2019 Annual Report Annual Meeting Agenda

BENCO Electric Cooperative Annual Meeting Mayo Clinic Health Systems Event Center April 4, 2020

Invocation

Call to Order

Determination of Quorum

Opening Remarks

Notice of Meeting Minutes

Financial Report

Election of Directors

President’s Report

Washington, DC Youth Delegate

CEO Report

Unfinished Business

New Business

Adjournment

Drawing of Door Prizes 1 - CEO & President’s Report

BENCO had a good year in 2019, despite the major storms we encountered. Shortly after last year’s Annual Meeting, Mother Nature delivered heavy snow, ice and strong winds up to 50 miles per hour. These conditions created Blake Meshke Dave Sunderman many widespread outages CEO President across the southern part of Minnesota. BENCO was no exception, as over 7,000 members were left without electricity as a result of the storm. Hundreds of members remained out of power for a couple of days. Winter Storm Wesley damaged over 300 electric poles and many miles of wire across our service territory. Severe ice and wind caused many transmission lines to gallop, which negatively affected BENCO’s substations; 18 substations were not operating to full capacity. Our employees safely worked very hard to restore electricity to our members and because damage to the co-op’s infrastructure was so great, mutual aid was provided to BENCO from Brown County REA of Sleepy Eye, Minnesota Valley Electric Cooperative of Jordan, Dakota Electric Cooperative of Farmington and Highline Construction. The damage cost to our system is approximately three million dollars. There was enough damage across Minnesota for the 2 - CEO & President’s Report Governor to declare a disaster and the President of the United States declared the storm a national disaster. BENCO is currently working with the Federal Emergency Management Association (FEMA) and Minnesota Homeland Security Emergency Management to receive reimbursements for our expenses incurred. The aftermath of Winter Storm Wesley still continues around our service territory. In 2019, we began the process of rebuilding our Jamestown Substation. This was one of our oldest substations, dating back to the 1940’s, and is responsible for feeding a growing area in Blue Earth County. Recently, the transformer was set and completion of the project is nearly completed. BENCO also spent time evaluating the overall space at our Mankato facility including safety and handicapped accessibility. We decided to move forward with the reconstruction of the entrance to our Mankato office, allowing a safer handicapped accessible entrance. The project will be completed this fall. Thank you to our member-owners for taking part in your cooperative; you play a very large role in our organization. We have a bright future ahead of us and value your participation. Please feel free to stop by, call or email with any questions. 3 - Annual Meeting Minutes

Members of the Blue Earth – Nicollet – Faribault Cooperative Electric Association held their annual meeting on Saturday, April 6, 2019 at 12:00 pm at the Verizon Wireless Civic Center, located at 1 Civic Center Plaza, Mankato, MN, pursuant to the notice mailed to each member of the Association, 15 days prior to the meeting. President Scott Johnson presided and Harlan Lanz, Secretary of the Association, kept the minutes of the meeting. As members arrived they could pick up their capital credit checks that totaled $863,539 from portions of 2000, 2001 and 2017. Najwa’s Catering provided the luncheon and each member also received a gift bag. Thank you to Najwa and the catering staff and Brian and the Civic Center staff. Members were entertained in the arena by the Mary Guentzel Quintet. The invocation was given by Pastor John Hendrickson of the Trinity Lutheran Church of Lake Crystal. President Scott Johnson welcomed everyone and called the meeting to order at 12:02 pm. There were more than 50 members registered and that constitutes a quorum according to Article II, Section 5 of the Association’s By-Laws. President Johnson appointed Harlan Lanz as Secretary. Chuck Peterson was appointed as Parliamentarian. Johnson stated the meeting was being recorded. Tellers appointed were: District 2 – Jerry Gish and Jean Lorentz; District 6 – Brent Meshke and Bob Boeck; District 8 – Janette Fenske and Brandy Douglas. President Johnson introduced guests including area legislators, the BENCO Board of Directors and spouses, the Brown County REA Board of Directors and spouses, former directors, CEO Dave Sunderman and spouse and BENCO employees. President Johnson called for a motion to dispense with the reading of the Proof of Mailing and Notice of Mailing. A motion was made, seconded and carried to dispense with the reading and approve them as mailed. President Johnson stated that the Annual Meeting minutes of April 7, 2018 were in the annual report and asked for a motion to dispense with the reading and approve them as printed. A motion was made, seconded and carried to approve the minutes as printed. President Johnson called on Craig Popenhagen of CliftonLarsonAllen, LLP to review the financial report for the year 2018. Popenhagen gave a summary of the report and stated that CliftonLarsonAllen, LLP had reviewed the audit with the Board of Directors and that it was approved at 4 - Annual Meeting Minutes the BENCO Board of Directors meeting. A motion was made, seconded and carried to approve the financial report. President Johnson called on Attorney Chuck Peterson to conduct the election. Attorney Peterson explained the election process according to the By-Laws Article III. In Districts 2 and 6, one candidate received 2/3 or more of the votes cast at the District Meetings so he is the only candidate to come forward to the Annual Meeting. Attorney Peterson asked the candidates to come forward and speak on their own behalf. A motion was made, seconded and carried by voice vote to elect Harlan Lanz – District 2 and Blake Meshke – District 6 to three-year terms. In District 8, there were two candidates for the position of Director. Incumbent Duane Ehrich and David Lein both came forward from the District meeting. Attorney Peterson asked the two candidates to come forward and speak on their behalf. The members were asked to vote and the tellers to pick up the votes. President Scott Johnson gave the President’s Report. He spoke on highlights from 2018, including the construction of the Faribault County Outpost, the addition of District 1 Director Terry Genelin to the Board of Directors, the implementation of greater safety training, and the addition of a new website. President Johnson introduced last year’s Washington, D.C. Youth Delegate recipient, Lexi Fosburgh. Lexi is the daughter of Robert and Donna Fosburgh of North Mankato. Lexi was unable to attend the meeting so President Johnson read a letter on her behalf, recapping her experience. President Johnson called on CEO Dave Sunderman for his report. Dave thanked everyone for their attendance at the meeting. Dave reviewed the severe weather BENCO endured in the year prior, the technological improvements being implemented, strong financials and the utilization of new communication tools. Dave acknowledged the BENCO employees and Board of Directors; he also encouraged all members to reach out to BENCO with any questions or concerns. Dave answered questions from the membership. There was no unfinished or new business. The election results were given by Chuck Peterson. Duane Ehrich was elected as Director for District 8. A motion was made, seconded and carried to adjourn the meeting at 12:50 pm. A drawing was held for door prizes. 5 - Directors

Terry Genelin Open Brad Leiding District 1 District 2 Vice President District 3

John Wells Marilyn Lynch Blake Meshke District 4 Treasurer President District 5 District 6

Gary Stenzel Duane Ehrich Scott Johnson District 7 District 8 Secretary District 9 6 - Map of Districts

KELSO SIBLEY 1 HENDERSON

22 LAKE PRAIRIE BERNADOTTE NEW 169 SWEDEN 22

BRIGHTON TRAVERSE GRANBY SAINT PETER SWAN LAKE 2 OSHAWA COURTLAND WASHINGTON KASOTA 14 OSHAWA

NICOLLET LIME JAMESTOWN

CAMBRIA BELGRADE MADISON LAKE BUTTERNUT MANKATO VALLEY LE RAY JANESVILLE JUDSON MANK ATO 14 3 60 SOUTH LAKE CRYSTAL BEND 4

McPHERSON GARDEN RAPIDAN DECORIA LINCOLN CITY 5 22 83

CERESCO MEDO VERNON LYRA BEAUFORD 6 CENTER

DANVILLE PLEASANT AMBOY STERLING MOUND MAPLETON 30 VIVIAN 30

SHELBY MAPLETON

169 DUNBAR

WINNEBAGO DELEVAN LURA 22 FREEBORN MINNESOTA WINNEBAGO CITY LAKE 7

WALNUT CARLSTON CENTER VERONA PRESCOTT BARBER CLARK CREEK LAKE

JO BLUE 90 FOSTER DAVIESS EART H BRUSH PLEASANT BLUE EMERALD CREEK ALDEN PRAIRIE EARTH 8 CITY 9

MANSFIELD EAST PILOT CHAIN GROVE ELMORE ROME SEELY KIESTER

ELMORE 7 - Financial Report The cooperative principles and BENCO Electric Cooperative’s strong business values guide our financial approach. As stewards of the resources you provide, we are accountable to you and have processes in place to ensure the integrity of our work. BENCO ended 2019 in a strong financial position. Our equity, debt service coverage and times interest earned ratios satisfied all of Abby Dahms the financial covenants of our lenders. Our Manager of Finance independent auditor, CliftonLarsonAllen, LLP, provided BENCO with a clean audit and an unqualified opinion upon review of our financial statements.

• Patronage Capital at End of Year = $39,202,601 • Equity as a % of Total Capitalization = 39.9% • 39 full-time employees • Real Estate Taxes paid in 2019 = $555,476

How the BENCO 2019 Revenue Dollar Was Allocated

Interest Operations & Maintenance 11.65¢ 4.19¢

Other 0.17¢ Cost of Power 66.03¢

Administrative & General 7.46¢ Operating Margins 3.17¢ Depreciation & Amortization 7.33¢ 8 - Financial Report BALANCE SHEETS 2019 2018 ASSETS Electric Plant $122,995,713 $120,646,967 Construction Work in Progress 2,003,719 380,990 Total 124,999,432 121,027,957 Less Accum. Provision for Depreciation (48,424,359) (46,667,189) Net Utility Plant 76,575,073 74,360,768 OTHER ASSETS AND INVESTMENTS Investments in Associated Organizations 20,149,438 19,511,639 Other Investments 1,326,530 1,528,707 Notes Receivable - Net of Current Portion 194,032 222,246 Total Other Assets and Investments 21,670,000 21,262,592 CURRENT ASSETS Cash and Cash Equivalents 10,325,550 9,326,952 Accounts Receivable, Net 3,981,814 4,320,395 Materials and Supplies Inventories 1,236,454 889,281 Interest Receivable (2,910) 3,293 Current Portion of Notes Receivable 34,000 39,000 Total Current Assets 15,574,908 14,578,921 DEFERRED DEBITS 780,140 791,984 Total Assets $114,600,121 $110,994,265

EQUITIES AND LIABILITIES EQUITIES Patronage Capital $39,202,601 $37,631,556 Memberships 77,568 76,393 Other Equities and Other Comprehensive Income 2,903,249 2,559,296 Total Equities 42,183,418 40,267,245 LONG-TERM DEBT, Less Current Maturities RUS Mortgage Notes 32,512,546 29,686,675 CFC Mortgage Notes 28,410,355 29,948,021 Conditional Asset Retirement Obligation 41,150 41,150 Total Long-Term Debt 60,964,051 59,675,846 OTHER NONCURRENT LIABILITIES Post Retirement Benefit Obligation 1,772,221 1,903,662 Total Other Noncurrent Liabilities 1,772,221 1,903,662 CURRENT LIABILITIES Current Maturities of Long-Term Debt 2,586,000 2,563,000 Current Portion of Accum. Postretirement Benefit Obligation 157,203 43,850 Accounts Payable 5,073,220 4,629,192 Consumer Deposits 2,933 2,620 Other Current and Accrued Liabilities 1,612,904 1,537,706 Total Current Liabilities 9,432,260 8,776,368 DEFERRED CREDITS 248,171 371,144 Total Equities and Liabilities $114,600,121 $110,994,265 9 - Financial Report

STATEMENTS OF REVENUES, EXPENSES & CHANGES IN PATRONAGE CAPITAL

2019 2018 OPERATING REVENUES $46,879,250 $47,756,572

OPERATING EXPENSES Cost of Power 30,955,926 31,817,986 Distribution Expense - Operations 2,476,030 2,285,823 Distribution Expense - Maintenance 2,986,589 2,974,623 Consumer Account Expense 1,061,299 661,108 Customer Service and Info Expense 921,548 949,907 Administrative and General Expense 1,516,001 1,519,983 Depreciation 3,434,364 3,303,251 Other 77,466 17,631 Total Operating Expenses 43,429,223 43,530,312

OPERATING MARGINS BEFORE FIXED CHARGES 3,450,027 4,226,260 INTEREST ON LONG-TERM DEBT 1,963,521 1,796,910 OPERATING MARGINS AFTER FIXED CHARGES 1,486,506 2,429,350

G & T AND OTHER CAPITAL CREDITS 1,098,909 1,001,835 NET OPERATING MARGINS 2,585,415 3,431,185 NON-OPERATING MARGINS Investment Income 292,801 230,869 Other Non-Operating (Loss) Gain (75,452) 12,527 Total Non-Operating Margins 217,349 243,396 NET MARGINS $2,802,764 $3,674,581

Patronage Capital, Beginning of Year $37,631,556 $34,796,516 Retirement of Patronage Capital, Net Change 1,571,045 2,835,040 Patronage Capital, End of Year $39,202,601 $37,631,556 10 - Financial Report

STATEMENTS OF CASH FLOWS

2019 2018 CASH FLOWS FROM OPERATING ACTIVITIES Net Margins $2,802,764 $3,674,581 Adjustments to Reconcile Net Margins to Net Cash Provided by Operating Activities: Depreciation 3,434,364 3,303,251 G & T and Other Capital Credits (1,098,909) (1,001,835) Loss (Gain) on Equity Investments (179,951) (120,530) Accrued Post Retirement Benefits (18,088) 241,948 Interest Income Credited to Cushion of Credit (77,991) (74,210) Changes in Assets and Liabilities - Decrease (Increase) in: Accounts Receivable 338,581 (168,294) Materials and Supplies Inventory (347,173) 195,130 Deferred Debits 11,844 88,808 Other Current and Accrued Assets 6,203 (3,200) Increase (Decrease) in: Accounts Payable 444,028 (971,114) Customer Deposits 313 (415) Deferred Credits (122,973) 99,013 Other Current and Accrued Liabilities 75,198 74,894 Net Cash Provided by Operating Activities 5,268,210 5,338,027 CASH FLOWS FROM INVESTING ACTIVITIES Construction and Acquisition of Plant (5,648,669) (8,637,956) Purchases of Investments 393,326 (243,305) Cash Received from Retirement of Patronage 471,110 109,762 Issuance of Notes Receivable - 234,500 Payments Received on Notes Receivable 12,016 11,755 Net Cash Used by Investing Activities (4,772,217) (8,525,244) CASH FLOWS FROM FINANCING ACTIVITIES Increase (Decrease) in Memberships 1,175 136 Retirement of Capital Credits (887,766) (808,500) Proceeds from Issuance of Long Term Debt 4,000,000 8,025,000 Principal Payments on Long Term Debt (2,610,804) (2,409,693) Net Cash Provided by Financing Activities 502,605 4,806,943 NET INCREASE IN CASH AND CASH EQUIVALENTS 998,598 1,619,726 Cash and Cash Equivalents - Beginning 9,326,952 7,707,226 CASH AND CASH EQUIVALENTS - ENDING $10,325,550 $9,326,952 SUPPL. DISCLOSURES OF CASH FLOW INFO. Interest Paid $1,965,194 $1,798,561 11 - Operations and Engineering Report

The Operations and Engineering department continues to focus on safely providing reliable service to the members of BENCO Electric Cooperative. Within the Operations and Engineering department there are currently 20 linemen that make up seven crews. Two stakers, a mechanic, a purchasing coordinator and a line superintendent round out the department. Tim Braulick In 2019, BENCO suffered extensive damage Operations and to many parts of our infrastructure as a result Engineering of Winter Storm Wesley. Since then, much of Manager our focus has been on permanent repairs to the damaged areas. Toward the end of the year, we replaced the Jamestown substation which was one of the co-op’s oldest substations and in 2020, we plan to strengthen our mapping system through GIS and GPS.

2019 2009 Miles of Line 3,614 3,204 Services in Place, year end 19,602 14,158 KWHs Purchased 398,225,303 273,959,914 KWHs Sold 385,922,643 258,238,655 Average Cost Per KWH Purchased $0.0777 $0.063 Average Cost Per KWH Sold $0.1213 $0.1028 New Services Installed 222 155 Services Removed 66 46 Average Outage Time per Member 264 min. 80 min. 12 - Energy Services Report

BENCO continues supporting load management programs including dual fuel, interruptible and storage water heating, storage space heating, and Marathon water heaters. Rebates for ground source heat pumps, air source heat pumps and electric vehicle charging are available. Members who participate in BENCO’s load management programs now have the ability John Hutchens to receive text message notifications, alerting Energy Services participants when BENCO plans to control. Manager Please visit our website to sign up for this new communication tool. Looking forward to 2020, BENCO will implement a new load management system that will partner with our current AMI system. BENCO’s Wellspring renewable energy program is a voluntary program that offers wind- or solar-generated electricity to our members. Members can select the wind option in 100 kWh blocks and $0.20 per 100 kWhs will be added to your monthly bill. Members can also select the solar option in 100 kWh blocks and $2.00 per 100 kWhs will be added to your monthly bill. To sign up for either program, please visit the ‘Renewable Energy’ page at benco.org.

• Average monthly consumption per member was 1,711 kWh; average number of consumers 18,793 • BENCO Electric Cooperative has: 16,772 residential meters 1,501 commercial & industrial accounts 594 seasonal meters 14 irrigation services • BENCO Electric Cooperative is controlling: 4,550 water heaters 2,200 cycled air conditioners 815 dual fuel heating systems and air source heat pumps 67 storage systems • Peak Demand - 73,157 KW 13 - Member Services Report In 2019, BENCO Electric Cooperative worked to improve our communications with our members by implementing an outage notification system. Members can now receive texts from BENCO during power outages, so even if you are away from home you can still know if your power is out and when it is restored. To enroll, follow these steps: visit our website, Kathy Gerber benco.org; under the Member Services drop- Member Services down menu at the top of the page, click on Manager “Text Message Notifications.”; under the “Outage Notifications” section, click the sign-up link. You can sign-up three different numbers to receive notifications and you can opt-out at anytime. Nick Huynh, son of Ngon Huynh and Thuy Trang of Mankato, represented BENCO as our 2019 Washington, DC Youth Tour Delegate. Nick joined 1,500 students from around the country and spent a week in Washington, DC learning about cooperatives and our government. Members of high school sophomores and juniors can have their son or daughter submit an essay on “Why they want to go to Washington DC” for an opportunity to win an all-expense paid trip to our nation’s capitol in 2021. Visit our website, benco.org, for more information. Operation Round-Up is an organization through BENCO Electric Cooperative where members’ utility bills are rounded up to the nearest dollar. The “rounded up” amount is added to the BENCO Electric Cooperative Trust that is then allocated to non-profit organizations throughout the year. The non-profit organizations receiving grants are organizations that impact people within the BENCO service territory. Last year BENCO members donated over $35,000 to worthwhile organizations in the area. 14 - Great River Energy Great River Energy: Powering what’s possible Great River Energy is a wholesale electric cooperative owned by 28 member-owner cooperatives, including BENCO Electric Cooperative. Great River Energy started its portfolio of wind energy resources 20 years ago with three turbines in southern Minnesota. The cooperative ended 2019 by adding its largest Gary Stenzel wind resource to date with the start of the GRE Director 80-turbine, 200-megawatt Emmons-Logan wind farm in North Dakota. Over the past five years, all of Great River Energy’s new energy resources have been renewable. The cooperative is on track to achieve its goal of 50% renewable energy by 2030, reaching the interim milestone of 30% in 2020. Meanwhile, Great River Energy has kept average wholesale electric rates flat, surpassed financial goals and began returning patronage capital to members. Great River Energy and its 28 member-owner cooperatives are committed to providing clean energy that is as affordable and reliable as ever. Sharing financial success For the second consecutive year, Great River Energy shared financial gains with its member-owner cooperatives, issuing a $10 million refund in January 2019. In addition, Great River Energy returned patronage capital for the first time in its history through a $15 million cash payment to its 28 member-owner cooperatives. Weather poses challenges The Great River Energy system performed reliably as temperatures plunged to record lows across the Midwest in January 2019. During severe winter events, Great River Energy’s generation and transmission assets are carefully operated and monitored to ensure electricity continues to power member-consumers’ homes. The cooperative’s resilient transmission system met the test with no 15 - Great River Energy outages or issues despite temperatures of -30 degrees Fahrenheit. When Winter Storm Wesley ripped through southern Minnesota on April 11, crews from Great River Energy, neighboring utilities and member-owner cooperatives teamed up to restore power to 8,300 member-consumers. More than 350 power poles were downed or damaged, by far the most recorded in Great River Energy’s history. Investing in a critical grid resource A critical transmission resource that has served members for 40 years received new life as Great River Energy upgraded its high- voltage, direct-current system. The unique 436-mile transmission line delivers power directly from the 1,140-megawatt Coal Creek Station power plant in central North Dakota to Minnesota. The upgrade will assure the line continues to provide value to members by operating reliably for decades to come. Great River Energy began preparations for the upgrade in 2011 and completed work during a 74-day stretch in the early summer of 2019. Nearly all the equipment housed in two converter stations was removed and replaced with advanced technologies. This project has been one of Great River Energy’s most significant capital investments over the last several years and was completed on time and on budget. Studying the low-carbon grid Great River Energy joined nine other utilities to study what system improvements and infrastructure upgrades will be needed to achieve ambitious carbon reduction goals. The study is critical to the eventual development of a comprehensive plan that will ensure the continued reliable delivery of low-cost electricity in a cost-effective manner. Long-running resource retired Operations of Great River Energy’s Elk River Resource Recovery Project concluded in January 2019. In the 30 years of operation as a waste-to-energy project, the energy recovery station generated 4.6 million megawatt-hours of renewable energy and processed more than 10 million tons of municipal solid waste. Decommissioning is underway and the plant is scheduled to be demolished in 2020. Godahl & Frost Towers

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