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corn belt power cooperative | 2011 annual report

THE COOPERATIVE SPIRIT:A lineman restores power in the middle of an icy winter night.

ENDURANCE. STAMINA.

An energy advisor conducts a detailed energy audit to make a member’s home more effi cient and comfortable.

COMMITMENT. PERSISTENCE.

A power plant operator inspects each control to keep the turbine operating safely.

TENACITY. PERSEVERANCE.

A director pores over fi nancial statements to keep fellow members’ rates down.

DEDICATION. FORTITUDE.

An economic development team provides fi nancing opportunities to encourage growth in the local community.

DETERMINATION. FOCUS.

An accountant checks expenses carefully, looking for ways to streamline costs.

DILIGENCE. ACCURACY.

An electrician installs new technology to strengthen system reliability. GUTS. HEART. MOXIE. METTLE. PLUCK.

Call it what you will, it’s how electric cooperatives have served their members for decades to provide reliable, affordable electricity

and thereby enhance members’ quality of life.

it ’s serving with true grit.

2 C O R N B E LT P O W E R C O O P E R A T I V E2 0 1 1 A N N U A L R E P O R T

President, Corn Belt Power Board of Directors

we serve our member

cooperatives with

tenacity and resolve,

regardless of whether

challenges come in the

form of severe weather,

financial pressures

or governmental

regulations.

Executive Vice President and General Manager

C O R N B E LT P O W E R C O O P E R A T I V E2 0 1 1 A N N U A L R E P O R T2

C O R N B E LT P O W E R C O O P E R A T I V E2 0 1 1 A N N U A L R E P O R T 3

REPORTExecutiv e

corn belt power cooperative

2011 annual report 3


FOR ALMOST 65 YEARS, Corn Belt Power Cooperative has boldly responded to challenges. We serve our member cooperatives with tenacity and resolve, regardless of whether challenges come in the form of severe weather, fi nancial pressures or governmental regulations.

2011 was no different. Throughout the year, Corn Belt Power demonstrated the Cooperative Spirit by taking action on a variety of challenges with unwavering commitment.

All through the year, we continued to focus on system reliability. Despite tornadoes, straight-line winds and unprecedented fl ooding, we kept outage time low. Our ongoing line reconductoring strengthens older sections of transmission line, while installation of new micro-processor based technology improves the reliability of our substations. New technology that immediately notifi es operators of the location of a fault when it occurs greatly reduces thelength of an outage.

The cost of electric power from Corn Belt Power and its wholesale power supplier, Basin Electric Power Cooperative, increased 5.6 percent in January 2011, due primarily to the high cost of new generating facilities. Generation cost to Corn Belt Power increased another 11 percent in October 2011, marking the fi rst mid-year Basin Electric rate increase to members since 1979. By cutting costs and redistributing resources, Corn Belt Power was able to delay implementing the increase to its member co-ops until January 2012.

A Class A member of Basin Electric since 2009, Corn Belt Power purchases all of its power supply from Basin Electric with the exception of its hydropower allocation. Due to projected load growth, Basin Electric recently added or is in the process of building three major new generation units along with two new wind generation projects.

The cost to build new electric generation increased dramatically in the last few years. A plant jointly owned by Corn Belt Power that came on line in 2007 cost $1,500 per kilowatt

to build. In contrast, a plant that came on line in 2011 cost $3,500 per kilowatt to build – a 133 percent increase in just four years.

Although new generation is more expensive than sources built in previous years, the new supplies will positively position Corn Belt Power to meet its member cooperatives’ power needs far into the future. Our membership in Basin Electric greatly mitigates our risk by reducing the need for Corn Belt Power either to buy power on the market or build new electric generation on our own.

To keep rates as low as possible, we continue to look for ways to reduce costs, whether that be through simple steps like keeping vehicles longer before trading or more complex options like using new technology to become more effi cient. Corn Belt Power foresees its rates stabilizing in approximately two years as demand grows to meet the increased supply of new generation.

Another challenge testing Corn Belt Power in 2011 and beyond is access to fi nancing. Unsure of the availability of funds from the cooperative’s traditional source of fi nancing – the Rural Utilities Service – for expenses related to fossil fuel generation, Corn Belt Power is exploring alternative sources, including obtaining an indenture and becoming fi nancially rated. New fi nancing options will be used for, among other projects, installing new environmental controls on the Neal 4 generating plant near Sioux City.

Corn Belt Power reduced its risk associated with decommissioning costs of the Duane Arnold Energy Center when, on April 30, its decommissioning funds (with anticipated additional interest and earnings) reached a level needed to retire the plant in 2034. After reaching the required funding level, Corn Belt Power was allowed to transfer to Basin Electric

EXECUTIVE REPORT


1. Kenneth H. Kuyper, Executive Vice President and General Manager 2. Donald Feldman, President, Corn Belt Power Board of Directors

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the responsibility of any additional funding that might be required due to decommissioning cost increase, market returns decrease or interest rate decrease.

After discussions early in 2011 about whether or not to make additional cash contributions to the decommissioning funds to avoid future expense, the Corn Belt Power board decided to let anticipated market gains increase the amount of the investment funds rather than add cash. The board’s strategy paid off in April when market

earnings increased the value of the funds to the required level without additional investment.

In October of 2011, Corn Belt Power successfully negotiated a new contract with the City of Webster City, extending until 2050 our relationship as the city’s wholesale power supplier, which began in 1979. We are pleased to continue our partnership, sharing resources in our combined system of power supply and transmission facilities.

In November of 2011, Corn Belt Power purchased an additional 2.14 megawatts of the Walter Scott 4 plant, increasing its ownership share to approximately 45 megawatts. Not only did this purchase allow us to acquire additional reasonably priced generation in a plant we already jointly own, but it also served as a catalyst for amending our contract with Basin Electric and reducing a coal plant adjustment charge to Corn Belt Power.

2011

YEAR

800

1,200

1,600

1,800

1,400

1,000

600

2,000

400

MILLION KWH

Total sales

5C O R N B E LT P O W E R C O O P E R A T I V E2 0 1 1 A N N U A L R E P O R T

Total sales include rural electric cooperatives, North Iowa Municipal Electric Cooperative Association, City of Webster City and sales to others.

As Corn Belt Power works to comply with new Environmental Protection Agency standards, including the Utility Mercury and Air Toxics Standards and Cross-State Air Pollution Rule, we will continue to communicate the importance of keeping electricity affordable to maintain the quality of life in rural Iowa.

These new EPA regulations will not only increase electric cooperatives’ costs substantially, but also threaten system reliability as utilities make diffi cult choices about whether or not to keep some plants operational.

Undoubtedly, we will continue to experience more challenges in the future. We’ve had the good fortune to have excellent directors serve our cooperatives. As long-time directors retire from service, it will be important to recruit members from younger generations and actively engage them in the electric co-op program. We will likely see more mergers of cooperatives, increasing the challenge within a generation and transmission system of dealing with diversity of member cooperatives’ size.

As always, Corn Belt Power will be challenged to keep our system viable. Corn Belt Power is a small generation and transmission cooperative. Joining with Basin Electric has allowed us to be part of a larger system, which strengthens our cooperative. With a voice provided by our seat on the Basin Electric board of directors, we are well positioned to help direct the path to a bright future.

30

35

40

45

50

55

60 2011

YEAR

MILLS PER KWH

Average REC member system cost, including substation charge; calculated average REC rate refl ects power sold to municipals and others served by RECs.member rec rates


REVIEWYEARin

corn belt power cooperative


NOTHING SHOWED the “Cooperative Spirit of True Grit” more than Corn Belt Power Cooperative’s response to adverse weather in 2011. Throughout the year, Mother Nature tested the cooperative’s strength and resilience, choosing wind and water as her primary weapons.

As in previous years, Corn Belt Power’s system and its personnel held up to the challenges.

Numerous tornadoes tore through the western part of Corn Belt Power’s system the evening of April 9, destroying buildings and snarling trees, tin and power lines into mangled messes. Remarkably, no loss of life resulted and offi cials reported few serious injuries. Corn Belt Power lost close to 50 transmission poles and sustained more than $1 million in damages. The storm downed poles in the Miles Nelsen tap east of Highway 71, the Dover dual circuit west of Pocahontas and in a six-mile stretch northeast of Odebolt and south of Schaller.

Near Odebolt, a tornado ripped some transmission poles from the line and carried them more than 200 feet. System operators rerouted power and quickly re-energized all substations with the exception of the Dover Substation, which crews had back on line by

4 p.m. the next day. Damage from the storm required the rebuilding of six miles of 69 kV transmission line near Odebolt.

In June, melting snowpack and unusually heavy spring rains triggered unprecedented releases of water through dams on the Missouri River. Owners of power plants near Sioux City and Council Bluffs prepared for fl ooding conditions that lasted through August.

MidAmerican Energy Company, which jointly owns three power plants along the Missouri River with Corn Belt Power and other utilities, built a temporary levee at Neal 4 near Sioux City to protect facilities and keep the plant operational. Neal 4 continued to operate during the fl ooding conditions and coal was delivered during that time.

Because the Walter Scott, Jr. Energy Center, Council Bluffs, sits at elevations above the river’s crest, fl oodwaters did not reach the plants. However, MidAmerican Energy reinforced low lying areas and moved spare equipment to higher elevations.

Straight-line sustained winds topping 130 mph – later identifi ed as a “derecho” – along

with heavy rain hit the Corn Belt Power system July 11, breaking 58 transmission poles in the Clutier to Dinsdale 69 kV line in Tama County, approximately 30 miles southeast of Grundy Center. With the transmission line down, the Clutier Substation was out of service, leaving about 350 Grundy County REC members without power. The heavy rain muddied gravel roads and hot, muggy weather hampered restoration efforts in the days that followed. Crews re-energized the Clutier Substation July 16. Corn Belt Power had to rebuild parts of four and a half miles of 69 kV transmission line due to the storm damage.

PHOTOS 1. The Missouri River rises close to the Neal Energy Center near Sioux City in early June. 2-3. Denny Evans, foreman, fi eld engineering, Matt Wittrock and Mike Devers, journeyman fi eld technicians, and Randy Rohr, journeyman lineman, start clean up work after straight-line winds damaged transmission lines in Tama County. 4-6. Corn Belt Power transmission crews, including Chris Smith, journeyman lineman, Connor Almond, apprentice electrician, and Ryan Conlon, journeyman lineman, repair the Dover dual circuit west of Pocahontas after an April 9 tornado.

2011 ADVERSE WEATHER

C O R N B E LT P O W E R C O O P E R A T I V E2 0 1 1 A N N U A L R E P O R T8

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EARLY IN 2011, Corn Belt Power transmission crews built the Otter Creek dual circuit north of Eldora, creating a shorter distance between breakers and thereby improving the reliability of the system. The new dual circuit provides a source of power for both Corn Belt Power members and Alliant Energy customers in the Eldora area.

Later in the year, transmission crews from Humboldt, Hampton and Emmetsburg began work to strengthen a 10-mile section of transmission line that runs south from Glidden. Due to age, load growth and previous ice storm damage, crews must rebuild the 69 kV transmission line to maintain reliability of power supply to members of Raccoon Valley Electric Cooperative. The Federal Emergency Management Agency will reimburse Corn Belt Power for approximately 75 percent of the $1.4-million cost to replace the conductor on this section of line.

Work began in late fall with an expected six-to-eight week completion schedule. Crews added new poles to shorten the spans where necessary and installed heavier motion-resistant conductor, making the structure sturdier and increasing the capacity of power the line can transmit.

In early July, Corn Belt Power crews began setting towers and installing equipment at the new Owl Lake Substation south of Renwick. The new substation provides additional service for Boone Valley Electric Cooperative and serves load growth on Humboldt County REC lines. Crews energized the facility in September.

The site of a former Corn Belt Power diesel plant will serve as home to a new switching station that will improve reliability in the Grundy County REC service territory. Corn Belt Power retired the Dinsdale diesel unit, southeast of Reinbeck, in the 1980s and sold the property to a local owner. When Corn Belt Power began looking for a place to build a new switching station in the area, purchasing the former diesel plant site provided an opportunity to accomplish two objectives: increase system reliability in the area and clean up the property to improve its appearance. Corn Belt Power crews are building the switching station with completion of the project scheduled for summer 2012.

During the year, construction began on the capacitor bank addition at the Dover Switching Station in Pocahontas County. The project, to be completed in 2012, will provide voltage support during switching contingencies.

In 2011, Corn Belt Power electricians installed new technology in the cooperative’s switching stations that will provide valuable information about locations and causes of faults in the system. Crews installed new gas circuit breakers and control panels with micro-processor based relays at the Pocahontas and Hampton switching stations. The new equipment increases system reliability by replacing oil-fi lled circuit breakers and electrical mechanical relays.

Crews installed new wildlife protection devices in 2011 that deter raccoons and birds from entering substations. Devices installed include protective cones and rope wrap, super-sonic bird chasers that emit wounded bird noises and ultrasonic repellent units that use high-pitched frequency sounds to deter raccoons.

In April, six representatives from the Midwest Reliability Organization performed a North American Electric Reliability Corporation audit at Corn Belt Power. The audit reviewed operations/planning and critical infrastructure protection standards. MRO offi cials conducted interviews and visited the alternative control center, auditing 35 standards and 150 requirements. Auditors shared a report of fi ndings during exit interviews and submitted it to the enforcement division for any potential follow up.

ENGINEERING AND SYSTEM OPERATIONS PROJECTS

PHOTOS 1. Connor Almond, apprentice electrician, Jon Girres, journeyman electrician, and Mark Saxton, apprentice lineman, remove an old breaker from the Pocahontas Switching Station. 2. Crews work to reconductor transmission line south of Glidden 3. Corn Belt Power crews built the Owl Lake Substation, south of Renwick, which was energized Sept. 15. 4. Travis Hefty, journeyman lineman, strings new conductor on the Otter Creek dual circuit near Eldora. 5. Operations and planning standards auditors, standing, interview Joel Haynes and Jeff Lindaman, system operators, during the NERC audit April 11.

5

OWL LAKE SUBSTATION AND TAP |

A new two-mile section of 69 kV transmission line was constructed to serve the new Owl Lake Substation and support the City of Renwick and Humboldt County REC load. The project was started and completed in 2011.

OTTER CREEK DUAL CIRCUIT | A new half-mile section of 69 kV dual circuit transmission line was constructed to interconnect with the new ITC-owned Otter Creek Switching Station. The project increases reliability and voltage support in the Eldora area. It was started and completed in 2011.

RELOCATION OF LINE AND SWITCH,

SAC CITY - ODEBOLT | A 1.5-mile section of 69 kV transmission line and three-way switch were relocated and rebuilt due to the Department of Natural Resources’ fl ooding of a marsh area where the line was previously located in Sac County. The project was started and completed in 2011.

GLIDDEN – CARROLLTON LINE

RECONDUCTORING | A 9.5-mile section of 69 kV transmission line is scheduled for reconductoring. The modifi cation of this line was completed in 2011, with the reconductoring to be completed in February 2012.

SCHALLER – ODEBOLT REBUILD | In Sac County, crews completely rebuilt six miles of 69 kV transmission line damaged by tornadoes. It was started and completed in 2011.

CLUTIER TAP | Crews partially rebuilt approximately 4.5 miles of 69 kV transmission line damaged by storms in Tama County. It was started and completed in 2011.

DINSDALE SWITCHING STATION |

Located southeast of Reinbeck, the Dinsdale Switching Station was started in 2011 and will be completed in 2012. It will increase reliability for members of Grundy County REC.

DOVER SWITCHING STATION |

Construction began on the capacitor bank addition at the Dover Switching Station in Pocahontas County in 2011 and will be completed in 2012. The project will provide voltage support during switching contingencies.

INSTALLATION OF BREAKERS, CONTROL

PANELS WITH MICRO-PROCESSORS |

New technology installed in the Pocahontas and Hampton switching stations increases system reliability.

UPGRADE OF SWITCHES | Six two-way switches on the 69 kV transmission system were replaced and upgraded. The new switches areequipped with vacuum interrupters and motor operators. Locations were: Conrad, Fostoria, Ringsted, Alden Rural, Graettinger and Boondocks. New one-way switches were also installed at NNG Tap and Union Tap. Work was started and completed in 2011.

2011 TRANSMISSION AND SUBSTATION PROJECTS


PHOTOS 1. Crews install a new breaker at the Pocahontas Switching Station. 2. Denny Evans, foreman, fi eld engineering, supervises construction work at Owl Lake Substation. 3. Justin Hinners, apprentice electrician, removes old equipment at the Pocahontas Switching Station. 4. Andy Stalzer and Mark Saxton, apprentice linemen, work to reconductor a transmission line. 5. David Heyden, journeyman electrician, checks a meter at the newly energized Owl Lake Substation. 6. Joel Harklau, journeyman electrician, installs copper at the Owl Lake Substation.

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SALES TO MEMBER CO-OPS, the City of Webster City and North Iowa Municipal Electric Cooperative Association were lower in 2011 compared to 2010, with 1,852,999,741 kilowatt-hours sold, a 3.6 percent decrease from the record high sales the previous year. Weather was likely a minor factor in the lower sales, with cooling degree days up only about one percent from 2010, and heating degree days down approximately fi ve percent. Similar to the previous year, 2011 saw little to no crop drying load due to extremely dry fall weather.

Electric sales refl ected an economy that is still struggling. Operational changes at some key loads like ethanol plants along with an extended maintenance outage at one of Corn Belt Power’s largest loads resulted in overall energy sales to commercial and industrial loads down roughly 38,000 megawatt-hours from 2010. Sales to Webster City were down more than 15 percent, refl ecting the closing of one of the town’s major manufacturers.

2011’s peak demand of approximately319 megawatts occurred on Tuesday, July 19, at noon in the middle of a multi-day period when temperatures had been slowly increasing each day since the previous Friday. Although the maximum temperature hit just about 95 degrees, the maximum heat indices were in the range of 110 to 120 degrees, indicating high humidity levels.

SALES, PEAK DEMAND AND RATES

“ Electric sales refl ected an economy that is still struggling.”

system peaks

Corn Belt Power Cooperative 2011 Highlights

2010 2011TOTAL ENERGY SALES 1.921,699,372 kWh 1,852,999,741 kWh

REC PEAK DEMAND (NO LOSSES) 277,851 kW 276,214 kW

SYSTEM PEAK DEMAND 326,979 kW 319,456 kW

MILES OF TRANSMISSION LINES* 1,737 1,740

DISTRIBUTION SUBSTATIONS 149 150

EMPLOYEES 94 93

*Includes jointly owned transmission lines

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360

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

2008 2009

2010

2011

MONTH

MW


Corn Belt Power system peak = (RECs + Webster City) x 1.06 at time of Corn Belt Power 60-minute system peak.


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PHOTOS 1. Carla Gates, environmental and safety specialist, Patrick Connor, plant manager, and Tony Borkowski, machinist-welder, monitor the coal tripper in the bunker room at Wisdom Unit 1. 2. The dedication ceremony for Basin Electric Power Cooperative’s newest coal-based plant was held Aug. 11 at the $1.35-billion Dry Fork Station six miles north of Gillette, Wyo. 3. Rod Stephas, shift operator, monitors operation of Wisdom Unit 2, which ran more in the month of July than it has for the past two years. 4. This Watts Smart® peak alert device will let co-op members know the status of the Corn Belt Power system peak.


POWER SUPPLY yy eeaarr iinn rreevviieeww

CORN BELT POWER increased its ownership share of the Walter Scott, Jr. Energy Center Unit 4, Council Bluffs, with its purchase of an additional 2.14 megawatts of capacity effective Nov. 1. Additional capacity of the coal-based generating unit, the most effi cient in Iowa, became available for purchase when the City of Pella opted to sell its 10.5-megawatt share.

The Walter Scott Unit 4 joint ownership agreement gives existing owners the right of fi rst refusal to purchase capacity that comes up for sale. After all owners responded, Corn Belt Power had the opportunity to purchase an additional 2.14 megawatts (based on the plant’s initial 790-megawatt capacity rating) bringing its total share to approximately 45 megawatts. The cost of Corn Belt Power’s share of the additional capacity totals approximately $5 million.

Basin Electric Power Cooperative will purchase the output from the additional capacity fromCorn Belt Power. The new Walter Scott Unit 4 ownership share resulted in an amendment to the purchase power agreement between Corn Belt Power and Basin Electric that improves terms for both cooperatives. With the amendment, Corn Belt Power reduces a coal plant adjustment charge and Basin Electric increases its access to a long-term generating resource.

In the fall of 2011, the City of Webster City approved a new wholesale fi rm power contract

that will keep Corn Belt Power as Webster City Municipal Utilities’ wholesale power supplier until 2050. Corn Belt Power and Webster City fi rst entered into a long-term agreement in 1979, creating a “combined system” that includes contribution of Webster City’s share of Neal 4 and the Webster City Combustion Turbine along with combined use of both parties’ transmission lines. The new power contract clarifi es how the combined system works for both parties and extends their relationship for the long term.

Basin Electric held a dedication ceremony for its newest coal-based power plant on Aug. 11 at the $1.35-billion Dry Fork Station six miles north of Gillette, Wyo. Construction of the plant began in 2007. The plant has a rated capacity of 385 megawatts.

Also in 2011, Basin Electric celebrated its 50th anniversary during its annual meeting in November. At the meeting, Ken Kuyper, executive vice president and general manager, Corn Belt Power, served as a speaker on a panel discussing regional transmission organizations.

Wisdom Unit 2, Corn Belt Power’s combustion turbine near Spencer that is jointly owned with Basin Electric, operated more in July 2011 than it had in the past two years combined. During the month, Western Area Power Administration called on Corn Belt Power dispatch to operate the unit 16 times, giving two new control

operators numerous opportunities to learn how to start up the natural gas plant.

Other news at Wisdom Station included installation of a new wall heater unit, lease of the rail spur to a Spencer business and plant operation in December to manage coal resources.

Implementing its Watts Smart® load management program, Corn Belt Power began controlling water heaters in December. Iowa Lakes Electric Cooperative started the program with 300 load control receivers hooked up. Four more member co-ops have plans to participate in load control in the near future. Savings from load control measures are passed on to the co-ops that are actively controlling load. Future plans include controlling air conditioners.

Using weather data that anticipates winter lows and summer highs along with historical records of peak demand, Corn Belt Power determines at what megawatt set point its Watts Smart® load management system should be engaged. When the set point is reached, the computerized system automatically sends a control signal that cycles off water heaters for a period of time. Iowa Lakes is also using in-home peak alert displays that notify members about the status of the control conditions.

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1057

12

%

%

%

%

%

%

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NATURALGAS

COAL

OIL/DIESEL

NUCLEAR

RENEWABLE OTHER

PURCHASE

RENEWABLEHYDRO

CORN BELT POWER GENERATION MIX 2011

y ear in review



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MWh MWh ANNUAL CAPACITY FACTORLOCATION FUEL 2010 2011 2011

WISDOM 1 Spencer, Iowa Coal 24,931 12,766 3.80%WISDOM 2 Spencer, Iowa Natural Gas/Fuel oil 736 4,139 1.20%DAEC Palo, Iowa Nuclear 445,064 521,523 95.70%WALTER SCOTT 3 Council Bluffs, Iowa Coal 206,324 194,420 84.60%WALTER SCOTT 4 Council Bluffs, Iowa Coal 309,003 317,898 84.40%NEAL 4 Sioux City, Iowa Coal 580,211 525,262 80.00%CROSSWIND Ayrshire, Iowa Wind 63,464 72,763 39.60%HANCOCK Hancock County, Iowa Wind 27,463 27,760 28.20%ILEC WIND Superior/Lakota, Iowa Wind 72,603 76,380 41.50%WAPA South Dakota Hydro 132,783 132,783

2011 Total Energy Generated

PHOTO 1. Corn Belt Power increased it ownership share of the Walter Scott, Jr. Energy Center Unit 4 with its purchase of 2.14 megawatts of capacity previously owned by the City of Pella. Walter Scott Unit 4 is the most effi cient coal-based generating plant in Iowa.

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LEGISLATIVE ISSUESyy eaarr iinn rreevviieeww

IN DECEMBER, the Environmental Protection Agency fi nalized its Utility Mercury and Air Toxics Standards, which will limit emissions from coal-based power plants. The Utility MATS will be the most expensive clean air regulation ever issued. The rule, estimated to cost $11 billion or more nationwide, gives power plants three years to install environmental controls to capture or neutralize this set of newly regulated combustion byproducts. Utility MATS establish separate emission limits for mercury, acid gases and particulate matter in power plant fl ue gas.

Utilities have warned that rates for electricity will increase, plants will close, jobs will be lost and grid reliability will decline because of the rule.

On Dec. 30, the D.C. Circuit Court of Appeals granted a motion to stay the Cross-State Air Pollution Rule, and will hear the case in April 2012. In the meantime, the Clean Air Interstate Rule – which has less stringent standards than the proposed CSAPR regulation – remains in place.

Corn Belt Power representatives participated in numerous events with Presidential candidates leading up to the Iowa caucuses Jan. 3, 2012. Co-op staff members across the state asked the candidates, “As President, what is your plan to ensure the U.S. has the electricity it needs in the future?” Corn Belt Power recorded video answers and posted them on its YouTube channel, www.youtube.com/cornbeltpower. The Iowa Association of Electric Cooperatives created a website incorporating some of the video,www.iaruralpower.org.

Electric co-ops logged positive results from their lobbying efforts at the Iowa State Capitol in Des Moines throughout the year. Gov. Terry Branstad signed House File 267, the “State Historic Preservation Offi ce Reform,” into law during REC Day on the Hill March 29. Co-ops’ support of House File 561, “Nuclear Generation Facilities,” helped the measure pass the House. Although the bill stalled in the Iowa Senate, it strengthened awareness and support for new nuclear generation in Iowa.

A reception held in January in Des Moines welcomed legislators to the new session and informed new representatives and senators about co-ops’ mission to provide reliable, affordable electricity.

Co-op representatives traveled to Washington, D.C., twice during the year to discuss energy and environmental issues with legislators and voice concern about new Environmental Protection Agency regulations.

PHOTOS 1. Gov. Terry Branstad signs the State Historic Preservation Offi ce Reform bill March 29 during REC Day on the Hill. 2. Sen. Tom Harkin discusses energy issues with representatives of Iowa’s electric cooperatives in Washington, D.C. May 3. 3. Charlie Gilbert, left, Corn Belt Power director, and Don Applegate, right, Northwest Iowa Power Cooperative director, greet Presidential candidate Newt Gingrich at the Iowa Association of Electric Co-ops’ annual meeting in Des Moines Dec. 1. (Photo by IAEC.) 4. Kevin White, shift operator, removes coal ash out of the boiler at Wisdom Station. New Environmental Protection Agency regulations will determine whether coal ash is classifi ed as a hazardous waste.

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ewy ear in revie

2011 SALES TO CORN BELT POWER MEMBER COOPERATIVES

2010 KWH BILLED BY CORN BELT POWER 2011 KWH BILLED BY CORN BELT POWERBOONE VALLEY ELECTRIC COOPERATIVE 9,746,390 kWh 9,567,439 kWh

BUTLER COUNTY REC 260,099,326 kWh 250,860,333 kWh

CALHOUN COUNTY REC 39,432,600 kWh 38,372,148 kWh

FRANKLIN REC 55,272,032 kWh 53,215,262 kWh

GRUNDY COUNTY REC 66,659,503 kWh 61,977,859 kWh

HUMBOLDT COUNTY REC 57,772,519 kWh 57,236,334 kWh

IOWA LAKES ELECTRIC COOPERATIVE 606,918,122 kWh 603,587,140 kWh

MIDLAND POWER COOPERATIVE 254,612,598 kWh 245,290,466 kWh

PRAIRIE ENERGY COOPERATIVE 252,258,018 kWh 234,914,452 kWh

RACCOON VALLEY ELECTRIC COOPERATIVE 139,861,886 kWh 139,841,285 kWh


4

228

1467

43%RESIDENTIAL & OTHER

%MUNICIPALS

%ETHANOL/BIODIESEL

%MANUFACTURING

%POULTRY

%SWINE

2011 ESTIMATED DEEMED KWH SAVINGS THROUGH ENERGY-EFFICIENCY PROGRAMS

TOTAL KWH2011 KWH GOAL

(IAEC FILING) PERCENT

RESIDENTIAL REBATES 5,381,653 71.1% Of 2011 Residential Goal

PULL THE PLUG 474,845 6.3% Of 2011 Residential Goal

CHANGE A LIGHT 622,030 8.2% Of 2011 Residential Goal

SERVICE CONCEPTS ONLINE STORE 177,281 2.3% Of 2011 Residential Goal

SEE THE LIGHT 2,827,727 37.4% Of 2011 Residential Goal

TOTAL RESIDENTIAL 9,483,536 7,566,728 125.3% Of 2011 Residential Goal

C&I/AG REBATES 7,514,523 427.7% Of 2011 C&I/Ag Goal

CHANGE A LIGHT C&I/AG 107,923 6.1% Of 2011 C&I/Ag Goal

TOTAL C&I/AG 7,622,446 1,769,480 430.8% Of 2011 C&I/Ag Goal

TOTAL 16,998,059 7,566,728 224.6% Of 2011 Residential & C&I/Ag Goal

2011 LOAD SEGMENT REPORT

% OF TOTAL SALES


Commitment yy eeaarr iinn rreevviieew

CORPORATE RELATIONS PROGRAMSCORN BELT POWER continued to assist its member co-ops with energy-effi ciency efforts throughout the year. Most member co-ops reached or surpassed their energy-effi ciency goals fi led with the Iowa Utilities Board. Co-ops mailed compact fl uorescent lamps in late 2011 to their members as part of the See the Light campaign. Along with CFLs, geothermal heat pumps and air source heat pumps continued to account for a large portion of reportable deemed kilowatt-hour savings.

Education efforts helped members learn how to save energy and money. Programs included a Build it Right Workshop in January, the Momentum is Building conference held for contractors in February, sponsorship of the Iowa State Fair 4-H Building in August, the Clay County Fair booth in September, and placement of the Touchstone Energy Cooperatives’ “Together We Save” television spots and radio ads throughout the year.

Corn Belt Power helped promote member co-ops’ communication efforts through assistance with Co-op Connections Card launches, website homepage design updates, a video workshop for communicators, and power plant tours to Basin Electric and Western Area Power Administration facilities for directors of member co-ops. Corporate Relations team members received seven communication awards in May in the NRECA Spotlight on Excellence contest. Throughout the year, Corn Belt Power continued communicating through its Facebook page, Twitter feed and YouTube channel.

Corn Belt Power registered the Watts Smart® name for its load management program in 2011 and developed several communication materials to inform members about the value and purpose of controlling load. Corporate Relations personnel designed brochures, roll-up displays, banners, website sign-up forms, postcards and website homepage alerts.

PHOTOS 1. Marena Fritzler, right, graphic designer, Corn Belt Power, and Jo Ann Neppl, cashier/secretary, Humboldt County REC, work with a video camera and editing software during a communicators’ workshop at Corn Belt Power. 2. Amy Howard, left, manager of customer services, and Tresa Hussong, vice president of customer and corporate relations, both of Iowa Lakes Electric Cooperative, oversee the Touchstone Energy Co-op Connections Card program at the co-op. 3. John Johnston, member service director, Raccoon Valley Electric Cooperative, helps a 4-H participant at the Iowa State Fair understand how much less electricity compact fl uorescent lamps require compared to incandescent bulbs.


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FINANCE AND ADMINISTRATIONON APRIL 30, Corn Belt Power’s Duane Arnold Energy Center decommissioning funds reached a level to meet the requirement included in Corn Belt Power’s agreement with Basin Electric. The total amount in the decommissioning funds on that date was estimated to cover required expenditures, with added interest and earnings, to decommission the plant in February 2034.

With the required funding level met, Basin Electric has assumed responsibility from Corn Belt Power to cover the decommissioning costs and assumes the risk of additional expense should decommissioning costs increase, the funds’ value decrease or interest rates decrease.

In 2011, Corn Belt Power began the process to obtain a fi nancial rating. The Corn Belt Power board of directors selected a consultant to assist in the process and approved rating agency engagement letters. Corn Belt Power personnel will make presentations to rating agencies in 2012.

Corn Belt Power anticipates reimbursement of approximately $1.5 million from the Federal Emergency Management Agency and the State of Iowa for expenses incurred in 2011. FEMA qualifying projects include the tornado and straight-line wind damage repair, fl ooding expenses and some reimbursement for the load management project.

During the year, Corn Belt Power added electronic card access to the Humboldt warehouses, storage buildings and Hampton and Emmetsburg service centers, increasing the security of the facilities. Insulation and new lighting and heating fi xtures added to the Humboldt storage building in the fall make the building more energy effi cient.

Personnel in the Information Technology Department switched Internet access from a T1 line to fi ber at the main offi ce building, increasing the access speed from 7.5 megabytes per second to 10 megabytes per second. IT employees installed a network hard drive that

backs up only the changes in documents, decreasing the size of computer back up fi les. A unit being added at Wisdom Station will replicate the computer system backup each night.

A faster connection between the offi ce and the disaster recovery site became active in 2011, creating a system for back ups that is four times faster than what the previous connection provided.

PHOTOS 1. Corn Belt Power reduced its risk associated with decommissioning costs of the Duane Arnold Energy Center when its decommissioning funds reached a level needed to retire the plant in 2034. 2. Brian Gibson, SCADA technician, accesses the control center using an electronic card. In 2011, Corn Belt Power added electronic card access to the Humboldt warehouses, storage buildings and Hampton and Emmetsburg service centers, increasing the security of the facilities.

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RETIREMENTS

Donald Routh | Line ForemanDavid Stockdale | Electrical Maintenance Foreman

NEW EMPLOYEES

Christopher Erdmann | Control OperatorTyler Herrig | Electronics TechnicianDylan Koch | Control OperatorEthan Miller | Apprentice LinemanTrent Petersen | Apprentice Lineman

PROMOTIONS

Rick Skow | Journeyman Electrician to Electrical Maintenance ForemanJeremy Stattelman | Journeyman Linemanto Line ForemanMatt Wittrock | Apprentice Field Technician to Journeyman Field TechnicianMike Devers | Apprentice Field Technician to Journeyman Field TechnicianMatt Newton | Apprentice Lineman to Journeyman LinemanChris Smith | Apprentice Lineman to Journeyman LinemanScott Gilderhus | Apprentice Mechanic & Electrician to MechanicJacob Olberding | Project Engineer I to Project Engineer II

SERVICE AWARDS

Jerry Moritz | System Electrical Superintendent, 40 yearsKevin Bornhoft | Vice President, Engineering and System Operations, 30 years Lynn Miller | Communications Superintendent, 30 yearsLance Tinken | Meter Technician, 25 yearsDarwin Johnson | Shift Operator, 20 yearsKurt Olson | Warehouse and Fleet Supervisor, 10 yearsSteve DePauw | Control Operator, 5 yearsTravis Hefty | Journeyman Lineman, 5 yearsSteve Smith | Control Operator, 5 years

Curtis Thelen | IT Specialist, 5 years

I ACT UNIVERSITY held its fi rst employee training Aug. 11 and Aug. 18 at three locations. Based on Corn Belt Power’s values communicated by the acronym I Act (integrity, accountability, commitment and teamwork), the training focused on helping employees improve their communication skills. Additional training sessions dealt with leadership style, interpersonal skills and conducting performance appraisals.

PHOTO 1. Kathy Peterson, center, PeopleWorks, Inc., conducts training for I Act University in Humboldt. Employees learned how to enhance their communication skills.

HUMAN RESOURCES UPDATE

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BUSINESS DEVELOPMENT

PHOTO 1. The Business Development Committee conducts strategic planning in November with facilitator Bryan Singletary.

KEY ACCOUNTS MANAGERS and members of the Business Development Committee participated in strategic planning in November to evaluate current programs and plan for future action. During the year, commercial and industrial development on member co-ops’ lines included new poultry barns, expansion of several different agricultural loads and contract renewals for serving municipal utilities.

Corn Belt Power administered monies from the revolving loan fund to support a pastry company, a community pool, a trucking fi rm, a home building program and a pet resort, among other projects. Loans totaling more than $760,000 were made in 2011.

y eaarr iinn rreevviieww


• PLAS-TECH TOOLING, GARNER, underwent a 9,600-square-foot expansion that helped retain eight jobs and create three new jobs.

• COUNTRY MAID, WEST BEND, built a 28,000-square-foot new production facility for its Butter Braid pastries. The project retained 43 jobs and created 23 jobs.

• KANAWHA COMMUNITY POOL,

KANAWHA, resurfaced the pool with inter-glass so that the facility can continue to be used in the community. The project helped retain 15 part-time jobs.

• HUMBOLDT COUNTY DEVELOPMENT

ASSOCIATION, HUMBOLDT, fi nished out the 20,000-square-foot speculative building in the Humboldt Northwest Industrial Park to assist a tenant who located there. The tenant has a new business and created two jobs.

• PETERSON TRANSPORTATION, INC.,

MANSON, purchased several new semi-trucks and hired more drivers for its operation and will continue to grow over the next few years. Thirty jobs were retained and 14 were created with plans to create at least 10 more jobs.

• GLIDDEN DEVELOPMENT GROUP,

GLIDDEN, partnered with Des Moines Area Community College Building Trades students to construct a third speculative home in the Glidden High View Addition.

• 4-PAWS INN, L.L.C., HARDY, is a new pet resort for dogs and cats. The facility has 5,760 square feet and also offers grooming services. The company currently employs two people and may add four more jobs.

2011 REVOLVING LOAN FUND ACTIVITY Seven loans were made out of the Revolving Loan Fund in 2011 totaling $760,897:

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• Iowa Cage-free added two more egg laying barns at 100 kW each, totaling 200 kW. This load is served by Humboldt County REC.

• Murphy Farms, L.L.C., upgraded its pelletizers, a 600 kW increase. This load is served by Humboldt County REC.

• Sparboe added new poultry barns, with 800 kW new load and an additional eight jobs. This load is served by Prairie Energy Cooperative.

• Naturally Recycled Protein added $7 million in investment, 15 jobs and 500 kW new load. This load is served by Midland Power Cooperative.

• Butler Logistics Park, a 200-acre rail park, was developed in 2011 and a 30,000-square-foot speculative building is planned. The park is served by Butler County REC.

• Unverferth added a 40,000-square-foot addition and 30 new jobs. This load is served by Butler County REC.

• Allan Industrial Coatings added 6,000 square feet, a 10,000-square-foot cold storage facility and 11 new jobs. This load is served by Butler County REC.

• Buresh Building Systems and North Central Millwright retained 65 jobs and added 50 jobs. This load is served by Franklin REC.

• Times Citizen added 7,500 square feet, new equipment and 26 new jobs. This load is served by Midland Power Cooperative.

• The Dough Plant added 12,000 square feet to a freezer. This load is served by Iowa Lakes Electric Cooperative.

• Precision Lawn Care and More added a 9,600-square-foot offi ce and a 6,240-square-foot cold storage area. The business retained 12 jobs and created four jobs. It is served by Grundy County REC.

• A new industrial park located near Spirit Lake is served by Iowa Lakes Electric Cooperative.

• The Fredericksburg municipal contract was renewed for 20 years. The city is served by Butler County REC.

• The Readlyn municipal contract was renewed for 20 years. The city is served by Butler County REC.

• Knife River Rock Quarry had 350 kW of increased load due to expanded operations. The load is served by Prairie Energy Cooperative.

• Gold-Eagle Elevator had 500 kW of increased load due to expanded operations. The load is served by Prairie Energy Cooperative.

• Mycogen Seeds completed an expansion adding 185 kW of increased load with about 250 kW more expected. The company maintains approximately 25 full-time employees with up to 100 part-time employees in the summer. Midland Power Cooperative serves this load.

PHOTOS 1. Sue Bueltel, left, offi ce manager, Humboldt County REC, and Michelle Erickson, owner, 4-Paws Inn, greet one of Erickson’s four-legged clients. Erickson’s business received a revolving loan from Corn Belt Power and Humboldt County REC. 2. Country Maid, West Bend, maker of Butter Braid pastries, received a loan from Corn Belt Power’s revolving loan fund to assist in the expansion of its production facility.

yy eeaarr iinn rreevviieew

2011 BUSINESS DEVELOPMENT PROJECTS

“ Corn Belt Power administered monies from the revolving loan fund to support a pastry company, a community pool, a trucking fi rm, a home building program and a pet resort, among other projects.”

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BOARDDIRECTORS

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MEMBERcooperatives1 IOWA LAKES ELECTRIC COOPERATIVE L. Kirby Range2 HUMBOLDT COUNTY REC Larry Tilton3 BOONE VALLEY ELECTRIC COOPERATIVE4 Prairie Energy Cooperative Scott Stecher, Secretary5 Franklin REC Dale Schaefer, Assistant Secretary/Treasurer6 Butler County REC Donald Feldman, President7 Raccoon Valley Electric Cooperative David Onken, Treasurer8 Calhoun County REC William Courter9 Midland Power Cooperative Charles Gilbert, Basin Electric Representative10 Grundy County REC Larry Rohach. North Iowa Municipal Electric Cooperative

Association (NIMECA) Ronald Deiber, Vice President


department heads 1. Kathy Taylor, vice president, corporate relations 2. Jim Vermeer, vice president, business development 3. Kevin Bornhoft, vice president, engineering and system operations 4. Mike Thatcher, vice president, generation 5. Ken Kuyper, executive vice president and general manager6. Karen Berte, senior vice president, fi nance and administration

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December 31, 2011 and 2010

(With Independent Auditors’ Report Thereon)

See accompanying notes to financial statements.corn belt power cooperative


Assets 2011 2010 Electric plant: In service $ 403,824,616 394,079,082 Less accumulated depreciation (209,342,872 ) (200,963,572 ) 194,481,744 193,115,510 Construction work in progress 11,937,368 6,923,147 Nuclear fuel, net of amortization 13,702,004 13,122,078 220,121,116 213,160,735 Other property and investments: Nonutility property 256,384 256,384 Investment in the National Rural Utilities Cooperative Finance Corporation (NRUCFC) 4,637,347 4,614,983 Decommissioning fund 31,102,437 31,701,919 Other investments 14,553,948 10,432,332 Notes receivable 5,314,861 5,608,135 Other assets 1,642,127 1,423,440 57,507,104 54,037,193 Deferred charges: DAEC regulatory asset 3,334,157 3,484,570 Deferred refueling costs 1,375,319 3,309,143 DAEC pension regulatory asset — 1,631,000 Decommissioning regulatory asset 29,979,106 29,495,534 34,688,582 37,920,247 Current assets: Cash and cash equivalents 4,106,427 2,240,633 Special funds 1,347,329 3,822,468 Member accounts receivable 8,702,793 8,962,644 Other receivables 240,451 524,786 Inventories: Fuel 9,644,016 10,000,286 Materials and supplies 9,162,123 9,482,095 Prepayments 230,374 240,474 33,433,513 35,273,386 $ 345,750,315 340,391,561

balance sheetsDecember 31, 2011 anD 2010

See accompanying notes to financial statements.32 c o r n b e lt p o w e r c o o p e r a t i v e2 0 1 1 a n n u a l r e p o r t

Membership Capital and Liabilities 2011 2010Membership capital: Memberships, at $100 per membership $ 1,200 1,200 Deferred patronage dividends, restricted 24,667,500 18,306,100 Other equities, per accompanying statements 47,745,336 46,468,884 Accumulated other comprehensive income 1,859,543 4,795,452 74,273,579 69,571,636 Long-term debt: Federal Financing Bank 174,746,270 182,239,359 NRUCFC 6,929,023 8,260,524 USDA intermediary relending program 4,239,095 4,338,249 185,914,388 194,838,132 Less – current maturities of long-term debt 14,076,504 14,064,286 171,837,884 180,773,846 Other long-term liabilities: DAEC decommissioning liability 59,222,000 56,402,000 Ash landfill retirement obligation 952,868 868,052 DAEC pension costs — 1,665,114 60,174,868 58,935,166 Current liabilities: Current maturities of long-term debt 14,076,504 14,064,286 Short-term debt 16,000,000 3,000,000 Accounts payable 4,149,113 6,670,177 Accrued property and other taxes 3,280,502 3,261,859 Deferred credit 1,250,000 3,750,000 Accrued interest and other 707,865 364,591 39,463,984 31,110,913 $ 345,750,315 340,391,561

balance sheetsDecember 31, 2011 anD 2010



2011 2010 Operating revenues: Sale of electric energy $ 106,637,930 101,075,662 Lease revenue 1,429,385 1,440,758 Other 4,531,244 4,785,391 112,598,559 107,301,811 Operating expenses: Operation: Steam and other power generation 38,238,311 36,634,794 Purchased power, net 31,254,615 24,087,688 Transmission 5,740,316 5,579,485 Sales 2,460,597 2,311,234 Administrative and general 3,513,566 3,294,942 Maintenance: Steam and other power generation 6,617,314 6,782,499 Transmission 1,915,588 1,832,902 General plant 149,416 152,567 Depreciation and decommissioning 9,887,169 13,513,131 Gain on the disposition of property (491 ) (1,582 ) 99,776,401 94,187,660 Net operating revenues 12,822,158 13,114,151 Interest and other deductions: Interest on long-term debt 9,253,784 9,937,094 Interest during construction (66,744 ) (156,217 ) Other interest and deductions 152,126 168,697 9,339,166 9,949,574 Net operating margin 3,482,992 3,164,577 Nonoperating margin: Interest and dividend income 495,526 723,808 Patronage income 4,040,865 1,323,763 Other, net 88,768 144,742 4,625,159 2,192,313 Net margin $ 8,108,151 5,356,890

statements of Revenues and expensesYears enDeD December 31, 2011 anD 2010

See accompanying notes to financial statements.34 c o r n b e lt p o w e r c o o p e r a t i v e2 0 1 1 a n n u a l r e p o r t

Other equities Accumulated Deferred Reserve for other patronage statutory contingent comprehensive total Membership dividends surplus losses income

Balance, December 31, 2009 $ 62,527,386 1,300 15,996,100 6,087,484 37,888,031 2,554,471 2010 net margin 5,356,890 — 2,863,521 700,000 1,793,369 — Revenue deferred patronage dividends 136,479 — 136,479 — — — Change in fair value of investments 2,240,981 — — — — 2,240,981 Patronage dividends paid (690,000 ) — (690,000 ) — — — Memberships returned (100 ) (100 ) — — — —Balance, December 31, 2010 69,571,636 1,200 18,306,100 6,787,484 39,681,400 4,795,452 2011 net margin 8,108,151 — 6,831,699 700,000 576,452 — Revenue deferred patronage dividends 276,301 — 276,301 — — — Change in fair value of investments (2,935,909 ) — — — — (2,935,909 ) Patronage dividends paid (746,600 ) — (746,600 ) — — —Balance, December 31, 2011 $ 74,273,579 1,200 24,667,500 7,487,484 40,257,852 1,859,543

statements of membeRship capitalYears enDeD December 31, 2011 anD 2010

statements of compRehensive incomeYears enDeD December 31, 2011 anD 2010

2011 2010Net margin $ 8,108,151 5,356,890 Change in unrealized gain in fair value of investments (2,935,909 ) 2,240,981 Comprehensive income $ 5,172,242 7,597,871



2011 2010Cash flows from operating activities: Net margin $ 8,108,151 5,356,890 Adjustments to reconcile net margin to net cash provided by operating activities: Depreciation and decommissioning 10,037,583 13,513,131 Amortization of nuclear fuel 4,526,062 3,651,876 Amortization of deferred refueling costs 1,833,760 1,685,321 Amortization of DAEC pension regulatory asset 1,631,000 233,000 Undistributed patronage earnings from other investments (3,942,121 ) (1,225,668 ) Changes in current assets and liabilities: Receivables 544,186 2,133,187 Inventories 676,242 2,810,967 Prepayments 10,100 47,662 Deferred refueling costs 100,064 (3,677,438 ) Other – deferred charges (4,026 ) 1,123 Accounts payable (2,593,328 ) 1,425,915 Accrued property and other taxes 18,643 (68,956 ) Deferred credit (2,500,000 ) 950,000 Accrued interest and other 347,300 (280,925 ) DAEC pension costs (1,665,114 ) (190,919 ) Net cash provided by operating activities 17,128,502 26,365,166 Cash flows from investing activities: Additions to electric plant, net (16,110,544 ) (9,450,589 ) Additions to nuclear fuel (5,105,988 ) (4,985,772 ) Additions to decommissioning fund — (711,677 ) Distributions from (additions to) special funds 2,475,139 (975,844 ) Additions to other investments, other assets, investment in NRUCFC, and notes receivable 149,029 50,898 Net cash used in investing activities (18,592,364 ) (16,072,984 ) Cash flows from financing activities: Proceeds from issuance of long-term debt 5,335,667 4,113,333 Repayment of long-term debt (14,259,411 ) (13,827,672 ) Short-term borrowings, net 13,000,000 (5,000,000 ) Deferred patronage dividends paid (746,600 ) (690,100 ) Net cash provided by (used in) financing activities 3,329,656 (15,404,439 ) Net increase (decrease) in cash and cash equivalents 1,865,794 (5,112,257 ) Cash and cash equivalents at: Beginning of year 2,240,633 7,352,890 End of year $ 4,106,427 2,240,633

statements of cash flowsYears enDeD December 31, 2011 anD 2010

36 c o r n b e lt p o w e r c o o p e r a t i v e2 0 1 1 a n n u a l r e p o r t notes to financial statements

(1) OrganizatiOnCorn Belt Power Cooperative (the Cooperative) is a Rural Utilities Service (RUS) financed generation and transmission cooperative created and owned by 10 distribution cooperatives and one municipal cooperative association. Electricity supplied by the Cooperative serves farms, small towns, and commercial and industrial businesses across counties in northern Iowa.

The Cooperative’s Board of Directors is comprised of one representative from each member cooperative and is responsible for, among other things, establishing rates charged to the member cooperatives.

(2) Significant accOunting POlicieSThe Cooperative maintains its accounting records in accordance with the Uniform System of Accounts as prescribed by the RUS. The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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 could differ from those estimates. The significant accounting policies are as follows:

(a) regulatOry MatterSThe Cooperative’s utility operations are subject to provisions of Accounting Standards Codification (ASC) Topic 980, Regulated Entities. Therefore, its utility operations recognize the effects of rate regulation by the Board of Directors and, accordingly, have recorded regulated assets and a liability to reflect the impact of regulatory items for which future rates are expected to recover. The regulatory assets are included within deferred charges and the regulatory liability is included within deferred credit on the balance sheets.

(b) electric PlantElectric plant is stated at original cost, which includes payroll and related benefits, interest during the period of construction, and the estimated asset retirement obligation (ARO).

Costs in connection with repairs of properties and replacement of items less than a unit of property are charged to maintenance expense. Additions to and replacements of units of property are charged to electric plant accounts.

Depreciation is provided using straight-line methods and RUS-prescribed lives. These provisions, excluding nuclear facilities, were equivalent to a composite depreciation rate on gross plant of 2.09% and 3.08% for 2011 and 2010, respectively. The decrease in composite rates were due to changes in lives for Neal #4 and Walter Scott #4 from 32 to 61 and 32 to 42 years, respectively, during 2011.

Under a joint-ownership agreement, the Cooperative has a 10% undivided interest in the Duane Arnold Energy Center (DAEC), a nuclear-fueled generating station, which was placed in service in 1974. The Cooperative is depreciating its interest in the DAEC and each year’s property additions subsequent to 1984 on a straight-line basis over the remaining term of the Nuclear Regulatory Commission (NRC) license for DAEC. The composite depreciation rate on gross plant for DAEC was 0.98% and 6.10% for 2011 and 2010, respectively. The decrease in composite rate was due to the extension of the NRC license by 20 years (note 2(c)).

(c) DecOMMiSSiOning Of DaecThe Cooperative recognizes and estimates an asset retirement obligation for its 10% share at the estimated cost to decommission DAEC. An NRC estimate of the decommissioning costs of DAEC was updated in 2008. This report estimated the Cooperative’s share of the decommissioning costs of DAEC to be approximately $76,159,700 (in 2008 dollars). The Cooperative is providing for overall nuclear decommissioning costs using a funding method, which assumes a 4% rate of inflation and a 3% real rate of return. The method is designed to accumulate a decommissioning reserve sufficient to cover the Cooperative’s share of decommissioning costs by the year 2034. This was extended by 20 years after the Cooperative received notice from the NRC the Plant license extension was approved in December 2010.

The total fair value of the decommissioning funds accumulated at December 31, 2011 was $31,102,437, of which $19,173,420 has been placed in a fund legally restricted for use in decommissioning DAEC. The remaining $11,929,017, while not legally restricted, has been designated by the Cooperative for use in decommissioning DAEC. The total fair value of the decommissioning funds accumulated at December 31, 2010 was $31,701,919, of which $19,391,909 has been placed in a fund legally restricted for use in decommissioning DAEC. The remaining $12,310,010, while not legally restricted, has been designated by the Cooperative for use in decommissioning DAEC.

notes to financial statements | December 31, 2011 anD 2010

corn belt power cooperative2011 annual report 37notes to financial statementsnotes to financial statements

At December 31, 2011 and 2010, decommissioning investments were classified as available for sale and consisted of the following:

Amortized Unrealized Unrealized cost gains losses Fair value 2011 Obligations of U.S. government and agencies $ 2,744,132 116,266 3,776 2,856,622 Corporate bonds and fixed income funds 2,515,153 27,910 26,630 2,516,433 Common and preferred stocks and funds 13,764,998 2,761,044 584,949 15,941,093 Hedge funds 315,845 26,704 — 342,549 Cash and cash equivalents 875,010 — — 875,010 Foreign investments – common stock 8,542,771 404,521 868,812 8,078,480 Foreign investments – government funds 484,985 7,265 — 492,250 $ 29,242,894 3,343,710 1,484,167 31,102,437

2010: Obligations of U.S. government and agencies $ 691,740 22,961 1,946 712,755 Corporate bonds 2,567,099 107,180 14,764 2,659,515 Common and preferred stock 11,401,799 3,662,806 304,651 14,759,954 Hedge funds 2,142,159 113,286 9,224 2,246,221 Cash and cash equivalents 2,112,101 — — 2,112,101 Foreign investments – common stock 7,470,750 1,359,305 171,076 8,658,979 Foreign investments – government 520,818 31,576 — 552,394 $ 26,906,466 5,297,114 501,661 31,701,919

Maturities of securities classified as available for sale were as follows at December 31, 2011:

Amortized cost Fair value Due within 1 year $ 1,200,434 1,255,190 Due after 1 year and through 5 years 753,233 779,785 Due after 5 years and through 10 years 496,779 505,053 Due after 10 years 1,146,016 1,194,324 Cash and cash equivalents 875,010 875,010 Equity securities and mutual funds 24,455,577 26,150,526 Hedge funds 315,845 342,549 $ 29,242,894 31,102,437

Realized gains and losses from the available for sale securities are determined on a specific-identification basis. Realized gains (losses) on investments available for sale were $1,226,379 and $(89,269) for 2011 and 2010, respectively. These gains (losses) result in a corresponding decrease (increase) to the decommissioning regulatory asset.

notes to financial statements


The following table shows the gross unrealized losses and fair value of the Cooperative’s investments with unrealized losses that are not deemed to be other than temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2011.

Less than 12 months 12 months or greater total Fair Unrealized Fair Unrealized Fair Unrealized value losses value losses value losses Obligations of U.S. government and agencies $ 405,132 (3,543 ) 47,016 (234 ) 452,148 (3,777 ) Corporate bonds and fixed income funds 387,939 (15,992 ) 1,423,123 (10,638 ) 1,811,062 (26,630 ) Common and preferred stocks and funds 4,295,718 (347,867 ) 982,746 (237,081 ) 5,278,464 (584,948 ) Foreign investments – common stock 3,510,372 (593,957 ) 2,166,232 (274,855 ) 5,676,604 (868,812 ) $ 8,599,161 (961,359 ) 4,619,117 (522,808 ) 13,218,278 (1,484,167 )

In evaluation of other-than-temporary impairment, the Cooperative considers its intent and ability to hold these investments for a period of time sufficient to allow for the anticipated recovery in the market value of these investments, which may be maturity, the severity of the decline, and the length of time and the extent to which fair value has been below cost. The Cooperative does not consider these investments to be other-than-temporarily impaired at December 31, 2011. Individually, none of the investments that have unrealized losses greater than 12 months are significant to the financial statements.

(d) nuclear fuelThe cost of nuclear fuel is amortized to steam and other power generation expenses based on the quantity of heat produced for the generation of electric energy. Such amortization was $4,526,062 and $3,651,876 for 2011 and 2010, respectively.

(e) Other inveStMentSOther investments consist of funds held in trust (mainly from patronage income), cash held for the Cooperative’s intermediary relending program (note 9), and common and preferred stock.

(f) inventOrieSInventories consist of fuel, primarily coal, emission allowances and materials and supplies. The cost for inventories is determined on a weighted-average basis.

The 1990 Clean Air Act (the Act) established the requirement for fossil fuel electric generating plants to hold sulfur dioxide (SO2) emission allowances. In 2009, the Clean Air Interstate Rule (CAIR) established a similar requirement for nitrous oxide (NOx) annual and seasonal emission allowances. The Act and CAIR allocate a certain number of emission allowances to owners of fossil fuel generating plants and established SO2, NOx annual, and NOx seasonal emission allowance trading programs. Emission allowances that have been granted to the Cooperative as a result of the Act do not have any cost, and therefore, the use of these emission allowances does not result in expense. From time to time, the Cooperative will purchase a quantity of each type of emission allowance to ensure an adequate number of allowances are held. The purchased allowances are combined with the allocated allowances to derive an average allowance cost each year for each type of emission allowance. Emission allowances purchased are capitalized in inventory and are charged to fuel expense as they are used in operations.

(g) intereSt During cOnStructiOnInterest during construction represents the cost of funds used for construction and nuclear fuel refinement. The average rate was 1.1% for both 2011 and 2010 and is based on the Cooperative’s costs of financing.

(h) agreeMent with webSter cityThe Cooperative has a long-term lease agreement with Webster City under which Webster City has agreed to provide certain generation and transmission facilities to the Cooperative. The Cooperative has recorded these assets in electric plant.

The Cooperative continues to operate certain Webster City generation and transmission assets and pay for the operation, maintenance, and capital additions associated with those assets. In October 2011, the Cooperative negotiated a new contract with Webster City, extending until 2050 its relationship as the city’s wholesale power supplier.

(i) incOMe taxeSThe Cooperative is exempt from federal and state income taxes under section 501(c)(12) of the Internal Revenue Code. Accordingly, no provision for income taxes has been included in the Cooperative’s financial statements. The Cooperative recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.


(j) StateMentS Of caSh flOwSFor the purpose of reporting cash flows, the Cooperative considers temporary cash investments purchased with a maturity of three months or less to be cash equivalents. Cash paid for interest was $9,388,682 and $10,083,407 for 2011 and 2010, respectively.

(k) OPerating revenueS anD cOSt Of POwerThe Cooperative recognizes sales of electric energy and the related cost of electric energy produced or purchased when energy is delivered to customers.

(3) agreeMentS with baSin electric POwer cOOPerativeOn September 1, 2009, the Cooperative became a Class A member of Basin Electric Power Cooperative (Basin Electric). As part of this agreement, energy and capacity needs above the Western Area Power Administration allocation and a separate 50 MW power purchase agreement with Basin Electric are to be provided by Basin Electric at Class A member rates. Further, the Cooperative sells the energy from its generation facilities at cost to Basin Electric but continues to be responsible for and own those facilities. Also a portion of the 161 kV transmission system that is contiguous with Basin Electric is being leased to Basin Electric. During 2011 and 2010, as part of these agreements, the Cooperative purchased $69,664,037 and $65,280,769 of power and sold $69,858,423 and $70,327,486 of power to Basin Electric, which is recorded net in purchased power, net, in the statements of revenues and expenses.

(4) fair value MeaSureMentS

(a) fair value Of financial inStruMentSThe following describes the carrying amounts and estimated fair value of financial instruments and the methods and assumptions that were used to estimate the fair value of each class of financial instruments:

Cash and cash equivalents, member accounts receivable, other receivables, special funds, short-term debt, accounts payable, and accrued liabilities – The carrying amounts, at face value or cost plus accrued interest, approximate fair value because of the short maturity of these instruments.

Investment in the National Rural Utilities Cooperative Finance Corporation, other investments, and notes receivable – These accounts are recorded at cost. The carrying value of these investments approximates fair value as of December 31, 2011 and 2010 due to the nature of the accounts.

Decommissioning funds – The investments within the decommissioning funds are recorded at fair value. Equity securities classified as available for sale are measured using quoted market prices at the reporting date multiplied by the quantity held. Debt securities classified as available for sale are measured using quoted market prices multiplied by the quantity held when quoted market prices are available. If quoted market prices are not available, the fair values are estimated using pricing models, quoted prices of similar securities with similar characteristics, or discounted cash flow. For hedge funds where no readily ascertainable market value exists, management, in consultation with their investment advisors, values these investments in good faith based upon the investment’s current financial statements or other information provided by the underlying investment advisor.

Long-term debt – The fair value of the Cooperative’s long-term debt is measured based on the borrowing rates currently available to the Cooperative for debt with similar terms and maturities. The fair values as of December 31, 2011 and 2010 are estimated at $218,725,893 and $204,759,765, respectively.

(b) fair value hierarchyASC Topic 820, Fair Value Measurements, establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1 – Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Cooperative has the ability to access at the measurement date.

Level 2 – Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 – Inputs are unobservable inputs for the asset or liability.

The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety.


The following tables present assets and liabilities that are measured at fair value on a recurring basis at December 31, 2011 and 2010:

Fair value measurements at December 31, 2011 using Quoted prices in active significant markets for other significant identical observable unobservable December 31, assets inputs inputs 2011 (Level 1) (Level 2) (Level 3) Assets: Cash equivalents: Commercial paper $ 3,613,096 3,613,096 — — Decommissioning fund: Obligations of the U.S. and agencies 2,856,622 2,856,622 — — Corporate bonds and fixed income funds 2,516,433 2,130,952 385,481 — Common and preferred stocks and funds 15,941,093 15,941,093 — — Hedge funds 342,549 — — 342,549 Foreign investments – government funds 492,250 492,250 — — Foreign investments – common stock 8,078,480 8,078,480 — — Cash and cash equivalents 875,010 875,010 Total $ 34,715,533 33,987,503 385,481 342,549

Fair value measurements at December 31, 2010 using Quoted prices in active significant markets for other significant identical observable unobservable December 31, assets inputs inputs 2010 (Level 1) (Level 2) (Level 3) Assets: Cash and cash equivalents: Commercial paper $ — — — — Decommissioning fund: Obligations of the U.S. and agencies 712,755 712,755 — — Corporate bonds 2,659,515 — 2,659,515 — Common and preferred stock 14,759,954 14,759,954 — — Hedge funds 2,246,221 — — 2,246,221 Foreign investments – government 552,394 552,394 — — Foreign investments – common stock 8,658,979 8,658,979 — — Cash and cash equivalents 2,112,101 2,112,101 Total $ 31,701,919 26,796,183 2,659,515 2,246,221


The following tables present the Cooperative’s activity for assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2011 and 2010:

Balance at December 31, 2010 $ 2,246,221

Sales (1,826,313 ) Realized loss on sale 111,965 Unrealized gains included in other comprehensive income (189,324 )Balance at December 31, 2011 $ 342,549

Balance at December 31, 2009 $ 2,257,269 Sales (231,124 ) Realized loss on sale (76,717 ) Unrealized gains included in other comprehensive income 296,793 Balance at December 31, 2010 $ 2,246,221

(5) inveStMent in the natiOnal rural utilitieS cOOPerative finance cOrPOratiOn (nrucfc), nOteS receivable, anD Other inveStMentSThe Cooperative has investments carried at cost in the following:

2011 2010Common and preferred stock $ 206,497 207,165 Funds held in trust 13,284,470 9,287,168 Restricted cash 2,705,108 2,361,439 Investment in NRUCFC 4,637,347 4,614,983 Economic development loans 5,314,861 5,608,135 $ 26,148,283 22,078,890

The above investments are included in the accompanying balance sheets as follows:

2011 2010Investment in NRUCFC $ 4,637,347 4,614,983 Notes receivable 5,314,861 5,608,135 Other investments 14,553,948 10,432,332 Other assets 1,642,127 1,423,440 $ 26,148,283 22,078,890

The Cooperative has an investment of $4,637,347 and $4,614,983, at December 31, 2011 and 2010, respectively, with the NRUCFC. This investment is required in order to allow the Cooperative to borrow funds from NRUCFC. The investment earns interest of 7.5% on $2,000,000, which matures in 2044, 5.0% on $2,195,507, which matures between 2070 and 2080, and 3.0% on $121,789, which matures in 2025. The remaining balance of $320,051 does not earn interest.

Notes receivable consist of notes to member cooperatives and other businesses to assist in economic development of qualifying industrial sites, speculative buildings, rural housing and certain joint venture projects. Interest rates on these notes receivable range from 0% to 7.65%.

Funds held in trust consist mainly of deferred patronage dividends related to the Cooperative’s membership in other cooperatives.

(6) DeferreD PatrOnage DiviDenDS anD Other equitieSIn accordance with the Iowa Code, the Board of Directors is required to allocate a portion of the current year’s net margin to statutory surplus until the statutory surplus equals 30% of total membership capital. No additions can be made to statutory surplus whenever it exceeds 50% of total membership capital. The Board of Directors appropriated $700,000 of the 2011 and 2010 net margins to statutory surplus.

The equity-designated reserve for contingent losses in the statements of membership capital is an appropriation of equity by the Board of Directors. The Board of Directors appropriated $576,452 and $1,793,369 of the 2011 and 2010, respectively, net margin to reserve for contingent losses. There is no statutory restriction of this equity.

The Board of Directors is permitted by the Iowa Code to allocate the current year’s net margin to deferred patronage dividends upon meeting certain requirements and is required to make such allocations if the net margin for the year exceeds specified maximums. The Board of Directors has appropriated $7,108,000 and $3,000,000 of the 2011 and 2010 net margins, respectively to deferred patronage dividends. Deferred patronage dividends are to be paid in the future as determined by the Board of Directors.


Under the conditions of the Cooperative’s mortgages, deferred patronage dividends cannot be retired without approval of the RUS and the NRUCFC unless the remaining equity meets certain tests. The Cooperative did not meet these tests at December 31, 2011 and 2010.

(7) DeferreD regulatOry DebitS anD creDitSRegulatory assets are recorded for expenses that are deferred and will be recovered through rates charged to members in future periods. Such deferrals are made at the discretion of the Cooperative’s Board of Directors. The Cooperative does not earn a return on these regulatory assets. Regulatory credits are established for revenues that have been deferred at the discretion of the Cooperative’s Board of Directors. These amounts will be included in income in the year that they are applied to future costs or otherwise returned to members through a reduction in rates.

At December 31, 2011 and 2010, deferred regulatory debits and credits consisted of the following:

2011 2010Deferred regulatory debits: DAEC regulatory asset $ 3,334,157 3,484,570 Deferred refueling costs 1,375,319 3,309,143 DAEC pension regulatory asset — 1,631,000 Decommissioning regulatory asset 29,979,106 29,495,534 $ 34,688,582 37,920,247 Deferred regulatory credits: Deferred credit $ 1,250,000 3,750,000

DAEC Regulatory Asset – In 2008, the Cooperative, with Board of Directors approval, established a regulatory asset in conjunction with the deferral of depreciation costs related to the DAEC until the extension of the plant license has been approved by the NRC (note 2(b)). The plant license was approved in December 2010, accordingly, the Cooperative began amortizing the asset over the remaining life of the license.

Deferred Refueling Costs – The Cooperative defers extraordinary operation and maintenance expenses incurred during refueling outages of DAEC. DAEC nuclear refueling occurs approximately every two years and occurred in October 2010. These deferred costs are being amortized to expense based on the expected generation of the next fuel cycle, which corresponds with the period the Cooperative is recovering these costs in its rates. Such amortization was $1,833,760 and $1,685,321 for 2011 and 2010, respectively.

Decommissioning Regulatory Asset – In connection with the costs related to decommissioning of DAEC, the Cooperative has established a regulatory asset in conjunction with recording of the decommissioning liability. This regulatory asset is the difference between the decommissioning liability and the realized value of the investments in the decommissioning fund.

DAEC Pension Regulatory Asset – In 2007, the Cooperative entered into an agreement with FPL to pay $2,330,000 of pension costs related to DAEC over a 10-year period. The Cooperative has established a deferred regulatory asset in conjunction with the pension cost. During 2011, the Cooperative paid the $1,631,000 to settle with FPL.

Deferred Credit – In September 2009, the Cooperative became a Class A member of Basin Electric and collected additional revenue over the next four months not anticipated in the beginning of the year. Rate increases were forecasted at the beginning of 2010, therefore, the Cooperative’s Board of Directors established a deferred credit of $2,800,000 for revenue, which was returned to members in 2010 in the form of reduced revenue requirements. In October 2010, large rate increases were forecasted for the next three years; therefore, the Cooperative’s Board of Directors established a deferred credit of $3,750,000, which will be returned to members in the form of reduced revenue requirements. The revenue deferral was set aside in a cash account to cover expenditures in 2011 and 2012. RUS requires these deferral plans to be set aside in a special fund. In addition, the Cooperative set aside money in a special fund to cover the future removal of the Wisdom Unit 1 ash landfill. The balance in the fund was $97,329 and $72,468 at the end of the 2011 and 2010, respectively.

(8) ShOrt-terM DebtIn 2008, the Cooperative entered into a $150,000,0000 syndicated unsecured revolving credit facility with NRUCFC, The Bank of Tokyo-Mitsubishi UFJ, LTD, and Lloyds TSB Bank. The previous two existing credit facilities were rescinded at the same time. On October 1, 2009, the Cooperative reduced the unsecured credit facility from $150,000,000 to $75,000,000. On June 1, 2010, the Cooperative further reduced the unsecured credit facility to $50,000,000. The credit facility is available through February 2013. The Cooperative has drawn down on this credit facility $16,000,000 and $3,000,000 as of December 31, 2011 and 2010, respectively. Interest rates for the 2011 advances range from 1.13% to 1.15%.


(9) lOng-terM DebtLong-term debt consists of mortgage notes payable to the United States of America acting through the RUS from the Federal Financing Bank (FFB), notes issued in conjunction with NRUCFC financing, and notes borrowed through the USDA Intermediary Relending Program (IRP Notes) and Rural Economic Development Loans and Grants (REDLG loans) Program. The proceeds of these IRP Notes and REDLG loans are then lent to other eligible businesses within certain approved counties in the Cooperative’s service area. Substantially, all the assets, rent, income, revenue, and net margin of the Cooperative are pledged as collateral for the long-term debt of the Cooperative, except for IRP Notes and REDLG loans, which are not secured by assets of the Cooperative. Long-term debt is comprised of:

2011 2010 Mortgage notes due in quarterly installments: FFB 2.093% – 10.657%, due 2012 – 2039 $ 174,746,270 182,239,359 NRUCFC 4.975% – 6.125%, due 2012 – 2020 6,929,023 8,260,524 181,675,293 190,499,883 USDA Intermediary Relending Program – 0% – 1%, due 2012 – 2035 4,239,095 4,338,249 $ 185,914,388 194,838,132

Maturities of long-term debt for the next five years are as follows:

Year: 2011 $ 14,076,504 2012 11,633,848 2013 11,142,959 2014 10,366,315 2015 9,981,159 Thereafter 128,713,603 $ 185,914,388

Restrictive covenants require the Cooperative to set rates that would enable it to maintain a times interest earned ratio (TIER) of 1.05 and a debt service coverage (DSC) of 1.00 on average in at least two out of every three years. As of December 31, 2011 and 2010, the Cooperative was in compliance with its covenants on long-term debt with respect to financial ratios.

During 2011, the Cooperative borrowed $5,238,000 from the FFB to finance transmission and generation construction with rates ranging from 2.093% to 3.464%.

USDA Rural Development requires all IRP and REDLG loans to be fully insured. The Cooperative maintains IRP and REDLG accounts with Bank Iowa. In January 2011, the Cooperative and Bank Iowa entered into a master repurchase agreement to guarantee the IRP and REDLG accounts in case of default. The accounts are guaranteed by securities pledged from Federal Farm Credit Bank and Federal National Mortgage Association in the amount of $1,000,000 each but not to exceed $1,500,000. These agreements will mature in five years or less.

(10) cOMMitMentS anD cOntingencieSIn 2002, the Cooperative entered into a power purchase agreement to purchase 11.49% of the monthly generation from the Hancock County Wind Energy Center up to 11.22 megawatts. This agreement is effective through December 31, 2022 and rates are firm for the life of the contract.

In 2007, the Cooperative entered into a power purchase agreement to purchase the monthly generation from Crosswind Energy, LLC up to 21 megawatts. This agreement is effective through June 15, 2022 and rates are firm for the life of the contract.

A long-term purchased power agreement with Basin Electric began on January 1, 2008 for 50 MW and expires December 31, 2050.

In 2008, the Cooperative entered into a power purchase agreement to purchase the monthly generation from Iowa Lakes Electric Cooperative’s two wind farms both of which started generating in 2009. The agreement was amended in 2011 and the price is not fixed for each of the years from 2012 - 2028. The Cooperative is only obligated to pay for power that is actually received and the projects are not dispatchable.

On September 1, 2009, the Cooperative became a Class A member of Basin Electric. As part of this agreement, energy and capacity needs above the WAPA allocation mentioned in the previous paragraph are to be provided by Basin Electric. The Cooperative sells the energy from its generation facilities at cost to Basin Electric but continues to be responsible for and own those facilities. Also, a portion of the 161 kV transmission system that is contiguous with Basin Electric is being leased to Basin Electric.


(11) JOint Plant OwnerShiPUnder joint ownership agreements with other utilities, the Cooperative had undivided interests at December 31, 2011 in electric plant, including construction work in progress, as shown below:

total Unit electric Accumulated accredited Cooperative’s plant depreciation capacity (MW) share (%) Wisdom Unit 2 $ 16,157,263 3,654,960 80 43.8 Neal #4 48,141,521 41,714,526 644 11.3 Walter Scott #3 27,287,150 13,092,977 690 3.8 DAEC 103,606,415 74,703,120 614 10.0 Walter Scott #4 70,674,975 9,119,773 804 5.6 Walter Scott #4 – transmission 4,976,169 663,206 - 4.2 Lehigh Webster – transmission 2,900,043 1,099,314 - 27.0 Neal #3 Grimes-Lehigh – transmission 654,234 103,877 - 3.8

Each participant provided its own financing for its share of the unit. The Cooperative’s share of direct expenses of the jointly owned units is included in the operating and maintenance expenses on the statements of revenues and expenses.

During 1991, the Cooperative; one of its members, North Iowa Municipal Electric Cooperative Association (NIMECA); and the city of Grundy Center, a NIMECA member, entered into a long-term lease agreement for the use by Grundy Center of 2 megawatts of the Cooperative’s capacity in the Neal #4 generation facilities. The Cooperative will continue to act as the Neal #4 partner on behalf of Grundy Center. The above plant statistics have been reduced to reflect the agreement.

During 2006, the Cooperative; one of its members, NIMECA; and the city of Spencer, a NIMECA member, entered into a long-term generation use agreement of approximately 5 megawatts of the Cooperative’s capacity in the Wisdom Unit 2 generation facilities. The above plant statistics have been reduced to reflect the agreement.

In November 2011, the Cooperative purchased an additional 2.14 megawatts of the Walter Scott #4 plant, increasing its jointly owned share to approximately 43 megawatts, for approximately $4.9 million.

(12) aSSet retireMent ObligatiOnThe Cooperative has AROs arising from regulatory requirements to perform certain asset retirement activities at the time of decommissioning DAEC and disposing of certain electric plant. The liability was initially measured at fair value and subsequently is adjusted for accretion expense and changes in the amount or timing of the estimated cash flows. The corresponding asset retirement costs are capitalized as part of the carrying amount of the related long-lived asset and depreciated over the asset’s remaining useful life.

The Cooperative recognizes and estimates an ARO for its 10% share of the estimated cost to decommission DAEC. During 2008, a NRC estimate of the decommissioning costs was updated. This report estimated the Cooperative’s share of the costs to be approximately $76,159,700 (in 2008 dollars). On December 16, 2010, the NRC announced approval of a plant license extension of 20 years (from 2014 to 2034). As a result, the Cooperative recognized a change in estimate of the ARO due mainly to the timing of estimated cash flows due to the extension of the plant license. The following table presents the activity for the AROs for the years ended December 31, 2011 and 2010:

2011 2010Balance at January 1 $ 56,402,000 58,282,000 Changes in estimates, including timing — (4,566,000 ) Accretion expense 2,820,000 2,686,000 Balance at December 31 $ 59,222,000 56,402,000

The Cooperative also recognizes a liability for its share of the estimated cost to remove the ash landfills at Walter Scott #3 and Neal #4. A reconciliation of the changes in the asset retirement obligation is depicted below:

2011 2010Balance at January 1 $ 868,052 831,347 Changes in estimates, including timing 56,132 —Obligations incurred 26,684 36,705 Balance at December 31 $ 950,868 868,052

corn belt power cooperative2011 annual report 45notes to financial statements

(13) nuclear inSurance PrOgraMLiability for accidents at nuclear power plants is governed by the Price-Anderson Act, which limits the liability of nuclear reactor owners to the amount of insurance available from both private sources and an industry retrospective payment plan. In accordance with this Act, DAEC maintains $375 million of private liability insurance, which is the maximum obtainable, and participates in a secondary financial protection system, which provides up to $12.2 billion of liability insurance coverage per incident at any nuclear reactor in the United States. The Cooperative’s assessment on its 10% ownership in DAEC may be up to $11,749,500 per nuclear incident. These limits are subject to adjustments for inflation in future years. Existing nuclear power plants, including DAEC, are covered under the insurance system of the 1988 Act for the remainder of their operating lives.

Pursuant to provisions in various nuclear insurance policies, the Cooperative could be assessed retroactive premiums in connection with future accidents at a nuclear facility owned by a utility participating in the particular insurance plan. In addition, the Cooperative could be assessed annually $3,173,508 related to coverage for excess property damage if the insurer’s losses relating to an accident exceed its reserves. While assessment also may be made for losses in certain prior years, the Cooperative is not aware of any losses in such years that it believes are likely to result in an assessment.

In the event of a catastrophic loss at DAEC, the amount of insurance available may not be adequate to cover property damage, decontamination and premature decommissioning. Uninsured losses, to the extent not recovered through rates, would be borne by the Cooperative and could have a material adverse effect on the Cooperative’s financial position and results of operations.

(14) benefit PlanSThe Cooperative participates in the National Rural Electric Cooperative Association (NRECA) Retirement & Security Program (the Program). The Program is a defined benefit pension plan qualified under Section 401 and tax exempt under Section 501(a) of the Internal Revenue Code. The Cooperative recorded a total current period service cost to the Program of $1,538,490 and $1,575,345, respectively, for 2011 and 2010. In this multi-employer plan, which is available to all NRECA member cooperatives, the accumulated benefits and plan assets are not determined or allocated separately by individual employer. The Cooperative also provides a 401(k) plan, available to all employees, with the Cooperative matching 40% of the employees’ contributions up to 5% of the employees’ wages. At December 31, 2011 and 2010, the Cooperative contributed $118,360 and $117,700, respectively, to the 401(k) plan.

(15) niMeca cOMbineD tranSMiSSiOn SySteMIn 1989, the Cooperative and one of its members, NIMECA, entered into a joint transmission agreement that allows several members of NIMECA an individual undivided ownership interest in and access to the Cooperative’s transmission system. The Cooperative will continue to operate and maintain the system. NIMECA members will reimburse the Cooperative for the proportionate share of operating expenses of the system and will contribute proportionately for all future capital additions of the system. The reimbursement of the 2011 and 2010 operating expenses was $783,826 and $812,412, respectively, and was recorded as other operating revenues.

(16) envirOnMental MatterSThe Clean Air Act (the Act), as amended, made significant reductions in the amounts of SO2 and nitrogen oxide (NOx) emissions allowed on an annual basis nationwide. The Cooperative’s coal-fired generating stations are in compliance with the standards established by Phase I and Phase II of the Act.

On December 23, 2008, the U.S. Court of Appeals for the District of Columbia Circuit reversed its vacatur of the U.S. Environmental Protection Agency’s (EPA) Clean Air Interstate Rule (CAIR). The Court had vacated CAIR in July 2008, citing significant flaws in the EPA’s regulations. CAIR regulates interstate emission of oxides of nitrogen (NOx) and sulfur dioxide (SO2) contributing to nonattainment areas for fine particulate and ozone. CAIR permanently caps emissions of SO2 and NOx in the eastern states.

In July 2011, the EPA finalized the Cross State Air Pollution Rule (CSAPR), which further addresses the interstate transport of air pollution. This rule is to replace CAIR starting January 1, 2012 with higher reductions of SO2 and NOx in the eastern states. On December 30, 2011, the District of Columbia Circuit Court of Appeals put on hold the EPA CSAPR as it hears arguments from petitioners challenging the rule’s implementation. The ruling also ordered EPA to continue enforcing CAIR.

In December 2009, the final EPA Mandatory Greenhouse Gas (GHG) Reporting rule became effective. The final rule requires that sources above certain threshold levels to monitor and report GHG emissions.

On December 16, 2011, EPA issued the final Utility Mercury and Air Toxics Rule (Utility MATS Rule). The Utility MATS Rule regulates mercury and other hazardous air pollutants based upon maximum achievable control technology for new and existing coal-fired electric generating units nationwide.

In June 2010, EPA proposed a Coal Ash Rule to further regulate coal ash landfills and ash ponds. The proposed rule has two coal ash-designated alternatives. A hazardous regulations has the potential to significantly reduce coal ash in beneficial use applications. The proposed regulations are out for public comment.

The Cooperative believes that the combination of the costs for the required capital investments, increased operational expenses, and purchase of emission allowances resulting from these new regulations will be significant.

(17) SubSequent eventSThe Cooperative has evaluated subsequent events from the balance sheet date through February 29, 2012, the date at which the financial statements were available to be issued.

46 c o r n b e lt p o w e r c o o p e r a t i v e2 0 1 1 a n n u a l r e p o r t

independent auditoRs’ RepoRtThe boarD of DirecTors corn belT Power cooPeraTive:

We have audited the accompanying balance sheets of Corn Belt Power Cooperative (a cooperative association incorporated in Iowa) as of December 31, 2011 and 2010, and the related statements of revenues and expenses, membership capital, comprehensive income, and cash flows for the years then ended. These financial statements are the responsibility of Corn Belt Power Cooperative’s management. Our 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 and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. 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 includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Corn Belt Power Cooperative’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Corn Belt Power Cooperative as of December 31, 2011 and 2010, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

In accordance with Government Auditing Standards, we have also issued our report dated February 29, 2012 on our consideration of Corn Belt Power Cooperative’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

/s/ KPMG LLP

Omaha, Nebraska February 29, 2012

corn belt power cooperative enhances the quality of life for members, employees and communities. Corn Belt Power Cooperative, headquartered in Humboldt, Iowa, is a generation and transmission electric cooperative owned by its member systems. Corn Belt Power provides electricity to 10 member cooperatives and one municipal electric cooperative that serve farms, rural residences, small towns and commercial and industrial members in 41 counties in northern Iowa. Corn Belt Power responsibly provides a safe, reliable and affordable supply of electricity and helps make the quality of life in our communities the best it can be.

1300 13th Street North | P.O. Box 508 | Humboldt, IA 50548phone 515-332-2571 | fax 515-332-1375 | www.cbpower.coop

Corn BeltPower CooperativeA

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