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2015 ANNUAL REPORT MEMBER OWNED.TRUSTED.RESPONSIBLE.EFFICIENT.OPEN. INNOVATIVE.PROGRESSIVE.SAFE.DEPENDABLE.SUSTAINABLE. COLLABORATIVE.FLEXIBLE.STRONG.COMPETITIVE.DEDICATED. ACCOUNTABLE.HONEST.RELIABLE.POWERING WHAT’S POSSIBLE. CONTENTS TO OUR STAKEHOLDERS ...................................................................2 ABOUT GREAT RIVER ENERGY ...........................................................4 OUR RESOURCE PORTFOLIO ..............................................................6 MEETING THE NEEDS OF A CHANGING MEMBERSHIP .........................8 POWER SUPPLY CONTINUES TO EVOLVE ..........................................11 TRANSMISSION: SERVING MEMBERS AND THE REGIONAL GRID........14 2015 FINANCIAL REPORT ................................................................17 MANAGEMENT AND BOARD OF DIRECTORS ...................................53 GREAT RIVER ENERGY IS A GENERATION AND TRANSMISSION COOPERATIVE THAT SUPPLIES WHOLESALE ELECTRICITY TO 28 MEMBER-OWNED DISTRIBUTION COOPERATIVES IN MINNESOTA AND PARTS OF WISCONSIN. WITH A DIVERSE PORTFOLIO OF GENERATION RESOURCES AND AN EXPANSIVE NETWORK OF TRANSMISSION INFRASTRUCTURE, GREAT RIVER ENERGY PROVIDES ITS MEMBERSHIP WITH A RELIABLE AND AFFORDABLE POWER SUPPLY IN HARMONY WITH A SUSTAINABLE ENVIRONMENT. GREAT RIVER ENERGY IS GUIDED BY THE SEVEN COOPERATIVE PRINCIPLES, WHICH INCLUDE DEMOCRATIC MEMBER CONTROL AND CONCERN FOR COMMUNITY. TOGETHER WITH ITS MEMBERS, GREAT RIVER ENERGY’S EMPLOYEES ARE DEDICATED TO KEEPING COOPERATIVE ENERGY COMPETITIVE. 1 2015 ANNUAL REPORT TO OUR STAKEHOLDERS Take a look around Great River Energy and you we have plans for more. By adding a solar component to our will see ideas taking root and becoming critical Wellspring program, we have enabled members to subscribe to strategies that will ensure our long-term success. greater proportions of solar electricity at a modest additional cost. We remain focused on generating and transmitting Feedback from a variety of stakeholders informed us there was reliable and affordable electricity in harmony with MICHAEL THORSON DAVID SAGGAU growing momentum for the electrification of Minnesota’s economy, a sustainable environment while discovering ways particularly transportation. We are supporting the advancement to evolve with changes in our industry and among of electric vehicles by embracing early adopters. Our research our membership. Great River Energy Great River Energy showed that electric vehicle drivers were motivated primarily by Board Chair President and CEO TM The announcement of the Clean Power Plan presents a challenge the cars’ reduced environmental impact. That inspired Revolt , a to utilities in coal-rich regions of the country. Despite a stay program that offers renewable energy credits for the expected life of the rule, the Environmental Protection Agency is obligated of an electric vehicle at no additional cost. It is the first program of to regulate carbon dioxide emissions. Great River Energy is its kind in the world. well positioned to comply while remaining competitive with other We continue to work with our member cooperatives to attract and Midwest utilities. It is no accident, either. We have been preparing retain businesses in the communities we serve. Over the past year, for carbon dioxide limits for years. we have identified the locations in our service area best suited for In recent years, Great River Energy has reduced our exposure investment from the technology sector. By identifying properties with superior broadband and electrical capacity, we will be prepared to carbon dioxide regulations by terminating an obligation to when opportunities arise. purchase energy and capacity from a Wisconsin coal-based power plant, commissioning a coal plant compliant with the We are entering an era in which energy data is becoming Clean Power Plan’s emission limits and accelerating the essential to effectively serve members. Great River Energy is depreciation of our remaining coal assets. In addition, we facilitating opportunities for partnerships, research and testing completed 20 solar installations across Minnesota. among our member cooperatives to identify platforms that will aid us in serving a new generation of consumers. When research revealed that our membership was becoming increasingly interested in solar electricity, we devised programs As we face new challenges, we find strength through collaboration. that offered solar energy in ways that treated members fairly. Great River Energy and our 28 member cooperatives are learning Today, Great River Energy and our member cooperatives from one another new ways to achieve our vision: to keep collectively own nearly 2 megawatts of solar capacity, and cooperative energy competitive. WE REMAIN FOCUSED ON GENERATING AND TRANSMITTING RELIABLE AND AFFORDABLE ELECTRICITY IN HARMONY WITH A SUSTAINABLE ENVIRONMENT WHILE DISCOVERING WAYS TO EVOLVE WITH CHANGES IN OUR INDUSTRY AND AMONG OUR MEMBERSHIP. 2 3 2015 ANNUAL REPORT TO OUR STAKEHOLDERS Take a look around Great River Energy and you we have plans for more. By adding a solar component to our will see ideas taking root and becoming critical Wellspring program, we have enabled members to subscribe to strategies that will ensure our long-term success. greater proportions of solar electricity at a modest additional cost. We remain focused on generating and transmitting Feedback from a variety of stakeholders informed us there was reliable and affordable electricity in harmony with MICHAEL THORSON DAVID SAGGAU growing momentum for the electrification of Minnesota’s economy, a sustainable environment while discovering ways particularly transportation. We are supporting the advancement to evolve with changes in our industry and among of electric vehicles by embracing early adopters. Our research our membership. Great River Energy Great River Energy showed that electric vehicle drivers were motivated primarily by Board Chair President and CEO TM The announcement of the Clean Power Plan presents a challenge the cars’ reduced environmental impact. That inspired Revolt , a to utilities in coal-rich regions of the country. Despite a stay program that offers renewable energy credits for the expected life of the rule, the Environmental Protection Agency is obligated of an electric vehicle at no additional cost. It is the first program of to regulate carbon dioxide emissions. Great River Energy is its kind in the world. well positioned to comply while remaining competitive with other We continue to work with our member cooperatives to attract and Midwest utilities. It is no accident, either. We have been preparing retain businesses in the communities we serve. Over the past year, for carbon dioxide limits for years. we have identified the locations in our service area best suited for In recent years, Great River Energy has reduced our exposure investment from the technology sector. By identifying properties with superior broadband and electrical capacity, we will be prepared to carbon dioxide regulations by terminating an obligation to when opportunities arise. purchase energy and capacity from a Wisconsin coal-based power plant, commissioning a coal plant compliant with the We are entering an era in which energy data is becoming Clean Power Plan’s emission limits and accelerating the essential to effectively serve members. Great River Energy is depreciation of our remaining coal assets. In addition, we facilitating opportunities for partnerships, research and testing completed 20 solar installations across Minnesota. among our member cooperatives to identify platforms that will aid us in serving a new generation of consumers. When research revealed that our membership was becoming increasingly interested in solar electricity, we devised programs As we face new challenges, we find strength through collaboration. that offered solar energy in ways that treated members fairly. Great River Energy and our 28 member cooperatives are learning Today, Great River Energy and our member cooperatives from one another new ways to achieve our vision: to keep collectively own nearly 2 megawatts of solar capacity, and cooperative energy competitive. WE REMAIN FOCUSED ON GENERATING AND TRANSMITTING RELIABLE AND AFFORDABLE ELECTRICITY IN HARMONY WITH A SUSTAINABLE ENVIRONMENT WHILE DISCOVERING WAYS TO EVOLVE WITH CHANGES IN OUR INDUSTRY AND AMONG OUR MEMBERSHIP. 2 3 2015 ANNUAL REPORT OUR MEMBER OWNERS GREAT RIVER ENERGY PROVIDES WHOLESALE ELECTRIC SERVICE TO 28 DISTRIBUTION COOPERATIVES. THOSE MEMBER Great River Energy maintained its strong financial position in 2015. The cooperative COOPERATIVES DISTRIBUTE ELECTRICITY TO APPROXIMATELY 665,000 MEMBERS – OR ABOUT 1.7 MILLION PEOPLE. GREAT RIVER ENERGY’S MEMBER COOPERATIVES RANGE FROM THOSE IN THE OUTER-RING SUBURBS OF THE TWIN consistently receives investment-grade credit ratings from three rating agencies. Over CITIES TO THE ARROWHEAD REGION OF MINNESOTA TO THE FARMLAND OF SOUTHWESTERN MINNESOTA. GREAT the past year, Great River Energy received $350 million in proceeds from a bond RIVER ENERGY’S LARGEST DISTRIBUTION COOPERATIVE SERVES MORE THAN 125,000 MEMBER-CONSUMERS; issuance executed in late 2014. THE SMALLEST SERVES ABOUT 2,500. Great River Energy’s wholesale rates remain below the weighted regional average. In fact, Great River Energy’s rate to its member cooperatives declined in 2015, and rate projections show moderate increases in the years ahead. With an equity position of 16.8 percent, Great River Energy is on pace to meet its goal of 20 percent