079

1,917,818

3,680

3,038,577

$85,238,419

111,224,494

678,376

$197,141,290

8,695

7.63

$663.47


Peak Demand (kW)

Estes Park

Fort Collins

Longmont

Loveland

sum of Municipalities’ Peaks

Coincident Demand

Energy (MWh)

Estes Park

Fort Collins

Longmont

Loveland

sum of Municipalities’ energy

Sales to Others and Miscellaneous2

energy-ToTAl SySTeM

System Reliability

2012 2011 2010

1- Compiled from preliminary sales and other reports of the municipalities supplied with electric energy by Platte River.

2- Includes energy imbalance and exchange agreement settlements.

24,394

302,602

181,196

157,450

665,642

652,761

126,889

1,508,735

813,675

742,919

3,192,218

820,993

4,013,211

26,971

298,192

175,105

156,556

656,824

639,460

131,617

1,493,417

825,550

731,522

3,182,106

1,051,491

4,233,597

26,695

282,492

171,380

144,522

625,089

614,787

129,839

1,472,941

806,535

702,481

3,111,796

1,117,762

4,229,558

Wholesale Power Requirements

14

Compliance ConfirmedUnder a 2005 revision to the Federal Power Act, Platte River must meet mandatory and enforceable standards for ensuring electric system reliability. The standards applicable to Platte River include 1,280 requirements and sub-requirements.

A designated enforcement authority performs audits of Platte River’s compliance with the reliability standards every three years. The most recent audit was completed in March 2012. During a four-day process carried out at Platte River’s headquarters, the auditors found no areas of concern and no violation of any standard or requirement.

Platte River Power authority provides reliable, competitively priced, and

environmentally responsible electricity to its owner municipalities of estes

Park, Fort Collins, Longmont, and Loveland, Colorado. The activities and

achievements of 2012 reflect a dedication to the fundamentals necessary

for carrying out this objective.

2012 Highlights


environmental Protections in PlaceSince its inception, Platte River has demonstrated a strong commitment to environmental stewardship.

In May 2011, Colorado Governor John Hickenlooper signed legislation accepting the Regional Haze Rule State Implementation Plan (SIP) approved by the Colorado Air Quality Control Commission. The Regional Haze SIP requires nitrogen oxide (NOx) emission reductions at Rawhide Unit 1

as well as NOx and sulfur dioxide (SO2) reductions at other coal-fired units. The Regional Haze SIP received preliminary approval from the EPA in March 2012. Following a period for public comment, the EPA issued its final approval on September 11, 2012. The SIP was published in the Federal Register on December 31, 2012, triggering implementation provisions. Compliance with the regional haze limits must be achieved as “expeditiously as practicable” but no later than 2017.

An advanced combustion control system that reduces NOx emissions has been in use at Rawhide Unit 1 since 2005 when a Platte River-initiated Voluntary Emissions Reduction Agreement (VERA) with the Colorado Air Pollution Control Division was implemented. The Regional Haze SIP requires additional reductions beyond Rawhide’s VERA NOx emission rates. During a five-week maintenance project carried out in March 2012, elements of Rawhide’s boiler combustion control equipment and computer control systems were redesigned and enhanced to further reduce NOx emissions. These actions, along with subsequent boiler combustion tuning and control system optimization efforts, lowered NOx emission rates by about 30 percent from the VERA limit, thus achieving the SIP’s NOx reduction requirement.

The VERA also addressed SO2 reduction. These VERA SO2 scrubber improvements resulted in enhanced removal capability that also ensures compliance with the SIP’s Rawhide SO2 limit. The 2012 SO2 emission rate met the SIP’s reduction requirement for Rawhide Unit 1.

The 2008 Colorado Utility Mercury Reduction Rule requires significant emission reductions from coal-fired power plants. A state-of-the-art brominated powdered activated carbon injection system was installed on Rawhide Unit 1 in October 2010. Operational tests of the mercury control system were conducted during 2010 and 2011. The system was placed into full-time use in January 2012 and successfully reduced mercury emissions to less than the limit of 0.0174 pounds per gigawatt-hour (lb/GWh) of electricity generated. The 12-month rolling average emissions limit

NOx

EmissiONs REducEd

additiONal 30%

16


was achieved during the rule’s first compliance period ending December 31, 2012. The rule contains emissions monitoring, recordkeeping, and reporting requirements that are fully implemented and also specifies that beginning in 2018 the 12-month rolling average limit will drop from 0.0174 lb/GWh to 0.0087 lb/GWh.

The EPA Mercury and Air Toxics Standard (MATS) regulation was published in the Federal Register on February 16, 2012 and became effective on April 16, 2012. MATS regulates mercury, non-mercury metals, acid gases, and organic emissions from oil and coal-fired electric utility boilers. Rawhide’s

compliance with the MATS emission limits must be achieved by April 2015. Operational impacts of this federal rule at Rawhide are anticipated to be minor, primarily consisting of additional monitoring, recordkeeping and reporting, and new continuous particulate matter monitoring and/or stack testing. This is due to the fact that Platte River installed mercury monitoring and mitigation equipment earlier than required (as part of the Colorado state mercury program), and already operates a state-of-the-art SO2 scrubber and baghouse particulate control system that also control MATS-regulated acid gas and non-mercury metal emissions.

“The opportunity to observe the harmony that can exist between buffalo, which once inhabited the Rawhide site, and Platte River’s modern facility that will produce energy there, will provide an invaluable lesson in the way a coal-fired power plant can be operated without environmental degradation.” —albert J. Hamilton, Platte River’s general manager, 1973-1984

The original Rawhide Bison herd was purchased in November 1983 from a ranch in Wray, Colorado.

18

Factors impact electric RatesThe Power Supply Agreements with the municipalities require that rates be sufficient to cover all operating and maintenance expenses, purchase power costs, and debt service expenses. Rates must also provide for the establishment of reasonable reserves and adequate earnings margins so that Platte River may obtain favorable debt financing. The Power Supply Agreements also require Platte River’s Board of Directors to review rates at least once each calendar year.

At its October 2012 meeting, the Board approved a 5.1 percent increase in the firm resale power service rate, effective January 1, 2013. Factors contributing to the need for a rate increase included increasing costs for coal to supply Rawhide Unit 1, reduced surplus sales revenues and slower than anticipated load growth. Platte River has worked aggressively to control costs by optimizing generation efficiency, managing operating and maintenance expenses for generation and transmission facilities, and maintaining low debt service.

While the U.S. Consumer Price Index rose 130 percent in the past 30 years, the price Platte River charges to its municipalities for electricity is only 37 percent higher than it was in 1983. Customers served by Platte River’s owner municipalities will continue to benefit from electric rates that are significantly lower than those of neighboring utilities.

$60.41 $61.45 $63.60 $65.14

$71.13$78.84 $79.66 $79.70

$89.43 $91.15 $92.91 $93.84

$108.98

Loveland(winter)

Longmont Fort Collins(winter)

Estes Park Xcel(winter)

Xcel(summer)

PVREA UnitedPower

Black HillsColoradoSprings

CheyenneLoveland(summer)

Fort Collins(summer)

ResIdeNTIaL eLeCTRIC BILLs

Averages for 716 kWh/month


Bonds issuedPlatte River issued its Series II bonds in March 2012 using $42 million of the proceeds to refund a portion of the outstanding Series EE bonds. The true interest cost of the Series II bonds is 3.16 percent, and the net present value savings for the refunded bonds exceeds $4.6 million. The remaining $30 million of the proceeds from the Series II bonds will be used to reimburse and fund transmission facility additions and upgrades.

Platte River’s strong credit rating was a key to obtaining a low interest rate for the Series II bonds. Prior to the sale, all three national bond rating agencies rated the bonds double-A with a stable outlook. The agencies also affirmed Platte River’s double-A ratings on all outstanding Power Revenue Bonds. Rationale behind the ratings included strong historical and projected debt service coverage, prudent risk management procedures, the creditworthiness of Platte River’s four owner municipalities, strength of the local economy, and a continued commitment of the Board to raise rates when necessary to sustain strong financial performance.

Low-sulfur coal from Wyoming is delivered to the Rawhide energy station.

20

improvements Made at Rawhide energy StationPlatte River maintains an aggressive plan for preventative maintenance and improvements at its facilities. Implementation of the plan is crucial for optimizing the value of Platte River’s assets and maintaining optimal efficiency and reliability. As part of the plan, Rawhide Unit 1 was offline March 3, 2012 through April 3, 2012 for a scheduled maintenance outage. Several projects were completed during the outage at a total cost of $9.5 million:

• Installation of new boiler air dampers and coal and air nozzle tips to reduce NOx emissions.

• Installation of new equipment to reduce wear on coal conveyor belts, prevent coal spillage, and improve dust containment.

• Installation of a new turbine overspeed protection control system. This system can be tested without taking the turbine rotors to an overspeed condition that has recently caused catastrophic failures of turbine generator rotors at other units across the country.

• Replacement of aging equipment within the SO

2 removal system to ensure that

the system continues to operate at the highest level of efficiency.

• Chemical cleaning of the boiler tubes to remove iron deposits and increase the efficiency of the boiler.

• Inspection of low pressure turbine blades, steam pipes, and valves.

As a testament to the effectiveness of Platte River’s maintenance practices, Rawhide Unit 1 was included in a list of the best-utilized U.S. coal-fired power plants based on the latest data available from the Energy Information Administration published in the November/December 2012 edition of Electric Light & Power (EL&P) magazine. According to EL&P, Rawhide’s 2011 capacity factor of 93.9 percent was the eighth highest in the nation. The average 12-month capacity factor for all 520 U.S. coal-fired power plants in the analysis was 62.8 percent. Capacity factor is a measure of power plant utilization calculated as the ratio of the actual output of the plant over a period of time to its output if it had operated at full capacity over the same period of time.

Rawhide Unit 1 is the only plant EL&P has ranked in its top 10 in each of the last three years.


Water Resources Remain a High Priority Water is essential for the steam generation process at Rawhide Unit 1. In light of frequent drought conditions in the western United States, managing water resources is a priority for Platte River.

To help ensure an adequate water supply, Platte River owns rights to 160 Units from the Windy Gap Project located near Granby, Colorado. The Windy Gap Project diverts water from the Colorado River to Colorado’s Front Range. Due to storage limitations and other factors, Platte River and other Windy Gap owners have had some difficulty in the past relying on Windy Gap deliveries to meet their water needs. The proposed Windy Gap Firming Project (WGFP) involves the construction of a reservoir approximately nine miles southwest of Loveland, Colorado, to store Windy Gap water in order to “firm” the reliability of future water deliveries. Platte River is a participant in the WGFP, along with regional water districts and cities, including Longmont and Loveland.

The U.S. Bureau of Reclamation published the Final Environmental Impact Statement for the WGFP in November 2011, and currently plans to issue a Record of Decision (ROD) in late 2013. The ROD has been delayed pending completion of a U.S. Army Corps of Engineers permit, an Intergovernmental Agreement with Grand County and other western Colorado entities addressing issues associated with water diversions on the Colorado River, and a revision of the contract with the Bureau for the storage, transport and delivery of Windy Gap water.

All agreements and permits described above are expected to be completed in 2013. Design of the WGFP could start by late 2013 or early 2014 and construction in late 2015 or early 2016, with a goal of having the project ready to fill in the spring of 2019.

Hamilton Reservoir provides cooling water for the Rawhide energy station as well as a sanctuary for waterfowl.

Completion of a new transmission line in 2012 enhanced electrical reliability for Fort Collins and Loveland residents.


Major Transmission Project CompletedAs part of a long-term plan to ensure a continued high level of electrical reliability in the owner municipalities, Platte River completed the 9.4-mile Dixon Creek-Horseshoe transmission project one month ahead of schedule on April 30, 2012. The project was completed in three phases over four years at a cost of $36 million. It involved rebuilding 115 kilovolt transmission lines owned by Tri-State Generation and Transmission Association, Inc. and Western Area Power Administration, and construction of a new Platte River 230 kilovolt line between Fort Collins and Loveland. Additionally, new 115 kilovolt and 230 kilovolt facilities were constructed at the Horseshoe Substation in Loveland.

Completion of the project provides a second 230 kilovolt transmission source to Loveland, offering enhanced electrical reliability to the community. It also alleviates potential situations on Platte River’s and neighboring transmission systems that could have led to outages in Fort Collins, Loveland, and surrounding areas.

Platte River’s environmental staff worked closely with the City of Fort Collins Natural Resources Department throughout the project to mitigate impacts on public lands. Restoration of construction areas began immediately upon the completion of the project and will continue until vegetative recovery is complete.

Installation of additional equipment at the Timberline Substation was also completed in April 2012 to accommodate future development on the east side of Fort Collins.

24

Planning Addresses Future GrowthLong-term electrical reliability requires continual planning. Platte River’s Integrated Resource Plan (IRP) provides criteria and a methodology for estimating the future electricity requirements of the municipalities. The 2012 edition of the IRP focuses primarily on the five-year period from 2012 to 2016, but also includes consideration of longer term planning issues. As the economy continues to improve and the populations of Platte River’s municipalities grow, demand for electricity is expected to increase. The IRP estimates that additional sources of firm capacity will be needed in approximately 2019.

25

0,0

51

279

,86

8

30

3,7

21

33

5,0

00

372

,00

0

2000 2005 2010 2015 2020

HIsToRICaL aNd PRoJeCTed FuTuRe PoPuLaTIoN

Platte River’s Four Municipalities

Sources: Colorado State Demography Office (Historical) and Platte River Power Authority (Future)

24

http://www.prpa.org/sources/i/irp.pdf


aVeRaGe MoNTHLY eMPLoYMeNT

HoMe PRICe INdex

Source: Colorado Dept. of Labor and Employment, Fort Collins-Loveland Metropolitan Statistical Area (includes Estes Park)

Source: Federal Housing Finance Agency, Fort Collins-Loveland Metropolitan Statistical Area (includes Estes Park)

Per

son

s e

mp

loye

d

2007 2008 2009 2010 2011 2012

160,000

162,000

164,000

166,000

168,000

170,000

Ho

me

Pri

ce In

dex

(1

st Q

uar

ter

199

5=

100

)

2007 2008 2009 2010 2011 2012172

173

174

175

176

177

178

179

180

181

182

25

26

Customers Save energy and MoneyThe customers of Platte River’s owner municipal utilities have a demonstrated desire for services that help them save energy. Accordingly, Platte River works together with the utilities to offer a number of “common” demand side management programs—programs offered to customers in all the municipalities with coordination and some or all of the funding provided by Platte River.

In 2012, Platte River and the municipalities invested over $2.5 million in these programs to help participating customers reduce electricity consumption by approximately 16.3 million kilowatt-hours (equivalent to the annual energy use of about 1,900 average homes) and lower their combined electric bills by more than $1 million per year.

To help customers save even more energy, each of the four owner municipalities offers programs in addition to the common programs.

eNeRGY eFFICIeNCY - INVesTMeNTs aNd saVINGs

an

nu

al e

ner

gy

savi

ng

s (M

Wh

)

Year

ly In

vest

men

t (m

illio

ns)

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

0

$0.3

$0.6

$0.9

$1.2

$1.5

$1.8

$2.1

$2.4

$2.7

$3.0

$0.02002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


In 2012, Platte River, Poudre Valley REA (PVREA), and Northern Colorado ENERGY STAR

®

Homes sponsored a nonprofit organization called Energy Select Contractors, Inc. Energy Select Contractors has been approved by the U.S. Environmental Protection Agency (EPA) as a heating, ventilation, and air conditioning (HVAC) Quality Installation Training and Oversight Organization (H-QUITO), an independent third-party organization that will provide the required training and oversight activities for HVAC contractors who wish to perform installations in new ENERGY STAR homes. Energy Select Contractors will serve as an H-QUITO in Platte River’s four municipalities and in PVREA’s territory for a 30-month period while the EPA seeks a longer-term, national solution to meet the training needs of HVAC contractors.

efforts Produce a Stronger WorkforceAttracting and retaining employees with the right skills and qualifications to meet operational needs and developing employees for the future are critical to the ongoing success of Platte River. As a result of turnover and promotions, 21 positions were filled during 2012.

In 2012, employee development activities included the design and implementation of a new senior leadership development program to enhance leadership abilities of current and new senior level managers. A monthly leadership training series was implemented for all supervisors, which covered key topics such as problem solving, managing change, delegating, and other

core skill areas. An updated apprenticeship program document was filed with the Colorado Department of Labor for four key craft jobs in both substations and power production. To support those efforts, an industry-leading, online training delivery system was implemented to provide modular- based training in these areas. Platte River also sponsored 20 interns from Front Range Community College for one week job shadowing programs at Rawhide.

A new performance management process was implemented in 2012, which expanded the evaluation categories to include both job- related results as well as key competencies expected of all employees. Throughout the year, areas of emphasis included internal customer service, continuous improvement, and compliance with a myriad of employment laws and regulations.

http://nocoenergystarhomes.org



http://www.energyselectcontractors.com/

http://www.energyselectcontractors.com/

28

Key to engaging the workforce is being able to listen and respond to employee issues and concerns, recognizing personal milestones and accomplishments, and communicating business decisions in a timely and effective manner. The monthly Power Source employee newsletter serves to help deliver information, as do monthly business meetings.

Focus on Health and Safety Benefits employeesPlatte River considers the health, safety, and well-being of its employees to be of utmost importance. A comprehensive health screening fair was offered to employees, as well as flu shots and health information. The goal is to help employees identify any health issues they may not be aware of. Classes on cardiopulmonary resuscitation (CPR) and use of automated external defibrillators are provided to all employees annually. One-hundred percent of Rawhide employees received this first aid training in 2012.

A focus on safety is an important part of Platte River’s culture, and employee training sessions are a regular occurrence. In 2012 Platte River’s Safety Department conducted 22 training sessions on topics such as confined space entry procedures, fall protection, inspection of safety equipment, bucket truck rescue, and controlled energy (e.g., lockout/tagout) procedures. Additionally, over 140 employees participated in annual fire extinguisher training. Safety also provided a variety of training specific to hazards employees face in their normal job assignments.


In addition to training, the Safety Department’s 2012 accomplishments included the acquisition of specialized safety equipment. A controlled descent system was purchased to enable substation technicians to self-rescue out of aerial lifts in an emergency. An engineered fall protection system was acquired and used by employees working in the baghouse ductwork during the spring maintenance outage at Rawhide. Also during the outage, aging fire suppression system valves were replaced with new self-resetting automatic deluge valves to improve operability and reliability. All of these systems were selected specifically to ensure safe work practices and prevent injury.

Proactive safety procedures such as lockout/tagout keep workers safe.

30

Glossary of Terms

Baghouse: A structure that houses tubular-shaped fabric bags used to filter and collect particulates from the gases created during combustion.

Circuit: A pathway through which electricity moves.

Consumer Price Index: A measure of the cost of goods purchased by average U.S. households. It is calculated by the U.S. government’s Bureau of Labor Statistics.

Demand Side Management: Activities designed to encourage consumers to modify patterns of electricity usage, including the level and timing of electricity demand (see Electricity Demand).

Electric System: Physically interconnected generating plants, transmission lines, and related equipment operated as an integrated unit.

Electricity Demand: The amount of electricity used by consumers at a given point of time.

Greenhouse Gas: A gaseous component of the atmosphere that traps some of the heat coming from the sun near the Earth’s surface. Greenhouse gases include water vapor, carbon dioxide, methane, nitrous oxide, and chlorofluorocarbons.

Gigawatt–hour (GWh): One billion watt-hours (see Watt-hour).

Integrated Resource Plan (IRP): A plan for meeting customers’ future electricity needs through acquisitions of generation resources (including renewable) and implementation of demand side management programs. As a customer of Western Area Power Administration, Platte River is required to submit an IRP every five years (see Demand Side Management and

Western Area Power Administration).

Kilovolt (kV): One thousand volts (see Volt).

Kilowatt (kW): One thousand watts (see Watt).

Kilowatt–hour (kWh): One thousand watt-hours (see Watt-hour).

Load: The amount of electric power delivered or required at any specific point or points on an electric system. The requirement originates at the electricity-consuming equipment of customers (see Electric System).

Lockout/Tagout: Refers to specific practices and procedures to safeguard employees from the unexpected energization or startup of machinery and equipment, or the release of hazardous energy during service or maintenance activities.

Megawatt (MW): One million watts (see Watt).


Megawatt–hour (MWh): One million watt-hours (see Watt-hour).

Mercury: A chemical element that can be deposited into bodies of water by natural sources such as soil and rock erosion, volcanoes and forest fires, and by human activities such as mining, manufacturing, and coal burning. Mercury contained in certain types of fish eaten by pregnant women or children is a health concern.

Nitrogen Oxide (NOx): A by-product of combustion. If not handled properly, NOx can combine with water, oxygen, and other chemicals in the atmosphere to create haze and ozone.

Substation: An electric system facility used to change voltage from one level to another and/or switch circuits or lines in- and out-of-service (see Circuit, Electric System,

and Voltage).

Sulfur Dioxide (SO2): A by-product of combustion. If not handled properly, SO2 can combine with water, oxygen, and other chemicals in the atmosphere to create acid rain.

Surplus Sales: Sales of energy and power generated in excess of the amount needed by Platte River’s owner municipalities.

Transformer: A device used to raise or lower voltage. For example, electricity is transported over long distances in high-voltage power lines and then transformers lower the voltage so that the electricity can be used by household appliances (see Voltage).

Transmission Lines: A system of structures, wires, and associated equipment that carry electricity from one point

to another in an electric system. Lines are operated at relatively high voltages varying from 69 thousand volts up to 765 thousand volts, and are capable of transmitting large quantities of electricity over long distances (see Electric System, Voltage).

Volt: Unit of measure for voltage (see Voltage).

Voltage: The force that causes electricity to flow through a circuit (see Circuit).

Watt: A unit of electric power.

Watt-hour: The amount of energy used in one hour by a device requiring one watt of electricity for operation (see Watt).

Western Area Power Administration: An agency of the U.S. Department of Energy. Western’s mission is to market and transmit hydroelectric power generated at federal dams to preference customers.

32

Report of Management Platte River Power Authority’s management is responsible for the preparation, integrity, and objectivity of the financial statements and related information included in this Annual Report. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and, where required, reflect amounts based on the best estimates and judgments of management.

Platte River maintains a strong internal control structure designed to provide reasonable assurance that transactions are executed in accordance with management’s authorization, that financial statements are prepared in conformity with generally accepted accounting principles, and that assets are safeguarded.

Platte River’s internal auditor evaluates internal controls for adherence to company policies and procedures on an ongoing basis and reports findings and recommendations for possible improvements to management. In addition, the independent auditors consider elements of the internal control system in determining the nature and scope of their audit procedures in performing the annual audit of Platte River’s financial statements.

The Board of Directors, whose members are not employees of Platte River, periodically meet with the independent auditors and management to discuss the audit scope, audit results, and any recommendations to improve the internal control structure. The Board of Directors directly engages the independent auditors.

David D. SmalleyChief Financial Officer

Jacqueline A. SargentGeneral Manager


Platte River Power Authority

independent Auditor’s Report and Financial Statements

december 31, 2012 and 2011

34

Contents

Independent Auditor’s Report on Financial Statements and Supplementary Information...............

Management’s Discussion and Analysis (Unaudited)...

FINaNCIaL sTaTeMeNTs

Statements of Net Position............................................

Statements of Revenues, Expenses and Changes in Net Position..........................................

Statements of Cash Flows..............................................

Notes to Financial Statements.......................................

Other Information (Unaudited).....................................

35

38

45

47

48

49

70


Management’s Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement

of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to Platte River’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Platte River’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

opinionIn our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Platte River as of December 31, 2012 and 2011, and the changes in its financial position and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

independent Auditor’s Report on Financial Statements and Supplementary information

We have audited the accompanying basic financial statements of Platte River Power Authority (Platte River), which are comprised of the statements of net position as of December 31, 2012 and 2011, and statements of revenues, expenses and changes in net position and of cash flows for the years then ended, and the related notes to the financial statements as listed in the table of contents, of Platte River Power Authority.

Board of directors Platte River Power AuthorityFort Collins, Colorado

36

independent Auditor’s Report on Financial Statements and Supplementary information

Required Supplementary informationAccounting principles generally accepted in the United States of America require that the management’s discussion and analysis listed in the table of contents be presented to supplement the basic financial statements. Such information, although not part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

other informationOur audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise Platte River’s basic financial statements. The Other Information (Budgetary Comparison Schedule) listed in the table of contents, is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it.

Denver, ColoradoMarch 11, 2013


Management’s Discussion and Analysis (Unaudited)

(This page intentionally left blank.)

38


Management’s discussion and Analysis (unaudited)december 31, 2012 and 2011

This discussion and analysis provides an overview of the financial performance of Platte River Power Authority (Platte River) for the fiscal years ended December 31, 2012 and December 31, 2011. The information presented should be read in conjunction with the basic financial statements and accompanying notes to the financial statements.

Platte River operates as a utility enterprise and follows the Uniform System of Accounts prescribed by the Federal Energy Regulatory Commission (FERC). Platte River has implemented all applicable Governmental Accounting Standards Board (GASB) pronouncements. The accompanying financial statements are prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America.



• Platte River reported income before contributions of $11.4 million in 2012, approximately the same as 2011. An increase in operating revenues and a decrease in operating expenses were offset by an increase in nonoperating expenses, net.

• Municipal sales increased $9.2 million in 2012 over 2011 as the result of a 0.3% growth in energy deliveries and a 6.1% average wholesale rate increase.

• Surplus sales revenue (sales for resale and other) decreased $8.0 million in 2012 compared to 2011 resulting from lower contract sales and lower short-term sales. The contract sales decreased $2.5 million with the Tri-State contract ending on May 31, 2012. Short-term sales decreased $5.5 million with lower energy sales and a lower average selling price.

• During 2012, a scheduled four-week maintenance outage for Rawhide Unit 1 (Rawhide) was completed. The focus of the outage was on preventative maintenance and capital improvements to increase efficiency and reliability of the unit. Outage costs included $7.0 million for operations and maintenance expenses and $2.3 million for capital additions.

• Purchased power costs for 2012 decreased $5.7 million compared to 2011 due to favorable replacement power costs during the Rawhide outage. Estimated replacement power costs for the outage were previously accrued in prior years.

• Fuel expense increased $1.4 million in 2012 compared to 2011 as the result of higher coal and transportation costs partially offset by lower generation from the thermal units.

• Depreciation expense in 2012 increased $2.5 million over 2011 as the result of new plant placed in service during 2011 and 2012. The majority of the new plant was for the 230kV transmission expansion projects.

• Nonoperating expenses, net, increased $1.6 million in 2012 compared to 2011 primarily due to lower allowance for funds used during construction. Also, other income increased as a result of leasing surplus water, and lower interest income offset a lower net decrease in fair value of investments.

• The Series II Power Revenue Bonds were issued in 2012 for a par amount of $65.5 million. The proceeds from the bonds were used to refund the remaining Series EE Power Revenue Bonds, $42.1 million, and to provide funding of $30.3 million for transmission capital additions.

• Capital expenditures (budgetary basis) of $16.3 million were made in 2012 for new additions and upgrades to the electric system. The largest portion, $9.0 million, was for production projects completed during the Rawhide outage and various upgrades to the Craig Units. Transmission additions totaled $5.9 million and included expenditures for the completion of the 230kV transmission expansion project. The last portion for the Dixon Creek to Horseshoe transmission line and Horseshoe substation was placed in service in April 2012. General additions totaled $1.4 million and included communication, facility and information technology projects.

Financial Highlights

40


Condensed Financial StatementsThe following condensed statements of net position and condensed statements of revenues, expenses and changes in net position summarize Platte River’s financial position and changes in financial position for 2012, 2011, and 2010.

CoNdeNsed sTaTeMeNTs oF NeT PosITIoN

december 31,

2012 2011 2010

(In thousands)

Assets:

Electric utility plant $ 604,603 $ 622,121 $ 619,731

Special funds and investments 86,039 60,685 80,639

Current and other assets 83,366 87,444 72,273

Total assets $ 774,008 $ 770,250 $ 772,643

Liabilities and net position:

Liabilities

Noncurrent liabilities $ 267,298 $ 259,537 $ 286,159

Current liabilities 37,386 52,638 39,663

Total liabilities 304,684 312,175 325,822

Net position

Net investment in capital assets 331,868 342,103 326,761

Restricted 24,772 24,608 23,940

Unrestricted 112,684 91,364 96,120

Total net position 469,324 458,075 446,821

Total liabilities and net position $ 774,008 $ 770,250 $ 772,643



• Electric utility plant decreased $17.5 million during 2012 as the result of an increase in accumulated depreciation and a decrease in construction work in progress partially offset by capital expenditures. In 2011, electric utility plant increased $2.4 million as the result of substantial capital expenditures for the transmission system expansion and other capital additions. Additional details about electric utility plant can be found in Note 4 to the financial statements.

• Special funds and investments at December 31, 2012 increased $25.4 million over December 31, 2011. The increase was primarily the result of issuing new debt, the Series II Bonds. Special funds and investments at December 31, 2011 decreased $20.0 million from December 31, 2010. The decrease was primarily the result of transmission capital expenditures from the Series HH construction fund and dedicated funds.

• Current and other assets decreased $4.1 million during 2012 as the result of a decrease in cash and cash equivalents and deferred charges, partially offset by an increase in other accounts receivable, materials and supplies inventory, and prepayments. Current and other assets increased $15.2 million during 2011 as a result of an increase in cash and cash

equivalents and fuel inventory, partially offset by a decrease in other accounts receivable. The primary factor for the increase in fuel inventory was lower generation at Craig Station due to a major maintenance outage and lack of demand in off-peak hours.

• Noncurrent liabilities increased $7.8 million in 2012 primarily as the result of the issuance of the Series II Bonds. An increase in the accrued maintenance outage liability was offset by a decrease in the capitalized lease obligation. Noncurrent liabilities decreased $26.6 million in 2011 as the result of scheduled principal debt payments, partially offset by a decrease in regulatory liabilities for the reclassification for the accrual of maintenance outage expenses to current liabilities (the outage was scheduled for spring 2012). Additional details about long-term debt can be found in Note 7 to the financial statements.

• Current liabilities decreased $15.3 million in 2012 due to the maintenance outage costs classified as short-term in 2011 for the Rawhide outage and a decrease in accounts payable resulting from less construction activity at the end of the year. Current liabilities increased $13.0 million in 2011 due to the maintenance outage costs reclassified to current liabilities and an increase in accounts payable.

Net PositionTotal net position at December 31, 2012 was $469.3 million, an increase of $11.2 million over 2011. In 2011, net position totaled $458.1 million, an increase of $11.3 million over 2010.

42


CoNdeNsed sTaTeMeNTs oF ReVeNues, exPeNses aNd CHaNGes IN NeT PosITIoN

Years ended december 31,

2012 2011 2010

(In thousands)

Operating revenues $ 182,635 $ 181,443 $ 176,222

Operating expenses 160,918 161,284 162,644

Operating income 21,717 20,159 13,578

Nonoperating expenses, net (10,313) (8,750) (8,155)

Income before contributions 11,404 11,409 5,423

Contributions of assets

to municipalities (155) (155) (155)

Change in net position 11,249 11,254 5,268

Beginning net position 458,075 446,821 441,553

Ending net position $ 469,324 $ 458,075 $ 446,821

Change in Net Position Net position increased $11.2 million in 2012, approximately the same as 2011. An increase in operating revenues and a decrease in operating expenses were offset by an increase in nonoperating expenses, net. The $11.2 increase in net position reported in 2011 reflects an increase of $6.0 million over 2010. This change was primarily due to an increase in operating revenues and a decrease in operating expenses.

• Operating revenues in 2012 increased $1.2 million over 2011. This increase was due to a $9.2 million increase in municipal sales partially offset by an $8.0 million decrease in surplus sales. Operating revenues in 2011 increased $5.2 million over 2010. This increase was due to a $12.2 million increase in municipal sales partially offset by a $7.0 million decrease in surplus sales.

• Operating expenses in 2012 decreased $0.4 million from 2011. This decrease was primarily due to lower purchased power costs partially offset by increases in depreciation, fuel, and operations and maintenance expenses. Operating expenses in 2011 decreased $1.4 million from 2010. This decrease was primarily due to lower fuel expenses resulting from the Craig Unit 1 outage and lower generation.

• Nonoperating expenses, net, in 2012 increased $1.6 million over 2011. The largest change was a decrease in the allowance for funds used during construction due to the majority of the transmission capital projects being completed by 2012. This was partially offset by decreases



in amortization of bond financing costs and interest expense. Also, increases in other income and in the fair value of investments were offset by a reduction in interest income. Nonoperating expenses, net, in 2011 increased $0.6 million over 2010. Decreases in interest income, other income and the allowance for funds used during construction were partially offset by a decrease in interest expense and the fair value of investments.

oPeRaTING ReVeNues aNd exPeNses (In millions)

$0$20$40$60$80

$100$120$140$160$180

Municipal Sales Contract Surplus Sales Short-Term Surplus Sales

2012

2011

2010

operating Revenues

operating expenses

$0

$10

$20

$30

$40

$50

Purchased Power

Fuel Operations & Maintenance

Administrative & General

Depreciation

2012

2011

2010

44


debt RatingsMoody’s, Standard & Poor’s (S&P) and Fitch Ratings assigned ratings of Aa2, AA and AA, respectively, to Platte River’s Series II Bonds issued in March 2012. The ratings on Platte River’s existing bonds remained unchanged. The Series EE Bonds, maturing on June 1, 2013 to 2018, were refunded with proceeds from the Series II Bonds.

Bond Issue Moody’s s&P Fitch

Power Revenue Bonds Series GG Aa2 AA AA Series HH Aa2 AA AA Series II Aa2 AA AA

Budgetary HighlightsPlatte River’s Board of Directors approved the 2012 Annual Budget with total revenues of $187.1 million, operating expenses of $135.2 million, debt service expenditures of $32.8 million and capital additions of $24.0 million. A portion of the capital additions funding was provided from the proceeds of the Series II Bonds. The following budgetary highlights are presented on a non-GAAP budgetary basis.

Total operating revenues of $182.6 million ended the year $3.7 million, or 2.0%, below budget. Municipal sales of $159.7 million were $1.4 million below budget due to below-budget variances in billing demand and energy deliveries. Surplus sales totaled $22.9 million in 2012 and were $2.3 million below budget resulting from lower-than-budgeted surplus sales market prices and lower kWh energy sales.

Operating expenses totaled $127.5 million and were $7.8 million, or 5.7%, below budget. All expense categories came in under budget for the year. Fuel was the largest variance, $4.4 million below budget, due to 4.1% lower-than-budgeted generation from the thermal units and lower average coal prices. Production expenses were $2.5 million below budget with lower-than-budgeted operations and maintenance costs for Rawhide Unit 1 and Craig Units 1 and 2. Purchased power was $0.4 million below budget due to lower reserve purchases. Transmission expenses were $0.3 million below budget due to lower contracted services. Administrative and general expenses were $0.2 million below budget with below-budget office expenses and contracted services.

Debt service expenditures, net of allowance for funds used during construction, totaled $32.9 million and were $0.1 million higher than budget. This variance is due to the issuance of the Series II Bonds in March 2012.

Capital additions of $16.3 million in 2012 were $7.7 million below budget. All categories came in below budget; however, the majority of this variance was the result of below-budget production additions due to project schedule changes and canceled projects. A portion of the variance will be carried over to the 2013 Annual Budget in order to complete the projects that were not completed in 2012.


Financial Statements - Statements of Net Position

december 31,

2012 2011

(In thousands)

asseTs

Electric utility plant, at original cost (Notes 3 and 4):

Land and land rights $ 14,517 $ 14,517

Plant and equipment in service 1,250,253 1,201,938

Less: accumulated depreciation (680,705) (647,664)

Plant in service, net 584,065 568,791

Construction work in progress 20,538 53,330

Total electric utility plant 604,603 622,121

Special funds and investments (Note 5):

Restricted funds and investments 31,945 25,673

Dedicated funds and investments 54,094 35,012

Total special funds and investments 86,039 60,685

Current assets:

Cash and cash equivalents (Notes 3 and 5) 14,363 17,633

Other temporary investments (Note 5) 21,404 21,301

Accounts receivable—municipalities 12,725 12,662

Accounts receivable—other 5,719 4,706

Fuel inventory, at last-in, first-out cost 11,120 11,249

Materials and supplies inventory, at average cost 11,200 10,717

Prepayments and other assets 1,557 1,082

Total current assets 78,088 79,350

Deferred charges and other assets, net of

amortization (Note 3):

Regulatory asset (Note 9) 2,492 2,893

Other deferred charges 2,786 5,201

Total deferred charges and other assets 5,278 8,094

Total assets $ 774,008 $ 770,250

sTaTeMeNTs oF NeT PosITIoN

See accompanying notes.

46

Financial Statements - Statements of Net Position

december 31,

2012 2011

(In thousands)

LIaBILITIes aNd NeT PosITIoN

Noncurrent liabilities (Notes 3 and 6):

Long-term debt, net (Note 7) $ 244,020 $ 236,224

Capitalized lease obligation (Note 8) 11,708 14,225

Regulatory liabilities and credits (Note 9) 2,879 –

Deferred / accrued liabilities 8,691 9,088

Total noncurrent liabilities 267,298 259,537

Current liabilities:

Current maturities of long-term debt (Notes 6 and 8) 21,265 20,330

Current portion of capitalized lease obligation (Note 6) 2,517 2,388

Regulatory liabilities and credits (Note 9) – 9,642

Accounts payable 11,029 18,085

Accrued interest 1,010 1,073

Accrued liabilities and other 1,565 1,120

Total current liabilities 37,386 52,638

Total liabilities 304,684 312,175

Net position:

Net investment in capital assets (Note 10) 331,868 342,103

Restricted 24,772 24,608

Unrestricted 112,684 91,364

Total net position 469,324 458,075

Total liabilities and net position $ 774,008 $ 770,250

sTaTeMeNTs oF NeT PosITIoN



Financial Statements - Statements of Revenues, expenses and Changes in Net Position


2012 2011

(In thousands)

Operating revenues (Note 3):

Sales to municipalities $ 159,675 $ 150,474

Sales for resale and other 22,960 30,969

Total operating revenues 182,635 181,443

Operating expenses:

Purchased power 22,262 27,979

Fuel 44,417 43,025

Operations and maintenance 49,420 47,976

Administrative and general 11,316 11,330

Depreciation 33,503 30,974

Total operating expenses 160,918 161,284

Operating income 21,717 20,159

Nonoperating revenues (expenses) (Notes 5 and 7):

Interest income 737 946

Other income 822 351

Interest expense (12,092) (13,815)

Allowance for funds used during construction 381 4,115

Net decrease in fair value of investments (Note 5) (161) (347)

Total nonoperating revenues (expenses) (10,313) (8,750)

Income before contributions 11,404 11,409

Contributions of assets to municipalities (Note 13) (155) (155)

Change in net position 11,249 11,254

Net position at beginning of year 458,075 446,821

Net position at end of year $ 469,324 $ 458,075

sTaTeMeNTs oF ReVeNues, exPeNses aNd CHaNGes IN NeT PosITIoN


48

Financial Statements - Statements of Cash Flows


2012 2011

(In thousands)

Cash flows from operating activities

Receipts from customers $ 181,483 $ 185,233

Payments for operating goods and services (109,195) (105,518)

Payments for employee services (27,934) (25,404)

Net cash provided by operating activities 44,354 54,311

Cash flows from capital and related financing activities

Additions to electric utility plant (14,930) (21,360)

Payments from accounts payable incurred for electric utility plant additions (7,889) (8,611)

Reductions (additions) to deferred charges and other assets 1,961 (172)

Deposits into escrow for bond defeasance (42,130) –

Proceeds from issuance of long-term debt 72,388 –

Principal payments on long-term debt (20,330) (19,365)

Interest payments on long-term debt (12,480) (13,271)

Contributions to municipalities related to assets (155) (155)

Net cash used in capital and related financing activities (23,565) (62,934)

Cash flows from investing activities

Purchases and sales of temporary and restricted investments, net (25,463) 19,498

Interest and other income, including realized gains and losses 1,404 2,283

Net cash (used in) provided by investing activities (24,059) 21,781

(Decrease) increase in cash and cash equivalents (3,270) 13,158

Balance at beginning of year in cash and cash equivalents 17,633 4,475

Balance at end of year in cash and cash equivalents $ 14,363 $ 17,633

sTaTeMeNTs oF CasH FLoWs


Financial Statements - Statements of Cash Flows


2012 2011

(In thousands)

Reconciliation of operating income to net cash provided by operating activities

Operating income $ 21,717 $ 20,159

Adjustments to reconcile operating income to

net cash provided by operating activities:

Depreciation 33,503 30,974

Changes in assets and liabilities:

(Increase) in fuel and materials and supplies inventories (354) (4,950)

(Increase) decrease in other assets (1,552) 3,082

(Decrease) increase in current operating liabilities (9,338) 12,795

Increase (decrease) in other liabilities 378 (7,749)

Net cash provided by operating activities $ 44,354 $ 54,311

Noncash capital and related financing activities

Additions of electric utility plant through incurrence of accounts payable $ 674 $ 7,889

Amortization of bond related costs (341) 608

Notes to Financial Statements1. OrganizationPlatte River Power Authority (Platte River) was organized in accordance with Colorado law as a separate governmental entity by the four municipalities of Estes Park, Fort Collins, Longmont, and Loveland. Platte River contracted to supply the wholesale electric power and energy requirements of each of these municipalities (except for energy produced by each municipality’s hydro facilities in service at September 1974). These contracts currently extend through December 31, 2050. Each of the four participant municipalities has a residual interest in Platte River’s assets and liabilities upon dissolution, which is proportional to the total revenue received from each municipality since Platte River was organized, less any contributions previously distributed. Based upon electric revenues billed from inception through December 31, 2012, these residual interests are approximately as follows:

Residual Interest

City of Fort Collins 48%

City of Longmont 26%

City of Loveland 21%

Town of Estes Park 5%

100%

sTaTeMeNTs oF CasH FLoWs

50

Notes to Financial Statements - 1. organization

Under Colorado law and the municipal contracts, Platte River’s Board of Directors has the exclusive authority to establish the electric rates to be charged to the member municipalities. Platte River must follow specified statutory procedures, including public notice and holding a hearing to receive public comments, before adopting an annual budget and implementing any changes in the electric rates.

2. Operations Rawhide energy StationThe Rawhide Energy Station consists of Rawhide Unit 1, a 280-megawatt (net) coal-fired generating facility, a cooling pond, coal-handling facilities, related transmission facilities, and five simple-cycle gas-fired peaking units. Peaking Units A through D have a summer peaking capacity of 65 megawatts each. Peaking Unit F has a summer peaking capacity of 128 megawatts. The Rawhide Energy Station facilities are wholly owned and operated by Platte River.

yampa ProjectPlatte River owns 18%, or 155 megawatts, of Craig Units 1 and 2 of the Yampa Project as a tenant-in-common with four other electric utilities. The current Yampa Project Participation Agreement took effect on April 15, 1992. The Yampa Project consists of 863 megawatts of coal-fired generation and associated transmission plant facilities located near the town of Craig in northwestern Colorado. Platte River’s share of the plant investment is included in plant in service, net, in the accompanying statements of net position. Platte River’s share of operating expenses of the Yampa Project is included in operating expenses in the accompanying statements of revenues, expenses and changes in net position. Separate financial statements for the Yampa Project are not available. In addition, Platte River and all but one of the other Yampa Project participants own Trapper Mining, Inc., which owns and operates the adjacent coal mine that supplies the majority of Craig Units 1 and 2 fuel needs.

Medicine Bow Wind ProjectPlatte River owns and operates nine wind turbines with a total capacity output of 5.8 megawatts near the town of Medicine Bow, Wyoming. Platte River has acquired a long-term site lease with annual payments based on a percentage of imputed revenues from the wind energy sales. The site lease payments are recorded as an operations and maintenance expense.


Notes to Financial Statements

3. Summary of Significant Accounting Policies

Reporting entity For financial reporting purposes, Platte River meets the criteria of an “other stand-alone government” and has no component units as defined in Governmental Accounting Standards Board (GASB) Statements No. 14 and 39, The Financial Reporting Entity and Determining Whether Certain Organizations Are Component Units—an amendment of GASB Statement No. 14. As a municipal utility and a separate governmental entity, Platte River is exempt from taxes on its property and income.

Basis of AccountingPlatte River accounts for its financial operations as a “proprietary fund” and the accompanying financial statements have been prepared using the accrual method of accounting in conformity with accounting principles generally accepted in the United States of America. Platte River’s accounts are maintained in accordance with the Uniform System of Accounts as prescribed by the Federal Energy Regulatory Commission.

As a Board-regulated entity, Platte River is subject to the provisions of GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, Regulated Operations, paragraphs 476–500, which requires the effects of the rate-making process to be recorded in the financial statements. Accordingly, certain expenses and revenues normally reflected in the statements of revenues, expenses and changes in net position as incurred are recognized when they are included in Platte River’s wholesale rates. Platte River has recorded various regulatory assets and liabilities to reflect the rate-making process. (Note 9.)

Budgetary Process A formal budgetary process is required by Colorado State Local Government Law and is utilized as a management control tool. A proposed annual budget must be submitted to Platte River’s Board of Directors by October 15 of each year. Following public hearings, the budget is considered for adoption by the Board of Directors on or before December 31. Since Platte River operates as an enterprise, it is not subject to Colorado’s Taxpayers’ Bill of Rights (TABOR) provisions. All budget appropriations, except capital additions, lapse at the end of the year.

52

Notes to Financial Statements - 3. Summary of Significant Accounting Policies

use of estimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America as prescribed by GASB requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.

electric utility Plant and depreciationElectric utility plant is stated at the historical cost of construction. Construction costs include labor, materials, contracted services, and the allocation of indirect charges for engineering, supervision, transportation, and administrative expenses. The cost of additions to utility plant and replacement property units is capitalized. Repairs, maintenance, and minor replacement costs are charged to expense when incurred. When construction is debt-financed, an allowance for borrowed funds used during construction is included in the project cost.

Depreciation is recorded using the straight-line method over the estimated useful lives of the various classes of plant in service, which range from five to 50 years. Depreciation expense was approximately 3% of depreciable property for the years 2012 and 2011. The original cost of property replaced or retired, and removal costs less salvage, are charged to accumulated depreciation.

Cash and Cash equivalentsFor purposes of the statements of cash flows, Platte River considers all cash on deposit with financial institutions and highly liquid investments

with an original maturity of less than three months, excluding special funds and investments, as cash and cash equivalents.

Closure and Postclosure Care Costs of disposal FacilityPlatte River accrues a liability of estimated future closure and postclosure care costs for its Rawhide Energy Station ash disposal facility. The liability is determined by multiplying the estimated closure and postclosure care costs in current dollars by the percentage of the disposal facility’s total estimated capacity used through the end of the year.

long-term debtThe difference between the reacquisition price and the net carrying amount of refunded debt (deferred amount on refundings) in an advance refunding transaction is deferred and amortized as a component of interest expense using the bonds outstanding method over the shorter of the remaining life of the defeased debt or the life of the new debt. The deferred amount is reported as a deduction from or an addition to long-term debt.

energy Risk ManagementPlatte River has established a formal energy risk management program to manage its exposure to risks associated with wholesale energy and natural gas market price fluctuations. Under Board of Directors approved policies, Platte River may use various physical and financial instruments, such as physical forward contracts, futures, swaps, and option agreements. These transactions are hedges and any expense, gain or loss that is realized on these transactions is recorded as purchased power or fuel expense in the accompanying statements of revenues, expenses and changes in net position.


Notes to Financial Statements - 3. Summary of Significant Accounting Policies

During 2012 and 2011, Platte River entered into natural gas swap contracts to fix prices for the purpose of hedging against natural gas price fluctuations. The contracts are based on the Colorado Interstate Gas Co. (CIG) index published in Gas Daily. There were no swap contracts outstanding at December 31, 2012. At December 31, 2011, Platte River had swap contracts for 30,000 mmBtu at an average fixed price of $3.95 per mmBtu, which expired in July and August 2012. These contracts had a negative fair value of $27,000 as of December 31, 2011, based on price estimates provided by Goldman Sachs & Company and JPMorgan, Platte River’s counterparties for the swap contracts. As a result of hedging contracts, there was an increase in fuel expense of $45,000 for the year ended December 31, 2012 and an increase of $8,000 for the year ended December 31, 2011. No cash was paid or received by Platte River when the contracts were initiated. Platte River is the fixed price payer. The natural gas swap contracts are considered normal purchase contracts because Platte River takes delivery of the natural gas. Thus, the contracts are not included in the scope of GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments.

operating Revenues and expensesOperating revenues and expenses consist of those revenues and costs directly related to the generation, purchase, and transmission of electricity. Operating revenues are billed and recorded at the end of each month for all electricity delivered. Revenues and expenses related to financing, investing, and other activities are considered to be nonoperating.

deferred Charges and other Assets Deferred charges and other assets reflect unamortized power revenue bond issuance costs,

deferred post-mining Trapper Mine reclamation costs, charges incurred in conducting project feasibility studies, deferred pension expenses to be recovered in future years, and other miscellaneous deferred charges.

use of Restricted Resources When both restricted and unrestricted resources are available for use, it is Platte River’s policy to use restricted funds first, for their intended purposes only, based on the bond resolutions.

Recent Accounting PronouncementsIn 2012, Platte River implemented GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. This statement places all applicable pre-November 30, 1989 FASB and AICPA pronouncements within the authoritative GASB literature. Platte River also implemented GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position in 2012. This statement changes the organization of the statement of net position, formerly the balance sheet. Under this new standard, the statement of net position includes deferred outflows of resources and deferred inflows of resources, in addition to assets and liabilities and will report net position instead of net assets. The implementation of GASB 62 and 63 had no material impact on the financial statements.

Reclassifications Certain reclassifications have been made to conform prior year’s information to the current year presentation.

54


4. Electric Utility PlantElectric utility plant asset activity for the year ended December 31, 2012, was as follows:

december 31, 2011 Increases decreases

december 31, 2012

(In thousands)

Nondepreciable assets:

Land and land rights $ 14,517 $ – $ – $ 14,517

Construction work in progress 53,330 18,549 (51,341) 20,538

67,847 18,549 (51,341) 35,055

Depreciable assets:

Production plant 874,167 8,937 (2,026) 881,078

Transmission plant 294,119 41,812 (417) 335,514

General plant 33,652 1,175 (1,166) 33,661

1,201,938 51,924 (3,609) 1,250,253

Less accumulated

depreciation (647,664) (33,503) 462 (680,705)

Total electric utility plant $ 622,121 $ 36,970 $ (54,488) $ 604,603

Electric utility plant asset activity for the year ended December 31, 2011, was as follows:

december 31, 2010 Increases decreases

december 31, 2011

(In thousands)

Nondepreciable assets:

Land and land rights $ 14,128 $ 389 $ – $ 14,517

Construction work in progress 117,411 35,703 (99,784) 53,330

131,539 36,092 (99,784) 67,847

Depreciable assets:

Production plant 869,257 6,914 (2,004) 874,167

Transmission plant 205,047 89,139 (67) 294,119

General plant 33,679 3,817 (3,844) 33,652

1,107,983 99,870 (5,915) 1,201,938

Less accumulated

depreciation (619,791) (30,974) 3,101 (647,664)

Total electric utility plant $ 619,731 $ 104,988 $ (102,598) $ 622,121



5. Cash and InvestmentsInvestment of Platte River’s funds is administered in accordance with Colorado law and Platte River’s General Power Bond Resolution, Fiscal Resolution and Investment Policy. Accordingly, Platte River may only invest in obligations of the United States government and its agencies and other investments permitted under Colorado law. Platte River records its investments at their estimated fair market values. The unrealized holding gains and losses on these investments are included in net increase (decrease) in fair value of investments in the statements of revenues, expenses and changes in net position.

The fair value of investments is presented on the statements of net position as special funds and investments, cash and cash equivalents, and other temporary investments. Special funds and investments are either internally dedicated by Board Resolution (dedicated funds and investments) or restricted as to use by Platte River’s General Power Bond Resolution (restricted funds and investments). The fair value of investments, exclusive of accrued interest of $87,000 and $82,000 as of December 31, 2012 and 2011, respectively, are shown in the following tables.

As of December 31, 2012, Platte River had the following cash and investments and related maturities:

Investment Maturities (in years)

Cash and

Investment Type

Fair

Value

Less

Than 1 1 - 2 2 - 3 3 - 4 4 - 5

(In thousands)

U.S. Treasuries $ 23,823 $ 8,010 $ 13,314 $ 2,499 $ – $ –

U.S. Agencies:

FFCB 8,977 6,583 334 2,060 – –

FHLB 8,363 8,363 – – – –

FHLMC 15,000 7,493 3,005 – 4,502 –

FNMA 12,961 7,018 – 2,006 3,937 –

Total securities 69,124 37,467 16,653 6,565 8,439 –

Certificates of deposit 13,351 3,171 4,837 5,343 – –

Cash & money market funds 39,244 39,244 – – – –

Total cash and investments $ 121,719 $ 79,882 $ 21,490 $ 11,908 $ 8,439 $ –

56

Notes to Financial Statements - 5. Cash and investments

Statement of net position presentation of cash, cash equivalents and investments is as follows as of December 31, 2012:

Fair

Value

accrued

Interest Total

(In thousands)

Restricted funds and investments $ 31,934 $ 11 $ 31,945

Dedicated funds and investments 54,038 56 54,094

Cash and cash equivalents 14,362 1 14,363

Other temporary investments 21,385 19 21,404

Total investments $ 121,719 $ 87 $ 121,806

As of December 31, 2011, Platte River had the following cash and investments and related maturities:

Investment Maturities (in years)

Cash and

Investment Type

Fair

Value

Less

Than 1 1 - 2 2 - 3 3 - 4 4 - 5

(In thousands)

U.S. Treasuries $ 25,002 $ 18,995 $ 6,007 $ – $ – $ –

U.S. Agencies:

FFCB 4,010 4,010 – – – –

FHLB 3,395 3,395 – – – –

FHLMC 5,510 – 5,510 – – –

FNMA 4,019 2,001 2,018 – – –

TLGP Corporate Notes 16,324 16,324 – – – –

Total securities 58,260 44,725 13,535 – – –

Certificates of deposit 13,239 5,334 3,100 4,805 – –

Cash & money market funds 28,038 28,038 – – – –

Total cash and investments $ 99,537 $ 78,097 $ 16,635 $ 4,805 $ – $ –


Notes to Financial Statements - 5. Cash and investments

Statement of net position presentation of cash, cash equivalents and investments is as follows as of December 31, 2011:

Fair

Value

accrued

Interest Total

(In thousands)

Restricted funds and investments $ 25,655 $ 18 $ 25,673

Dedicated funds and investments 34,966 46 35,012

Cash and cash equivalents 17,632 1 17,633

Other temporary investments 21,284 17 21,301

Total investments $ 99,537 $ 82 $ 99,619

interest Rate RiskAs a means of limiting its exposure to fair value losses arising from rising interest rates, Platte River’s investment policy and Colorado state statutes limit the investment portfolio to maturities of five years or less. Platte River uses a laddered approach to investing funds based on projected cash flows. The assumed maturity date for callable securities is based on market conditions as of December 31, 2012. If the price of the security is above its call price, the security is assumed to be redeemed on its next call date.

Credit Risk Platte River’s investment policy allows investments in local government investment pools and money market funds. As of December 31, 2012, Platte River maintained investments in funds managed by the local government investment pool Colorado Local Government Liquid Asset Trust (COLOTRUST), the Colorado Statewide Investment Program (CSIP), and the Wells Fargo Heritage Money Market Fund. All of these funds are rated AAAm by Standard and Poor’s Ratings Services (S&P). Platte River’s investments in Federal Farm Credit Bank (FFCB), Federal Home Loan Bank (FHLB), Federal Home Loan Mortgage Corporation (FHLMC), Federal National Mortgage Association (FNMA), and Temporary Liquidity Guarantee Program (TLGP) corporate notes were rated Aaa by Moody’s Investors Service and AA+ by S&P. TLGP investments are explicitly backed by the “full faith and credit of the United States”.

Concentration of Credit RiskPlatte River’s investment policy states that assets held in Platte River’s funds shall be diversified to eliminate the risk of loss resulting from over concentration of assets in a specific maturity, a specific issuer or a specific class of securities. As of December 31, 2012, more than 5% of Platte River’s investments were concentrated in FFCB, FHLB, FHLMC and FNMA. These investments are 7%, 7%, 12% and 11%, respectively, of Platte River’s total investments (including outside investment pools and certificates of deposit).

58


6. Noncurrent LiabilitiesNoncurrent liability activity for the year ended December 31, 2012, was as follows:

december 31, 2011 additions Reductions

december 31, 2012

due within one year

(In thousands)

Long-term debt, net $ 256,554 $ 71,314 $ (62,583) $ 265,285 $ 21,265

Capitalized lease obligation 16,613 – (2,388) 14,225 2,517

Regulatory liabilities and

credits 9,642 3,255 (10,018) 2,879 –

Deferred reclamation liability 3,802 – (176) 3,626 –

Disposal facility closure costs

Wind turbine reimbursement

Compensated absences

185

327

3,625

1

–

228

–(76)

(265)

186

251

3,588

–

80

202

Lease advances 1,156 – (83) 1,073 83

Yampa employee obligation 330 2 – 332 –

Total noncurrent liabilities $ 292,234 $ 74,800 $ (75,589) $ 291,445 $ 24,147

Noncurrent liability activity for the year ended December 31, 2011, was as follows:

december 31, 2010 additions Reductions

december 31, 2011

due within one year

(In thousands)

Long-term debt, net $ 275,535 $ – $ (18,981) $ 256,554 $ 20,330

Capitalized lease obligation 18,822 – (2,209) 16,613 2,388

Regulatory liabilities and

credits 6,446 3,196 – 9,642 9,642

Deferred reclamation liability 2,825 977 – 3,802 –

Disposal facility closure costs

Wind turbine reimbursement

Compensated absences

183

399

3,422

2

–

445

–(72)

(242)

185

327

3,625

–

76

178

Lease advances – 1,216 (60) 1,156 83

Yampa employee obligation 327 3 – 330 –

Total noncurrent liabilities $ 307,959 $ 5,839 $ (21,564) $ 292,234 $ 32,697



7. Long-term DebtLong-term debt outstanding as of December 31, 2012 and 2011, consists of the following:

december 31,

Interest Rate 2012 2011

(In thousands)

Power Revenue Bonds—

Series EE:

Serial Bonds—

6/1/2012–6/1/2018 4.125%–5.375% $ – $ 53,375

Series GG:

Serial Bonds—

6/1/2012–6/1/2018 4.50%–5.00% 77,520 86,505

Series HH:

Serial Bonds—

6/1/2012–6/1/2029 3.00%–5.00% 114,025 114,125

Series II:

Serial Bonds—

6/1/2012–6/1/2037 2.00%–5.00% 65,475 –

257,020 254,005

Unamortized bond premium 12,761 8,869

Deferred amount on refundings (4,496) (6,320)

Total revenue bonds outstanding 265,285 256,554

Less: due within one year (21,265) (20,330)

Total long-term debt, net $ 244,020 $ 236,224

Fixed rate bond premium, bond issuance, and refinancing costs are amortized over the terms of the related bond issues.

Interest expense for the years ended December 31, 2012 and 2011, is comprised of the following:

2012 2011

(In thousands)

Interest $ 12,433 $ 13,207

Amortization of bond related costs (341) 608

Total interest expense $ 12,092 $ 13,815

60

Notes to Financial Statements - 7. long-term debt

Bond service funding requirements projected for all bonds outstanding are shown in the table below:

Year ending december 31 Principal Interest Total

(In thousands)

Deposits in 2012 for 2013 payment $ 12,405 $ 1,004 $ 13,409

2013 21,145 11,632 32,777

2014 21,597 10,788 32,385

2015 18,850 9,787 28,637

2016 20,660 8,900 29,560

2017 17,370 7,977 25,347

2018–2022 48,619 31,083 79,702

2023–2027 59,330 18,299 77,629

2028–2032 24,142 5,407 29,549

2033–2037 12,902 1,814 14,716

$ 257,020 $ 106,691 $ 363,711

In March 2012, Platte River issued $65,475,000 Series II Power Revenue Bonds at a true interest cost of 3.16%. Proceeds from the bonds and additional contributions by Platte River were used to refund $42,130,000 of Series EE Power Revenue Bonds. Additionally, all of the Series EE Bonds became callable and were paid in full from cash held in trust. Proceeds were also use to finance $30,263,000 of transmission facility additions and upgrades. The refunding resulted in an economic gain (net present value savings) of $4,607,000.

In prior years, Platte River defeased certain revenue bonds by placing the proceeds of the refunding bonds and available cash in an irrevocable trust to provide for all future debt service payments on the refunded bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in Platte River’s financial statements. As of December 31, 2012, $16,975,000 of the defeased Series I Bonds remains outstanding.



other long-term debtWind turbine reimbursement represents a note payable to the City of Fort Collins for the acquisition of wind turbines. The note is payable in ten annual installments of $92,000 each, beginning July 2006, which includes interest at 5.0%. The noncurrent portion of the wind turbine reimbursement is included as a component of deferred / accrued liabilities and the current portion is included in accrued liabilities and other in the statements of net position. The note is uncollateralized. Maturities are as follows as of December 31, 2012:

Year ending december 31 Principal Interest Total

(In thousands)

2013 $ 80 $ 12 $ 92

2014 83 9 92

2015 88 4 92

Total note payments $ 251 $ 25 $ 276

Bond Service CoveragePower revenue bonds are secured by a pledge of the revenues of Platte River after deducting operating expenses, as defined in the General Power Bond Resolution. The power revenue bonds issued by Platte River may be subject to early call provisions. Principal and interest payments are met from net revenues earned from wholesale electric rates charged to the municipalities and others, and from interest earnings.

Under the General Power Bond Resolution, Platte River is required to charge wholesale electric energy rates to the municipalities that are reasonably expected to yield net revenues for the forthcoming 12-month period that are at least equal to 1.10 times total power bond service requirements. Under the General Power Bond Resolution, Platte River has established a Rate Stabilization Reserve Account. Deposits to this account are a reduction to current net revenues for purposes of computing bond service coverage. Future withdrawals will increase net revenues for purposes of computing bond service coverage and could assist Platte River, at such time, in meeting its wholesale rate covenant. The balances in the Rate Stabilization Reserve Account at December 31, 2012 and 2011 were $20,325,000 and $20,376,000, respectively, excluding accrued interest. The Rate Stabilization Reserve Account is included in dedicated funds and investments in the statements of net position.

62


The following table is a calculation of the power revenue bond coverage ratios for the years ended December 31, 2012 and 2011:

2012 2011

(In thousands)

Net revenues:

Operating revenues $ 182,635 $ 181,443

Operating expenses, excluding depreciation 127,415 130,310

Net operating revenues 55,220 51,133

Plus interest and other income(1) 1,404 1,210

Net revenues before rate stabilization 56,624 52,343

Rate stabilization:

Deposits – –

Withdrawals – –

Total net revenues $ 56,624 $ 52,343

Bond service:

Power revenue bonds Allowance for funds used during construction

$ 33,294 (381)

$ 33,117 (4,115)

Net revenue bond service $ 32,913 $ 29,002

Coverage:

Power revenue bonds 1.72 1.80

(1) Excludes unrealized holding gains and losses on investments.

Arbitrage Rebate Under U.S. Treasury Department regulations, all governmental tax-exempt debt issued after August 31, 1986, is subject to arbitrage rebate requirements. Interest income on bond proceeds that exceeds the cost of borrowing is payable to the federal government on every fifth anniversary of each bond issue. No arbitrage liability was outstanding as of December 31, 2012 and 2011.



8. Capitalized Lease ObligationUnder an agreement with the Municipal Subdistrict of the Northern Colorado Water Conservancy District, Platte River is entitled to an allocation of one-third of the available water from the Windy Gap Project, a water diversion facility completed May 1, 1985. Under the agreement, Platte River is obligated to pay each year one-third of the debt service and approximately one-third of the actual operating and maintenance costs of the Windy Gap Project. These payments, which totaled $4,328,000 and $4,372,000 in 2012 and 2011, respectively, have been included in operations and maintenance expenses in the accompanying statements of revenues, expenses and changes in net position, as allowed under GASB 62, paragraphs 476–500. Platte River originally recorded $41,590,000 as a capitalized lease for its water allotment and has recorded $27,365,000 accumulated amortization as of December 31, 2012. The remaining liability of $14,225,000 represents Platte River’s share of principal amounts of the Subdistrict’s Series H, I and J Bonds outstanding as of December 31, 2012. These amounts will be amortized over the terms of the Subdistrict’s Water Revenue Bonds, which mature in 2017.

The following is a schedule of the future minimum lease payments for the capital lease:

Year ending december 31

(In thousands)

2013 $ 3,241

2014 3,241

2015 3,243

2016 3,394

2017 3,398

16,517

Less: amount representing interest (2,292)

Total lease payments 14,225

Less: due within one year (2,517)

Present value of future net payments $ 11,708

64


9. Regulatory Assets and Liabilitiesdeferred Pension expensePlatte River funds its defined benefit pension plan (Note 11) based on cost estimates developed on an actuarial basis. In addition to the base contribution, Platte River has an additional funding charge if the market value of the assets is less than 100% of the actuarial present value of accumulated plan benefits. Effective January 1, 2010, the Board of Directors approved a policy under GASB 62, paragraphs 476–500, that provides for the expense recognition of any additional pension funding charge to be spread over a ten-year period. Each subsequent year’s additional funding charge, if any, will be added to the regulatory prepaid asset and amortized over an additional ten-year period. The additional pension funding charge was $0 for 2012 and $850,000 for 2011. The regulatory prepaid asset for deferred pension expense was $2,893,000 and $3,294,000 as of December 31, 2012 and 2011, respectively. The current portion of these amounts, $401,000 as of December 31, 2012 and 2011, is included as a component of prepayments and other assets in the statements of net position.

Accrued Maintenance outage CostsAs allowed under GASB 62, paragraphs 476–500, an accrual for the estimated incremental expenses of future scheduled major maintenance outages is recorded each year. Prior to the major maintenance outage at Rawhide Unit 1 in the spring of 2012, a portion of the estimated maintenance expenses was accrued. After the 2012 outage was completed, a portion of the estimated maintenance and replacement power costs for the next major maintenance outage, planned for the fall of 2015, was accrued. As of December 31, 2012, $2,879,000 was accrued as a liability for the 2015 scheduled maintenance outage planned for Rawhide Unit 1. As of December 31, 2011, $9,642,000 was accrued for the spring 2012 scheduled outage.

10. Net Investment in Capital AssetsNet investment in capital assets is comprised of the following as of December 31, 2012 and 2011:

2012 2011

(In thousands)

Electric utility plantUnspent Series II Bond proceedsUnamortized bond issuance costsLong-term debt, netCapitalized lease obligationOther long-term debt payableAccounts payable incurred for capital assets

$ 604,603 6,170 1,530

(265,285) (14,225) (251) (674)

$ 622,121 – 1,365

(256,554) (16,613) (327) (7,889)

$ 331,868 $ 342,103



11. Defined Benefit Pension PlanThe Platte River Power Authority Defined Benefit Plan (the Plan) is a single-employer, defined benefit pension plan administered by Platte River. The Plan provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to Plan members and beneficiaries. All regular Platte River employees hired prior to September 1, 2010 are covered by the Plan. Retirement benefits are based upon years of service rendered and salaries earned by the employee in accordance with the Plan’s provisions. Benefit provisions of the Plan are determined and authorized by the Board of Directors of Platte River. Platte River issues publicly available financial statements and required supplementary information for the Plan. The report may be obtained from Platte River.

All contributions to the Plan are authorized by the Board of Directors and made by Platte River. The Plan’s funding policy is intended to fund current service costs as they accrue, plus an additional funding charge if the market value of the assets is less than 100% of the actuarial present value of accumulated plan benefits. For the year ended December 31, 2012, the annual pension cost and required contribution by Platte River was $3,561,000. There was no net pension obligation for the years ended December 31, 2012 and 2011.

The annual required contribution for the current year was determined as part of the January 1, 2011, actuarial valuation using the frozen-initial-liability method. The actuarial assumptions included: (a) 8% investment rate of return, (b) 2.5% projected salary increase due to inflation, merit and seniority for the year 2011, reverting to 4.5% for years thereafter, and (c) 3.0% per year cost-of-living adjustment for participants in pay status prior to January 1, 1992, and 2.0% per year for all other participants. The actuarial value of Plan assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a four-year period.

Three-year trend information for Platte River’s pension cost and contributions is as follows:

Year

ended

annual Pension Cost

(aPC)

Percentage

of aPC Contributed Net Pension obligation

(In thousands)

2010 $ 7,736* 100.0% $ –

2011 4,390* 100.0 –

2012 3,561 100.0 –

* As described in Note 9, $2,893,000 of these amounts has been deferred.

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Notes to Financial Statements - 11. defined Benefit Pension Plan

A schedule of funding progress for the Plan is as follows:

actuarial Valuation

date

actuarial Value of assets

(a)

actuarial accrued Liability

(aaL)(b)

unfunded aaL (uaaL)(b-a)

FundedRatio(a/b)

CoveredPayroll

(c)

uaaL as a Percentage of

Covered Payroll[(b-a)/c]

(In thousands)

1/1/10 $ 58,486 $ 58,486 $ – 100.0% $ 17,714 –

1/1/11 65,475 65,475 – 100.0 18,728 –

1/1/12 67,677 67,677 – 100.0 18,766 –

12. Defined Contribution Pension PlanEffective September 1, 2010, the Board of Directors established the Platte River Power Authority Defined Contribution Plan (in accordance with the Internal Revenue Code Section 401(a)) for all regular employees hired on or after that date. As of December 31, 2012, there were 25 plan participants. The plan’s assets are held in an external trust account. The general manager of Platte River is the plan administrator and benefit provisions and contribution requirements are authorized and may be amended by the Board of Directors.

Platte River contributed the required contribution for plan participants of 5% of their earnings for the years 2012 and 2011. Platte River will also contribute to the 401(a) an amount equal to 50% of the participant’s contributions to a separate 457(b) plan, taking into account only such participant contributions up to 6% of the participant’s earnings. For the years ended December 31, 2012 and 2011, contributions to the 401(a) plan by Platte River were $89,000 and $42,000, respectively. The plan’s records are kept on the accrual basis.

13. Contribution of Fiber Optic Network to Municipalities

During 1998, Platte River constructed a fiber optic network between and around the four municipalities to which it provides electric service. The surplus capacity in the network built around the City of Longmont was contributed to the City of Longmont in 1998 and was recorded as a return of capital. Platte River retained ownership of the remaining fiber optic network, and in 1999, began leasing surplus portions of the dark fiber for the benefit of each of the remaining three municipalities to independent telecommunication service providers. A portion of the revenues distributed to the municipalities, $155,000, is considered a return of capital on the original asset. As of December 31, 2012 and 2011, lease advances of


Notes to Financial Statements - 13. Contribution of Fiber optic Network to Municipalities

$1,073,000 and $1,156,000, respectively, have been recorded as a deferred liability in the statements of net position. The municipalities’ portion of the lease payments received is flowed through to the municipalities, net of Platte River’s costs.

14. Insurance ProgramsPlatte River has purchased insurance policies to cover the risk of loss related to various general liability and property loss exposures. The amount of insurance settlements has not exceeded insurance coverage in the past three years. Platte River also provides a self-insured medical and dental plan to its employees. Medical stop-loss insurance has been purchased, which covers losses in excess of $175,000 per person per incident. A liability was recorded for estimated medical and dental claims that have been incurred but not reported of $261,000 at December 31, 2012 and $243,000 at December 31, 2011. A third-party administrator is used to account for the health insurance claims and provides the estimated medical claims liability based on prior claims payment experience. The medical claims liability is included as a component of accounts payable in the statements of net position.

Changes in the balance of the medical claims liability during 2012 and 2011 were as follows:

2012 2011

(In thousands)

Medical claims liability, beginning of year $ 243 $ 204

Current year claims and changes in estimates 2,487 2,381

Claim payments (2,469) (2,342)

Medical claims liability, end of year $ 261 $ 243

15. Commitments and ContingenciesPlatte River has long-term purchase power contracts with the Western Area Power Administration through September 30, 2024. The federal hydroelectric power received in 2012 provided approximately 20% of the resources needed by Platte River to serve the loads of the four owner municipal systems. The contract rates and the amount of energy available are subject to change. During 2012, Platte River purchased $18,172,000 under these contracts.

Platte River and three of the other four participants in the Yampa Project own Trapper Mine, the primary source of coal for the Yampa Project. The original contract provided delivery of specified amounts of coal to each Yampa Participant through 2014. In September 2009, the contract was extended through 2020. Supplemental coal will be supplied through the year 2017 under a contract with ColoWyo Coal Company. These contracts are subject to price escalation adjustments. During 2012, coal purchases totaled $13,082,000 from Trapper Mine and $5,447,000 from ColoWyo Coal Company.

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Notes to Financial Statements - 15. Commitments and Contingencies

The Rawhide Energy Station’s coal purchase and transportation agreements are under multiple-year contracts. Base prices for these contracts are subject to future price adjustments. During 2012, Platte River paid $23,907,000 for coal delivered under these agreements.

Platte River has committed to purchase Renewable Energy Credits (RECs) for the years 2013 through 2024 with future payments of $6,214,000. During 2012, Platte River purchased $550,000 under these REC agreements. In addition, Platte River has committed to purchase renewable wind energy output of 12 megawatts from Silver Sage Windpower, LLC through 2027. During 2012, Platte River purchased $1,876,000 under this renewable wind energy agreement.

Platte River and the other Yampa Project participants, in order to comply with recent environmental regulations, have agreed to upgrade the NOx emissions control equipment at Craig Units 1 and 2 beginning in 2012. Platte River’s share of the capital costs of these upgrades, expected to be completed in 2017, is estimated to be approximately $43,000,000.

In the ordinary course of business, Platte River may be impacted by various legal matters and is subject to legislative, administrative, and regulatory requirements relative to environmental issues. Although the outcomes of such matters is not possible to predict, management is aware of no pending legal matters or proposed environmental regulations for which the outcome is likely to have a material adverse effect upon Platte River’s operations, financial position or changes in financial position.

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Other Information

Other Information

Year Ended December 31, 2012

Budget Actual Variance

(In thousands)

REVEnuEsOperating revenues:

Municipal sales $ 161,059 $ 159,675 $ (1,384)

Contract surplus sales 1,437 1,437 –

Short-term surplus sales 23,805 21,523 (2,282)

Total operating revenues 186,301 182,635 (3,666)

Nonoperating revenues(1):

Interest income 505 582 77

Other income 317 822 505

Total nonoperating revenues 822 1,404 582

Total revenues 187,123 184,039 (3,084)

Funds provided from prior reserves 4,983 (7,352) (12,335)

Total sources $ 192,106 $ 176,687 $ (15,419)

BuDGETARY COMPARIsOn sCHEDuLE (unAuDITED)


other information - Budgetary Comparision Schedule (unaudited)

Year ended december 31, 2012

Budget actual Variance

(In thousands)

exPeNdITuRes Operating expenses(2):

Purchased power $ 22,659 $ 22,262 $ 397

Fuel expense 48,826 44,417 4,409

Production expenses 45,396 42,940 2,456

Transmission expenses 6,447 6,151 296

Administrative and general 11,896 11,683 213

Total operating expenses 135,224 127,453 7,771

Debt service expenditures(3):

Interest expense 12,189 12,433 (244)

Principal 21,015 20,875 140

Allowance for funds used during construction (363) (381) 18

Total debt service expenditures 32,841 32,927 (86)

Capital additions:

Production 15,458 9,005 6,453

Transmission 7,002 5,919 1,083

General 1,581 1,383 198

Total capital additions 24,041 16,307 7,734

Total expenditures $ 192,106 $ 176,687 $ 15,419

(1) Interest income excludes unrealized investment holding gains and losses.

(2) Operating expenses do not include depreciation and other nonappropriated expenses.

(3) Debt service expenditures represent monthly principal and interest funding.

BudGeTaRY CoMPaRIsoN sCHeduLe (uNaudITed)

2000 eAST HoRSeTooTH RoAdFoRT ColliNS, ColoRAdo 80525-5721

970.226.4000

www.prpa.org

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