Financial Statements For the Quarterly Periods Ended June 30, 2026 and 2025
FINANCIAL HIGHLIGHTS Associated Electric Cooperative, Inc. (Associated) is pleased to present the enclosed interim financial statements, which include balance sheets, statements of revenues and expenses, and statements of cash flows as of, or for the periods ended June 30, 2026 and 2025. The discussion below is not meant to be comprehensive but rather to identify significant aspects in the current quarter performance of Associated. Overview Net margin for the six-month period ended June 30, 2026, was $44.3 million compared to $65.5 million in the same period of 2025. The second quarter of 2026 had a net margin of $22.1 million compared to $36.9 million for the second quarter of 2025. Total assets were $4.3 billion and $3.9 billion, respectively, at June 30, 2026, and June 30, 2025. Significant factors contributing to Associated’s financial performance for this period are discussed in detail in the paragraphs below. Operating Revenues Member Revenue Revenue from members increased $11.0 million, or 4.0%, for the second quarter and $1.3 million, or 0.2%, for the six-month period ended June 30, 2026, compared to the same periods of 2025. Demand revenue increased $10.0 million and $16.2 million for the second quarter and first six months of 2026, respectively, primarily due to base and seasonal rate increases effective April 1, 2026, which offset a 13.8% decrease in seasonal billing demand. For the six-month period, the increase in demand revenue was largely offset by a $14.9 million decrease in member energy revenue, primarily attributable to a 4.7% decrease in member energy sales volume compared to the same period of 2025. Nonmember Revenue Revenue from nonmembers decreased $29.4 million for the second quarter, but increased $29.0 million for the first six months of 2026, as compared to the same periods of 2025. The primary drivers of the variances were:
Interchange sales: o Decreased $26.3 million for the second quarter due to: 27.8% decrease in sales volume o Increased $21.5 million year-to-date due to: 13.7% increase in the weighted average sales price
Capacity sales: o Decreased $2.2 million for the second quarter o Increased $6.0 million year-to-date, driven by a short-term capacity contract through the end of the first quarter
Operating Revenues 900 800
In millions of dollars
700
225.6
196.6
591.6
590.4
YTD 2026
YTD 2025
600 500 400 300
73.3
102.7
282.7
271.7
2nd Qtr 2026
2nd Qtr 2025
200 100 0
Member Revenue
Nonmember Revenue
Operating Expenses Generation Operation Generation operations expense decreased $11.4 million for the second quarter but increased $33.0 million for the first six months of 2026. The year-to-date increase was driven by higher fuel and market prices during Winter Storm Fern (January 23-26), as well as increased natural gas generation to capitalize on favorable nonmember sales market conditions and to offset reduced coal generation during planned coal unit outages. Coal fuel expense decreased $18.6 million in the second quarter, primarily due to a 1,016,024 MWh, or 31.7%, decrease in generation compared to the same period of 2025. The decrease in coal generation was largely attributable to a 160-day planned outage of Thomas Hill Unit 3 that began on March 7, 2026. Fuel expense for natural gas generation increased $3.6 million and $43.4 million for the three- and six-month periods ending June 30, 2026, respectively, driven by increases in gas generation of 275,373 MWh and 735,688 MWh. Gas prices at Henry Hub averaged $2.93 in the second quarter of 2026, compared to $3.13 for the same period of 2025.
400
$35.00
350
$30.00
300
$25.00 188.4
250
141.4
$20.00
200 $15.00
150 100 50
56.3 59.9 63.4
82.0
2nd Qtr 2026
2nd Qtr 2025
$/MWh
In milions of dollars
Fuel Expense
$10.00 147.4
166.1
YTD 2026
YTD 2025
$5.00
0
$0.00
Coal Fuel Exp
Gas Fuel Exp
Coal $/MWh
Gas $/MWh
Interest Expense Interest on long-term debt increased $4.7 million and $9.5 million for the second quarter and first six months of 2026, respectively, as compared to the same periods of 2025. The increase was primarily attributable to additional borrowings used to finance the capital construction plan for new natural gas-fired peaking generating units. These significant construction projects also resulted in higher capitalized interest, which increased $5.5 million and $10.2 million during the second quarter and first six months of 2026, respectively, as compared to the same periods of 2025. Financial Position Significant changes in the balance sheet at June 30, 2026, as compared to the prior year, include the following:
Utility plant, including construction work in progress, increased $580.9 million primarily due to capital spending on the design and construction of three new natural gas-fired peaking generating units in addition to contracted purchases of equipment for potential future generating facilities, transmission system upgrades and projects for the existing generating fleet.
Right of use asset-operating leases increased $8.2 million due to four new rail car leases beginning January 1, 2026. The right-of-use assets recorded in January 2026 totaled $11.4 million. The majority of the activity was renewals and amendments of existing leases.
Cash and cash equivalents decreased $138.4 million primarily due to significant capital expenditures over the past twelve months. With a substantial portion of the capital construction plan funded through debt, cash balances are being strategically managed to optimize borrowing levels and related interest expense.
Designated cash and cash equivalents increased $20.0 million, while restricted and designated short-term investments decreased $20.0 million, due to the sale of treasuries and government agency securities with original maturities of more than three months.
Other current assets increased by $11.0 million primarily due to a $6.4 million increase in hedging activity and a $3.3 million increase in prepayments.
Deferred regulatory debits, including the current portion, increased $42.6 million due to a $22.2 million increase in deferred maintenance costs and an $18.0 million increase in hedging activity.
Other deferred assets decreased $12.8 million primarily due to a $27.2 million decrease in hedging activity, partially offset by a $13.5 million increase in deferred generator interconnect upgrade reimbursements.
Patronage capital increased by $65.8 million due to the net impact of the retirement of $28.5 million in patronage capital in May of 2026 and margins.
Other current and accrued liabilities increased $11.9 million primarily due to a $9.0 million increase in hedging activity, a $5.3 million increase in transmission study deposits, and a $4.4 million decrease in collateral held from hedging counterparties based on credit exposure limitations in those contracts.
Long-term debt, including current maturities, increased $272.3 million. Associated received $357.7 million in advances on loans from the Rural Utilities Service, partially offset by $85.4 million in principal payments.
Deferred regulatory credits, including the current portion, decreased $9.8 million mostly due to an $8.3 million decrease in deferred gains on diesel and natural gas swaps.
Other deferred liabilities increased by $22.2 million due primarily to an $8.9 million increase in hedging activity, a $7.5 million increase in long-term transmission deposits and a $6.9 million increase in long-term operating lease liabilities.
40.00% 36.00% 32.00% 28.00% 24.00% 20.00% 16.00% 12.00% 8.00% 4.00% 0.00%
Financial Ratios
27.83%
28.73%
Equity to Total Capitalization June 30, 2026
22.89% 23.44%
Equity to Assets June 30, 2025
Associated Electric Cooperative, Inc. Statement of Operations For the Six Months Ending 6/30/2026 (In thousands of dollars) Three Months Ended
Six Months Ended
June 30
2026 Operating revenues: Members Nonmembers
Operating expenses: Generation operation Contracted generation Power purchased Depreciation and amortization Transmission Expense Generation maintenance Administrative and general Taxes Accretion of asset retirement obligations Operating margin before interest expense Interest Expense: Interest on long-term debt Less: interest capitalized Operating margin Nonoperating: Interest and dividend income Other nonoperating income Interest expense Total nonoperating Net margin (loss)
June 30
2025
2026
2025
$282,685 73,317 356,003
$271,729 102,714 374,444
$591,627 225,646 817,274
$590,353 196,629 786,982
152,866
164,279
15,583
12,980
31,168
29,224
29,604
28,827
30,096
28,836
32,932
33,021
27,826
25,660
1,842
1,744
392,783 36,013 79,353 59,076 65,564 58,753 54,772 3,954 1,136 751,405 65,868
359,775 26,611 80,105 57,018 60,144 57,328 50,779 3,802 1,215 696,778 90,204 41,911 (10,843) 31,069 59,136 6,688 968 (1,300) 6,356 65,491
571
612
322,490 33,513
325,183 49,260
25,887
21,157
(11,415)
(5,959)
14,472 19,040
15,197 34,063
51,429 (21,015) 30,414 35,455
2,808 778 (570) 3,016 22,057
3,120 453 (752) 2,821 36,884
8,572 1,268 (1,032) 8,808 44,262
These interim financial statements are unaudited. In the opinion of management, all adjustments, which are normal recurring accruals, necessary for a fair presentation of results for interim periods have been included. The interim financial statements should be read in conjunction with the Notes to the Financial Statements included in the 2025 Annual Report.
Associated Electric Cooperative, Inc. Balance Sheet As of June 30 (In thousands of dollars)
2026
2025
$5,105,068 1,203,442 6,308,510 (2,962,523) 3,345,987
$5,030,549 697,048 5,727,597 (2,859,573) 2,868,023
32,951 11,996 589 20,658 66,195
32,951 3,823 1,098 18,080 55,953
18,051 27,292 45,343
20,029 25,057 45,085
44,884 150,482 0 126,581 122,078 111,486 65,476 23,045 644,031
183,269 130,482 20,000 145,865 116,412 108,881 54,471 14,271 773,650
120,699 68,285 188,985
86,845 81,111 167,955
4,290,540
3,910,668
Assets Utility Plant: Electric plant in service Construction work in progress Less accumulated depreciation
Other property and investments: Nonutility property Right of use asset-operating leases Net investment in direct financing leases Advanced construction funds
Restricted assets: Investments in associated organizations Other restricted assets and designated assets
Current assets: Cash and cash equivalents Designated cash and cash equivalents Restricted and designated short-term investments Accounts receivable, net Fuel inventories Materials and supplies inventories Other current assets Current portion of deferred regulatory debits
Deferred regulatory debits Other deferred assets
Total Assets
These interim financial statements are unaudited. In the opinion of management, all adjustments, which are normal recurring accruals, necessary for a fair presentation of results for interim periods have been included. The interim financial statements should be read in conjunction with the Notes to the Financial Statements included in the 2025 Annual Report.
Associated Electric Cooperative, Inc. Balance Sheet As of June 30 (In thousands of dollars)
2026
2025
Capitalization and Liabilities Patronage capital and other equities: Memberships Patronage capital Other equities Accumulated other comprehensive inc. (exp)
12 928,919 55,543 (2,419) 982,055
12 863,126 55,543 (2,000) 916,681
2,456,021
2,189,122
Asset retirement obligation
73,647
65,598
Accumulated provision for postretirement benefits
20,776
21,202
52,516 180,977 62,345 90,763 6,934 25,386 418,921
42,905 171,184 50,422 85,389 16,078 21,082 387,060
230,466 108,653 339,119
244,560 86,446 331,006
4,290,540
3,910,668
Long-term debt, excluding current maturities
Current Liabilities: Payable to member cooperatives Accounts payable Other current and accrued liabilities Current maturities of long-term debt Current portion of asset retirement obligation Current portion of deferred regulatory credits
Deferred regulatory credits Other deferred liabilities Total Capitalization and Liabilities
These interim financial statements are unaudited. In the opinion of management, all adjustments, which are normal recurring accruals, necessary for a fair presentation of results for interim periods have been included. The interim financial statements should be read in conjunction with the Notes to the Financial Statements included in the 2025 Annual Report.
Associated Electric Cooperative, Inc. Statement of Cash Flows For the Six Months Ending June 30 (in thousands of dollars) 2026 Cash flows from operating activities: Net margin(loss) Adjustments to reconcile net margin to net Cash provided by operating activities: Provision for depreciation and amortization Loss (Gain) on Disposal of Utility Plant Amortization of loan expenses and other costs Decrease (increase) in deferred debits Increase (decrease) in deferred credits Increase (decrease) in asset retirement obligation Change in assets and liabilities: Accounts receivable Fuel inventories Materials and supplies inventories Accounts payable Other current and accrued liabilities Other operating activities, net Net cash provided by operating activities Cash flows from investing activities: Construction expenditures for utility plant Proceeds from Disposal of Utility Plant Sale (purchase) of investments Investments in associated organizations Direct financing lease proceeds Other investments Reimbursement of capital expenditures Net cash (used) in investing activities Cash flows from financing activities: Increase (decrease) in net borrowings from member cooperatives
2025 $44,262
$65,491
63,454 (70) 18,487 (48,324) 458 (2,334)
61,545 0 2,384 (3,416) 5,839 (2,876)
16,726 (12,037) 1,123 (5,244) 15,340 5,382 97,223
(14,101) 11,080 (793) 14,472 9,795 11,873 161,293
(375,937) 1,090 1,038 (802) 259 567 (34) (373,819)
(223,290) 0 (1,008) (2,102) 240 729 (30) (225,461)
14,604
14,953
Issuance of long-term debt, including change in current maturity Retirement of long-term debt, including change in current maturity Retirement of patronage capital Net cash (used) in financing activities
150,886
349,942
(42,374) (28,500) 94,617
(227,239) (27,575) 110,080
Net change in cash and cash equivalents and designated cash and cash equivalents
(181,979)
45,912
377,345
267,839
195,366
313,751
Cash and cash equivalents Designated cash and cash equivalents
44,884 150,482
183,269 130,482
Cash and cash equivalents and designated cash and cash equivalents
195,366
313,751
Supplemental cash flows information: Cash paid for interest (net of amount capitalized)
31,585
32,551
Supplemental noncash activities: Change in plant expenditures included in accounts payable
25,664
51,318
Cash and cash equivalents and designated cash and cash equivalents, beginning of period Cash and cash equivalents and designated cash and cash equivalents, end of period
These interim financial statements are unaudited. In the opinion of management, all adjustments, which are normal recurring accruals, necessary for a fair presentation of results for interim periods have been included. The interim financial statements should be read in conjunction with the Notes to the Financial Statements included in the 2025 Annual Report.