2012-10-UPC-AR

Be Connected

2012 Annual Report

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Did you know that one in four Americans belongs to a cooperative of some kind?

Like many of those Americans, you may not often think about the value that co-op membership adds to your life daily. Around the world, co-ops form a global network of independent, local businesses that put people first and deliver value to our members.

The United Nations General Assembly has declared this year, 2012, the International Year of Cooperatives. At Union Power, this is an opportunity to celebrate the cooperative business model, our legacy of innovation, and all the ways we strive to deliver exceptional value while providing you with safe and reliable power.

Reliable Service Connects You to Value Seventy-five years ago, nearly 90 percent of our rural ancestors were living in the dark. Today, we all depend on electricity — it’s a necessary part of our lives.

Things that help ensure our system is very efficient and provides you with uninterrupted and reliable service 99.99 percent of the time: •• Continuous proactive maintenance to our system helps our personnel identify and correct small issues before they turn into bigger, costlier problems.

•• Building and upgrading infrastructure such as new substations and transmission lines helps the Co-op deliver reliable power and provide capacity for future load growth.

•• Our nationally recognized vegetation management program — crews regularly trim trees and brush along power lines, preventing electrical hazards and tree-related outages.

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Innovation Connects You to Value Innovation takes many forms, and each innovative step forward delivers more value for you, our members.

Deploying state-of-the-art solutions that help us pinpoint and solve problems quickly is one way we continually improve the services we provide to you.

During the past year, key staffers in our engineering and operations department created the Union Power Operations Dashboard, a fully automated and easyto-use map of the co-op’s entire distribution system.

This internal communication tool is underpinned by the cooperative’s geographic information system.

Dashboard provides a comprehensive, at-a-glance overview of our system, and its applications deliver a wealth of data such as real-time outage information and vehicle location.

In recent months, Dashboard has taken the utility world by storm, receiving both national and international accolades and awards. Yet it was developed with you in mind, and we are proud that this advanced technology helps us serve you more efficiently.

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Member Dividends Connect You to Value Union Power membership delivers value because you receive returns on your investment in your Co-op. Electric co-ops aim to operate at-cost, so any excess revenues, or margins, are returned to members in the form of member dividends, sometimes called capital credits.

Margins are retained to provide working capital to operate and improve the power system our members depend on, so money won’t have to be borrowed and to keep rates as low as possible.

Allocating and retiring excess revenue to members helps distinguish cooperatives. We’re proud to support our communities by putting money back into the local economy — and into the pockets of those we serve. It makes our business model special.

Doing our Part to Deliver Value By holding down operating costs, we strive to help keep electric rates affordable and ensure you get exceptional value for the money you spend on your electric bill. Unfortunately, there are things we cannot control, such as the rising cost of wholesale power and increased government regulations. While current infrastructure is still reliable, and we have done a good job of keeping our part of the electric distribution system well maintained and up-to-date, the national grid is aging. Increased demand, changes in technology, and the addition of generating facilities using renewable resources has pushed utilities to add new infrastructure and software.

But as always, we pledge to be diligent in all our efforts to hold down operating costs while providing you with the best value for your dollar.

We are continually implementing cost-saving measures throughout our day-to-day operations and reviewing workflow processes to ensure efficiency.

As a member of Union Power Cooperative, you matter. The Co-op exists to improve your quality of life, and we are working hard to deliver value and exceed your expectations.

B. L. Starnes

President, Board of Directors

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Tony E. Herrin

Executive Vice President, General Manager

More Value for You

■■Your cooperative purchases wholesale power that is generated from power plants fueled from nuclear, coal, hydro, and natural gas resources. Generators of these fuels are also experiencing upgrades and modernization, which increases the cost passed on to the consumer.

■■About half of NC’s electric cooperatives’ electricity is generated by nuclear power, where costs have remained relatively steady, with zero carbon emissions. Without this nuclear resource, our costs would be significantly higher than they are now.

■■Additionally, as required by North Carolina law, we are including renewable resources like solar and landfill gas facilities. These resources are typically more expensive and are limited in our area. We continue to manage this requirement by purchasing a diverse mix of renewable resources to minimize the cost impact.

■■Union Power strives to operate efficiently while adhering to our mission of providing you with safe and reliable power with exceptional value. We’ve worked hard to keep your bill affordable through a number of cost-saving measures at the Co-op and in partnership with our wholesale power provider.

■■Like most cooperatives, we have invested in new technologies and data management software that results in system efficiencies to provide consumers with more value and meet consumer expectations.

These investments will provide positive outcomes for both the cooperative and consumer members over time.

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Highlights of 2011 Annual Business Meeting ■ Secretary/Treasurer Jan Haigler read proof of mailing stating each member was notified by mail on September 23, 2011, of the date and time of the 2011 Annual Meeting.

Financial Info

(as of December 31, 2011)

What We Own

Assets:

Original Cost of Our System

We Estimate it Has Depreciated

Net Value of Our Property

Cash and Investment Reserves:

Cash on Hand and in Bank

$281,182,558 66,281,105 $214,901,453 15,797,766

Members Owe Us for Electric Bills

12,467,095

Materials and Supplies on Hand

2,600,867

■ Cooperative Attorney Bobby Griffin announced that 568 members were present or represented by proxy.

Other Investments for Reserves & Property

Total Assets

529,412 $246,296,593

What We Owe

Liabilities:

Long-term Debt

■ With Mr. Griffin presiding, Directors Jan Haigler, Rufus N. Reid, Dent Turner, and Vann W. Hilton were elected for three-year terms.

Notes Payable

We Owe for Power, Material & Supplies

Current Portion Long Term Debt

3,914,196

Consumer Deposits

3,167,535

Other Current & Accrued Liabilities

6,275,266

Deferred Credit

■ A short video entitled “Electricity – A Great Value” was shown.

Total We Owe

Patronage Capital

■ Winners announced for $2,500 in door prizes.

■ Meeting adjourned by Board President B. L. Starnes.

Net Worth (Total Ownership in Co-op)

Total Liabilities and Net Worth

Where the

Money

Sale of Electric Energy

Came From

Non-Operating Income

$113,544,672 6,750,000 10,727,734

3,000,000 $147,379,403 $98,917,190 $246,296,593

Revenues:

Total Revenue

132,865,035 2,417,758 $135,282,793

How the

Money

was Used

Expenses: Wholesale Power Cost

83,872,195

Operating Expenses

21,567,050

Depreciation Expenses

Taxes Interest

Total Expense

8,454,060 4,364,635 6,002,448 $124,260,388

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Net Margins

$11,022,405

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How Your Dollar is Spent Cost of Power 62¢

Net Margins 8¢

Cost to Operate 16¢

Cost of Borrowing Money 5¢

Depreciation Costs 6¢

Taxes 3¢

Statistical Highlights

Average Meters Billed Miles of Distribution Line Members per Mile of Line

1991 2001 2011 28,110 3,480 8

45,419

66,183

4,738

5,617

10

12

Total Assets

52,329,017

120,402,786

246,296,593

Net Investment in Plant

41,889,101

103,035,987

214,901,453

471,281,962

789,340,066

1,272,062,567

89

107

119

$1,490

$2,269

$3,247

1,185

1,215

1,342

Total kWh Purchased Number of Employees Net Plant Investment per Member Monthly kWh Use per Residential Member Right-of-Way Maintenance Wholesale Power Costs % of Distribution System that is Underground

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$901,456 $1,475,152 $2,477,051 $23,251,820

$35,865,199

$83,872,195

13%

32%

46%

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This year, Union Power is celebrating the International Year of Cooperatives with cooperatives around the globe. Electric co-ops and other members of the co-op family are taking center stage with the theme, “Cooperative Enterprises Build a Better World.”

Union Power is also excited to be partnering with the nation’s Touchstone Energy cooperatives as we introduce a new benefit that will make life better for our members — the Co-op Connections card.

Celebrating Cooperatives Co-ops exist to meet the needs of our members.

We believe in the benefits of a community working together. We know we’re stronger and can accomplish more when we’re united. Electric cooperatives like Union Power are different from other businesses you deal with, and we’re not alone. Co-ops use local labor and capital, respect the environment, and strengthen local economies while helping create a sustainable future. There are 29,200 co-ops of all kinds across America, and more than 1 billion co-op members around the world.

Co-ops take many forms, from farmers banding together to get a fair price on supplies to credit unions

delivering low fees and reasonable rates. The business model works for dairy farmers and small business owners, financial institutions, grocery stores, and electric companies. Co-ops form to fill a community need, giving a voice to folks that profit-driven businesses often overlook.

Electric cooperatives’ lines cover 75 percent of this great nation, delivering power to 42 million Americans in 47 states. North Carolina’s electric co-ops work together with other local and national cooperatives to restore power where needed in emergencies. They also place priority on safety, education and concern for community.

Dairy Farmers of America, a co-op owned by 16,000 of the nation’s dairy farmers, produces more than 7 billion gallons of milk annually.

Globally, co-ops employ more than 100 million people and serve more than 1 billion members in 90+ countries.

Housing co-ops provide affordable housing to 1.2 million Americans.

More than 50,000 families in the U.S. use cooperative day care centers, giving co-ops a crucial role in the care of our children.

In the U.S., co-ops provide 850,000 jobs and create more than $74 billion in annual wages with revenue of nearly $500 billion.

7,300+ credit unions in the U.S. save members $6.7 billion a year in lower fees and better rates.

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“Be Connected” There have always been benefits of being a member of Union Power, but you’re about to get more with the Co-op Connections Card program. Coming in November, Union Power will provide members with the Co-op Connections Card that provides discounts of 10 to 85 percent on prescriptions at more than 60,000 pharmacies nationwide, including CVS, Walgreens, Wal-Mart, Target and more. The card also offers savings from participating businesses on medical services, online discounts, local business deals and more!

The card is free, it doesn’t expire, there are no charges or fees, and any members of your family can use it. The easiest way to learn about the Co-op Connections Card and the advantages of membership is to visit connections.coop and browse the offers, incentives and discounts. Enter your zip code and the product or service you’re looking for to find a list of participating retailers.

This is just one more way Union Power is adding value to you. We believe in partnering with you to make life better as we proudly celebrate our part in a global and national cooperative history!

10% to 85% dis counts on most prescr ip over 60,000 pa tions at pharmacies in rticipating Walgreens, Walcluding CVS, -Mart, Target and more

10% to 60% d iscounts on ey lenses, eye exam eglasses, cont act vision centers s, and LASIK at participat ing

20% to 40% d such as cleani iscounts on most dental se and orthodon ngs, x-rays, root canals, crowrvices tics with part icipating denti ns, sts PLUS, additio nal savings on chiropractic vi lab tests, imag sits, ing scans and hearing aids

Be looking for your way to be connected at union-power.com. Coming soon to the Quick Tools section of our home page: click on the Co-op Connections card for more information and to find local providers.

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Board Members From left to right:

Rufus N. Reid – District VI Jim T. Hartsell – District VI Dent H. Turner, Jr. – Asst. Secretary-Treasurer, District I Juanita Poplin – District I B. L. Starnes – President, District III Jan Haigler – Secretary-Treasurer, District V Neil W. Hasty – District IV Carole P. Jones – District IV Richard L. Simpson – Vice President, District II Lee Roy Kirk, Jr. – District I Vann W. Hilton – District II

Monroe Corporate Office 1525 Rocky River Rd. North Monroe, NC 28110 Phone: (704) 289-3145 or (800) 922-6840 Fax: (704) 296-0408

Oakboro Office

Service Territories

Union County is our largest service area. It covers 3,504 miles of energized line and 44,412 meters.

474 S. Main Street Oakboro, NC 28129 Phone: (704) 485-3335 Fax: (704) 485-4725

union-power.com

Stanly County is our second largest service area. It covers 1,004 miles of energized line and 8,477 meters.

Cabarrus County is our third largest service area. It covers 573 miles of energized line and 6,715 meters.

Mecklenburg County covers 345 miles of energized line and 5,944 meters.

Rowan County covers 155 miles of energized line and 1,073 meters.

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